UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
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 Rule14a-6(e)(2)) | |
| Definitive Proxy Statement | ||
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under§240.14a-12 | |
Kelly Services, Inc.
(Name of Registrant as Specified In Its Charter)
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LETTER FROM THE CHAIRMAN OF THE BOARD
April 9, 20186, 2020
To Our
Dear Stockholders:
You2019 saw a leadership transition for our Company and continued progress in corporate governance.
On October 1, 2019, Peter Quigley became our new President and CEO and joined our Board of Directors. George Corona stepped down as President and CEO for his planned retirement on June 30, 2020. Peter was selected following an extensive succession process conducted by the Board, involving internal and external candidates. Prior to becoming President and CEO, Peter spent 17 years in varied and demanding leadership roles at Kelly. With the support of the Board, Peter is leading the Company’s strategic transformation into a specialty talent company.
On behalf of the Board, I want to express our gratitude to George for his exceptional leadership. He has helped Kelly become a more focused company, make solid investments in technology and the future of work, and stay aligned with our Noble Purpose of connecting people to work in ways that enrich their lives. We are cordially invitedgrateful for his 25 years of service to attendKelly and pleased that George will remain on our Board and will be contributing his experience to Peter’s transition.
I would also like to take this opportunity to thank Takao Wada for his distinguished service on the Board. Mr. Wada served as the designated representative of Persol Holdings, LLC, Kelly’s strategic partner in the Asia-Pacific region, and is not standing forre-election.
The Board is committed to sound corporate governance as a means of enhancing long-term stockholder value. We have a majority independent Board and fully independent Audit and Compensation Committees. Following our Annual Meeting, when we will make new committee assignments, our Corporate Governance and Nominating Committee will be fully independent. That will bring us to the important milestone of satisfying all the Nasdaq independence requirements for board and board committees that are applicable tonon-controlled companies.
As of this writing, like most businesses throughout the world, we are confronting serious challenges raised by COVID – 19 (“Coronavirus”) for our Company, employees, and business partners. In response, Kelly implemented its emergency management procedures under which a cross-functional Emergency Management Team was assembled to coordinate crisis management for the organization, including containment measures, policies, communications, and resources. We have implemented measures designed to protect the health and safety of Kelly employees, including initiating travel restrictions, barringin-person attendance at conferences and large events, and restricting nonessential visitors from our buildings. Kelly’s adoption of information technology systems and policies that enable remote work are proving to be extremely beneficial during this time, and Kelly workers are able to perform nearly all essential functions remotely. When possible, Kelly is also working with its customers to implement remote work plans for temporary employees. Kelly will continue to adapt its approach in light of government actions, best practices, and the recommendations of public health officials. As we get closer to the date of the Annual Meeting, of Stockholders of Kelly Services, Inc., whichwe will be held at 11:00 a.m., Eastern Daylight Time, on Wednesday, May 9, 2018, in the Auditorium located on the first floor ofdetermine whether it is advisable to hold our headquarters building at 999 West Big Beaver Road, Troy, Michigan 48084-4716.
As explained in the enclosed Proxy Statement, at this year’s meetingAnnual Meeting as a virtual meeting. Whatever format it ultimately takes, I hope you will be asked to vote on the election of Directors, anon-binding advisory vote on executive compensation, the amendment and restatement of the Company’s Certificate of Incorporation, and amendment to the Company’s amended and restated Bylaws, and the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2018.
Whether you planable to attend or not, please date, sign and return the proxy card in the accompanying envelope, or vote by telephone or via the Internet as soon as possible so that your shares can be voted at the meeting in accordance with your instructions.Your vote is important to us. You may, of course, withdraw your proxy and change your vote prior to or at theour Annual Meeting by following the steps described in the Proxy Statement.
We appreciate the strong support of our stockholders over the years and look forward to seeing you at the meeting.on May 6, 2020.
Sincerely, |
| DONALD R. PARFET |
Chairman of the Board |
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Please refer to the enclosed Proxy Card and Proxy Statement for information on voting options:
Internet – Scan QR Code – Telephone – Mail
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KELLY SERVICES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders ofApril 6, 2020
Kelly Services, Inc.:Dear fellow Stockholders:
We are pleased to invite you to join our Board, senior leadership, and other associates of Kelly Services, Inc., a Delaware corporation (the “Company”), for the Annual Meeting of Stockholders, to be held at the offices of the Company, 999 West Big Beaver Road, Troy, Michigan 48084-4716, on Wednesday, May 9, 20186, 2020 at 11:00 a.m., Eastern Daylight Time.
As a precaution regarding the Coronavirus orCOVID-19, we may hold our annual meeting over the web in a virtual meeting format instead of holding the meeting in Michigan. If we take this step, we would publicly announce a determination to hold a Virtual Annual Meeting in a press release available at kellyservices.com as soon as practicable before the meeting. The purposespress release would include instructions as well as a webcast link from which to access the 2020 Annual Meeting of Stockholders on the above date and time, via live audio webcast, but only if the meeting is not held in Michigan.
At the Annual Meeting, are:you will be asked to consider the following proposals:
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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR EACH DIRECTOR NOMINEE AS SET FORTH IN PROPOSAL 1,FOR THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION AS SET FORTH IN PROPOSAL 2,FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY’S CERTIFICATE OF INCORPORATION AS SET FORTH IN PROPOSAL 3,FOR THE APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED BYLAWS AS SET FORTH IN PROPOSAL 4, ANDFOR RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AS SET FORTH IN PROPOSAL 5.
Only holdersIf you were a holder of record of the Company’s Class B common stockCommon Stock at the close of business on the Record Date, March 19, 2018,16, 2020, you are entitled to notice of and to vote at the Annual Meeting.
Please promptly submit your vote your shares by Internet,internet, telephone, or by mail usingsigning, dating, and returning the enclosed proxy card or voting instruction form in the postage-paid envelope which requires no postage. We encourageprovided so that your shares will be represented and voted at the meeting.
Thank you for your interest in Kelly.
| By Order of the Board of Directors |
| JAMES M. POLEHNA |
| Corporate Secretary |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held May 6, 2020. |
The following materials, also included with the Notice of Annual Meeting of Stockholders, are available for view on the Internet:
Proxy Statement for the Annual Meeting of Stockholders
Annual Report to vote promptly.Stockholders, includingForm 10-K, for the year ended December 29, 2019
To view the Proxy Statement or Annual Report visit: www.envisionreports.com/kelyb.
Please refer to the enclosed Proxy Card and Proxy Statement for information on voting options:
Internet — Scan QR Code — Telephone — Mail
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Questions and Answers About the Proxy Statement and the Annual Meeting | ||||
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Proxy Summary
We provide belowThis summary highlights of certain information contained elsewhere in this Proxy Statement. As it is only a summary, pleasePlease refer to the complete Proxy Statement and Kelly’s 20172019 Annual Report before you vote.
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| 6, 2020 at 11:00 a.m., Eastern Daylight Time | |||||||
Place: | Kelly Services, Inc., 999 West Big Beaver Road, Troy, Michigan 48084-4716 | |||||||
Record Date: | Close of Business, Eastern Daylight Time, March | 16, 2020 | ||||||
Voting: | Class B Stockholders as of the Record Date are entitled to vote. Each share of Class B | |||||||
Admission: | All holders of the Company’s Class A and Class B | Stockholders. | ||||||
Voting Matters | Board’s | Page Reference (for more detail) | ||||||||||||||
Proposal 1. |  Election of nine directors |  |  |  ✓ FOR Each Nominee | 12 | |||||||||||
Proposal 2. | Advisory vote to approve the Company’s executive compensation | ✓ FOR | 30 | |||||||||||||
Proposal 3. | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the 2020 fiscal year | ✓ FOR | 63 | |||||||||||||
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Internet at www.envisionreports.com/kelyb | QR code - Scan and vote with your mobile device | Calling 1-800-652-VOTE (8683) within the U.S., U.S. territories & Canada on a touch tone telephone |
| Mail - Return the signed proxy card | ||||||
Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Central Daylight Time, on May 8, 2018.5, 2020. If you vote by mail, your proxy card must be received before the Annual Meeting.
Beneficial owners, who own shares through a bank, brokerage firm, or other financial institution, can vote by returning the voting instruction form, or by following the instructions for voting via telephone or the Internet, provided by the bank, broker, or other organization. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all your shares.
If you are astockholder of record or a beneficial owner who has alegal proxy to vote the shares, you may choose to vote in person at the Annual Meeting. If you plan to vote your shares at the meeting, please promptly request a legal proxy from your broker, as you will need to bring this with you to the meeting in order to vote your shares.Even if you plan to attend our Annual Meeting in person, please cast your vote as soon as possible.
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Proxy Summary
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Proxy Summary
The following table provides summary information about each Director nominee. Each Director is elected annually by a plurality vote.
| Name | Age | Director Since | Principal Occupation | Independent | Committee Memberships | Other Public Company Boards | ||||||||||
Terence E. Adderley | 84 | 1962 | Chairman of the Board of Directors, Kelly Services, Inc. (1998 – present). | No | Governance | - | ||||||||||
Carol M. Adderley | 58 | 2010 | Writer and Researcher in the Humanities. | No | Governance (Vice Chair) | - | ||||||||||
Gerald S. Adolph | 64 | 2018 | Director, NAACP Legal Defense and Education Fund (1998 – present); Director, Cintas Corporation (2006 – present); Director, Cardinal Spellman High School Board (2010 – present); Senior Partner and other executive positions, Booz & Co. (1981 – 2016). | Yes | - | 1 | ||||||||||
George S. Corona | 59 | 2017 | President and Chief Executive Officer, Kelly Services, Inc. (2017 – present); Executive Vice President and Chief Operating Officer, Kelly Services, Inc. (2009 – 2017). | No | - | - | ||||||||||
Robert S. Cubbin | 60 | 2014 | Director, Huntington Bancshares Incorporated (2017 – present); Director, First Merit Corporation (2013 – 2017); President and Chief Executive Officer, Meadowbrook Insurance Group, Inc. (2002 – 2016). | Yes | Audit; Compensation (Chair); Governance | 1 | ||||||||||
Jane E. Dutton | 65 | 2004 | Robert L. Kahn Distinguished University Professor Emeritus of Business Administration and Psychology, The University of Michigan Business School (2017 – present); Robert L. Kahn Distinguished University Professor of Business Administration and Psychology, The University of Michigan Business School (2007 – 2017). | Yes | Compensation; Governance (Chair) | - | ||||||||||
Terrence B. Larkin | 63 | 2010 | Executive Vice President, Business Development, General Counsel and Corporate Secretary, Lear Corporation (2008 – present). | Yes | Audit (Vice Chair); Compensation | - | ||||||||||
Leslie A. Murphy | 66 | 2008 | President and CEO, Murphy Consulting, Inc. (2008 – present); Certified Public Accountant; Member of AICPA’s Governing Council (2008 – present); Member of NACD Advisory Councils on Audit Committee Issues and Risk Oversight (2012 – present); Director, Detroit Legal News Company (2012 – present); Director, Loop Industries, Inc. (2017 – present). | Yes | Audit (Chair); Compensation (Vice Chair) | 2 | ||||||||||
Donald R. Parfet | 65 | 2004 | Managing Director, Apjohn Group, LLC (2001 – present); General Partner, Apjohn Ventures Fund (2003 – present); Director, Rockwell Automation, Inc. (2008 – present); Director, MASCO Corporation (2012 – present); Director, Sierra Oncology, Inc. (2015 – present). | Yes | (Lead Director since 2012); Audit; Compensation; Governance | 3 | ||||||||||
Hirotoshi Takahashi | 48 | 2015 | Director, Deputy Vice President and COO, Persol Holdings Co., LTD. (2013 – present); Representative Member, Godo Kaisha Yamashiroya, (2010 – present); Vice President, Japan Association of HR Services Industry (2012 – 2016) | No | - | 1 | ||||||||||
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Proxy Summary
CORPORATE GOVERNANCE HIGHLIGHTS
The Company is committed to good corporate governance, which we believe is important to the success of our business and in advancing stockholder interests. Our corporate governance practices are described in greater detail in the Corporate Governance section. Highlights include:
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Proxy Summary
FINANCIAL AND OPERATING HIGHLIGHTS
2017 was a good year for Kelly that featured strategic focus and acceleration. The company created and carried solid momentum throughout all four quarters that resulted in an improved gross profit rate, year over year growth in earnings from operations, and an improved conversion rate*. Kelly’s solid performance throughout 2017 demonstrates its commitment to focus and growth in the solutions that can make the biggest difference now and in the future.
2017 TOTAL COMPANY
2017 OPERATING EARNINGS BY SEGMENT
Effective January 2, 2017, Kelly realigned its business into three segments to reflect customer buying behavior and the Company’s operational structure.
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FINANCIAL MEASURES
The constant currency (“CC”) change amounts refer to the year-over-year percentage changes resulting from translating 2017 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for 2016. We believe that CC measurements are a useful measure, indicating the actual trends of our operations without distortion due to currency fluctuations. We use CC results when analyzing the performance of our segments and measuring our results against those of our competitors. Additionally, substantially all of our foreign subsidiaries derive revenues and incur cost of services and selling, general and administrative expenses within a single country and currency which, as a result, provides a natural hedge against currency risks in connection with their normal business operations.
CC measures arenon-GAAP (Generally Accepted Accounting Principles) measures and are used to supplement measures in accordance with GAAP. Ournon-GAAP measures may be calculated differently from those provided by other companies, limiting their usefulness for comparison purposes.Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
Return on sales (earnings from operations divided by revenue from services) and conversion rate (earnings from operations divided by gross profit) are ratios used to measure the Company’s operating efficiency.
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Proxy Summary
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Proposal 1: Election of Directors
PROPOSAL 1 - ELECTION OF DIRECTORS
Under our Restated Certificate of Incorporation, the Board of Directors is to consist of no fewer than five and no more than eleven members, the exact number of Directors to be determined from time to time by the Board. As of the date of the mailing of this Proxy Statement, the number of Directors constituting the whole Board has been fixed at ten. Directors are elected annually forone-year terms. Each of the current Directors is a nominee for election at the Annual Meeting.
Director Independence and Tenure
Our Board of Directors is responsible for overseeing the management of the business of the Company.
On March 7, 2018, our Board affirmatively determined that Directors G.S. Adolph, R.S. Cubbin, J.E. Dutton, T.B. Larkin, L.A. Murphy, and D.R. Parfet, representing a majority of the Board, are independent pursuant to the Nasdaq Global Market listing standards, and that none of them had a material relationship with the Company.
The following table illustrates the tenure of our Director nominees. Director tenure is distributed fairly evenly, resulting in a Board that provides us with both new perspectives and long-standing experience with the Company.
Director Qualifications, Background, and Diversity
The Corporate Governance and Nominating Committee makes recommendations to the Board of Directors regarding the Board’s size and composition. The Committee annually reviews with the Board the composition of the Board as a whole and proposes nominees for election to the Board, with a view towards achieving a Board that has a range of relevant qualifications, skills and experience, outstanding personal attributes and diversity of thought. Recommendations made by the Committee of candidates for consideration as director nominees are based upon specific criteria as well as other considerations that the Committee may from time to time deem appropriate, including the Company’s strategic objectives and Board composition factors such as the balance of independent andnon-independent directors or the need for financial experts on the Audit Committee. The Committee may engage third parties to assist in the search for director candidates or to assist in gathering information regarding a candidate’s background and experience.
Director candidates should possess the following competencies and attributes: the highest personal and professional ethics, integrity and values; a reputation, both personal and professional, for maturity, strength of character, and sound judgment; the ability to comply with the Company’s Code of Business Conduct and Ethics; a high level of accomplishment in his or her respective field; an understanding of the complexities of business organizations and demonstrated leadership skills; and flexibility and independence of thought, with the ability to offer independent opinions in a constructive manner. Director candidates should be leaders with relevant expertise and experience with complex organizations of similar size and global scope –- in the past, the Board has sought active and former chief executive officers, chief operating officers, or substantially equivalent level executive officers of a complex organization such as a corporation, university, or major unit of government, or a professional who regularly advises such organizations. In recognition of the nature of the Company’s business, the Board has also sought to have some directors with experience in the business services industry or human resources and workforce solutions field.
Director candidates must also have financial acumen and the ability to read and understand fundamental financial statements; a willingness to devote sufficient time to become knowledgeable about the Company’s business and to carry out the duties and responsibilities of the office; and an intention to serve a sufficient period of time to make a meaningful contribution to the Board and the Company. Independent director candidates must meet the independence requirements established by Nasdaq and the SEC, and all director candidates must review with the Corporate Governance and Nominating Committee any relationships that might be construed as a conflict of interest. The resulting Board is a diverse body in terms of gender, age, race, ethnic background, and professional experience; and in light of the Company’s status as a controlled company, the Board has given consideration to the representation of the controlling shareholder.
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Proxy Summary
The following table provides summary information about each director nominee. Each director is elected annually by a plurality vote.
Name | Age | Director Since | Principal Occupation | Independent | Other Public Company Boards | |||||||||||
Donald R. Parfet | 67 | 2004 | Managing Director, Apjohn Group, LLC | Yes | 2 | |||||||||||
Peter W. Quigley | 58 | 2019 | President and Chief Executive Officer, Kelly Services, Inc. | No | — | |||||||||||
Carol M. Adderley | 60 | 2010 | Writer and Researcher in the Humanities | No | — | |||||||||||
Gerald S. Adolph | 66 | 2018 | Retired Senior Partner, Booz & Co.;Co-Chair, NAACP Legal Defense and Education Fund | Yes | 1 | |||||||||||
George S. Corona | 61 | 2017 | Retired President and Chief Executive Officer, Kelly Services, Inc. | No | — | |||||||||||
Robert S. Cubbin | 62 | 2014 | Retired President and Chief Executive Officer, Meadowbrook Insurance Group, Inc. | Yes | 1 | |||||||||||
Jane E. Dutton | 67 | 2004 | Robert L. Kahn Distinguished University Professor Emeritus of Business Administration and Psychology, The University of Michigan Business School | Yes | — | |||||||||||
Terrence B. Larkin | 65 | 2010 | Retired Executive Vice President, Business Development, General Counsel and Corporate Secretary, Lear Corporation | Yes | — | |||||||||||
Leslie A. Murphy | 68 | 2008 | President and CEO, Murphy Consulting, Inc.; Former Chair, American Institute of Certified Public Accountants | Yes | 1 | |||||||||||
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Proxy Summary
CORPORATE GOVERNANCE HIGHLIGHTS
Kelly is committed to sound corporate governance as a means of enhancing long-term stockholder value. Highlights of our governance practices are described below.
Independence | Accountability | Best Practices | ||
• Majority independent Board | • Annual election of all directors | • A diverse Board in terms of experience, skills, background, gender, and ethnicity | ||
• Independent Chairman of the Board | • Annual election of the Chairman of the Board | • Average Board attendance of 96% during 2019 | ||
• Audit and Compensation Committees composed entirely of independent directors | • Annual evaluation of the CEO (including compensation) by independent directors | • Strong oversight of Enterprise Risk Management by the Board and Audit Committee | ||
• Majority independent Corporate Governance and Nominating Committee – to be composed entirely of independent directors after the 2020 Annual Meeting | • Annual Board and Committee self-evaluations | • CEO and executive leadership succession planning by the Board and Compensation Committee | ||
• Regular executive sessions of independent directors | • Annual review of governance documents | • Long-standing commitment to sustainability and corporate social responsibility, including ESG updates to Board | ||
• Committees may hire independent advisors | • Clawback policy that applies to short-term and long-term incentive plans for senior management | • Policies prohibiting short-sales, hedging, pledging and margin accounts | ||
• Stock ownership guidelines for directors and senior management | ||||
Proposal 1: Election of Directors
In 2017, the Corporate Governance and Nominating Committee of the Board initiated a search for an additional independent Director. This search, which was conducted with the assistance of an independent search firm, resulted in the Board’s selection and appointment of Mr. Gerald S. Adolph to the Company’s Board of Directors, effective March 7, 2018.73 YEARS OF INDUSTRY LEADERSHIP
| Principal | Top 5 | Leading | |||
| staffing provider in targeted U.S. specialties. | provider ofK-12 educational staffing in U.S. | science, engineering, and office talent provider in the U.S. | managed services provider with $8.3 billion spend under management. | |||
| Delivering | Supported | 91% | Helping | |||
| staffing, outsourcing and consulting across Americas, EMEA, and APAC. | by 4,600+ supplier partners globally. | of Fortune 100 companies use our services. | people thrive in the new world of work. | |||
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Proxy Summary
Corporate Sustainability Strategy
We consider sustainability to be a guiding principle in strengthening the relationship with our global workforce, suppliers, and customers. As a leading provider of global workforce solutions, we connect people with employment opportunities and make a difference in the communities in which we live and work. Through our programs and initiatives, we seek to contribute to improving the quality of life of our employees, their families, as well as the communities in which we operate. Given the worldwide span of our workers, clients, suppliers, and partners, we recognize the global reach of both our business practices and our public accountability.
Since 2017,we embarked on a transformation from Corporate Social Responsibility initiatives, toward a long-term Corporate Sustainability Strategy aligned to our business core which contributes to the Sustainable Development Goals.
This new sustainability approach, rather than being philanthropic, is strategic to our business values. It is based on the concept of social investment, which, instead of aiding on isolated occasions, ensures the creation of future development capacities. We aim to guide all our subsidiaries and collaborators in the planning, management, and implementation of sustainable strategic approaches that create measured and impactful shared value to all our stakeholders.
Our Corporate Sustainability Strategy is defined as an integrated decision-making strategy that provides comprehensive guidelines for implementing internal actions toward these ends. These guidelines provide procedures and tools to ensure the applicability of the strategy on a worldwide basis–guaranteeing the same standards, metrics, and objectives for all our operations.
This strategy has been developed with consideration given to the perceptions of our stakeholders, as well as its impact on business operations.In early 2018,we conducted a material assessment that helped us define the policies and guidelines of our Corporate Sustainability Strategy.
Permanent monitoring of our sustainable performance is conducted on an annual basis by means of an interdisciplinary perspective assessment involving cross-functional areas within the company. Progress in our Corporate Sustainability Strategy are reported on an annual basis through the Global Reporting Initiative Standard (GRI), and Communications of Progress (following the UN Global Compact), which we support sinceFebruary 2019.
Sustainability is an integral part of our company’s strategy and operations. To learn more about our ESG program, please view our website athttps://www.kellyservices.com/global/about-us/corporate-sustainability/corporate-sustainability-program/.
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Proxy Summary
Assessments, Recognition & Awards
| • KellyOCG was recognized as the best of the best by IAQP®. 2020. |
• Kelly is named among Forbes’ list of America’s best recruiting firms for 2019. | ||||
• America’s top corporations for women’s business enterprises (WBES) awards. 2019. | • Intel® Supplier Continuous Quality Improvement awards. 2018. | |||||
• Kelly was named to Flexjobs®. 2014-2020. | • Women’s Business Enterprises National Council (WBENC). 2019. | |||||
• Human Resources vendor of the year 2019. | • CEI Corporate Equality Index 100/100 for 2018 and 2020. | |||||
• Michigan Minority Supplier Diversity Council (MMSDC) Ace Awards. 2019. |
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Proxy Summary
FULL YEAR 2019 FINANCIAL SUMMARY
(As Reported)
| Actual Results | Change | Constant Currency Change(1) | ||||||||||
Revenue | $ | 5.4B | (2.9 | %) | (1.9 | %) | ||||||
Gross Profit (“GP”)% | 18.1 | % | 50 bps | |||||||||
Earnings from Operations | $ | 81.8M | (6.5 | %) | (5.0 | %) | ||||||
Return on Sales (“ROS”)% | 1.5 | % | (10 | ) bps | ||||||||
Earnings per Share (“EPS”) | $ | 2.84 | $ | 2.26 | ||||||||
Revenue declined in Americas Staffing and International Staffing in the face of a weakening manufacturing sector in the U.S. and softening demand in Europe, respectively. Global Talent Solutions (“GTS”) revenue improved year-over-year
GP rate improved from the impact of higher margin acquisitions and structural improvement in product mix in GTS
Earnings from Operations declined compared to last year as a higher GP rate on lower revenue resulted in lower gross profit. The Corporate Governancedecline was partially offset by lower performance-based incentive expenses and Nominating Committee worksexpense control efforts. Asset impairment and restructuring charges were partially offset by gain on sale of assets
EPS favorably impacted by a $0.63 gain on equity investment in 2019 compared to a $1.69 loss in 2018
| (1) | Constant Currency represents year-over-year changes resulting from translating 2019 financial data into USD using 2018 exchange rates. |
FULL YEAR 2019 FINANCIAL SUMMARY
(Excluding Gain/Loss on investment in Persol Holdings, Acquisitions, Asset Impairment Charge, Restructuring, and Gain on Sale of Assets)
| Actual Results | Change | Constant Currency Change(4) | ||||||||||
Revenue(1) | $ | 5.2B | (5.4 | %) | (4.4 | %) | ||||||
Gross Profit %(1) | 17.8 | % | 20 bps | |||||||||
Earnings from Operations(1),(2) | $ | 78.9M | (9.7 | %) | (8.1 | %) | ||||||
Return on Sales %(1),(2),(3) | 1.5 | % | (10 | ) bps | ||||||||
Earnings per Share(1),(2),(3) | $ | 2.16 | ($ | 0.11 | ) | |||||||
Revenue declined in Americas Staffing and International Staffing in the face of a weakening manufacturing sector in the U.S. and softening demand in Europe, respectively
GP rate improved due to structural improvement in product mix in GTS, partially offset by lower perm fees
Earnings from Operations declined as the effect of declining revenues was only partially offset by improving GP rate and reduced expenses from lower performance-based incentive expenses and efforts to align costs with revenue trends
EPS declined on lower earnings
| (1) | Excludes 2019 results from the NextGen and GTA acquisitions, which were acquired on January 2, 2019, and were included in the reported results of operations in Americas Staffing and GTS, respectively. |
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2019 asset impairment charge of $15.8 million, $11.8 million net of tax or $0.30 per share;
2019 restructuring charges of $5.5 million, $4.1 million net of tax or $0.10 per share
| (3) | Change excludes: |
2019 gain on investment in Persol Holdings of $35.8 million, $24.8 million net of tax or $0.63 per share;
2018 loss on investment in Persol Holdings of $96.2 million, $66.8 million net of tax or $1.69 per share
| (4) | Constant Currency represents year-over-year changes resulting from translating 2019 financial data into USD using 2018 exchange rates. |
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Proxy Summary
EXECUTIVE COMPENSATION HIGHLIGHTS
What We Do☑ | What We Don’t Do☒ | |
• Align pay with performance through the use of balanced performance measures across strategic business objectives in both short- and long-term incentives for senior officers • Align executive compensation with stockholder returns through performance-based equity incentive awards • Annual review of performance measures and goals for our annual and long-term incentive plans by the independent Compensation Committee to ensure we use diversified measures with challenging, but attainable targets • Require the achievement of a minimum acceptable level of financial performance in order for any payment to be made pursuant to the Short-Term Incentive Plan (“STIP”) • Include caps on individual incentive payouts in incentive plans • Require stock ownership and retention of a portion of equity-based awards by senior officers • Hold an annual“say-on-pay” stockholder advisory vote on executive compensation • Retain an independent executive compensation consultant to the Compensation Committee of the Board of Directors • Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes in existing programs or policies • Conduct annual assessments of any potential risks in our incentive compensation programs and policies and related internal controls • Annually review with the Compensation Committee share utilization, burn rate and dilution levels resulting from our compensation practices • Maintain an insider trading policy that requires directors, senior officers, and other designated officers of the Company to contact our Corporate Secretary prior to sales or purchases of common stock • Maintain a double-trigger for the accelerated vesting provisions under the Equity Incentive Plan (“EIP”) and the Senior Executive Severance Plan • Condition severance benefits for senior officers on compliance with restrictive covenants | • Provide employment agreements for senior officers • Guarantee bonus arrangements with our senior officers • Allow directors or senior officers to engage in hedging or pledging of Company securities • Allow the repricing or backdating of equity awards • Beginning with 2017 grants to executive officers, pay dividend equivalents on unvested restricted stock units until performance hurdle has been achieved and vesting period has been completed • Pay dividends on performance share awards • Provide excise taxgross-ups uponchange-in-control • Grant incentive awards to senior officers that are not subject to the Company’s Incentive Compensation Recovery (“Clawback”) Policy • Accrue additional retirement benefits under any supplemental executive retirement plans (“SERPs”) • Provide excessive perquisites | |
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Proposal 1: Election of Directors
PROPOSAL 1 – ELECTION OF DIRECTORS
The Board has nominated nine individuals for election as directors at the Annual Meeting, each to determineserve for one year and until his or her successor is elected and qualified. All of these individuals are currently serving on the appropriate mixBoard. The other current director, Mr. Takao Wada, is the designated representative of experience, qualifications, skills,our joint venture partner Persol Holdings Co., Ltd. (“Persol”). Mr. Wada is not standing forre-election and, attributes that enable a Director to make significant contributions tofollowing the Company. We doAnnual Meeting, Persol will not have a formal policy with regard to diversity. However, the Board values diversity highly and takes it into consideration, including diversity in gender, ethnicity, race, and age, as we strive to maintain a Board that is strong collectively in its backgrounds, knowledge, and experience. The following table highlights the breadth of experience that is representedrepresentative on the Board. A particular Director may possess other skills, knowledge, or experience that is in addition to those noted below.
Listed on the following pages are the names of the persons nominated for election as Directors of the Company, all of whom are currently Directors of the Company, their ages, principal occupations, other public companies at which they are Directors, occupations held during the past five years (unless otherwise stated, the occupations listed have been held during the entire past five years), and the year in which they first became a Director of the Company.
If a nominee is unavailable for election for any reason on the date of the election of the Director (which event is not anticipated), the persons named in the enclosed form of proxy may vote for the election of a person designated by the Board of Directors or the Board may reduce the number of Directors constituting the whole Board.
Directors will be elected by a plurality of the votes cast by holders of Class B common stockCommon Stock who are present in person, or represented by proxy, and entitled to vote at the Annual Meeting. Withheld votesOur controlling stockholder has indicated its support and brokernon-votesintention to vote for each of the director nominees.
We do not contemplate that any of the nominees will not count towardsbe unavailable to serve at the time of the Annual Meeting; in that event, however, the persons named in the enclosed form of proxy may vote for the election of a nominees’ achievementsubstitute selected by the Board or the Board may reduce its size.
On February 12, 2020, our Board affirmatively determined that directors Gerald S. Adolph, Robert S. Cubbin, Jane E. Dutton, Terrence B. Larkin, Leslie A. Murphy, and Donald R. Parfet, representing a majority of plurality.the Board, are independent. The Board’s guidelines for director independence conform to the listing standards of the Nasdaq Global Market (“Nasdaq”) on which the Company’s common stock is listed.
The Board of Directors is responsible for approving Director nominees based on the recommendation of the Corporate Governance and Nominating Committee.
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Proposal 1: ElectionCommittee is responsible for identifying and recommending to the Board qualified candidates for Board membership with the goal of Directors
building a Board that is effective, collegial, diverse, and responsive to the current and anticipated needs of the Company. The Committee considers the following criteria: (i) ethics, character, and judgment; (ii) business and other experience, expertise, skills, and knowledge relevant to the Company’s business and strategy; (iii) objectivity and independence of thought; (iv) diversity of background, experience, and personal characteristics such as gender, race, ethnicity, sexual orientation, and age; and (v) the interplay of the candidate’s qualities with those of other members of the Board. In determining whether to recommend a director forre-nomination, the Committee also considers the director’s recent contributions and potential for continuing contributions to the work of the Board. The Board has not adopted a policy whereby stockholders may recommend nominees to the Board because of the Company’s status as a controlled company.
After a review of the individual qualifications and experience of eachEach of our Directordirector nominees has been recommended for election by our Corporate Governance and their contributionsNominating Committee and nominated by our Board. Together, they bring to our Board broad diversity in terms of experience, skills, and personal attributes. The Board believes that this diversity strengthens the Board’s ability to carry out its oversight role on behalf of stockholders. While we do not have a formal diversity policy, the Board will seek to build upon its diversity in connection with future refreshment.
The following graphics highlight the personal diversity and breadth of Directors unanimously recommendsskills, knowledge, and experience that stockholders vote “FOR”are represented on the election of all Director nomineesBoard. A particular director may possess other skills, knowledge, or experience in addition to serve for theone-year term ending at the Annual Meeting of Stockholders held after the close of the fiscal year ending December 30, 2018.those noted below.
Set forth below are the nominees for election at the 2018 Annual Meeting of Stockholders.
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Proposal 1: Election of Directors
Biographical Information About Director Nominees
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Age: Director since: | 2004
|  | Peter W. Quigley Age: 58 Director since: 2019
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• None | ||||||||
Board Committees: • None | ||||||||
• Managing Director, Apjohn Group, LLC (2001 - present) • General Partner, Apjohn Ventures Fund (2003 - present) • General Partner, Apjohn Ventures Annex Fund (2010 - present) • Director, Rockwell Automation, Inc. (2008 - present) • Director, MASCO Corporation (2012 - present) • Director, Sierra Oncology Inc. (2015 - 2019) | Principal Occupation and Directorships: • President and Chief Executive Officer, Kelly Services, Inc. (2019 - present) • Executive Vice President, President of Global Staffing and General Manager of IT, Global Service, and Global Business Services, Kelly Services, Inc. (2017 - 2019) • Senior Vice President, General Counsel, Chief Administrative Officer and Assistant Secretary, Kelly Services, Inc. (2015 - 2017) | |||||||
Education: • University of Michigan, MBA, Finance • University of Arizona, BA, Economics | Education: • National Law Center at George Washington University, JD • University of Michigan, BA | |||||||
Don was appointed Chairman of the Board in 2018. Prior to being appointed to the Chairman role, he had | Peter was appointed President and Chief Executive Officer of Kelly in October 2019. Peter has 17 years of experience in a | |||||||
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Proposal 1: Election of Directors
 | Carol M. Adderley
Director since: 2010 |  | Gerald S. Adolph Age: Director since: 2018 | |||
Board Committees: • Governance and Nominating | Board Committees:
• Audit • Compensation • Governance and Nominating | |||||
Principal Occupation and Directorships:
• Writer and Researcher in the Humanities | Principal Occupation and Directorships: • Director andCo-Chair, NAACP Legal Defense and Education Fund (1998 - present)
• Director, Cintas Corporation (2006 - present)
• Trustee, Cardinal Spellman High School Board (2010 - present)
• Senior Partner and other executive positions, Booz & Co. (1981 - 2016) | |||||
Education:
• University of Chicago, AM, General Studies in Humanities, Literature and Social Change • University of Western Ontario, BA (Honors), English and Philosophy | Education: • Harvard Business School,
• Massachusetts Institute of Technology, MS, Chemical Engineering
• Massachusetts Institute of Technology, BS, Management Science (Concentration in Organizational Psychology)
• Massachusetts Institute of Technology, BS, Chemical Engineering | |||||
Carol is the granddaughter of William R. Kelly, the Company’s founder, and the daughter of Terence E. Adderley, who served for many years as Chief Executive Officer and as Chairman of the Board. Carol holds advanced degrees in the humanities and is a published author. | Gerald, | |||||||
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Proposal 1: Election of Directors
 | George S. Corona Age: Director since: 2017 |  | Robert S. Cubbin Age: 62 Director since: 2014 | |||
Board Committees:
• None | Board Committees: • Audit • Compensation (Chair) • Governance and Nominating | |||||
Principal Occupation and Directorships:
• President and Chief Executive Officer, Kelly Services, Inc. (2017 -
• Executive Vice President and Chief Operating Officer, Kelly Services, Inc. (2009 - 2017) | Principal Occupation and Directorships:
• Director, First Merit Corporation (2013 - 2017) • President and Chief Executive Officer, Meadowbrook Insurance Group, Inc. (2002 - 2016) | |||||
Education: • Oakland University, MBA
• Wayne State University, BSBA | Education:
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• Detroit College of Law, JD • Wayne State University, BA, Psychology | ||||||
George | ||||||
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Proposal 1: Election of Directors
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Proposal 1: Election of Directors
 | Jane E. Dutton Age: Director since: 2004 |  | Terrence B. Larkin Age: 65 Director since: 2010 | |||
Board Committees:
| Board Committees:
• Audit • Compensation | |||||
Principal Occupation and Directorships:
• Robert L. Kahn Distinguished University Professor Emeritus of Business Administration and Psychology, The University of Michigan Business School (2017 - present)
• Robert L. Kahn Distinguished University Professor of Business Administration and Psychology, The University of Michigan Business School (2007 - 2017) | Principal Occupation and Directorships:
• Executive Vice President, Business Development, General Counsel and Corporate Secretary, Lear Corporation (2008 - 2020) | |||||
Education:
• Northwestern University, Ph.D. and
• Colby College, BA Sociology | Education:
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• Wayne State University Law School, JD cum laude • Michigan State University, BA (High Honors), Finance | ||||||
Jane | ||||||
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Proposal 1: Election of Directors
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Proposal 1: Election of Directors
 | Leslie A. Murphy Age: 68 Director since: 2008 | |||||
Board Committees:
• Compensation |
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Principal Occupation and Directorships:
• President and CEO, Murphy Consulting, Inc. (2008 - present)
• Certified Public Accountant
• Member of AICPA’s Governing Council
• Member of NACD Advisory Councils on Audit Committee Issues and Risk Oversight (2012 - present)
• Director, Detroit Legal News Company (2012 - present)
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Education: • University of Michigan, BBA, Accounting | ||||||
Leslie | ||||||
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Proposal 1: Election of Directors
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Corporate Governance
Compliance with Nasdaq Independence Standards forUnderNon-Controlled Companies
Nasdaq, on which the listing standardsCompany’s common stock is listed, has established exemptions from its governance requirements for “controlled companies,” defined as companies in which a single person, entity, or group holds 50% of the Nasdaq Global Market, we are deemedvoting power for the election of its directors. The Company is a “controlled company” becauseby virtue of the fact that the Terence E. Adderley Revocable Trust K (“Trust K”), discussed below, has the Chairmanpower to vote approximately 91.6% of the BoardCompany’s outstanding shares of Directors, and certain trusts of which he acts as trustee orco-trustee, have voting powerClass B Common Stock.
In keeping with respect to more than fifty percent of our outstanding voting stock. As such, the Company may avail itself of exemptions relating to the independence of the Board, the Compensation Committee, and the nominating process.
Although we are a controlled company, the Company’s approach to leadership is intended to serve the interestshistoric recognition of all stockholders, and the Company has historically recognized the importance of having a Board composedmajority of independent directors, the Company has elected to comply voluntarily with all the Nasdaq listing standards that otherwise do not apply to controlled companies. Thus, a majority of the Board are independent Directors. Despitedirectors, all members of the availabilityCompensation Committee are independent directors and all members of controlled company exemptions, a majority of our Board is independent and we maintain an independentthe Audit Committee and Compensation Committee. In addition, ourare independent directors (which is a Nasdaq requirement for all listed companies). Commencing with the Annual Meeting of the Board to be held on May 6, 2020, when committee assignments will be made, all members of the Corporate Governance and Nominating Committee will be independent directors and the Company will fully satisfy the Nasdaq independence standards for boards and board committees ofnon-controlled companies.
Prior to his death in October 2018, Mr. Adderley was the trustee of Trust K. Upon his death, Trust K became irrevocable and, in accordance with the provisions of the trust, Andrew H. Curoe, David M. Hempstead, and William U. Parfet were appointed as successor trustees (the“co-trustees”). Theco-trustees are required to act by a majority vote, in voting and making investment decisions with respect to the Class B Common Stock held by Trust K.
William U. Parfet, aco-trustee,is majority independent.
the brother of Donald R. Parfet, Chairman of the Board. In the fall of 2017,determining that Donald R. Parfet is an independent director, the Board formed a special committee consisting of the independent Directors to review and make recommendations to the Board about governance matters, including the responsibilities of the independent Directors, Board leadership, and governance best practices. In March 2018, upon recommendation of the special committee, and with the support of Mr. Adderley, the Board adopted amendments to the Company’s Corporate Governance Principles to,considered, among other things, reallocate certain leadership responsibilities fromthat Donald R. Parfet and William U. Parfet are financially independent of one another, that the Executive Chairmanco-trustees are required to act by majority vote and Chairmanthat none of theco-trustees serves as an officer or director of the Board (a position heldCompany or has any personal financial interest in Trust K that could benefit from actions taken by Mr. Adderley, the Company’s controlling stockholder) to the Lead Director and the Chief Executive Officer. Commensurate changes were made to the title and compensation of that position. Upon recommendation of the special committee, the Board also adopted Amended and Restated Bylaws effective March 7, 2018 (as disclosed in the Company’s Current Report on Form8-K filed with the SEC on March 9, 2018), and, subject to stockholder approval, an Amended and Restated Certificate of Incorporation (Proposal 3) and a further amendment to the Bylaws to designate the Delaware Chancery Court as the exclusive forum for certain legal actions involving the Company in the event they were to arise (Proposal 4).Board.
Board Leadership and Governance Structure
The Company’sBoard is responsible for establishing and maintaining the most effective leadership is now vested in astructure for the Company. At the present time, the Board has determined that the roles of the Chairman of the Board of Directors (a position held by Mr. Adderley, the Company’s controlling stockholder), a Lead Director to provide independent leadership, and the Chief Executive Officer subjectshould be separate, with the Chairman an independent director, because that structure affords independent Board leadership and allows the Chief Executive Officer to the overall authority of the Board.
Our Chairman of the Board is a member ofconcentrate on the Company’s founding family and has given, to date, 60 years of dedicated service to the Company, including many years as its Chief Executive Officer. In his rolebusiness. Donald R. Parfet serves as Chairman of the Board Mr. Adderley contributes his deep knowledge of the Company and the staffing industry, and champions the values that have been integral to the Company’s culture since its founding: a commitment to the people of the Company – both our employees and the workers we place throughout the world; ethical business practices; and strong corporate governance.Peter W. Quigley serves as Chief Executive Officer.
The Chairman of the Board’s duties include consulting with our Chief Executive Officer, reviewing the agendas for Board meetings, presiding over meetings of the Board and, together with our Chief Executive Officer, presiding over meetings of stockholders. As longThe Chairman of the Board’s duties also include serving as liaison among the Chief Executive Officer and the independent directors, establishing the schedule for Board meetings (in consultation with the Chief Executive Officer), developing and approving agendas for Board meetings, approving the information sent to the Board for meetings, establishing the schedule and agendas for and presiding over meetings of the independent directors in executive session, providing feedback to the Chief Executive Officer on those executive sessions, and facilitating discussions among independent directors on key issues outside of Board meetings.
In the event that the Chairman of the Board is not an independent Director, as is currentlydirector, the case, the independent Directors are required under ourCompany’s Corporate Governance Principles toprovide that the independent directors will elect one of the independent Directors as Lead Director.
The Lead Director’s principal duties are to ensure the Board functions independent of management,their number to serve as liaison among the Chairman of the Board, the Chief Executive OfficerLead Director and the independent Directors, to establish the schedule for Board meetings (in consultation with our Chairman of the Board and Chief Executive Officer), to assist in the development of and to approve the agendas for Board meetings, to approve the information sent to the Board for meetings, to preside at meetings of the Board of Directors in the absencefulfill many of the Chairman of the Board, to establish the schedule and agendas for and to preside over meetings of the independent Directors in executive session and to provide feedback to the Chairman of the Board and the Chief Executive Officer on those executive sessions, to facilitate discussions among independent Directors on key issues outside Board meetings, and to be available for consultation with the Chairman of the Board and Chief Executive Officer.Board’s current responsibilities.
The Chief Executive Officer is responsible for managing the business and affairs of the Company, subject to the oversight of the Board. The Chief Executive Officer’s duties include leading the management team, representing the Company externally, consulting with the Chairman of the Board about developments in the Company, and communicating with all Directorsdirectors about key issues outside of Board meetings.
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Corporate Governance
Board of Directors Majority Independent Independent Chairman of the Board | ||||||||
| Audit Committee | Compensation Committee | Governance and Nominating Committee | ||||||
| All Independent | All Independent | Majority Independent (All Independent in May 2020) | ||||||
The Board has established three standing committees: an Audit Committee, a Compensation Committee, and a Corporate Governance
and Nominating Committee. Each committee functions under a written charter adopted by the Board, which is available on the Company’s website atkellyservices.com or to any stockholder who requests a copy. The current members, responsibilities, and the number of meetings each of these committees held in 2019 are shown below.
| Audit Committee | ||
Members: All Independent Leslie A. Murphy (Chair) Terrence B. Larkin Gerald S. Adolph Robert S. Cubbin Meetings in 2019: 7 The Board has unanimously determined that each member of the Audit Committee meets Nasdaq’s “financial sophistication” requirements and that Mr. Cubbin, Mr. Larkin, and Ms. Murphy each has the financial education and experience to qualify as an “Audit Committee financial expert” within the meaning of SEC regulations. | Key Responsibilities: • Oversees and reports to the Board with respect to the quality and integrity of the Company’s financial statements, accounting, and financial reporting processes, and audits of the financial statements and internal controls over financial reporting • Appoints, compensates, and evaluates the qualifications, independence, and performance of the independent auditor • Oversees the performance of the internal audit function • Oversees the Company’s Enterprise Risk Management Program • Monitors the Company’s compliance with legal and regulatory requirements • Reviews and approves related party transactions • Serves as the Company’s Qualified Legal Compliance Committee | |
| Compensation Committee | ||
Members: All Independent Robert S. Cubbin (Chair) Leslie A. Murphy Gerald S. Adolph Jane E. Dutton Terrence B. Larkin Meetings in 2019: 6 During 2019, none of the Company’s executive officers served on the Board of Directors of any entities whose directors or officers served on the Company’s Compensation Committee. No current or past executive officers of the Company or its subsidiaries serve on the Compensation Committee. | Key Responsibilities: • Develops the Company’s compensation philosophy • Designs and administers the Company’s executive compensation programs and policies that are aligned with business and compensation objectives • Determines and approves the annual compensation of the CEO, all senior officers, and Section 16 officers • Reviews stock ownership requirements for Senior Officers and compliance with the guidelines • Reviews and makes recommendations to the Board concerning director compensation • Reviews and advises the Board concerning CEO and senior officer succession planning | |
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The full text of our Board’s
Corporate Governance Principles and the charters of the Board’s three standing committees, which are the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee, are available on the Company’s website atkellyservices.com.The following table sets forth the Board committees and the current members of each.
Audit
| Compensation
| Governance and
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Terence E. Adderley
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Carol M. Adderley
| Vice Chair
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Gerald S. Adolph *
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George S. Corona
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Robert S. Cubbin *
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| Chair
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Jane E. Dutton *
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| Chair
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Terrence B. Larkin *
| Vice Chair
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Leslie A. Murphy * | Chair
| Vice Chair
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Donald R. Parfet * (Lead Director)
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Hirotoshi Takahashi
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Number of Meetings Held in Fiscal Year 2017 | 5
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Directors are expected to attend the Annual Meeting of the Stockholders, all Board meetings, and all meetings of the committees on which they individually serve. The Board held nine meetings during 2017. Seven of the nine Directors then in office attended the 2017 Annual Meeting of Stockholders. Director attendance averagedninety-two percent of the aggregate number of meetings of the Board of Directors and the committees on which they served during 2017. Only Mr. Takahashi, who resides in Japan, attended fewer than seventy-five percent of the aggregate number of meetings of the Board of Directors. He does not serve on any committee. The independent Directors met in executive sessions at which only they were present at least eight times during 2017 as well as met as part of the Special Committee at least four times during 2017.
The Audit Committee is composed of R.S. Cubbin, T.B. Larkin (Vice Chair), L.A. Murphy (Chair), and D.R. Parfet, all of whom are independent Directors. The Audit Committee held five meetings in 2017. The Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Audit Committee’s responsibilities are detailed in its charter and include: monitoring the integrity of the Company’s financial statements, accounting and financial reporting processes, and financial statement audits; the qualifications, independence, and performance of the Company’s independent registered public accounting firm; the qualifications and performance of the Company’s Internal Audit group; the Company’s compliance with legal and regulatory requirements; and the Company’s Enterprise Risk Management program that includes systems of disclosure controls and procedures, internal controls over financial reporting, and compliance with ethical standards adopted by the Company.
| Corporate Governance and Nominating Committee | ||||
Members: Majority Independent* Jane E. Dutton (Chair) Carol M. Adderley Gerald S. Adolph Robert S. Cubbin Meetings in 2019: 4 * The Committee will become fully independent following the Annual Meeting. | Key Responsibilities: • Identifies and recommends to the Board, nominees to serve on the Board • Monitors the independence of directors of the Board and Board Committees • Oversees the Board and Board Committees annual evaluation process • Develops and oversees compliance with the Company’s Corporate Governance Principles • Reviews and makes recommendations to the Board with respect to corporate governance matters generally • Reviews and reports to the Board concerning the development of the Company’s Corporate Sustainability Strategy | |||
The Audit Committee approves (or ratifies fee adjustments onpre-approved services approved under authority delegated to the Chief Financial Officer (“CFO”)) all audit, audit related, internal control related, tax, and permittednon-audit services of the independent registered public accounting firm prior to engagement. The Audit Committee also serves as the Company’s Qualified Legal Compliance Committee.
The Board has unanimously determined that R.S. Cubbin, T.B. Larkin, L.A. Murphy and D.R. Parfet each have the financial education and experience to qualify as an “Audit Committee financial expert” within the meaning of SEC regulations and as such meet the “financial sophistication” requirements under current Nasdaq Global Market listing standards.
The Compensation Committee’s current members are R.S. Cubbin (Chair), J.E. Dutton, T.B. Larkin, L.A. Murphy (Vice Chair), and D.R. Parfet, all of whom are independent Directors. The Compensation Committee is charged with developing the Company’s compensation philosophy and establishing and monitoring compensation programs for all employees. The Compensation Committee held six meetings in 2017.
The Compensation Committee determines the compensation of the CEO and, taking into account the CEO’s recommendations, determines the compensation for all Senior Officers, which includes all officers as defined inSection 16a-1(f) of the Securities Exchange Act of 1934 (the “Exchange Act”).. The Compensation CommitteeWhile management is responsible for the administration of base salaries, short-term incentive awards under the Company’s Short-Term Incentive Plan (“STIP”), and long-term incentive awards under the Company’s Equity Incentive Plan (“EIP”) for Senior Officers. Our thirteen current Senior Officers are listed under Kelly Leadership on the Company’s website atkellyservices.com. The authoritymanaging risk, one of the Compensation Committee is detailed in its charter.
To assist the Compensation Committee in making compensation recommendations for Senior Officers, the Company’s Executive Compensation group provides the Compensation Committee with historical, survey, and benchmark compensation data. The Compensation Committee also relies on the CEO and the other Named Executive Officers to provide performance evaluations and compensation recommendations to assist in its decisions regarding the total compensation of Senior Officers. The Compensation Committee has delegated to the CEO the authority to approve salary recommendations and incentive awards to the Company’s Officers below the Senior Officer group who are not subject to Section 16 of the Exchange Act.
The Compensation Committee has the authority to retain independent consultants. Retained consultants report directly to the Compensation Committee, which determines the consultants’ scope of work and fees. In 2017, the Compensation Committee retained Pay Governance LLC (“Pay Governance”) to provide assistance with the review of Executive and Director compensation. The Compensation Committee conducted an assessment of Pay Governance’s independence using factors established by the SEC and Nasdaq Global Market, and affirmed the independence of Pay Governance.
Compensation Committee Interlocks and Insider Participation
During 2017, none of the Company’s Executive Officers served on the Board of Directors of any entities whose Directors or Officers served on the Company’s Compensation Committee. No current or past Executive Officers of the Company or its subsidiaries serve on the Compensation Committee.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee, whose current members are C.M. Adderley (Vice Chair), T.E. Adderley, R.S. Cubbin, J.E. Dutton (Chair), and D.R. Parfet, held six meetings during 2017. The Corporate Governance and Nominating Committee’s responsibilities include: assisting the Board of Directors in identifying individuals qualified to become Directors; recommending to the Board the nominees for the next Annual Meeting of Stockholders or to otherwise fill vacancies and newly created directorships; overseeing the composition, organization, and governanceimportant functions of the Board and its committees; overseeing an annual evaluationcommittees is oversight of Board and committee effectiveness; developing and overseeing compliance with the Board’s Corporate Governance Principles; and advising and making recommendations to the Board with respect to corporate governance matters.
The Board’s oversight responsibilities includerisk management. This includes consideration of strategic issues and risks to the Company as well as management’s actions to address and mitigate those risks. Through its charter,Risk is inherent in business, and the Audit Committee is charged byBoard’s oversight, assessment, and decisions regarding risks occur in conjunction with the other activities of the Board with overseeingand its committees.
Risk Governance and Oversight Responsibilities
Board of Directors
Oversees consideration of strategic issues and risks to the Company’sCompany as well as management’s actions to address and mitigate those risks. The Board is kept apprised of its committees’ risk assessment and enterprise risk management processes. The Audit Committee andoversight activities through reports from the committee chairs to the full Board focuspresented at regular Board meetings. Focuses on risk management strategy and risks of greatest significance, and seekseeks to ensure that risks assumed by the Company are consistent with the Company’s risk tolerance and risk appetite. Risk oversight is also addressed as part of the full Board’s regular oversight of strategic planning.
Audit Committee | Compensation Committee | Corporate Governance and Nominating Committee | ||
• Plays a key role in the Board’s risk oversight process, particularly with respect to risks that could have a financial impact, such as financial reporting and disclosure, accounting practices, internal controls, conflicts of interest, and compliance with legal and regulatory requirements. | • Oversees our compensation plans, policies, and practices to ensure alignment with our Executive Compensation Risk Assessment Framework. | • Manages risk associated with governance issues, such as the independence of the Board and its Committees, Board and Committee effectiveness and organization, corporate governance, and director succession planning. | ||
• Responsible for overseeing the Company’s risk assessment and enterprise risk management processes. | • Responsible for reviewing the Company’s compensation program risk assessment for employee compensation programs and reporting to the Board any compensation program that is reasonably likely to have a material adverse effect on the Company. | • Maintains corporate governance principles and procedures designed to assure compliance with all applicable legal and regulatory requirements and governance standards and the Company’s Code of Conduct and Insider Trading Policy. | ||
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Corporate Governance
Audit Committee | Compensation Committee | Corporate Governance and Nominating Committee | ||
• Reviews all quarterly and annual reports, including any disclosure of risk factors affecting our business. | • Together with the compensation committee’s independent consultant, provides input to management in conjunction with their annual assessment of potential risks that may be created by our compensation plans, policies and practices. | • Reviews the skills and experience of the Board and its committees on a regular basis, and as needed for potential candidates to serve on the Board, to ensure the diversity and relevant experience necessary for an effective Board. | ||
• Receives quarterly updates on the Company’s proactive approach to cyber security from the Information Technology and Internal Audit groups. | • Sets performance goals under our annual and long-term incentive plans that provide an appropriate balance between the achievement of both short and long-term performance objectives, with emphasis on managing the sustainability of the business and mitigation of risk. | • Evaluates annually the independence of each director under the independence requirements of Nasdaq and applicable SEC regulations. | ||
• Oversees the performance of the Company’s Internal Audit function. | • Oversees the orientation and education of directors to ensure clear understanding of their Board responsibilities and the Corporate Governance Principles, Code of Business Conduct and Ethics, and the Insider Trading Policy. | |||
• Monitors the qualifications, performance, and independence of the Company’s independent auditors. | ||||
Corporate Governance
While the Audit Committee has responsibility for the oversight of the Company’s risk assessmentManagement assesses and risk management processes, it is the duty of the Company’s management to assess and managemanages critical risks, including the execution of itsthe Company’s Enterprise Risk Management (“ERM”) program. The Company’s risk-related departments and functions are under the direction of the Vice President and Chief Risk, Compliance, and Privacy Officer (“Chief Risk Officer”) who reports directly. With respect to the CEO.risk assessment of the Company’s compensation programs, management is responsible for the framework and approach as outlined below under, “Risk Assessment of Compensation Programs.”
Enterprise Risk Management (“ERM”) Program
The Company’s ERM program serves as the primary means of identifying and managing the Company’s key risks. The Company’s ERM team has, among other activities, performed assessments of risks to the Company, participated in the development and execution of mitigation programs for critical risks, facilitated the establishment of a corporate risk appetite and tolerance statement, inclusive of an oversight and monitoring mechanism, established a privacy governance function, and assisted in the integration of risk concepts within the Company’s strategic planning process.
The ERM team reports its findings to the Audit Committee on a quarterly basis, providing both written reports and periodicin-person presentations. Its current activities remain focused on mitigation and oversight of specific risk exposures, analysis of the breadth and effectiveness of existing risk management practices, and maturation of measurement and monitoring practices concerning high-priority strategic and operational risks. Current areas of particular emphasis include cyber security, data privacy, wage-hour risk management, and improvements to the Company’s compliance governance and incident reporting practices. The Company’s Information Technology and Internal Audit groups provide regular quarterly updates to the Audit Committee with respect to the Company’s proactive approach to cyber security. Controls are reviewed for operational effectiveness and to provide reasonable assurance that: business risk is managed and assets are safeguarded; security of information, processing infrastructure, and applications are maintained; and all risks are mitigated to the extent practicable.
In addition to the reports submitted quarterly by the Company’s Chief Risk Officer, the Vice President of Internal Audit independently assesses the Company’s risk management process and separately reports to the Audit Committeeon the effectiveness of the Company’s risk identification, prioritization, and mitigation processes.processes to the Audit Committee.
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Corporate Governance
Risk Assessment of Employee Compensation Programs
As set forth in its charter, the Compensation Committee is charged with reviewing the Company’s compensation program risk assessment for all employee compensation programs and reporting to the Board any compensation program that is reasonably likely to have a material adverse effect on the Company.
AtAnnually, at its February 2018 meeting, the Compensation Committee reviewedreviews management’s Compensation Program Risk Assessment Report. The report wasis prepared by the Company’s Executive Compensation and Human Resources groups in collaboration withand is reviewed by the Company’s Internal Audit Department.Chief Risk Officer. The Company’s Executive Compensation Program Risk Assessment Framework is reviewed and updated as needed to ensure a robust and comprehensive assessment process. In addition, the ConsultantBoard’s independent compensation consultant reviewed the assessment prepared for the executive compensation section of the report.
The Company’s Executive Compensation Program Risk Assessment
Framework takes into consideration the following guiding factors: |
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Corporate Governance
Short- and long-term incentive performance measures and equity award types do not encourage excessive risk-taking
A balanced structure with a mix of compensation that includes an appropriate mix of fixed and variable cash and equity; and, for variable compensation, a balance of short- and long-term incentive opportunities
Performance criteria and corresponding objectives include a balance of performance and the quality of such performance; include the appropriate use oftop-line vs. bottom-line metrics; and use annual and long-term measures that complement each other
Plans are well-designed and do not include steep payout curves, uncapped incentive payouts, and misaligned payout timing
Incentive plans are tested for multiple scenarios under realistic assumptions to ensure that potential payouts are reasonable relative to results
A thorough and qualitative assessment of how results were achieved, and the quality and sustainability of the results is conducted
Validation of the relationship between performance and incentive plan payouts to ensure it falls within the range of competitive practices determined by comparison with a representative peer group and general industry
Implementation of risk-mitigating features such as a clawback policy that applies in certain circumstances involving the restatement of financial results and a policy that requires a portion of the shares received from incentive award payouts to be retained by the participants through ownership/retention approaches
Incentive plan governance includes involvement at a variety of levels from the Compensation Committee to various corporate functions including Corporate Governance, Executive Compensation, Finance, HR, Legal, and the Board’s outside consultant, Pay Governance
Potential risk is discussed with the Compensation Committee, recorded in Committee minutes, and discussed in the Compensation Discussion and Analysis section of the Company’s Annual Proxy Statement
To assess the risk of employee compensation programs below the executive level, the Company’s Human Resources group has implemented a Governance Committee to review and approve plan design and address any significant issues that arise. The Governance Committee utilizes its Global Incentive Plan Design and Risk Mitigation Framework to consider links to strategy and any risks associated with the design of each incentive plan. The risks associated with each of the following elements of the design and implementation of an incentive plan are considered, as well as the steps in place to mitigate risk and ensure alignment with the Company’s strategic plan:
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Linkage of incentive measures with business objectives, analysis of total compensation market data, determination of design elements/payout threshold levels, potential range of payouts, and timely and accurate tracking of performance data;
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Modeling, approval, and communication of incentive plans;
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Calculation, audit, approval, and communication of incentive payments; and
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Annual plan reviews to ensure planned design updates align with business goals and budgets, and do not present a material risk to the Company.
After due consideration of management’s 20182019 Compensation Program Risk Assessment Report, the Compensation Committee concluded that the Company’s compensation programs do not create a reasonable likelihood of a material adverse effect on the Company.
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Corporate Governance
Directors are expected to attend the Annual Meeting of the Stockholders, all Board meetings, and all meetings of the committees on which they individually serve. The Board held nine meetings during 2019. All directors then in office attended the 2019 Annual Meeting of Stockholders. Director attendance averaged 96% of the aggregate number of meetings of the Board of Directors and the committees on which they served during 2019. Mr. Wada’s attendance averaged 86% of the aggregate number of meeting of the Board of Directors on which he served during 2019. The independent directors met in executive sessions at which only they were present at least six times during 2019.
Under the Company’s Amended and Restated Bylaws (the “Bylaws”), the number of directors constituting the Board may be fixed by the Board within the range of five to eleven directors. The size of the Board should not exceed a number that, as determined by the Board, will permit it to function efficiently in discharging its duties.
The Board does not have term or age limits. The Board believes that the perceived value of such limits is outweighed by the contributions of directors who have been able to develop, over a period of time, increasing insight into the Company’s operations and strategic direction and, therefore, provide an increasing contribution to the effectiveness of the Board as a whole.
Director Service on Outside Public Company Boards
While there is no specified limit on the number of other public company boards on which a director may serve, the number of board memberships is a consideration, along with any other time commitments a director or nominee may have, in determining his or her ability to serve effectively. Directors must be willing and able to devote sufficient time to carrying out their duties and responsibilities effectively and have an intention to serve an appropriate length of time in order to make a meaningful contribution to the Board and Committee Evaluation
Annually,the Company. A director should engage in discussion with the Chair of the Corporate Governance and Nominating Committee overseesprior to accepting an invitation to serve on an additional public company board or accepting an invitation to chair a committee of a public company board on which he or she currently serves.
Director Orientation and Continuing Education
Management, working with the Board’sCorporate Governance and Committees’ evaluation processesNominating Committee, provides an orientation program for new directors. The program addresses the Company’s business, history, vision, strategic direction, competitive landscape, core values, ethics, corporate governance practices, financial matters, key policies, and reports resultssenior leadership. The program is conducted by means of, as appropriate, written materials, briefings by the senior management, and visits to Company facilities. Directors are also encouraged to participate in continuing director education programs that include presentations on business, financial, accounting, legal, and other subjects relevant to the Board. The Company’s business. Reasonable costs and expenses incurred for continuing education are reimbursed by the Company.
Board and each Committee conductEvaluation
The Corporate Governance and Nominating Committee organizes and oversees an annual evaluation of their respective performance, the purpose of which is to increase the effectiveness of the committees and the Board as a whole. The process includes an assessment ofby the Board and each Committee’s effectiveness and independence, access to and reviewits committees of information from management, responsiveness to stockholder concerns, maintenance of standards of business conduct and ethics, and relationship with management.their performance. The evaluation is intended to facilitate an examination and discussion by the entire Board and each Committee of its effectiveness as a group in fulfilling its charter requirements and other responsibilities. Some ofresponsibilities, its performance as measured against the Company’s Corporate Governance Principles, and areas reviewed as part offor improvement. From time to time the evaluation include: Director obligations, roles and responsibilities, Board member qualifications, Committee member qualifications, Board structure, Committee structure, corporate governance, organization performance, culture and ethics, and educational opportunities. Past evaluations have resulted in the Committee revising its criteria for Director candidates, extending the length of various meetings to ensure sufficient discussion time, discussion of potential future Committee participation, establishment of the roles of Committee Vice Chairs, and Committee Chair succession.may also include individual director assessments.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all Directors, Officers,directors, officers, and employees to help them recognize and deal with ethical issues, deter wrongdoing, provide mechanisms to report dishonest or unethicalany concerns, promote honest and ethical conduct, provide full, fair and timely disclosure, comply with applicable law and regulations, and help foster a culture of honesty and accountability. The Code of Conduct was updated in 2017 and addresses conflicts of interest,interest; anti-bribery/anti-corruption,anti-corruption; insider trading,trading; corporate opportunities,opportunities; confidentiality and privacy,privacy; external communications; protection and proper use of assets,assets; fair dealing,dealing; contract management; acceptable behavior in the workplace,workplace; corporate sustainability; compliance with laws, rules and regulations, Company policies,regulations; risk tolerance,tolerance; anti-human trafficking and slavery; seeking advice and reporting dishonest or unethical behavior andconcerns; outside activities; political contributions; public company reporting requirements.requirements; and other policies. The Code of Conduct includes an enforcement mechanism.
The full text of the Code of Conduct is posted on the Company’s website atkellyservices.com. This information is available in print to any stockholder who requests it from the Company’s Investor Relations Department.department. The Company will disclose future amendments to the Code of Conduct for its Directorsdirectors and Executive Officersexecutive officers on its website or by filing a current report on Form8-K within four business days following the date of amendment, or such earlier period as may be prescribed by Nasdaq or the SEC.
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Corporate Governance
Related Person Transactions and Certain Relationships
Pursuant to the Company’s Code of Conduct, any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company must be disclosed immediately to the Vice President of Internal Audit or to the General Counsel. In addition, Directorsdirectors and Executive Officersexecutive officers are required to complete an annual questionnaire that solicits information regarding any transactions or relationships between themselves or their immediate family members and the Company of the types described in Item 404(a) of SEC RegulationS-K (“Related Party Transactions”). Directors and Executive Officersexecutive officers must seek a determination and obtain prior authorization or approval of any potential conflict of interest (including any Related Party Transaction) from the independent Audit Committee. The Audit Committee, pursuant to its charter, is tasked, among other things, with the responsibility to review Related Party Transactions and other conflicts of interest involving Directorsdirectors and Executive Officers.executive and senior officers. The Company does not havemaintains a formal written policy regarding such reviews.addressing the reporting, review, and approval or ratification of transactions with related persons.
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Corporate Governance
Mr. Adderley, the Chairman of the Board and our controlling stockholder, receives compensation from the Company, as described below under “Director Compensation,” which is approved by the independent Compensation Committee. Mr. Takahashi,Wada, a Directordirector of the Company serveswhose term expires as of the date of the Company’s 2020 Annual Meeting, served as the designated representative of Persol, Holdings Co., Ltd., which owns 4.5%4.4% of the Company’s Class A Common Stock, and with which the Company has a strategic alliance, as described in the Company’s Annual Report on Form10-K for the periodfiscal year ended December 31, 2017.29, 2019. Mr. Takahashi receivesWada received no compensation for his service as a Director.
Corporate Social Responsibility
The Company believes that corporate social responsibility (“CSR”) is a cornerstone of the organization. The Company focuses its CSR efforts in four crucial areas: employees and people, ethics, engagement, and the environment. The Company’s CSR report is posted on the Company’s website atkellyservices.com.director.
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Director Compensation
Our approach to director compensation is to appropriately compensate ourIn 2017,non-employee directors for the time, expertise, and effort required to serve as a director of a large, complex company and to align the interests of directors with those of stockholders. Compensation levels for ournon-employee directors are periodically reviewed for market competitiveness. Compensation payments are made after thenon-employee directors are elected by stockholders at the Annual Meeting.Non-employee directors who begin their Board or committee chair service other than at the Annual Meeting receive a prorated amount of annual compensation.
The Compensation Committee typically reviewsnon-employee director compensation in alternating years.In 2018, the Compensation Committee engaged its independent compensation consultant, Pay Governance, to evaluate itsnon-employee Director compensation, which was last increased in 2009. At its meeting followingdirector compensation. Pay Governance conducted a comprehensive review of the 2017 Annual Meetingmost recent proxy filings of Stockholders, the CompensationCompany’s peer group and general industry to assess the competitiveness of the Company’snon-employee director compensation. Based on the results of the review, the Committee approved increasesan increase in the retainers paidvalue of the equity portion of the annual retainer in 2018. No changes were made to thenon-employee Directors, effective beginning May 11, 2017.director compensation in 2019. The base retainer forcompensation of ournon-employee Directors (other than Mr. Takahashi, who receives no compensation for his service as a Director) was increased from $150,000 to $180,000.directors will next be reviewed in 2020, with the assistance of Pay Governance. The additional retainers associated with Board leadership positions were also increased: for the Lead Director, from $20,000 to $40,000; for the Chair of the Audit Committee, from $12,500 to $20,000; for the Chair of the Compensation Committee, from $7,500 to $15,000; and for the Chair of the Corporate Governance and Nominating Committee, from $7,500 to $10,000.following table illustrates our 2019non-employee director compensation:
| Annual Base Retainer | Board Leadership Positions - Additional Retainer (Committee Chairs) | |||||||||||||||||||
| Non-Employee Directors | Chairman of the Board | Audit Committee | Compensation Committee | Corporate Governance & Nominating Committee | ||||||||||||||||
Cash | $ | 100,000 | $ | 150,000 | $ | 20,000 | $ | 15,000 | $ | 10,000 | ||||||||||
Equity (Kelly Class A Stock - $ Value) | $ | 110,000 | $ | 165,000 | — | — | — | |||||||||||||
TOTAL | $ | 210,000 | $ | 315,000 | $ | 20,000 | $ | 15,000 | $ | 10,000 | ||||||||||
Under the Company’s amended and restated Equity Incentive Plan (“EIP”), which was approved at the 2017 Annual Meeting of Stockholders, the Board of Directors is required to periodically determine from time to time the percentage of the base retainer that will be issued tonon-employee Directorsdirectors in shares of Class A common stock. AtCommon Stock. The Compensation Committee and Board of Directors have approved fixing the meetingportion of the Board followingannual base retainer that is paid in cash at $100,000, and the 2017 Annual Meetingportion paid in equity at $110,000 (cash portion of Stockholders,$150,000 and equity portion of $160,000 for the Board determined that $80,000Chairman of the base retainer would be issued in shares. DirectorsBoard).
Non-employee directors are subject to a stock ownership requirement that is a minimum fair market value of twofour times the value of the cash portion of the annual retainer (which currently equates to $360,000)$400,000).
The Chairman of the Board is anon-officerNon-Employee employee position. In 2018, in connection with the review of governance matters described above, and with the advice of Pay Governance LLC, the special committee of independent Directors recommended, and the Board approved, effective May 1, 2018, annual compensation for the redesigned role of Chairman of the Board equal to 150% of the annual base retainer payable tonon-employee directors, inclusive of the cost ofbenefits-in-kind disclosed in footnote (3) below, with the remaining amount payable in cash. Deferred Compensation Plan
The Company will continue to furnish administrative staff support to Mr. Adderley related to his duties as Chairman of the Board.
During 2017, the Companyhas established theNon-Employee Directors Deferred Compensation Plan (“DDCP”), which providesnon-employee Directorsdirectors with the opportunity to defer all or a portion of all fees payable to them, pursuant to a valid deferral election. The DDCP is anon-qualified plan that allows for the deferral of all or a portion of annual cash payments to a notional account with investment fund choices that mirror those provided to participants in the Company’s Management Retirement Plan (“MRP”); in. In addition to those fund choices the Plan also includes the option to defer annual cash payments into Company common stock units.Non-employee Directorsdirectors may also elect to defer all or a portion of their annual stock retainer into Company common stock units. Participants may elect to receive distributions from their DDCP account at the time they cease to be a Directordirector of the Company or at a future date that is between one and ten years following the date they cease to be a Directordirector of the Company.Non-employee Directorsdirectors can elect to have distributions from the DDCP made in either a lump sum or in annual installment payments made over a two to ten yeartwo-to-ten-year period.
The following table sets forth the compensation paid during 20172019 to the Directors other thanCompany’snon-employee directors. Mr. Corona,Quigley received no compensation for his services as a director in 2019, for the period of time he served as our President and Chief Executive Officer. Mr. Quigley’s compensation as President and Chief Executive Officer whose compensation is disclosed in the Compensation Discussion & Analysis section of this Proxy Statement.
| Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
T.E. Adderley | – | – | – | – | – | 1,007,544 | $1,007,544 | (3) | ||||||||||||||||||||
C.M. Adderley | $100,010 | $79,990 | – | – | – | – | $180,000 | |||||||||||||||||||||
G.S. Adolph | $16,667 | $13,333 | – | – | – | – | $30,000 | |||||||||||||||||||||
R.S. Cubbin | $115,010 | $79,990 | – | – | $15,752 | – | $210,752 | |||||||||||||||||||||
J.E. Dutton | $110,010 | $79,990 | – | – | $30,354 | – | $220,354 | |||||||||||||||||||||
T.B. Larkin | $100,010 | $79,990 | – | – | – | – | $180,000 | |||||||||||||||||||||
L.A. Murphy | $120,010 | $79,990 | – | – | – | – | $200,000 | |||||||||||||||||||||
D.R. Parfet | $140,010 | $79,990 | – | – | – | – | $220,000 | |||||||||||||||||||||
H. Takahashi(4) | – | – | – | – | – | – | – | |||||||||||||||||||||
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Director Compensation
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
Carol M. Adderley | $ | 100,000 | $ | 110,000 | — | — | ($ | 340 | ) | — | $ | 209,660 | ||||||||||||||||
Gerald S. Adolph | $ | 100,000 | $ | 110,000 | — | — | ($ | 10,006 | ) | — | $ | 199,994 | ||||||||||||||||
George S. Corona(3) | — | — | — | — | — | — | — | |||||||||||||||||||||
Robert S. Cubbin | $ | 115,000 | $ | 110,000 | — | — | $ | 16,012 | — | $ | 241,012 | |||||||||||||||||
Jane E. Dutton | $ | 110,000 | $ | 110,000 | — | — | $ | 75,470 | — | $ | 295,470 | |||||||||||||||||
Terrence B. Larkin | $ | 100,000 | $ | 110,000 | — | — | — | — | $ | 210,000 | ||||||||||||||||||
Leslie A. Murphy | $ | 120,000 | $ | 110,000 | — | — | ($ | 1,359 | ) | — | $ | 228,641 | ||||||||||||||||
Donald R. Parfet | $ | 150,000 | $ | 165,000 | — | — | — | — | $ | 315,000 | ||||||||||||||||||
Takao Wada(4) | — | — | — | — | — | — | — | |||||||||||||||||||||
| (1) | One of our directors deferred the following amounts from her 2019 cash retainer fee: Ms. Dutton - $110,000. |
| (2) | Represents the aggregate fair market value of grants awarded on May 8, 2019. Each director received a grant of 4,385 shares of the Company’s Class A Common Stock having a fair market value of $25.08 per share. Ms. Adderley deferred 25% of her 2019 annual stock grant into deferred common stock units. Each of Mr. Adolph, Mr. Cubbin, Ms. Dutton, and Ms. Murphy deferred 100% of their 2019 annual stock grant into deferred common stock units. |
| (3) | Mr. Corona did not receive compensation as a director in 2019. His compensation as President and CEO for the first nine months of 2019 and as anon-executive employee for the last three months of 2019 is disclosed in the Compensation Discussion and Analysis section below. |
| (4) | Mr. Wada served on the Board as the designated representative of our joint venture partner, Persol, and received no compensation for his service as director. Mr. Wada will complete his service as a director as of the date of the 2020 Annual Meeting. |
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Director Compensation
(1) Two of our directors deferred the following amounts from their 2017 cash retainer fee: Mr. Cubbin – $46,004; and Ms. Dutton – $110,010. Mr. Adolph was appointed as a Director effective March 7, 2018 and received a pro rata amount of the annual cash retainer fee fornon-employee Directors.
(2) Represents the aggregate fair market value of grants awarded on May 11, 2017. Each Director received a grant of 3,493 shares of the Company’s Class A common stock having a fair market value of $22.90 per share. Mr. Cubbin deferred 40% of his 2017 annual stock grant into deferred common stock units; and Ms. Dutton deferred 100% of her 2017 annual stock grant into deferred common stock units. Mr. Adolph received a pro rata grant of 450 shares of the Company’s Class A common stock having a fair market value of $29.63 per share on the award date of March 7, 2018.
(3) As an employee, Mr. Adderley is eligible to participate in the Company’s benefit plans and Management Retirement Plan. Other compensation includes base salary of $958,100, employer provided life insurance in the amount of $17,304, the incremental cost to the Company for personal use of airplane totaling $29,902, and a Medicare taxgross-up on the Company’s contributions to the Management Retirement Plan in the amount of $2,238. Mr. Adderley is not eligible to participate in the Company’s Short- Term Incentive Plan or Equity Incentive Plan. As discussed above, Mr. Adderley’s annual compensation for services as Chairman of the Board has been revised effective May 1, 2018.
(4) Mr. Takahashi serves on the Board as the designated representative of our joint venture partner, PERSOL HOLDINGS CO. LTD., and receives no compensation for his service as Director.
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Beneficial Ownership of Shares
BENEFICIAL OWNERSHIP OF SHARES
Under regulationsThe following table sets forth, as of March 16, 2020, (i) the beneficial ownership of the Securities and Exchange Commission, persons who have powerCompany’s Class B Common Stock by each person known by the Company to vote or dispose of common stockown beneficially more than 5% of the Company, either alone or jointly with others, are deemed to be beneficial owners of the common stock.
Set forth in the following table isClass B Common Stock, and (ii) the beneficial ownership of the Company’s Class A and Class B common stock on March 19, 2018 of (i)Common Stock by (a) each person known by the Company to own beneficially more than five percent of the Class B Common stock, (ii) each Directordirector (each of whom, other than Mr. Wada, is a nominee for election as a Directordirector at the Annual Meeting of Stockholders)Meeting), (iii)(b) each of the Named Executive Officers,named executive officers, and (iv)(c) all Directorsdirectors and Executive Officersexecutive officers as a group.
| Class A Common Stock | Class B Common Stock | |||||||||||
| Directors and Named Executive Officers(1) | Number of Shares and Nature of Beneficial Ownership | Percent of Class | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||
T. E. Adderley, Chairman of the Board | 1,514,686 | (2) | 4.2 | 3,213,265 | (3) | 94.0 | ||||||
C. M. Adderley, Director | 340,398 | (4) | 1.0 | 425 | (4) | * | ||||||
G.S. Adolph, Director(5) | 450 | * | — | * | ||||||||
C. T. Camden, Former Director and Executive Officer | 252,751 | * | 100 | * | ||||||||
G. S. Corona, Director and Executive Officer | 211,767 | * | 100 | * | ||||||||
R.S. Cubbin, Director | 14,276 | (6) | * | 100 | * | |||||||
J. E. Dutton, Director | 27,714 | (6) | * | 100 | * | |||||||
T. B. Larkin, Director | 23,249 | * | 100 | * | ||||||||
L. A. Murphy, Director | 22,695 | * | 100 | * | ||||||||
D. R. Parfet, Lead Director | 23,520 | * | 100 | * | ||||||||
H. Takahashi, Director | 1,576,169 | (7) | 4.0 | 1,475 | * | |||||||
S.S. Armstrong, Executive Officer | 40,900 | * | — | * | ||||||||
T.S. Carroll, Executive Officer | 102,957 | * | 100 | * | ||||||||
P.W. Quigley, Executive Officer | 100,577 | * | 100 | * | ||||||||
O.G. Thirot, Executive Officer | 61,569 | * | 10 | * | ||||||||
All Directors and Executive Officers as a Group (17 persons) | 4,147,446 | 12.0 | 3,216,075 | 94.0 | ||||||||
Greater than Five Percent Class B Stockholders | Class B Common Stock | |||||||
| Number of Shares and Nature of Beneficial Ownership(1) | Percent of Class | |||||||
Terence E. Adderley Revocable Trust K | 3,139,940 | 91.6 | % | |||||
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| Class A Common Stock | Class B Common Stock | |||||||||||||||
Directors and Named Executive Officers | Number of Shares and Nature of Beneficial Ownership | Percent of Class | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||||||
Directors: | ||||||||||||||||
Carol M. Adderley | 343,401 | (2)(3) | 1.0 | 425 | (2) | * | ||||||||||
Gerald S. Adolph | 8,478 | (3) | * | 100 | * | |||||||||||
George S. Corona | 153,018 | * | 100 | * | ||||||||||||
Robert S. Cubbin | 26,348 | (3) | * | 100 | * | |||||||||||
Jane E. Dutton | 31,899 | (3) | * | 100 | * | |||||||||||
Terrence B. Larkin | 31,211 | * | 100 | * | ||||||||||||
Leslie A. Murphy | 30,824 | (3) | * | 100 | * | |||||||||||
Donald R. Parfet | 33,675 | * | 100 | * | ||||||||||||
Takao Wada | 1,576,169 | (4) | 4.4 | 1,475 | * | |||||||||||
Named Executive Officers: | ||||||||||||||||
Peter W. Quigley (also a director) | 132,634 | * | 100 | * | ||||||||||||
Olivier G. Thirot | 87,266 | * | 10 | * | ||||||||||||
Peter M. Boland | 9,636 | * | — | * | ||||||||||||
James H. Bradley | 24,452 | * | — | * | ||||||||||||
HannahLim-Johnson(5) | 11,490 | * | — | * | ||||||||||||
All directors and executive officers as a Group (14 persons) | 2,500,501 | 7.0 | 2,710 | 0.0 | ||||||||||||
| * | Less than 1% |
| (1) | This information is based on the Schedule 13D (the “13D”) filed with the SEC on October 19, 2018 on behalf of the Terence E. Adderley Revocable Trust K (“Trust K”) and the threeco-trustees of Trust K. Trust K was created by Terence E. Adderley, the Company’s former Chairman of the Board, during his lifetime as a revocable trust, with Mr. Adderley serving as the trustee of and retaining the right to revoke the trust during his lifetime. Mr. Adderley funded Trust K, including a gift of 3,139,940 shares of Class B Stock. Mr. Adderley died on October 9, 2018, at which time the trust became irrevocable. In accordance with the provisions of Trust K, Andrew H. Curoe, David M. Hempstead and William U. Parfet, were appointed as successorco-trustees of Trust K following Mr. Adderley’s death. They are required by the provisions of Trust K to act by majority vote to exercise voting or investment power over the Class B stock held by Trust K and have stated in the 13D that the filing is not an admission that theco-trustees are beneficial owners of such Class B stock. Mr. Curoe may be deemed the beneficial owner of an additional 72,825 shares of Class B Stock held by trusts where Mr. Curoe acts as trustee orco-trustee, including ten trusts holding 100 shares of Class B Stock each, and one trust holding 71,825 shares of Class B Stock. The business address of the Terence E. Adderley Revocable Trust K and each of Messrs. Curoe, Hempstead and Parfet is c/o Andrew H. Curoe, 6th Floor at Ford Field, 1901 St. Antoine Street, Detroit, Michigan 48226. |
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(1) Mr. Camden retired as President and CEO
Beneficial Ownership of Shares
| (2) | Includes 190,306 shares of Class A stock and 200 shares of Class B stock held in two separate trusts of which Ms. Adderley is one of two individual trustees with Comerica Bank & Trust, N.A. as Corporate Trustee. |
| (3) | Includes 2,032 shares for Ms. Adderley, 4,451 shares for Mr. Adolph, 15,518 shares for Mr. Cubbin, 11,763 shares for Ms. Dutton, and 8,129 shares for Ms. Murphy indirectly held in the Company’sNon-Employee Directors Deferred Compensation Plan. |
| (4) | Mr. Wada is the designated representative of Persol, which owns the reported shares. Mr. Wada disclaims beneficial ownership of the shares held by Persol. Mr. Wada will complete his service as a director as of the date of the 2020 Annual Meeting. |
| (5) | Effective March 19, 2020,Ms. Lim-Johnson, Senior Vice President and Chief Legal Officer, separated from Kelly Services, Inc. |
Delinquent Section 16(a) Reports
Section 16(a) of the Company effective May 10, 2017.Exchange Act requires the Company’s directors and certain officers, as well as persons who beneficially own more than 10% of the outstanding shares of common stock, to file reports regarding their initial stock ownership and subsequent changes to their ownership with the SEC.
(2) Includes 1,345,202 shares held directly; 30,000 shares inBased solely upon a charitable trustreview of filings for fiscal year 2019 with the SEC and related written representations that no other reports were required, we believe that all Section 16(a) reports were filed on a timely basis, except a Form 4 for Ms. Adderley due April 5, 2019, which Mr. Adderley is aco-trustee with Comerica Bank & Trust, N.A.; 100,000 shares in an irrevocable trust,was filed on February 18, 2020 to report her sale of which he is a beneficiary; 38,484 shares in five separate trusts of which Mr. Adderley is aco-trustee with Comerica Bank & Trust, N.A.; and 1,000 shares held by his spouse.
(3) Includes 3,139,940 shares held by the Terence E. Adderley Revocable Trust K of which Mr. Adderley is sole trustee and has sole investment and voting power; 71,825 shares in an irrevocable trust, of which he is beneficiary and has no voting and investment power; 1,000 shares held by his spouse of which he has shared voting and investment power; and 500 shares held in five separate trusts of which he is aco-trustee with shared voting and investment power, in which he has no equity interest.
(4) Includes 190,3065,000 shares of Class A stock and 200 shares of Class B stock held in two separate trusts of which Ms. Adderley is one of two individual trustees with Comerica Bank & Trust, N.A. as Corporate Trustee.
(5) Mr. Adolph was appointed to the Company’s Board of DirectorsCommon Stock on March 7, 2018.
(6) Includes 3,446 shares for Mr. Cubbin and 3,534 shares for Ms. Dutton indirectly held in the Company’sNon-Employee Directors Deferred Compensation Plan.
(7) Mr. Takahashi is the Director, Deputy Vice President and COO, PERSOL HOLDINGS CO., LTD (formerly Temp Holdings Co., Ltd.) which entered into a strategic alliance with the Company in 2010. Mr. Takahashi is the designated representative of PERSOL HOLDINGS CO., LTD, which owns the reported shares. Mr. Takahashi disclaims beneficial ownership of the shares held by PERSOL HOLDINGS CO., LTD.April 3, 2019.
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Beneficial Ownership of Shares
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the Company’s Directors, Executive Officers, and any person who beneficially owns more than 10% of the common stock (collectively, the “Reporting Persons”), are required to report their ownership of the common stock and any changes in that ownership to the SEC. Specific due dates for these reports have been established and pursuant to applicable rules, the Company is required to report in its Proxy Statement any failure to file by these due dates. Based on certifications received from the Reporting Persons, and on copies of the reports that such persons have filed with the SEC, all required reports of Reporting Persons were filed timely with the SEC for 2017.
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Proposal 2:2 – Advisory Vote to Approve the Company’s Executive Compensation
PROPOSAL 2 -– ADVISORY VOTE TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION
As described in the following Compensation Discussion and Analysis, our executive compensation programs are designed to align the interests of our Executive Officersexecutive officers with those of our shareholdersstockholders by tying a significant portion of the compensation they receive to Company performance, and by providing a competitive level of compensation in order to attract, retain, and reward Executive Officers,executive officers, who are critical to the long-term success of our business. Under these programs, our Named Executive Officersnamed executive officers are rewarded for the Company’s financial performance, individual performance, and long-term potential,value creation, as well as to facilitate retention, and reflect market realities. Please read the Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the fiscal year 20172019 compensation of our Named Executive Officers.named executive officers.
As required by Section 14A of the Exchange Act, this proposal, commonly referred to as a “say on pay” proposal, seeks a stockholder advisory vote on our Named Executive Officers’named executive officers’ compensation, as disclosed in this Proxy Statement pursuant to Item 402 of RegulationS-K and in the Compensation Discussion and Analysis, through the following resolution:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Named Executive Officers,named executive officers, as disclosed in the Company’s Proxy Statement for the 20182020 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 20172019 Summary Compensation Table, and the other related tables and disclosure.”
Thesay-on-pay vote is advisory;advisory and, therefore, not binding on the Company. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and considersconsider the result of the advisory vote in designing and evaluating our executive compensation programs.
The Board of Directors recommends a vote “FOR” the approval of the compensation of our Named Executive Officers,named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC.
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Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis section of this Proxy Statement provides an overview of our executive compensation philosophy and objectives and describes the material elements of our executive compensation programs, the compensation decisions the Compensation Committee (the “Committee”) has made under those programs, key factors that were considered, and provides details of the compensation paid to our Named Executive Officers.named executive officers.
The Compensation Discussion and Analysis is organized in the following sections:
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| 2. | Executive Summary |
| 3. | Executive Compensation Philosophy, Objectives, and Design |
| 4. | Process for Determining Executive Compensation |
| 5. | Compensation Programs: Decisions and Actions in |
| 6. | Governance of Executive Compensation Programs |
| 7. | Tax and Accounting Considerations |
| 8. | Compensation Committee Report |
20172019 Named Executive Officers
Our Named Executive Officersnamed executive officers for 2017,2019, as defined by the SEC, were as follows:
Name | Title | |
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| Executive Vice President, | |
| Officer (commencing 10/1/19) | |
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| Olivier G. Thirot | Executive Vice President and Chief Financial Officer | |
| Peter M. Boland | Senior Vice President and | |
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| James H. Bradley | Senior Vice President, Global Business Services and Global Talent Solutions | |
| George S. Corona | Former President and Chief Executive Officer | |
| Teresa S. Carroll(2) | Former Executive Vice President, and President, Global Talent Solutions and General Manager, Global Solutions, Marketing and Human Resources | |
| Hannah S.Lim-Johnson(3) | Former Senior Vice President and Chief Legal Officer | |
| (1) | Mr. Corona stepped down as President and CEO and an officer of the Company effective September 30, 2019. |
| (2) | Ms. Carroll separated as an officer and an employee of the Company effective September 30, 2019. |
| (3) | Effective March 19, 2020,Ms. Lim-Johnson, Senior Vice President and Chief Legal Officer, separated from Kelly Services, Inc. |
As previously disclosed, following his resignation as CEO, Mr. Corona was appointed Presidentbecame anon-executive employee of the Company, in a transition and Chief Executive Officer effective May 10, 2017.
(2) Mr. Thirot was appointed Executive Vice President and Chief Financial Officer effective March 1, 2018.
(3) Mr. Camden retiredadvisory role until his expected retirement from the Company effective May 10, 2017.on or about June 30, 2020. Effective October 1, 2019, Mr. Quigley assumed the role of President and CEO. A description of the compensation arrangements for Messrs. Corona and Quigley in connection with the transition can be found under the heading “CEO Transition” in the section Compensation Programs: Decisions and Actions in 2019 below.
We areKelly’s philosophy as a leadertalent company is rooted in providing workforce solutions. We connect people with workthe conviction that our business makes a difference on a daily basis – in ways that enrich theirthe lives of our employees and enable companies to access skilled talent that can move their businesses forward.networks, for our customers, in the local communities we serve and in the broader economy. As work has evolved so has our range of solutions, growing over the years to reflect the changing needs of our customers and the changing nature of work itself. We have progressed from a traditional office staffing company into a workforce solutions leader delivering expertise in a portfolio of specialty services. As workforcetalent management has become more complex, we have developed a talent supply chain management approachinnovative solutions to help many of the world’s largest companies plan for and manage their workforces. Innovative solutions supporting this approach spanworkforce through outsourcing, consulting, recruitment, talent advisory, career transition, and vendorsupplier management services.
In early 2017, we restructured components of our previous Americas Commercial, Americas PT, We offer innovative outsourcing and OCG segments underconsulting services, as well as staffing on a single delivery organization, triggering a change in our operating structure. We now provide staffing through our branch networks in our Americastemporary,temporary-to-hire, and International operations, with commercial and specialized professional/technical staffing businesses in the Americas and Europe, respectively. In July 2016, we moved our APAC staffing operations into our expanded joint venture with PERSOL HOLDINGS (formerly Temp Holdings), PERSOL KELLY Asia Pacific (the “JV”), enabling us to more efficiently provide staffing solutions to customers throughout the APAC region via the JV.direct-hire basis. We also provide a suite of innovative talent fulfillment and outcome-based solutions, through our Global Talent Solutions (“GTS”) segment, which deliversdelivering integrated talent management solutions on a global basis. In doing so, we enable companies to meet customer needs across the entire spectrum ofaccess skilled talent categories. Using talent supply chain strategies, GTS helps customers plan for, manage and executethat can move their acquisition of contingent labor, full-time labor and free agents, and gain access to service providers and quality talent at competitive rates with minimized risk.businesses forward.
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Compensation Discussion and Analysis
Our long-term strategic objectiveKelly is committed to create stockholder value by deliveringbeing a competitive profit fromleading talent solutions provider among the best workforce solutionstalent with whom we choose to specialize and talent in the industry. To achieve this,markets we are focused onchoose to compete, which is the following areas:foundation of our strategy in 2019 and beyond. This strategic intent is underpinned by our Noble Purpose, “We connect people to work in ways that enrich their lives,” and is brought to life by our expected behaviors and actions:
Continue to build our core strengths in branch-delivered staffing in key markets where we have scale or specialization;Employ a talent-first mentality
Maintain our position as a market-leading provider of talent management solutions in our GTS segment; andRelentlessly deliver for customers
LowerGrow through discipline and focus
Deliver efficiency and effectiveness in everything we do
By aligning ourselves with our costs through deploymentNoble Purpose, executing against these strategic pillars, and investing in additional innovation, we intend to reap the benefits of efficient service delivery models.
2017 wasoperating as a yearmore agile and focused organization and we expect to achieve new levels of strategic and operational progress that demonstrated our commitment to profitable growth. We delivered solidtop-line growth and increased earnings, evenprofitability as we invested indevelop further specializations across our future.portfolio of business.
During 2019, we continued our progress as a talent solutions company and identified several specialty growth platforms for investment. Early in 2019, we expanded our engineering portfolio with the year,acquisition of Global Technology Associates, LLC (“GTA”) and NextGen Global Resources LLC (“NextGen”), leaders in the growing 5G telecommunications market. These acquisitions position Kelly as one of the leading engineering workforce solutions companies in this fast-growing market. And in January 2020, we reorganizedacquired Insight Workforce Solutions LLC (“Insight”), an educational staffing company, to expand our operating segmentsleadership position in the U.S. education talent solutions industry. We intend to further accelerate our efforts to drive revenue and restructured to create a more efficient and focused delivery organization. We invested in our Americas Staffing and International Staffing operations by addingearnings growth through additional sales and recruiting talent. In GTS, we are exercising price discipline and are continuing to invest in higher margin outcome-based and outsourcing solutionsinorganic growth platforms, making smart acquisitions that align with market demands. In September 2017, we completed our acquisition of Teachers On Call,Kelly’s focus on specialization.
We continue to make investments in technology, particularly those which exemplifies our commitmentsupport greater efficiency in finding talent to focus and grow in solutions where we see outsized market potential. And finally, weanswer customer needs. We are accelerating the implementation of our front office platforms, which when fully deployed inmid-2020, will streamline the processes and workflows associated with recruiting, onboarding, and reassigning workers. This investment will create the platform from which we will deploy additional operational improvements over the next several years that will enhance the experience of the hundreds of thousands of job seekers who interact and work with Kelly each year.
Our review of the commercial staffing operations delivered by our U.S. branch network in initiativesthe first quarter of 2019 resulted in the reorganization of our operations to enhance technologyimprove geographic coverage and process automation.operational efficiency. The new structure will allow us to refine our focus on specialties within the commercial staffing portfolio, including light industrial, electronic assembly, office professionals, and contact center staffing. During 2019, we recorded total restructuring charges of $5.5 million as a result of these actions. While we have already gained efficiency from the restructure, the growth we anticipated has not yet occurred. We remain committed to delivering revenue growth in our U.S. market and have initiated further actions to modernize our operations and deliver on that commitment.
Key performance highlights for 2017 include:2019 incentive plan financial measures were lower than the prior year and resulted in below target payouts:
| Earnings from | Totaled $81.8 million for the full year |
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| Gross Profit | Decreased from $972.2 in 2018 to $968.4 in 2019 | |||||
Conversion Rate
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| Return on Sales | ROS declined from 1.6% in 2018 to 1.5% in 2019 | |||||
| Earnings Before Taxes plus JV Income | ||||||
While faced with market conditions that may hamper our efforts, including a sluggish manufacturing sector and a tight labor market, and the recent business challenges arising from the Coronavirus, Kelly continues to focus on accelerating the execution of our strategystrategic plan and making the necessary investments and adjustments to advance that strategy. We have set our sights on becomingOur objective is to become an even more competitive,agile, consultative, and profitable company, and we are reshaping our business to make that visiongoal a reality. We will measure our progress against bothusing financial measures, including: revenue growth (both organic and inorganic); gross profit growth, as well as earningsrate improvement; and conversion rate. The goals we have establishedrate and EBITDA margin.
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Compensation Discussion and Analysis
We are based onacting with urgency to achieve the current economicfollowing:
Grow higher-margin specialty and business environment,outsourced solutions, creating a more balanced portfolio that yields benefits from improved mix;
Integrate our investments in specialty solutions with significant growth opportunities, such as our acquisitions of GTA, NextGen, and may change as conditions warrant.Insight;
Deliver long-term structural improvements in costs through investments in technology and process automation; and
Improve our financial results.
Key Executive Compensation Program Highlights for Fiscal 20172019
We continue to evaluate our executive compensation program and make changes to further align it with our strategic priorities and to reward both shortshort- and long-term business success. We believe we have designed a program that aligns with stockholder interests, incentivizes growth and operational excellence, and demonstrates a clear linkage between compensation and performance. The program continues to seek to minimize incentives for management to take excessive risks. The Committee worked with management and its independent compensation consultant, as described later in this document, to review current compensation programs, including the incentive plans, and made the decisions described below in 2017.2019.
Reflecting the Company’s commitment to driving a high-performance culture, our executive compensation program emphasizesat-risk incentive awards that can be earned over one and three-year periods. As our business evolves and we strive for performance that is better than the prior year, the design of our incentive plans has changed to ensure continued alignment to our business strategy for driving long-term stockholder value. The executive compensation program, particularly the annual and long-term incentive plans, are designed to directly support the Company’s strategic transformationintent to become a more efficient, profitable, growth-focused, and performance-driven organization. Incentive payouts earned for performance cycles ending in 20172019 are commensurate with the earnings, gross profit, expense management, and total stockholder return results that were achieved. Annual incentive awards for 2019 corporate performance were earned at approximately 45.60% of target, commensurate with our performance on earnings, gross profit, and expense goals. Long-term incentive
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Compensation Discussion and Analysis
awards for the performance share periods ending in 2017period 2017-2019 were earned at 115%an aggregate funding of 36.62% of target for gross profitreturn on sales and earnings before taxes plus Joint Venture (“JV”) income results, and 200% of target for our total shareholderstockholder return relative to the market. The 2018 incentive designs, which are briefly summarized below and will be discussed in further detail in next year’s proxy filing, are similar to the 2017 incentive designs discussed below, with the requirement for performance set meaningfully above 2017 actual results to earn the target award.
The Board has adopted two plans that provide the framework for incentive compensation opportunities for our Executive Officers.senior officers, a group that includes our executive officers.
The Short TermShort-Term Incentive Plan (“STIP”) provides for annual cash-based incentive opportunities that are based upon the achievement of one or more performance measures, as established by the Committee.
The Equity Incentive Plan (“EIP”) provides the Committee the ability to grant long-term incentive (“LTI”) opportunities, in various award types, that focus on the long-term performance of the Company and align the interests of Executive Officerssenior officers with those of stockholders. The Committee amended the EIP at their meeting on February 15, 2017 approving the following key changes to the EIP, which was approved by stockholders at the Company’s 2017 Annual Meeting:
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20172019 STIP Design and Results
Approved multiple, balanced performance measures for the corporate component of the 20172019 STIP. 20172019 target goals for each measure were set at budgeted numbers, which were substantially higher than 20162018 actual results:
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Earnings from Operations (weighted 50%);
Return on Gross Profit (Conversion Rate) (weighted 25%); and
Total Gross Profit (weighted 25%).
Maintained “gatekeeper” goal that must be achieved in order to earn a payout under any STIP measure
(Earnings (Earnings from Operations measure must achieve at least 60% of target).
Executive Officersofficers who are responsible for providing direct leadership to a business unit have at least 50%30% of their STIP award opportunity based on the achievement of specific business unit measures and the remainder of their award based on the corporate component.
Based upon 20172019 results for the three performance measures of the corporate component of the STIP, the Committee approved payouts on the 20172019 STIP corporate component equal to 99.98%45.60% of target.
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Compensation Discussion and Analysis
Maintained LTI grant mix for Executive Officerssenior officers, including our executive officers, that heavily emphasizesat-risk performance-based pay opportunities through the following equity vehicles:
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Performance Share Units = 75% of LTI mix; and
Restricted Stock Awards/Units (RSAs/RSUs) = 25% of LTI mix.
Approved threetwo new LTI performance measures for the 2017-20192019-2021 Performance Share Awards moving from fourthat management and the Committee believe to be strong drivers of Kelly’s long-term value.
Gross Profit Growth (weighted 50%)
Improvement in Return on Gross Profit (Conversion Rate) (weighted 50%)
Retained a Relative Total Shareholder Return (“TSR”) performance component; however, it will now be applied as a modifier to the outcome of the 2019-2021 financial performance measures used in the 2016 grantsto strengthen accountability to financial results and enhance alignment between earned awards and expense. The TSR modifier can have either a positive or negative impact of up to 25% on overall financial results.
Established goals for a simplified design. 2017full three-year performance periods for all measures. 2019-2021 target financial goals for each measure were set at budgeted numbers, which were substantially higher than 20162016-2018 actual results. Awards earned, if any, are based on performance assessed over the three-year period.
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NOTE: The “Earnings Before Taxes plus Joint Venture (JV) Income” measure includes a“bottom-line” earnings measure to capture Joint Venture earnings and in support of our business strategy.
Maintained LTI grants that were approximately the same value as the 2016 LTI grants, which were reduced in value from the 2015 LTI grant to Senior Officers in support of the Company’s investment strategy and efforts to reduce costs.
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Compensation Discussion and Analysis
Added a performance hurdle of “Positive Net Income” to the restricted stock units awarded to Executive Officersexecutive officers in 2017 that qualify awards for tax deductibility under 162(m).
Implemented practice of not paying dividends or dividend2019. Dividend equivalents to Executive Officers on unearned and unvested restricted stock units granted during 2017.2019 are not paid to executive officers until both the performance hurdle and vesting requirements are met.
2015-20172017-2019 LTI Results
BasedPerformance share awards based upon 2017-2019 financial measures, “Return on theSales”, and “Earnings Before Taxes plus Joint Venture (“JV”) Income” achieved an average funding level of approximately 54.99% of target and vested on February 11, 2020.
The Company’s strong stock price performance over the three-year period 2015-20172017-2019 (2.3%) as compared to the stock price performance of the S&P SmallCap 600 Index (25%) for the same period, the Committee approved the funding ofresulted in below threshold results for the Relative TSR measure for the 2015-20172017-2019 LTI awards at 200% of target andawards. As a result, shares vestedbased on February 14, 2018.this performance measure were not eligible for vesting.
Performance share awards previously approved by the Committee that were earned based uponone-year 2015 financial measures, “Return on Gross Profit” and “Gross Profit: OCG and PT” and achieved an average funding level of approximately 115% of target, were subject to an additional two years of vesting, 2016 and 2017. With the time-based requirement satisfied, these shares also became vested to participants, including the Executive Officers on February 14, 2018.
2017 Base Salary2019 Individual Compensation Decisions
Messrs. CoronaThirot, Boland and Quigley,Bradley andMs. CarrollLim-Johnson received base salary increases as a result of their promotionsaveraging 3.6%, effective May 10, 2017. In addition, as a result of March 1, 2019.
Mr. Thirot’s move from Swiss payrollCorona and benefits to U.S. payroll and benefits effective January 1, 2017, a portion of his Swiss allowances were added to his U.S. salary. Senior Officers, including the Named Executive Officers,Ms. Carroll did not receive regular base salary increases in 20172019 as part of the totalCommittee believed their compensation review process. This was in light of management’s and the Board’s views that corporate financial results for 2016 were not at desiredto be appropriate based on market competitive levels and reflectedother factors.
To begin moving target pay closer to market median, at the time of Mr. Quigley’s promotion to President and CEO, he received a continued conservative approachbase salary increase of 46%, an increase to his STIP target from 85% to 110% of base salary earnings, and an additional LTI award grant, effective October 1, 2019. Messrs. Thirot and Boland received salary increases of 5% in supportrecognition of the Company’s investment strategy.additional responsibilities each of them took on effective October 1, 2019. Further explanation can be found under “Base Salary.”“Compensation Programs: Decisions and Actions in 2019”.
The Committee believes these actions support the strategic direction of the Company and help position it for long-term success in achieving its goals. These compensation decisions and actions are discussed in more detail below.
Executive Compensation Philosophy, Objectives, and Design
Our executive compensation philosophy is to provide market-based pay opportunities with incentive payouts aligned with the achievement of the Company’s overall shortshort- and long-term business strategies.strategies and results. The design of our executive compensation programs allocates total compensation to fixed and variable pay elements resulting in a mix of short-term and long-term pay elements. The Committee continually evaluates our executive compensation programs to ensure that the Company provides market-competitive opportunities that enable us to attract and retain highly qualified individuals to lead the organization and drive business success in the competitive and ever-changing business environment in which we operate. Our executive compensation programs are designed to achieve the following objectives:
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Compensation Discussion and Analysis
Align a significant portion of compensation with the achievement of multiple performance goals that motivate and reward executives based on Company, business unit, and individual performance results;
Attract and retain world-class talent with the leadership abilities and experience necessary to develop and execute business strategies, achieve outstanding results, and build long-term stockholder value;
Support the achievement of the Company’s vision and strategy;
Create an ownership mindset that closely aligns the interests of management with those of stockholders; and
Provide an appropriate balance between the achievement of both short- and long-term performance objectives, with clear emphasis on managing the sustainability of the business and mitigation of risk.
The Committee believes that a majority of an Executive Officer’sa senior officer’s compensation should be “at risk” and based upon the achievement of corporate and business unit results, the Company’s share price performance, as well as individualan individual’s performance. As a result, Executive Officerssenior officers participate in incentive programs that provide them with the opportunity to earn awards that are directly tied to the Company’s performance and that drive sustainable long-term stockholder value. The Company’s compensation programs provide an incentive for Executive Officerssenior officers to meet and exceed performance goals. Executives are held accountable for results and rewarded with above target payout amounts for performance that exceeds target goals. When target goals are not met, award payouts are designed to deliver below target payouts or no payouts. We believe the combination of our annual short-term incentive awards and long-term equity incentive awards align the interests of our Executive Officerssenior officers with the interests of our stockholders.
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Compensation Discussion and Analysis
CEO and Other Named Executive Officers Pay Mix
While we believe that a majority of an Executive Officer’sexecutive officer’s target compensation opportunity should be performance-based, we do not have a specified formula that defines the overall weighting of each element. We believe that the higher a role is positioned within the organizational structure, the greater the emphasis on performance-based compensation should be. As such, the CEOChief Executive Officer (“CEO”) has a greater percentage of his compensation opportunity that is performance-based through higher target opportunities for STIP and LTI, as compared to the compensation opportunities of the other Named Executive Officers. At risknamed executive officers (“NEOs”).At-risk compensation consists of annual cash incentive awards and long-term equity awards (restricted shares and performance shares) that are contingent upon the achievement ofpre-established performance goals. The following charts illustrate the 20172019 Target Total Direct Compensation mix for our President and CEO and the other Named Executive Officersnamed executive officers combined (as of December 31, 2019) and includes the pay elements of base salary, STIP (at target), restricted shares, and performance shares (at target):
FY 2019 CEO Target Compensation Mix | FY 2019 Other NEO Target Compensation Mix | |
 |  |
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Compensation Discussion and Analysis
Elements of Compensation for Named Executive Officers
The Committee determines the elements of total direct compensation that we provide to our Executive Officers.senior officers, a group that includes the named executive officers. The elements of our fiscal 20172019 executive compensation program and the objectives for each are as follows:
COMPENSATION | TYPE | FORM | CONSIDERATIONS | OBJECTIVES | ||||||
Base Salary | Fixed Compensation |
| • Reviewed annually and adjusted when appropriate
• Determined based on role and scope of responsibilities, skills, experience, sustained individual contribution, and comparison to market-comparable jobs |
• Attract and retain qualified • Balance risk-taking | ||||||
| Short-Term Incentive Plan (STIP) |
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| Cash |
• Annual performance period
• Target payout opportunity established as percentage of earnings for each
• Performance measures selected to align with our business strategy
• Multiple performance measures that reflect key operational and financial measures of success
• Payout based on achievement of predetermined goals
• “Gatekeeper” goal must be achieved for any award to be earned |
• Motivate and reward | |||||
Long Term Incentives (LTI) | ||||||||||
Variable
At-RiskCompensation | Stock- Settled |
Restricted Stock • Accounts for 25% of total LTI award opportunity
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• Align interests of
• Support retention
• Support meaningful stock ownership | |||||||
| Long Term Incentives (LTI) | Variable At-Risk Performance- Based Compensation | |||||||||
| Stock- Settled |
Performance Shares • Accounts for 75% of total LTI award opportunity
• Provides opportunity to earn shares based on achievement of multiple specific performance goals
• Relative TSR measure is for a three-year period
• Financial measures for 2017-2019 and 2018-2020 LTI awards are based on three years of performance (payouts, if any, are based on the aggregation of threeone-year performance • Financial measures for 2019-2021 LTI awards are for a three-year period with full goals set in early 2019 |
• Drive long-term value creation for stockholders
• Motivate and reward
• Align the interests of | ||||||||
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Compensation Discussion and Analysis
20182020 Executive Incentive Plans – Overview
For the 20182020 incentive plan designs, the Company continues to focus onpay-for-performance alignment by using multiple financial measures and Relative TSR to strongly drive our key business objectives and stockholder value. In support of this strategy, the Committee has approved the following:
A combination of gross profit and earnings from operations measures, as well as Relative TSR, for the 2018-2020 incentive plan performance measures;
Continuation of a performance hurdle for the 2018 grant of RSUs for Executive Officers that must be achieved before shares become earned. Dividends on these shares will only be paid upon achievement of the performance hurdle and time vesting requirements; and
Voluntarily maintain many of the practices previously required for performance-based compensation under the former requirements of Section 162(m) of the Internal Revenue Code (the “Code”) as good governance of our performance-based plans.
DetailsAdditional details regarding the 20182020 incentive plan designs will be presented in our 20192021 proxy filing.statement.
Process for Determining Executive Compensation
Role of the Compensation Committee
The Committee designs and administers the Company’s executive compensation programs and policies, and regularly reviews these programs and policies relative to its objectives, applicable new legal and regulatory practices, evolving best practices, and corporate governance trends. The Committee and members of the Board of Directors determine the compensation of the CEO. The CEO’s total compensation is comprised of base salary, STIP, and LTI award opportunities, and is the same design as the other Named Executive Officers.named executive officers. The CEO does not participate in recommendations or discussions related to his own compensation.compensation levels. As part of its responsibility for executive compensation, the Committee annually reviews and determines the compensation of each of our Senior Officers,senior officers, including the Named Executive Officersnamed executive officers listed in the Summary Compensation Table of this Proxy Statement, based on each individual’s performance including consideration of ethical behavior, achievement of planned goals, relevant market comparisons, and the recommendations of the CEO.CEO, and other factors. The Committee reviews the costs and short- and long-term benefits of the compensation arrangements it considers and approves for Senior Officers.senior officers.
AllThe responsibilities of the Committee responsibilities are defined in its charter, which can be found on the Company’s website atkellyservices.com.
Role of the Independent Compensation Consultant
Since October 2014, the Committee has engaged Pay Governance LLC as its independent compensation consultant (the “Consultant”). The Committee considers analysis and guidance from the Consultant when making compensation decisions on plan design; the merits of various incentive plan performance measures; Executive Officersenior officer pay levels, including that of the CEO and our other executive officers, relative to peer group and other market data; composition of peer group companies; stock ownership requirements; and other pay practices. In addition, the Consultant updates the Committee on market trends and best practices in executive compensation and, as requested, provides data and guidance on other items such as Director compensation. The Committee uses its own independent judgment to make all decisions related to the compensation of the Company’s Executive Officers.senior officers.
During 2017,2019, the Consultant regularly attended Committee meetings and communicated with the Chairman of the Board, the Committee Chairman, and the Committee Vice Chairman outside of Committee meetings. The Committee regularly meets with the Consultant in private session (without members of management). As directed by the Compensation Committee, the Consultant also met with the Senior Vice President and Corporate Secretary and Chief Investor Relations, Executive Compensation and Communications Officer (“Corporate Secretary”) and members of the Executive Compensation, Finance, and Corporate Governance teams of the Company. The Consultant maintains a direct reporting relationship to the Committee on all compensation matters.
The Committee conducts an annual assessment of the Consultant’s independence, using factors established by Nasdaq Global Market.Nasdaq. The Consultant provided no services to the Company in 20172019 other than services to the Committee. The Committee reviewed and affirmed the independence of the Consultant as the Compensation Consultant to the Committee and concluded the work performed by the Consultant did not raise a conflict of interest.
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Compensation Discussion and Analysis
The Committee consults with the CEO and the Corporate Secretary to obtain feedback with respect to the strategic direction of our executive compensation programs.
The CEO makes recommendations for each of the Executive Officers with regard toexecutive officers about elements of their total compensation. He bases his recommendations on the assessment of each Executive Officer’sexecutive officer’s performance, as well as the performance of their respective business or function.function and other factors. The Committee takes into consideration the recommendations of the CEO when determining the compensation of the other Executive Officers.executive officers.
In addition, the CFO provides periodic financial updates and information to the Committee, to aid in establishing incentive plan goals and determining payout amounts.
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Compensation Discussion and Analysis
The Committee uses third-party survey data for comparably sized general industry companies and available data from a select group of peer companies, in determining the competitive positioning of our compensation programs, and the individual compensation opportunities of each of our Named Executive Officers.senior officers, including the named executive officers.
Each Executive Officer’ssenior officer’s performance is reviewed (see ExecutiveSenior Officer Performance Reviews and Succession Planning below) and compensation decisions are made on an annual basis (or as an Executive Officer’sa senior officer’s duties and responsibilities change). Base salaries, target STIP, and target long-term incentive opportunities are benchmarked against a group of comparable executive positions in general industry companies of similar revenue size as reflected in multiple third-party surveys. We seek to establish target total direct compensation opportunities (defined as base salary, target STIP, and target long-term incentive) for our Named Executive Officersnamed executive officers that are withinnear a competitive range of the median of the competitive market data. Compensation ultimately earned from these opportunities can vary from the mediantargeted levels based on the company, business unit, and individual performance. Various other factors are taken into consideration and in certain circumstances, we may target pay above or below the competitive median. Individual target total direct compensation may be above or below the median depending on Company performance, cost considerations, the role’s scope of responsibilities, individual experience and performance, and any succession, retention or internal equity considerations. Prior to 2015, theThe Company hadhas taken a conservative approach to target long-term incentive opportunities for Senior Officers that were generally well below market median. The 2015 LTI design brought target total direct compensation opportunities, on average, closer to market median levels for our Senior Officers. Insenior officers. This approach is in support of the Company’s efforts to reduce costs in connection with its investment strategy management voluntarily requested and the Committee agreed, that the 2016 and 2017 LTI levels for Senior Officers would be reduced from the 2015 levels, as explained further in the Long-Term Incentive section of this Proxy Statement.its goal to become more profitable.
In 2017,2019, a competitive executive compensation analysis was performed which included both an analysis of third-party survey data prepared internally by the Company’s Executive Compensation group, and a peer group review of CEO pay prepared by the Consultant. Third-party general industry survey data from Aon Hewitt, Mercer, and Willis Towers Watson was used to prepare the survey analysis. Specific companies that participated in the third-party surveys were unknown and not a factor in the Committee’s deliberations. The survey analysis was reviewed by the Consultant for the Committee.
The Company considersConsultant worked with the officerCommittee and management to develop an updated group of peer companies to be used for market comparison purposes in terms of CEO pay practiceslevels and executive pay practices. We do not believe many companies compete directly with us in all areas of our business or are of similar size. However, in order to have a comparator peerreference group prepared byof publicly-traded comparators, the Consultant which was selected using the following criteria: industry,has identified a group of relevant companies that compare to Kelly in at least some areas of our business. The resulting group of twelve comparator companies consists solely of staffing andHR-focused companies with generally similar annual revenues andnon-staffing companies considered by shareholder advisory groups as peers. recent market cap. The majority are multi-national/global companies headquartered in U.S. The resulting group of fifteen comparator companies includes direct peers supplemented by other people-intensive businesses with similar margins. Thisfollowing updated group of companies includes nine companies used by Institutional Shareholder Services (“ISS”) in their 2017 report, which means 60%more direct peers and a balanced mix of some significantly smaller and larger companies in oursimilar industries. The peer group are shared with ISS. The Company’s 2016 revenue of $5.28 billion was on par with the median peer group revenue of $5.25 billion for the same period. The following comparator group of fifteen companies was unchanged from last year and used by the Committee and management as another reference point when reviewing 2017 officerassessing 2019 executive pay practices and CEO pay levels:
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• Adecco Group AG | • Heidrick & Struggles International, Inc. | • Randstad NV | ||
• AMN Healthcare Services, Inc. | • Insperity, Inc. | • Robert Half International Inc. | ||
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The Committee considers peer group and general industry survey data as a point of reference, not the sole factor in determining executivesenior officers’ compensation. The third-party survey data and peer group analysis represent “Market Data” when referenced throughout this Compensation Discussion and Analysis. The Committee considers all of the resources provided as part of a holistic process that also includes officer performance and the recommendations of the Company’s CEO regarding total compensation for Senior Officers.senior officers.
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Compensation Discussion and Analysis
In addition to Market Data and for use as background information, the Executive Compensation group provides the Committee with comprehensive tally sheets for each Executive Officer,executive officer, summarizing up to four years of historical target and actual total compensation data and long-term incentive grant detail that includes grant date fair value as well as the intrinsic value of outstanding shares.award opportunities. The Committee reviews tally sheets for all of the Executive Officersexecutive officers and believes they are a useful multi-year reference tool, along with other perspectives, when considering whether compensation decisions reflect the Company’s executive compensation philosophy and performance. Tally sheets are not a determining factor for the Committee when making compensation decisions.
ExecutiveSenior Officer Performance Reviews and Succession Planning
Annually, the Committee conducts a comprehensive Executive Officersenior officer performance review that includes succession planning and identification of officer developmental opportunities. Updated performance evaluation templates were developed in 2019 for use with the senior officers. Detailed executive performance review information for each of the Senior Officers,senior
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Compensation Discussion and Analysis
officers, including the Named Executive Officers,named executive officers, is prepared by the Chief Human Resources Officer (“CHRO”). Methodology that had been implemented the prior year was enhanced for 2019 and used to identify and develop the Company’s talent, including a framework to assess future leadership needs, evaluate talent, and a succession planning and talent development system. Sessions were held with multiple levels of the organization to discuss talent and development, increasing transparency with the sharing of information, and understanding of key talent across leadership teams and business units. Individual development plans continue to be prepared to identify future opportunities for emerging leaders, including increased development through experiential learning opportunities and formal coaching.
The performance review information for each of the Executive Officerssenior officers includes key annual initiatives, performance results, strengths, and development opportunities. Senior officers with high technical knowledge in one area of functional expertise and those with the ability to have cross functional potential and serve in many capacities were identified. The CEO reviews the performance of the other Executive Officersexecutive officers and presents their individual performance assessments, development plans, and succession strategies to the Committee. Executive officers who have direct reports who are senior officers, present the individual performance assessments, development plans, and succession strategies to the Committee for each of those senior officers. During the individual performance assessments, the Committee asks questions, renders advice, and makes recommendations on matters that include individual development needs, succession planning, and retention. The Company’s Chairman of the Board and the Committee Chair present the performance review for the CEO to the other Committee members. None of the Executive Officerssenior officers are present when their performance is being discussed by the Committee. Each Executive’sexecutive’s individual performance assessment is used by the Committee, together with the compensation analysis discussed in the previous section and the recommendations of the CEO, to determine compensation for the Executive Officers.senior officers.
The Company’s succession plan is updated annually in connection with the performance assessments and is approved by the Board. The plan documentation includes all executives at the Senior Officersenior officer level, as well as their potential successors from within the Company in case of an unexpected disability or departure of a Senior Officer.senior officer. Documentation includes detailed executive performance review information as discussed above, readiness assessments, and at least one potential successor for each role. Any changes to the plan during the year also require the approval of the Board. The CHRO is leading the implementation of a new succession planning approach and process for 2018, details of which will be disclosed in the Company’s 2019 Proxy Statement.
Compensation Programs: Decisions and Actions in 20172019
As previously disclosed, effective September 30, 2019, Mr. Corona – Promotion
Following notification byresigned as President and CEO of the Company. Mr. Camden in April 2017 of his intentCorona continues to retireserve as an Executive Officer and Directora director of the Company effectivethrough his current term and thereafter as provided by the Board. He currently serves as anon-executive employee in a transition and advisory role, until his expected retirement on or about June 30, 2020. In connection with the annual meeting in May,transition, the Company’s Board of Directors, at a meeting held on April 13, 2017, appointedCompany and Mr. Corona entered into a transition employment agreement, which sets forth the terms of Mr. Corona’s employment in anon-executive capacity until his retirement. During the transition period, Mr. Corona assists with the leadership transition and receives a base salary of $15,000 per month. Mr. Corona received a prorated payout under the STIP with respect to his service for the first nine months of 2019 as President and CEO as disclosed in the section, Annual Cash Incentives below. Mr. Corona received shares earned under the 2017-2019 LTI awards as disclosed in the Long-Term Incentives section below. He remains eligible to receive prorated shares that become earned under certain conditions for the 2018-2020 LTI awards and the 2019-2021 LTI awards. Upon Mr. Corona’s retirement, he will forfeit any outstanding restricted shares that have not vested. Effective September 30, 2019, Mr. Corona is not eligible for severance benefits from the Company.
Effective October 1, 2019, Mr. Quigley assumed the role of President and Chief Executive Officer, effective May 10, 2017. AsCEO and became a result of this promotion, Mr. Corona received an increase to his base salary, and prorated STIP target and LTI opportunity for 2017, pursuant to the termsdirector of the STIP and EIP as they pertain to Named Executive Officers. These changes were in recognition of his appointment and took into account market competitive compensation opportunities for the role as summarized below:
Base salary increase of 52.7%, resulting in a newCompany. The Committee approved an increased base salary of $1,000,000;
$840,000 for Mr. Quigley, an increased STIP target opportunity from 85% to 110% of base salary earnings, and his long-term incentive target opportunity was increased from 90%140% to 130%200% of base salary;
Valuesalary. The committee also approved an additional grant of 2019 LTI target opportunity was increased;
Participation inawards with a total grant date value of $218,750. Mr. Quigley’s benefits under the Company’s Senior Executive Severance Plan was changedincreased from a Tier 2 participant to a Tier 1 participant;
No formal employment contract was entered into withparticipant. Mr. CoronaQuigley’s severance eligibility can be found in connection with his promotion to CEO; and
Elected to the Company’s Board of Directors at the Annual Meeting on May 10, 2017.
Teresa S. Carroll and Peter W. Quigley – Promotionssection below titled, Potential Payments upon Termination or Change in Control.
On May 10, 2017, and upon the recommendation of the Committee, the Company’s Board of Directors elected Teresa Carroll to the role of Executive Vice President and President, Global Talent Solutions and General Manager, Sales, Marketing and Human Resources, and Peter Quigley to the role of Executive Vice President and President, Global Staffing
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Compensation Discussion and Analysis
and General Manager, Global Information Technology, Global Business Services and Global Services. As a result of their promotions, Ms. Carroll and Mr. Quigley each received base salary increases, and prorated STIP targets and LTI opportunities for 2017 pursuant to the terms of the STIP and EIP as they pertain to Named Executive Officers. These changes were in recognition of their appointments and to more closely reflect market competitive compensation opportunities for their new roles as summarized below:
Base salary increases of 15%, resulting in new base salaries of $575,000 for each;
STIP target opportunities were increased from 70% to 85% of their base salaries; and
Value of their LTI target opportunities were increased.
Base salaries for senior officers, including the Named Executive Officersnamed executive officers are intended to be competitive with Market Data to ensure that the Company can attract and retain the executives necessary to successfully lead and manage the organization. Base salaries generally fall within a range (+/- 15%) around the median of salaries in the Market Data, as individual base salaries will vary based upon the factors described below. Based on Market Data available at the time the review was conducted in December 2016,November 2018, we determined that the base salaries of our Named Executive Officersnamed executive officers were within this competitive range of the 2017 market medians for comparable roles. Base salary is only one component of target total direct compensation and may be affected by other components to ensure that target total direct compensation meets compensation objectives.
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Compensation Discussion and Analysis
The Committee reviews the base salaries of Executive Officers,senior officers, including the Named Executive Officers,named executive officers, on an annual basis (or as an Executive Officer’sa senior officer’s duties and responsibilities change). Base salaries are determined by the Committee for each of the Executive Officerssenior officers based on various factors, including the scope and responsibilities of the role, an individual’s experience and performance in the role, their current level of pay compared to Market Data, internal pay equity, the recommendations of the CEO, and consideration of the Company’s salary adjustment budget.
Management elected to move the timing of theThe Company’s annual total compensation review process for all employees, including the Executive Officers, from October 2016 to March 2017 in ordersenior officers, typically occurs during the first quarter to coincide with the timing of any potential incentive award payouts. The timing alignment of compensation elements wasis intended to reinforce the Company’s pay for performance philosophy and provide each employee with their “total compensation” overview. In December 2016,November 2018, the Committee conducted its annual review of base salaries of the Senior Officers,senior officers, including Named Executive Officers,named executive officers. In February 2019, it was determined that no changes would be made to base salary levels for Messrs. Corona and consideredQuigley and Ms. Carroll as the recommendationCommittee believed their salary levels were market competitive. Salaries for Messrs. Thirot, Boland and Bradley andMs. Lim-Johnson were increased on average 3.6%, to recognize performance and move market competitiveness closer to median.
Effective with his promotion to President and CEO on October 1, 2019, the Committee approved a base salary increase of management that46% for Mr. Quigley to move his salary closer to competitive market levels for the Senior Officers not receive regularCEO position. At the same time, Messrs. Thirot and Boland each received base salary increases of 5% in March 2017. The Committee supported this recommendation and did not provide the Senior Officers with salary increases during the annual total compensation review process in early 2017. This decision reflected a conservative approach that both management and the Committee believed was in supportrecognition of the Company’s investment strategy.additional responsibilities.
In consideration of the factors noted above, the following base salaries for the Named Executive Officersnamed executive officers were approved by the Committee in 2017:2019:
| 2018 Base | 2019 Base | Adjustment | |||||||||||||||||||||||||
| Named Executive Officer |
2016 Base | 2017 Base Salary | Adjustment % | Salary | Salary | % | |||||||||||||||||||||
Peter W. Quigley | $ | 575,000 | $ | 840,000 | 46.1 | % | |||||||||||||||||||||
Olivier G. Thirot | $ | 550,000 | $ | 588,000 | 6.9 | % | |||||||||||||||||||||
Peter M. Boland | $ | 350,000 | $ | 376,600 | 7.6 | % | |||||||||||||||||||||
James H. Bradley | $ | 315,500 | $ | 333,500 | 5.7 | % | |||||||||||||||||||||
George S. Corona | $ | 655,000 | $ | 1,000,000 | 52.7% | $ | 1,000,000 | $ | 1,000,000 | 0.0 | % | ||||||||||||||||
Olivier G. Thirot | $ | 515,000 | $ | 533,500 | 3.6% | ||||||||||||||||||||||
Teresa S. Carroll | $ | 500,000 | $ | 575,000 | 15.0% | ||||||||||||||||||||||
Peter W. Quigley | $ | 500,000 | $ | 575,000 | 15.0% | ||||||||||||||||||||||
Steven S. Armstrong | $ | 332,000 | $ | 332,000 | 0.0% | ||||||||||||||||||||||
Hannah S.Lim-Johnson | $ | 350,000 | $ | 365,000 | 4.3 | % | |||||||||||||||||||||
Notes:
Effective January 1, 2017 Mr. Thirot moved from Swiss payroll and benefits to U.S. payroll and benefits. The allowances he had been receiving in Switzerland were discontinued at that time and a portion of the amount was added to his U.S. base salary.
Messrs. Corona and Quigley and Ms. Carroll’s base salaries were increased effective with their promotions in May 2017.
Amounts represent base salaries in effect on December 31 of each applicable year.
2019 total compensation review salary adjustments were effective March 1, 2019.
Promotional increase for Mr. Quigley was effective October 1, 2019.
Special increases for Messrs. Thirot and Boland were effective October 1, 2019.
Mr. Corona’s base salary was reduced to $180,000 effective October 1, 2019 through June 30, 2020, per the terms of his Transition Employment Agreement.
Ms. Carroll separated as an officer and an employee of the Company effective September 30, 2019.
The Committee believes that the Named Executive Officersnamed executive officers should have a meaningful percentage of their total compensation earned through annual “at risk” performance-based incentives. The percentage of target total compensation at risk under the terms of the STIP increases significantly as the individual executive’s responsibilities and influence on
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Compensation Discussion and Analysis
overall corporate performance results increase. The STIP is designed to encourage executives to meet and exceed the Company’s short-term goals that align with overall corporate strategy and improve stockholder value.
The STIP target opportunity is established as a percentage of each individual’s actual base salary earnings and is targeted near the median Market Data, but may vary based upon individual factors, internal equity, and other considerations. STIP payments for all participants are capped at 200% of the target incentive award opportunity. In December 2016,November 2018, the Committee reviewed the target incentive opportunity for each of the Named Executive Officersnamed executive officers and found that all but one were appropriately positioned relative to the Market Data. The Committee approved increasing Mr. Thirot’s STIP target from 75% to 80%, effective January 1, 2019.
Mr. Quigley’s STIP target opportunity was increased from 85% to 110% of base salary effective with his promotion to President and CEO on October 1, 2019. His 2019 STIP award amount was prorated between the time he spent in each role and the associated STIP goals, target percentage, and base salary earnings.
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Compensation Discussion and Analysis
The following table shows the 20162018 and 20172019 STIP target opportunities, as a percent of base salary, for our Named Executive Officers:named executive officers:
| Named Executive Officer | 2016 STIP Target % | 2017 STIP Target % | 2018 STIP Target % | 2019 STIP Target % | ||||||||||||||
Peter W. Quigley | 85 | % | 110 | % | ||||||||||||||
Olivier G. Thirot | 75 | % | 80 | % | ||||||||||||||
Peter M. Boland | 55 | % | 55 | % | ||||||||||||||
James H. Bradley | 65 | % | 65 | % | ||||||||||||||
George S. Corona | 90% | 130% | 130 | % | 130 | % | ||||||||||||
Olivier G. Thirot | 75% | 75% | ||||||||||||||||
Teresa S. Carroll | 70% | 85% | ||||||||||||||||
Peter W. Quigley | 70% | 85% | ||||||||||||||||
Steven S. Armstrong | 60% | 60% | ||||||||||||||||
Hannah S.Lim-Johnson | 65 | % | 65 | % | ||||||||||||||
Note:
Messrs. Corona and Quigley and Ms. Carroll’s incentive targets were increased effective with their promotions in May 2017.
In the months leading up to year end, the Committee reviews and determines the objectives, performance measures, and other terms and conditions of the STIP for the following plan year. For 2017, similar to the prior year’s incentive plan redesign,2019, the Committee approved the use of the same multiple performance measures as were used in 2018 to comprise the corporate component of the STIP. The Committee selected these multiple financial measures inagain for the STIP thatbecause they aligned to thewith business objectives and value creation, provided balance, ensured a strongpay-performance linkage, and improved line of sight for Senior Officers,senior officers, including the Named Executive Officers.named executive officers. Measures selected for 20172019 STIP were:
Earnings from Operations, in orderto focus on improving the Company’s earnings;
Total Gross Profit, to maximize the Company’s earnings;growth for all Kelly businesses; and
Return on Gross Profit (also referred to as “conversion rate”“Conversion Rate”), in order to focus on expense control; and
Total Gross Profit, selected to maximize growth for all of our businesses.control.
Payout for threshold performance under the corporate component of STIP is 25%50% of an Executive Officer’sa named executive officer’s target payout opportunity, with zero payout earned for performance below threshold. An intermediate performance level that is halfway between threshold and target performance levels was added in 2017. Achievement of intermediate level of performance results in payouts that are 75% of target. Achievement of target performance results in target payouts for the Executive Officers. Each additional performance incrementnamed executive officers. Performance above target earns prorated incentive payouts above target and up to the maximum of 200% of target. As in prior years, the 20172019 STIP design includes a ‘gatekeeper’ goal which must be achieved in order to earn a payout under any measure. The gatekeeper goal is earnings from operations with a required level of achievement of at least 60% of target.
Performance measures used for purposes of STIP are the same as defined in the Company’s GAAP financial statements, excluding special items such as: changes in accounting principles, gains or losses on acquisitions or divestitures, changes in budget due to acquisitions or divestitures, restructuring expenses, and other unusual items, which are defined as such and quantified in the financial statements and/or footnotes to the Company’s Annual Report on Form10-K. Adjustments would apply only to unbudgeted items. For the total gross profit measure, constant currency (using the Company’s 20172019 budgeted currency exchange rate) was used to determine values in establishing achievement of the incentive plan goals for 2017.2019.
In February 2017,2019, the Committee determined and approved threshold, intermediate, target, and maximum performance goal levels for the 20172019 STIP. The threshold goals were set at levels for which the Committee believed it was appropriate to start earning incentives; intermediate goals were set halfway between threshold and target amounts; target goals were set at the budgeted levels, which the Committee considered were “challenging but achievable”; maximum goals were set at significant stretch levels for which the Committee believed the earning of two times target payouts was warranted. StraightIn approving the performance goals in February, the Committee determined it would review goals again at the May meeting that would include the estimated impact of the Company’s January 2019 acquisitions. In May 2019, the Committee approved higher performance goals, as shown in the table below, that reflected the impact of the acquisitions. For the Corporate measures, straight line interpolation occurs for achievement of performance between threshold and intermediate, intermediate and target, and between target and maximum. For the business unit measures for Mr. Quigley and Ms. Carroll, there is no straight-line interpolation between payout levels of the payout schedule. For the business unit goal for Mr. Bradley, straight line interpolation occurs for achievement between payout levels. The goals at threshold, target, intermediate and maximum for the 20172019 STIP, as well as resulting performance for each measure of the corporate component were as follows:
| 2019 Performance Goals | ||||||||||||||||||||||||
Corporate Component Performance Measures | Weighting | Threshold | Target | Maximum | 2019 Actual Results | Weighted 2019 Payout (% of Target) | ||||||||||||||||||
Earnings from Operations | 50.0 | % | $ | 87.465 | $ | 106.524 | $ | 138.482 | $ | 90.646 | 29.2 | % | ||||||||||||
Return on Gross Profit | 25.0 | % | 8.996 | % | 10.148 | % | 11.993 | % | 9.361 | % | 16.5 | % | ||||||||||||
Total Gross Profit | 25.0 | % | $ | 978.722 | $ | 1,049.693 | $ | 1,154.662 | $ | 973.427 | 0.0 | % | ||||||||||||
$ in millions | 100 | % | 45.6 | % | ||||||||||||||||||||
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Compensation Discussion and Analysis
| 2017 Performance Goals | Weighted | |||||||||||||
Corporate Component Performance Measures | Weighting | Threshold | Intermediate | Target | Maximum | 2017 Actual Results | 2017 Payout (% of Target) | |||||||
Earnings from Operations | 50.0% | $68.800 | $77.400 | $86.000 | $111.800 | $85.529 | 49.32% | |||||||
Return on Gross Profit | 25.0% | 7.100% | 8.107% | 9.114% | 10.614% | 8.994% | 24.25% | |||||||
Total Gross Profit | 25.0% | $876.000 | $909.800 | $943.600 | $1,037.960 | $948.945 | 26.42% | |||||||
| 100% | 99.98% | |||||||||||||
$Total Company revenue from services for 2019 declined, due to revenue decreases in millionsAmericas Staffing and International Staffing, partially offset by an increase in GTS revenue. The Company’s gross profit rate increased across all business segments from the prior year. The Company’s return on gross profit and earnings from operations were down from 2018 due to restructuring expense.
Messrs. Corona, Thirot, and Thirot’sBoland, andMs. Lim-Johnson’s STIP opportunities were based 100% upon the performance measures of the corporate component, as shown above.
Ms. Carroll’s STIP opportunity was based 30%50% on the corporate component measures and 70%50% on the business unit measures for which she is accountable for the first four months of the year prior to her promotion in May 2017. At that time, the Committee determined to increase the weighting of the corporate measure to 50% to better reflect her new responsibilities for several functional areas of the organization: Sales, Marketing and Human Resources. Her STIP business unit measures were changed to be weighted 50%.was accountable. Payout results for the business unit measures for Ms. Carroll were positively impacted by increased revenue, primarily due to the GTA acquisition and Gross Profit growthprogram expansion in the Contingent Workforce Outsourcing (“CWO”), KellyConnect andour Business Process Outsourcing (“BPO”) businesses, and KellyConnect products. These increases were negatively impactedpartially offset by shifting customer demandslower demand in the centrally delivered staffing and payroll business, as well asstaffing. The GTS gross profit rate increased due to improving product mix coupled with lower employee-related costs. Total SG&A expenses decreased due to proactive cost management as we continue to align our resources and spending levels with volume and gross profit in our products. Decreases were partially offset by an increase in SG&A expenses related to the costs associated with the headcount added for new and expanding programs.January 2019 acquisition of GTA. The measure, “Contribution” that appears below for Ms. Carroll and Messrs.Mr. Quigley and Armstrong is defined as income from operations.
Performance results for each of Ms. Carroll’s business unit measures are as follows:
Teresa Carroll: In effect JanuaryCarroll 1, 2017 - April 30, 2017
| 2017 Performance Goals | Weighted | |||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | 2017 Payout (% of Target) | ||||||
Corporate Component Performance Measures | 30.0% | see details above | 29.99% | |||||||||
Americas SAO Gross Profit | 17.5% | $144.419 | $160.465 | $200.581 | $163.702 | 17.50% | ||||||
Global OCG Gross Profit | 17.5% | $197.628 | $219.587 | $263.504 | $210.055 | 13.13% | ||||||
Global Talent Solutions (GTS) Contribution | 35.0% | $58.463 | $73.079 | $109.619 | $79.910 | 38.50% | ||||||
| 100% | 99.12% | |||||||||||
$ in millions
Teresa Carroll: In effect May 1, 2017 - December 31, 2017
| 2017 Performance Goals | Weighted | |||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | 2017 Payout (% of Target) | ||||||
Corporate Component Performance Measures | 50.0% | see details above | 49.99% | |||||||||
Americas SAO Gross Profit | 12.5% | $144.419 | $160.465 | $200.581 | $163.702 | 12.50% | ||||||
Global OCG Gross Profit | 12.5% | $197.628 | $219.587 | $263.504 | $210.055 | 9.38% | ||||||
Global Talent Solutions (GTS) Contribution | 25.0% | $58.463 | $73.079 | $109.619 | $79.910 | 27.50% | ||||||
| 100% | 99.37% | |||||||||||
$ in millions
| 2019 Performance Goals | ||||||||||||||||||||||||
| Corporate Component and | 2019 | Payout | ||||||||||||||||||||||
| Business Unit | Actual | (% of | ||||||||||||||||||||||
Performance Measures | Weighting | Threshold | Target | Maximum | Results | Target) | ||||||||||||||||||
Corporate Component Performance Measures | 50.0 | % | see details above | 45.6 | % | |||||||||||||||||||
Global Talent Solutions (GTS) Staffing GP $ | 12.5 | % | $ | 118.291 | $ | 131.435 | $ | 164.293 | $ | 129.903 | 75.0 | % | ||||||||||||
Global OCG GP $ | 12.5 | % | $ | 250.119 | $ | 277.910 | $ | 333.492 | $ | 271.760 | 90.0 | % | ||||||||||||
Global Talent Solutions (GTS) Contribution | 25.0 | % | $ | 81.056 | $ | 101.320 | $ | 151.980 | $ | 108.213 | 110.0 | % | ||||||||||||
$ in millions | 100.0 | % | Weighted Payout: | 70.9 | % | |||||||||||||||||||
Mr. Quigley’s STIP opportunity was based 100% on corporate measures for the first fournine months of the year until his promotion in May 2017 at which time his STIP opportunity2019 was changed to be based 50% on the corporate component measures and 50% on the Global Staffing business unit measures for which he became accountable.was accountable in his role as Executive Vice President and President, Global Staffing and General Manager, Global IT, Global Service, and Global Business Services. Payout results for the America’s Staffing business unit measures for Mr. Quigley were positively impacted by the reductionacquisition of worker’s compensation expensesNextGen in 2017 and increasedJanuary 2019. Revenue from services was down, reflecting a decrease in hours volume and an increase in average bill rates. The decrease in hours volume was primarily due to the disruption resulting from the restructure of the U.S. branch-based staffing in the EMEA region,first quarter of 2019 and were negativelyslower achievement of the related benefits. The increase in average bill rates was the result of wage increases and stronger revenue growth in our service lines with higher pay rates. The change in revenues reflects decreases in volume in our light industrial and office services specialties, partially offset by an increase in engineering, educational staffing and science specialties. The Americas gross profit rate increased in comparison to the prior year, having been positively impacted by increasedthe addition of NextGen. SG&A expenses linkedincreased due to additional employee investmentsthe addition of NextGen and also restructuring expenses related to U.S. branch-based staffing operations severance costs. International Staffing revenue from services decreased from the prior year, primarily due to revenue declines in the EMEA branch networkFrance and the sales and recruiting resourcesGermany, reflecting current staffing market conditions. These decreases were partially offset by increased revenue in the Americas that were added inRussia, due to higher hours volume. International Staffing gross profit decreased as a result of declining revenue. Total SG&A expenses for International Staffing decreased due to continued effective cost management to align to revenue trends. Mr. Quigley’s STIP opportunity for the last halfthree months of 2019, in his role as President and CEO, was based 100% on the year to capture growing demand.corporate component.
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Compensation Discussion and Analysis
Performance results for each of Mr. Quigley’s business unit measures are as follows:
Peter Quigley
| 2019 Performance Goals | ||||||||||||||||||||||||||||
Job Title | Period | Corporate Component and Performance Measures | Weighting | Threshold | Target | Maximum | 2019 Actual Results | Payout (% of Target) | ||||||||||||||||||||
EVP & President, Global Staffing and GM, Global IT, Global Business Services & Global Service | 1/1/19 - 9/30/19 | Corporate Component Performance Measures | 50.0 | % | see details above | 45.6 | % | |||||||||||||||||||||
Americas Staffing Gross Profit | 20.0 | % | $ | 435.100 | $ | 483.444 | $ | 604.305 | $ | 429.853 | 0.0 | % | ||||||||||||||||
Americas Staffing Contribution | 20.0 | % | $ | 65.694 | $ | 82.118 | $ | 123.177 | $ | 62.313 | 0.0 | % | ||||||||||||||||
EMEA Staffing Gross Profit | 5.0 | % | $ | 143.470 | $ | 159.411 | $ | 199.263 | $ | 144.050 | 0.0 | %(1) | ||||||||||||||||
EMEA Staffiing Contribution | 5.0 | % | $ | 18.731 | $ | 23.414 | $ | 35.121 | $ | 15.204 | 0.0 | % | ||||||||||||||||
President & CEO | 10/1/19-12/31/19 | Corporate Component Performance Measures | 100.0 | % | see details above | 45.6 | % | |||||||||||||||||||||
$ in millions | Weighted | Payout: | 31.5 | % | ||||||||||||||||||||||||
| (1) | ||||
| No payout on GP measure if Contribution measure does not achieve at least a threshold level of performance. |
Compensation Discussion and Analysis
Peter Quigley: In effect May 1, 2017 – December 31, 2017
| 2017 Performance Goals | Weighted | |||||||||||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | 2017 Payout (% of Target) | ||||||||||||||
Corporate Component Performance Measures | 50.0% | see details above | 49.99% | |||||||||||||||||
Americas Staffing Gross Profit | 20.0% | $377.782 | $419.758 | $524.697 | $425.985 | 20.00% | ||||||||||||||
Americas Staffing Contribution | 20.0% | $69.518 | $86.897 | $130.346 | $81.706 | 10.00% | ||||||||||||||
EMEA Staffing Gross Profit | 5.0% | $132.712 | $147.458 | $184.322 | $151.379 | 5.50% | ||||||||||||||
EMEA Staffiing Contribution | 5.0% | $14.324 | $17.906 | $26.858 | $21.538 | 7.00% | ||||||||||||||
| 100% | 92.49% | |||||||||||||||||||
$ in millions
Mr. Armstrong’sBradley’s STIP opportunity was based 30%70% on the corporate component measures and 70%30% on the business unit measuresmeasure, days sales outstanding (“DSO”) Americas for which he iswas accountable. AlthoughFor the result for U.S. Operations PT Gross ProfitDSO measure, was above threshold, the design requires achievement of threshold level of performance for the U.S. Operations PT Contribution measure before payout can be earned on the corresponding Gross Profit measure. Threshold performance was not achieved for the U.S. Operations PT Contribution measure, so no payout was earned for the U.S. Operations PT Gross Profit measure.a lower value reflects better performance. Payout results for the business unit measuresmeasure for Mr. ArmstrongBradley were positively impacted by the reductionjust above threshold, resulting in a payout of worker’s compensation expenses in 2017 and were negatively impacted by the increased SG&A expenses linked to higher performance based compensation and additional sales and recruiting resources added to capture growing demand in the last half of the year.7.5%.
Performance resultsresult for each of Mr. Armstrong’sBradley’s business unit measures aremeasure is as follows:
Steven Armstrong: In effect JanuaryJames Bradley 1, 2017 – December 31, 2017
| 2017 Performance Goals | Weighted | |||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | 2017 Payout (% of Target) | ||||||
Corporate Component Performance Measures | 30.0% | see details above | 29.99% | |||||||||
US Operations Gross Profit | 17.5% | $282.205 | $313.561 | $391.951 | $320.225 | 17.50% | ||||||
US Operations PT Gross Profit | 17.5% | $64.855 | $72.061 | $86.473 | $70.068 | 0.00% | ||||||
US Operations Contribution | 35.0% | $65.429 | $81.786 | $122.679 | $75.546 | 17.50% | ||||||
| 100% | 64.99% | |||||||||||
$ in millions
| 2019 Performance Goals | ||||||||||||||||||||||||
Corporate Component and | Weighting | Threshold | Target | Maximum | 2019 Actual Results | Payout (% of Target) | ||||||||||||||||||
Corporate Component Performance Measures | 70.0 | % | see details above | 45.6 | % | |||||||||||||||||||
Americas DSO | 30.0 | % | 49.84 | 47.84 | 44.84 | 49.69 | 7.5 | % | ||||||||||||||||
| 100.0 | % | Weighted Payout: | 34.2 | % | ||||||||||||||||||||
Under the terms of the STIP, the Committee retains the right in its discretion to reduce a STIP award based on Company, business unit, or individual performance. The Committee has no discretion to increase a STIP award for Named Executive Officersnamed executive officers (though the Committee may approve a special bonus for Named Executives Officersnamed executives officers on a discretionary basis to recognize exceptional performance or actions not related to objectives set forth in the STIP; in 2017,2019, no discretionary bonus awards were made to Named Executive Officers)named executive officers). STIP awards made in 2017 were designed2019 to comply with the requirements of Section 162(m) of the Code and any awards made under the STIPnamed executive officers are subject to the Company’s Clawback Policy.
Based on these performance results, at its February 14, 201811, 2020 meeting, the Committee reviewed and approved payments to the Named Executive Officersnamed executive officers in accordance with the STIP provisions as follows:
|
Named Executive Officer | 2019 Base Salary Earnings | 2019 STIP Target as % of Salary | 2019 STIP Payout at Target | 2019 Payout as a Percentage of Target | 2019 STIP Payout | |||||||||||||||
Peter W. Quigley | $ | 640,231 | 85%/110 | % | $ | 595,889 | 31.5 | % | $ | 187,720 | ||||||||||
Olivier G. Thirot | $ | 565,200 | 80 | % | $ | 452,160 | 45.6 | % | $ | 206,185 | ||||||||||
Peter M. Boland | $ | 361,634 | 55 | % | $ | 198,899 | 45.6 | % | $ | 90,698 | ||||||||||
James H. Bradley | $ | 330,454 | 65 | % | $ | 214,795 | 34.2 | % | $ | 73,395 | ||||||||||
George S. Corona | $ | 750,000 | 130 | % | $ | 975,000 | 45.6 | % | $ | 444,600 | ||||||||||
Teresa S. Carroll | $ | 431,250 | 85 | % | $ | 366,563 | 70.9 | % | $ | 259,984 | ||||||||||
Hannah S.Lim-Johnson | $ | 362,462 | 65 | % | $ | 235,600 | 45.6 | % | $ | 107,434 | ||||||||||
Compensation Discussion and Analysis
| Named Executive Officer | 2017 Base Salary Earnings | 2017 STIP Target as % of Salary | 2017 STIP Payout at Target | 2017 Payout as a Percentage of Target | 2017 STIP Payout | ||||||||||||||||||||
George S. Corona(1/1 - 04/30) | $218,333 | 90% | $196,500 | 99.98% | $196,461 | ||||||||||||||||||||
George S. Corona(5/1 - 12/31) | $657,519 | 130% | $854,775 | 99.98% | $854,604 | ||||||||||||||||||||
| $1,051,275 | $1,051,064 | ||||||||||||||||||||||||
Olivier G. Thirot | $533,500 | 75% | $400,125 | 99.98% | $400,045 | ||||||||||||||||||||
Teresa S. Carroll(1/1 - 04/30) | $166,667 | 70% | $116,667 | 99.12% | $115,639 | ||||||||||||||||||||
Teresa S. Carroll(5/1 - 12/31) | $381,345 | 85% | $324,143 | 99.37% | $322,085 | ||||||||||||||||||||
| $440,810 | $437,723 | ||||||||||||||||||||||||
Peter W. Quigley(1/1 - 04/30) | $166,667 | 70% | $116,667 | 99.98% | $116,643 | ||||||||||||||||||||
Peter W. Quigley(5/1 - 12/31) | $381,345 | 85% | $324,143 | 92.49% | $299,800 | ||||||||||||||||||||
| $440,810 | $416,443 | ||||||||||||||||||||||||
Steven S. Armstrong | $332,000 | 60% | $199,200 | 64.99% | $129,468 | ||||||||||||||||||||
The EIP provides for long-term incentives that reward executives for achieving the Company’s long-term growth and profitability goals. Long-term incentive compensation is also intended to help the Company retain key employees, and provide those employees shared financial interests with the Company’s stockholders and positively influence their job performance and longer-term strategic focus. The EIP allows for grants of equity andnon-equity awards to key employees. The Committee approved a redesign of the Company’s long-term incentives in 2015 that included updated performance measures, a greater portion of variableat-risk performance-based compensation,
| 43 | |
Compensation Discussion and target opportunities for the Named Executive Officers that were set, on average, to be near market competitive levels.Analysis
The Committee believes that compensation programs for the Company’s Senior Officerssenior officers should include strong alignment between pay and performance, with a significant portion of “at risk” pay. As a result, since 2015 the design of the 2017Committee has provided long-term incentives for Senior Officers,senior officers, including the Named Executive Officers, mirrored the 2016 grants,named executive officers with grant levels based 75% on performance shares (at target) and 25% on restricted stock in order to create award opportunities that heavily emphasize performance. The current incentive mix emphasizes performance-contingent awards that are delivered through performance shares and places a reducedlower weighting on restricted shares.
In 2015 we implemented a significant design change from the Company’spre-2015 long-term incentive awards. PriorOn average, target LTI awards granted to 2015, target long-term incentive opportunities for Senior Officers were generallysenior officers have historically been and currently remain below market median and provided primarily in time vesting restricted stock. The overall target number of shares granted to Senior Officers under the 2015 long-term incentive awards brought target total direct compensation opportunities, on average, to be near market median levels.median. The target number of shares granted toLTI award amounts for each Senior Officersenior officer in 2015,2019, including the Named Executive Officers,named executive officers, were based on an established value for each officer level. Target LTI grant levels, in terms of the number of shares, for nearly all Senior Officers were reduced for the 2016 grant by approximately 15% from the 2015 target share grant levels. This change was made at the request of management and with the approval of the Committee, as both believed it was an approach that supported the Company’s investment strategy and efforts to reduce cost. This reduced grant value was maintained for the 2017 LTI grants, with grant values approximately the same in 2017 as they were in 2016 (for those executives in the same position each year). The number of target shares granted to each Named Executive Officernamed executive officer is based on the grant value and closing stock price on the date of grant and can be found in the “Grants of
|
Compensation Discussion and Analysis
Plan-Based Awards” table, later in this document. TheFor performance share awards, the actual value realized, if any, for the grant will be based upon achievement of the performance measures of the performance share awardsthree-year goals as determined in early 2022 and the price of the Company’s stock.
Under the terms of the EIP, the Committee retains the right in its discretion to reduce an LTI award based on individual performance. The Committee has no discretion to increase an LTI award for Named Executive Officers.named executive officers. LTI grants made in 2017 and prior years were designed to comply with the requirements of Section 162(m) of the Code and any performance-based awards made under the EIP are subject to the Company’s Clawback Policy.
Performance shares provide Senior Officerssenior officers with the opportunity to earn shares, from zero to 200% of their target opportunity, based on achievement ofpre-established measures and goals. For 2017,the 2019-2021 performance period, the Committee selected the following two new equally weighted financial performance measures for the performance shares: return on sales,gross profit growth and average conversion rate improvement in order to maximize margins from revenues; earnings before taxes plus joint venture (JV) Income,reinforce the Company’s focus on profitable growth and expense control. The Committee also elected to include an operating earnings measure that also captures JV earnings; andcontinue to use TSR relative to the S&P SmallCap 600 Index to reward relative TSR performance.performance, however determined that it would be applied as a modifier for the 2019-2021 LTI awards (not a separate measure). Using the relative TSR measure as a modifier strengthens accountability to financial results and enhances alignment between earned awards and expense. Financial measure outcomes can be impacted by the TSR modifier either positively or negatively as a multiplier from between zero to 25%, with overall payouts under the plan capped at 200% of target. The Committee believed that these performance measures were aligned with the business strategy and stockholder interests and also provided balance with STIP measures across the strategic business objectives of the Company.measures.
For the 20172019-2021 grant of performance shares, the two financial measures, return on salesgross profit growth and earnings before taxes plus JV Income,average conversion rate improvement, as well as the Relative TSR modifier, were established to have three-year goals which would be developed by aggregatingone-year performance goals for each of the years in thefull performance period 2017—2019.2019-2021. This design was selected due to the desire to haveprovides multi-year accountability for performance results, while recognizing the challenges, at this time, of establishing traditional three-year goals in an uncertain environment.results. In February 2017,2019, the Committee approved goals at threshold, intermediate, target, and maximum levels of performance for each of the measures for 2017. Goals for the measures in subsequent years of the performance period will be established within the first ninety days of each of the years, 2018 and 2019.2019-2021. At the end of the three-year performance period 2017-2019 (i.e., in early 2020), goals and2022, results will be aggregated and/or averaged as appropriate, for each of the two financial measures, toplus the TSR modifier, will determine achievement and earning, if any, of shares. The Relative TSR measure of the performance shares is a three-year goal with vesting at the end of the 2017-2019 performance period, provided that a threshold level of performance for this measure is achieved. The following table illustrates performance periods for each of the measures for the 2017-20192019-2021 performance shares:
| Measures | 2017 | 2018 | 2019 | |||
• Return on Sales (ROS) • Earnings Before Taxes plus Joint Venture (JV) Income | Three-year performance is assessed based on the average (for the ROS measure) or sum (for the earnings measure) of the annual goals set at the start of each year, relative to three years’ of results | |||||
• Relative TSR | Three-calendar year Performance Period | |||||
| 44 | |
Compensation Discussion and Analysis
Measures | 2019 | 2020 | 2021 | |||
• Gross Profit Growth
• Improvement in Return on Gross Profit (Conversion Rate) | Three-fiscal year Performance Period | |||||
• Relative TSR (applied as modifier) | Three-calendar year Performance Period | |||||
The following target number of performance shares were awarded for each performance measure to the Named Executive Officersnamed executive officers in 2017:2019:
| Target Number of 2017-2019 Performance Shares Awarded | ||||||||
| Financial Measures | ||||||||
| Name | Return on Sales | Earnings Before Taxes plus JV Income | Relative TSR Measure | Total Number of Performance Shares @ Target | ||||
George S. Corona | 23,297 | 23,297 | 23,297 | 69,891 | ||||
Olivier G. Thirot | 8,325 | 8,325 | 8,325 | 24,975 | ||||
Teresa S. Carroll | 9,317 | 9,317 | 9,316 | 27,950 | ||||
Peter W. Quigley | 9,317 | 9,317 | 9,316 | 27,950 | ||||
Steven S. Armstrong | 3,100 | 3,100 | 3,100 | 9,300 | ||||
Target Number of 2019-2021 Performance Shares Awarded | ||||||||||||
Financial Measures(1) | Total Number of | |||||||||||
Name | Gross | Average | Performance | |||||||||
Peter W. Quigley(2) | 15,751 | 15,751 | 31,502 | |||||||||
Olivier G. Thirot | 12,266 | 12,266 | 24,532 | |||||||||
Peter M. Boland | 3,474 | 3,474 | 6,948 | |||||||||
James H. Bradley | 3,611 | 3,611 | 7,222 | |||||||||
George S. Corona | 34,285 | 34,285 | 68,570 | |||||||||
Teresa S. Carroll(3) | 12,266 | 12,266 | 24,532 | |||||||||
Hannah S.Lim-Johnson(4) | 5,333 | 5,333 | 10,666 | |||||||||
| (1) | Results for the two financial measures may be increased or decreased up to 25% based on the Company’s Relative TSR results in the form of a modifier. |
| (2) | Amounts include additional shares granted to Mr. Quigley following his promotion to President and CEO. |
| (3) | Effective with her separation from the Company and per the terms of the EIP, Ms. Carroll’s 2019-2021 Performance Shares were forfeited. |
| (4) | Effective with her separation from the Company and per the terms of the EIP,Ms. Lim-Johnson may be eligible for a prorated 2019-2021 Performance Share award, if any, based upon achievement of performance goals. |
For achievement of threshold performance, 25% of target performance shares would be earned; for achievement of intermediate performance, 75%50% of target performance shares would be earned; for achievement of target performance, 100% of target performance shares would be earned; and for achievement of maximum performance or higher, 200% of target performance shares would be earned under the 20172019-2021 long-term incentive design. The threshold goals were set at levels for which the Committee believed it was appropriate to start earning incentives; Intermediate goals were set halfway between threshold and target levels of performance; target goals were set at budgeted levels, which the Committee considered were “challenging but achievable”; maximum goals were set at significant stretch levels for which the Committee
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Compensation Discussion and Analysis
believed the earning of two times target payout was warranted. Straight line interpolation occurs for achievement of performance between threshold and intermediate, intermediate and target, and between target and maximum.
Shares that are subject to theThe Relative TSR measure have a three-year performance period, 2017–2019. TSR combines share price appreciation plus the value of reinvestedex-date dividends and is expressed as a percentage. For the 20172019-2021 performance shares, TSR will be calculated based on the average adjusted closing stock price for the twenty consecutive trading days immediately prior to the beginning and end of the three-year measurement period, January 1, 20172019 to December 31, 2019. Shares are earned based on2021. Results of the Company’s TSR at the end of the three-year performance period relative to that of the S&P SmallCap 600 Index. InIndex will be applied as a modifier to the outcomes of the two financial measures in order to determine the number of shares earned. To encourage appreciation of the Company’s share price, the calculated award will not be reducedpositively impacted by 50%the modifier if at the end of the performance period the Company’s TSR is negative, indicating it has declined over the three-year period.negative.
Performance awards are granted in the form of Performance Share Units. Performance shares are not eligible for dividends or dividend equivalents. Any 2019-2021 performance shares earned under any measure will vest in early 2020,2022, following approval by the Committee.
In the event of a Senior Officer’ssenior officer’s termination of employment due to death, disability, normal retirement, or termination not for cause, theythe officer will receive a prorated award of performance shares based on actual results achieved, if any. Normal retirement is defined as age 62 with at least five years of service.service, or a combination of age plus years of service equal to 70, with a minimum age of 60. In order to be eligible for a prorated award due to termination by the Company not for cause, a Senior Officersenior officer must have been employed for at least one year after the date the grants were approved by the Committee. The prorated amount is based on the number of whole months in the performance period that were worked by the Senior Officersenior officer prior to termination divided by 36. In the case of termination not for cause in connection with a change in control, performance shares vest immediately at target amounts.
| 45 | |
Compensation Discussion and Analysis
Restricted stock is considered by the Committee to be an effective vehicle to support the Company’s long-term compensation objectives:
Alignment with stockholder interests;
Facilitate retention through an extended pro rata vesting structure; and
Support meaningful stock ownership.
At its February 15, 201713, 2019 meeting, the Committee approved restricted stock grants for Senior Officers,senior officers, including the Named Executive Officers,named executive officers, which vest ratably over four years, as detailed in the Summary Compensation Table and the Grants of Plan Based Awards Table. This grant of restricted shares represents 25% of each Senior Officer’ssenior officer’s target long-term incentive grant. Grants of restricted stock made to our executive officers have a performance hurdle of “Positive Net Income” that must be achieved for 2019 in order for shares to become earned and eligible for vesting. Dividend equivalents are not paid to executive officers until the performance hurdle is achieved and each tranche of shares vest. The Company believes that restricted stock is an important component of total compensation for our Named Executive Officersnamed executive officers and the four-year, pro rata vesting feature supports the Company’s retention objective. RestrictedAny remaining unvested portion of restricted stock awards are forfeited upon voluntary termination, normal retirement, and involuntary termination for cause or not for cause, unless termination not for cause is in connection with a change in control. In the case of termination not for cause in connection with a change in control, all restricted stock shares or units vest immediately. Restricted stock is prorated in the event of termination due to death or disability.
All of the Senior Officers’ 2017senior officers’ 2019 long-term incentive awards were granted in a mix of 75% performance shares and 25% restricted stock, and there were no other special grants.
2017-2019 Long-Term Incentive for 2015-2017 Performance Results
The first grant of performance shares under the redesigned long-term incentives was awarded in 2015. As outlined in the Company’s 20162018 Proxy Statement, 2017-2019 performance shares become earned based on two financial measures and a Relative TSR measure. As part of the transition to the new plan design, theThe two financial performance measures for the 20152017-2019 award, return on gross profitsales, and gross profit for the OCG and PT businesses,earnings before taxes plus JV income, were established withto have three-year goals, which would be developed by aggregatingone-year performance goals for 2015.each of the years in the performance period 2017-2019. Goals for the performance measures were established and approved by the Committee within the first ninety days of each of the years 2017, 2018 and 2019. At the end of the performance period 2017-2019 (i.e., in early 2020), goals and results were aggregated and averaged as appropriate, for each of the two financial measures, to determine achievement and earning, if any, of shares. The relative TSR measure of the performance shares is a three-year goal with vesting at the end of the 2017-2019 performance period, provided that a threshold level of performance for this measure is achieved. Upon achievement of at least a threshold level of performance for eithereach measure, shares would be contingently earned but would require an additional two years of continued employment before vestingsubject to approval by the Committee in early 2018.2020. Performance results achieved for the awards that were based on 20152017-2019 financial measures were 169.27%68.42% of target for the return on gross profit measuresales measure; and 61.04%41.56% of target for the gross profit for the OCG and PT businesses. The additional two years of vesting for the performance awards that were earned based on the two 2015 financial measures have now been satisfied.earnings before taxes plus JV income measure. For performance awards based on the Relative TSR performance measure for the period 2015-2017,2017-2019, results were based on the Company’s stock price appreciation and dividend reinvestment over the three-year period as compared to the performance of the S&P SmallCap 600 Index for the same period. The beginning stock price was the average dividend-adjusted closing stock price for the twenty consecutive trading days ending December 31, 2014.2016. The ending stock price was the average dividend-adjusted closing stock price for the twenty consecutive trading days ending December 29, 2017.31, 2019. The Company’s
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Compensation Discussion and Analysis
2015-2017 2017-2019 TSR of 79%2.3% is 36.4% higher22.7% lower than the 2015-20172017-2019 TSR for the S&P SmallCap 600 Index, which was 42.6%25.0%, resulting in ano payout of 200% of target.shares for this measure. Award amounts earned are based on the level of achievement for each of the performance measures. Aggregate funding for all performance measures of the 2017-2019 LTI performance awards was 36.62% of target. These levels and final performance results for the 2015-20172017-2019 performance period are provided in the following chart:
| Performance Goals | |||||||||||||||
| Financial Performance Measures | Threshold 50% | Target 100% | Maximum 200% | Actual Results | Payout as % of Target | ||||||||||
Return on Gross Profit | 6.033% | 6.733% | 8.133% | 7.703% | 169.27% | ||||||||||
Gross Profit $: OCG + PT | $363.799 | $404.221 | $485.066 | $372.728 | 61.04% | ||||||||||
Relative TSR | -15% | 0% | +30% | +36.4% | 200.00% | ||||||||||
| 2017-2019 Performance Goals | 2017-2019 | Payout | ||||||||||||||||||||||||||
| Threshold | Intermediate | Target | Maximum | Actual | as % of | |||||||||||||||||||||||
Financial Performance Measures | Weighting | 50% | 75% | 100% | 200% | Results | Target | |||||||||||||||||||||
Return on Sales | 33.3 | % | 1.469 | % | 1.583 | % | 1.697 | % | 1.997 | % | 1.568 | % | 68.42 | % | ||||||||||||||
Earnings Before Taxes plus JV Income | 33.3 | % | $ | 247.768 | $ | 267.512 | $ | 287.255 | $ | 373.434 | $ | 254.307 | 41.56 | % | ||||||||||||||
Relative TSR | 33.4 | % | -15 | % | -7.5 | % | 0 | % | +30 | % | -22.7 | % | 0.00 | % | ||||||||||||||
$ in millions | Weighted Payout: | 36.62 | % | |||||||||||||||||||||||||
$ in millions
| 46 | |
Compensation Discussion and Analysis
As a result of the above level of achievement for each of the performance measures of the 2015-20172017-2019 LTI award, the Committee approved the vesting of the following number of earned performance shares for each Named Executive Officer:named executive officer(1):
| Financial Measure: Return on Gross Profit | Financial Measure: Gross Profit $: OCG+PT | Relative TSR | ||||||||||||
| Payout as % of Target: | 169.27% | Payout as % of Target: | 61.04% | Payout as % of Target | 200.00% | |||||||||
| Name | Target # of Shares | # of Shares Earned | Target # of Shares | # of Shares Earned | Target # of Shares | # of Shares Earned | Total # of Shares Earned | |||||||
George Corona | 17,500 | 29,622 | 17,500 | 10,683 | 17,500 | 35,000 | 75,305 | |||||||
Olivier Thirot | 5,000 | 8,464 | 5,000 | 3,052 | 5,000 | 10,000 | 21,516 | |||||||
Teresa Carroll | 10,000 | 16,927 | 10,000 | 6,105 | 10,000 | 20,000 | 43,032 | |||||||
Peter Quigley | 10,000 | 16,927 | 10,000 | 6,105 | 10,000 | 20,000 | 43,032 | |||||||
Steven Armstrong | 5,000 | 8,464 | 5,000 | 3,052 | 5,000 | 10,000 | 21,516 | |||||||
Carl Camden | 32,222 | 54,543 | 32,222 | 19,670 | 32,222 | 64,444 | 138,657 | |||||||
| Financial Measure: Return on Sales | Financial Measure: Earnings Before Taxes plus JV Income | Total Shareholder Return (TSR) | Total Number of Performance Shares Earned | |||||||||||||||||||||||||
| Payout as % of Target: 68.42% | Payout as % of Target: 41.56% | Payout as % of Target: 0.00% | ||||||||||||||||||||||||||
Name | Target # Shares | # of Shares Earned | Target # of Shares | # of Shares Earned | Target # of Shares | # of Shares Earned | ||||||||||||||||||||||
Peter W. Quigley | 9,317 | 6,375 | 9,317 | 3,872 | 9,316 | 0 | 10,247 | |||||||||||||||||||||
Olivier G. Thirot | 8,325 | 5,696 | 8,325 | 3,460 | 8,325 | 0 | 9,156 | |||||||||||||||||||||
James H. Bradley | 3,100 | 2,121 | 3,100 | 1,288 | 3,100 | 0 | 3,409 | |||||||||||||||||||||
George S. Corona | 23,297 | 15,940 | 23,297 | 9,682 | 23,297 | 0 | 25,622 | |||||||||||||||||||||
Teresa S. Carroll | 8,540 | 5,843 | 8,540 | 3,549 | 8,541 | 0 | 9,392 | |||||||||||||||||||||
Note:
Mr. Camden’s performance shares have been prorated based on being normal retirement eligible at the time he left the Company in 2017
| (1) | Ms. Lim-Johnson and Mr. Boland were not participants in the 2017-2019 LTI award. |
Highly compensated employees in the U.S. are not eligible to participate in the Company’s qualified 401(k) plan. In order to provide a competitive total compensation package, the Company has established the Management Retirement Plan (the “MRP”). The MRP is a U.S. nonqualified defined contribution/deferred compensation plan available to all highly compensated employees, including the Named Executive Officers,named executive officers, as outlined by Section 414(q)(1)(B)(i) of the Code. Employees who are working in the U.S. while on an international assignment are not eligible to participate in the MRP. All participants in the MRP can elect to defer from 2% to 25% of their annual base earnings and 2% to 50% of their annual cash incentive earnings. Matching contributions by the Company equal 50% of the first 10% of base salary and annual cash incentives deferred by a participant. Other than the MRP, there are no other retirement income plans available to the Company’s highly compensated employees in the U.S. The MRP provides all participants, including the Named Executive Officers,named executive officers, with a taxgross-up of Medicare taxes incurred on contributions to the plan. The Medicare taxgross-up provides for parity with other employees who are eligible to participate in the Company’stax-qualified 401(k) plan and therefore do not pay Medicare tax on Company contributions.
Mr. Thirot’s Retirement Benefits
As a result of his move from Swiss payroll and benefits to U.S. payroll and benefits effective January 1, 2017, Mr. Thirot is now a participant in the MRP. He retains a Swiss retirement benefit from his employment in Switzerland that includes contributions that he made to the fund, as well as company contributions that were made to the fund on his behalf. Company contributions to Mr. Thirot’s Swiss retirement account stopped at the end of 2016 and no company contributions were made to his Swiss retirement account in 2017.2017, 2018, or 2019.
|
Compensation Discussion and Analysis
The health and welfare plans, including Company-provided life insurance, provided to the Named Executive Officersnamed executive officers are the same plans available to all regular staff employees.
Mr. Thirot’s Health
| 47 | |
Compensation Discussion and Welfare BenefitsAnalysis
Mr. Thirot pays employee premiums for health care coverage for himself and his dependents under an international plan established for employees who are on or have recently been on international assignments. Mr. Thirot and his dependents are no longer eligible for Swiss health and welfare benefits. He became a participant in the U.S. life insurance program for 2017.
A modest level of perquisites is available to Named Executive Officers:named executive officers:
Perquisite | Benefit | Usage in 2019 | ||
Company Aircraft | To facilitate conducting the Company’s business and provide a competitive advantage, a private aircraft service is available. Senior | No personal use of private aircraft by | ||
| Executive Physical | To ensure | |||
| Vacation Facility | Two Company-owned condominiums are available on a limited basis to employees at the Vice President level and above. | |||
The aggregate amount of perquisites provided in 20172019 for each of the Named Executive Officers,named executive officers, with the exception of Mr. Thirot,Boland, was less than $10,000 and therefore only Mr. Thirot’s usage isBoland’s perquisites are reported in the Summary Compensation Table.
Mr. Thirot’s International Assignment
In light of his transition to being a U.S.-based employee, the initial international assignment benefits provided to Mr. Thirot were reduced for 2016, and then were eliminated when he moved to U.S. payroll and benefits at the beginning of 2017. The Company continues to provide tax support to Mr. Thirot as it relates to carryover costs related to his assignment and these amounts are included in the “All Other Compensation” column of the Summary Compensation Table and are explained in detail in the footnotes of that table.
Senior Executive Severance Plan
To encourage the retention of certain key executives of the Company and thereby promote the stability and continuity of management, the Senior Executive Severance Plan (“Severance Plan”) was established by the Company and approved by the Committee effective March 31, 2017. Participation in the planSeverance Plan is limited to certain Executive Officers,executive officers, namely Messrs. Corona, Thirot and Quigley, and Ms. Carroll.Carroll during 2019. The Severance Plan provides severance benefits in the event a participant’s employment is terminated under certain circumstances as explained and illustrated in Potential Payments Upon Termination.Termination (below). The Plan does not provide excise taxgross-ups to participants under Section 280G of the Code. The Company’s EIP provides for the immediate vesting of restricted stock and performance awards upon a qualified termination in connection with a change in control, andwhich is also explained in Potential Payments Upon Termination.
Under the terms of the Severance Plan covering the eligible Named Executive Officers,named executive officers, each would be entitled to severance payments and benefits in the event that he or she experiences a “qualifying termination” (i.e., any termination of the participant by the Company other than for cause, disability or death: or for good reason by a participant in connection with a change in control as is defined in the Severance Plan). A change in control will not automatically entitle an eligible Named Executive Officernamed executive officer to severance benefits or equity acceleration; instead, the executive must also lose his or her job, or suffer a significant adverse change to employment terms or conditions in order to be eligible for benefits under the Severance Plan. In the event of a termination for any reason, eligible Named Executive Officersnamed executive officers would be entitled to any
|
Compensation Discussion and Analysis
earned compensation owed but not yet paid as of the date of termination. Eligible Named Executive Officersnamed executive officers would also be entitled to payment of vested benefits, if any. Details of the Severance Plan are provided in the Potential Payments Upon Termination section of this Proxy Statement.
The General Severance Plan was amended and restated effective March 27, 2017 to include the Senior Officerssenior officers not covered by the Senior Executive Severance Plan. The General Severance Plan is designed to provide severance benefits in the event of an involuntary termination of employment as a result of general separation of employment or general reduction in force, as provided for under the plan.Plan. During 2019, Mr. Armstrong isBoland, Mr. Bradley, andMs. Lim-Johnson were covered by the General Severance Plan and benefits under this plan are explained and illustrated in Potential Payments Upon Termination.
Governance of Executive Compensation Programs
The frequency of the Company’s Say on Pay vote is annual and, as such, the Committee considers the shareholderstockholder advisory vote on executive compensation as disclosed in the Company’s proxy statement each year. In 2017, 98.7%2019, 99.82% of the shares represented at the meeting approved the Say on Pay proposal. The Committee considered this result as a factor in its decision to maintain the general design of the Company’s compensation programs.
Executive Stock Ownership and Retention Requirements
The Committee seeksimplemented minimum stock ownership and retention requirements to encourage meaningful stock ownership by the Company’s executives so as to alignthat aligns their interests more closely with stockholders’ interests. The Committee periodically reviews the Executive Stock Ownership Requirements to ensure the design is consistent with market practice. In consideration of the Company’s LTI design that provides Senior Officers with the opportunity to earn a greater number of shares through the addition of performance share awards and to ensure guidelines are in line with current market practice and those of our peers, as determined by research performed by the Committee approved the current executive stock ownership and retention requirements.Consultant. The requirements are expressed as a multiple of base salary for each level of Senior Officer and more closely reflect current market practices,senior officer, as determined by research performed byshown in the Consultant.table below.
| 48 | |
Compensation Discussion and Analysis
| 2019 Minimum Stock Ownership Requirements | ||||
| Multiple of Base Salary | ||||
| CEO | Other Senior Officers | |||
| 6x | 3x | |||
Under the ownership requirements, Senior Officerssenior officers are required to hold all (100%) of theafter-tax shares acquired upon equity award vesting until compliance with the requirements is achieved. Shares counted toward achievement of ownership requirements include: directly owned shares (including those held in retirement plans), shares held by family or trusts, and 60% of unvested restricted stock awards, restricted stock units, and earned unvested performance shares. Although there is not a fixed compliance period, it is expected that new Senior Officerssenior officers will likely reach the guidelines within five years from their start date. The Committee reviews each executive’s progress towards and compliance with the share ownership requirements on an annual basis. If the required level of ownership is not achieved within a reasonable period of time or an executive falls out of compliance with the requirements, the Committee can eliminate or adjust the amount of any future equity awards. Stock ownership levels must be maintained as long as the executive is employed by the Company as a Senior Officersenior officer and is subject to the terms of the Executive Stock Ownership Requirements.
As of March 19, 2018,17, 2019, all Named Executive Officersnamed executive officers were in compliance with their stock ownership requirement, other than twoor if they have not yet achieved their current stock ownership guideline, the stock retention requirement. Three officers areon-track to achieve their stock ownership guideline as they retainafter-tax shares to increase their stock holdings to move closer to their ownership guideline. This includes one officer who had been in compliance until their requirementshis ownership requirement substantially increased as a result of being promoted during 2017.2019 and two officers due to the length of time they had served in their current roles. Following a review of competitive market practices, the stock ownership requirement forMs. Lim-Johnson was increased from 1.5 to 2 times her annual base salary beginning in 2019.
Incentive Compensation Recovery (“Clawback”) Policy
The Company’s Clawback policy applies to awards granted under the STIP and EIP on or after January 1, 2011 to officers of the Company who are subject to Section 16 of the Securities Exchange Act of 1934. In early 2019, the application of the “Clawback” Policy was broadened to include all senior officers. These officers are required to repay or forfeit, to the fullest extent permitted by law and as directed by the Committee, any performance-based annual or long-term incentive compensation, based on the achievement of financial results that were subsequently restated due to the Company’s materialnon-compliance with the financial disclosure requirements of the federal securities laws, provided the amount of incentive compensation that would have been received or earned would have been lower had the financial results been properly reported. If necessary, we plan to modify our policy to comply with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, when the SEC or Nasdaq implements rules and regulations. The Clawback policy wasPolicy is included as part of the Company’s updated Insider Trading Policy and Section 16 Compliance Procedures in 2017.Procedures.
|
Compensation Discussion and Analysis
Hedging and Pledging of Shares
The Company’s Insider Trading Policy and Section 16 Compliance Procedures strictly prohibit the Company’s
Directors directors and all employees, including the Executive Officers,named executive officers, from engaging in hedging, monetization or other derivativesderivative or speculative transactions in securities of the Company. This includes short sales, failing to deliver Company securities sold, put or call options, equity swaps, collars, forward sale contracts, exchange funds, holding Company securities in a margin account, or pledging Company securities as collateral for a loan. The EIP does not allow the pledging, sale, assignment or transfer of shares in any manner, except if the Committee determines that a transfer will not violate any requirements of the SEC or IRS. The Committee may permit an inter vivos transfer by gift to, or for the benefit of, a family member of the grantee.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Prior to 2018, Section 162(m) of the Code placed a limit of $1 million on the amount of nonperformance-based compensation that could be deducted for tax purposes for the CEO and the other three highest paid executives (excluding the CFO) listed in the Summary Compensation Table. The Company’s compensation programs were generally designed to qualify for the performance-based exception to this limit. Beginning in 2018, effective with the Tax Cuts and Jobs Act (‘the Act”) that was enacted in December 2017, the corporate tax deduction previously available for performance-based compensation above $1 million for Named Executive Officersnamed executive officers has been eliminated. This means that pay to each Named Executive Officernamed executive officer in excess of $1 million will no longer be tax deductible. Transitional relief is available under the new tax rules where a written, binding contract was in effect on November 2, 2017 and is not materially modified after that date. We will continue to comply with the requirements of Section 162(m) to the extent to which our outstanding LTI awards are
| 49 | |
Compensation Discussion and Analysis
determined to be tax deductible under the transitional relief. Now that the performance-based exception is no longer available, the Company will no longer include reference to Section 162(m) related limitations or provisions or stockholder approval for this purpose. However, management and the Committee have decidedcurrently intend to retain as good governance, certain practices that had been in place previously for Section 162(m) purposes. These practices include: specification of guidelines for the adjustment of special items, establishing performance goals within the first ninety days of a performance period, and requiring the Committee’s certification of results prior to the payout of any award.
Prior to and at the Board of DirectorsCompensation Committee meeting held on March 20, 2018,23, 2020, the Compensation Committee members reviewed and discussed the Compensation Discussion and Analysis presented in this Proxy Statement. Based on its review and subsequent discussions with management, the Committee and Board approved the Compensation Discussion and Analysis and directed management to include it in this Proxy Statement.
This report is submitted by the Compensation Committee of the Board of Directors.
ROBERT S. CUBBIN, CHAIR LESLIE A. MURPHY GERALD S. ADOLPH JANE E. DUTTON TERRENCE B. LARKIN |
| 50 | |
2019 Executive Compensation Tables
Summary Compensation Table 2019
Name and Principal Position | Year | Salary(1) ( $) | Bonus ($) | Stock Awards (2)(3) ( $) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation (4) ( $) | Total ($) | |||||||||||||||||||||||||||
Peter W. Quigley | 2019 | 640,231 | — | 1,053,933 | — | 187,720 | 44,112 | 1,925,996 | ||||||||||||||||||||||||||||
President and Chief Executive | 2018 | 575,000 | — | 807,586 | — | 214,561 | — | 53,173 | 1,650,321 | |||||||||||||||||||||||||||
Officer | 2017 | 548,011 | — | 784,666 | — | 416,443 | — | 30,077 | 1,779,197 | |||||||||||||||||||||||||||
Olivier G. Thirot | 2019 | 565,200 | — | 828,740 | — | 206,185 | — | 39,744 | 1,639,869 | |||||||||||||||||||||||||||
Executive Vice President and | 2018 | 547,271 | — | 807,586 | — | 204,898 | — | 73,482 | 1,633,238 | |||||||||||||||||||||||||||
Chief Financial Officer | 2017 | 533,500 | — | 701,381 | — | 400,045 | — | 45,867 | 1,680,793 | |||||||||||||||||||||||||||
Peter M. Boland | 2019 | 361,634 | — | 234,727 | — | 90,698 | — | 57,560 | 744,618 | |||||||||||||||||||||||||||
Senior Vice President and | ||||||||||||||||||||||||||||||||||||
Chief Marketing Officer | ||||||||||||||||||||||||||||||||||||
James H. Bradley | 2019 | 330,454 | — | 244,000 | — | 73,395 | — | 18,909 | 666,758 | |||||||||||||||||||||||||||
Senior Vice President, Global | ||||||||||||||||||||||||||||||||||||
Business Services and Global Talent | ||||||||||||||||||||||||||||||||||||
Solutions | ||||||||||||||||||||||||||||||||||||
George S. Corona | 2019 | 798,154 | — | 2,316,507 | — | 444,600 | — | 33,374 | 3,592,635 | |||||||||||||||||||||||||||
Former President and Chief | 2018 | 1,000,000 | — | 2,257,096 | — | 608,400 | — | 43,689 | 3,909,185 | |||||||||||||||||||||||||||
Executive Officer | 2017 | 875,852 | — | 1,893,664 | — | 1,051,064 | — | 38,438 | 3,859,019 | |||||||||||||||||||||||||||
Teresa S. Carroll | 2019 | 433,461 | — | 828,740 | — | 259,984 | 46,148 | 170,951 | 1,739,284 | |||||||||||||||||||||||||||
Former EVP and President of Global | 2018 | 575,000 | — | 807,586 | — | 349,578 | — | 54,267 | 1,786,432 | |||||||||||||||||||||||||||
Talent Solutions and General | 2017 | 548,011 | — | 784,666 | — | 437,723 | — | 35,542 | 1,805,942 | |||||||||||||||||||||||||||
Manager - Global Solutions, | ||||||||||||||||||||||||||||||||||||
Marketing, and HR | — | |||||||||||||||||||||||||||||||||||
Hannah S. Lim-Johnson | 2019 | 362,462 | — | 360,349 | — | 107,434 | — | 18,123 | 848,368 | |||||||||||||||||||||||||||
Former Senior Vice President | 2018 | 348,346 | — | 341,075 | — | 105,967 | — | 18,355 | 813,743 | |||||||||||||||||||||||||||
and Chief Legal Officer | ||||||||||||||||||||||||||||||||||||
| (1) | Represents 2019, 2018 and 2017 actual base salary earnings.
|
| (2) | Grant date fair value is determined by multiplying the number of shares granted by the Market Value (MV) on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Stock granted to all named officers on February 13, 2019 is $24.61, on February 14, 2018 is $29.27, on February 15, 2017 is $21.95, and to Mr. Quigley on October 1, 2019 is $23.54. The 2019 target Performance Share awards that are based on financial measures, with the potential for application of a Relative TSR performance modifier, are valued using a Monte Carlo valuation method based on the MV at the date of grant and other inputs. The value for the 2019 grant of Performance Share awards to all named officers on February 13, 2019 is $25.58, and to Mr. Quigley on October 1, 2019 is $24.46. The 2018 and 2017 target Performance Share awards that are based on financial measures are valued using the closing stock price on the date of grant, discounted because these shares are not eligible for dividends. The resulting value for the 2018 grant on February 14, 2018 is $28.40, and the 2017 grant on February 15, 2017 is $21.07. The target Performance Share awards that are based on the Relative TSR measure are valued using a Monte Carlo valuation method, based on the MV at the date of grant. The value for the 2018 grant on February 14, 2018 is $31.38, and the 2017 grant on February 15, 2017 is $20.16. The MV for the May 10, 2017 grants of Restricted Stock Units to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.93. The MV for the Performance Shares granted on May 10, 2017 to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.05 for shares based on financial measures, and $20.14 for the shares based on the Relative TSR measure. Please reference the Company’s 201910-K filing for details of the assumptions used in the Monte Carlo valuation. |
| (3) | The maximum number of shares and award value for Performance Share awards for the 2019-2021 performance period is 200% of target shares granted. The table below shows the maximum number of shares and value for Performance Share awards based on achievement of financial measures using the values of $25.58 for shares granted February 13, 2019, and $24.46 for Performance Share awards granted October 1, 2019, as explained in the previous footnote. Effective with her separation from the Company, and according to the terms of the EIP, Ms. Carroll forfeited all 2019-2021 Performance Shares. Effective with her separation from the Company and according to the terms of the EIP,Ms. Lim-Johnson may be eligible for a prorated 2019-2021 Performance Share award, if any, based upon achievement of performance goals. |
| |
20172019 Executive Compensation Tables
Summary Compensation Table 2017
Name | Maximum Number of Performance Shares | Maximum Value of Performance Shares | ||||||
Peter W. Quigley | 63,004 | $ | 1,596,030 | |||||
Olivier G. Thirot | 49,064 | $ | 1,255,057 | |||||
Peter M. Boland | 13,896 | $ | 355,460 | |||||
James H. Bradley | 14,444 | $ | 369,478 | |||||
George S. Corona | 137,140 | $ | 3,508,041 | |||||
Teresa S. Carroll | 49,064 | $ | 1,255,057 | |||||
Hannah S. Lim-Johnson | 21,332 | $ | 545,673 | |||||
| Name and Principal Position | Year | Salary(1) ($) | Bonus ($) | Stock ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in ($) | All Other ($) | Total ($) | |||||||||||||||||||||||||||
| George S. Corona | 2017 | 875,852 | - | 1,893,664 | - | 1,051,064 | - | 38,438 | 3,859,019 | |||||||||||||||||||||||||||
| President and Chief Executive Officer | 2016 | 655,000 | - | 995,138 | - | - | - | 58,260 | 1,708,397 | |||||||||||||||||||||||||||
| 2015 | 655,000 | - | 1,159,900 | - | 697,968 | - | 55,697 | 2,568,565 | ||||||||||||||||||||||||||||
| Olivier G. Thirot | 2017 | 533,500 | 701,381 | 400,045 | 45,867 | 1,680,793 | ||||||||||||||||||||||||||||||
| Senior Vice President | 2016 | 515,000 | - | 568,650 | - | - | - | 729,947 | 1,813,597 | |||||||||||||||||||||||||||
| and Chief Financial Officer | 2015 | 481,032 | - | 331,400 | - | 342,722 | - | 291,355 | 1,446,509 | |||||||||||||||||||||||||||
| Teresa S. Carroll | 2017 | 548,011 | 784,666 | 437,723 | 35,542 | 1,805,942 | ||||||||||||||||||||||||||||||
| EVP and President of Global Talent | 2016 | 500,000 | - | 568,650 | - | 104,125 | - | 39,439 | 1,212,214 | |||||||||||||||||||||||||||
| Solutions and GM - Global Solutions, Marketing, and HR | 2015 | 482,227 | - | 662,800 | - | 228,220 | - | 35,174 | 1,408,421 | |||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Peter W. Quigley | 2017 | 548,011 | 784,666 | �� | 416,443 | 30,077 | 1,779,197 | |||||||||||||||||||||||||||||
| EVP and President of Global Staffing | 2016 | 500,000 | - | 568,650 | - | - | - | 48,032 | 1,116,682 | |||||||||||||||||||||||||||
| and General Manager - Global IT, | 2015 | 482,227 | - | 662,800 | - | 392,921 | - | 41,672 | 1,579,621 | |||||||||||||||||||||||||||
| Global Service, and Global Business | ||||||||||||||||||||||||||||||||||||
| Solutions | ||||||||||||||||||||||||||||||||||||
| Steven S. Armstrong | ||||||||||||||||||||||||||||||||||||
| Senior Vice President and General | 2017 | 332,000 | - | 261,175 | 129,468 | - | 18,309 | 740,952 | ||||||||||||||||||||||||||||
| Manager - US Operations | ||||||||||||||||||||||||||||||||||||
| Carl T. Camden | 2017 | 398,252 | - | 2,093,613 | - | - | - | 22,949 | 2,514,813 | |||||||||||||||||||||||||||
| Former President and Chief | 2016 | 1,000,000 | - | 2,274,600 | - | - | - | 102,614 | 3,377,214 | |||||||||||||||||||||||||||
| Executive Officer | 2015 | 1,000,000 | - | 2,651,200 | - | 1,539,200 | - | 98,112 | 5,288,512 | |||||||||||||||||||||||||||
| (4) | Amounts for named executive officers include company matching contributions to the Management Retirement Plan (MRP), and Medicare taxgross-ups on those MRP contributions. (See table below.) The MRP is anon-qualified defined contribution deferred compensation plan available to all highly compensated employees, including the named executive officers. No highly compensated employees as outlined by Section 414(q)(1)(B)(i) of the Internal Revenue Code, including the named executive officers, are eligible to participate in the Company’stax-qualified retirement plan. Company contributions to the MRP include the Company match on participant deferrals as explained in the Retirement Plan section of this document. Mr. Boland received company-paid commuting expenses for travel between his residence in Florida and the Company’s headquarters in Michigan. Related to Ms. Carroll’s separation, she received severance payments during 2019 that total $110,577, employer-paid health care premiums of $2,859, and a lump sum payout of unused vacation for $33,173. The total value of perquisites provided to each named executive officer (other than Mr. Boland) in 2019 was less than $10,000 and, in accordance with reporting regulations, were not required to be included in this table. |
(1) Represents 2015, 2016, and 2017 actual base salary earnings. 2017 amount for Mr. Camden also includes a lump sum payout for all unused vacation upon his termination from the company.
(2) Grant date fair value is determined by multiplying the number of shares granted by the Market Value (MV) on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Stock Units granted to all named officers on February 15, 2017 is $21.95, on February 17, 2016 is $16.44, and on February 11, 2015 is $17.65. The target Performance Share awards that are based on financial measures are valued using the closing stock price on the date of grant, discounted because these shares are not eligible for dividends. The resulting value for the 2017 grant on February 12, 2017 is $21.07, the 2016 grant on February 17, 2016 is $15.85, and the 2015 grant on May 6, 2015 is $16.31. The target Performance Share awards that are based on the Relative TSR measure are valued using a Monte Carlo valuation method, based on the MV at the date of grant. The value for the 2017 grant on February 15, 2017 is $20.16, the 2016 grant on February 17, 2016 is $19.73, and the 2015 grant on May 6, 2015 is $16.01. The MV for the May 10, 2017 grants of Restricted Stock Units to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.93. The MV for the Performance Shares granted on May 10, 2017 to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.05 for shares based on financial measures, and $20.14 for the shares based on the Relative TSR measure. Please reference the Company’s 201710-K filing for details of the assumptions used in the Monte Carlo valuation.
(3) The maximum number of shares and award value for Performance Share awards for the 2017-2019 performance period is 200% of target shares granted. The table below shows the maximum number of shares and value for Performance Share awards based on achievement of financial measures using the values of $21.07 for shares granted February 15, 2017 and $21.05 for shares granted May 10, 2017, and for Performance Share awards based on achievement of the Relative TSR measure using the values of $20.16 for shares granted February 15, 2017 and $20.14 for shares granted May 10, 2017, as explained in the previous footnote.
Name | Company Matching MRP Contributions | MRP Medicare Gross-ups | Commuting Expenses | Payments Made Upon Termination | Total All Other Compensation | |||||||||||||||
Peter W. Quigley | $ | 42,740 | $ | 1,372 | — | — | $ | 44,112 | ||||||||||||
Olivier G. Thirot | $ | 38,505 | $ | 1,239 | — | — | $ | 39,744 | ||||||||||||
Peter M. Boland | $ | 18,082 | — | $ | 39,478 | — | $ | 57,560 | ||||||||||||
James H. Bradley | $ | 18,307 | $ | 602 | — | — | $ | 18,909 | ||||||||||||
George S. Corona | $ | 31,926 | $ | 1,448 | — | — | $ | 33,374 | ||||||||||||
Teresa S. Carroll | $ | 23,332 | $ | 1,010 | — | $ | 146,609 | $ | 170,951 | |||||||||||
Hannah S. Lim-Johnson | $ | 18,123 | — | — | — | $ | 18,123 | |||||||||||||
| |
20172019 Executive Compensation Tables
Grants of Plan-Based Awards 2019(1)
| All Other | Grant | |||||||||||||||||||||||||||||||||||
| Stock | Date Fair | |||||||||||||||||||||||||||||||||||
| Awards: | Value of | |||||||||||||||||||||||||||||||||||
| Estimated Future Payouts | Estimated Future Payouts | Number | Stock | |||||||||||||||||||||||||||||||||
| Under Non-Equity Incentive | Under Equity Incentive Plan | of Shares | and | |||||||||||||||||||||||||||||||||
| Plan Awards (4) | Awards (5) | of Stock | Option | |||||||||||||||||||||||||||||||||
Name | Grant Date (2) | Approval Date (3) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (6) (#) | Awards (7) ($) | ||||||||||||||||||||||||||
Peter W. Quigley | STIP | 242,678 | 595,889 | 1,191,777 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 12,266 | 24,532 | 49,064 | 627,529 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 8,176 | 201,211 | ||||||||||||||||||||||||||||||||||
| 10/1/2019 | 8/6/2019 | 3,486 | 6,970 | 13,940 | 170,486 | |||||||||||||||||||||||||||||||
| 10/1/2019 | 8/6/2019 | 2,324 | 54,707 | |||||||||||||||||||||||||||||||||
Olivier G. Thirot | STIP | 226,080 | 452,160 | 904,320 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 12,266 | 24,532 | 49,064 | 627,529 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 8,176 | 201,211 | ||||||||||||||||||||||||||||||||||
Peter M. Boland | STIP | 99,449 | 198,899 | 397,797 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 3,474 | 6,948 | 13,896 | 177,730 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 2,316 | 56,997 | ||||||||||||||||||||||||||||||||||
James H. Bradley | STIP | 91,288 | 214,795 | 429,590 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 3,612 | 7,222 | 14,444 | 184,739 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 2,408 | 59,261 | ||||||||||||||||||||||||||||||||||
George S. Corona | STIP | 487,500 | 975,000 | 1,950,000 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 34,286 | 68,570 | 137,140 | 1,754,021 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 22,856 | 562,486 | ||||||||||||||||||||||||||||||||||
Teresa S. Carroll | STIP | 142,043 | 366,563 | 733,125 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 12,266 | 24,532 | 49,064 | 627,529 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 8,176 | 201,211 | ||||||||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | STIP | 117,800 | 235,600 | 471,201 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 5,334 | 10,666 | 21,332 | 272,836 | ||||||||||||||||||||||||||||||||
| 2/13/2019 | 3,556 | 87,513 | ||||||||||||||||||||||||||||||||||
| Name | Maximum Number of Performance Shares | Maximum Value of Performance Shares | ||
George S. Corona | 139,782 | $2,901,316 | ||
Olivier G. Thirot | 49,950 | $1,037,295 | ||
Teresa S. Carroll | 55,900 | $1,160,484 | ||
Peter W. Quigley | 55,900 | $1,160,484 | ||
Steven S. Armstrong | 18,600 | $386,260 | ||
Carl T. Camden | 149,100 | $3,096,310 |
(4) Stock Awards granted to Mr. Camden include the market values of both restricted shares and performance shares. Mr. Camden forfeited all unvested restricted shares upon his retirement, however, he is eligible to receive prorated performance shares, if they become earned, as he was “Normal Retirement eligible” under the terms of the EIP for the outstanding 2015, 2016 and 2017 grants.
| (1) | The Company has not granted stock options since 2004, including 2019. Accordingly, this column has been eliminated from the table. |
| Name | Group Term Life Premiums | Company Matching MRP Contributions | MRP Medicare Gross-ups | Use of Vacation Property | International Assignment Carryover Cost | Total All Other | ||||||||||||||||||||||||
George S. Corona | $1,808 | $35,034 | $1,596 | - | - | $38,438 | ||||||||||||||||||||||||
Olivier G. Thirot | $1,472 | $26,675 | $1,259 | $506 | $15,955 | $45,867 | ||||||||||||||||||||||||
Teresa S. Carroll | $1,380 | $32,607 | $1,555 | - | - | $35,542 | ||||||||||||||||||||||||
Peter W. Quigley | $1,380 | $27,401 | $1,296 | - | - | $30,077 | ||||||||||||||||||||||||
Steven S. Armstrong | $916 | $16,600 | $793 | - | - | $18,309 | ||||||||||||||||||||||||
Carl T. Camden | $2,070 | $19,913 | $966 | - | - | $22,949 | ||||||||||||||||||||||||
| (2) | Long-term incentive grants to named executive officers, consisting of Restricted Share Units and Performance Shares, were approved by the Committee at its February 13, 2019 meeting. |
(5) Amounts for named executive officers include premiums paid for life insurance, company matching contributions to the Management Retirement Plan (MRP), and Medicare taxgross-ups on those MRP contributions. (See table above.) The MRP is anon-qualified defined contribution deferred compensation plan available to all highly compensated employees, including the named executive officers. No highly compensated employees as outlined by Section 414(q)(1)(B)(i) of the Internal Revenue Code, including the Named Executive Officers, are eligible to participate in the Company’stax-qualified retirement plan. Company contributions to the MRP include the Company match on participant deferrals as explained in the Retirement Plan section of this document. The amount reported for Mr. Thirot includes the following 2017 carryover costs associated with his international assignment from Switzerland to the U.S. during 2014 to 2016: tax preparation fee of $14,501, professional services of $15,042, visa support expense of $6,216, tax recoveries (for 2016) of U.S. federal and Michigan state taxes made by the Company on Mr. Thirot’s behalf under the Company’s tax equalization policy totaling $19,804. The total value of perquisites provided to each Named Executive Officer (other than Mr. Thirot) in 2017 was less than $10,000 and, in accordance with reporting regulations, were not required to be included in this table. Amounts reported in this column for 2016 and 2015 have been restated to remove dividends and dividend equivalents earned on outstanding RSA and RSU awards, as dividends are included in the grant date fair value of the award.
| (3) | On August 6, 2019, the Committee approved an additional long-term incentive grant to Mr. Quigley due to his promotion to CEO, with an effective date of October 1, 2019. |
| (4) | Payout for threshold performance under the STIP for Messrs. Thirot, Boland, and Corona andMs. Lim-Johnson was 50% of each named executive officer’s target payout amount, as payouts were based 100% on corporate measures and goals. In addition to corporate measures, business unit measures are included in the STIP goals for Messrs. Quigley and Bradley and Ms. Carroll, which have payouts for threshold performance ranging from 20% to 50% of each named executive officer’s target payout amount. The weighted average payout for all performance measures at a threshold level of performance is equal to approximately 40.7% of the target payout amount for Mr. Quigley, 42.5% of the target payout amount for Mr. Bradley, and 38.75% of the target payout for Ms. Carroll. For the corporate measures, achievement between threshold and target, and target and maximum levels is interpolated on a straight-line basis. For Mr. Bradley’s business unit measure, achievement between payout levels is interpolated on a straight-line basis. For Ms. Carroll’s and Mr. Quigley’s business unit measures, there is no straight-line interpolation between payout levels of the payout schedule. The required level of performance for each payout level must be achieved in order to earn the corresponding payout amount. STIP maximum payout is 200% of target with an individual maximum payout of no more than $3,000,000 as required under the terms of the amended and restated STIP, effective February 12, 2015. |
| (5) | Performance Shares granted in 2019 are earned based upon achievement of two financial measures, with a Relative TSR measure applied as a modifier. The two financial measures are equally weighted at 50%. Achievement of a threshold level of performance on any measure results in 50% of the target shares for that measure being earned. Achievement of a target level of performance results in 100% of the target shares being earned. Achievement of the maximum level of performance on any measure results in 200% of the target shares for that measure being earned by the named executive officer. Achievement between these levels is interpolated on a straight-line basis. Restricted Share Units, with aone-year performance hurdle, were granted to each of the named executive officers who were executive officers at the time the grant was made in 2019. Achievement of theone-year performance hurdle will trigger the awards to vest ratably on each of the first four anniversaries of the date of grant (25% per year). If theone-year performance hurdle is not achieved, all shares will be forfeited. The performance hurdle was achieved for 2019. |
| |
20172019 Executive Compensation Tables
| (6) | Restricted Stock Awards granted February 13, 2019 vest ratably on each of the first four anniversaries of the date of grant (25% per year). |
| (7) | Grant date fair value is determined by multiplying the target number of shares granted by the MV on the grant date. For restricted stock, MV is determined by the closing price on the date of grant. The MV for Restricted Share Units and Restricted Share Awards granted to all named officers on February 13, 2019 is $24.61. The target Performance Share awards that are based on financial measures are valued using a Monte Carlo valuation model that includes assumptions for inputs of expected stock price volatility, dividend yield and risk-free interest rate. The resulting value for the 2019 grant of Performance Share awards on February 13, 2019 is $25.58. The MV for the grant made to Mr. Quigley on October 1, 2019 for Restricted Stock Units is $23.54 and the value for Performance Shares is $24.46. |
Outstanding Equity Awards at Fiscal Year End 2019(1)
Grants of Plan-Based Awards 2017 (1)
| Stock Awards | ||||||||||||||||||||
Name | Grant Year | Number of Shares or Units of Stock That Have Not Vested (2)(3) (#) | Market Value of Shares or Units of Stock That Have Not Vested(4) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(4) ($) | |||||||||||||||
Peter W. Quigley | 2019 | 10,500 | 233,205 | 31,502 | 699,659 | |||||||||||||||
| 2018 | 5,157 | 114,537 | — | — | ||||||||||||||||
| 2017 | 14,905 | 331,040 | ||||||||||||||||||
| 2016 | 2,125 | 47,196 | ||||||||||||||||||
Olivier G. Thirot | 2019 | 8,176 | 181,589 | 24,532 | 544,856 | |||||||||||||||
| 2018 | 5,157 | 114,537 | — | — | ||||||||||||||||
| 2017 | 13,319 | 295,815 | ||||||||||||||||||
| 2016 | 2,125 | 47,196 | ||||||||||||||||||
Peter M. Boland | 2019 | 2,316 | 51,438 | 6,948 | 154,315 | |||||||||||||||
| 2018 | 6,599 | 146,564 | — | — | ||||||||||||||||
James H. Bradley | 2019 | 2,408 | 53,482 | 7,222 | 160,401 | |||||||||||||||
| 2018 | 1,455 | 32,316 | — | — | ||||||||||||||||
| 2017 | 4,959 | 110,139 | ||||||||||||||||||
| 2016 | 1,063 | 23,609 | ||||||||||||||||||
George S. Corona | 2019 | 22,856 | 507,632 | 68,570 | 1,522,940 | |||||||||||||||
| 2018 | 14,412 | 320,091 | — | — | ||||||||||||||||
| 2017 | 35,718 | 793,297 | ||||||||||||||||||
| 2016 | 3,719 | 82,599 | ||||||||||||||||||
Teresa S. Carroll | 2019 | — | — | — | — | |||||||||||||||
| 2018 | — | — | — | — | ||||||||||||||||
| 2017 | 9,392 | 208,596 | ||||||||||||||||||
| 2016 | — | — | ||||||||||||||||||
Hannah S.Lim-Johnson | 2019 | 3,556 | 78,979 | 10,666 | 236,892 | |||||||||||||||
| 2018 | 2,178 | 48,373 | — | — | ||||||||||||||||
| 2017 | 3,400 | 75,514 | ||||||||||||||||||
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(3) | Estimated Future Payouts Under Equity Incentive Plan | All Other Stock Awards: Number of Shares of Stock or Units (5) (#) | Grant Date Fair and Option | |||||||||||||||
| Name | Grant Date (2) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||
George S. Corona | STIP | 262,819 | 1,051,275 | 2,102,549 | ||||||||||||||
| 2/15/2017 | 8,156 | 32,625 | 65,250 | 677,513 | ||||||||||||||
| 2/15/2017 | 10,875 | 238,706 | ||||||||||||||||
| 5/10/2017 | 9,317 | 37,266 | 74,532 | 773,145 | ||||||||||||||
| 5/10/2017 | 9,316 | 204,300 | ||||||||||||||||
Olivier G. Thirot | STIP | 100,031 | 400,125 | 800,250 | ||||||||||||||
| 2/15/2017 | 6,244 | 24,975 | 49,950 | 518,648 | ||||||||||||||
| 2/15/2017 | 8,325 | 182,734 | ||||||||||||||||
Teresa S. Carroll | STIP | 116,296 | 440,810 | 881,619 | ||||||||||||||
| 2/15/2017 | 4,650 | 18,600 | 37,200 | 386,260 | ||||||||||||||
| 2/15/2017 | 6,200 | 136,090 | ||||||||||||||||
| 5/10/2017 | 2,338 | 9,350 | 18,700 | 193,982 | ||||||||||||||
| 5/10/2017 | 3,116 | 68,334 | ||||||||||||||||
Peter W. Quigley | STIP | 102,099 | 440,810 | 881,619 | ||||||||||||||
| 2/15/2017 | 4,650 | 18,600 | 37,200 | 386,260 | ||||||||||||||
| 2/15/2017 | 6,200 | 136,090 | ||||||||||||||||
| 5/10/2017 | 2,338 | 9,350 | 18,700 | 193,982 | ||||||||||||||
| 5/10/2017 | 3,116 | 68,334 | ||||||||||||||||
Steven S. Armstrong | STIP | 42,828 | 199,200 | 398,400 | ||||||||||||||
| 2/15/2017 | 2,325 | 9,300 | 18,600 | 193,130 | ||||||||||||||
| 2/15/2017 | 3,100 | 68,045 | ||||||||||||||||
Carl T . Camden | STIP | 325,000 | 1,300,000 | 2,600,000 | ||||||||||||||
| 2/15/2017 | 18,638 | 74,550 | 149,100 | 1,548,155 | ||||||||||||||
| 2/15/2017 | 24,850 | 545,458 | ||||||||||||||||
The Company did not grant stock options during the 2019 fiscal year. All previously outstanding granted stock options for the named executive officers expired during the 2014 fiscal year. As a result, there are no outstanding options to report and, accordingly, these columns have been eliminated from the table. All outstanding restricted stock awards/unit grants vest ratably over 4 years. The number of outstanding shares has been determined as of December 29, 2019. (1) The Company has not granted stock options since 2004, including 2017. Accordingly, this column has(1) (2) Long-term incentive grants to named executive officers, consisting of Restricted Share Units and Performance Shares, were approved by the Committee at its February 15, 2017 meeting. Additional grants were provided to Messrs. Corona and Quigley and Ms. Carroll effective with their promotions on May 10, 2017.(3) Payout for threshold performance under the STIP for Messrs. Corona and Thirot was 25% of each named executive officer’s target payout amount, as payouts were based 100% on corporate measures and goals. In addition to corporate measures, business unit measures are included in the STIP goals for Ms. Carroll and Messrs. Quigley and Armstrong, which have payouts for threshold performance ranging from 20% to 50% of each named executive officer’s target payout amount. The weighted average payout for all performance measures at a threshold level of performance is equal to approximately 26.4% of the target payout amount for Ms. Carroll, 23.2% of the target payout amount for Mr. Quigley, and 21.5% of the target payout amount for Mr. Armstrong. For the corporate measures, achievement between threshold and intermediate, intermediate and target, and target and maximum levels is interpolated on a straight-line basis. For Ms. Carroll’s and Messrs. Quigley and Armstrong’s business unit measures, there is no straight-line interpolation between payout levels of the payout schedule. The required level of performance for each payout level must be achieved in order to earn the corresponding payout amount. STIP maximum payout is 200% of target with an individual maximum payout of no more than $3,000,000 as required under the terms of the amended and restated STIP, effective February 12, 2015.(4) Performance Shares granted in 2017 are earned based upon achievement of two financial measures and a Relative TSR measure. These three measures are equally weighted. Achievement of a threshold level of performance on any measure results in 25% of the target shares being earned. Achievement of an intermediate level of performance (halfway between threshold and target) results in 75% of the target shares being earned. Achievement of the maximum level of performance on any measure results in 200% of the target shares being earned by the named executive officer. Achievement between these levels is interpolated on a straight-line basis. Restricted Share Units, with aone-year performance hurdle, were granted to each of the Named Executive Officers in 2017. Achievement of theone-year performance hurdle will trigger the awards to vest ratably on each of the first four anniversaries of the date of grant (25% per year). If theone-year performance hurdle is not achieved, all shares will be forfeited. The performance hurdle was achieved for 2017.(5) There were no Restricted Share awards granted to the Named Executive Officers during the 2017 plan year.(2) 5354
20172019 Executive Compensation Tables
| (3) | 2017 total includes performance shares earned based upon the 2017-2019 level of achievement for both financial measures. No performance shares were earned based upon the 2017-2019 level of achievement for the Relative TSR measure. 2017, 2018, and 2019 totals includes restricted stock units granted with a performance hurdle that was achieved for each of the respective years. |
| (4) | The market value is determined based on the closing market price of our common shares on the last trading day of the 2019 fiscal year, December 27, 2019 ($22.21). |
| (5) | Performance shares granted in 2018 are earned based upon achievement of selected financial measures and a Relative TSR measure over a three-year period. Performance shares granted in 2019 are earned based upon achievement of selected financial measures over a three-year period. Results of the 2019 financial measures may be modified by the results of a Relative TSR performance measure up to 25%, positively or negatively. If the minimum or threshold performance is not attained, the performance shares will be forfeited. In accordance with SEC reporting requirements, the total shares shown in this table for the 2018 grant reflect below threshold performance for the three measures. The total shares shown for the 2019 grant reflect target performance for the two measures. Performance will not be known until early 2021 for the 2018 grant, and early 2022 for the 2019 grant. If the Company does not attain the cumulative results assumed for this disclosure over the three-year period, the number of shares received by the named executive officers upon settlement will be reduced. |
Option-Exercises and Stock Vested 2019
| Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | ||||||||||||
Peter W. Quigley | — | — | 28,756 | 707,428 | ||||||||||||
Olivier G. Thirot | — | — | 27,258 | 672,065 | ||||||||||||
Peter M. Boland | — | — | 2,199 | 47,270 | ||||||||||||
James H. Bradley | — | — | 13,614 | 334,777 | ||||||||||||
George S. Corona | — | — | 53,090 | 1,306,311 | ||||||||||||
Teresa S. Carroll | — | — | 28,756 | 707,428 | ||||||||||||
Hannah S.Lim-Johnson | — | — | 2,426 | 58,922 | ||||||||||||
(6) Grant date fair value is determined by multiplying the target number of shares granted by the MV on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Share Units granted to all named officers on February 15, 2017 is $21.95. The target Performance Share awards that are based on financial measures are valued using the closing stock price on the date of grant, discounted because these shares are not eligible for dividends. The resulting value for the 2017 grant on February 12, 2017 is $21.07. The target Performance Share awards that are based on the Relative TSR measure are valued using a Monte Carlo valuation method, effective the date of grant. The value for the 2017 grant of Performance Shares based on the Relative TSR measure on February 15, 2017 is $20.16. The MV for the Restricted Share Units granted on May 10, 2017 to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.93. The MV for the Performance Shares granted on May 10, 2017 to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.05 for shares based on financial measures, and $20.14 for the shares based on the Relative TSR measure.
| (1) | Value Realized on Vesting is calculated by multiplying the shares vested times the stock closing price on the day of vesting. |
Outstanding Equity Awards at Fiscal Year End 2017(1)Nonqualified Deferred Compensation 2019
| Stock Awards | ||||||||||||||||||||||||||||||
| Name | Grant Year | Number of Shares or Units of Stock That Have Not Vested (2)(3) (#) | Market Value ($) | Equity Incentive Plan (#) | Equity Incentive Plan ($) | Executive Contributions in Last Fiscal Year(1) ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate Earnings in Last Fiscal Year(3) ($) | Aggregate Withdrawals/ Distributions(4) ($) | Aggregate Balance at Last Fiscal Year End(5) ($) | ||||||||||||||||||||
Peter W. Quigley | 85,479 | 42,740 | 314,226 | — | 1,821,668 | |||||||||||||||||||||||||
Olivier G. Thirot | 158,969 | 38,505 | 11,522 | — | 590,962 | |||||||||||||||||||||||||
Peter M. Boland | 36,163 | 18,082 | 8,729 | — | 111,332 | |||||||||||||||||||||||||
James H. Bradley | 36,615 | 18,307 | 230,857 | — | 1,644,412 | |||||||||||||||||||||||||
George S. Corona | 2017 | 20,191 | 550,609 | 116,485 | 3,176,546 | 63,852 | 31,926 | 47,861 | — | 2,214,928 | ||||||||||||||||||||
| 2016 | 11,157 | 304,251 | 61,360 | 1,673,287 | ||||||||||||||||||||||||||
| 2015 | 84,055 | 2,292,180 | ||||||||||||||||||||||||||||
| 2014 | 12,500 | 340,875 | ||||||||||||||||||||||||||||
Olivier G. Thirot | 2017 | 8,325 | 227,023 | 41,625 | 1,135,114 | |||||||||||||||||||||||||
| 2016 | 6,375 | 173,846 | 35,063 | 956,168 | ||||||||||||||||||||||||||
| 2015 | 24,016 | 654,916 | ||||||||||||||||||||||||||||
| 2014 | 4,250 | 115,898 | ||||||||||||||||||||||||||||
Teresa S. Carroll | 2017 | 9,316 | 254,047 | 46,583 | 1,270,318 | 46,663 | 23,332 | 323,041 | (46,148 | ) | 2,072,423 | |||||||||||||||||||
| 2016 | 6,375 | 173,846 | 35,063 | 956,168 | ||||||||||||||||||||||||||
| 2015 | 48,032 | 1,309,833 | ||||||||||||||||||||||||||||
| 2014 | 3,750 | 102,263 | ||||||||||||||||||||||||||||
Peter W. Quigley | 2017 | 9,316 | 254,047 | 46,583 | 1,270,318 | |||||||||||||||||||||||||
| 2016 | 6,375 | 173,846 | 35,063 | 956,168 | ||||||||||||||||||||||||||
| 2015 | 48,032 | 1,309,833 | ||||||||||||||||||||||||||||
| 2014 | 3,750 | 102,263 | ||||||||||||||||||||||||||||
Steven S. Armtrong | 2017 | 3,100 | 84,537 | 15,500 | 422,685 | |||||||||||||||||||||||||
| 2016 | 3,188 | 86,937 | 17,532 | 478,098 | ||||||||||||||||||||||||||
| 2015 | 24,016 | 654,916 | ||||||||||||||||||||||||||||
| 2014 | 3,000 | 81,810 | ||||||||||||||||||||||||||||
Carl T . Camden | 2017 | - | - | 17,255 | 470,544 | |||||||||||||||||||||||||
| 2016 | - | - | 66,226 | 1,805,983 | ||||||||||||||||||||||||||
| 2015 | 138,657 | 3,781,176 | ||||||||||||||||||||||||||||
| 2014 | - | - | ||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | 54,369 | 18,123 | 28,792 | — | 183,482 | |||||||||||||||||||||||||
(1) The Company did not grant stock options during the 2017 fiscal year. All previously outstanding granted stock options for the Named Executive Officers expired during the 2014 fiscal year. As a result, there are no outstanding options to report and, accordingly, these columns have been eliminated from the table.
(2) All outstanding restricted stock awards/unit grants vest ratably over 4 years. The number of outstanding shares has been determined as of December 31, 2017.
| (1) | Executives may defer a percentage of their base salary (up to 25%) and incentive earnings (up to 50%) for retirement. These amounts, as applicable, are reported as a part of the salary or incentive earnings found in the Summary Compensation Table. |
| (2) | Registrant Contributions in Last Fiscal Year above represent Company matching contributions (50% of the first 10% of salary and annual incentive deferrals), and they are also reported as All Other Compensation in the Summary Compensation Table. All but two of the named executive officers have met the three-year vesting requirement for the Company match. |
|
2017 Executive Compensation Tables
(3) 2015 total includes performance shares earned based upon the 2015 level of achievement for both financial measures, and performance shares earned based upon the 2015-2017 level of achievement for the Relative TSR measure. 2017 total includes restricted stock units granted with a performance hurdle for 2017 that was achieved.
(4) The market value is determined based on the closing market price of our common shares on the last trading day of the 2017 fiscal year, December 29, 2017 ($27.27).
(5) Performance shares granted in 2016 and 2017 are earned based upon achievement of selected financial measures and a Relative TSR measure over a three-year period. If the minimum or threshold performance is not attained, the performance shares will be forfeited. In accordance with SEC reporting requirements, the total shares shown in this table for the 2016 grant reflect threshold performance for one of the four measures that were selected for that grant, target performance for one of the four measures and maximum performance for two of the four measures. The total shares shown for the 2017 grant reflect target performance for one measure and maximum performance for two measures. Performance will not be known until early 2019 for the 2016 grant, and early 2020 for the 2017 grant. If the Company does not attain the cumulative results assumed for this disclosure over the three-year period, the number of shares received by the Named Executive Officers upon settlement will be reduced.
Option Exercises and Stock Vested 2017
| Option Awards | Stock Awards | |||||||
| Name | Number of (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | ||||
George S. Corona | - | - | 33,093 | 804,034 | ||||
Olivier G. Thirot | - | - | 7,950 | 185,166 | ||||
Teresa S. Carroll | - | - | 12,125 | 289,204 | ||||
Peter W. Quigley | - | - | 13,375 | 318,454 | ||||
Steven S. Armstrong | - | - | 8,312 | 201,043 | ||||
Carl T . Camden | - | - | 18,500 | 404,115 | ||||
(1) Value Realized on Vesting is calculated by multiplying the shares vested times the stock closing price on the day of vesting.
Nonqualified Deferred Compensation 2017
| Name | Executive ($) | Registrant ($) | Aggregate ($) | Aggregate Withdrawals/ Distributions (4) ($) | Aggregate Balance at Last Fiscal Year End (5) ($) | |||||
George S. Corona | 70,068 | 35,034 | 31,266 | - | 1,910,972 | |||||
Olivier G. Thirot | 53,350 | 26,675 | 5,124 | - | 85,089 | |||||
Teresa S. Carroll | 65,213 | 32,607 | 225,678 | (20,673) | 1,685,411 | |||||
Peter W. Quigley | 54,801 | 27,401 | 167,487 | - | 1,288,107 | |||||
Steven S. Armstrong | 36,520 | 16,600 | 367,349 | - | 2,306,242 | |||||
Carl T . Camden | 39,825 | 19,913 | 387,233 | (5,158,289) | - |
(1) Executives may defer a percentage of their base salary (up to 25%) and annual incentive earnings (up to 50%) for retirement. These amounts, as applicable, are reported as a part of the salary or incentive earnings found in the Summary Compensation Table.
(2) Registrant Contributions in Last Fiscal Year above represent Company matching contributions (50% of the first 10% of salary and annual incentive deferrals), and they are also reported as All Other Compensation in the Summary Compensation Table. All Named Executive Officers have met the three-year vesting requirement for the Company match.
(3) Represents actual earnings from the investment of the prior year aggregate balance plus the earnings on current year executive and Company contributions. The aggregate earnings are based on investment options that are also offered to employees who
| 55 | |
20172019 Executive Compensation Tables
| (3) | Represents actual earnings (or loss) from the investment of the prior year aggregate balance plus the earnings on current year executive and Company contributions. The aggregate earnings are based on investment options that are also offered to employees who participate in the Company’stax-qualified 401(k) plan. As these earnings are not “above market” interest payments or preferential earnings, they are not included in the Summary Compensation Table. |
| (4) | Participants may elect to receive distributions after separation from service, the later of a specified age and separation of service or a scheduledin-service distribution. Amounts may be paid as a lump sum, monthly installments for up to 20 years, or a combination of the two as elected by the participant. Ms. Carroll received a scheduledin-service distribution from her account in 2019. |
| (5) | Amounts reported in this column include the following amounts that have been reported in the Summary Compensation Table for fiscal years 2013-2019: Peter W. Quigley ($791,355); Named in the proxies for fiscal years 2015-2019: Olivier Thirot ($579,615) and Teresa S. Carroll ($526,779); Named in the proxies for fiscal years 2018-2019: HannahLim-Johnson ($142,162); Named in the proxy for fiscal year 2019: Peter M. Boland ($54,245) and James H. Bradley ($54,922); Named in the proxies for fiscal years 2006-2019: George S. Corona ($1,412,718). |
participate in the Company’stax-qualified 401(k) plan. As these earnings are not “above market” interest payments or preferential earnings, they are not included in the Summary Compensation Table.
(4) Participants may elect to receive distributions after separation from service, the later of a specified age and separation of service or a scheduledin-service distribution. Amounts may be paid as a lump sum, monthly installments for up to 20 years, or a combination of the two as elected by the participant. Ms. Carroll received a scheduledin-service distribution from her account in 2017. Mr. Camden received a lump sum distribution of his account balance following his separation from employment.
(5) Amounts reported in this column include the following amounts that have been reported in the Summary Compensation Table for fiscal years 2006-2017: George S. Corona ($1,196,939); Named in the proxies for fiscal years 2013-2017: Peter W. Quigley ($514,419); Named in the proxies for fiscal years 2015-2017: Olivier G. Thirot ($80,025) and Teresa S. Carroll ($470,531); Named in the proxy for fiscal year 2017: Steven S. Armstrong ($53,120).
Potential Payments Upon Termination 20172019
This section describes the potential additional payments and benefits under our compensation and benefit plans and arrangements to which the Named Executive Officersnamed executive officers would be entitled upon termination of employment under certain circumstances. Named Executive Officersexecutive officers would also be entitled to vested benefits and generally available benefits under our various plans and arrangements, as discussed after the Potential Payments Upon Termination table. The Company does not maintain employment agreements with our Named Executive Officers.named executive officers. The table following the narrative discussion summarizes the amounts payable upon termination under certain circumstances to our Named Executive Officers,named executive officers, assuming that the executive’s employment terminated on December 31, 2017,29, 2019, the last day of our fiscal year.
Senior Executive Severance Plan
The Company implemented the Senior Executive Severance Plan (“Severance Plan”) for a limited number of Executive Officersexecutive officers in March 2017. Messrs. Corona, Thirot and Quigley, and Ms. Carroll are the only participants in the plan. Described below and illustrated in the table, Potential Payouts Upon Termination, are the different elements payable under the Severance Plan if a Named Executive Officernamed executive officer who iswas a party to the Severance Plan would experience a qualifying termination. All continuation amounts would be paid over the salary continuation period in compliance with Section 409A of the Code. Messrs. Thirot and Quigley are the only current participants in the Severance Plan. Ms. Carroll had been a participant in the Severance Plan and effective with her separation on September 30, 2019 began receiving benefits under the qualifying termination, “involuntary termination other than for cause”. Under the terms of Mr. Armstrong participatesCorona’s Transition Employment Agreement, he ceased being a participant in the Severance Plan following September 30, 2019, when he stepped down as the company’s CEO. He is no longer eligible to receive severance benefits of any kind. Messrs. Boland and Bradley andMs. Lim-Johnson were covered in the General Severance Plan in 2019 as outlined in the next section.
If one of the eligible Named Executive Officersnamed executive officers were to have experienced a qualifying termination under the Severance Plan in 2017,2019, the Named Executive Officernamed executive officer would have been entitled to severance benefits based on the type of qualified termination and whether they were a Tier 1 or a Tier 2 participant. Mr. Corona isQuigley was the only Tier 1 participant in the Severance Plan. Messrs.Mr. Thirot and Quigley, and Ms. Carroll arewere Tier 2 participants in the Severance Plan. A “qualified termination” is any termination of a participant’s employment: by the Company other than for cause, disability or death; or for “good reason” by a participant in connection with a change in control.
For a qualified termination that occurs not in connection with a change in control, a Tier 1 participant would receive severance payments in the form of base salary continuation for a period of twenty-four months, and a Tier 2 participant would receive severance payments in the form of base salary continuation for a period of eighteen months. In addition, Tier 1 and Tier 2 participants would receive a prorated portion of their annual incentive compensation for the fiscal year in which the termination occurred, based on the actual performance results for the year. The pro rata annual incentive payout will be determined based on the number of calendar days the eligible Named Executive Officernamed executive officer was actually employed during such plan year. Prorated annual incentive awards are paid at the same time that incentive compensation for the same year are paid to the other Senior Officerssenior officers of the Company, following certification by the Committee that applicable performance goals have been attained. Salary continuation amounts would be paid by the Company in installments over the severance period and in accordance with the Company’s standard payroll practice, subject to the requirements of Section 409A.
For a qualified termination that occurs in connection with a change in control, a Tier 1 participant would receive a single lump sum severance payment equal to two (2) times the sum of the participant’s annual base salary and target annual incentive compensation. A Tier 2 participant would receive a single lump sum severance payment equal to one andone-half (1.5) times the sum of the participant’s annual base salary and target annual incentive compensation. In addition, Tier 1 and Tier 2 participants would receive a prorated portion of their annual incentive compensation. If the qualifying termination
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occurred in the same year as the change in control, a prorated portion of the participant’s annual incentive compensation is paid based on achievement of a target level of performance. If the qualifying termination occurred in the two years following a change in control, a prorated portion of the participant’s annual incentive compensation is paid based on the actual performance results achieved for the year. Any pro rata annual incentive payout will be determined based on the number of calendar days the eligible Named Executive Officernamed executive officer was actually employed during such plan year. Prorated annual incentive awards are paid in a lump sum at the same time that incentive compensation for the same year are paid to the other Senior Officerssenior officers of the Company, following certification by the Committee that applicable performance goals have been attained. Participants are subject to abest-net
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2017 Executive Compensation Tables
cutback for 280G excise tax calculations with no excise taxgross-ups provided under the Severance Plan.
Subject to the participant’s timely election of continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company would provide comparable medical (including prescription drug), dental, vision, and hospitalization benefits to the eligible Named Executive Officernamed executive officer and his or her eligible dependents for the severance period, provided the Named Executive Officernamed executive officer continues to pay the applicable employee rate for such coverage and the Named Executive Officernamed executive officer remains eligible for COBRA coverage. The severance period for a Tier 1 participant is 24 months and for a Tier 2 participant is 18 months.
The eligible Named Executive Officernamed executive officer will be entitled to receive reimbursement for professional outplacement services actually incurred during the initial12-month period following termination, not to exceed $10,000.
The eligible Named Executive Officers,named executive officers, as a condition to receiving payments under the Severance Plan, are required to sign a general release of claims relating to their employment. In addition, they are required to agree not to directly or indirectly, individually or in any capacity or relationship, engage in any business or employment, or aid or endeavor to assist any business or legal entity, that is in direct competition with the business of the Company for the 12 months following termination.
During the 12 months following termination, the eligible Named Executive Officersnamed executive officers must also agree to not induce any employee of the Company to terminate employment with the Company, nor knowingly offer employment to any person who is or who was employed by the Company unless such person has ceased to be employed by the Company for a period of at least six months.
Named Executive Officersexecutive officers covered under the Severance Plan may not disparage, slander, or injure the business reputation or goodwill of the Company.
Named Executive Officersexecutive officers must maintain as secret and confidential all protected information such as trade secrets, confidential and proprietary business information of the Company, and any other information of the Company, including but not limited to customer lists, sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agents or employees, including the Named Executive Officer.named executive officer.
Noncompliance with any of the above may result in the loss of severance benefits.
The General Severance Plan was amended and restated effective March 27, 2017 to include the Senior Officerssenior officers who are not covered by the Senior Executive Severance Plan. Mr. Armstrong isBoland, Mr. Bradley, andMs. Lim-Johnson were the only Named Executive Officernamed executive officers in 20172019 who participatesparticipated in this plan.Plan. Described below and illustrated in the table, Potential Payouts Upon Termination, are the different elements payable under the General Severance Plan if Mr. Armstrong would experienceBoland, Mr. Bradley, orMs. Lim-Johnson had experienced an involuntary termination of employment. All continuation amounts would be paid over the salary continuation period in compliance with Section 409A.
If Mr. ArmstrongBoland, Mr. Bradley, orMs. Lim-Johnson were to have experienced an “involuntary termination of employment” under the General Severance Plan in 2017, he2019, they would have been entitled to severance benefits. “Involuntary termination of employment” is defined in the General Severance Plan as the termination of employment of an eligible employee by the employer, other than: for cause; as a result of his or her failure to accept such additional or revised responsibilities as communicated by the employer; by reason of the sale of his employer or any portion of the employer’s assets or divisions (whether by asset or stock sale), provided he or she continuesis offered employment with the purchaser thereof; or a voluntary termination of employment of any kind.
For an involuntary termination, an eligible employee would receive severance payments in the form of base salary continuation for a period of weeks that is determined based on his or her job title/level and years of service. Mr. ArmstrongBoland andMs. Lim-Johnson would have been eligible for 4826 weeks of severance as of December 31, 2017.29, 2019. Mr. Bradley would have been eligible for 46 weeks of severance as of December 29, 2019. Salary continuation amounts would be paid by the Company in installments and in accordance with the Company’s standard payroll practice, subject to the requirements of Section 409A.
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Subject to the eligible employee’s timely election of continued coverage under COBRA and the Company’s receipt of the signed severance agreement, the Company would provide comparable medical (including prescription drug), dental, vision, and hospitalization benefits to the eligible Named Executive Officernamed executive officer and his or her eligible dependents for a period of time that is determined based on the number of weeks of severance that the employee is eligible for. The Company pays the full cost of COBRA during the severance period. Following completion of the severance period, the employee is responsible for the full cost of maintaining COBRA benefits. Based on the number of weeks of severance that Mr. Armstrongthey would have been eligible for, heMr. Boland andMs. Lim-Johnson would have received 12six months of company-paid COBRA premiums, and Mr. Bradley would have received twelve months of company-paid COBRA premiums.
The eligible Named Executive Officernamed executive officer will be entitled to receive reimbursement for professional outplacement services actually incurred during the initial6-month period following termination, not to exceed $7,500.
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2017 Executive Compensation Tables
Severance benefits under the General Severance Plan are conditioned upon the terms of the severance agreement that require the employee to sign a general release of claims relating to their employment and also include:non-competition;non-solicitation of employees or customers; maintaining confidentiality of information and trade secrets of the Company and all affiliates; andnon-disparagement of the Company and all officers and employees. The Benefit Plans Committee has the authority to make any determinations with respect to benefits payable under the Plan and the amount and duration of such benefits.
Treatment of Long-Term Incentive Awards
Each equity-based award is conditioned upon the grantee’s acceptance of the terms of the EIP and the grant agreement, which includes restrictive covenants such as post-employment conditions not to solicit the Company’s employees or customers and not to compete against the Company for twelve months following any termination of employment, and indefinite covenants coveringnon-disparagement and confidentiality terms. Each of our Named Executive Officer’snamed executive officer’s performance-based equity awards is subject to the Company’s Clawback Policy, which was described earlier in this document. Provisions for the treatment of long-term incentive awards upon various termination scenarios are outlined in the table below.
Termination | Restricted Stock/Units | Performance Shares (Performance and Time Vesting) | ||
Termination not for Cause in connection with aChange-in-Control | Immediate Vesting | Immediate Vesting at Target | ||
Other Termination not for Cause | Forfeit | Prorated based on actual results (as determined at the end of the cycle), subject to employment for at least one year after the date grant was approved | ||
Termination for Good Reason in connection with aChange-in-Control | Forfeit | Forfeit | ||
Termination for Cause | Forfeit | Forfeit | ||
Voluntarily Quit | Forfeit | Forfeit | ||
Retirement | Forfeit | Prorated based on actual results (as determined at the end of the cycle) for “Normal Retirement” defined as age 62 with 5 years of service and beginning with the 2019 grants is also defined as a combination of age plus years of service equal to 70, with a minimum age of 60 | ||
Death or Disability | Prorated | Prorated based on actual results |
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Based on the terms of the severance plans and treatment of LTI awards for each upon termination of employment as outlined above, the table below illustrates the amounts that each Named Executive Officernamed executive officer would receive in each of the potential termination scenarios.
Event and Amounts | Peter W. Quigley ($) | Olivier G. Thirot ($) | Peter M. Boland ($) | James H. Bradley ($) | George S. Corona ($) | Teresa S. Carroll ($) | Hannah S. Lim-Johnson ($) | |||||||||||||||||||||
Involuntary Termination (For Cause) | ||||||||||||||||||||||||||||
No other payments due | ||||||||||||||||||||||||||||
Voluntary Termination | ||||||||||||||||||||||||||||
No other payments due | ||||||||||||||||||||||||||||
Death or Disability | ||||||||||||||||||||||||||||
Performance Shares (Equity-Based)(1) | 766,238 | 690,405 | 137,924 | 215,311 | 1,930,375 | — | 207,960 | |||||||||||||||||||||
Restricted Shares(2) | 156,514 | 152,672 | 55,635 | 55,947 | 357,825 | — | 43,132 | |||||||||||||||||||||
Total | 922,752 | 843,077 | 193,559 | 271,258 | 2,288,200 | — | 251,092 | |||||||||||||||||||||
Normal Retirement (Age 62 and 5 Years of Service or any Combination of Age + Service³ 70 with Minimum Age of 60) |
| |||||||||||||||||||||||||||
Performance Shares (Equity-Based)(1) | n/a | n/a | n/a | n/a | 507,647 | n/a | n/a | |||||||||||||||||||||
Involuntary Termination (Not For Cause) |
| |||||||||||||||||||||||||||
Cash Severance(3) | 1,680,000 | 882,000 | 188,300 | 295,019 | — | 862,500 | 182,500 | |||||||||||||||||||||
Pro-Rated Annual Incentive(4) | 187,720 | 206,185 | 90,698 | 73,395 | — | 259,984 | 107,434 | |||||||||||||||||||||
Performance Shares (Equity-Based)(1) | 533,018 | 508,787 | 86,486 | 161,844 | — | 386,765 | 128,996 | |||||||||||||||||||||
Restricted Shares(2) | — | — | — | — | — | — | — | |||||||||||||||||||||
Benefits Continuation(5) | 16,582 | 17,912 | 10,146 | 11,560 | — | 13,318 | 7,542 | |||||||||||||||||||||
Outplacement Services(6) | 10,000 | 10,000 | 7,500 | 7,500 | — | 10,000 | 7,500 | |||||||||||||||||||||
Total | 2,427,320 | 1,624,883 | 383,130 | 549,319 | — | 1,532,567 | 433,971 | |||||||||||||||||||||
Termination in Connection with a Change-in-Control - For Good Reason | ||||||||||||||||||||||||||||
Cash Severance(3) | 3,528,000 | 1,587,600 | — | — | — | — | — | |||||||||||||||||||||
Pro-Rated Annual Incentive(4) | 924,000 | 470,400 | — | — | — | — | — | |||||||||||||||||||||
Performance Shares (Equity-Based)(1) | — | — | — | — | — | — | — | |||||||||||||||||||||
Restricted Shares(2) | — | — | — | — | — | — | — | |||||||||||||||||||||
Benefits Continuation(5) | 16,582 | 17,912 | — | — | — | — | — | |||||||||||||||||||||
Outplacement Services(6) | 10,000 | 10,000 | — | — | — | — | — | |||||||||||||||||||||
Total | 4,478,582 | 2,085,912 | — | — | — | — | — | |||||||||||||||||||||
Termination in Connection with a Change-in-Control - Not For Cause | ||||||||||||||||||||||||||||
Cash Severance(3) | 3,528,000 | 1,587,600 | 188,300 | 295,019 | — | — | 182,500 | |||||||||||||||||||||
Pro-Rated Annual Incentive(4) | 924,000 | 470,400 | 90,698 | 73,395 | — | — | 107,434 | |||||||||||||||||||||
Performance Shares (Equity-Based)(1) | 1,385,393 | 1,206,358 | 284,044 | 365,310 | — | — | 430,385 | |||||||||||||||||||||
Restricted Shares(2) | 498,392 | 435,771 | 197,991 | 143,822 | — | — | 202,866 | |||||||||||||||||||||
Benefits Continuation(5) | 16,582 | 17,912 | 10,146 | 11,560 | — | — | 7,542 | |||||||||||||||||||||
Outplacement Services(6) | 10,000 | 10,000 | 7,500 | 7,500 | — | — | 7,500 | |||||||||||||||||||||
Total | 6,362,367 | 3,728,041 | 778,678 | 896,607 | — | — | 938,227 | |||||||||||||||||||||
| (1) | ||||
| In the event of a named executive officer’s termination of employment due to disability, death, normal retirement (defined as age 62 with five years of service or effective beginning with the 2019-2021 grant, any combination of age + service > 70 with a minimum age of 60), or termination by the Company without Cause, at the end of the performance period and following approval by the Compensation Committee, the named executive officer (or the named executive officer’s beneficiary) would receive a pro rata portion of the equity-based Performance Award that would have otherwise vested if employment had continued until the end of the performance period, based on the portion of the performance period that the officer was employed and based on the performance level achieved. For termination by the Company without Cause, the named executive officer must have been employed for at least one year following the date of each grant in order to be eligible to receive prorated performance shares. As such, the values of the 2019-2021 performance shares are not included in the totals for this termination event. Amounts shown in the table above include2017-209 performance shares based on financial measures and the Relative TSR measure that were earned but not yet vested with certification by the Committee to occur in early 2020, and for the 2018-2020 and 2019-2021 performance shares a prorated target level of performance for all measures as performance is not yet known and will be determined at the end of the performance period in early 2021 and early 2022 respectively. Upon a Change in Control, if awards are not assumed, converted, or replaced by the resulting entity, all vesting restrictions on outstanding Performance Awards shall lapse, with any applicable performance goals deemed to be satisfied as if “target” performance had been achieved and all such Awards become fully vested and exercisable, effective as of the date of such Change in Control. The value under the pro rata settlement, or Change in Control settlement (assuming the December 27, 2019 stock value of $22.21) is shown in the table. |
2017 Executive Compensation Tables
| Event and Amounts | George S. ($) | Olivier G. ($) | Teresa S. Carroll ($) | Peter W. Quigley ($) | Steven S. Armstrong ($) | |||||||||||||||
Involuntary Termination (For Cause ) | ||||||||||||||||||||
No other payments due
| ||||||||||||||||||||
Voluntary Termination | ||||||||||||||||||||
No other payments due
| ||||||||||||||||||||
Death or Disability | ||||||||||||||||||||
Performance Shares (Equity-Based) (1) | 3,500,171 | 1,277,350 | 1,891,129 | 1,891,129 | 903,069 | |||||||||||||||
Restricted Shares(2) | 380,880 | 159,148 | 185,326 | 185,326 | 93,400 | |||||||||||||||
Total | 3,881,051 | 1,436,498 | 2,076,455 | 2,076,455 | 996,469 | |||||||||||||||
Normal Retirement (Age 62 and 5 Years of Service)(3) | ||||||||||||||||||||
No other payments due
| n/a | n/a | n/a | n/a | n/a | |||||||||||||||
Involuntary Termination (Not For Cause) | ||||||||||||||||||||
Cash Severance(4) | 2,000,000 | 800,250 | 862,500 | 862,500 | 306,462 | |||||||||||||||
Pro-Rated Annual Incentive(5) | 1,051,064 | 400,045 | 437,723 | 416,443 | - | |||||||||||||||
Performance Shares (Equity-Based) (1) | 2,864,862 | 1,050,327 | 1,637,064 | 1,637,064 | 818,532 | |||||||||||||||
Restricted Shares(2) | - | - | - | - | - | |||||||||||||||
Benefits Continuation(6) | 24,772 | 21,743 | 21,539 | 18,284 | 23,244 | |||||||||||||||
Outplacement Services(7) | 10,000 | 10,000 | 10,000 | 10,000 | 7,500 | |||||||||||||||
Total | 5,950,698 | 2,282,365 | 2,968,826 | 2,944,291 | 1,155,737 | |||||||||||||||
Termination in Connection with aChange-in-Control - For Good Reason | ||||||||||||||||||||
Cash Severance(4) | 4,600,000 | 1,400,438 | 1,595,625 | 1,595,625 | - | |||||||||||||||
Pro-Rated Annual Incentive(5) | 1,300,000 | 400,125 | 488,750 | 488,750 | - | |||||||||||||||
Performance Shares (Equity-Based) (1) | - | - | - | - | - | |||||||||||||||
Restricted Shares(2) | - | - | - | - | - | |||||||||||||||
Benefits Continuation(6) | 24,772 | 21,743 | 21,539 | 18,284 | - | |||||||||||||||
Outplacement Services(7) | 10,000 | 10,000 | 10,000 | 10,000 | - | |||||||||||||||
Total | 5,934,772 | 1,832,306 | 2,115,914 | 2,112,659 | - | |||||||||||||||
Termination in Connection with aChange-in-Control - Not For Cause | ||||||||||||||||||||
Cash Severance(4) | 4,600,000 | 1,400,438 | 1,595,625 | 1,595,625 | 306,462 | |||||||||||||||
Pro-Rated Annual Incentive(5) | 1,300,000 | 400,125 | 488,750 | 488,750 | - | |||||||||||||||
Performance Shares (Equity-Based)(1) | 5,176,430 | 1,963,190 | 2,631,055 | 2,631,055 | 1,188,040 | |||||||||||||||
Restricted Shares(2) | 1,434,347 | 584,942 | 666,506 | 666,506 | 321,459 | |||||||||||||||
Benefits Continuation(6) | 24,772 | 21,743 | 21,539 | 18,284 | 23,244 | |||||||||||||||
Outplacement Services(7) | 10,000 | 10,000 | 10,000 | 10,000 | 7,500 | |||||||||||||||
Total | 12,545,549 | 4,380,438 | 5,413,475 | 5,410,220 | 1,846,705 | |||||||||||||||
(1) In the event of a Named Executive Officer’s termination of employment due to disability, death, normal retirement (defined as age 62 with five years of service), or termination by the Company without Cause, at the end of the performance period and following approval by the Compensation Committee, the Named Executive Officer (or the Named Executive Officer’s beneficiary) would receive a pro rata portion of the equity-based Performance Award that would have otherwise vested if employment had continued until the end of the performance period, based on the portion of the performance period that the officer was employed and based on the performance level achieved. For termination by the Company without Cause, the Named Executive Officer must have been employed for at least one year following the date of each grant in order to be eligible to receive prorated
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performance shares. As such, the values of the 2017 performance shares are not included in the totals for this termination event. Amounts shown in the table above include 2015 performance shares based on financial measures and the Relative TSR measure that were earned but not yet vested with certification by the Committee to occur in early 2018, and for the 2016 and 2017 performance shares a prorated target level of performance for all measures as performance is not yet known and will be determined at the end of the performance period in early 2019 and early 2020 respectively. Upon the event of a Change in Control, if awards are not assumed, converted, or replaced by the resulting entity, all vesting restrictions on outstanding Performance Awards
| (2) | In the event of a named executive officer’s termination of employment due to disability or death, the named executive officer (or the named executive officer’s beneficiary) would receive a pro rata settlement of unvested restricted shares outstanding at the time of termination. For each grant of restricted stock awards/units, the number of shares settled would equal the total number of restricted shares originally granted times the ratio of days employed since the grant date divided by total number of days in the vesting period less the number of restricted shares already settled on the anniversary dates of the grant. Upon a Change in Control, if awards are not assumed, converted, or replaced by the resulting entity, all vesting restrictions on outstanding Restricted Share awards/units shall lapse, |
| (3) | Per the Kelly Services Inc. Senior Executive Severance Plan, for involuntary termination by the Company without cause, the value of cash severance includes base salary continuation for Mr. Quigley for 24 months, and Mr. Thirot and Ms. Carroll for 18 months. For payments under Change in Control, with qualifying termination, Mr. Quigley would receive a lump sum payment equal to 2 times the sum of his annual base salary and target annual incentive; and Mr. Thirot would receive a lump sum payment equal to 1.5 times the sum of base salary and target annual incentive. Messrs. Boland, Bradley andMs. Lim-Johnson were covered under the Kelly Services Inc. General Severance plan and eligible to receive base salary continuation for a minimum of 26 weeks plus one additional week for each year of service greater than five years, only for involuntary termination by the company without cause, with or without a change in control. |
| (4) | In the event of an involuntary termination by the Company without cause and not in connection with a change in control, Messrs. Quigley and Thirot and Ms. Carroll were eligible to receive a pro rata portion of their annual Incentive Compensation for such fiscal year, based on the actual performance results for such year. In the event of an involuntary termination by the Company without cause or termination by the named executive officer for good reason, either occurring in connection with a change in control, Messrs. Quigley and Thirot were eligible to receive a pro rata portion of their annual Incentive Compensation for such fiscal year, paid at the target level. Under the General Severance Plan, Messrs. Boland, Bradley andMs. Lim-Johnson were entitled to payment of annual Incentive compensation in cases of involuntary termination by the Company without cause that occurred following completion of the performance period and prior to payout of such annual incentive, based on actual performance results for such year. The General Severance Plan does not provide for payout of annual incentive compensation under any other termination scenario. The value of pro rata target incentive with respect to year of termination represents the calculated target incentive for the named executive officers if they had terminated on December 31, 2019. |
| (5) | The value of the health care benefit provided is calculated as the Company-paid portion of the medical plan cost, times the number of months eligible according to the applicable severance plan. Coverage can include medical, dental, and vision (assumes no change in Health Plan or coverage type) and assumes a 10% health care coverage cost increase in second year (as applicable). named executive officers participating in the Senior Executive Severance Plan continue to pay the employee rate for COBRA coverage during the severance period. Named executive officers participating in the General Severance Plan are not required to pay the employee portion of COBRA during the severance period as the Company covers the full COBRA cost. |
| (6) | Represents the maximum allowed benefit for reimbursement of outplacement services for participants in the applicable Severance Plan. The severance plan that covers Messrs. Boland, Bradley andMs. Lim-Johnson does not provide outplacement benefits in any termination scenario outside of involuntary termination by the Company without cause. |
The value under the pro rata settlement, or Change in Control settlement (assuming the December 29, 2017 stock value of
$27.27) is shown in the table.
(2) In the event of a Named Executive Officer’s termination of employment due to disability or death, the Named Executive Officer (or the Named Executive Officer’s beneficiary) would receive a pro rata settlement of unvested restricted shares outstanding at the time of termination. For each grant of restricted stock awards/units, the number of shares settled would equal the total number of restricted shares originally granted times the ratio of days employed since the grant date divided by total number of days in the vesting period less the number of restricted shares already settled on the anniversary dates of the grant. Upon the event of a Change in Control, if awards are not assumed, converted, or replaced by the resulting entity, all vesting restrictions on outstanding Restricted Share awards/units shall lapse, and all such Awards become fully vested and exercisable, effective as of the date of such Change in Control. The value under the prorated settlement, or Change in Control settlement (assuming the December 29, 2017 stock value of $27.27) is shown in the table.
(3) Mr. Camden retired from the Company in May 2017. Compensation received by Mr. Camden included amounts in the “Salary” and “All Other Compensation” columns of the Summary Compensation Table. He is also eligible for prorated performance shares as shown in the Outstanding Equity Awards at Fiscal Year End Table because he was Normal Retirement eligible under the terms of the EIP. Mr. Camden forfeited all unvested restricted stock at the time of his termination. Company-provided medical and dental benefits for Mr. Camden terminated at the end of the month in which he retired pursuant to the terms of the Summary Plan Description as applied to all employees.
(4) Per the Kelly Services Inc. Senior Executive Severance Plan, for involuntary termination without cause and for termination for good reason, the value of cash severance includes base salary continuation for Mr. Corona for 24 months, and Messrs. Quigley, Thirot and Ms. Carroll for 18 months. For payments under Change in Control, with qualifying termination, Mr. Corona would receive a lump sum payment equal to 2 times the sum of his annual base salary and target annual incentive; and Messrs. Quigley, Thirot and Ms. Carroll would receive a lump sum payment equal to 1.5 times the sum of base salary and target annual incentive. Mr. Armstrong is covered under the Kelly Services Inc. General Severance plan and is eligible to receive base salary continuation for 48 weeks, only for involuntary termination by the company without cause, with or without a change in control.
(5) In the event of an involuntary termination by the Company without cause, or termination by the Named Executive Officer for good reason in connection with a change in control, Messrs. Corona, Quigley, Thirot and Ms. Carroll are eligible to receive a pro rata portion of their annual Incentive Compensation for such fiscal year that would otherwise be paid if his or her employment or service had continued until the end of such performance period based on the actual results for such year. The value of pro rata target incentive with respect to year of termination represents the calculated target incentive for the Named Executive Officers if they had terminated on December 31, 2017. The severance plan covering Mr. Armstrong does not provide payment for annual Incentive compensation, regardless of termination reason.
(6) The value of the health care benefit provided is calculated as the Company-paid portion of the medical plan cost, times the number of months eligible according to the applicable severance plan. Coverage can include medical, dental, and vision (assumes no change in Health Plan or coverage type) and assumes a 10% health care coverage cost increase in second year (as applicable). Named Executive Officers participating in the Senior Executive Severance Plan continue to pay the employee rate for COBRA coverage during the severance period. Named Executive Officers participating in the General Severance Plan are not required to pay the employee portion of COBRA during the severance period as the Company covers the full COBRA cost.
(7) Represents the maximum allowed benefit for reimbursement of outplacement services for participants in the applicable Severance Plan. The severance plan that covers Mr. Armstrong does not provide outplacement benefits in any termination scenario outside of involuntary termination by the Company without cause.
The Named Executive Officersnamed executive officers would also be entitled to the vested benefits included in the Outstanding Equity Awards at FiscalYear-End table and the Nonqualified Deferred Compensation table. In addition, the amounts shown in the table above do not include payments and benefits to the extent they are provided on anon-discriminatory basis to salaried employees generally upon termination of employment or certain types of termination of employment. These include accrued salary and vacation pay, and life insurance benefits.
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CEO Pay Ratio
As required by Section 953(b) of Dodd-Frank and Item 402(u) of RegulationS-K, we are providing the required information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Corona,Quigley, our President and Chief Executive Officer (the “CEO”), as follows:
For fiscal 2017,2019, our last completed fiscal year:
The median of the annual total compensation of all employees of our company (other than Mr. Corona,Quigley, our President and CEO), was $7,198;$8,627;
The annualannualized total compensation of Mr. Corona,Quigley, our President and CEO, was $4,436,760;$2,997,834; and
Based on this information, the ratio of the annual total compensation for our President and CEO to the median of the annual total compensation of all employees is 616347 to 1.
The pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for determining the employee population and identifying the median employee provide companies with flexibility surrounding the elements of compensation to be included and various methodologies for gathering the employee population for inclusion in the analysis. The pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices, and may utilize different methodologies, exclusions, estimates, samplings and assumptions in calculating their own pay ratios.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, the methodology that we used and the material assumptions and adjustments that we used to identify the median and determine annual total compensation are outlined below:
Our workforce consists of regular employees (employees who provide services to the Company) and those employees for whom we find employment as temporary workers. While services may be provided inside the facilities of our customers, we remain the employer of record for our temporary employees. We retain responsibility for employee assignments, the employer’s share of all applicable payroll taxes and the administration of the employee’s share of these taxes. In most cases, we determine the compensation for our temporary employees.
Our median employee in 2018 was a temporary employee, and as such we determined to not use that same employee in determining our 2019 CEO pay ratio. Due to the variance in assignment lengths, the number of assignments worked in a year, and potentially the compensation rate for each assignment, it is unlikely that the median employee in 2018 would be the median employee again in 2019. As a result, we conducted a similar compensation data gathering exercise for 2019 as we had for 2018 to determine the median employee.
We selected December 31, 2017,29, 2019, which is a date within the last three months of fiscal 2017,2019, as the date we would use to both gather compensation for the year and identify our median employee. We did this to ensure we had a full year of earnings for our temporary employees as we are not able to estimate what earnings for that group would be under a partial year scenario.
As of December 31, 2017,29, 2019, our employee population totaled 141,481120,624 and consisted of all regular and temporary employees that were actively on assignment and being paid as of that date.
| Category | U.S. | Non U.S. | Total | U.S. | Non-U.S. | Total | ||||||||||||||||||
Regular | 4,722 | 3,006 | 7,728 | 4,467 | 3,301 | 7,768 | ||||||||||||||||||
Temporary | 74,294 | 59,459 | 133,753 | 55,282 | 57,574 | 112,856 | ||||||||||||||||||
| 79,016 | 62,465 | 141,481 |
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TOTAL | 59,749 | 60,875 | 120,624 | |||||||||||||||||||||
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The vast majority of our employees, about 94%, are temporary employees who work anywhere from one week tofifty-two weeks in a calendar year.
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Approximately 50.5% of our employee population is located in twenty-three countries outside of the U.S.
To identify the “median employee” we collected actual base salary earnings and overtime paid for the 12 month12-month period ending December 31, 2017.29, 2019. We used actual base salary earnings and overtime paid as our consistently applied compensation measure. Based on our demographics and the likelihood that our median employee would come from our temporary workforce, we believe this to be the appropriate compensation measure most effectively applied to our employee population.
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CEO Pay Ratio
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In making this determination, the compensation for all regular employees hired after January 1, 2019 was annualized.
Compensation for temporary workers, pursuant to SEC rules, was not annualized, but all earnings for the12-month period were collected and included all assignments that a temporary employee would have been paid for throughout the year.
We did not utilize either the Data Privacy Exemption or the De Minimis Exemption.
We did not make anycost-of-living adjustments in identifying the median employee.
For purposes of making the determination, employee compensation from locations outside the U.S. was converted to U.S. dollars using the Company’s exchange rates in effect on January 1, 2019, consistent with our current financial reporting.
Using this methodology, we determined that our median employee was a temporary employee located in the U.S. with base salary and overtime earnings in the amount of $7,198.$8,627. This temporary employee worked approximately thirteen andone-halffifteen weeks during 2017.2019. Our median employee did not receive any other compensation or benefits required under Item 402(u) to be included in the employee’s annual total compensation.
The Company had two individuals that served in the role of CEO during the 12 month12-month period ending December 31, 2017.2019. Pursuant to the instructions under Item 402(u), we have elected to useused the compensation of Mr. CoronaQuigley for our analysis, as he was serving as CEO on the activelast day of our fiscal year, December 29, 2019. Mr. Quigley was appointed as Kelly’s CEO as of the determination date, and in the role for over 50% of the full 12 month period. Mr. Corona became CEO in May 2017.on October 1, 2019. In determining Mr. Corona’sQuigley’s compensation to be included in the analysis, we adjusted his compensation as reported in the Summary Compensation Table to reflect his compensation as if he were CEO for the full calendar year, by increasing his base salary, and STIP award amount, as if he were CEO effective January 1, 2017.and LTI grant value. His base salary was annualized at thehis full year CEO salary of $1,000,000.$840,000. The STIP award amount was adjusted based on thehis annualized CEO base salary and the higher CEOhis incentive target as CEO of 130%110% of base salary, and based 100% on Corporate measures, resulting in a STIP award of $1,299,740. Additionally, the$421,344. His LTI award value of the long-term incentive award granted in 2017 has been adjusted to $2,093,616was determined based on his annualized base salary and reflects the award amount he would have received had he been CEO for the full year.higher target level as CEO. All other compensation, as included in the Summary Compensation Table, was adjusted, where appropriate to reflect annualized amounts.
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Proposal 3: Amendment and Restatement of the Company’s Certificate of Incorporation
PROPOSAL 3 - AMENDMENT AND RESTATEMENT OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO ELIMINATE CERTAIN OBSOLETE PROVISIONS, TO ELIMINATE A “STAKEHOLDER PROVISION” THAT COULD CONFLICT WITH DELAWARE LAW, AND TO MAKE ADDITIONAL REVISIONS IN THE INTERESTS OF MODERNIZATION
As described in the “Corporate Governance” section of this Proxy Statement, the Board recently formed a special committee consisting of the independent Directors to review and make recommendations to the Board about governance matters. Upon recommendation of the special committee, the Board approved and adopted, and recommends for stockholder approval, amendments to the Company’s Restated Certificate of Incorporation. These amendments eliminate certain obsolete provisions, eliminate a “stakeholder provision” that could conflict with Delaware law, and make additional revisions in the interests of modernization. The amendments are as follows:
Amending Article THIRD to provide that the Company may engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, and eliminating the specific purposes currently listed;
Eliminating obsolete references from Article FIFTH regarding thede-classification of the Board, which the Company carried out in 2010;
Eliminating Article SIXTH, which lists the original incorporators of the Company;
Adding a new Article SIXTH, which provides that the election of directors need not be carried out by written ballot;
Eliminating Article EIGHTH, which describes powers that are granted to the Board under Delaware law and therefore need not be included in the Certificate of Incorporation;
Eliminating Article NINTH, which has been rendered obsolete by federal bankruptcy law;
Eliminating Article TENTH, which could conflict with Delaware law, as described below; and
Making certain othernon-substantive and administrative changes.
Article TENTH currently requires that the Board, when evaluating any offer of another party to make a tender or exchange offer for any equity security of the Company, to merge or consolidate the Company with another corporation or to acquire all or substantially all of the properties and assets of the Company, give “due consideration to such factors as the Board of Directors determines to be relevant, including without limitation, the social, legal and economic effects of the proposed transaction upon employees, customers, suppliers, and other affected persons, firms and corporations and on the communities in which this corporation and its subsidiaries operate or are located.” Article TENTH addresses circumstances in which the Board’s obligation under Delaware law is to act, in the exercise of its business judgment, in the best interests of the Company and its stockholders. The Board is proposing the elimination of Article TENTH because, in mandating consideration of certain effects upon constituencies other than stockholders, Article TENTH purports to require the Board to consider interests that may conflict with or detract from the best interests of the Company and its stockholders.
The full text of the Amended and Restated Certificate of Incorporation as proposed is set forth in Annex A, with additions indicated by underlining and deletions indicated by strikeout.
If this proposal is approved, the Company will file the Amended and Restated Certificate of Incorporation with the Delaware Secretary of State promptly after the Annual Meeting of Stockholders. The Amended and Restated Certificate of Incorporation will take effect upon filing.
This proposal must be approved by the affirmative vote of holders of a majority of the voting power of the Company’s outstanding Class B Common Stock. For purposes of this stockholder vote, abstentions and brokernon-votes will have the effect of votes against the proposal.
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Proposal 4: Amendment to the Company’s Amended and Restated Bylaws
PROPOSAL 4 - AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED BYLAWS TO DESIGNATE THE DELAWARE CHANCERY COURT AS THE EXCLUSIVE FORUM FOR CERTAIN LEGAL ACTIONS
As described in the “Corporate Governance” section of this Proxy Statement, the Board recently formed a special committee consisting of the independent Directors to review and make recommendations to the Board about governance matters. Upon recommendation of the special committee, the Board approved and adopted Amended and Restated Bylaws effective March 7, 2018 (as disclosed in the Company’s Current Report on Form8-K filed with the SEC on March 9, 2018). Also upon recommendation of the special committee, the Board approved and adopted, and recommends for stockholder approval, an amendment to the Company’s Amended and Restated Bylaws (the “Bylaw Amendment”) that, if adopted, would result in the Delaware Court of Chancery serving as the exclusive forum for certain legal actions involving the Company. Specifically, if this proposal is approved by our stockholders, the Company’s Amended and Restated Bylaws will be amended to insert a new Article XI as follows:
Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the corporation to the corporation or the corporation’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, the Company’s certificate of incorporation or the Bylaws or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Article XI.
The Board believes that the Bylaw Amendment is in the best interests of the Company and its stockholders for the following reasons:
The Bylaw Amendment provides that all intra-corporate disputes will be litigated in Delaware, the state in which we are incorporated and whose law governs such disputes;
The Delaware Chancery Court has developed considerable expertise in dealing with corporate law issues, as well as a substantial and influential body of case law construing Delaware’s corporate law and long-standing precedent regarding corporate governance;
The Bylaw Amendment will help us avoid multiple lawsuits in multiple jurisdictions relating to such disputes, thus saving the significant costs and effort in addressing cases brought in multiple jurisdictions;
The Bylaw Amendment will reduce the risk that the outcome of cases in multiple jurisdictions could be inconsistent, even though each jurisdiction purports to follow Delaware law;
The Bylaw Amendment will only regulate the forum where our stockholders may file claims relating to the specified intra-corporate disputes; it does not restrict the ability of our stockholders to bring such claims, nor does it affect the remedies available if such claims are ultimately successful; and
We will retain the ability to consent to an alternative forum in appropriate circumstances where we determine that our interests and those of our stockholders are best served by permitting a particular dispute to proceed in a forum other than Delaware.
The Bylaw Amendment is not being proposed by our Board in anticipation of or in reaction to any specific litigation or transaction; rather, it is being proposed to prevent potential harm to the Company and its stockholders. Because this provision prescribes the forum in which stockholders may commence certain types of litigation, in keeping with the views of certain proxy advisors, the Board is seeking the approval of stockholders prior to adopting the Bylaw Amendment. If the proposal is not approved, the Board will reconsider whether the Bylaw Amendment is in the best interests of the Company.
If this proposal is approved, the Bylaw Amendment will become effective immediately.
This proposal must be approved by the affirmative vote of holders of a majority of the voting power the Company’s outstanding Class B Common Stock. For purposes of this stockholder vote, abstentions and brokernon-votes will have the effect of votes against the proposal.
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Proposal 5: Ratification of the Appointment of PricewaterhouseCoopers LLP
PROPOSAL 5 -3 – RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 20182020 FISCAL YEAR
On an annual basis, the Audit Committee approves and appoints the independent registered public accounting firm. During its February 14, 201811, 2020 meeting, PricewaterhouseCoopers LLP (“PwC”) was appointed to audit the consolidated financial statements of the Company for the year ending December 30, 2018.January 3, 2021. This firm has served as the Company’s independent registered public accounting firm for many yearssince 1960 and is considered to be well qualified. The reappointment process for the independent registered public accounting firm includes an annual assessment that takes into consideration, but is not limited to, a review of the following:
1. Quality of services and sufficiency of resources provided by the auditor |
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2. Communication and interaction during the engagements |
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3. Independence, objectivity, and professional skepticism |
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The Board of Directors seeks ratification of the appointment of PwC. The representatives of the firm are expected to be present at the Annual Meeting and will be available to respond to all appropriate questions.
The Audit Committee is responsible for the compensation (including negotiations) of the independent registered public accounting firm and requirespre-approval of all audit andnon-audit services prior to engagement by the Company. In conjunction with thepre-approval, the Committee considers whethernon-audit services are consistent with the rules and regulations of the SEC on auditor independence. The authority of the Audit Committee is detailed in its charter, which is posted on the Company’s website atkellyservices.com.
The table below displays the fees incurred from the audit andnon-audit services provided by PwC.
2016 ($) | 2017 ($) | 2018 ($) | 2019 ($) | |||||||||||||
Audit Fees | 3,904,889 | 4,118,778 | 3,872,647 | 3,968,500 | ||||||||||||
Audit Related Fees | 29,147 | 56,800 | 0 | 0 | ||||||||||||
Tax Fees | 140,200 | 101,300 | 66,000 | 159,000 | ||||||||||||
All Other Fees | 1,800 | 1,800 | 1,800 | 2,800 | ||||||||||||
Total | 4,076,036 | 4,278,678 | 3,940,447 | 4,130,300 | ||||||||||||
Audit Fees: Audits and quarterly reviews of our consolidated financial statements, statutory audits, attestation of controls, issuance of consent, and assistance with review of documents filed with the SEC.
Audit Related Fees:Technical assistance with new accounting standards and services associated with international regulatory reporting.
Tax Fees:Tax and transfer pricing consulting.
All Other Fees: Accounting research.
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Proposal 5:3: Ratification of the Appointment of PricewaterhouseCoopers LLP
Management is responsible for the preparation, presentation and integrity of Kelly’s financial statements, for its accounting and financial reporting principles, and for the establishment and effectiveness of internal controls and procedures designed to ensure compliance with generally accepted accounting principles and applicable laws and regulations. The independent registered public accounting firm is responsible for performing an independent audit of Kelly’s financial statements and of its internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”) and expressing an opinion as to the conformity of Kelly’s financial statements with generally accepted accounting principles and the effectiveness of its internal control over financial reporting. The independent registered public accounting firm has free access to the Committee to discuss any matters it deems appropriate.
In connection withperforming its oversight role, the Committee has considered and discussed the audited financial statements of Kelly for the fiscal year ended December 31, 2017,29, 2019 with each of management and PwC, the Auditindependent registered public accounting firm. The Committee has:
(1) reviewed and discussed the audited financial statements with management;
(2)has also discussed with PwC the matters required to be discussed by applicable requirements of the statement on Public Company Accounting Oversight Board AU Section 380 Communication With Audit Committees; and
(3)PCAOB. The Committee has received the written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding PwC’s communications with the Audit Committee concerningauditors’ independence and has discussed with PwC its independence.
Based upon these reviewson the reports and discussions described in this Report, the Audit Committee recommended to the Board at its February 14, 2018 meeting that the Company’s audited financial statements of Kelly for 2019 be included in the 2019 Annual Report on Form10-K for the year ended December 31, 2017 filed with the SEC. The Board approved this inclusion.10-K.
THE AUDIT COMMITTEE
THE AUDIT COMMITTEE LESLIE A. MURPHY, CHAIR TERRENCE B. LARKIN GERALD S. ADOLPH ROBERT S. CUBBIN LESLIE A. MURPHY, CHAIRROBERT S. CUBBINTERRENCE B. LARKIN, VICE CHAIRDONALD R. PARFET 6664
Questions and Answers About the Proxy Statement and the Annual Meeting
KELLY SERVICES, INC.
999 West Big Beaver Road
Troy, Michigan 48084-4716
April 9, 20186, 2020
QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND THE ANNUAL MEETING
Q)
| Q) | WHERE ARE WE HOLDING THE ANNUAL MEETING AND COULD EMERGING DEVELOPMENTS REGARDING THE CORONAVIRUS AFFECT OUR ABILITY TO HOLD ANIN-PERSON ANNUAL MEETING? |
| A) | We are currently planning to hold the 2020 Annual Meeting of Stockholders at the offices of the Company, 999 West Big Beaver Road, Troy, Michigan 48084-4716. However, we are monitoring the coronavirus situation closely and if we determine that holding anin-person annual meeting could pose a risk to the health and safety of our stockholders, employees, and directors, the Company may decide to instead hold a Virtual Annual Meeting. If we decide to use that format, we will make a public announcement via a press release as soon as practicable prior to the meeting. |
In such event, to attend and participate in the Virtual Annual Meeting, stockholders will need to access the live audio webcast of the meeting. To do so, stockholders of record will need to visitkellyservices.com for instructions and use their16-digit Control Number provided in the Notice to log in to this website. Beneficial holders will need to obtain a “legal proxy” from their broker if they want to vote during the virtual meeting. Beneficial holders will need to send our transfer agent, Computershare, the legal proxy before the meeting and they will then issue via email, an authorized control number. Instructions will be available on the Company’s website following the press release.
| Q) | WHO IS MAKING THE SOLICITATION IN THIS PROXY STATEMENT? |
| A) | This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors |
| Q) | WHO WILL BEAR THE COST OF THE PROXY SOLICITATION? |
| A) | The cost of soliciting proxies will be borne by the Company. The solicitation of proxies will be made primarily by mail. The Company may also make arrangements with brokerage houses, custodians, banks, nominees, and fiduciaries to forward solicitation material to beneficial owners of Class B stock held of record by them and to obtain authorization to execute proxies. The Company may reimburse such institutional holders for reasonable expenses incurred by them in connection therewith. |
A copy of the Company’s Annual Report and Annual Report onForm10-K as of December 31, 2017,29, 2019, the close of the Company’s latest fiscal year, has been mailed or otherwise made available to each stockholder of record. The expense of preparing, printing, assembling, and mailing the accompanying form of proxy and the material used in the solicitation of proxies will be paid by the Company. In addition, the Company may reimburse brokers or nominees for their expenses in transmitting proxies and proxy material to principals.
| Q) | WHO IS ENTITLED TO VOTE? |
| A) | Only stockholders of record of our Class B |
At the close of business on March 19, 2018,16, 2020, the number of issued and outstanding voting securities (exclusive of treasury shares) was 3,431,972 shares of the Class B common stock.Common Stock. Class B stockholders on the record date will be entitled to one vote for each share held of record.
| Q) | HOW DO I VOTE? |
| A) | We encourage Class B stockholders to return their proxies promptly via the enclosed form of proxy in the enclosed postage prepaid envelope or vote via the |
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Questions and Answers
| Q) | HOW IS MY VOTE COUNTED? |
| A) | If a proxy in the accompanying form is properly executed, returned to the Company and not revoked, the shares represented by the proxy will be voted in accordance with the instructions set forth thereon. If no instructions are given with respect to the matters to be acted upon, the shares represented by the proxy will be voted in accordance with the recommendation of the Company’s Board of Directors on each of the proposals set forth in the accompanying Notice of Annual Meeting of Stockholders and on any other matters that properly come before the Annual Meeting in such manner as may be determined by the individuals named as proxies. |
| Q) | CAN I REVOKE MY PROXY AFTER I HAVE SUBMITTED IT? |
| A) | If the enclosed form of proxy is executed and returned by the stockholder, it may nevertheless be revoked by the person giving it by written notice of revocation to the Corporate Secretary of the Company or by submitting a later dated proxy, provided such notice or later dated proxy is received by 11:59 p.m., Central Time, on May |
| Q) | WHAT CONSTITUTES A QUORUM? |
| A) | Pursuant to the Company’s |
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Questions and Answers About the Proxy Statement and the Annual Meeting
that are present and entitled to vote on any of the proposals to be considered at the Annual Meeting will be considered to be present at the Annual Meeting for purposes of establishing the presence or absence of a quorum for the transaction of business.
| Q) | WHAT IS A BROKERNON-VOTE? |
| A) | A “brokernon-vote” occurs if a broker or other nominee indicates on the enclosed proxy that it does not have discretionary authority as to certain shares to vote on a particular proposal, but otherwise has authority to vote at the Annual Meeting. Abstentions and shares subject to brokernon-votes will be considered as present for purposes of determining the presence or absence of a quorum at the Annual Meeting. |
| Q) | HOW IS IT DETERMINED IF A MATTER HAS BEEN APPROVED? |
| A) | Under |
For Proposal 2 and Proposal 5, theThe affirmative vote of a majority of the Class B shares present in person (provided meeting is held in Michigan) or by proxy at the Annual Meeting and entitled to vote on such proposal will be required to approve each of the other proposals to be considered at the Annual Meeting.Proposal 2 and Proposal 3. Abstentions will have the effect of negative votes with respect to these proposals. Brokernon-votes will not be taken into account for purposes of these proposals.
For Proposal 3 and Proposal 4, the affirmative vote of the outstanding shares entitled to vote on such proposal will be required to approve each of the other proposals to be considered at the Annual Meeting. Abstentions and broker non-votes will have the effect of votes against these proposals.
| Q) | WHAT HAPPENS IF ADDITIONAL MATTERS (OTHER THAN THE PROPOSALS DESCRIBED IN THIS PROXY STATEMENT) ARE PRESENTED AT THE ANNUAL MEETING? |
| A) | If any other matters do properly come before the Annual Meeting, all proxies signed and returned by holders of the Class B |
| Q) | HOW CAN I COMMUNICATE WITH THE BOARD? |
| A) | Stockholders may communicate with the Board in writing, addressed to the Board of Directors and mailed to the Corporate Secretary, Kelly Services, Inc., 999 West Big Beaver Road, Troy, Michigan 48084-4716. All written stockholder communications will be summarized and reported to the Board at its regularly scheduled meetings. |
| Q) | WHAT IS THE DEADLINE TO SUBMIT STOCKHOLDER PROPOSALS AND DIRECTOR |
| A) | If a Class B stockholder intends to present a proposal for |
The Company’s Amended
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Questions and RestatedAnswers
Our Bylaws providecontain an advance notice procedures with regard to certain matters, includingof stockholder proposalsbusiness and nominations requirement, which generally prescribes the procedures that a stockholder of individualsthe Company must follow if the stockholder intends at an annual meeting of stockholders to nominate a person for the election to the Board or to propose other business to be considered by stockholders. These procedures include, among other things, that the stockholder give timely notice to the Corporate Secretary of Directors, outside the process of Rule14a-8, beginningnomination or other proposed business, that the notice contain specified information, and that the stockholder comply with certain other requirements. If a stockholder’s nomination or proposal is not in connectioncompliance with the 2019 Annual Meetingprocedures set forth in our Bylaws, the Company may disregard such nomination or proposal. Generally, in the case of Stockholders. In general,an annual meeting of stockholders, a stockholder’s notice of a stockholder proposal or director nominationin order to be timely must be received bydelivered in writing to the CompanyCorporate Secretary, at its principal executive office, not lesslater than 90the close of business on the 90th day nor moreearlier than 120 daysthe close of business on the 120th day prior to the first anniversary of the previousdate of the proceeding year’s annual meeting, and must contain specified information to conform to the requirements set forth in the bylaws.meeting. To be timely for the 20192021 Annual Meeting of Stockholders, the notice must be received by the CompanyCorporate Secretary no earlier than January 9, 20196, 2021 and no later than February 8, 2019. If the chair of the meeting of stockholders determines that a stockholder proposal or director nomination was not made in accordance with the bylaws, the Company may disregard such proposal or nomination.5, 2021. In addition, if a stockholder submits a proposal outside of Rule14a-8 for the 2019Company’s 2021 Annual Meeting of Stockholders and such proposal is not delivered within the proposal fails to comply with the advance notice procedures under the Amended and Restatedtime frame specified in our Bylaws, then the Company’s proxy may confer discretionary authority on the persons being appointed as proxies on behalf of the BoardCompany to vote on such proposal.
In each case, proposals made under Rule14a-8 and nominations for director nominees and/or an item of business to be introduced at an annual meeting of stockholders must be submitted in writing and received by the proposal.Corporate Secretary, Kelly Services, Inc., 999 West Big Beaver Road, Troy, Michigan 48084-4716.
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Annex A
999 West Big Beaver Road
Troy, Michigan 48084-4716
248.362.4444
kellyservices.com
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
C1234567S9 KELLY SERVICES INC.
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Kelly Services, Inc.ENDORSEMENT_LINE____ 000004 SACKPACK. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD A ADD 5 ADD 6 OCOOOCOOO.OOOCOD ext OCOOOCOOO.OOOCOD ext OCOOOCOOO.OOOCOD ext OOOOOOOCO.COOOCO ext OOOODDOCO.CODOCO ext OOOOOOOCO.COOOCO ext Your vote matters - here's how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received by 11:59 pm., a corporation organized and existing underCentral Time, on May 5,2020 Online Go to www.envisionreports.com/kelyb or scan the laws of Delaware, certifies as follows:
1. The name of the Corporation is KELLY SERVICES, INC.
2. The original certificate of incorporation was filed with the Secretary of State of Delaware on August 27, 1952 under the name of PERSONNEL SERVICE, INC.
3. ThisAmended and Restated Certificate of Incorporation amendsand, restatesand integrates the certificate of incorporation of the corporation heretofore in effect. ThisAmended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware by the directors and stockholders of the corporation.
4. TheAmended andRestated Certificate of Incorporation so adopted reads in full as follows:
FIRST: The name of this corporation is Kelly Services, Inc.
SECOND:Its principalThe address of the corporation’s registered officeQR code - login details are located in the State of Delaware islocated at 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its resident agent at such address is The Corporation Trust Company.
THIRD: Thenature of the business, or objects or purposes to be transacted, promoted or carried on are:purpose of the corporation is to engage in any lawful act or activity for which corporations may be organizedunder the General Corporation Law of the State of Delaware.
To furnish office, clerical, supervisory and consultant services.
To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and dealshaded bar below. Using a black pen, mark your votes with goods, wares and merchandise and personal property of every class and description.
To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade-marks and trade names, relating to or useful in connection with any business of this corporation.
To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, andan X as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof.
To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof.
To borrow or raise moneys for any of the purposes of the corporation and, from time to time, without limit as to amount to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable ornon-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the corporation for its corporate purposes.
To loan to any person, firm or corporation any of its surplus funds, either with or without security.
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Annex A
To purchase, hold, sell and transfer the shares of its own capital stock; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital except as otherwise permitted by law, and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly.
To operate a private trade school and business school in the State of Michigan after obtaining the necessary license for such operation for the instruction of students in various office skills, including, but not by way of limitation, instruction in the use of various office equipment and machines.
To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and personal property of every class and description in any of the States, Districts, Territories or Colonies of the United States, and in any and all foreign countries, subject to the laws of such State, District, Territory, Colony or Country.
In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formedunder the General Corporation Law of the State of Delaware, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do.
The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clauseshown in this certificate of incorporation, butexample. Please do not write outside the objects and purposes specified in each of the foregoing clauses of this article shall be regarded as independent objects and purposes.
FOURTH:
Division A
The total number of shares of stock which the corporation shall have authority to issue is 110,000,000 shares, the par value of each of the shares is $1.00,amounting in the aggregate to $110,000,000, and the shares are divided into two classes consisting of 100,000,000 shares of Class A Common Stock and 10,000,000 shares of Class B Common Stock.
Division B
The designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions in respect of the shares of each class are as follows:
(a)Dividends. Holders of the Class A Common Stock and the Class B Common Stock shall be entitled to receive dividends, out of funds legally available therefor, when and as declared by the Board of Directors, subject only to the limitations that (1) no cash dividend payable on the shares of the Class B Common Stock shall be declared unless the Board of Directors shall concurrently declare a cash dividend on the shares of the Class A Common Stock at a rate which is not less than the rate of the cash dividend payable on the shares of the Class B Common Stock (but a cash dividend may be declared on the Class A Common Stock without declaring a cash dividend on the Class B Common Stock), and (2) no dividend payable in shares of the Class B Common Stock shall be declared on the Class A Common Stock (but a dividend payable in shares of Class A Common Stock may be declared on the Class A Common Stock or the Class B Common Stock and a dividend payable in shares of Class B Common Stock may be declared on the Class B Common Stock).
(b)Voting Rights. Except on matters where their vote is required by Delaware law, the holders of the Class A Common Stock shall not be entitled to vote on any matter coming before any meeting of stockholders. The holders of the Class B Common Stock shall be entitled to one vote per share upon each matter coming before any meeting of stockholders.
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Annex A
(c)Conversion of Class B Common Stock.
1. Shares of Class B Common Stock shall be convertible, at the option of the respective holders thereof, at any time, into fully paid andnon-assessable shares of Class A Common Stock on the basis of one share of Class A Common Stock for each share of Class B Common Stock.
2. No payment or adjustment with respect to dividends on shares of the Class A Common Stock or on the Class B Common Stock shall be made in connection with any conversion of shares of Class B Common Stock into shares of Class A Common Stock.
3. The holders of a certificate or certificates for Class B Common Stock, in order to effect the conversion of shares represented thereby, shall surrender the certificate or certificates to the corporation or to the Transfer Agent for the shares of the Class B Common Stock, with request for conversion. If the shares of the Class A Common Stock issuable upon conversion are to be issued in a name other than that in which the shares of the Class B Common Stock to be converted are registered, the certificate or certificates shall be duly endorsed for transfer or accompanied by a duly executed stock transfer power, and shall also be accompanied by the necessary stock transfer stamps or equivalent funds.
Upon surrender of the certificate or certificates, the corporation shall issue and deliver or cause to be issued and delivered to the person entitled thereto a certificate or certificates for the number of full shares of the Class A Common Stock issuable upon conversion. The corporation shall pay all original issue taxes, if any, payable upon the issue of shares of the Class A Common Stock issued upon any conversion.
The conversion shall be deemed to have been effected on the date of the surrender of the certificate or certificates of shares of the Class B Common Stock, and the person in whose name the certificate or certificates of the shares of the Class A Common Stock issuable upon conversion are to be issued shall be deemed to be the holder of record of the shares as of that date.
4. If there should be any capital reorganization or any reclassification of the Class A Common Stock, the shares of the Class B Common Stock shall thereafter have the right to be converted into the number of shares of stock or other securities or property of the corporation to which outstanding shares of the Class A Common Stock would have been entitled upon the effective date of the reorganization or reclassification. The Board of Directors shall make an appropriate adjustment in the application of the provisions of this paragraph (c) with respect to the conversion rights of the holders of the shares of the Class B Common Stock after the reorganization or reclassification, to the end that the provisions shall be applicable, as nearly as reasonably may be, in respect to any shares or other securities or property thereafter issuable or deliverable upon the conversion of shares of the Class B Common Stock. The provisions of thissub-paragraph shall not apply to a reorganization or reclassification involving merely a subdivision or combination of outstanding shares of the Class A Common Stock.
5. In case the corporation shall be consolidated with or merged into any other corporation or shall sell or transfer its property and business as or substantially as an entirety, then the stock or other securities or other property, including cash, issuable or deliverable in connection with such consolidation, merger or sale in respect of each share of the Class A Common Stock then outstanding, shall thereafter, for the purposes of the conversion rights of the Class B Common Stock, be deemed the equivalent of one share of Class A Common Stock. Upon the exercise of conversion rights, holders of Class B Common Stock shall be entitled to receive on an equivalent basis and at the same rate and on the other terms and conditions set forth in this paragraph (c), the stock or other securities or property, including cash, deemed to be the equivalent of Class A Common Stock. Lawful provisions to this effect shall be made a part of and condition to the consolidation, merger or sale.
6. In case the corporation shall propose (i) to effect any reclassification of the Class A Common Stock or any capital reorganization involving a change in the Class A Common Stock, other than a reclassification or reorganization involving merely a subdivision or combination of outstanding shares of the Class A Common Stock, or (ii) to consolidate with or merge into another corporation, or to sell or transfer its property and business as or substantially as an entirety, then, in each such case, the corporation shall file with each Transfer Agent for the shares of the Class B Common Stock and shall mail to the holders of record of the shares at their respective addresses then appearing on the records of the corporation a statement, signed by an officer of the corporation, with respect to the proposed action, the statement to be so filed and mailed at least 30 days prior to the record date for holders of the Class A Common Stock for the purposes thereof. The statement shall set forth such facts with respect to the proposed action as shall be reasonably necessary to inform each Transfer Agent for the shares of the Class B Common Stock and the holders of those shares as to the effect of the action upon the conversion rights of the holders.
7. The corporation shall at all times have authorized but unissued, or in its treasury, a number of shares of the Class A Common Stock sufficient for the conversion of all shares of the Class B Common Stock from time to time outstanding.
8. In case the shares of the Class A Common Stock or the Class B Common Stock at any time outstanding shall, by reclassification or otherwise, be subdivided into a greater number of shares or combined into a lesser number of shares, the shares of Class B Common
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Annex A
Stock or Class A Common Stock, respectively, then outstanding shall, at the same time, be subdivided or combined, as the case may be, on the same basis.
(d)Preemptive Rights. Holders of the Class A Common Stock shall have no preemptive right to subscribe to any securities issued by the corporation. Holders of the Class B Common Stock shall have the preemptive right to subscribe to additional shares of Class B Common Stock, or any other voting stock or any security convertible into Class B Common Stock or other voting stock, hereafter issued by the corporation.
(e)Liquidation Preferences.
1. In the event of dissolution, liquidation or winding up of the corporation, whether voluntary or involuntary, holders of the Class A Common Stock and of the Class B Common Stock shall be entitled to payment out of the assets of the corporation ratably in accordance with the number of shares held by them respectively.
2. Neither a consolidation nor a merger of the corporation with or into any other corporation, nor a merger of any other corporation into the corporation, nor the purchase or other acquisition by the corporation of all or a part of the outstanding shares of any class or classes of its stock, nor the sale or transfer of the property and business of the corporation, as or substantially as an entirety, shall be considered a dissolution, liquidation or winding up of the corporationdesignated ares. X Phone Call toll free 1-800-652-V0TE (8683) within the meaning of the foregoing provisions.
FIFTH: The business, propertyUSA, US territories and affairs of this corporation shall be managed by a Board of Directors consisting of no fewer than five (5)Canada Save paper, time and no more than eleven (11) members, the exact number to be determined from time to time by resolution of the Board of Directors.Effectivemoney! Sign up for electronic delivery atAt each annual meeting of the stockholders of the corporationfrom and after the annual meeting to be held in 2010, all director nominees shall stand for election to terms expiring at the next succeeding annual meeting, with each director to hold office until his successor is duly elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Theterm of each director serving as of and immediately prior to the annual meeting of the stockholders of the corporation to be held in 2010 shall expire as of the date of such annual meeting, notwithstanding that such director may have been elected for a term that extended beyond the date of such annual meeting. The Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by theCcertificate ofIincorporation or by the by-lawsof the corporation (the “Bylaws” www.envisionreports.com/kelyb Annual Meeting Proxy Card ( 1234 5678 9012 345 ) directed or required to be exercised or done by the stockholders.
Newly created directorships resulting from any increase in the authorized number of directors and vacancies in the Board of Directors from death, resignation, retirement, disqualification, removal from office or othercause, shallreason, may only be filled by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the next annual meeting of the stockholders of the corporation and until their successors are duly elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Any director, or the entire Board of Directors, may be removed at any time, with or without cause. The affirmative vote of the holders of a majority of the voting power of all of the stock of this corporation entitled to vote in elections of directors shall be required to remove a director from office. The stockholders of the corporation are expressly prohibited from cumulating their votes in any election of directors of the corporation.
SIXTH: The names and places of residence of the incorporators were as follows:
SIXTH: Unless and except to the extent that the Bylaws shall so require, the election of directors of the corporation need not be by written ballot.
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Annex A
SEVENTH: By-laws of the corporation may be adopted, amended or repealed by the affirmative vote of a majority of the total number of directors or by the affirmative vote of the holders of a majority of the voting power of all of the stock of this corporation entitled to vote in elections of directors. Theby-lawsBylaws may contain any provision for the regulation and management of the affairs of the corporation and the rights or powers of its stockholders, directors, officers, or employees not inconsistent with the laws of the State of Delawareor this certificate of incorporation.
EIGHTH:
In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:
To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this corporation.
From time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of this corporation (other than the stock ledger), or any of them, shall be open to inspection of stockholders; and no stockholder shall have any right of inspecting any account, book or document of this corporation except as conferred by statute, unless authorized by a resolution of the stockholders or directors.
By resolution or resolutions, passed by a majority of the whole board to designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in said resolution or resolutions, or in theby-laws of this corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of this corporation, and may have power to authorize the seal of this corporation to be affixed to all papers which may require it. The committee or committees shall have the name or names as may be stated in theby-laws of this corporation or as may be determined from time to time by resolution adopted by the Board of Directors.
This corporation may in itsby-laws confer powers upon its directors in addition to the foregoing, and in addition to the powers and authorities expressly conferred upon them by the statute.
Both stockholders and directors shall have power, if theby-laws so provide, to hold their meetings, and to have one or more offices within or without the State of Delaware, and to keep the books of this corporation (subject to the provisions of the statutes), outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors.
NINTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.
TENTH: The Board of Directors of this corporation, when evaluating any offer of another party to (a) make a tender or exchange offer for any equity security of this corporation; (b) merge or consolidate this corporation with another corporation; or (c) purchase or otherwise acquire all or substantially all of the properties and assets of this corporation, shall, in connection with the exercise of its judgment in determining what is in the best interest of this corporation and its stockholders, give due consideration to such factors as the Board of Directors determines to be relevant, including without limitation, the social, legal and economic effects of the proposed transaction upon employees, customers, suppliers, and other affected persons, firms and corporations and on the communities in which this corporation and its subsidiaries operate or are located.
ELEVENTHEIGHTH: No action required or permitted to be taken at any annual or special meeting of the stockholders of this corporation may be taken without a meeting and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.
TWELFTHNINTH: No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty by such director as a director; provided, however, that this ArticleTWELFTHNINTH shall not eliminate or limit liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment or repeal of this ArticleTWELFTHNINTH shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.
THIRTEENTHTENTH: Special meetings of the stockholders of this corporation for any purpose or purposes may be called at any time by the Board of Directors or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors or in theby-laws of this corporationBylaws, include the power to call such meetings, but such special meetings may not be called by any other person or persons.
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Annex A
FOURTEENTHELEVENTH: This corporation reserves the right to amend, alter, change or repeal any provision contained in thisCcertificate ofIincorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
[Signature Page Follows]
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Annex A
IN WITNESS WHEREOF, Kelly Services, Inc. has caused thisAmended and Restated Certificate of Incorporation to be signed byDaniel T. Lis, its Senior Vice President and Corporate Secretary this 5th___________, its ____________________ this ___ day of May,20092018.
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL. SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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| For | Against | Abstain | For | Against | Abstain | |||||||||||||||
| 2. | Non-binding advisory vote on executive compensation. | ☐ | ☐ | ☐ | 4. | Amending the Company’s Amended and Restated Bylaws to designate the Delaware Chancery Court as the exclusive forum for certain legal actions.
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| 3. | Amendment and restatement of the Company’s Restated Certificate of Incorporation to eliminate certain obsolete provisions, to eliminate a “Stakeholder provision” that could conflict with Delaware law, and to make additional revisions in the interest of modernization.
| ☐ | ☐ | ☐ | 5. | Ratification of PricewaterhouseCoopers LLP as independent accountants for the 2018 fiscal year. | ☐ | ☐ | ☐ | |||||||||||
| 6. | Transacting any other business as may properly come before the Meeting or any postponement or adjournments thereof. | |||||||||||||||||||
NOTE: Please sign exactly as namename(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,adminisVator. corporate officer, trustee, guardian, or guardian,custodian, please give full title as such.title. Date (mm/dd/yyyy) - Please print date below. Signature 1 - Please keep signature within the box. Signature 2 - Please keep signature within the box. C 1234567890 JNT 9 2 B V 454973 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND + 03725B
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.
Shareholders. The Proxy Statement and the 2017 Annual Report to stockholders arematerial is available at:
www.envisionreports.com/kelyb
q Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/kelyb IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proxy —- Kelly Services, Inc.
999 West Big Beaver Road
+ Notice of Annual Meeting of StockholdersShareholders Proxy Solicited by Board of Directors for Annual Meeting - May 9, 2018
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
6, 2020 The undersigned hereby names, constitutes and appoints Peter W. QuigleyOlivier G . Thirot and Olivier G. Thirot,James M. Polehna, and each of them, with power to act without the other and with power of substitution, as proxies andattorneys-in-fact attorneys - in - fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Kelly Services, Inc.Inc . Class B Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of StockholdersShareholders of the Company to be held May 9, 20186 , 2020 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE PROPOSALS.
(Continued (Continued to be marked, dated and signed, on the other side.) C Non - Voting Items Change of Address — Please print new address below. Comments — Please print your comments below. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD +
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