ABM Industries Incorporated
ABM INDUSTRIES INC /DE/ (Form: DEF 14A, Received: 02/08/2017 16:47:39)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. ___)

 

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Definitive Proxy Statement

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ABM Industries Incorporated

 

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2017

ANNUAL MEETING OF SHAREHOLDERS

PROXY STATEMENT

ABM INDUSTRIES INCORPORATED

 

 

 


 


ABM Industries Incorporated

One Liberty Plaza, 7th Floor

New York, New York 10006

February 8, 2017

Dear Fellow Shareholders:

In 2016 we continued the 2020 V ision transformation process announced by our Company in September 2015.  During the past year, guided by our Board, we completed the first phase of our 2020 Vision , which entailed reorganizing how we deliver facility solutions from a service-line structure to an industry-based strategy.

I am extremely proud that during this time of transformation, our management team continued to maintain focus on our business and operations, consistently driving results that underscore the quality of our organization. We are excited about our current trajectory and the progress that we are making in the implementation of our 2020 Vision , and we remain committed to capturing greater value for our shareholders, customers and employees.

We also note that Maryellen Herringer, who has led the Board as Chairman since 2006, and Luke Helms, who has been a director for over 20 years, will be retiring from the Board after our 2017 Annual Meeting, in accordance with the Board’s retirement policy. We want to thank them for their dedication, guidance and many contributions to the Board over the years they have served ABM.

 

 

Sincerely,

 

 

 

Scott Salmirs

President and Chief Executive Officer

 

 

 


 

NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS

WHEN

Wednesday, March 8, 2017,
10:00 a.m. Eastern Time

PROXY VOTING

Your vote is important. Even if you plan to attend the annual meeting in person, please vote as soon as possible using the internet or by telephone, or by completing, signing, dating and returning your proxy card.

WHERE

ABM Industries Incorporated
Worldwide Corporate Headquarters
One Liberty Plaza, 7th Floor
New York, New York 10006

Using the Internet and voting at the website listed on the proxy card or the e-proxy notice;

Using the toll-free phone number listed on the proxy card/voting instruction form; or

Signing, dating and mailing the proxy card in the enclosed postage paid envelope.

ITEMS OF BUSINESS

1.

Election of three directors to serve three-year terms until the 2020 Annual Meeting and until their successors are duly elected and qualified.

2.

Advisory vote to approve executive compensation.

3.

Advisory vote on frequency of advisory vote to approve executive compensation.

4.

Ratification of the selection of KPMG LLP as ABM’s independent registered public accounting firm for the current year.

5.

Transaction of such other business as may properly come before the meeting.

RECORD DATE

Shareholders of record at the close of business on January 11, 2017 are entitled to notice of, and to vote at the Annual Meeting.

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS

On or about February 8, 2017, we began mailing this Notice and Proxy Statement dated February 8, 2017, together with a proxy card, to shareholders. The Proxy Statement, Annual Report on Form 10-K for the fiscal year ended October 31, 2016 and the means to vote by Internet are available at www.proxyvote.com .

By Order of the Board of Directors,

Barbara L. Smithers

Vice President, Deputy General Counsel

and Assistant Corporate Secretary

 

 

 

 


Forward-Looking Statements

This Proxy Statement contains forward-looking statements. Forward-looking statements are not based on historical facts but instead reflect our current expectations, estimates or projections concerning future results or events. These statements generally can be identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “intend,” “forecast,” “outlook,” or other similar words or phrases. These statements are not guarantees of future performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results to differ materially from those indicated by those statements. Information regarding risks and uncertainties the Company faces is contained in the Company's Annual Report on Form 10-K for the year ended October 31, 2016 and in other reports the Company files from time to time with the Securities and Exchange Commission. The Company urges readers to consider these risks and uncertainties in evaluating its forward-looking statements. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein (or elsewhere) to reflect any change in the Company's expectations with regard thereto, or any change in events, conditions or circumstances on which any such statement is made, whether as a result of new information, future events or otherwise, except as otherwise required by the federal securities laws.

 

 

 


TABLE OF CONTENTS

 

 

 

Page

 

 

 

PROXY STATEMENT SUMMARY

 

1

01

 

 

GOVERNANCE

 

 

PROPOSAL NO. 1–ELECTION OF DIRECTORS

 

4

CORPORATE GOVERNANCE AND BOARD MATTERS

 

11

The Board of Directors

 

11

Summary Board Information

 

11

Corporate Governance

 

12

Identifying and Evaluating Nominees for Directors

 

12

Board Leadership Structure

 

12

Director Independence

 

13

The Board’s Role in Risk Management

 

13

Mandatory Retirement

 

13

Committees

 

13

Board and Committee Attendance in 2016

 

15

Compensation Committee Interlocks and Insider Participation

 

15

DIRECTOR COMPENSATION FOR FISCAL YEAR 2016

 

15

2016 Non-Employee Director Compensation

 

15

2016 Non-Employee Director Compensation Table

 

16

Director Deferred Compensation Plan

 

17

Other Arrangements

 

17

Director Stock Ownership Policy

 

17

02

 

 

EXECUTIVE COMPENSATION

 

 

PROPOSAL NO. 2–ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

18

COMPENSATION DISCUSSION AND ANALYSIS

 

19

Our Compensation Philosophy and Practices

 

19

How We Compensated Our NEOs in 2016

 

23

Other Compensation and Governance-Related Matters

 

32

Compensation Committee Report

 

34

Additional Information About Executive Compensation

 

35

2016 Summary Compensation Table

 

35

Grants of Plan-Based Awards During Fiscal Year 2016

 

36

Outstanding Equity Awards at 2016 Fiscal Year-End

 

37

Option Exercises and Stock Vested in Fiscal Year 2016

 

39

Pension Benefits at 2016 Fiscal Year-End

 

39

Nonqualified Deferred Compensation in Fiscal Year 2016

 

40

Potential Benefits on Termination

 

41

03

 

 

FREQUENCY OF SAY-ON-PAY VOTE

 

 

PROPOSAL NO. 3–ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

45

04

 

 

AUDIT MATTERS

 

 

PROPOSAL NO. 4–RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

46

AUDIT-RELATED MATTERS

 

47

Audit Committee Report

 

47

Principal Accounting Firm Fees and Services

 

48

Policy on Preapproval of Independent Registered Public Accounting Firm Services

 

48

i


 

 

Page

 

 

 

05

 

 

GENERAL INFORMATION

 

 

Certain Relationships and Transactions with Related Persons

 

48

Section 16(a) Beneficial Ownership Reporting Compliance

 

49

Equity Compensation Plan Information

 

49

Security Ownership of Certain Beneficial Owners

 

50

Security Ownership of Directors and Executive Officers

 

51

Questions and Answers about the Proxy Materials and the 2017 Annual Meeting

 

52

Submission of Shareholder Proposals for 2018 Annual Meeting

 

57

Appendix A–Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

 

A-1

 

 

ii


 

 

 

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. You should read the entire Proxy Statement carefully before voting.

 

Annual Meeting of Shareholders

 

 

Time and Date:

10:00 a.m. Eastern Time, March 8, 2017

 

Place:

ABM Industries Incorporated

 

 

One Liberty Plaza, 7th Floor

 

 

New York, New York 10006

 

Record Date:

January 11, 2017

 

Voting:

You can vote if you were a holder of ABM’s

 

 

common stock on January 11, 2017

 

Voting Matters

 

Board Proposals

Board Vote

Recommendation

Page Reference

(for more detail)

01

 

Election of Directors

 

 

FOR EACH DIRECTOR NOMINEE

 

 

4

02

 

Advisory vote to approve executive compensation

 

 

FOR

 

 

18

03

 

Advisory vote on frequency of future advisory votes to approve executive compensation

 

EVERY YEAR

 

 

45

04

 

Ratification of the selection of KPMG LLP as our independent registered public accounting firm

 

FOR

 

 

46

 

Board Nominees

 

The following table provides summary information about each director who is nominated for election.

 

Name

Age

Director

Since

Occupation

Independent

Committee

Assignments

Anthony G. Fernandes

71

2007

Former Chairman, Chief Executive Officer and President of Philip Services Corporation

Audit, Chair;

Corporate Citizenship and Communications

Thomas M. Gartland

59

2015

Former President, North America of Avis Budget Group, Inc.

Audit;

Compensation

Winifred (Wendy)

M. Webb

58

2014

Chief Executive Officer, Kestrel Corporate Advisors

Audit;

Governance

1


 

 

 

BUSINESS HIGHLIGHTS

 

2020 VISION PROGRESS

 

We made great strides in our 2020 Vision during fiscal year 2016. Our Company transformed from one that had been focused on the services we provide to one that is now focused on the industries we serve. Our go-to-market approach is illustrated by the five industry groups and one technical solutions group through which we provide our comprehensive services.

 

 

The solid foundation created in 2016 has paved the way for us to concentrate on the next phase of our transformation which focuses on promoting increased efficiencies and operational improvements throughout our Company, which we believe will lead to accelerated growth.

 

CONTINUED GROWTH DURING TIME OF TRANSFORMATION

 

In fiscal year 2016, we grew revenues by 5% over the prior year to approximately $5.1 billion, driven by organic revenue growth of 3% for 2016, compared to fiscal year 2015. On a GAAP basis, income from continuing operations grew 15.2% to $62.3 million, or $1.09 per diluted share, compared to income from continuing operations of $54.1 million, or $0.94 per diluted share in 2015.

 

Net income for 2016 was $57.2 million, or $1.01 per diluted share, compared to $76.3 million, or $1.33 per diluted share for 2015. Adjusted EBITDA for 2016 was $212.2 million, compared to $206.0 million in 2015. Adjusted income from continuing operations grew 6.7% to $99.2 million, or $1.74 per diluted share, compared to $92.9 million, or $1.62 per diluted share in 2015. 1

 

 

RETURNING VALUE TO SHAREHOLDERS

 

In fiscal year 2016, we:

 

 

returned $46.6 million to shareholders in share repurchases;

 

 

paid $36.9 million to shareholders in dividends; and

 

 

achieved three-year total shareholder return (TSR) in the top quartile of S&P 600 companies.

 

 

 

1  

Adjusted EBITDA, adjusted income from continuing operations and adjusted income from continuing operations per diluted share are non-GAAP financial measures. These adjustments have been made with the intent of providing financial measures that give management and investors a better understanding of underlying operational results and trends as well as the Company’s operational performance. Please refer to Appendix A for a reconciliation of these non-GAAP financial measures to certain GAAP financial measures.

2


 

 

 

GOVERNANCE HIGHLIGHTS

 

In January 2017, we added two directors to our Board for a total of 12 directors. Following the retirement of Ms. Herringer and Mr. Helms in March 2017, we will reduce the size of our Board to 10 directors. The following table reflects our Board’s current composition.

 

Board

Structure

Board

Tenure

Committees and Attendance

Corporate Governance Enhancements

 

    Independent Chair of the Board.

    11 of 12 directors are Independent.

    4 of 12 directors are women.

    Independent directors meet in regular Executive Sessions.

 

    6 of 12 directors have served on the Board three years or less.

    3 of 12 directors have served on the Board between four and ten years.

    3 of 12 directors have served more than ten years.

 

    Independent Audit, Compensation, Governance, and Corporate Citizenship and Communications Committees.

    In 2016, all directors together attended at least 97% of Board and their respective Committee meetings.

 

 

    Implemented majority voting in uncontested elections.

    Director Retirement Policy requires retirement at age 73.

 

 

EXECUTIVE COMPENSATION HIGHLIGHTS

 

Our compensation philosophy, established by the Compensation Committee, is intended to bring our executive’s compensation in line with our strategic goals and our short-term and long-term performance while providing the compensation and incentives needed to attract, motivate and retain key executives who are crucial to ABM’s future and long-term success. In 2016 our Compensation Committee focused on strengthening the alignment of our incentive compensation with our 2020 Vision, resulting in significant changes to our long-term and annual incentive compensation programs.

 

To achieve our compensation objectives:

  

We align annual short-term incentive awards with annual operating, financial and strategic objectives, as well as with business unit and individual performance.

We align long-term incentive awards with the interests of our shareholders through a combination of performance-based and service-based equity grants that deliver value based on operating results and encourage stock ownership.

A meaningful portion of our incentive compensation opportunity for executives is directly related to ABM’s total shareholder return (TSR) over a three-year period compared to the S&P 600.

 

OUR COMPENSATION PRACTICES

 

We maintain leading compensation practices including:

 

     Compensation Recoupment (“Clawback Policy”)

 

     Limited Perquisites

     Stock Ownership Requirements

 

     No “Gross-Ups”

     Independent Compensation Consultant

 

     No Repricing

     No Hedging or Pledging

 

 

 

 

3


 

 

 

PROPOSAL 1—ELECTI ON OF DIRECTORS

 

THE BOARD OF DIRECTORS RECOMMENDS VOTES

“FOR” THE ELECTION OF ALL OF THE NOMINEES AS DIRECTORS

 

Director nominees are elected by a majority of the votes cast. This means that the number of shares voted “for” a director’s election must exceed 50% of the number of votes cast for that director’s election. Votes cast includes votes “for,” votes “against” and votes to withhold authority with respect to that director’s election, but excludes any abstentions or broker non-votes. Any nominee who does not receive a majority of votes cast “for” his or her election would be required to tender his or her resignation promptly following the failure to receive the required vote. The Governance Committee would then be required to make a recommendation to the Board as to whether the Board should accept the resignation, and the Board would be required to decide whether to accept the resignation.

 

Art A. Garcia and Filippo Passerini were appointed as directors on January 24, 2017. Mr. Garcia was named to the class of directors whose terms expire in 2018 and Mr. Passerini was named to the class of directors whose terms expire in 2019. Maryellen C. Herringer and Luke S. Helms are retiring as directors under our Director Retirement Policy at the close of the 2017 Annual Meeting of Shareholders.

 

 

Nominees for Election as Directors for a Term Expiring in 2020

 

Anthony G. Fernandes

Director Since 2007

Age 71

Former Chairman, Chief Executive Officer and President of Philip Services Corporation

Mr. Fernandes served as chairman, chief executive officer and president of Philip Services Corporation from August 1999 to April 2002. Prior to joining Philip Services Corporation, Mr. Fernandes had a 30-year career with the Atlantic Richfield Company (ARCO), serving as executive vice president and director of ARCO from 1994 to 1999; president of ARCO Coal, a subsidiary of ARCO, from 1990 to 1994; and corporate controller of ARCO from 1987 to 1990. He was a member of the ARCO board of directors and chairman of ARCO Chemical Company, a NYSE company 80% owned by ARCO. Additionally, he was a director of Tower Automotive, Inc. from 2003 to 2007, a director of Black and Veatch from 1999 to 2016, and a director of Cytec Industries from 2002 to 2015. He also currently serves as a director of Baker Hughes Incorporated and Envirosystems, Inc., a privately held Canadian company.

 

Mr. Fernandes’ qualifications to serve on our Board include his leadership and management experience as a chief executive officer, his experience as a senior financial officer, and his experience as a director of other public companies. Mr. Fernandes brings valuable operations, compensation, public company board, leadership, financial management, mergers and acquisitions and global operations experience to the Board.

4


 

 

 

 

Thomas M. Gartland

Director Since 2015

Age 59

Former President, North America of Avis Budget Group, Inc.

Mr. Gartland retired in December 2014 from his role as president, North America for Avis Budget Group, Inc., a publicly traded leading global provider of vehicle rental services, a position he held from October 2011 to December 2014. Previously, he was executive vice president, sales, marketing and customer care at Avis Budget Group, Inc. from April 2008 to October 2011, where he developed the overall strategic direction for marketing and sales. Mr. Gartland was employed by JohnsonDiversey, Inc. from 1994 to 2008, in various high-level capacities, including as president of the company’s North American region from 2003 to 2008, vice president, Sales, Health and Hospitality from 2002 to 2003, vice president, Business Development from 1998 to 2002, with various positions of increasing responsibility within the company from 1994 to 1998. Prior to that, Mr. Gartland served as vice president and director of national accounts at Ecolab, Inc. from 1980 to 1994. Mr. Gartland serves on the board of directors of Xenia Hotels & Resorts, Inc., a publicly traded, self-advised and self-administered REIT that invests primarily in premium full-service, lifestyle, and urban upscale hotels.

 

Mr. Gartland’s qualifications to serve on our Board include his extensive experience in senior executive positions at major, multinational companies, including sales, operations, financial management, leadership, and mergers and acquisitions. He also brings public company board experience to our Board.

 

Winifred (Wendy) M. Webb

Director Since 2014

Age 58

Chief Executive Officer, Kestrel Corporate Advisors

Ms. Webb is chief executive officer of Kestrel Corporate Advisors, a position she has held since February 2013. From January 2010 to January 2013, she was managing director for Tennenbaum Capital Partners, LLC. Ms. Webb was a member of the corporate executive team as chief communications and investor relations officer and senior advisor for Ticketmaster Entertainment Inc. from April 2008 to January 2010. She served for 20 years with The Walt Disney Company, from 1988 to 2008, primarily as corporate senior vice president of investor relations and shareholder services responsible for overseeing Disney’s strategic financial communications worldwide and governance outreach. She was also executive director for The Walt Disney Company Foundation. Her previous roles included investment banking positions with PaineWebber Inc. and Lehman Brothers Kuhn Loeb. A member of the board of directors of publicly traded 9 Spokes International Limited from 2015, and of TiVo Inc. from 2016 until it was acquired in September 2016, of Jack in the Box Inc. from 2008 to 2014, and of nonprofit PetSmart Charities, Inc. from 2014 to 2016, Ms. Webb is an NACD Board Leadership Fellow, the highest level of credentialing for corporate directors offered by The National Association of Corporate Directors.

 

Ms. Webb’s qualifications to serve on our Board include her experience in senior management at global public companies and her experience in the global financial services industry. Ms. Webb brings valuable operations, public company board, finance, investor relations, communications, media and public relations, treasury, corporate governance, sales and marketing, global operations, corporate social responsibility, strategic planning, mergers and acquisitions, investment banking and capital markets experience to our Board.

 

5


 

 

 

Direct ors Whose Terms Expire in 2019

 

Sudhakar Kesavan

Director Since 2012

Age 62

Chairman and Chief Executive Officer, ICF International

Mr. Kesavan is chairman and chief executive officer of ICF International, a publicly traded company that is a leading provider of consulting services and technology solutions to government and commercial clients, a position held since 1999. He has also been a director of ICF International since June 1999. Previously, Mr. Kesavan served as the president of ICF Consulting Group, a subsidiary of ICF Kaiser, from 1997 to 1999. Mr. Kesavan serves on the board of the Northern Virginia Technology Council. He also serves as board member emeritus of the Rainforest Alliance, a New York-based nonprofit environmental organization, on the board of Inova Health Systems, a not-for-profit healthcare system based in Northern Virginia, and is a trustee of the Shakespeare Theater Company in Washington, DC.

 

Mr. Kesavan’s qualifications to serve on our Board include his leadership and operational experience gained from serving as a chief executive officer and director of another public company. Mr. Kesavan brings valuable experience leading both organic growth and acquisition activities, a thorough understanding of corporate governance, compensation expertise, operations, industry, public company board, financial, mergers and acquisitions, government and government relations, and global operations experience to our Board.

 

Lauralee E. Martin

Director Since 2015

Age 66

Former President and Chief Executive Officer of HCP, Inc.

Ms. Martin served as chief executive officer and president of HCP, Inc., a real estate investment trust focusing on properties serving the healthcare industry, from October 2013 to July 2016. Prior to joining HCP in October 2013, Ms. Martin was employed by Jones Lang LaSalle Incorporated, one of the world’s leading real estate services and money management firms, in various high-level capacities, including as chief executive officer, Americas beginning in January 2013. Prior to that, she was executive vice president and chief financial officer since January 2002, and was appointed to the additional position of chief operating officer in January 2005. Ms. Martin served on its board of directors from 2005 until May 2013. Ms. Martin previously held positions with Heller Financial as its chief financial officer, senior group president – Heller Financial Real Estate, Equipment Financing and Small Business Lending and served as president of its Real Estate group. Ms. Martin was also a member of the Heller Financial board of directors. Ms. Martin has served on the Board of Kaiser Aluminum Corporation since 2013, and previously served as a director of HCP, Inc. from 2008 to July 2016, of KeyCorp from 2003 through 2010, and of Gables Residential Trust from 1994 through 2005. Ms. Martin served as a trustee of the Urban Land Institute and the International Council of Shopping Centers.

 

Ms. Martin’s qualifications to serve on our Board include her leadership and management experience gained from her positions as a chief executive officer, chief financial officer, and chief operating officer. Ms. Martin brings valuable knowledge to our Board in all aspects of corporate financial and operational matters, including the oversight of complex financial, accounting and corporate infrastructure functions, evaluation of acquisition opportunities, and investor relations. Her service as a member of the boards of directors of two other public companies has contributed to her expertise in corporate governance matters.

6


 

 

 

 

Filippo Passerini

Director Since 2017

Age 59

Operating Executive, Carlyle Group

Mr. Passerini has been an operating executive in U.S. Buyouts at Carlyle Group since 2015. From January 2015 until his retirement in June, he served as Officer on Special Assignment to the President and CEO of Procter & Gamble. Prior to that, Mr. Passerini served as Procter & Gamble Company’s group president, Global Business Services (GBS) and chief information officer (CIO), positions he held since February 2008 and July 2004, respectively. Mr. Passerini joined Procter & Gamble, a leading multinational manufacturer of consumer goods, in 1981 and held executive positions in the United Kingdom, Greece, Italy, Turkey, Latin America and the United States. While with the Procter & Gamble organization, he oversaw more than 170 distinct services in 70 countries and led the integration of Procter & Gamble’s IT and services groups to form GBS, one of the largest and most progressive shared services organizations in the world. Mr. Passerini has served as a director of Integer Holdings Corporation since 2015 and of United Rentals, Inc. since 2009. Since 2015, Mr. Passerini has also served as a director of Poste Italiane Spa, an Italian company that provides postal and infrastructure services. He is a member of the CIO Hall of Fame and has received numerous awards, including: the inaugural Fisher-Hopper Prize for Lifetime Achievement in CIO Leadership; Shared Service Thought Leader of the Year; and InformationWeek’s Chief of the Year.

Mr. Passerini’s qualifications to serve on our board include his significant global experience in operations, technology and general management roles. He is recognized as a thought leader in information technology and shared services, attributes he acquired through his various senior level positions with Procter & Gamble, including Chief Information Officer, for more than 33 years. Mr. Passerini brings extensive experience in operations, information technology, and shared services as well as public company board experience to our Board.

 

 

Directors Whose Terms Expire in 2018

 

Linda Chavez

Director Since 1997

Age 69

President, Becoming American Institute

Ms. Chavez is the president of the Becoming American Institute, a position she has held since 2014. Additionally, she is founder and chairman of the Center for Equal Opportunity, a position she has held since January 2006. Prior to her appointment as chairman, Ms. Chavez served as president of the Center for Equal Opportunity from January 1995 through December 2005. Ms. Chavez was a director of Pilgrim’s Pride Corporation from 2004 to 2008, where she served on the audit committee. Previously, she was a director of Greyhound Lines, Inc. from 1995 to 1999, when it was acquired by another company. Ms. Chavez has held numerous appointed positions, including chief executive officer of the National Commission on Migrant Education from 1988 to 1992, chief executive officer of the U.S. Commission on Civil Rights from 1983 to 1985, and White House director of public liaison in 1985. In 1992, she was elected by the United Nations Commission on Human Rights to serve a four-year term as U.S. Expert to the U.N. Sub-Commission on the Prevention of Discrimination and Protection of Minorities. She is a 2006 graduate of the UCLA Anderson Graduate School of Management Director Training and Certification Program and served on the advisory board of the Outstanding Directors Exchange in 2008 and 2009. Ms. Chavez serves on the board of Research Electro-Optics, a privately held company. Ms. Chavez also serves or has served on numerous nonprofit boards. She is an author and nationally syndicated columnist and television commentator and writes extensively about public policy issues.

 

Ms. Chavez’s qualifications to serve on our Board include her extensive knowledge of, and experience in, government relations and her leadership skills and corporate governance experience gained during her service as a public company director and her involvement with nonprofit organizations. Ms. Chavez brings valuable public company board experience, compensation expertise, financial experience, public policy experience, and government and government relations experience to our Board.

7


 

 

 

 

J. Philip Ferguson

Director Since 2009

Age 71

Former Vice-Chairman, University of Texas Investment Management Company

Mr. Ferguson has spent over 45 years in the investment management business, currently serving on the board of managers of Salient Partners, on the investment committee for Silver Ventures, on the investment board for San Manuel Band of Mission Indians, and as non-executive chair of the investment committee of Ascendant Advisors. Mr. Ferguson served until April 2012 on the board of directors of the University of Texas Investment Management Company (UTIMCO), a position he held since August 2003. He chaired the UTIMCO compensation committee and served on its risk and policy committees. Mr. Ferguson also serves on the advisory committee of the MBA Investment Fund at the McCombs School of Business at the University of Texas-Austin, a position held since March 2005, and is a member of the advisory board of Murphree Venture Partners. Mr. Ferguson held various executive positions with AIM Capital Management, Inc. (now Invesco AIM) from 2000 to 2007, serving most recently as president and chief investment officer. Previously, he held senior positions at several investment management firms, including: managing partner at Beutel, Goodman & Company; senior vice president at Lehman Brothers, Inc.; and vice president of Goldman, Sachs & Company. Mr. Ferguson also serves or has served on various investment and civic boards, including the Investment Advisor Association, the Houston Ballet, the Memorial Hermann Foundation, Museum of Fine Arts, Houston, and on the Chancellor’s Advisory Council of Texas Christian University.

 

Mr. Ferguson’s qualifications to serve on our Board include his extensive business and financial experience gained from working in the investment industry for over 45 years . Mr. Ferguson brings valuable operations, mergers and acquisitions, sales and marketing, government and government relations, compensation, strategic transactions, investor relations and public company board experience to our Board.

 

Art A. Garcia

Director Since 2017

Age 55

Executive Vice President and Chief Financial Officer, Ryder System, Inc.

Mr. Garcia is the executive vice president and chief financial officer of Ryder System, Inc., a $6.5 billion commercial fleet and supply chain management solutions company, a position held since 2010. He is a member of Ryder’s executive leadership team. Prior that, Mr. Garcia served as senior vice president, controller and chief accounting officer of Ryder from 2005 to 2010. Mr. Garcia joined Ryder in 1997 as senior manager of corporate accounting. He later served as director of corporate accounting and, subsequently, as group director of accounting services. Prior to joining Ryder, Mr. Garcia spent 14 years with the Miami office of the accounting firm Coopers & Lybrand LLP as senior manager of business assurance.

 

Mr. Garcia’s qualifications to serve on our Board include his extensive business, financial and management experience and his experience as a senior financial officer. Mr. Garcia brings valuable accounting, financial management and supply chain experience to our Board.

8


 

 

 

 

Scott Salmirs

Director Since 2015

Age 54

President and Chief Executive Officer, ABM Industries Incorporated

Mr. Salmirs is president and chief executive officer of the Company, a position held since March 2015. Previously, he served as executive vice president of the Company from September 2014 to March 2015, with global responsibility for the Company’s aviation division and all international activities. Mr. Salmirs served as executive vice president of ABM Janitorial Services – Northeast from 2003 to December 2014. Prior to joining the Company, Mr. Salmirs held various leadership positions at Goldman, Sachs & Company, Lehman Brothers, Inc., and CBRE. Mr. Salmirs also serves on the board of Outreach, a New York nonprofit organization dedicated to rehabilitating teen drug users, is a founding board member of Donate Eight, a nonprofit group associated with LiveOnNY, and also serves on the Business Advisory Council for the business program at SUNY Oneonta.

 

Mr. Salmirs’ qualifications to serve on our Board include his experience in the facility services industry, and his knowledge of and perspective on the Company as its president and chief executive officer. Mr. Salmirs brings valuable leadership skills and operations, financial management, industry, mergers and acquisitions, sales and marketing, and global operations experience to the Board.

 

9


 

 

 

Directors Who Will Retire at Close of 2017 Annual Meeting of Shareholders

 

Luke S. Helms

Director Since 1995

Age 73

Managing Director, Sonata Capital Group

Mr. Helms is the managing director of Sonata Capital Group, a privately owned, registered investment advisory firm, a position held since June 2000. Previously, Mr. Helms served as vice-chairman of KeyBank from April 1998 to March 2000 and held various senior executive positions at Bank of America Corporation, including vice-chairman from May 1993 to October 1998. He also served as president of Seafirst Bank from November 1987 to September 1990 and chief executive officer from September 1990 to May 1993. Mr. Helms was a director of Lifelock, Inc., a privately owned company, from 2007 to 2008, has served as a director of Manulife Financial Corporation since 2007, and has served as a director of Point Inside since 2014.

 

Mr. Helms’ qualifications to serve on our Board included his extensive business, operational and financial experience gained from working in the investment and banking industry, as well as his public company board experience. During his tenure on the Board, Mr. Helms brought valuable operations, corporate strategy, risk management, capital markets, financial, mergers and acquisitions, sales and marketing, global operations, and public company board experience to the Board.

 

Maryellen C. Herringer

Director Since 1993

Age 73

Non-Executive Chairman of the Board, ABM Industries Incorporated

Ms. Herringer is retired executive vice president, general counsel and secretary of APL Limited. She held various executive positions with APL Limited, an international provider of transportation and logistics, from 1991 to 1997 and was responsible at various times for overseeing functions including legal, risk management, corporate communications, human resources, internal audit, tax and community affairs. Prior to joining APL Limited, Ms. Herringer was a partner in the international law firm of Morrison & Foerster from 1989 to 1991. From 1981 to 1989, Ms. Herringer held various positions at Transamerica Corporation (insurance and financial services), including vice president and general counsel from 1981 to 1983 and senior vice president and general counsel from 1983 to 1989. Ms. Herringer serves as a director of PG&E Corporation and Pacific Gas and Electric Company, a subsidiary of PG&E Corporation, and is chair of such companies’ nominating and governance committees and serves on their audit and compensation committees. She served as interim lead director of PG&E Corporation and Pacific Gas and Electric Company and interim non-executive chairman of the board of Pacific Gas & Electric Company from May to September 2011. Ms. Herringer currently is a member of the board of trustees of Mills College, Vassar College, and the San Francisco Museum of Modern Art and has served on the boards of numerous educational institutions and not-for-profit organizations. She is also a former chair of the Business Law Section of the State Bar of California.

 

Ms. Herringer’s qualifications to serve on our Board included her leadership, business, legal, and management skills developed as an executive and a director of, and legal counsel to, other large public companies. During her tenure on the Board, Ms. Herringer brought valuable compensation, legal, corporate governance, financial, risk management, internal audit, corporate transactional, public company board, government and government relations, global operations, and mergers and acquisitions experience to our Board.

 

 

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CORPORATE GOVERNANC E AND BOARD MATTERS

The Board of Directors

Our Board of Directors is divided into three classes serving staggered three-year terms, each class to be as nearly equal in number as possible as the other two. Directors whose terms expire in 2017 are Anthony G. Fernandes, Thomas M. Gartland, Maryellen C. Herringer, and Winifred M. Webb. Ms. Herringer, who will retire at the close of the 2017 Annual Meeting of Shareholders in accordance with our Director Retirement Policy, is not seeking re-election to the Board. Luke S. Helms will also retire at the close of the 2017 Annual Meeting of Shareholders in accordance with our Director Retirement Policy. Messrs. Garcia and Passerini, who were appointed to our Board on January 24, 2017, have not yet been appointed to Board Committees as of the date of this Proxy Statement.

 

Summary Board Information

 

 

Committee

Qualifications

Name and

Current Position

Age

Director Since

Independent

Audit

Compensation

Governance

Corporate Citizenship and Communications

Business Leadership

Industry Experience

Public Company

Financial/Investment

Risk Oversight

Global

Maryellen C. Herringer

  Non-Executive Chairman of the

  Board

73

1993

YES

 

 

 

 

Linda Chavez

  President, Becoming American

  Institute

69

1997

YES

 

Chair

 

 

J. Philip Ferguson

  Former Vice Chairman, University

  of Texas Investment Management

  Company

71

2009

YES

 

Chair

 

 

Anthony G. Fernandes

  Former Chairman, Chief Executive

  Officer and President of Philip

  Services Corporation

71

2007

YES

Chair

 

 

 

Art A. Garcia

  Executive Vice President and

  Chief Financial Officer of Ryder

  Systems, Inc.

55

2017

YES

 

 

 

 

 

 

Thomas M. Gartland

  Former President, North America

  of Avis Budget Group, Inc.

59

2015

YES

 

 

 

Luke S. Helms

  Managing Partner, Sonata Capital

  Group

73

1995

YES

 

 

 

Sudhakar Kesavan

  Chairman and Chief Executive

  Officer, ICF International

62

2012

YES

 

Chair

 

 

Lauralee E. Martin

  Former President and Chief

  Executive Officer, HCP, Inc.

66

2015

YES

 

 

Filippo Passerini

  Operating Executive, Carlyle

  Group

59

2017

YES

 

 

 

 

 

Scott Salmirs

  President and Chief Executive

  Officer, ABM Industries

  Incorporated

54

2015

NO

 

 

 

 

Winifred M. Webb

  Chief Executive Officer, Kestrel

  Corporate Advisors

58

2014

YES

 

 

 

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Corporate Governance

Our Board of Directors has adopted Corporate Governance Principles that reflect our commitment to good corporate governance and the role of governance in building long-term shareholder value. Our Corporate Governance Principles, which include our independence standards, can be found on our website at http://investor.abm.com/corporate-governance.cfm . Other information relating to our corporate governance is also available on our website at the same address, including our Bylaws, Code of Business Conduct, and the Charters of our Audit Committee, Compensation Committee, Corporate Citizenship and Communications Committee, and Governance Committee. These documents are also available in printed hard-copy format upon written request to the Corporate Secretary at the Company’s corporate headquarters.

Identifying and Evaluating Nominees for Directors

Our Board is responsible for selecting nominees for election as directors. The Board delegates the screening process to the Governance Committee with the expectation that other members of the Board will participate in this process, as appropriate. The Governance Committee periodically reviews the skills and types of experience that it believes should be represented on the board of directors in light of the Company’s current business needs and future strategy. The Governance Committee then uses this information to consider whether all of the identified skills and experience are represented on the Board. Based upon its review, the Committee may recommend to the Board that the expertise of the current members should be supplemented. The Committee takes these factors into account when looking for candidates for the Board. Candidates recommended by the Governance Committee are subject to approval by the Board. Our Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected because of retirement or otherwise. In the event that any vacancy is anticipated, or otherwise arises, the Governance Committee considers various potential candidates for director.

Our Governance Committee recommends to the Board the criteria for director candidates, and the Board establishes the criteria . The Governance Committee of the Board is also responsible for reviewing with the Board the requisite skills and characteristics of new Board candidates and current Board members in the context of the current composition of the Board.

In analyzing director nominations and director vacancies, our Governance Committee seeks to recommend candidates for director positions who will create a collective membership on the Board with varied experience and perspectives. The Governance Committee believes that this will contribute to a Board that reflects diversity, including, but not limited to, gender, ethnicity, background and experience. We do not have a policy that requires specified types of diverse backgrounds. The Governance Committee strives to recommend candidates who demonstrate leadership and significant experience in a specific area or endeavor, understand the role of a public company director and can provide insights and practical wisdom based on their experience and expertise.

The Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director, such as search firms and the relationships of current directors. Candidates may also come to the attention of the Governance Committee through shareholders or other persons. These candidates are evaluated at regular or special meetings of the Governance Committee and may be considered at any point during the year.

Our directors are expected to prepare for, attend and participate in Board meetings and meetings of the Committees of the Board on which they serve. They are also expected to meet as frequently and spend as much time as necessary to properly discharge their responsibilities and duties as directors and to arrange their schedules so that other existing and planned future commitments do not materially interfere with their service as a director. Ordinarily, directors who are full-time employees of ABM or who serve as chief executive officers or in equivalent positions at other companies may not serve on the boards of more than two other publicly traded companies. Other directors may not serve on the boards of more than four other publicly traded companies. Service on other boards and other commitments are considered by the Governance Committee and the Board when reviewing Board candidates.

 

Board Leadership Structure

The Company currently has separate persons serving as its Chairman and its Chief Executive Officer, in recognition of the differences between the two roles. The Chief Executive Officer has general and active management over the business and affairs of the Company, subject to the control of the Board. Our Chairman is charged with presiding over all meetings of the Board and our shareholders, as well as providing advice and counsel to the Chief Executive Officer, coordinating the preparation of agendas, keeping directors informed of matters impacting the Company, and

12


 

 

 

maintaining contact with the Company’s General Counsel. The Board of Direc tors believes that at this time, the separation of these roles is the most appropriate and effective leadership structure for the Company and its shareholders. Maryellen Herringer has served as Chairman of the Board since 2006. The Board has named Mr. Kesa van to serve as Chairman upon Ms. Herringer’s retirement following the 2017 Annual Meeting of Shareholders.

 

Director Independence

Our Corporate Governance Principles provide that a majority of our directors will be independent; our Audit Committee, Compensation Committee and Governance Committee will consist solely of independent directors; and the Corporate Citizenship and Communications Committee will consist solely of non-management directors. Each year, our Governance Committee reviews the independence of each of our directors under the NYSE listing standards and considers any current or previous employment relationships as well as any transactions or relationships between our Company and our directors or any members of their immediate families (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder). The purpose of this review is to determine whether any relationships or transactions exist that preclude a director from being deemed independent under the NYSE listing standards or are otherwise inconsistent with a determination that the director is independent.

Our Governance Committee has affirmatively determined and recommended to our Board, and the Board has agreed, that all of our directors, other than our Chief Executive Officer, should be designated as independent.

The Board’s Role in Risk Management

Our Company is subject to a number of risks. Our Board of Directors exercises oversight over the Company’s strategic, operational and financial matters, as well as compliance and legal risks. In connection with this role, the Board oversees our Company’s Enterprise Risk Management (“ERM”) process, under which it reviews our business risk framework. The ERM process is designed to strengthen our risk management capability as well as to monitor business risks. The Board, as permitted in the Company’s Bylaws and committee charters, exercises its oversight, in part, through the Audit Committee, the Compensation Committee, the Corporate Citizenship and Communications Committee, and the Governance Committee. The Audit Committee reviews and discusses guidelines and policies with respect to risk assessment and risk management. The Compensation Committee annually reviews and assesses risks, if any, arising from the Company’s compensation policies and practices for its employees and whether any such risks are reasonably likely to have a material adverse effect on the Company. The Corporate Citizenship and Communications Committee reviews and advises with respect to risks related to strategies, policies and communications targeted to various key constituencies. The Governance Committee considers risks in relationship to succession planning. The Board’s role in risk oversight has not affected its leadership structure.

Mandatory Retirement

The Board has adopted a mandatory retirement policy for non-employee directors. Under this policy, a director who attains the age of 73 during his or her current term must resign from the Board effective upon the conclusion of the annual shareholders meeting next following his or her 73rd birthday. Ms. Herringer and Mr. Helms will each retire as a director at the close of the 2017 Annual Meeting of Shareholders.

Committees

The Board has four standing committees: Audit, Compensation, Governance, and the Corporate Citizenship and Communications Committee. Each committee is composed solely of independent directors, meets periodically throughout the year, reports its actions and recommendations to the Board, receives reports from senior management, annually evaluates its performance and has the authority to retain outside advisors. Annually, our Governance Committee reviews committee assignments and makes recommendations to the Board with respect to committee membership, taking into consideration directors’ qualifications and the desire to refresh committee membership. The primary responsibilities of each committee, as well as membership of each committee as of the date of this Proxy Statement, are summarized below. For more detail, see the committee charters on our website at www.abm.com .

 

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Audit Committee

 

 

Anthony G. Fernandes, Chair

J. Philip Ferguson

Thomas M. Gartland

Winifred M. Webb

 

Key Oversight Responsibilities

 

 

Independent auditor, including audit/nonaudit services provided

Scope and results of the independent auditor’s audit

Financial reporting activities and accounting standards/principles used

Internal audit functions

Disclosure controls and internal controls

 

 

“In 2016, we continued to focus on risks, including those related to our insurance and safety programs.”

 

 

The Board of Directors has determined that each member of the Audit Committee is financially literate and that each qualifies as an “audit committee financial expert” under the definition promulgated by the Securities and Exchange Commission.

 

 

 

The Audit Committee met six times in 2016.

 

Compensation Committee

 

 

Sudhakar Kesavan, Chair

Linda Chavez

Thomas M. Gartland

Luke S. Helms

Maryellen C. Herringer

Key Oversight Responsibilities

 

 

CEO compensation and evaluation

Executive incentive compensation

Equity plan and awards

Review of compensation structure

Executive employment agreements

 

 

“This year we focused on the continued alignment of incentive compensation with our 2020 Vision and corporate strategy.”

 

 

 

The Compensation Committee met six times in 2016 .

 

Governance Committee

 

 

Linda Chavez, Chair

J. Philip Ferguson

Luke S. Helms

Lauralee E. Martin

Winifred M. Webb

Key Oversight Responsibilities

 

 

Director recruitment

Corporate governance

Board committee structure and membership

Director compensation

Succession planning

 

 

“Director recruitment, succession planning and Board composition were key priorities in 2016.”

 

 

 

The Governance Committee met five times in 2016.

 

Corporate Citizenship and Communications Committee

 

 

J. Philip Ferguson, Chair

Linda Chavez

Anthony G. Fernandes

Lauralee E. Martin

Key Oversight Responsibilities

 

 

Corporate philanthropy

Public affairs and government relations

Crisis management planning

 

 

“Corporate philanthropic outreach, marketing and branding were principal areas of focus in 2016.”

 

 

 

The Corporate Citizenship and Communications Committee met four times in 2016.

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Board and Committee Attendance in 2016 

During 2016, the Board held 11 meetings. Together, the directors attended 97% of the combined total meetings of the full Board and the committees on which they served in 2016, and no director attended less than 88% of the combined total meetings of the full Board and the committees on which he or she served in 2016. Our Board meets in executive session during each regularly scheduled Board meeting and may meet in executive session during specially called meetings. Under our Corporate Governance Principles, directors are expected to dedicate the time, energy, and attention necessary to discharge their duties.

Our directors attend our annual meetings of shareholders, absent a conflict or other extenuating circumstance. In 2016, all of our directors, except for two directors who had business conflicts, attended the annual meeting of shareholders.  

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee during fiscal year 2016 or as of the date of this Proxy Statement is or has been an officer or employee of the Company, and no executive officer of the Company served on the compensation committee or board of any company that employed any member of the Company’s Compensation Committee or Board of Directors.

 

 

DIRECTOR CO MPENSATION FOR FISCAL YEAR 2016

 

ABM compensates non-employee directors through a combination of annual cash retainers, fees relating to chairing or serving on a committee, and equity grants. The Governance Committee reviews the compensation of non-employee directors periodically and recommends changes to the Board whenever it deems appropriate. Semler Brossy Consulting Group, LLC (“Semler Brossy”), the Compensation Committee’s independent consultant, periodically provides information regarding non-employee director compensation to the Governance Committee. The following table describes the components of the non-employee director compensation program in effect during 2016.

 

 

2016 Non-Employee Director Compensation

 

Compensation Element

2016 Compensation Program

Annual Board Cash Retainer

$175,000 for Chairman of the Board;

$70,000 for other non-employee directors

Annual Board Equity Retainer

$175,000 for Chairman of the Board;

$110,000 for other non-employee directors

Board and Committee Attendance Fees

None

Annual Chair Fees

$15,000 for Audit Chair;

$10,000 for Compensation Chair;

$7,500 for Governance Chair;

$5,000 for Corporate Citizenship and Communications Chair

Annual Committee Member Retainer*

 

 

*The Chairman of the Board does not receive a separate retainer for Committee memberships.

$20,000 for Audit members;

$12,500 for Compensation members;

$7,500 for Governance members;

$5,000 for Corporate Citizenship and Communications members

 

 

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The Governance Committee may recommend to the Board that directors who invest significant time above and beyond the normal requirements of service on the Board, or a committee thereof, receive $2,000 per day for such service. The Board may also determine that it is appropriate to compensate Board members (other than the Chairman of the Board) who are not serving on a particular committee of the Board for attendance at such committee’s meetings if the Board member’s attendance has been requested by the Chair of that committee. In such cases, the Boa rd member may receive $2,000 for each such meeting attended. The Chairman of the Board is not eligible to receive such payments. ABM also reimburses its directors for out-of-pocket expenses incurred in attending Board and Committee meetings. Equity awards to non-employee directors are granted under our shareholder-approved 2006 Equity Incentive Plan, which limits the amount of equity awards that may be granted to non-employee directors in any one calendar year.

 

 

2016 Non-Employee Director Compensation Table

 

 

Fees

Earned or

Paid in

Cash (1)

 

Stock

Awards (2)

 

All Other

Compensation (3)

 

Total

 

  Name of Director

($)

 

($)

 

($)

 

($)

 

  Linda Chavez

 

99,859

 

 

109,998

 

 

3,060

 

 

212,917

 

  J. Philip Ferguson

 

105,739

 

 

109,998

 

 

4,626

 

 

220,363

 

  Anthony G. Fernandes

 

110,000

 

 

109,998

 

 

1,528

 

 

221,526

 

  Thomas M. Gartland

 

98,098

 

 

146,654

 

 

67

 

 

244,819

 

  Luke S. Helms

 

99,684

 

 

109,998

 

 

4,626

 

 

214,308

 

  Maryellen C. Herringer

 

175,000

 

 

174,981

 

 

3,098

 

 

353,079

 

  Sudhakar Kesavan

 

92,500

 

 

109,998

 

 

4,626

 

 

207,124

 

  Lauralee E. Martin

 

79,859

 

 

146,654

 

 

67

 

 

226,580

 

  William W. Steele (4)

 

39,333

 

 

-

 

 

67,571

 

 

106,904

 

  Winifred M. Webb

 

94,859

 

 

109,998

 

 

-

 

 

204,857

 

 

(1)

Amount includes retainers and Board and Committee fees as well as amounts paid in connection with the performance of services beyond the normal requirements of Board service, under our policy described above. Our chief executive officer does not receive separate compensation for Board service. Messrs. Garcia and Passerini joined our Board in January 2017 and accordingly are not included in the above table.

(2)

The value of stock awards shown in the “Stock Awards” column is based on the grant date fair value computed in accordance with FASB ASC Topic No. 718. The grant date fair value of the equity awards shown in the “Stock Awards” column is based on the closing price of the Company’s common stock on the date of grant of the equity award. A director who becomes a Board member following the date of the last held annual meeting of shareholders receives a prorated grant of restricted stock units (“RSUs”). As Ms. Martin and Mr. Gartland were named to the Board in October 2015, each received a prorated grant of 1,293 RSUs on December 11, 2015. In addition, each non-employee director who was expected to continue on the Board after the 2016 Annual Meeting received an annual grant on January 11, 2016. For each then-current director, with the exception of Ms. Herringer, the grant for 2016 on January 11, 2016 was 4,071 RSUs, which was calculated by dividing $110,000 by $27.02. For Ms. Herringer, the grant on January 11, 2016 was 6,476 RSUs, which was calculated by dividing $175,000 by $27.02. Director RSUs vest ratably over a three-year period, except that in the case of a mandatory retirement, RSUs immediately vest upon retirement. RSUs held by each director as of October 31, 2016, were: Ms. Chavez, 11,578; Mr. Ferguson, 7,886; Mr. Fernandes, 37,566; Mr. Gartland, 4,985; Mr. Helms, 13,643; Ms. Herringer, 28,568; Mr. Kesavan, 7,886; Ms. Martin, 4,985; and Ms. Webb, 8,619. As of October 31, 2016, the aggregate number of stock options (relating to grants prior to 2006) held by each director was: Ms. Chavez, 6,000; and Mr. Helms, 12,000.

(3)

Amounts shown represent dividend equivalents paid with respect to prior Director RSU awards that were paid to non-employee directors in fiscal year 2016. Dividend equivalents are settled in Company stock when the underlying RSUs vest. Directors who defer RSUs under the Deferred Compensation Plan for Non-Employee Directors do not receive dividend equivalents on deferred RSUs until the deferral period ends. For Mr. Steele, the amount shown includes: $54,155 in dividend equivalent units paid upon the accelerated vesting of RSUs upon retirement; $5,279 of retirement gifts, including a $5,000 donation to the 9/11 Memorial in the name of William W. Steele; and $8,137 in family/spousal travel in connection with Mr. Steele’s retirement.

(4)

Mr. Steele retired on March 9, 2016.

 

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Director Deferred C ompensation Plan

 

Non-employee directors are eligible to participate in the ABM Deferred Compensation Plan for Non-Employee Directors (“Director Deferred Compensation Plan”). Plan participants may elect to defer receipt of all or any portion of their annual cash retainers and meeting fees (if any) until they cease to be members of the Board, or to specified withdrawal dates (at least three years after their election), in accordance with the terms of the Director Deferred Compensation Plan. The amounts held in each director’s account are credited with interest quarterly at a rate based on the prime interest rate published in the Wall Street Journal on the last business day coinciding with or next preceding the valuation date. In addition, this plan permits directors to defer the settlement of Director RSUs to a date later than the vesting date.

 

Other Arrangements

 

ABM has entered into indemnification agreements with its directors. Among other things, these agreements require ABM to indemnify its directors against certain liabilities that may arise in connection with their services as directors to the fullest extent provided by Delaware law. ABM permits non-employee directors who were members of the Board on or before October 31, 2012 to participate in ABM’s health benefit plans. Directors who elect to participate pay the entire direct costs of participation in such plans. This benefit is not available to directors who join the Board after October 31, 2012. No directors are currently participating in ABM’s health benefit plans.

 

Director Stock Ownership Policy

 

Our Director Stock Ownership Policy requires directors to hold common stock (including unvested or deferred restricted stock units) having a value equivalent to five times his or her annual cash retainer within five years of becoming a director. Under this policy, directors who are not at their targeted stock ownership level within the five-year period must hold at least 50% of any net shares realized until they reach their target. “Net shares realized” means unrestricted shares acquired by a director under the 2006 Equity Incentive Plan or acquired pursuant to the exercise of an option, net of any shares sold to pay the exercise price. All directors are either at or above the targeted stock ownership levels or are still within the initial five-year period.

 

 

 

 

 

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PROPOSAL 2—ADVISO RY VOTE TO APPROVE

EXECUTIVE COMPENSATION

 

THE BOARD OF DIRECTORS RECOMMENDS

A VOTE IN FAVOR OF PROPOSAL 2

 

The Company asks that you indicate your support for our executive compensation policies and practices as described in the Company’s Compensation Discussion and Analysis, accompanying tables, and related narrative contained in this Proxy Statement. Your vote is advisory and so will not be binding on the Board. However, the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation. The affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy and entitled to vote on the proposal (but excluding abstentions) will be considered as an approval of the proposal. Depending on the outcome of Proposal 3, we expect the next nonbinding advisory vote to approve executive compensation will occur at our 2018 Annual Meeting of Shareholders.

 

One of the key principles underlying our Compensation Committee’s compensation philosophy is pay for performance. We will continue to emphasize compensation arrangements that align the financial interests of our executives with the interests of long-term shareholders. Please refer to the section of this Proxy Statement entitled “Executive Compensation” for a detailed discussion of our executive compensation practices and philosophy.

 

The Board of Directors recommends a vote FOR the following resolution:

 

RESOLVED—that the shareholders approve, on an advisory basis, the compensation of the Company’s executives named in the Summary Compensation Table, as disclosed in the Company’s 2017 Proxy Statement pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and other executive compensation disclosures.

 

[Intentionally left blank]

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EXECUTIV E COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

 

This CD&A describes our executive compensation program for our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and the three other most highly compensated executive officers who are named in the summary compensation table (collectively, our “NEOs”). Our Compensation Committee (the “Committee”) oversees all aspects of our NEO compensation. Our NEOs for fiscal year 2016 are:

 

 

  

Scott Salmirs , President and Chief Executive Officer

  

D. Anthony Scaglione , Executive Vice President and Chief Financial Officer

  

James P. McClure , Executive Vice President and Chief Operating Officer

  

Sarah Hlavinka McConnell , Executive Vice President, General Counsel and Corporate Secretary

  

Thomas J. Marano , President – Aviation

On January 17, 2017, Ms. McConnell left the Company to take a position at another company.

Mr. Marano will retire from the Company on March 31, 2017.

OUR COMPENSATION PHILOSOPHY AND PRACTICES

Compensation Philosophy

Our objective is to design an executive compensation program that encourages all of our leaders to produce strong financial results and create sustainable long-term value for our shareholders. To achieve this, we:

 

use evaluation criteria that include internally measured performance (represented by our financial performance against our financial targets) and externally measured performance (represented by total shareholder return);

 

place significant weight on long-term equity compensation, thereby tying the total compensation of our executives to the achievement of shareholder value; and

 

provide a mix of short-term annual cash incentive compensation and long-term performance-based equity compensation.

Best Practices

 

 

Clawback Policy.    Our recoupment policy extends to cash incentive and equity compensation, and permits us to recover incentive compensation paid to executives in connection with a restatement of the Company’s financial statements or in cases where the executive’s conduct would permit the Company to terminate him or her for “cause.”

 

No Hedging or Pledging.    We prohibit hedging and pledging of Company stock.

 

No Single-Trigger Change-in-Control Payments.    We utilize double-trigger change-in-control provisions.

 

No Tax Gross-Ups.    We do not have tax gross-ups.

 

Stock Ownership Guidelines. We have adopted stock ownership guidelines applicable to our executive officers.

 

Limited Perquisites. Our executive officers receive limited perquisites.

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“Say-on-Pay” Considerations

In March 2016, our say-on-pay proposal was approved by over 94% of votes cast by our shareholders. The Committee and management remain committed to strengthening our pay-for-performance correlation, as well as the overall design of our executive compensation program. The Committee and management will continue to use the annual say-on-pay vote as a guidepost for shareholder perspective.

Role of the Compensation Committee

The Committee is responsible for the Company’s executive compensation program, including the design elements of our program and for reviewing the overall effectiveness of our executive compensation program to ensure the design achieves our objectives. The Committee:

 

approves CEO annual performance objectives and performance achievement;

 

approves our compensation market analysis process, as well as the companies used for compensation comparison purposes;

 

approves performance metrics for our annual and long-term incentive compensation programs;

 

approves non-CEO executive officer compensation, based on recommendations from the CEO; and

 

performs an annual evaluation of risk as it pertains to our Company-wide compensation plans and programs.

Based on the Committee’s assessment of the CEO’s performance achievement against his performance objectives, the Committee recommends CEO compensation to the members of our Board who are both independent and “outside directors” under Section 162(m) of the Internal Revenue Code (the “CEO Committee”). This recommendation includes base pay levels, equity awards and cash incentive compensation. All elements of CEO pay are approved by the CEO Committee.

Role of Compensation Consultants

The Committee continued to engage Semler Brossy in 2016 to serve as its independent compensation consultant. The Committee takes into consideration the advice of Semler Brossy to inform its decision-making process and has sole authority for retaining and terminating its consultant, as well as approving the terms of engagement, including fees. Semler Brossy works for the Committee and, with the approval of the Committee, also has provided services to the Governance Committee in connection with director compensation matters. Semler Brossy provides no services to the Company. The Committee has determined Semler Brossy to be independent from the Company. The Company retains Willis Towers Watson as its primary compensation consultant to advise on program design, apprise management of evolving practices and trends, and perform other consulting services as needed. The Committee also considered the independence of Willis Towers Watson under applicable rules of the New York Stock Exchange. From time to time, the Committee may also engage other consultants and advisors in connection with various compensation and benefits matters.

Use of Market Data and Our Compensation Comparator Group

The Committee uses compensation comparator group comparisons as one of its tools in connection with its assessment of our executive compensation programs and levels of compensation. Working with Semler Brossy, the Committee regularly reviews the various criteria by which it selects the Company’s Compensation Comparator Group (“CCG”). Companies in our CCG are generally selected with reference to the following criteria:

 

companies, like ABM, that provide business-to-business services, such as outsourcing, logistics management, food service, staffing, and cleaning;

 

companies in other industries that have a high ratio of employees to revenue or market capitalization; and

 

companies that generate annual revenue comparable to ABM.

 

20


 

 

 

The Committee’s decisions relating to NEO pay are informed by its review of the compensation practices reported in the proxy statements filed by the companies in t he CCG. The Committee believes that the proxy data reviewed provides a reasonable indicator of total compensation paid by companies that recruit executives with skill sets similar to those which we seek in our executives. Compensation for our executives is typically managed within the ranges of compensation paid by companies in the CCG and the general industry community. While the Committee normally references the CCG median (50th percentile) for each compensation element, the Committee uses its judgment to determine pay levels necessary to pay for performance and attract and retain executive talent and places significant weight on individual job performance, experience, compensation history, future potential, internal comparisons, affordability, retention r isk, and in the case of executives other than the CEO, the CEO’s recommendations.

 

 

2016 COMPENSATION COMPARATOR GROUP

 

ArcBest Corporation

Aramark Corporation

Brinker International, Inc.

The Brink’s Company

C. H. Robinson Worldwide, Inc.

Cintas Corporation

Convergys Corporation

 

 

Corrections Corporation of America

Emcor Group, Inc.

Healthcare Services Group, Inc.

Insperity, Inc.

Iron Mountain Inc.

J.B. Hunt Transport Services, Inc.

Kelly Services, Inc.

 

 

Rent-A-Center

Republic Services, Inc.

Robert Half International Inc.

Rollins Inc.

SP Plus Corporation

ServiceMaster

Werner Enterprises, Inc.

 

 

In October 2015, the Committee reviewed the CCG selected for fiscal year 2015 compensation comparator purposes, and added ServiceMaster and Aramark to the CCG for fiscal year 2016, as they share business attributes with ABM. Due to merger and acquisition activity during the year, URS Corporation and Con-Way Inc. have been eliminated from the Company’s 2016 CCG. For fiscal year 2017, the Committee has removed Corrections Corporation of America and Rent-A-Center, in each case due to significant changes or events impacting those companies, and added United Rentals, Inc. and TrueBlue, Inc.

Pay-for-Performance Alignment

The following graph illustrates three-year realizable compensation of our NEOs relative to NEO compensation of our CCG. Each point on the graph represents three-year realizable compensation of the NEOs in this group relative to his or her company’s three-year performance in Total Shareholder Return (“TSR”) over the 2013–2015 period. ABM’s position in this graph shows that the Company’s pay for performance is strongly aligned with that of our CCG.

 

[Intentionally left blank]

21


 

 

 

 

 

 

About this graph:

This graph is based on the 2016 proxy filings reflecting 2015 compensation of our Compensation Comparator Group.

TSR reflects share price appreciation, adjusted for dividends and stock splits.

Realizable compensation consists of: (1) actual base salary paid over the three-year period; (2) actual short-term incentive payouts over the three-year period; and (3) the 12/31/2015 market value of equity grants as listed below:

 

in-the-money value of stock options granted over the three-year period;

 

service-based restricted stock awards granted over the three-year period; and

 

performance-based incentives: (i) as achieved, for performance cycles that have been completed through 2015; and (ii) as granted, for performance cycles that have not yet been completed, assuming target performance.

 

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Elements of Compensation

The material components of our executive compensation program and their purposes and characteristics are summarized below.

 

 

Pay Element

Description and Purpose

Link to Business and Strategy

Base salary – payable in cash

 

Designed to recognize individual performance, leadership skills, responsibility and time in role

Competitive base pay to help attract and retain strong executive talent

Annual review and adjustment, if appropriate

Increases are not automatic or guaranteed

Annual short-term incentives – payable in cash

 

Variable compensation measured by performance against annually established financial and individual performance targets

Design of short-term incentives is evaluated annually for alignment with Company strategy

Designed to reward annual performance related to key financial and operational measures

 

Long-term incentives – structured as equity awards, settled in Company stock

 

Variable compensation that consists of a mix of performance-based and time-vested equity awards

Designed to link incentives to long-term shareholder value

Performance-based equity programs are evaluated annually for alignment with Company strategy

Equity award mix and design of performance metrics reviewed annually

 

 

 

HOW WE COMPENSATED OUR NEOS IN 2016

 

2016 Base Salary

The Compensation Committee reviews total compensation, including base salaries, for executives in the first quarter of each fiscal year, and as needed, in connection with recruitment, promotions or other changes in responsibilities. Base salary amounts affect potential annual cash performance incentive payments and equity awards, since these other compensation elements are based on a percentage of base salary. The following table shows, for each NEO, such officer’s 2015 base salary and 2016 base salary.

 

 

NEO

2015 Annual

Base Salary

2016 Annual

Base Salary

Scott Salmirs

$760,000

$800,000

D. Anthony Scaglione

$425,000

$475,000

James P. McClure

$691,190

$711,926

Sarah H. McConnell

$482,225

$500,000

Thomas J. Marano

$497,556

$512,483

 

Messrs. McClure and Marano, and Ms. McConnell each received salary increases of approximately 3%, which were in line with Company guidelines for salary increases in 2016. Messrs. Salmirs and Scaglione received salary increases of approximately 5% and 12%, respectively, reflecting both market-based adjustments and considerations related to their performance in their respective roles.

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2016 Annual Cash Incentive Compensation

 

Each year the Committee reviews Company strategy and develops an annual cash incentive program (“CIP”) that is designed to incentivize behavior that will drive financial and individual performance objectives and achievement aligned with the Company’s strategic objectives. This process generally begins in the fourth quarter of the preceding fiscal year and culminates in the first quarter when relevant objectives are established by the Committee. As part of this process, the Committee reviews market data in December of each year, which informs its decisions with respect to annual incentive opportunities.

 

The Committee approves financial and other objectives which are included in the CIP. It also approves the individual performance objectives for our CEO. The CEO approves the individual performance objectives of the other NEOs although the Committee has the discretion to change these individual objectives. Although the Committee bases annual cash incentive payments on the achievement of the specified performance objectives, it retains discretion in determining the actual payouts to the NEOs.  

 

Metrics under Our CIP

 

In fiscal year 2016, financial metrics under our CIP were based on adjusted EBITDA margin compared to the 2016 budget and income from continuing operations compared to the 2016 budget, weighted equally to provide balanced measurement across both factors (collectively, “Financial Objectives”). In addition, for executives having direct responsibility for industry groups included within Commercial Operations, the Committee approved additional financial objectives consisting of 2016 profit from Commercial Operations compared to 2016 budget and 2016 profit margin from Commercial Operations compared to 2016 budget. Corporate results are distinguished from Commercial Operations results in that Corporate results include corporate overhead and certain items, such as litigation settlements, insurance reserves or other liabilities that are not allocated to the industry groups within Commercial Operations. All NEOs had safety objectives relating to promoting a safe working environment (“Safety Objectives”) and individual performance objectives (“Individual Objectives”).

 

Financial Objectives, Safety Objectives and Individual Objectives are weighted by the Committee. In developing the weighting for each NEO, the Committee considered the extent to which the NEO had responsibility for the overall performance of the Company and for the operations of an industry group. The Committee believed that it was appropriate to accord more weight to Individual Objectives in the case of executives with specific industry group responsibility given the expected correlation between their individual performance and the performance of their industry group. For this reason, Mr. Marano’s individual performance objectives were accorded a 50% weight, whereas the other NEOs’ individual objectives were weighted at 30%. The relative weights for each performance component are set forth in the following table.

 

2016 Annual Cash Incentive Program Weighting

 

Corporate

Commercial Operations

Safety

Individual Performance

Scott Salmirs

60%

n/a

10%

30%

D. Anthony Scaglione

60%

n/a

10%

30%

James P. McClure

60%

n/a

10%

30%

Sarah H. McConnell

60%

n/a

10%

30%

Thomas J. Marano

20%

20%

10%

50%

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2016 CIP Financial Results

 

The tables below show the incentive compensation funding related to (1) Corporate; (2) Commercial Operations; and (3) Safety.

 

CIP Funding – Corporate

 

($ in thousands)

Target

Actual

% Achievement

Incentive Compensation Funding (1)

Overall Corporate Compensation Funding

Income from
Continuing Operations

$51,166

$62,336

121.8%

159.0%

Adjusted EBITDA Margin

4.11%

4.13%

100.3%

100.8%

129.9%

 

(1)

See the CIP Funding table below.

 

 

CIP Funding – Commercial Operations

 

($ in thousands)

Target

Actual

% Achievement

Incentive Compensation Funding (1)

Overall Commercial Operations Compensation Funding

Profit

$261,745

$257,994

98.6%

96.5%

Adjusted EBITDA Margin

5.02%

5.01%

100.0%

100.0%

98.3%

 

(1)

See the CIP Funding table below.

 

 

CIP Funding – Safety

 

Safety Objectives were funded at 21.3% based on a combination of year-over-year metrics relating to certain general liability claims, auto liability claims, and workers’ compensation claims and the promotion of a safe working environment throughout the Company.

 

 

CIP Funding Table

 

Incentive compensation funding is based on an interpolation of achievement levels as follows:

 

%
Achievement

CIP
Funding %

≥ 125

175

≥ 120

150

≥ 100

100

≥ 80

50

< 80

0

 

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2016 CIP Payment for Scott Salmirs, President and CEO

 

Mr. Salmirs’ annual cash incentive compensation was based on CIP objectives relating to Corporate and Safety as well as individual performance objectives established by the Committee. As described above, Corporate Results, which comprised 60% of Mr. Salmirs’ cash incentive compensation, were funded at approximately 130%; and Safety Results, which comprised 10% of Mr. Salmirs’ cash incentive compensation, were funded at approximately 21%.

 

The Committee also set two threshold financial objectives for the CEO which were based on achieving 2016 pretax income from continuing operations equal to at least 80% of 2015 pretax income from continuing operations and at least 80% of 2016 budget, as shown below.

 

 

 

CEO ANNUAL CASH INCENTIVE – THRESHOLD CALCULATION

Prior Year
Pretax Income from
Continuing Operations

($ in millions)

Current Year
Pretax Income from
Continuing Operations
(Budget)

($ in millions)

Current Year
Pretax Income from
Continuing Operations

($ in millions)

FY2015 ACTUAL

80% of FY2015 ACTUAL

FY2016 BUDGET

80% of FY2016 BUDGET

FY2016 ACTUAL

FY2016 ADJUSTED (1)

$72.4

$57.9

$87.2

$69.8

$51.9

$74.4

 

(1)

In determining whether these thresholds were met, the GAAP results were adjusted to exclude the $22.5 million impairment charge resulting from the Board’s decision in the fourth quarter of fiscal year 2016 to sell the Company’s Government Services business. The effect of the impairment charge was to reduce 2016 pretax income from continuing operations to approximately 72% of 2015 pretax income from continuing operations and to approximately 60% of budget. Absent this decision, pretax income from continuing operations would have been approximately 103% of 2015 pretax income from continuing operations and approximately 85% of budget. The Board’s decision to sell the Government Service business was an event that was not foreseen at the time these thresholds were set and, for this reason, the Committee believed it was appropriate to adjust the GAAP results.

 

Mr. Salmirs’ individual performance objectives, established by the Committee, included the strategic execution of the Company’s 2020 Vision (weighted 75%) and building relationships and communication (weighted 25%). Elements of the objective related to the Company’s 2020 Vision included:

 

 

profitable growth;

 

organizational realignment;

 

consistent excellence in account and labor management;

 

cost optimization;

 

talent development; and

 

capital allocation focus.

 

Elements of the objective relating to building relationships and communication included:

 

 

building broader and deeper relationships with the executive team and the Board; and

 

building and strengthening relationships with the investment community.

 

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The Committee considered Mr. Salmirs’ performance against these obje ctives in a process that involved discussions with all Board members. After considering the perspectives of the Board, the Committee agreed that Mr. Salmirs had been instrumental in driving the Company’s 2020 Vision during 2016 and had shown exceptional le adership skills in building relationships and strengthening the effectiveness of communication throughout the company and within the investment community. Accordingly, the Committee determined that Mr. Salmirs’ individual performance objectives had been at tained at approximately 137%, out of a maximum possible achievement level of 150% of target.

 

The following table sets forth the calculation related to the CEO’s cash incentive compensation, which resulted in an overall cash incentive payment of $969,600.

 

 

CEO ANNUAL CASH INCENTIVE COMPENSATION CALCULATION

 

CORPORATE RESULTS

INDIVIDUAL

TOTAL
FUNDING

 

Adjusted EBITDA Margin (1)
vs. Budget

Income From Continuing Operations (2)
vs. Budget

SAFETY

Budget

4.11%

$51,166

n/a

 n/a

Actual

4.13%

$62,336

n/a

 n/a

% Achievement

100.3%

121.8%

  (3)

137.0%

Funding (4)

100.8%

159.0%

21.3%

137.0%

Weighting

30.0%

30.0%

10.0%

30.0%

Weighted Funding

30.2%

47.7%

2.1%

41.1%

121.2%

(1)

Adjusted EBITDA = Earnings from Continuing Operations before interest, taxes, depreciation and amortization and excludes items impacting comparability; Adjusted EBITDA Margin = Adjusted EBITDA / Total Revenue. A reconciliation of Adjusted EBITDA to net income is set forth in Appendix A.

(2)

Income from Continuing Operations as reported in the Form 10-K for the fiscal year ended October 31, 2016.

(3)

As described above, composed of numerous metrics that resulted in a funding of 21.3%.

(4)

See the CIP Funding table above where applicable.

 

2016 CIP Payment for D. Anthony Scaglione, Executive Vice President and Chief Financial Officer

 

As described above, Corporate Results, which comprised 60% of Mr. Scaglione’s cash incentive compensation, were funded at approximately 130%, and Safety Results, which comprised 10% of Mr. Scaglione’s cash incentive compensation, were funded at approximately 21%. Mr. Scaglione’s individual performance objectives included leadership during a time of transition and change management within the organization. The Committee determined that Mr. Scaglione achieved his individual performance objectives, which comprised 30% of his cash incentive compensation, at approximately 140%, out of a maximum possible achievement level of 150% of target, noting his many significant contributions to the Company and effective leadership. Accordingly, the Committee approved an overall CIP payment of $405,883 for Mr. Scaglione.

 

 

27


 

 

 

2016 CIP Payment for James P. McClure, Executive Vice President and Chief Operating Officer

 

 

As described above, Corporate Results, which comprised 60% of Mr. McClure’s cash incentive compensation, were funded at approximately 130%; and Safety Results, which comprised 10% of Mr. McClure’s cash incentive compensation, were funded at approximately 21%. Mr. McClure’s individual performance objectives included ensuring that business operations functioned well during a time of transition and providing inspirational leadership to the organization as COO during this period. The Committee determined that Mr. McClure achieved his individual performance objectives, which comprised 30% of his cash incentive compensation, at approximately 140%, out of a maximum possible achievement level of 150% of target, noting that his leadership skills had greatly contributed to the continued success of the Company. Accordingly, the Committee approved an overall CIP payment of $651,837 for Mr. McClure.

 

 

2016 CIP Payment for Sarah Hlavinka McConnell, Executive Vice President, General Counsel and Corporate Secretary

 

 

As described above, Corporate Results, which comprised 60% of Ms. McConnell’s cash incentive compensation, were funded at approximately 130%; and Safety Results, which comprised 10% of Ms. McConnell’s cash incentive compensation, were funded at approximately 21%. Ms. McConnell’s individual performance objectives included reorganizing the legal department to align with the Company’s 2020 Vision, serving as acting CHRO during the first quarter of fiscal 2016, and providing leadership to the Company in connection with legally sensitive matters. The Committee determined that Ms. McConnell achieved her individual performance objectives, which comprised 30% of her cash incentive compensation, at approximately 120%, out of a maximum possible achievement level of 150% of target, noting that she had successfully aligned the legal department with the Company’s 2020 Vision. Accordingly, the Committee approved an overall CIP payment of $348,210 for Ms. McConnell.

 

 

2016 CIP Payment for Thomas Marano, President–Aviation

 

 

As described above, Corporate Results, which comprised 20% of Mr. Marano’s cash incentive compensation, were funded at approximately 130%; Commercial Operations Results, which comprised 20% of Mr. Marano’s cash incentive compensation, were funded at approximately 98%; and Safety Results, which comprised 10% of Mr. Marano’s cash incentive compensation, were funded at approximately 21%. Mr. Marano’s individual performance objectives included driving top- and bottom-line growth with respect to the Aviation business and developing the new Aviation industry group. The Committee determined that Mr. Marano achieved his individual performance objectives, which comprised 50% of his cash incentive compensation, at approximately 110%, out of a maximum possible achievement level of 150% of target, noting his achievements in driving growth in and developing the Aviation industry group. Accordingly, the Committee approved an overall CIP payment of $263,314 for Mr. Marano.

 

Equity Incentive Compensation

 

The Committee believes that a long-term incentive program motivates and rewards our executive officers for their contributions to our Company’s performance and serves to align long-term compensation with the performance of Company stock. Our practice is to grant long-term incentives annually in the form of equity awards that are allocated among restricted stock units (“RSUs”), which typically vest over a four-year period, and performance share units (“PSUs”), which we sometimes refer to as “performance shares” and which typically vest after three years. In connection with regular equity grants, the Committee considers market data and the mix of compensation at risk when establishing long-term incentive opportunity for each NEO. Generally the Committee approves an equity award of a specific dollar value for each recipient based on a multiple of the recipient’s base salary. The dollar value of the award is determined after taking into consideration various factors, including a market analysis prepared by the Committee’s compensation consultant and the overall mix of performance-based or “at risk” compensation. The Committee believes that a meaningful portion of equity compensation should be performance-based. The Committee may also grant one-time equity awards when circumstances indicate that such an award is appropriate.

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In late 2015 and early 2016, the Committee reviewed the Company’s performance share programs in light of the Company’s 2020 Vision. At that time, there were two types of performance share progr ams: one based on “value creation” (“Value Creation PSP”) and one based on total shareholder return (“TSR PSP”). Achievement under the Value Creation PSP was measured by three one-year periods using a formula based on operating cash flow and adjusted EBITD A, as described below, and one three-year period in which performance was measured by compounded three-year adjusted EBITDA growth, calculated at the end of the three-year performance period. The TSR PSP measured Company TSR against the TSR of the S&P 600 over a three-year period. In 2016, the Committee replaced the Value Creation PSP with a performance share program with a simpler design covering one three-year performance period. The performance metrics applicable to executive officers under this new 2016 –2018 PSP are based on organic revenue growth, EBITDA and return on invested capital (“ROIC”). The Committee believes the simpler design affords greater visibility into key drivers of success under our 2020 Vision and will better align performance with our 2020 Vision.

 

The following table shows equity grants to our NEOs in fiscal year 2016.

 

 

Fiscal Year 2016 Equity Awards*

NEO

Annual Performance Share
Grant

Grant Date Value
($)

One-Time

Performance Share
Grants (1)

Grant Date Value
($)

Annual
RSU
Grant

Grant
Date
Value
($)

Annual TSR Grant

Grant Date Value
($)

Aggregate

Value of Equity Awards

($)

Scott Salmirs

41,988

1,139,974

n/a

n/a

12,899

499,965

7,447

399,978

2,039,917

D. Anthony Scaglione

11,740

318,741

n/a

n/a

4,595

178,102

2,110

118,699

615,542

James P. McClure

21,003

570,231

61,855

2,109,874

5,268

204,188

3,645

195,773

3,080,066

Sarah H. McConnell

13,321

361,665

n/a

n/a

3,224

124,962

2,327

124,983

611,610

Thomas J. Marano

6,261

169,986

3,219

99,982

1,906

73,877

858

46,083

389,928

 

*

For additional information, please see “Grants of Plan-Based Awards During Fiscal Year 2016.”

(1)

Represents one-time grants to each of Messrs. McClure and Marano, described below.

 

On March 8, 2016, the Committee approved a one-time equity grant of 3,219 PSUs to Mr. Marano in recognition of his increased responsibilities relating to the Aviation industry group. These PSUs have the same terms as the 2016 2018 PSP described above.

 

On June 6, 2016, the Committee approved an equity grant of 61,855 PSUs to Mr. McClure. The grant was in recognition of his new responsibilities as Chief Operating Officer and his role in leading the implementation of the Company’s 2020 Vision. In connection with this grant, the Committee rescinded and canceled the retention PSUs that were granted to him in January 2015, prior to the Company’s 2020 Vision and Mr. McClure’s change in position. The June 2016 PSUs will vest on October 31, 2017 if the Company achieves pretax income from continuing operations of at least $100 million in fiscal year 2017, as adjusted in accordance with pre-specified provisions. These PSUs do not contain accelerated vesting in the event of his retirement or involuntary termination prior to the vesting date.

 

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Amounts Earned for 2016 Performance unde r 2014 2016 and 2015 2017 Value Creation PSPs

 

The following tables summarize the results for 2016 under our 2014–2016 and 2015–2017 Value Creation PSPs. Annual targets for same fiscal years differ, reflecting Company conditions at the time the targets were set. Adjusted EBITDA reflects adjustments related to acquisitions and discontinued operations, as well as items impacting comparability. Operating cash flow is also adjusted to reflect the impact of acquisitions and discontinued operations. Categories of adjustments are approved by the Committee when the PSP is established.

 

 

2014–2016 Value Creation PSP

60%

40%

Year

Operating
Cash
Flow

($ millions)

Adjusted
EBITDA

($ millions)

Value Creation (1)

($ millions)

Value
Creation
Achievement
(%)

Award Funding (2)
(%)

Weight

Adjusted
EBITDA Growth

(%)

Award

Funding (2)

(%)

Weight

 

Plan

Results

Plan

Results

Plan

Results

 

 

 

 

 

 

2014

124.0

120.7

218.7

216.7

188.0

174.7

92.9

89.4

20%

n/a

n/a

n/a

2015

93.4

145.3

229.6

221.6

147.9

169.8

114.8

124.7

20%

n/a

n/a

n/a

2016

87.5

122.6

241.1

220.0

145.0

114.6

79.0

59.3

20%

91.2%

87%

40%

Final

 

 

 

 

 

 

 

 

 

 

 

89.4

 

(1)

Value Creation equals Operating Cash Flow plus change in current-year adjusted EBITDA over prior-year adjusted EBITDA multiplied by 5.

(2)

The award funding percentage is determined applying the percentage under the Value Creation Achievement or adjusted EBITDA Growth, as applicable, to the award funding table (as shown below under “2015 2017 Value Creation PSP”).

 

 

2015–2017 Value Creation PSP

60%

40%

Year

Operating
Cash
Flow

($ millions)

Adjusted
EBITDA

($ millions)

Value Creation (1)

($ millions)

Value
Creation
Achievement
(%)

Award Funding (2)
(%)

Weight

Adjusted
EBITDA Growth

Award

Funding (2)

(%)

Weight

 

Plan

Results

Plan

Results

Plan

Results

 

 

 

 

 

 

2015

118.4

145.3

236.0

221.6

214.9

169.8

79.0

59.3

20%

n/a

n/a

n/a

2016

117.4

127.5

247.8

219.4

176.4

116.5

66.0

0.0

20%

n/a

n/a

n/a

2017

121.1

 

260.2

 

183.1

 

 

 

20%

 

 

40%

Final

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Value Creation equals Operating Cash Flow plus change in current-year adjusted EBITDA over prior-year adjusted EBITDA multiplied by 5.

(2)

The award funding percentage is determined by applying the percentage under the Value Creation Achievement to the award funding table (shown below). Percentages in between the table values are calculated using straight-line interpolation .

 

 

%

Achievement

Award

Funding %

≥ 135

200

≥ 125

150

≥ 115

125

≥ 100

100

≥ 90

85

≥ 75

50

< 75

0

 

 

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Settlement of 2014 2016 TSR PSP

 

Under the 2014–2016 TSR PSP, the measurement period was a three-year period commencing on November 1, 2013 and ending on October 31, 2016, with TSR being measured by reference to the S&P 600. Achievement under the 2014–2016 TSR PSP is measured by the Company’s TSR percentile rating, compared to the S&P 600, for the three-year period ending October 31, 2016. The table below shows ABM’s TSR compared to the S&P 600 for this period.

 

 

 

 

Award funding for the TSR PSP is set forth below.

 

TSR AWARD FUNDING TABLE

 

ABM 3-Year
Percentile Ranking

Award
Funding

Threshold

25th Percentile

50%

Target

50th Percentile

100%

Maximum

75th Percentile

150%

 

The Company ranked in the top quartile (78th percentile) for TSR of S&P 600 companies, resulting in a payout under the 2014–2016 TSR PSP of 150%.

 

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Other Compensation and Governance-Related Matters

 

Annual Compensation-Related Risk Evaluation

We annually review risks associated with our executive compensation program, as well as other broad-based employee incentive plans with respect to enterprise risk factors, with the assistance of management’s compensation consultant, Willis Towers Watson which prepares a risk analysis. The Compensation Committee and its independent compensation consultant, Semler Brossy, review this analysis. In connection with this review, the Committee noted the various ways in which risk is managed or mitigated. Practices and policies mitigating risks included the balance of corporate, business unit and individual weightings in incentive compensation plans, the mix between long-term and short-term incentives, use of stock ownership requirements, the Company’s policy prohibiting hedging, and the Company’s recoupment or “clawback” policy. Based on this review, the Compensation Committee agreed with the findings in the analysis that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

Stock Ownership Guidelines and Anti-Hedging and Pledging Policy

The Company has stock ownership guidelines for certain officers, including NEOs. Executives are expected to achieve their targets within five years of becoming subject to the stock ownership policy. Stock ownership guidelines are based on a multiple of base salary. Individuals who have not met their stock ownership level at the end of the applicable five-year period are expected to retain 50% of their after-tax net shares paid under any Company long-term incentive plan or program, such as shares paid out under the performance share program and vested restricted stock units, until their ownership guidelines are satisfied. The Committee periodically reviews the stock ownership guidelines and may make adjustments to these guidelines to the extent it believes such adjustments are appropriate. Progress toward targeted ownership levels may be taken into consideration in future grants to executives. Unvested RSUs are taken into consideration when determining if ownership guidelines have been achieved; unearned performance shares are not included nor are stock options, whether vested or unvested. Current stock ownership guidelines are as follows:

 

 

Position

Requirements

CEO

Shares with a fair market value equal to six times base salary

Executive Vice Presidents

Shares with a fair market value equal to three times base salary

Senior Vice Presidents and certain subsidiary senior officers

Shares with a fair market value equal to base salary

 

All of our NEOs are either at or above stock ownership guidelines or are well positioned to achieve compliance within the required time period.

Additionally, the Company has a policy prohibiting all employees, including the NEOs and members of our Board, from engaging in any hedging transactions involving our stock. We also prohibit pledging, or using as collateral, Company stock to secure personal loans or other obligations.  

 

Window Trading and Rule 10b5-1 Trading Plans

Under the Company’s insider trading policy, officers may only purchase or sell ABM securities during “window” periods, which begin on the third business day following the date of each quarterly earnings announcement and end at the close of trading on the fifteenth day of the third month of the fiscal quarter. The only exception to this is for officers who have entered into a trading plan pursuant to SEC Rule 10b5-1.

NEOs are permitted to establish trading plans under Section 10b5-1 of the Securities Exchange Act during open trading windows. These plans enable an executive to diversify his or her holdings of Company stock during periods in which the executive would otherwise be unable to buy or sell such stock because he or she possessed material, nonpublic information about the Company. Any trading plan must be submitted in writing to the Company’s designated officer for review and approval prior to its effective date.

32


 

 

 

Compensation Recoupment (Clawback) Policy

The Board of Directors has adopted a policy relating to the recoupment of cash and equity compensation. The policy provides that, if the Company’s financial statements are the subject of a restatement due to misconduct, fraud or malfeasance, then, to the extent permitted by applicable law, the independent members of the Board, or a committee consisting of independent members of the Board designated by the Board, may, in their discretion, recover cash compensation paid to an executive officer of the Company or rescind or make other adjustments to an equity award made to an executive officer of the Company, including recovering cash proceeds relating to the sale or other disposition of an equity award, to the extent that the payment or award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement. Where applicable, the Company may seek to recover any amount determined to have been inappropriately received by the individual executive officer. In addition, it is the Board of Directors’ policy that if the independent members of the Board, or a committee consisting of independent members of the Board, determine that an employee who has received a cash incentive payment or an equity award has engaged in conduct constituting “cause” (such as serious misconduct, dishonesty, disloyalty, conviction of a felony or misdemeanor involving moral turpitude, or failure to substantially perform employment-related duties or responsibilities), the Board or such Committee may take such action it deems necessary to address such conduct, including recovery of cash incentive payments, rescission of equity grants made to the employee in the 36-month period prior to the date on which the Board or such Committee makes such determination and recovery of proceeds relating to the sale or other disposition of an equity award during such 36-month period.

Benefits and Perquisites

The NEOs are eligible for customary employee benefits, which include participation in ABM’s 401(k) Plan, as well as group life, health and accidental death and disability insurance programs and executive health examinations. These and certain other perquisites are set forth in the Summary Compensation Table.

Mr. McClure qualifies for benefits under the Supplemental Executive Retirement Plan (SERP), an unfunded retirement plan that was previously closed to new participants. Mr. McClure also participates in the Service Award Benefit Plan (SAB), which provides participants, upon termination of employment, with a minimum of seven days of pay for each year of employment between November 1989 and January 2002. Both the SERP and the SAB were closed to new participants prior to the employment of our other NEOs.

The NEOs are eligible to participate in ABM’s Employee Deferred Compensation Plan, which is an unfunded deferred compensation plan available to highly compensated employees. The Employee Deferred Compensation Plan benefits are shown in the “Nonqualified Deferred Compensation in Fiscal Year 2016” table, followed by a description of the plan. The Committee regularly reviews the benefits provided under this and other plans, and as a result of such a review, in January 2011, the Company entered into a trust agreement that will fund amounts due under the Employee Deferred Compensation Plan in the event of a change in control of ABM.

Change-in-Control and Severance Agreements

In order to assure continuity of ABM’s senior management in the event of a potential change-in-control, ABM has agreed to provide certain NEOs with “double-trigger” severance compensation should their employment with ABM be terminated following a change-in-control. The payment of severance compensation is predicated upon the occurrence of two triggering events: (1) the occurrence of a change-in-control and (2) either the involuntary termination of employment with ABM (other than for “cause” as defined in the change-in-control agreements) or the termination of employment with ABM by the executive for “good reason” as defined in the change-in-control agreements.

In addition, our NEOs may be eligible for severance benefits outside of a change-in-control under their employment agreements. The terms of these agreements are described under “Potential Benefits on Termination.”

Accounting and Tax Considerations

The Committee takes into consideration the accounting, tax and related financial implications to the Company and executives when designing compensation and benefit programs. From an accounting perspective, in general, base salary, annual cash incentive payments, and the costs related to benefits and perquisites are recognized as compensation expense at the time they are earned or provided, and equity-based compensation expense is recognized over the vesting period of the grant. Subject to the exceptions and limits described below, the Company deducts for federal income tax purposes payments of compensation and other benefits to executives. The Company does not deduct nonqualified deferred compensation until the year that the deferred compensation is paid to the executive.

33


 

 

 

Section 162(m) of the Internal Revenue Code generally does not allow a tax deduction to public companies for compensation over $1 million paid to the CEO or any of the three o ther most highly compensated executive officers (other than the chief financial officer), unless the compensation is paid based solely on the attainment of one or more preestablished objective performance goals and certain other requirements are met. While generally the Company intends to structure components of its compensation in a manner that would comply with Section 162(m), the Committee has the flexibility to pay nondeductible compensation if it believes it is in the best interests of the Company. The Company’s Executive Officer Incentive Plan and 2006 Equity Incentive Plan, both of which have been approved by the Company’s shareholders, have been designed to permit the Company to make incentive payments and awards of performance shares and stock optio ns that are not subject to the deduction limits of Section 162(m). From time to time, the Committee or, in the case of the CEO, the CEO Committee, has awarded, and may in the future award, compensation that is not fully tax deductible.

Our change-in-control arrangements do not provide for tax gross-ups in the event that executives become subject to excise taxes under Section 4999 and Section 280G of the Internal Revenue Code as a result of receiving benefits in connection with a change in control of ABM.

 

 

COMPENSATION COMMITTEE REPORT

The Committee has reviewed the Compensation Discussion and Analysis and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in ABM’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016 and ABM’s 2017 Proxy Statement.

This report is provided by the following independent and outside directors, who comprise the Committee:

Sudhakar Kesavan, Chair

Linda Chavez

Thomas M. Gartland

Luke S. Helms

Maryellen C. Herringer

 

 

 

 

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Additional Information abo ut Executive Compensation

The following tables and accompanying narrative provide detailed information regarding the compensation of the NEOs.

 

2016 Summary Compensation Table

 

 

 

 

 

 

 

 

 

Fiscal

Salary

Stock

Awards (1)

Nonequity

Incentive

Plan

Compensation (2)

Change in Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

All

Other

Compensation (3)

Total

   Name

Year

($)

($)

($)

($)

($)

($)

  Scott Salmirs (4)

2016

793,333

2,039,917

969,600

-

35,135

3,837,985

President and

2015

654,124

1,094,960

318,325

-

64,277

2,131,686

Chief Executive Officer

 

 

 

 

 

 

 

  D Anthony Scaglione (4)

2016

466,666

615,542

405,883

-

22,770

1,510,861

Executive Vice President

2015

379,673

394,493

118,151

-

29,967

922,284

and Chief Financial Officer

 

 

 

 

 

 

 

  James P. McClure

2016

708,470

3,080,066

651,837

15,241

20,341

4,475,955

Executive Vice President

2015

688,931

2,647,633

312,979

-

15,566

3,665,109

and Chief Operating Officer

2014

674,347

734,511

572,773

22,155

14,176

2,017,962

  Sarah H. McConnell

2016

497,037

611,610

348,210

-

12,639

1,469,496

Executive Vice President,

2015

480,649

536,355

130,202

-

13,108

1,160,314

General Counsel and

2014

470,475

465,829

375,928

-

13,818

1,326,050

Corporate Secretary

 

 

 

 

 

 

 

  Thomas J. Marano (5)

2016

509,995

389,928

263,314

-

45,514

1,208,751

President - Aviation

 

 

 

 

 

 

 

 

(1)

The value shown is the aggregate grant date value for performance share unit (PSU) and RSU awards computed in accordance with FASB ASC Topic No. 718, based on target levels of achievement (the probable outcome at grant), in the case of PSUs. A discussion of assumptions used in calculating these values may be found in Note 18, “Share-Based Compensation Plans,” in the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016. The maximum values for PSU awards granted in fiscal year 2016 under the 2016–2018 Performance Share Program are as follows: Mr. Salmirs, $2,279,948; Mr. Scaglione, $637,482; Mr. McClure, $1,140,462; Ms. McConnell, $723,330; and Mr. Marano, $539,936. The maximum values for PSU awards granted under the TSR-Based 2016–2018 Performance Share Program are as follows: Mr. Salmirs, $599,967; Mr. Scaglione, $178,049; Mr. McClure, $293,658; Ms. McConnell, $187,475; and Mr. Marano, $69,125. No stock options were granted in 2014, 2015 and 2016. As described in the CD&A, a portion of Mr. McClure’s 2015 performance share grant was rescinded and canceled in 2016 and replaced with another performance share grant that reflected his new responsibilities.

(2)

Amounts shown in this column represent annual performance-based cash payments under the CIP, as described in the CD&A.

(3)

For fiscal year 2016, represents: for Mr. Salmirs: ABM contributions to the 401(k) plan, $10,600; auto allowance, $425; TSA/registered traveler annual fee, $106; spousal/family travel, $4,187; value of realized dividend equivalents (DEUs) upon distribution of PSUs, $2,149; and value of realized DEUs upon distribution of RSUs, $17,668; for Mr. Scaglione: ABM contributions to the 401(k) plan, $10,600; auto allowance of $425; parking, $150; medical exam, $1,777; value of realized DEUs upon distribution of PSUs, $1,350; and value of realized DEUs upon distribution of RSUs, $8,468; for Mr. McClure: ABM contributions to the 401(k) plan, $10,600; TSA/registered traveler annual fee, $179; spousal/family travel, $3,581; medical exam, $609; and value of realized DEUs upon distribution of PSUs, $5,372; for Ms. McConnell: ABM contributions to the 401(k) plan, $10,600; and value of realized DEUs upon distribution of PSUs, $2,039; for Mr. Marano: ABM contributions to the 401(k) plan, $10,600; auto allowance of $10,200; parking, $3,600; TSA/registered traveler annual fee, $209; spousal/family travel, $8,379; home office expense, $37; value of realized DEUs upon distribution of PSUs, $9,698; and value of realized DEUs upon distribution of RSUs, $2,791.

(4)

For Messrs. Salmirs and Scaglione, only compensation for fiscal years 2015 and 2016 are shown because neither of these individuals was a named executive officer in fiscal year 2014.

(5)

For Mr. Marano, only compensation for fiscal year 2016 is shown because he was not a named executive officer in fiscal years 2015 or 2014.

Payments which may be made to an NEO upon certain terminations of employment pursuant to their respective employment agreements are described under “Potential Benefits on Termination,” beginning on page 41 of this Proxy Statement.

35


 

 

 

The following table shows payout ranges for the NEOs with respect to non-equity incentive plan awards under the CIP and equity incentive plan awards granted under the 2006 Equity Incentive Plan, as well as other information.

 

Grants of Plan-Based Awards During Fiscal Year 2016

 

 

 

 

 

 

 

 

 

 

 

 

 Named Executive

 Officer

Grant

Date

Committee

Approval

Date

RSU/PSU

Grant

Date

FMV

Estimated Future Payouts Under Non-

Equity Incentive Plan Awards (1) ($)

Estimated Future Payouts Under Equity

Incentive Plan Awards (2) (#)

All Other

Stock

Awards: #

of Shares

or Stock

Units (3)

Grant Date Fair

Value of Stock

and Option

Awards

($)

 

 

 

 

Threshold

Target

Maximum

Threshold

Target

Maximum

 

 

  Scott Salmirs

n/a

n/a

 

400,000

800,000

1,340,000

 

 

 

 

 

 

01/12/2016

01/12/2016

$27.15

 

 

 

20,994

41,988

83,976

 

1,139,974

 

09/12/2016

09/06/2016

$53.71

 

 

 

3,724

7,447

11,171

 

399,978

 

09/12/2016

09/06/2016

$38.76

 

 

 

 

 

 

12,899

499,965

  D. Anthony Scaglione

n/a

n/a

 

166,250

332,500

556,938

 

 

 

 

 

 

01/12/2016

01/12/2016

$27.15

 

 

 

5,870

11,740

23,480

 

318,741

 

09/12/2016

09/06/2016

$53.71

 

 

 

1,105

2,210

3,315

 

118,699

 

09/12/2016

09/06/2016

$38.76

 

 

 

 

 

 

4,595

178,102

  James P. McClure

n/a

n/a

 

266,972

533,944

894,356

 

 

 

 

 

 

01/12/2016

01/12/2016

$27.15

 

 

 

10,502

21,003

42,006

 

570,231

 

06/06/2016

06/06/2016

$34.11

 

 

 

n/a

61,855

n/a

 

2,109,874

 

09/12/2016

09/06/2016

$53.71

 

 

 

1,823

3,645

5,468

 

195,773

 

09/12/2016

09/06/2016

$38.76

 

 

 

 

 

 

5,268

204,188

  Sarah H. McConnell

n/a

n/a

 

150,000

300,000

502,500

 

 

 

 

 

 

01/12/2016

01/12/2016

$27.15

 

 

 

6,661

13,321

26,642

 

361,665

 

09/12/2016

09/06/2016

$53.71

 

 

 

1,164

2,327

3,491

 

124,983

 

09/12/2016