|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows how much of our common stock was beneficially owned as of March 12, 2018, by each director, each executive officer named in the summary compensation table, all executive officers and directors as a group, and by each holder of 5% or more of our common stock. To our knowledge and except as set forth in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. Unless we indicate otherwise, each holder’s address is c/o TiVo Corporation, 2160 Gold Street, San Jose, California 95002.
The option column below reflects shares of common stock that are subject to options that are currently exercisable or are exercisable within 60 days of March 12, 2018. Those shares are deemed outstanding for the purpose of computing the percentage ownership of the person holding these options, but are not deemed outstanding for the purpose of computing the beneficial ownership of any other person. Percentage ownership is based on 122,966,444 shares outstanding on March 12, 2018. Certain options listed below may have exercise prices in excess of the current fair market value of our common stock.
|
|
|
|
|
|
Beneficial Owner
|
Shares
|
Options
|
Total
|
Percent of
Class
|
Blackrock, Inc. (1)
|
15,870,029
|
--
|
15,870,029
|
12.9%
|
The Vanguard Group (2)
|
11,624,634
|
--
|
11,624,634
|
9.5%
|
Ameriprise Financial, Inc. (3)
|
9,501,462
|
--
|
9,501,462
|
7.7%
|
Dimensional Fund Advisors LP (4)
|
7,515,610
|
--
|
7,515,610
|
6.1%
|
Thomas Carson
|
39,710
|
723,039
|
762,749
|
*
|
Dustin Finer
|
43,352
|
110,193
|
153,545
|
*
|
Peter Halt
|
186,029
|
141,688
|
327,717
|
*
|
Enrique Rodriguez
|
55,974
|
--
|
55,974
|
*
|
Pamela Sergeeff
|
94,075
|
46,306
|
140,381
|
*
|
Pete Thompson (5)
|
12,817
|
--
|
12,817
|
*
|
Alan L. Earhart (6)
|
52,486
|
15,000
|
67,486
|
*
|
Eddy W. Hartenstein (7)
|
59,738
|
--
|
59,738
|
*
|
Jeffrey T. Hinson (8)
|
37,167
|
--
|
37,167
|
*
|
James E. Meyer (9)
|
88,699
|
15,000
|
103,699
|
*
|
Daniel Moloney (10)
|
17,087
|
--
|
17,087
|
*
|
Raghavendra Rau (11)
|
46,478
|
--
|
46,478
|
*
|
Glenn W. Welling (12)
|
2,578,642
|
--
|
2,578,642
|
2.1%
|
All executive officers and directors as a group (13 persons) (13)
|
3,312,254
|
1,051,226
|
4,363,480
|
3.5%
|
* Less than one percent
|
|
(1)
|
Based solely on, and in reliance upon, and without independent investigation of, information provided by Blackrock, Inc. in an amended Schedule 13G filed with the SEC on February 8, 2018. Blackrock, Inc. has sole voting power with respect to 15,585,782 shares and sole dispositive power with respect to all of the shares. The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10022.
|
|
|
(2)
|
Based solely on, and in reliance upon, and without independent investigation of, information provided by The Vanguard Group in an amended Schedule 13G filed with the SEC on
|
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
February 9, 2018. The Vanguard Group has sole voting power with respect to 133,818 shares, sole dispositive power with respect to 11,481,781 shares and shared dispositive power with respect to 142,853 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
|
|
(3)
|
Based solely on, and in reliance upon, and without independent investigation of, information provided by Ameriprise Financial, Inc. in a Schedule 13G filed with the SEC on February 14, 2018. Ameriprise Financial, Inc. or AFI, is the parent company of Columbia Management Investment Advisors, LLC, or CMIA, (225 Franklin St., Boston, MA 02110). AFI may be deemed to beneficially own the shares reported by CMIA. The shares reported by AFI include those shares separately reported by CMIA. CMIA and AFI do not directly own any shares of Common Stock of the issuer. As the investment adviser to Columbia Seligman Communications & Information Fund, or the Fund, CMIA may be deemed to beneficially own the shares reported herein by the Fund. The address of Ameriprise Financial, Inc. is 145 Ameriprise Financial Center, Minneapolis, MN 55474.
|
|
|
(4)
|
Based solely on, and in reliance upon, and without independent investigation of, information provided by Dimensional Fund Advisors LP in a Schedule 13G filed with the SEC on February 9, 2018. Dimensional Fund Advisors LP has sole voting power with respect to 7,360,150 shares and sole dispositive power with respect to all of the shares. The address of Dimensional Fund Advisors LP is 6300 Bee Cave Road, Austin, Texas 78746. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares held by the Funds. However, all securities reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership of such securities.
|
|
|
(5)
|
Mr. Thompson departed from the company on October 4, 2017. Shares beneficially owned are based on a Form 4 filed with the SEC on October 3, 2017 and do not include any shares subject to the release of restricted stock awards.
|
|
|
(6)
|
Shares beneficially owned include 8,579 shares subject to the release of restricted stock awards. TiVo has a right of repurchase with respect to unvested shares subject to the restricted stock awards, which lapse when the shares vest on July 1, 2018.
|
|
|
(7)
|
Shares beneficially owned include 8,579 shares subject to the release of restricted stock awards. TiVo has a right of repurchase with respect to unvested shares subject to the restricted stock awards, which lapse when the shares vest on July 1, 2018.
|
|
|
(8)
|
Shares beneficially owned include 8,579 shares subject to the release of restricted stock awards. TiVo has a right of repurchase with respect to unvested shares subject to the restricted stock awards, which lapse when the shares vest on July 1, 2018.
|
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
|
|
(9)
|
Shares beneficially owned include 8,579 shares subject to the release of restricted stock awards. TiVo has a right of repurchase with respect to unvested shares subject to the restricted stock awards, which lapse when the shares vest on July 1, 2018.
|
|
|
(10)
|
Shares beneficially owned include 8,579 shares subject to the release of restricted stock awards. TiVo has a right of repurchase with respect to unvested shares subject to the restricted stock awards, which lapse when the shares vest on July 1, 2018.
|
|
|
(11)
|
Shares beneficially owned include 8,579 shares subject to the release of restricted stock awards. TiVo has a right of repurchase with respect to unvested shares subject to the restricted stock awards, which lapse when the shares vest on July 1, 2018.
|
|
|
(12)
|
Shares beneficially owned include direct ownership of 8,579 shares subject to the release of restricted stock awards and indirect ownership of 2,271,000 shares held by Engaged Capital Flagship Master Fund, LP and 254,000 shares held by Managed Account of Engaged Capital, LLC (together with Engaged Capital Flagship Master Fund, LP, the “Engaged Capital Funds”). TiVo has a right of repurchase with respect to unvested shares subject to the restricted stock awards, which lapse when the shares vest on July 1, 2018. Mr. Welling is a Principal and Chief Executive Officer of Engaged Capital, LLC, which is the general partner of each of the Engaged Capital Funds, and may be deemed to have shared voting and dispositive power with respect to the shares held by or issuable to the Engaged Capital Funds. Mr. Welling disclaims beneficial ownership of all such shares held by the Engaged Capital Funds except to the extent of his proportionate pecuniary interest therein.
|
|
|
(13)
|
All executive officers and directors as a group includes all individual executive officers and directors listed in the summary compensation table.
|
|
|
EQUITY COMPENSATION PLAN INFORMATION
|
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information with respect to all of the company’s equity compensation plans in effect as of December 31, 2017.
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(#)
(a)
|
|
Weighted-average exercise price of outstanding options, warrants and rights
($)
(b)
|
|
Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a))
(#)
(c)
|
Equity compensation plan
approved by security holders
|
|
8,255,954
|
|
$27.16 (2)
|
|
19,087,572 (3)
|
Equity compensation plans not
approved by security holders
|
|
0
|
|
$0
|
|
0
|
Total
|
|
8,255,954
|
|
$27.16
|
|
19,087,572
|
|
|
(1)
|
All shares reflected in this table are issuable pursuant to the Rovi Corporation 2000 Equity Incentive Plan, the Rovi Corporation Amended 2008 Equity Incentive Plan (the “2008 EIP”) and the Rovi Corporation 2008 Employee Stock Purchase Plan (the “2008 ESPP”), as well as the TiVo Inc. Amended and Restated 1999 Equity Incentive Plan and TiVo Inc. Amended and Restated 2008 Equity Incentive Award Plan (“2008 TiVo Plan”), which were both assumed in the connection with the TiVo Acquisition.
|
With respect to the 2008 TiVo Plan assumed in connection with Rovi's acquisition of TiVo, Inc., there are 154,966 shares of stock to be issued upon exercise of outstanding options, with a weighted average exercise price of $20.21, and 1,794,807 shares of stock remain available for issuance under the 2008 TiVo Plan.
|
|
(2)
|
This reflects the weighted average exercise price for stock options granted pursuant to equity compensation plans only. Restricted stock is issued at a cost of $0.001 per share and therefore has no weighted average exercise price.
|
|
|
(3)
|
As of December 31, 2017, 5,808,070 shares remained available for future issuance under the 2008 ESPP.
|
|
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In accordance with Section 16(a) of the Exchange Act and the regulations of the SEC, our directors, executive officers and holders of more than 10% of our common stock are required to file reports of ownership and changes in ownership with the SEC and NASDAQ and to furnish us with copies of all of the reports they file.
To the best of our knowledge, based solely on a review of the copies of such forms and certifications furnished to us from the reporting persons, we believe that during the fiscal year ended December 31, 2017, all Section 16(a) filing requirements applicable to our directors, executive officers and holders of more than 10% of our common stock were timely met.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the material elements of our compensation programs and explains our executive compensation philosophy, policies and practices for the following executives, who are referred to in this Compensation Discussion and Analysis and in the subsequent tables as our named executive officers for 2017: Enrique Rodriguez, President and Chief Executive Officer; Thomas Carson, former President and Chief Executive Officer; Peter Halt, Chief Financial Officer; Dustin Finer, Chief Administrative and Internal Operations Officer; Pamela Sergeeff, Executive Vice President, General Counsel and Chief Compliance Officer; and Pete Thompson, former Executive Vice President and Chief Operating Officer.
Prior to the TiVo Acquisition, each of our named executive officers other than Mr. Rodriguez was employed by Rovi, the predecessor registrant to TiVo Corporation and the acquiring entity in the TiVo Acquisition for accounting purposes under generally accepted accounting principles in the United States. All references in this Compensation Discussion and Analysis to “us”, the “company” and “TiVo” refer to Rovi prior to the TiVo Acquisition and TiVo Corporation following the TiVo Acquisition and all references in this Compensation Discussion and Analysis to “compensation committee” refer to the compensation committee of the board of directors of Rovi prior to the TiVo Acquisition and the compensation committee of the board of directors of TiVo Corporation following the TiVo Acquisition. All references in this Compensation Discussion and Analysis to the “Chief Executive Officer” and “CEO” refer to Thomas Carson, prior to November 13, 2017, the date Mr. Carson ceased service as our Chief Executive Officer, and Enrique Rodriguez on and after November 13, 2017, the date Mr. Rodriguez commenced service with us as our Chief Executive Officer.
Executive Summary
TiVo Corporation is a global leader in media and entertainment products that power consumer entertainment experiences and enable its customers to deepen and further monetize their audience relationships. We provide a broad set of cloud-based services, embedded software solutions and intellectual property that enable people to find and enjoy online video, television programming, movies and music entertainment. Our solutions include content discovery through device embedded and cloud-based user experience ("UX"), including interactive program guides (“IPGs”), digital video recorders ("DVRs"), natural language voice and text search, cloud-based recommendations services and our extensive entertainment metadata (i.e., descriptive information, promotional images or other content that describes or relates to television shows, videos, movies, sports, music, books, games or other entertainment content).
We offer our portfolio of products as both discrete component technologies for our customers to integrate into their internally developed solutions or as part of completely integrated modular solutions. Our integrated portfolio of software and cloud-based services provide an all-in-one approach for navigating a fragmented universe of content by seamlessly combining live, recorded, video-on-demand ("VOD") and over-the-top ("OTT") (e.g., Netflix, Amazon Video, Hulu, VUDU and YouTube, among others) content into one intuitive user interface with simple universal search, discovery, viewing and recording, to create a unified viewing experience.
We also offer advanced media and advertising solutions, including viewership data, audience insights and advertising and programming promotion optimization, which enable advanced audience targeting in linear television advertising.
Our solutions are sold globally to cable, satellite and telecommunications pay TV service providers, virtual video programming distributors, content and internet companies, consumer electronics manufacturers and advertisers. In the United States, we also sell a suite of DVR and whole home media products and services directly to retail consumers.
Our products and innovations are protected by broad portfolios of licensable technology patents. These portfolios cover many aspects of content discovery, DVR, VOD and OTT experiences, multi-screen viewing, mobile device video experiences, entertainment personalization, interactive applications, data analytics solutions and advertising. We license our patent portfolios for use with linear broadcast television and, as the industry extends into new video services through internet technologies, for use with internet connected televisions, personal computers, video game consoles, media streaming and mobile devices. We believe that an ongoing marketplace transition toward mobile viewing and device proliferation present further opportunity to extend our patent licensing programs for new use cases and additional customer verticals.
We are industry pioneers having invented the IPG and the DVR. Today, we continue our strong focus on innovation with new advanced solutions for unified viewing of internet video and Pay TV, cutting edge natural language voice enabled technologies, entertainment personalization, audience management and viewership prediction solutions. Through our innovations, we have established broad industry relationships with the companies leading the next generation of digital entertainment. As industry transforms to deliver more content over the internet, we are developing complementary products, services and intellectual property to address our customers' needs.
To achieve our corporate mission, we rely on our employees. We encourage teamwork and collaboration among our employees and we demand accountability and strong results. Accordingly, we have designed our executive compensation program to provide a competitive compensation package that focuses on paying for performance, internal pay equity, retention value and comparability of compensation to peer group companies and executive pay survey data.
2017 Highlights
2017 was a year of significant achievement for our company as we made progress across all areas of our business and delivered solid financial results. Specifically, we:
|
|
•
|
Continued Integration Efforts following the TiVo Acquisition
during the year, exiting 2017 having achieved $93 million in post-TiVo Acquisition annual run-rate synergies and revising targeted aggregate run-rate synergies to $110 million (up from the original $100 million target).
|
|
|
•
|
Entered into or renewed significant new IP licensing agreements
, including agreements with AT&T, Liberty Global, Sony, Google and Altice USA.
|
|
|
•
|
Implemented further cost reductions
during the year, which funded investments in organic growth initiatives and contributed to higher earnings per share.
|
|
|
•
|
Continued to expand the breadth and depth of our patent portfolio
through targeted patent acquisitions and our ongoing innovation efforts.
|
|
|
•
|
Launched several successful products and released enhancements
,
including our innovative voice search and the New TiVo Experience, our new visually rich user interface, and our next generation operator product.
|
In May 2017, Mr. Carson informed us of his intention to retire from his current positions, but agreed to remain in those positions until a successor was appointed, following which he would serve in an advisory capacity to the Board and new Chief Executive Officer to ensure a smooth transition. In keeping with our succession planning process, the Corporate Governance and Nominating Committee led a search for our new Chief Executive Officer, considering a diverse group of both internal and external candidates. Both the Board and the Corporate Governance and Nominating Committee gave high priority to hiring an executive with deep experience in the entertainment technology and media industries. After an extensive search and candidate interviews, the Corporate Governance and Nominating Committee identified Mr. Rodriguez as the best candidate with the requisite experience. The recruitment of Mr. Rodriguez was a highly competitive process due to his track record of success and experience as Executive Vice President and Chief Technical Officer of AT&T, Inc. and his decades of leadership and management experience in prior roles at Microsoft and Cisco.
In determining his transition package, the Compensation Committee considered Mr. Rodriguez’s compensation arrangement at his prior employer and the amounts that he was expected to receive in future years.
The Compensation Committee also considered the company’s executive compensation program and received advice from its independent compensation consultant
to design a competitive, market-based compensation package appropriate for a senior executive with Mr. Rodriguez’s skills and experience.
Mr. Rodriguez received various awards and payments in consideration of various cash compensation and equity awards at his former employer that Mr. Rodriguez was forgoing, as well as certain expenses that he was incurring, to accept our offer:
|
|
•
|
In consideration for the long-term incentive compensation at his former employer that he was forgoing to accept our offer, he received six separate time-based restricted stock unit awards (the “Replacement RSUs”).
Because the
Replacement
RSUs were intended to replace his AT&T awards, the vesting dates and the percentage of the
Replacement
RSUs vesting on each date were structured to correspond to the AT&T awards.
|
|
|
•
|
In consideration for the long-term incentive compensation at his former employer that was scheduled to vest in early 2018 and that he was forgoing to accept our offer, he received a cash amount of $973,000.
|
|
|
•
|
In consideration for the 2017 annual incentive compensation at his former employer that he was forgoing to accept our offer, he received a cash payment of $1,225,000.
|
|
|
•
|
In consideration for deferred compensation at his former employer that he was forgoing and relocation expenses that he was incurring to accept our offer, he received a cash payment of $1,600,000. This payment is subject to repayment if Mr. Rodriguez’s employment is terminated by the company with cause or by Mr. Rodriguez without good reason, in each case within one year following his start date.
|
Mr. Rodriguez also received a front-loaded performance-based RSU award with a value of $7,032,000 (“Front-Loaded Performance RSU”). The Front-Loaded Performance RSU aligns with our emphasis on performance-based compensation and vests based on (i) achievement of certain average annual total stockholder return targets (15%, 22.5%, and 30%), or (ii) achievement of certain TiVo stock price targets ($28, $34, and $40), over the period between Mr.
Rodriguez’s start date and December 31, 2020. The Front-Loaded Performance RSU was intended to encourage Mr. Rodriguez to join the company and was “front-loaded” to provide him with a meaningful equity stake in the company provided that the company achieves strong total stockholder return and/or stock price performance by December 31, 2020. Because the Front-Loaded Performance RSU was granted upon hire, the compensation committee intends to make annual equity grants to Mr. Rodriguez through the end of 2020 that are less than typical annual awards, and expected to be equal to at least $1,750,000 per his employment agreement
.
The compensation committee believes the transition-related portion of Mr. Rodriguez’s compensation agreement was critical to Mr. Rodriguez’s decision to accept employment with us and aligned with our goal of creating long-term stockholder value. Mr. Rodriguez joined the company on November 13, 2017 as President and Chief Executive Officer.
Stockholder Engagement
Management and our compensation committee engage in productive conversations with many of our principal stockholders, soliciting their views on the executive compensation issues of primary interest to them. Their input has been valuable, informing our decisions designed to match compensation of our executives with the evolving nature of our business and align their compensation with the fundamental interests of investors. As we continue to focus on transforming our business, we have and we intend to continue eliciting and addressing our stockholders’ interests and concerns regarding our compensation programs, as described below.
Commitment to Responsible Executive Compensation Philosophy and Practices
The following table summarizes what we do and what we don’t do in our executive compensation practices to highlight both the responsible practices we have implemented and the practices we have avoided to best serve our stockholders’ long-term interests.
|
|
|
|
|
|
What We Do
|
|
What We Don't Do
|
|
Pay for performance (page 38)
|
|
|
We don’t guarantee salary increases (page 49)
|
|
Grant performance-based stock awards that directly align executive and stockholder interests and are based on rigorous goals over a multi-year measurement period (page 54)
|
|
|
We don’t provide excise tax gross-ups upon change in control of the company (page 59)
|
|
Use a balanced mix of fixed and variable cash incentives and long-term equity (page 41)
|
|
|
We don't permit hedging or other forms of speculative transactions by executive officers, members of management and directors (page 59)
|
|
Maintain rigorous stock ownership guidelines for our named executive officers and directors (page 58)
|
|
|
We don’t reprice underwater stock options without stockholder approval. Despite the fact that our executives hold stock options which are underwater, we have not repriced stock options since our option exchange program over ten years ago.
|
|
Maintain a clawback policy that applies to incentive cash and stock compensation (page 59)
|
|
|
|
|
|
|
|
|
|
|
Engage with stockholders to solicit feedback on their views of our compensation practices and consider potential changes based on this input (page 35)
|
|
|
|
|
Limit payments following a change in control of our company to situations involving an involuntary termination of employment (a so-called “double trigger” arrangement) (page 59)
|
|
|
|
|
Conduct an annual assessment of compensation related risk to effectively manage our compensation related risks profile (page 63)
|
|
|
|
Compensation Committee Engagement Efforts and Actions in Connection with Say-on-Pay Vote
Our compensation committee is committed to ensuring that our executive compensation program is effective and aligned with our stockholders’ interests and concerns. Accordingly, a critical component of our compensation committee’s process has been to continue to:
|
|
•
|
Review emerging compensation “best practices” in the United States, with a focus toward companies of similar size;
|
|
|
•
|
Solicit advice from our compensation committee’s independent compensation consultant;
|
|
|
•
|
Gather feedback from major stockholders to gain a thorough understanding of their concerns and review proxy advisory firms’ methodology, rationale and critiques of our compensation program;
|
|
|
•
|
Discuss with major stockholders and proxy advisory firms the potential changes to the compensation program that could address their concerns, before actually implementing any changes; and
|
|
|
•
|
Solicit guidance from major stockholders and the proxy advisory firms on any emerging policy issues.
|
Our compensation committee has engaged with our stockholders and made fundamental changes to our compensation programs over the past several years to understand and address their concerns. Our compensation committee’s interaction directly with stockholders, proxy advisors and other experts has significantly aided in the ongoing evolution of our compensation program, and led to substantial changes in the compensation program. Stockholder support for our say-on-pay votes has increased from approximately 40% in 2014 to 84% in 2015, 92% in 2016 and 96% in 2017.
Our compensation committee considered the results of our prior say-on-pay votes, including our 2017 vote, a meaningful improvement and an indication that our stockholders acknowledged and appreciated the changes that we have made. However, the compensation committee believes that evaluating our executive compensation program in light of our changes in our business, best practices, market dynamics and stockholders’ input, is an
important ongoing process. Accordingly, the compensation committee is committed to continue its thoughtful evaluation and refinement in several areas in an effort to continuously strengthen our compensation program to serve our company and stockholder objectives.
The following chart summarizes the key actions our compensation committee has taken over the past several years as a result of our prior say-on-pay votes and our process to ensure our executive compensation program is effective and aligned with our stockholders’ interests and concerns, as described above, with special notation of the new or refined changes made for 2017:
|
|
|
Topic
|
Description of Change
|
Competitive Pay Positioning & Peer Group
|
Adjusted our competitive positioning philosophy and pay levels downward.
We shifted our general long-term incentive equity positioning from the 75
th
percentile to the 50
th
percentile of peer data, resulting in overall target compensation aimed at the 50
th
percentile of peer data.
|
Better aligned our peer group with our company and continued to thoughtfully analyze alignment so that our peers are appropriate reference points
.
We made substantial changes to the peer group over the past several years. In 2017, we further refined the peer parameters relating to revenue size of the peer companies within our peer group to better align with our revenues and business focus.
|
Stock Ownership Guidelines
|
Increased our CEO stock ownership guideline (*2017 change*).
The Board believes that executive officers should hold a significant equity interest in the company. While we have maintained a CEO stock ownership guideline since 2011, beginning in 2016, we increased the guideline from three to five times annual base salary and in 2017, we further increased the guideline from five to six times annual base salary and our other named executive officers’ stock ownership guidelines from one to three times annual base salary. The stock ownership guidelines are intended to further align executive officers’ interests with stockholder interests. While the guidelines generally allow our named executive officers and directors five years to reach the requisite ownership levels, in December 2017, our newly hired CEO, Enrique Rodriguez, invested directly in the company’s common stock to demonstrate his alignment with our stockholders’ interests by purchasing 55,974 shares of our common stock on the open market for $999,606.
|
Short-Term Incentives
|
Enhanced the threshold of our short-term incentive goals (*2017 change*)
. We set our annual bonus plan targets for the corporate performance factor at rigorous levels at the beginning of each year. For 2016, we increased the threshold levels of the corporate performance factor that would be necessary to earn any bonus, from 50% to 75% achievement of each goal. For 2017, we further increased the threshold levels of the corporate performance factor that would be necessary to earn any bonus, from 75% to 90% achievement of each goal.
|
|
Eliminated discretionary provisions under our annual bonus plan and eliminated individual goals for our CEO
.
We eliminated the discretionary bonus component of our annual bonus plan, so that bonuses are paid under our plan only upon achievement of specified corporate and, if applicable, individual performance goals. We also eliminated all individual subjective goals for our CEO.
|
|
|
|
Long-Term Incentives
|
Structured a significant percentage of equity compensation as performance-based, increased performance-vesting awards and eliminated stock option grants (*2017 change*)
. Approximately 50% of the 2017 annual equity grants to our named executive officers consisted of performance-based awards, comprised of performance-vesting awards based on a multi-year performance goal, representing an increase from 40% in 2017, based on the grant date target value approved by our compensation committee. The entire Front-Loaded Performance RSU granted to Mr. Rodriguez consisted of a performance-based award. In 2017, we eliminated the use of stock options and structured annual equity grants to consist entirely of performance-vesting restricted stock units and time-based restricted stock units.
|
Eliminated use of the same or similar performance goal for our short-term and long-term incentive compensation (*2017 change*).
We structured our 2017 annual
performance-vesting equity awards to vest upon the achievement of a three-year relative TSR metric of percentile ranking against the S&P 400 Software & Services Index, which is a different performance goal structure than that used in our annual bonus plan. In addition, given that the entire performance-vesting award is based on relative TSR, we changed the threshold and maximum percentile rankings for the performance-vesting equity awards to approximate peer practice (threshold from 30
th
percentile to 25
th
percentile and maximum from 90
th
percentile to 75
th
percentile).
|
Eliminated annual measurement component of performance-based awards and replaced with three-year measurement period
.
We now use a three-year measurement period for our performance-vesting equity awards, rather than one-year measurements. This change enhances the long-term objectives of the performance awards.
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Disclosure Practices
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Enhanced disclosure about structure and process of our performance-based equity awards, including the specific performance goals
.
We now provide a detailed description of the performance awards in our Compensation Discussion and Analysis, including the process and amount by which shares may vest based on the level of achievement of performance goals. We disclose actual goals for the previous year (including the threshold and maximum goals) and the corresponding vesting terms of the performance awards. We will continue to disclose the goals so that our stockholders have visibility into the rigor of our goal-setting process and our goals.
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Risk Mitigation
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Added a clawback policy.
We adopted a clawback policy that currently authorizes the Board, beginning after February 2015, to take action to recover the incentive compensation paid to or vested by an executive officer based upon the achievement of certain financial results that were subsequently restated or corrected to the extent that the amount of such compensation would have been lower if the financial results had been properly reported. We adopted this policy proactively even though the SEC has not yet issued final rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act requirement, as a good corporate governance practice.
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Commitment to Pay for Performance
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Our 2017 executive compensation program is weighted towards at-risk, performance-based compensation designed to align the interests of our executives with those of our stockholders.
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A significant portion of the named executive officers’ compensation is at risk and dependent upon our company’s performance and/or an increase in the market price of our company’s common stock. Approximately 71% of our current Chief Executive Officer’s total target compensation and approximately 46% of our other named executive officers’ total target compensation is at risk and dependent upon the company’s performance.
Specifically, bonuses under our annual incentive plan for our senior executives (including the named executive officers) are contingent on the achievement of two key corporate performance goals and, in some cases, individual performance. Additionally, we granted a meaningful portion (50% in 2017, an increase from 2016) of 2017 annual equity awards (granted in July 2017) to our named executive officers consisting of awards that vest only if certain pre-determined relative stockholder value metrics are met over a multi-year period, based on the grant date target value of such awards as required to be reported in the Summary Compensation Table, and excluding Mr. Rodriguez who joined after annual equity award grants in July 2017 and Mr. Carson who did not receive an annual equity award grant in 2017. For Mr. Rodriguez, we structured 100% of his Front-Loaded Performance RSU in the form of a performance-based award that vests over a multi-year period based on pre-determined relative stockholder value or stock price metrics. The actual economic value of all of the equity grants to our named executive officers depends on the performance of our stock price over the period during which the awards vest.
Chief Executive Officer’s Realizable Pay
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Our compensation committee’s goal is to align our chief executive officer’s compensation with stockholder returns as well as the financial goals that we believe lead to long-term stockholder value.
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The charts below show the value of compensation realizable by our former Chief Executive Officer, and how it changes year-over-year in comparison to our stock price performance and our reported pay. We are not presenting the compensation realizable by Mr. Rodriguez because the 1.5 month period between when he started and the end of 2017 is too short to assess the alignment between executive compensation and stockholder interests.
Definitions
. Realizable pay recognizes the impact of actual financial and stock performance in the returns available (or “realizable”) by the executive. In contrast, reported pay (which is the grant date fair value used in Summary Compensation Table disclosure) estimates the expected value of compensation on the day it was granted, in accordance with financial accounting principles.
Why We Present This Information
. We believe showing
realizable pay
compared to reported pay helps investors understand the sensitivity of our plan to actual financial and market performance and the resulting returns available to the executive. The compensation committee believes that given the heavily-weighted pay-for-performance structure of our executive compensation program,
realizable pay
and the ratio between
realizable pay
and
reported pay
shows the alignment between executive compensation and stockholder interests.
Realizable Pay Fluctuates with Stockholder Return
. As reflected in the chart below for Mr. Carson, during each of 2015 and 2016, Mr. Carson’s realizable pay differed from reported pay, as a result of changes in our stock price over time. When our stock price falls after options and stock awards are granted early in a year, the realizable value of those awards is reduced (or eliminated completely, in the case of out-of-the-money stock options). The compensation committee did not grant any annual equity awards to Mr. Carson in 2017 because Mr. Carson had notified TiVo of his intention to retire prior to the grant of the annual equity awards in July 2017 and the compensation committee felt that it was not appropriate to grant Mr. Carson an equity award given his planned retirement. The 2017 $95,959 value under Stock Awards and the $731,107 value under Option Awards in the Summary Compensation Table are excluded from realizable pay because they are additional grant date fair value accounting charges related to modifications of prior awards, and not value from new award grants in 2017.
Compensation decisions were made at the beginning of a year, based on information available at that time and therefore reported pay should be viewed in light of the historical stock price performance at that time; a subsequent increase or decrease in our TSR for such year would generally not factor into the pay decisions until the following year.
Comparison to Reported Pay
. The charts below demonstrate that while reported pay is a measure required to be disclosed in our Summary Compensation Table by an SEC rule that provides consistency amongst companies, it is not the measure that best reflects the value of equity compensation paid to our CEO nor the amount that can best be compared to our stock price in determining whether our CEO compensation is aligned with stockholders’ interests. For 2015, 2016 and 2017, the charts below demonstrate general alignment between our CEO’s realizable compensation with our stock price performance.
During the three-year period 2015-2017, while TSR decreased by an average of approximately 10% per year, Mr. Carson’s 2015-2017 three-year average realizable pay was under the three-year average reported pay by approximately 46%. This was due primarily to the stock price at the end of 2017 being lower than the stock prices at each date of grant during this period, which resulted in no in-the-money realizable value for options as all options granted had exercise prices greater than the value of the stock at the end of 2017, and the time-vested and performance-vested stock awards had a lesser value than on the date of grant.
During 2016, the year-end stock price decreased by 11% from the grant date stock price, resulting in Mr. Carson’s 2016 realizable pay being under the reported pay by approximately 33%. Mr. Carson’s approximately 21% decrease in 2016 reported pay was a result of the compensation committee’s decision to shift its target equity positioning from the 75th percentile to the 50th percentile of peer data following the 26% stock price decline in 2015, significantly decreasing the amount of target long-term incentives granted for 2016. Despite the decrease in 2016 reported pay, 2016 realizable pay did not decrease from 2015 realizable pay, due primarily to TSR increasing by approximately 25% during 2016.
Chief Executive Officer Reported Pay(1) vs. Realizable Pay(2)(3) - Tom Carson
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Tom Carson Reported Pay vs. Realizable Pay
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2015
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2016
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2017
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Reported Pay (1)
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$
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7,555,131
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$
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5,941,364
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$
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2,087,566
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Realizable Pay (2)
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$
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3,967,563
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$
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3,978,631
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$
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1,260,500
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% Change of Reported Pay to Realizable Pay
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-47%
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-33%
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-40%
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1-Yr TSR
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-26%
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25%
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-22%
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3 Yr Avg
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Reported Pay 2015-2017 Average
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$
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5,194,687
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Realizable Pay 2015-2017 Average (3)
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$
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2,794,036
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(based on 12/31/17 stock price)
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% Change for Reported to Realizable Pay
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-46%
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3-Yr 2015/2017 TSR CAGR
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-10%
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(1)
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Reported Pay is defined as total compensation as reported in the 2017 Summary Compensation Table
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(2)
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Realizable Pay per year-end represents actual base salary and actual bonus paid out; long-term incentives are valued at year-end stock price each year, covering the in-the-money value of stock options granted in the current year (calculated as the difference between the year-end stock price and the exercise price), number of restricted shares or restricted stock units granted per year, and number of shares or units subject to performance-vesting awards earned (if known) or at target (for remaining balance of awards still in current performance periods). The 2017 $95,959 value under Stock Awards and the $731,107 value under Option Awards in the Summary Compensation Table are excluded from Realizable Pay because they are additional grant date fair value accounting charges related to modifications of prior awards, and not value from new award grants in 2017 (Mr. Carson did not receive and equity awards in 2017).
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(3)
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3-year Average Realizable Pay represents an average of the sum of the last three years’ actual base salary and actual bonus paid out; long-term incentives valued at FY17 year-end stock price, covering the in-the-money value of stock options granted in the corresponding year (calculated as the difference between the year-end stock price and the exercise price), number of restricted shares or restricted stock units granted per year, and number of shares or units subject to performance-vesting awards earned (if known) or at target (for remaining balance of awards still in current performance periods).The 2017 $95,959 value under Stock Awards and the $731,107 value under Option Awards in the Summary Compensation Table are excluded from the 3-year Average Realizable Pay because they are additional grant date fair value accounting charges related to modifications of prior awards, and not value from new award grants in 2017 (Mr. Carson did not receive and equity awards in 2017).
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Compensation Philosophy: Objectives, Considerations and Elements
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Objectives
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Our executive compensation programs
are designed to:
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attract and retain talented and experienced executives by offering market competitive compensation programs;
motivate key executives to achieve strategic business initiatives and to reward them for their achievements;
support a pay-for-performance environment that differentiates bonus amounts among the named executive officers on their responsibilities and contributions toward company performance; and
align the interests of executives with the long-term interests of our stockholders through equity-based awards whose value over time depends upon the market value of the company’s common stock.
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Considerations
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To achieve these objectives, our executive compensation package provides a mix of compensation elements, including base salary, annual variable cash bonuses, stock-based compensation,
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compensation practices and levels among our peer companies and pay levels among our peer companies and executive pay survey as further described below under “
Compensation Positioning Against Peer Data and Executive Pay Survey Data
”;
historical and anticipated corporate and individual
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broad-based employee benefits and severance benefits. In any given year, our compensation committee may consider one or more of the following factors in determining the amount and form of each of these compensation elements with appropriate attention to both absolute and relative levels of compensation and the mix in achieving proper parity:
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performance, including stock price, achievement of revenue and operating profit, and execution of individual, team and company-wide strategic initiatives;
budget constraints for salary, bonus and equity adjustments;
historical compensation levels;
broader economic conditions, with the goal of ensuring that our pay strategies are effective, yet responsible;
the potential dilutive effect of our equity compensation practices on our stockholders;
stockholder feedback with respect to our compensation programs and practices in the markets in which we compete for talent; and
individual negotiations with executives, as these executives may be leaving meaningful compensation opportunities at their prior employer or foregoing other compensation opportunities with other prospective employers to work for us, as well as negotiations upon their departures, as we recognize the benefit to our stockholders of smooth transitions.
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Elements
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What We Pay
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Why We Pay It
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Base Salary (fixed cash)
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Fixed source of compensation for our executives, allowing them a degree of certainty in the face of having a material portion of their compensation “at risk” in the form of annual variable cash bonuses and equity-based compensation.
Helps to attract and retain our named executive officers.
The compensation committee generally set base salaries annually and targets base salary levels at the 50th percentile of our market data (using peer group companies and executive pay survey data) as it believes this positioning provides adequate retention incentive.
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Annual Variable Cash Bonus (“at-risk” cash)
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Rewards the achievements of our executive officers and their contributions to our financial performance.
Promotes strong linkages between our executives’ contributions and our company performance, supports the achievement of our business objectives and promotes retention of our executives.
Our compensation committee recognizes the important role that variable compensation plays in attracting, retaining and motivating our executives to achieve our short-term goals.
The compensation committee generally sets bonus levels annually and targets annual variable cash bonus levels at the 50th percentile of our market data (using peer group companies and executive pay survey data).
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Equity Compensation (“at-risk” stock awards)
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Aligns the long-term interests of our stockholders and our employees by creating a strong, direct link between employee compensation and stock price appreciation and, with respect to performance-based awards, company performance and relative stock price appreciation.
The compensation committee believes that if our officers own shares of our common stock with values that are significant to them, they will have an incentive to act to maximize long-term stockholder value.
The compensation committee and/or Board generally approves equity incentives annually in the form of restricted stock units (“RSUs”) that vest based on service and RSUs that vest based on achievement of specific performance goals.
The compensation committee generally targets annual equity awards at or near the 50th percentile of our market data (using peer group companies and executive pay survey data).
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Role of Our Compensation Committee
Our compensation committee evaluates and approves the annual compensation changes for our named executive officers other than our Chief Executive Officer. Our compensation committee also evaluates and recommends for approval by the independent members of the Board the annual compensation changes for our Chief Executive Officer, as well as the performance goals for our compensation programs. References below to approvals by our Board are intended to refer to approvals by the independent members of the Board. Our compensation committee solicits and considers our Chief Executive Officer’s recommendations on the compensation levels of each named executive officer, as well as his reviews of each named executive officer’s performance and contributions in the prior year. In addition, our chairman of the Board solicits from other Board members their evaluations of the performance of the Chief Executive Officer for the prior year and discusses his assessment of our Chief Executive Officer’s performance with the other members of the compensation committee. These actions occurred in February and beginning in 2017, in June, as we shifted the timing for executive compensation decisions for base salary, target bonus and equity compensation for the year to harmonize annual equity grant timing for all employees following the TiVo Acquisition. The compensation committee and Board also met multiple times in the fall of 2017 to discuss and determine compensation arrangements for Mr. Rodriguez’s commencement of employment with us and for Mr. Carson’s transition and retirement
.
As part of its deliberations, in any given year, the compensation committee may review and consider materials such as company financial reports and projections, historical achievement of company-wide operational and financial objectives, operational data, tax and accounting information, total compensation that may become payable to executives in various hypothetical scenarios, executive stock ownership information, company stock performance data, analyses of historical executive compensation levels and current company-wide compensation levels, and the recommendations of our Chief Executive Officer, human resources department and the advice of the compensation committee’s independent compensation consultant.
Role of Management in Setting Compensation
The company’s human resources, finance, and legal departments work with our Chief Executive Officer to review peer compensation data, to propose compensation programs for consideration by the compensation committee, to recommend changes to existing compensation programs, to recommend financial and other performance targets to be achieved under those programs, to prepare analyses of financial data and other briefing materials, and ultimately to implement the decisions of the compensation committee.
Our internal personnel responsible for compensation analysis for the company generally attend a portion of each of the compensation committee’s meetings and leave before certain executive sessions. None of our named executive officers were present or participated directly in the compensation committee or the Board’s final determinations regarding the amount of any component of their own 2017 compensation packages.
However, given his responsibilities for managing the performance of our executive officers, our Chief Executive Officer plays a primary role in establishing the performance goals for, and evaluating the performance of, our other named executive officers, as described in greater detail below under “
Short-Term Incentive Compensation
”. The compensation committee solicits and considers his evaluations and recommendations (as well as those of the human resources group), including his recommendations regarding base salary adjustments, target cash and equity incentive award levels for the other named executive officers. In the case of the Chief Executive Officer, the compensation committee and the Board meet outside the presence of our Chief Executive Officer and assess his performance.
Role of Our Independent Compensation Consultant
The compensation committee retains an independent consultant to provide the compensation committee with an additional external perspective with respect to its evaluation of relevant market and industry practices. Since August 2015, the compensation committee has retained Farient Advisors (“Farient”) to act as its independent compensation consultant.
In weighing its recommendations for executive compensation for the fiscal year 2017, the compensation committee directed Farient to advise the compensation committee on both best practices and peer practices when designing and modifying our compensation program for executive officers in order to achieve our objectives. As part of its duties, Farient provided the compensation committee with the following services with respect to 2017 compensation decisions:
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•
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carried out a comprehensive review of our peer group for use in making 2017 executive compensation decisions;
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•
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provided compensation data for the peer group and relevant executive pay survey data and an analysis of the compensation of the company’s executive officers as compared to this market data;
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•
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provided a competitive assessment of, and comparison to, long-term incentive design and executive pay program structure based on peer group data;
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•
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provided competitive data regarding executive severance and guidance to the compensation committee for establishing a non-change-in-control severance policy;
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•
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assisted the compensation committee in determining a pay package for Mr. Rodriguez;
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•
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assisted the compensation committee with respect to Mr. Carson’s transition arrangement
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•
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conducted a comprehensive pay for performance assessment;
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•
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provided recommendations regarding the annual bonus and long-term incentive program design for 2017;
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•
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assisted the compensation committee with the design of 2017 pay programs consistent with the company’s business strategy and pay philosophy;
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•
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provided background information and data for 2017 adjustments to the company’s executive compensation program consistent with good governance practices and the company’s objectives; and
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•
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provided a review of regulatory changes, and stockholder and proxy advisor firms’ best practices with respect to executive pay.
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In 2017, the compensation committee met regularly with Farient, both with and without the Chief Executive Officer and/or the chief administrative and internal operations officer present depending upon the topic being discussed. Farient took its direction from the compensation committee chairman. The company’s chief administrative and internal operations officer and general counsel worked with Farient to provide any information Farient needed about the company to provide its services; however, the compensation committee retained the sole authority to direct, terminate or continue Farient’s services. Farient was not engaged for any non-compensation related services.
The compensation committee has analyzed whether the work of Farient as a compensation consultant has raised any conflict of interest, taking into consideration the following factors: (i) the provision of other services to the company by Farient; (ii) the amount of fees from the company paid to Farient as a percentage of the firm’s total revenue; (iii) Farient’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Farient or the individual compensation advisors employed by the firm with an executive officer of the company; (v) any business or personal relationship of the individual compensation advisors with any member of the compensation committee; and (vi) any stock of the company owned by Farient or the individual compensation advisors employed by the firm. The compensation committee has determined, based on its analysis of the above factors, that the work of Farient and the individual compensation advisors employed by Farient as compensation consultants to the company has not created any conflict of interest.
Peer Group Determination
The compensation committee considers compensation practices and levels among our peer companies as one factor in determining compensation each year. This helps us, among other process objectives, to balance our goal of attracting and retaining top executive talent with the need to maintain a reasonable and responsible cost structure. Our compensation committee generally reviews and updates our peer group of companies annually to reflect changes in the industry and to ensure that our comparisons to peer group data are meaningful to the compensation committee’s process and review.
2017 Peer Group
. For 2017 compensation decisions made in February and June 2017, management worked with Farient in late 2016 to make recommendations to update the 2016 peer group of companies. Farient evaluated several key parameters relating to TiVo’s then-current size and business focus, as well as significant acquisition activity within the 2016 peer group, to formulate the appropriate recommended peer group for 2017 compensation decisions.
Based on this analysis, our compensation committee determined that our 2017 peer group of companies should consist of the 15 companies listed below. The median revenue of the 2017 peer group is $850 million, higher than from the 2016 peer group median revenue to reflect the combined companies following the TiVo Acquisition and close to the high end of the range of our 2017 revenue estimates of $835 million. The companies in our peer group are companies: (i) that have similar business focus to us (focusing on a combination of IP licensing, data analytics solutions, data aggregator or provider services, content delivery platforms and solutions, integrated targeted advertising products and a similar customer base) and with whom we believe we compete within the market for executive talent and (ii) with a revenue range of approximately one-third to up to potentially three times our projected revenue (resulting in median revenue for the group slightly higher than our pro forma revenue for the combined company at the time $800 million), determined as of November 2016 when the peer group proposed by Farient was approved by the compensation committee. Market capitalization, enterprise value and EBITDA were also considered in developing the peer group, as indicative of company performance, but were not formal screening criteria.
As a result, seven of our prior peer companies from 2016 were removed and four new peer companies were added. Specifically, we removed DreamWorks Animation, Millennial Media, Inc. and TiVo Inc. because these companies had been acquired. We removed Rocket Fuel Inc. and Splunk Inc. because their EBITDA performance was negative, which differed from that for other peers as well as us, and we removed Harmonic Inc., and Progress Software Corporation to balance the overall size of companies in the peer group because these companies were relatively smaller.
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Acxiom Corporation*
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Fair Isaac Corporation
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Nuance Communications*
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Commvault Systems, Inc.
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InterDigital, Inc.
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Pegasystems Inc.
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comScore, Inc.
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Microstrategy Inc.
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Take-Two Interactive Software*
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CoreLogic, Inc.
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Monster Worldwide, Inc.
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Tessera Technologies Inc.
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Dolby Laboratories, Inc.
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NeuStar, Inc.*
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Verint Systems Inc.
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* New peer company for 2017
Farient then collected, analyzed and provided to the compensation committee a report on the total direct compensation, total target cash compensation, base salary, target annual incentive award, equity award and pay practice data for executive officers holding comparable positions at the peer group companies from individual proxy filings (with respect to chief executive officer and chief financial officer compensation) based on publicly available data and other proprietary and published survey sources, and, in order to provide a broader reference point for certain of the named executive officers, from the 2016 Radford Global Technology Survey for technology companies with revenue between $500 million and $1.5 billion, both generally and as specifically limited to our 2017 peer group companies who participated in the
survey, in order to capture compensation data from our 2017 peer group companies for certain named executive officer positions for which there was less publicly available data.
Compensation Positioning Against Peer Data and Executive Pay Survey Data
As a general guideline, our compensation committee targets total direct compensation at a level that is competitive within our peer group and also the marketplaces in which we operate. The compensation committee’s compensation consultant collects, analyzes and provides to the compensation committee a report on the total direct compensation data for executive officers holding comparable positions at the peer group companies from individual proxy filings and based on other proprietary and published survey sources (collectively referred to as the “peer data”).
Our compensation committee believes that compensation should be at the levels necessary to achieve the objectives of our executive compensation program - attracting and retaining top talent as well as linking more of our executives’ compensation to achievement of annual and longer-term corporate performance goals as well as long-term gains in the value of our stock. The opportunity for higher performance-based compensation reflects our commitment to pay for performance, with compensation being higher for exceptional performance and compensation being lower if our performance goals are not reached.
Our compensation committee believes that comparisons to the peer data and executive pay survey data are useful guidelines to measure the competitiveness of our compensation practices. For 2017 compensation decisions made in February and June 2017, the compensation committee generally targeted overall cash compensation, long-term incentives and total target compensation around the 50
th
percentile of peer data. This represented a shift from its practice prior to 2016 of targeting long-term incentives above the 50
th
percentile of peer data. The compensation committee made this shift because it felt that targeting around the 50
th
percentile of peer data served the committee’s objective of offering a market competitive compensation program, while at the same time motivating and rewarding our executives to achieve our initiatives and aligning their interests with those of our stockholders, as the incentive nature of our long-term and short-term compensation is designed to deliver above median pay with strong company performance and below median pay with poor company performance. The compensation committee referenced the full range of pay for executives in similarly sized firms from the peer data. For 2017, the compensation committee maintained discretion to set levels of executive compensation above or below peer levels based upon distinguishing factors such as individual performance, an executive’s level of experience and responsibilities, the comparability or lack thereof in roles and responsibilities when compared with peer companies, internal pay equity and our compensation budget.
Reasons for Providing, and Manner of Structuring, the Key Compensation Elements in 2017
As described above under “
Compensation Philosophy: Our Objectives, Elements and Considerations
,” our 2017 executive compensation program consists of three principal components: base salary, annual variable cash bonus and equity compensation. The compensation committee does not have a set formula for determining the mix of each pay element, and instead seeks to ensure that compensation across all elements is fair and consistent with our company’s compensation philosophy as a whole. In addition, the compensation committee has not adopted any formal or informal policies or guidelines on the mix of the equity awards with regard to stock options versus RSU grants. We believe having flexibility in our allocation among various elements of compensation allows us to tailor each executive’s
compensation package to meet our compensation goals based on the facts and circumstances known at that time.
The following charts illustrate, for 2017, and in the case of Mr. Rodriguez for 2018, the target mix of annual key pay elements for our executives. Percentages represented in the chart below are based on the target value of each element of the total compensation package which includes annualized base pay, target short term incentive and equity. For purposes of calculating the equity value, the value of RSUs was based on the grant date closing stock price. The annual equity grant that will be made for Mr. Rodriguez in 2018 has a target value of $1,750,000 as per his employment agreement.
Mr. Carson’s Target Key Compensation Elements reflect salary and annual bonus only. The compensation committee did not grant any annual equity awards to Mr. Carson in 2017 because Mr. Carson had notified TiVo of his intention to retire prior to the grant of the annual equity awards in July 2017 and the compensation committee felt that it was not appropriate to grant Mr. Carson an equity award given his planned retirement. The 2017 $95,959 value under Stock Awards and the $731,107 value under Option Awards in the Summary Compensation Table are excluded from Key Compensation Elements because they are additional grant date fair value accounting charges related to modifications of prior awards, and not value from new award grants in 2017.
Mr. Rodriguez’s Target Key Compensation Elements reflect his 2018 target pay because we believe that is a better representation of his target pay given that he started in November 2017 and during 2017 received various awards and payments in consideration of various cash compensation and equity awards at his former employer that he was forgoing, as well as certain expenses that he was incurring, to accept our offer. We believe Mr. Rodriguez’s 2018 target pay is a better representation of the target mix of annual key pay elements intended by the compensation committee, which include salary, target annual bonus, a portion of the Front-Loaded Performance RSU and the approximate value of the annual equity award expected to be made in 2018). To reasonably depict annual compensation, the following chart includes an annualized portion of the Front-Loaded Performance RSU (annualized over the 3.125 year performance period), even though the entire award was granted in 2017, and the estimated target value of the smaller annual equity award that Mr. Rodriguez is expected to receive in 2018 pursuant to his offer letter.
Mr. Thompson was included in the Other NEOs’ Average Target Key Compensation Elements chart even though he resigned in October 2017 because his target pay for 2017 had already been determined. Ms. Sergeeff received a special one-time recognition equity grant of 10,554 RSUs, which was excluded from the Other NEOs’ Average Target Key Compensation Elements chart.
2017 Base Salary Decisions
Base Salary:
In June 2017, our compensation committee reviewed and determined the 2017 base salaries for each of the named executive officers, other than Mr. Rodriguez, whose 2017 base salary was approved in connection with his hiring in November 2017, as set forth in the table below. In making these 2017 decisions, the compensation committee considered the positioning of each individual’s salary as compared to the peer data, as well as the individual’s historical salary levels, our then-current budget for employee salary adjustments and the individual’s anticipated role and responsibilities for the coming year.
The compensation committee determined not to make any increases to the base salaries of the named executive officers for 2017, with the exception of Ms. Sergeeff. The compensation
committee increased Ms. Sergeeff’s base salary, effective June 30, 2017, in recognition of her 2016 performance and the fact that her base salary, and total annual target cash compensation, consisting of base salary and target bonus, fell below the 50
th
percentile of the peer data. In connection with his commencement of employment in November 2017, the compensation committee set Mr. Rodriguez’s the base salary at $750,000.
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Executive Officer
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2017 Base Salary
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% Change from 2016
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Enrique Rodriguez(1)
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$
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750,000
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N/A
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Thomas Carson
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$
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625,000
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0
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%
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Peter Halt
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$
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413,751
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0
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%
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Dustin Finer
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$
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391,498
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0
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%
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Pamela Sergeeff
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$
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390,000
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10
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%
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Pete Thompson(2)
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$
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475,000
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0
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(1)
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Mr. Rodriguez’s 2017 base salary was effective upon his commencement with the company on November 13, 2017.
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(2)
|
Mr. Thompson’s 2017 base salary ceased on his departure on October 4, 2017.
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2017 Short-Term Incentive Compensation Decisions
Target Amounts:
In June 2017, the compensation committee reviewed the target bonus levels of all of the named executive officers serving at such time, considering the peer data and Mr. Carson’s recommendations (other than for himself) and determined all such bonus levels were appropriate and should remain unchanged from the 2016 target bonus levels, other than Mr. Halt’s target bonus. Mr. Halt’s target bonus was increased from 60% in 2016 to 70%, effective July 1, 2017, in order to align Mr. Halt’s total annual target cash compensation (consisting of base salary plus target bonus) closer to the 50
th
percentile of the peer data. Messrs. Carson’s, Finer’s, Halt’s and Thompson’s, and Ms. Sergeeff’s resulting 2017 target bonus percentages were at approximately the 50
th
percentile of the peer data with respect to short-term incentive compensation targets.
|
|
|
|
|
|
Executive Officer
|
2017 Target Bonus (% of base salary)
|
% Change from 2016
|
Thomas Carson
|
100
|
%
|
0
|
%
|
Peter Halt
|
70
|
%
|
17
|
%
|
Dustin Finer
|
55
|
%
|
0
|
%
|
Pamela Sergeeff
|
55
|
%
|
0
|
%
|
Pete Thompson
|
70
|
%
|
0
|
%
|
Weighting of Goals
. In February 2017, the compensation committee approved the terms of our 2017 Senior Executive Company Incentive Plan (the "2017 Executive Incentive Plan"). Under the 2017 Executive Incentive Plan, the named executive officers would be eligible to earn their annual variable cash bonus based on the company’s achievement of worldwide revenue (“Revenue”) and worldwide adjusted EBITDA (“Adjusted EBITDA”) targets, and, except for Mr. Carson, achievement of individual performance goals, with the weightings set forth in the following table.
|
|
|
|
|
|
Weighting Among Goals
|
Executive Officer
|
Corporate
Performance
|
|
Individual
Performance
|
Thomas Carson
|
100%
|
|
0%
|
Peter Halt
|
75%
|
|
25%
|
Dustin Finer
|
75%
|
|
25%
|
Pamela Sergeeff
|
75%
|
|
25%
|
Pete Thompson
|
75%
|
|
25%
|
With respect to Messrs. Carson, Halt, Finer and Thompson and Ms. Sergeeff, the compensation committee set the 2017 weighting between corporate and individual performance at the same level as in effect at the end of 2016, as they believed it appropriately aligned our executives with corporate performance. Because as Chief Executive Officer, Mr. Carson has a greater direct impact on, and responsibility for, corporate performance, the compensation committee believed that his bonus should be solely dependent on corporate performance.
Corporate Performance Goals
. The average of the payout percentages for the Revenue and Adjusted EBITDA goals is the “corporate performance factor.” The portion of the annual variable cash bonus that could be earned based on corporate performance is calculated as the product of: (i) the executive’s base salary, (ii) target bonus percentage, (iii) the fraction of the annual variable cash bonus that could be earned based on corporate performance, and (iv) the corporate performance factor.
Adjusted EBITDA is defined as operating income excluding depreciation, amortization of intangible assets, restructuring and asset impairment charges, equity-based compensation, transaction, transition and integration costs, retention earn-outs payable to former stockholders of acquired businesses, earn-out settlements, CEO transition cash costs, remeasurement of contingent consideration, gain on settlement of acquired receivable, changes in franchise tax reserve and contested proxy election costs.
Rigor of Corporate Performance Goals
. To assist the compensation committee in determining the appropriate target levels, Farient provided a competitive assessment of our targets, considering our historical performance and the historical performance of our peer group and the S&P 400 Software and Services index and projected performance.
The compensation committee set our Revenue and Adjusted EBITDA targets for 2017 above their respective 2016 targets and their respective 2016 actual results, in each case where such 2016 figures are based on a combined company budget, which reflects the TiVo Acquisition in September 2016). Further, the 2017 targets were set toward the high end (rather than the midpoint) of our annual expectations for Revenue and Adjusted EBITDA, ensuring that our bonus targets were rigorous.
The compensation committee determined the 2017 targets were particularly rigorous given (i) new revenue challenges related the level of one-time extraordinary catch-up payments in 2016 that were not going to available in 2017; and (ii) the Comcast renewal, where litigation is ongoing and that revenue cannot be anticipated on any specific timeframe. However, to further increase the rigor or our program, the compensation committee raised the threshold level of performance necessary to earn a payout for each of the targets for 2017, from 75% to 90% achievement.
The corporate performance factor was calculated by averaging the payout of each of the Revenue and Adjusted EBITDA targets. The payout level for each of the targets is set forth in the table below. This methodology replaced the payout matrix we have used in prior years in effort to simplify communication and calibration of goals.
|
|
|
|
|
|
|
|
|
|
Attainment
(% of target)
|
Payout
(% of target)(1)
|
Threshold
|
90
|
%
|
50
|
%
|
|
Target
|
100
|
%
|
100
|
%
|
|
Maximum
|
110
|
%
|
200
|
%
|
|
(1) Below 90% of attainment, the plan provided for 0% payout. Between 90% and 100% attainment of target, a straight-line interpolation of 5% points of payout were earned for every 1% point of attainment. From 100% to 110% of attainment of target, 10% points of payout were earned for every 1% point of attainment. The maximum payout was capped at 200%.
Individual Performance Goals
. Individual performance is calculated as a number, between 0 and 200%, with 100% as target performance, and that number is called the individual performance factor. The portion of the annual variable cash bonus that could be earned based on individual performance was calculated for each participant as the product of: (i) the executive’s base salary, (ii) target bonus percentage, (iii) the fraction of the annual variable cash bonus that could be earned based on individual performance, and (iv) the individual performance factor. The compensation committee approved each eligible executive’s individual performance factor based on Mr. Rodriguez’s evaluation of performance (with input from Mr. Carson given Mr. Rodriguez’s November 2017 commencement of employment) of each respective function and whether certain pre-established individual goals for the year had been achieved. The compensation committee believes it is important to retain flexibility to reward individuals for their contributions to overall company performance.
2017 Corporate Performance Results
. The Revenue target at 100% achievement was $833.3 million and the Adjusted EBITDA target at 100% achievement was $281.2 million. Our performance in 2017 against our Revenue and Adjusted EBITDA goals was $826.5 million in Revenue, or 99.2% of the target goal, and $290.1 million in Adjusted EBITDA, or 103.2% of the target goal, resulting in a factor on the corporate performance factor of 114% (that is, the average of 96% payout for Revenue and 132% payout for Adjusted EBITDA).
2017 Individual Performance Results
. In February 2018, our compensation committee evaluated Messrs. Finer and Halt and Ms. Sergeeff to determine the individual performance factor payouts as follows:
|
|
•
|
Dustin Finer
: Mr. Rodriguez recommended, and our compensation committee approved, an individual performance factor payout for Mr. Finer (as reflected in the table below) based on Mr. Finer’s management of the human resources function and management of the company’s administrative and internal operations.
|
|
|
•
|
Peter Halt
: Mr. Rodriguez recommended, and our compensation committee approved, an individual performance factor payout for Mr. Halt (as reflected in the table below) based upon Mr. Halt’s management of our financial reporting and audit processes and his management of the company’s finance organization.
|
|
|
•
|
Pamela Sergeeff
: Mr. Rodriguez recommended, and our compensation committee approved, an individual performance factor payout for Ms. Sergeeff (as reflected in the table below) based upon Ms. Sergeeff’s overall leadership, management of the worldwide corporate legal function, material contribution on corporate governance and compliance initiatives, management of the worldwide revenue generating commercial legal function and support of business and corporate development strategies. In awarding Ms. Sergeeff an individual payout above target, the compensation committee was particularly mindful of Ms. Sergeeff’s overall leadership and assistance with the various management transitions following the TiVo Acquisition and outstanding contributions towards the ongoing integration of Rovi and TiVo Inc.
|
|
|
|
|
|
|
|
|
|
|
|
2017 Target Bonus
|
2017 Actual Bonus Paid
|
|
Executive Officer
|
2017 Target
Bonus as a percentage of base salary (%)
|
2017 Target
Bonus ($)
|
Corporate Performance Factor Payout Calculation($)
|
|
Individual Performance Factor Payment Calculation($)
|
|
2017 Actual Bonus Paid ($)(1)
|
2017 Actual Bonus as a % of Target Bonus
|
Thomas Carson
|
100
|
$625,000
|
$712,500
|
|
N/A
|
|
$625,000
|
100%
|
Peter Halt
|
70(2)
|
$269,222
|
$230,184
|
|
$67,305
|
|
$297,490
|
111%
|
Dustin Finer
|
55
|
$215,324
|
$184,102
|
|
$53,831
|
|
$237,933
|
111%
|
Pamela Sergeeff
|
55
|
$205,034(3)
|
$175,304
|
|
$76,888
|
|
$252,192
|
123%
|
|
|
(1)
|
The Actual Bonus Paid for each executive is generally equal to the Corporate Performance Factor Payout Calculation plus the Individual Performance Factor Payout Calculation, as shown above. However, under the terms of the 2017 Executive Incentive Plan, the compensation committee has the discretion to pay less than the full amount (including to pay zero percent) of the payout to which any participant would otherwise be entitled, which determination shall be based upon such factors as the compensation committee determines appropriate. The committee exercised such discretion to reduce Mr. Carson’s 2017 bonus as further described below.
|
|
|
(2)
|
Mr. Halt’s target bonus as a percentage of his base salary was adjusted from 60% to 70% effective July 1, 2017 and his bonus calculations reflect pro ration of such bonus target percentages for the applicable portions of the year.
|
|
|
(3)
|
Ms. Sergeeff’s base salary was adjusted from $355,100 to $390,000 effective July 1, 2017 and her bonus calculations reflect pro ration of such base salary and related bonus target amounts for the applicable portions of the year.
|
Notwithstanding the company’s Corporate Performance Factor of 1.14, resulting in a payout calculation for Mr. Carson of $712,500, such bonus amount was reduced by the compensation committee (with such reduction also approved by the company’s Board of Directors), in accordance with the terms of the plan, based on the committee’s and Board’s perception of such reduction being an appropriate amount commensurate with the period of time served by Mr. Carson as Chief Executive Officer and his overall contribution to the company’s performance in 2017.
As a result of Mr. Thompson’s separation from us effective October 6, 2017, he was not eligible to earn a bonus under our 2017 Executive Incentive Plan.
Mr. Rodriguez was not eligible to
participate in the 2017 Executive Incentive Plan, as he commenced employment with us late in the year. However, in consideration of the 2017 annual incentive compensation at his prior employer that he did not receive as a result of accepting our offer, he was paid a cash amount equal to $1,225,000.
2017 Long-Term Incentive Compensation Decisions
Size of Equity Awards
. In determining the size of the total equity compensation opportunity in 2017, the compensation committee:
|
|
•
|
aimed to have the aggregate target award value result in target total direct compensation at a level that is competitive in the marketplaces in which we compete;
|
|
|
•
|
focused a larger portion of total direct compensation in the form of long-term and performance-based equity awards intended to drive long-term differentiated value relative to our peers and maximize long-term stockholder value;
|
|
|
•
|
aimed to structure a substantial portion of equity opportunity in the form of awards that vest based on achievement of performance goals to better align our executives’ long-term compensation opportunity with our stockholders’ interests; and
|
|
|
•
|
considered the recommendations of Mr. Carson for the other named executive officers (the awards were granted prior to Mr. Rodriguez commencing his employment with TiVo).
|
Equity Award Mix
. The compensation committee determined that the annual equity awards granted to the named executive officers in 2017 should consist of time-vesting RSU grants and performance-vesting RSU grants as set forth in the table below. The compensation committee determined that these two types of equity awards provided the appropriate balance of long-term incentives for our executive officers in 2017. Specifically, RSU awards that vest based on performance goals focus executives on achieving specific longer-term company performance goals and increasing stockholder value, and RSU awards that vest over time provide tangible value to executive officers and serve as an incentive and retention tool during a difficult operating or volatile business environment, while still being tied to our stockholder value. The compensation committee determined not to grant stock options in 2017 because they felt that solely using performance-vesting RSUs and time-vesting RSUs would strengthen the direct alignment of the long-term incentive program to stockholder value creation.
In setting the mix of the two types of equity awards for 2017, the compensation committee determined that a substantial portion of the equity grants should consist of awards that vest based on our performance (in the form of measurable performance goals), in addition to continued service over time and accordingly, the compensation committee structured performance-based awards to account for half of each executive’s annual equity award.
In setting the annual grant levels, the compensation committee reviewed peer data and generally aimed for the equity grants to the executive officers for 2017 to fall around the 50
th
percentile of peer data. The compensation committee believes that this positioning, combined with its mix of equity compensation reflects our commitment to pay for performance, with compensation above the median of our peers for exceptional performance and compensation below this level if our performance goals are not reached. The resulting target grant values were established based on market data, individual performance and criticality, the retention value of current existing equity awards. Each award fell around the 50
th
percentile of the peer data,
except for the grant Ms. Sergeeff, which fell around the 60
th
percentile of the peer data. The compensation committee determined Ms. Sergeeff’s award was appropriate in recognition of her 2016 performance and to align the level of her total direct compensation to market levels and her peers.
The compensation committee did not grant any annual equity awards to Mr. Carson in 2017 because Mr. Carson had notified TiVo of his intention to retire prior to the grant of the annual equity awards in July 2017 and the compensation committee felt that it was not appropriate to grant Mr. Carson an equity award given his planned retirement.
The compensation committee approved a total dollar value for each named executive officer’s annual grants, which we refer to as the grant date target value, based on the market data and other factors described above, and the allocation of such value to each of the two forms of equity awards (50% performance-vesting RSUs and 50% time-vesting RSUs). The actual share amounts of the awards granted on July 1, 2017 were then calculated using the closing stock price of the company’s common stock as of the last trading day on or before the date of grant (dividing the applicable grant date target value by such closing stock price to arrive at the RSU share number and performance-vesting RSU target share number).
Each of the following grants, reflecting the actual share amounts granted on July 1, 2017, was approved by the compensation committee in June 2017:
|
|
|
|
|
|
Executive Officer
|
|
RSU -
Time Vesting
|
|
RSU -
Performance Vesting (Target)
|
Thomas Carson
|
|
0
|
|
0
|
Peter Halt
|
|
32,172
|
|
32,172
|
Dustin Finer
|
|
17,426
|
|
17,426
|
Pamela Sergeeff
|
|
20,107
|
|
20,107
|
Pete Thompson
|
|
28,150
|
|
28,150
|
2017
Performance Award Vesting Criteria
. The 2017 performance-vesting RSU awards were structured to be based entirely on a three-year performance period (2017-2019) and are eligible to vest on a cliff basis, if at all, after three years based upon the achievement of a three-year relative TSR metric of percentile ranking against the S&P 400 Software & Services Index (the “TSR Factor”), as reflected below. Further, the vesting of the performance awards is conditioned upon the grantee remaining employed with the company through the vesting date, which is the third anniversary of the grant date.
The compensation committee structured the TSR Factor to be based on a three-year measurement period (rather than one-year measurements over a three-year period), to enhance the long-term nature of the award, distinguish long-term incentive award and short-term incentive award goals and further align management with our long-term stockholder interests. The compensation committee chose the TSR Factor to provide a relative performance metric against an appropriate comparator group of companies to incentivize and reward not only for returns to our stockholders, but returns in excess of our general industry. The compensation committee eliminated vesting based on a matrix of additional financial measures, as was used for the performance-vesting RSUs in 2016, because the compensation committee felt increasing the weight of the relative TSR performance measure would further directly link executive reward and valuate creation for stockholders, simplify executive understanding (and incentive toward achievement) of the program’s performance goals and because key financial measure targets were difficult to establish for the awards given the ongoing integration efforts related to the TiVo Acquisition and the related strategic decisions still being made with respect thereto. For similar
reasons, in 2017 the compensation committee acted pursuant to the terms of the 2015 and 2016 performance-vesting RSU awards to similarly adjust the vesting criteria for the effect of the TiVo Acquisition and determined that for the 2015 and 2016 performance-vesting RSU awards, only the TSR metrics would apply. As a result of this determination and application of only the TSR metric for the 2015-2017 three-year performance period, none of the shares subject to the 2015 performance-vesting RSUs vested at the end of such performance period.
We carefully set the performance award goals to be rigorous and ultimately serve to align management and our stockholders’ interests. The TSR Factor was set at levels the compensation committee determined to be competitively challenging, with the maximum metric extremely robust.
At the end of the 2017-2019 performance period, the compensation committee will apply the vesting factors resulting from the performance of the TSR Factor over the entire three-year period to the grant amount to determine the total amount that will vest based on achievement of the performance metric. Depending on the level of achievement, the minimum number of shares issuable pursuant to the performance award is zero and the maximum number of shares issuable is twice the number of target shares.
The range of threshold, target and maximum levels for the three-year TSR Factor and resulting vesting are as follows:
|
|
|
|
TSR Factor
|
Vesting as a % of
Target (if TSR is positive)
|
Payout as a % of
Target (if TSR is
negative)
|
75
|
200%
|
100%
|
70
|
180%
|
100%
|
65
|
160%
|
100%
|
60
|
140%
|
100%
|
55
|
120%
|
100%
|
50 (target)
|
100%
|
100%
|
45
|
90%
|
90%
|
40
|
80%
|
80%
|
35
|
70%
|
70%
|
30
|
60%
|
60%
|
25
|
50%
|
50%
|
Since the 2017 performance-vesting RSUs no longer have financial goals and are entirely based on relative TSR performance, the compensation committee decreased slightly the threshold and maximum performance goals to reflect the most prevalent practice among those peers using relative TSR as a performance measure (25
th
percentile performance for threshold and 75
th
percentile performance for maximum) and to take into account the reduced ability of executives to directly influence the outcome of a TSR performance measure compared to a financial performance measure. The threshold TSR goal for a 50% of target payout decreased from 30
th
percentile in 2016 to 25
th
percentile in 2017, and the maximum TSR goal for a 200% of target goal decreased from 90
th
percentile in 2016 to 75
th
percentile in 2017.
In addition to the annual equity award grants in July 2017, the compensation committee approved an equity award for Ms. Sergeeff in February 2017, in special recognition of her extraordinary efforts and outstanding contributions during 2016 towards the TiVo Acquisition and the renewal of the company’s IP license agreement with DISH Networks, in addition to the rest of her duties as General Counsel and Chief Compliance Officer in the normal course of business.
While it is not the compensation committee’s general practice to grant special equity awards of this nature, the compensation committee believed that Ms. Sergeeff’s tremendous effort level and contribution through the months-long and overlapping processes of the TiVo Acquisition and the DISH renewal, among her other activities, which were instrumental to their successful consummation, presented a special circumstance that necessitated an additional award to reward, incentivize and retain Ms. Sergeeff. The equity award was granted on March 1, 2017 in the form of a RSU award covering 10,554 shares, vesting with respect to half of the shares on each of January 1, 2018 and January 1, 2019, subject to Mr. Sergeeff’s continued service through such dates. The compensation committee carefully considered the appropriate form of delivery of Ms. Sergeeff’s award (considering both cash and equity) and determined that an equity award, as opposed to a cash bonus, was most appropriate because the award vests over Ms. Sergeeff’s future service (and so there is a retentive aspect) and delivers realizable value directly dependent on company stock price (and so there is a performance incentive aspect). In choosing the size of the award, the compensation committee was mindful of the value of the award in comparison to Ms. Sergeeff’s current equity incentives (the grant date target value of her special award represented approximately one-third of the grant date target value of her 2016 annual equity incentive).
In connection with his commencement of employment with us, on December 1, 2017, the compensation committee granted Mr. Rodriguez a performance-vesting RSU award for 400,000 shares at target and the ability to vest in up to twice the target number of shares based on (i) achievement of certain average annual total stockholder return targets (15%, 22.5%, and 30%), or (ii) achievement of certain TiVo stock price targets ($28, $34, and $40), over the period between Mr. Rodriguez’s start date and December 31, 2020. This performance-vesting RSU award is front-loaded and approximates a significant part of the annual equity compensation that Mr. Rodriguez would have received as CEO over the next three years had his equity grants been made on an annual basis without any front-loading. As a result of the front-loading, Mr. Rodriguez will receive a smaller than typical annual equity grant in each year from 2018 through 2020, equal to at least $1,750,000 as per his employment agreement. Mr. Rodriguez was also granted six separate time-based restricted stock unit awards in consideration for the long-term incentive compensation at his former employer that he was forgoing to accept TiVo’s offer. The vesting of the six time-based RSU awards approximates the vesting of the forfeited long-term incentive compensation at his former employer.
In addition, Mr. Carson’s equity awards are subject to certain potential acceleration benefits in connection with his retirement pursuant to his transition agreement with us, as further described below under “
Agreements Providing for Change of Control and Severance Benefits
”.
Equity Compensation Policies
Our general policy is to make annual, new-hire and promotion equity grants on pre-determined dates as follows:
|
|
•
|
In 2017, annual equity grants for named executive officers were recommended by the compensation committee and approved by the Board, or approved by the compensation committee, as applicable, on the second regularly scheduled meeting of the compensation committee and/or the Board during the second quarter of each year, with a target grant date effective as of July 1. This change was made from the timing of equity grants in 2016 due to the TiVo Acquisition to align annual equity grant timing of all employees.
|
|
|
•
|
New-hire and promotion grants of equity awards (stock options and/or RSUs) for all executive officers are subject to approval by our compensation committee and occur on the first day of the month following the new employee’s start date or promotion date, as applicable (except for January, which would be January 2, due to the perpetual January 1 holiday). For example, if the compensation committee authorized a grant to a new-hire executive officer on January 10 and the executive officer started employment on January 20, the grant date would be February 1. If the new-hire executive officer started employment on January 20 but the compensation committee did not authorize the grant until February 2, the grant date would be March 1.
|
The exercise price of the options is not less than the closing price of our common stock on the grant date of the option. It is our policy not to purposely accelerate or delay the public release of material information in consideration of a pending equity grant to allow the grantee to benefit from a more favorable stock price.
Directors and Named Executive Officers Stock Ownership Guidelines
We have maintained stock ownership guidelines for our Board and our executive officers (including the named executive officers) since 2011. Those guidelines currently provide the following:
|
|
•
|
Board members are required to own, or acquire within five years after appointment, shares of common stock of the company (including vested stock options or other vested equity awards received as compensation for serving as a member of the Board) having a market value of at least four times the amount of the annual cash retainer for such director.
|
|
|
•
|
Our Chief Executive Officer is required to own, or acquire within five years after appointment), shares of common stock of the company (including vested stock options or other vested equity awards received as compensation in connection with his employment with the company) having a market value of at least six times his then-current annual base salary (ownership requirement changed from five times base salary to six times base salary in February 2017).
|
|
|
•
|
Each named executive officer (other than the Chief Executive Officer) is required to own, or acquire within five years after appointment), shares of common stock of the company (including vested stock options or other vested equity awards received as compensation in connection with his or her employment with the company) having a market value of at least three times his or her then-current annual base salary (ownership requirement changed from one times base salary to three times base salary in February 2017).
|
|
|
•
|
The required ownership level for each member of the Board, the Chief Executive Officer and the other named executive officers of the company shall be recalculated whenever such person’s level of base pay changes (for members of the Board, such director’s annual cash retainer), and as of January 1 of every third year; and, if such re-calculation results in an increased ownership amount being required under the above guidelines, then such person shall have five years from the date of the re-calculation to accumulate the incremental amount of the increase resulting from the re-calculation.
|
Compensation Recovery Policy
We adopted a clawback policy, even though the SEC has not yet issued final rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act requirement. Our policy currently provides that, in the event of (i) a financial statement restatement or (ii) a later determination that the figures upon which incentive compensation (equity compensation or cash) was calculated and paid to executive officers were in error (provided that in each case that an executive officer’s misconduct caused either the noncompliance that resulted in the restatement or the error in the figures upon which incentive compensation was calculated and paid), the Board may take action to recover the incentive compensation that was paid or vested (including gain from the sale of vested shares) during the three-year period preceding the restatement obligation or the determination of the error as noted above. In addition, as a public company subject to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002, if we are required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive. We will also comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will modify our policy to the extent required by law once the SEC adopts final regulations on the subject.
Anti-Hedging Policy
We have a policy that prohibits our executive officers, directors and other members of management from engaging in short sales, transactions in put or call options, hedging transactions or other inherently speculative transactions with respect to our stock. We adopted this policy as a matter of good corporate governance. Furthermore, by not allowing executives to engage in such transactions, they face the downside risk of a reduction in value of their unvested equity awards, and therefore pay from equity is more strongly correlated to stock price performance over the vesting period.
Agreements Providing for Change of Control and Severance Benefits
The employment of each of our named executive officers is “at will.” However, each of the current named executive officers has entered into an executive severance and arbitration agreement with the company. The executive severance and arbitration agreements of Mr. Finer, Mr. Halt and Ms. Sergeeff have substantially the same material terms, providing cash severance of up to twelve months of base pay, continuation of Welfare Benefits (as defined in the agreement) during the period in which cash severance is being paid, and accelerated vesting of certain equity-based compensation, only upon termination of employment by the company for any reason other than cause or by each officer with good reason in connection with a change in control of the company. The executive severance agreement of Mr. Carson provided for similar cash severance, accelerated vesting and benefit coverage as the other named executive officers described above in the event of a change in control, but differed from the other named executive officer’s agreements in that Mr. Carson’s executive severance and arbitration agreement generally provided: (i) certain of such severance benefits upon termination of his employment by the company without “cause” or his voluntary termination with good reason unrelated to any change in control of the company or by reason of death, and (ii) a “best after-tax results” provision if such payments upon a change in control results in an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"). The severance agreement of Mr. Thompson provided for substantially the same terms as those of Mr. Finer, Mr. Halt and Ms. Sergeeff described above.
Additionally, each of Mr. Finer, Mr. Halt and Ms. Sergeeff (and, prior to his departure, Mr. Thompson) are eligible for severance benefits under the Executive Severance Plan we approved in July 2017 for certain designated company executive vice presidents and senior vice presidents. The plan provides for cash severance of twelve months of base salary, certain equity acceleration benefits and certain health and outplacement severance benefits to each such named executive officer, upon a termination of employment by the company for any reason other than cause or by each officer with good reason. The benefits under the plan are offset by any then-existing change in control severance agreements and subject to certain cessation upon commencement of new employment. The details of the Executive Severance Plan are discussed more fully in the section below entitled “
Potential Payments upon Termination or Change of Control
.”
As a result of Mr. Thompson’s resignation in October 2017, he was not eligible to receive any payments or benefits under his severance agreement, under the Executive Severance Plan or otherwise. Mr. Carson’s eligibility to receive any payments or benefits under his severance agreement will cease upon the end of his transition period following his cessation as President and Chief Executive Officer (or sooner if his employment is terminated by the company under certain circumstances) pursuant to his transition agreement, as described below.
In connection with his appointment as President and Chief Executive Officer, we entered into an executive severance and arbitration agreement with Mr. Rodriguez. The agreement provides, among other things, for severance benefits to Mr. Rodriguez upon (i) a termination by the company without cause or by Mr. Rodriguez for good reason at any time, (ii) a termination by the company without cause or by Mr. Rodriguez for good reason in connection with a change in control of the company and (iii) Mr. Rodriguez’s termination by the company as a result of death or disability. The severance benefits include cash payment of base salary, payment of some or all of annual performance bonus, acceleration of all or a portion of equity awards and certain welfare benefits, in varying degrees based on the reason for Mr. Rodriguez’s termination and are discussed more fully in the section below entitled “
Potential Payments upon Termination or Change of Control
.” Our Board of Directors determined that these severance benefits were necessary and appropriate in order to attract and retain Mr. Rodriguez.
In October 2017, we entered into a transition agreement with Mr. Carson as a result of his ceasing to serve as President and Chief Executive Officer and agreeing to continue to work in a strategic advisory capacity through the beginning of the second quarter of 2018 to assist Mr. Rodriguez in transition matters and to help advise the Board as requested. During this transition period, the agreement provides for continued base salary and bonus eligibility under the 2017 Executive Incentive Plan (but not the 2018 Executive Incentive Plan), continued vesting of equity awards in accordance with their terms and continued employee benefits. Following the end of the transition period, or sooner if Mr. Carson’s employment is terminated by the company prior to the end of the transition period, in exchange for Mr. Carson’s execution, delivery and non-revocation of a release of claims against the company and his continued assistance of the company during the following twelve month period on matters of historical knowledge, the transition agreement provides for continued base salary for twelve months, an amount equal to his target bonus (assuming full performance, but no over-performance, of targets) for the year in which Mr. Carson’s termination occurs and vesting acceleration of stock awards (other than performance-based awards and future grants of similar performance-based vesting shares) as to the number of shares that would have vested in accordance with the applicable vesting schedule as if Mr. Carson had been in service for an additional twelve months and continued exercisability of stock options for up to twelve months, and certain welfare benefits as provided in Mr. Carson’s existing executive severance and arbitration agreement with the company. The terms of the transition agreement with Mr. Carson is discussed more fully in the section below
entitled “
Potential Payments upon Termination or Change of Control
.” The compensation committee carefully considered the severance and transition benefits for Mr. Carson, in consultation with Farient and considering peer company and market data, and determined the benefits described above were appropriate given Mr. Carson’s contractual benefits, historical compensation and performance, and his strategic transition services.
The amounts, terms and conditions of these change in control and severance rights reflect the arrangements between our named executive officers and the company at the time these awards and documents were entered into, the benefits provided by our peer companies to similarly situated executives, as well as our desire for internal pay equity among our executive officers. The compensation committee believes that the severance benefits and accelerated vesting offered to our named executive officers in the event of a termination of employment in connection with a change in control serves to minimize the distractions to our executive team and helps our named executive officers maintain a balanced perspective in making overall business decisions during periods of uncertainty and are structured so that an acquirer that wishes to retain our management team during a transition period or over the long term will have an opportunity to do so. In connection with the transition of our Chief Executive Officer in 2017, the compensation committee evaluated the executive severance benefits and, with the assistance of Farient and consideration of market data, determined to provide the non-change in control severance benefits under the Executive Severance Plan approved in 2017 to facilitate recruiting and leadership stability in the company’s management team.
401(k) Plan
Our employees, including our named executive officers, are eligible to participate in our 401(k) plan. Our 401(k) plan is intended to qualify as a tax qualified plan under Section 401 of the Code. Our 401(k) plan provides that each participant may contribute a portion of his or her pretax compensation. Employee contributions are held and invested by the 401(k) plan’s trustee. Our 401(k) matching contribution program matches employee contributions at a rate of 50% up to 6% of eligible compensation and within the federal statutory limit under Section 401(a)(17). We believe that this benefit is consistent with the practices of our peer companies, and therefore is a necessary element of compensation in attracting and retaining employees.
Other Employee Benefits
We provide health insurance, dental insurance, life insurance, disability insurance, healthcare savings accounts, wellness program incentives, health club membership reimbursement and paid vacation time benefits to all of our employees, including our named executive officers on the same terms and conditions. We believe these benefits are consistent with the practices of our peer companies, and therefore necessary in attracting and retaining our employees.
In addition to the benefits listed above, the compensation committee provides, from time to time, limited business-related perquisites to our named executive officers. In considering potential perquisites, the compensation committee reviews the company’s cost of such benefits against the perceived value we receive. No such perquisites were approved or paid in 2017, except that, pursuant to his offer letter, we provided $35,000 on behalf of Mr. Rodriguez for his legal fees related to his offer letter and severance agreement. The compensation committee determined this benefit was necessary to induce Mr. Rodriguez to leave his then-current employer and commence employment with us and appropriate in light of market practices.
Tax Deductibility of Executive Compensation
Our compensation committee considers the deductibility of executive compensation under Section 162(m) of the Code in designing, establishing and implementing our executive compensation policies and practices. Section 162(m) generally limits the corporate tax deduction by a public company for compensation paid to its Chief Executive Officer and certain other named executive officers during any single year to $1 million per individual, unless, under tax laws in effect prior to January 1, 2018
,
certain requirements
are
met which qualify that compensation as performance-based under Section 162(m). The Tax Cuts and Jobs Act signed into law on December 22, 2017 (the “Tax Act”), among other changes, repealed the exception from the deduction limit under Section 162(m) for performance-based compensation effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017 that are not materially modified after that date.
During taxable years beginning before January 1, 2018, the compensation committee could grant compensation intended to qualify as performance-based compensation. For example, under the company’s stock option plans, stock options and performance-based stock awards may be granted in a manner that satisfies the deductibility requirements of Section 162(m). However, we have not established a policy whereby all compensation paid to our named executive officers must be fully deductible. Rather, the deductibility of such compensation has been and will be one of the factors considered in establishing and implementing our executive compensation programs, along with the need to design compensation programs that appropriately motivate our senior management and our goal to attract and retain key executives by remaining competitive in our pay practices. For example, in 2017, the compensation committee deemed it desirable to retain adequate flexibility in designing compensation programs that motivate executives to achieve extraordinary results. Therefore, the 2017 Executive Incentive Plan was not structured to qualify as performance-based compensation under the Section 162(m) rules and so compensation payable thereunder may not be fully deductible by us in all circumstances.
Despite any of the compensation committee’s efforts in the past to structure compensation in a manner intended to be exempt from the Section 162(m) deduction limit as performance-based compensation, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) as revised by the Tax Act, including the uncertain scope of the transition relief adopted in connection with repealing Section 162(m)’s performance-based compensation exception, no assurance can be given that any previously granted compensation intended to satisfy the requirements for performance-based compensation will in fact qualify for such exception. The compensation committee will administer any awards granted prior to November 2, 2017 which qualify as performance-based compensation under Section 162(m), as amended by the Tax Act, in accordance with the transition rules applicable to binding contracts in effect on November 2, 2017, and will have the sole discretion to revise compensation arrangements to conform with the Tax Act and the compensation committee’s administrative practices, all without obtaining further stockholder approval. In addition, the compensation committee reserves the right to modify compensation that was initially intended to be exempt from the Section 162(m) deduction limit when it was granted if the compensation committee determines that such modifications are consistent with our business needs.
Accounting Considerations
The company accounts for equity compensation paid to our employees under the FASB ASC Topic 718 ("Topic 718"), which requires us to estimate and record an expense over the service period of the equity award. Our cash compensation is recorded as an expense at the time the obligation is incurred. The accounting impact of our compensation programs are one of many factors that the compensation committee considers in determining the structure and size of our executive compensation programs.
Compensation Program Risk Review
Our compensation committee has reviewed our compensation policies as generally applicable to our employees and believes that our policies do not encourage excessive or inappropriate risk taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on the company.
Compensation Committee Report
The material in this compensation committee report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the company under the Securities Act or the Exchange Act, other than in TiVo’s Annual Report on Form 10-K where it shall be deemed to be furnished, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K contained in this proxy statement. Based on this review and discussion, the compensation committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement for the fiscal year ended December 31, 2017.
Respectfully submitted,
Members of the Compensation Committee
Glenn W. Welling (Chair)
Eddy Hartenstein
Daniel Moloney
SUMMARY COMPENSATION TABLE
The following table shows the compensation for the years ended December 31, 2017, 2016 and 2015 awarded to, earned by or paid to each person who served as our President and Chief Executive Officer in 2017, our Chief Financial Officer, our two other executive officers and a former executive officer who would have been a Named Executive Officer but for his resignation prior to December 31, 2017, each of whom has total 2017 compensation in excess of $100,000 (“Named Executives”).
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|
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|
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|
Name and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
All Other
Compensation
($)
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)(2)(5)
|
(f)(6)
|
(g)(7)
|
(i)(8)
|
(j)
|
Enrique Rodriguez
President and Chief Executive Officer (1)
|
2017
|
102,273
|
3,798,000
|
12,195,791
|
--
|
--
|
300
|
16,096,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Carson
Former President and Chief Executive Officer (2)
|
2017
|
625,000
|
--
|
95,959
|
731,107
|
625,000
|
10,500
|
2,087,566
|
2016
|
625,000
|
|
3,496,695
|
1,015,570
|
793,750
|
10,350
|
5,941,365
|
2015
|
620,833
|
|
4,468,632
|
1,917,816
|
537,500
|
10,350
|
7,555,131
|
|
|
|
|
|
|
|
|
Peter Halt
Chief Financial Officer
|
2017
|
413,751
|
--
|
1,193,260
|
--
|
297,490
|
10,500
|
1,915,001
|
2016
|
413,751
|
|
1,037,037
|
228,502
|
283,006
|
10,350
|
1,972,646
|
2015
|
411,743
|
|
1,489,544
|
361,852
|
212,875
|
10,350
|
2,486,364
|
Dustin Finer Chief Administrative and Internal Operations Officer (3)
|
2017
|
391,498
|
--
|
664,269
|
--
|
237,933
|
8,937
|
1,302,637
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2016
|
391,498
|
|
809,052
|
126,162
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285,842
|
10,787
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1,623,341
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|
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|
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|
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Pamela Sergeeff
EVP, General Counsel & Chief Compliance Officer
|
2017
|
372,550
|
--
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952,466
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--
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252,192
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8,937
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1,586,145
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2016
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355,100
|
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691,358
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152,338
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283,681
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8,508
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1,490,985
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2015
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351,750
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1,117,158
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226,158
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174,798
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8,508
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1,878,372
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|
|
|
|
|
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Pete Thompson
Former EVP and Chief Operating Officer (4)
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2017
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366,146
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--
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1,044,084
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--
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--
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3,121
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1,413,351
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2016
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152,936
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1,599,908
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400,016
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127,066
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1,269
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2,281,195
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(1)
|
On November 13, 2017, Mr. Rodriguez was appointed Chief Executive Officer. Amounts disclosed under “Bonus” in 2017 represents incentive and deferred compensation at his former employer that he was forgoing and relocation expenses that he was incurring to accept our offer, $1,600,000 of which is subject to repayment under certain circumstances described above in “
Compensation Discussion and Analysis – Executive Summary - CEO Transition."
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(2)
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Effective as of Mr. Rodriguez’s appointment as Chief Executive Officer on November 13, 2017, Mr. Carson ceased to serve as our Chief Executive Officer.
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(3)
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On June 16, 2016, Mr. Finer was appointed Chief Administrative and Internal Operations Officer effective July 1, 2016.
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(4)
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On August 31, 2016, Mr. Thompson was appointed Executive Vice President and Chief Operating Officer effective September 6, 2016. Effective October 6, 2017, Mr. Thompson resigned from his position.
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(5)
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Amounts disclosed under “Stock Awards” represent the aggregate grant date fair value of stock awards granted during the year indicated, and/or the incremental fair value associated with award modifications, as applicable and as described further below, measured in accordance with Topic 718. For a discussion of assumptions used to measure fair value, see Note 12, “Equity-based Compensation,” to the Consolidated Financial Statements in our 2017 Annual Report on Form 10-K. With respect to restricted stock units granted in 2016 and 2017 subject to market vesting conditions, the grant date fair value was measured using a Monte-Carlo simulation. As our restricted stock units are not dividend-protected, with respect to restricted stock units granted in 2017, 2016 and 2015 not subject to market vesting conditions, the fair value of restricted stock units was estimated based on the price of our common stock at the close of trading on the date of grant, reduced by the present value of dividends expected to be paid during the vesting period. These amounts do not necessarily correspond to the actual value that may be realized by the Named Executives. In December 2017, restricted stock units granted in 2016 and 2015 subject to performance vesting conditions were modified to be subject to a market vesting condition; the incremental fair value associated with this modification, under Topic 718, is as follows: Mr. Carson - $95,959; Mr. Finer - $17,939; and Ms. Sergeeff - $17,992. Assuming that the highest level of attainment will be achieved for awards subject to market vesting conditions, the aggregate maximum grant date fair value of awards granted in 2017 would be as follows: Mr. Rodriguez - $7,032,000; Mr. Halt - $1,299,749; Mr. Finer - $704,010; Ms. Sergeeff - $832,323; and Mr. Thompson - $1,137,260.
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(6)
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Amounts disclosed under “Option Awards”, other than with respect to Mr. Carson’s 2017 amount, represent the aggregate grant date fair value of option awards granted during the year indicated, measured in accordance with Topic 718. For a discussion of assumptions used to measure fair value, see Note 12, “Equity-based Compensation” to the Consolidated Financial Statements in our 2017 Annual Report on Form 10-K. With respect to options granted in 2016 and 2015, the grant date fair value was measured using the Black-Scholes-Merton option pricing formula. These amounts do not necessarily correspond to the actual value that may be realized by the named executive officers. With respect to Mr. Carson’s 2017 amount, in October 2017, outstanding options previously granted to Mr. Carson were modified to extend the post-termination exercise period thereof to one year and the amount shown is entirely comprised of the value of such modification.
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(7)
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Amounts disclosed under “Non-Equity Incentive Plan Compensation” represent the individual and corporate performance component of the annual cash bonuses earned pursuant to the Executive Incentive Plan for services rendered in 2017. Such bonuses for services rendered in 2017 were paid in 2018.
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(8)
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Amounts disclosed under “All Other Compensation” consist of: (i) matching contributions we made on behalf of the Named Executives to our 401(k) plan and (ii) employer paid premiums for life insurance coverage.
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Grants of Plan-Based Awards
The following table sets forth certain information with respect to grants of plan-based awards for the fiscal year ended December 31, 2017 to the Named Executives.
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Name
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Grant
Date
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Approval
Date
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Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
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Estimated Future Payouts
Under Equity Incentive Plan
Awards
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All Other Stock Awards:
Number of Shares of Stock or Units
(#)(2)
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All Other Option Awards:
Number of Securities Underlying Options
(#)
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Exercise or Base Price of Option Awards
($/Sh)
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Grant Date Fair Value of Stock and Option Awards
($)(3)
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Threshold
($)
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Target
($)(4)
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Maximum
($)
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Threshold
(#)
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Target
(#)(5)(6)
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Maximum
(#)(5)
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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(i)
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(j)
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(k)
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(l)
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Enrique Rodriguez
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12/1/2017
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11/10/2017
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|
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310,423
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0.001
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5,163,791
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12/1/2017
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11/10/2017
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400,000
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800,000
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0.001
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7,032,000
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Thomas Carson
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N/A
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N/A
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312,500
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625,000
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1,250,000
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10/4/2017 (7)
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731,107 (8)
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12/11/2017 (9)
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|
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95,959 (10)
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Peter Halt
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N/A
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N/A
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134,611
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269,222
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538,444
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7/1/2017
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6/4/2017
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|
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32,172
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0.001
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543,385
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7/1/2017
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6/4/2017
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16,086
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32,172
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64,344
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|
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0.001
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649,874
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Dustin Finer
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N/A
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N/A
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107,662
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215,324
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430,648
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|
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7/1/2017
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6/4/2017
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17,426
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0.001
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294,325
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7/1/2017
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6/4/2017
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|
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8,713
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17,426
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34,852
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|
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0.001
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352,005
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|
12/11/2017 (9)
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17,939 (11)
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Pamela Sergeeff
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N/A
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N/A
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102,517
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205,034
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410,068
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3/1/2017
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2/13/2017
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|
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10,554
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0.001
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188,706
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7/1/2017
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6/4/2017
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|
|
|
|
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|
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20,107
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0.001
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339,607
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7/1/2017
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6/4/2017
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|
|
|
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10,054
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20,107
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40,214
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|
|
0.001
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406,161
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|
12/11/2017 (9)
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|
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17,922 (12)
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Pete Thompson (13)
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N/A
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N/A
|
|
|
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|
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7/1/2017
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6/4/2017
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|
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28,150
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|
0.001
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475,454
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7/1/2017
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6/4/2017
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|
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14,075
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28,150
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56,300
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0.001
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568,630
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(1)
|
We award the individual and corporate components of cash bonuses pursuant to our 2017 Executive Incentive Plan. The 2017 Executive Incentive Plan provides for the award of such annual cash bonuses based upon the attainment of: (i) corporate performance based on specified revenue and operating income goals and (ii) individual performance based upon achievement of pre-established individual objectives. The table above reflects the target and maximum cash bonuses that each Named Executive could earn. The actual amount of the cash bonus attributable to corporate performance that was earned and paid to each of the Named Executives for fiscal year ended December 31, 2017 is set forth in the Summary Compensation Table under the column Non-Equity Incentive Plan Compensation.
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(2)
|
Other than with respect to Mr. Rodriguez, all restricted stock units and options granted to the Named Executives in 2017 were granted under the 2008 EIP. Restricted stock unit grants made to Mr. Rodriguez were granted pursuant to the 2008 TiVo Plan.
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(3)
|
Amounts disclosed represent the aggregate grant date fair value of stock awards granted during the year and incremental fair value associated with modifications of previously granted equity awards, measured in accordance with Topic 718. For a discussion of valuation assumptions used to measure fair value, see Note 12, “Equity-based Compensation” in the Consolidated Financial Statements of our 2017 Annual Report on Form 10-K. With respect to restricted stock units granted in 2017 subject to market vesting conditions, the grant date fair value was measured using a Monte-Carlo simulation.
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(4)
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Amounts represent the target payout with respect to corporate performance under the 2017 Executive Incentive Plan assuming 100% achievement of target.
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(5)
|
Represents the target and maximum number of shares that may be earned under the restricted stock units granted to Named Executives in 2017 subject to market vesting
|
conditions pursuant to the 2008 EIP, other than with respect to Mr. Rodriguez, which were granted pursuant to the 2008 TiVo Plan.
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(6)
|
The award for Mr. Rodriguez does not vest unless performance is achieved at or above the target level.
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(7)
|
Represents the date of modification of previously granted stock options to extend the post-termination exercise period thereof to one year.
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(8)
|
Represents the incremental fair value associated with the modification of Mr. Carson’s previously granted stock options, as determined under Topic 718. See footnote 6 to “Summary Compensation Table" above.
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(9)
|
Represents the date of modification of the 2015 and 2016 performance-based restricted stock unit awards.
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(10)
|
Represents the incremental fair value associated with the modification of Mr. Carson's 2015 and 2016 performance-based restricted stock unit awards, as determined under Topic 718. See footnote 5 to "Summary Compensation Table" above.
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(11)
|
Represents the incremental fair value associated with the modification of Mr. Finer's 2015 and 2016 performance-based restricted stock unit awards, as determined under Topic 718. See footnote 5 to "Summary Compensation Table" above.
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(12)
|
Represents the incremental fair value associated with the modification of Ms. Sergeeff's 2015 and 2016 performance-based restricted stock unit awards, as determined under Topic 718. See footnote 5 to "Summary Compensation Table" above.
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(13)
|
Awards to Mr. Thompson were forfeited in October 2017, along with his bonus eligibility under the 2017 Executive Incentive Plan, in connection with his departure from the company.
|
Discussion of Summary Compensation and Plan-Based Awards Tables
Our executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the Grants of Plan-Based Awards table was paid or awarded, are described above under “Compensation Discussion and Analysis.” A summary of certain material terms of our continuing compensation plans and arrangements is set forth below.
Employment Agreements with Named Executives
Mr. Rodriguez
. In November 2017, we appointed Mr. Rodriguez as the company’s President and Chief Executive Officer. On November 5, 2017 we entered into an offer letter agreement with Mr. Rodriguez under which, he is entitled to an annual base salary, currently set at $750,000 and is eligible to participate in the company’s 2017 Executive Incentive Plan (the “SECIP”) with a cash bonus target equal to 125% of his base salary, with such percentage subject to change each year as determined by the company’s compensation committee. In connection with this appointment, on December 1, 2017, we granted Mr. Rodriguez a performance-based restricted stock unit award in the amount of 800,000 shares, with a target number of shares subject to the award of 400,000 shares (the “Target Number of Shares”) and the ability to vest in up to twice the Target Number of Shares based on (i) achievement of certain average annual total stockholder return targets (15%, 22.5%, and 30%), or (ii) achievement of certain company stock price targets ($28, $34, and $40), over the period between Mr. Rodriguez’s start date and
December 31, 2020. Pursuant to the offer letter agreement, subject to his continued employment with the company, Mr. Rodriguez will also receive various awards and payments in consideration of various cash compensation and equity awards at his former employer that Mr. Rodriguez had foregone, as well as certain expenses that he incurred, to accept the company’s offer. In addition, Mr. Rodriguez was offered an Executive Severance and Arbitration Agreement, the terms of which are described under “
Potential Payments upon Termination or Change of Control
.”
Mr. Carson
. In December 2011, we appointed Mr. Carson as the company’s President and Chief Executive Officer. On December 14, 2011 we entered into an offer letter agreement with Mr. Carson under which, he is entitled to an annual base salary, currently set at $625,000 and unchanged from 2015, and was eligible to participate in the company’s SECIP with a cash bonus target equal to 100% of his base salary, with such percentage subject to change as determined by the company’s compensation committee and certain equity awards that are now fully vested. Also in December 2011, the company entered into an Amended and Restated Executive Severance and Arbitration Agreement with Mr. Carson, which supersedes and replaces Mr. Carson’s previous executive severance and arbitration agreement, the terms of which are described under “
Potential Payments upon Termination or Change of Control
.” Effective as of Enrique Rodriguez’s commencement of employment with the company on November 13, 2017, Mr. Carson ceased service as the company’s President and Chief Executive Officer. Mr. Carson will continue work in a strategic advisory capacity through the beginning of the second quarter of 2018 to assist Mr. Rodriguez in transition matters pursuant to Mr. Carson’s transition agreement, the terms of which are described under “
Potential Payments upon Termination or Change of Control
.”
Mr. Finer
. In June 2016, we appointed Mr. Finer as our Chief Administrative and Internal Operations Officer. Under the terms of Mr. Finer’s employment with the company, he is entitled to an annual base salary, currently set at $391,498, and is eligible to participate in the company’s SECIP with a cash bonus target equal to 55% of his base salary, with such percentage subject to change each year as determined by the company’s compensation committee. In connection with this appointment, on July 1, 2016, we granted Mr. Finer: (i) options to purchase 7,407 shares of our common stock, having a term of seven years and vesting over four years, with 25% vesting on the one-year anniversary of the grant date and the remaining vesting monthly thereafter, (ii) a restricted stock unit award in the amount of 6,063 shares which will vest over four (4) years with 25% vesting on each of the annual anniversaries of the grant date, (iii) a performance based restricted stock unit award in the amount of 6,063 shares which are eligible to vest after the third anniversary of the grant date and the number of Performance-Based restricted stock units that vest shall be based on the achievement of the following two factors, each weighted equally: (a) a three-year relative TSR Factor and (b) three-year revenue CAGR/Margin Factor, and (iv) a restricted stock unit award in the amount of 15,159 shares which will vest over four (4) years with 50% vesting on the second anniversary of the grant date and 25% vesting on each of the third and fourth year anniversary of the grant date. Mr. Finer also had an existing Executive Severance and Arbitration Agreement, the terms of which are described under “
Potential Payments upon Termination or Change of Control
.” On March 2, 2018, we announced that by mutual agreement reached on February 27, 2018, Mr. Finer will be leaving the company. The effective date for Mr. Finer’s departure has not been determined and Mr. Finer intends to continue to serve in his current position of Chief Administrative and Internal Operations Officer for the next several months to help ensure a smooth transition of his duties and as the company finds a new human resources leader.
Mr. Halt
. In May 2012, we appointed Mr. Halt as our Chief Financial Officer, effective May 19, 2012. Under the terms of Mr. Halt’s employment, he is entitled to an annual base salary,
currently set at $413,751, and is eligible to participate in the company’s SECIP with a cash bonus target currently equal to 70% of his base salary, with such percentage subject to change each year as determined by the company’s compensation committee. Also, Mr. Halt was offered an Executive Severance and Arbitration Agreement, the terms of which are described under “
Potential Payments upon Termination or Change of Control
.”
Ms. Sergeeff
. In December 2013, we appointed Ms. Sergeeff as our Executive Vice President, General Counsel and Chief Compliance Officer, effective December 7, 2013. Under the terms of Ms. Sergeeff’s employment with the company, she is entitled to an annual base salary, currently set at $390,000, and is eligible to participate in the company’s SECIP with a cash bonus target equal to 55% of her base salary, with such percentage subject to change each year as determined by the company’s compensation committee. Ms. Sergeeff was also offered an Executive Severance and Arbitration Agreement, the terms of which are described under “
Potential Payments upon Termination or Change of Control
.”
Mr. Thompson
. In August 2016, we appointed Mr. Thompson as our Executive Vice President and Chief Operating Officer, effective September 6, 2016. Under the terms of Mr. Thompson’s employment with the company, he was entitled to an annual base salary of $475,000, and was eligible to participate in the company’s SECIP with a cash bonus target equal to 70% of his base salary, with such percentage subject to change each year as determined by the company’s compensation committee. On October 1, 2016, we granted Mr. Thompson: (i) options to purchase 56,497 shares of our common stock, having a term of seven years and vesting over four years, with 25% vesting on the one-year anniversary of the grant date and the remaining vesting monthly thereafter and (ii) a restricted stock award in the amount of 82,135 shares which will vest over four (4) years with 25% vesting on each of the annual anniversaries of the grant date. On October 4, 2017, Mr. Thompson notified the company of his resignation effective October 6, 2017. Mr. Thompson also entered into an Executive Severance and Arbitration Agreement with the company, but no payments were made under such agreement in light of his resignation.
2017 Executive Incentive Plan Cash Awards.
Our 2017 Executive Incentive Plan provides for annual cash bonus award opportunities to reward executive officers for performance in the prior fiscal year. For more information regarding our 2017 Executive Incentive Plan, please see the section entitled “
2017 Short-Term Incentive Compensation Decisions
” in the Compensation Discussion and Analysis above.
2017 Equity Incentive Awards.
During 2017, the Named Executives received restricted stock unit awards under the 2008 EIP, other than with respect to Mr. Rodriguez, which restricted stock units were granted pursuant to the 2008 TiVo Plan. The restricted stock unit awards granted to the Named Executive Officers in 2017 consisted of awards that vest over a four-year period and awards that vest upon specified performance goals, as further described under “
2017 Long-Term Incentive Compensation Decisions in the Compensation Discussion and Analysis
” section above.
Executive Severance Plan
. Certain of our Named Executives are participants in our Executive Severance Plan as described under “
Potential Payments upon Termination or Change of Control
.”
Outstanding Equity Awards
The following table sets forth certain information with respect to outstanding equity awards held by the Named Executives as of December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
|
Option Exercise Price ($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
Market Value of Shares or Units of Stock That Have Not Vested ($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
Equity Incentive Plan Awards:
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Enrique Rodriguez
|
|
|
|
|
|
310,423(14)
|
4,842,599
|
800,000(19)
|
12,480,000
|
Thomas Carson
|
40,000
|
|
|
54.10
|
3/1/2018
|
105,944 (15)
|
1,652,726
|
84,000(20)
|
1,310,400
|
300,000
|
|
|
24.56
|
1/3/2019
|
|
|
65,057(21)
|
1,014,889
|
126,562
|
8,438(1)
|
|
24.84
|
4/6/2019
|
|
|
|
|
145,750
|
66,250(2)
|
|
24.88
|
4/6/2019
|
|
|
|
|
43,157
|
55,488(3)
|
|
23.44
|
4/6/2019
|
|
|
|
|
Peter Halt
|
75,000
|
|
|
23.48
|
6/1/2019
|
83,148 (16)
|
1,297,109
|
32,172(22)
|
501,883
|
21,562
|
1,438 (4)
|
|
24.84
|
3/1/2021
|
|
|
|
|
27,500
|
12,500 (5)
|
|
24.88
|
3/1/2022
|
|
|
|
|
9,710
|
12,485 (6)
|
|
23.44
|
3/1/2023
|
|
|
|
|
Dustin Finer
|
60,000
|
|
|
23.48
|
6/1/2019
|
58,458 (17)
|
911,945
|
21,000(20)
|
327,600
|
21,562
|
1,438 (7)
|
|
24.84
|
3/1/2021
|
|
|
6,099(21)
|
95,144
|
17,187
|
7,813 (8)
|
|
24.88
|
3/1/2022
|
|
|
6,063 (21)
|
94,583
|
3,237
|
4,161 (9)
|
|
23.44
|
3/1/2023
|
|
|
17,426 (22)
|
271,846
|
2,623
|
4,784(10)
|
|
15.54
|
7/1/2023
|
|
|
|
|
Pamela Sergeeff
|
17,343
|
1,157 (11)
|
|
24.84
|
3/1/2021
|
62,810(18)
|
979,836
|
21,000(20)
|
327,600
|
17,187
|
7,813 (12)
|
|
24.88
|
3/1/2022
|
|
|
12,198 (21)
|
190,289
|
6,474
|
8,323 (13)
|
|
23.44
|
3/1/2023
|
|
|
20,107 (22)
|
313,669
|
Pete Thompson (23)
|
14,125
|
|
|
19.48
|
10/1/2023
|
|
|
|
|
|
|
(1)
|
Of the shares underlying unvested options, approximately 2,813 will vest on the 1st of each month through March 1, 2018.
|
|
|
(2)
|
Of the shares underlying unvested options, approximately 4,417 will vest on the 1st of each month through April 1, 2018 and 48,584 will vest on April 6, 2018.
|
|
|
(3)
|
Of the shares underlying unvested options, 2,055 will vest on the 1st of each month through April 1, 2018, and 24,661 will vest on April 6, 2018 and 22,606 will be forfeited on April 6, 2018.
|
|
|
(4)
|
Of the shares underlying unvested options, approximately 480 will vest on the 1st of each month through March 1, 2018.
|
|
|
(5)
|
Of the shares underlying unvested options, approximately 833 will vest on the 1st of each month through March 1, 2019.
|
|
|
(6)
|
Of the shares underlying unvested options, approximately 462 will vest on the 1st of each month through March 1, 2020.
|
|
|
(7)
|
Of the shares underlying unvested options, approximately 480 will vest on the 1st of each month through March 1, 2018.
|
|
|
(8)
|
Of the shares underlying unvested options, approximately 521 will vest on the 1st of each month through March 1, 2019.
|
|
|
(9)
|
Of the shares underlying unvested options, approximately 154 will vest on the 1st of each month through March 1, 2020.
|
|
|
(10)
|
Of the shares underlying unvested options, approximately 154 will vest on the 1st of each month through July 1, 2020.
|
|
|
(11)
|
Of the shares underlying unvested options, approximately 386 will vest on the 1st of each month through March 1, 2018.
|
|
|
(12)
|
Of the shares underlying unvested options, approximately 521 will vest on the 1st of each month through March 1, 2019.
|
|
|
(13)
|
Of the shares underlying unvested options, approximately 308 will vest on the 1st of each month through March 1, 2020.
|
|
|
(14)
|
These shares vest as follows: 53,584 shares on January 28, 2019; 52,347 shares on January 29, 2019; 63,968 shares on August 2, 2019; 65,205 shares on January 26, 2020; 53,584 shares on January 28, 2020; and 21,375 shares on January 26, 2021.
|
|
|
(15)
|
These shares vest as follows: 56,481 shares on March 1, 2018; 35,231 shares on April 6, 2018; and 14,232 shares will be forfeited on April 6, 2018.
|
|
|
(16)
|
These shares vest as follows: 29,784 shares on March 1, 2018; 8,043 shares on July 1, 2018; 16,617 shares on March 1, 2019; 8,043 shares on July 1, 2019; 4,575 shares on March 1, 2020; 8,043 shares on July 1, 2020; and 8,043 on July 1, 2021.
|
|
|
(17)
|
These shares vest as follows: 13,025 shares on March 1, 2018; 13,452 shares on July 1, 2018; 6,775 shares on March 1, 2019; 9,663 shares on July 1, 2019; 1,525 shares on March 1, 2020; 9,661 shares on July 1, 2020; and 4,357 shares on July 1, 2021.
|
|
|
(18)
|
These shares vest as follows: 5,277 shares on January 1, 2018; 20,800 shares on March 1, 2018; 5,026 shares on July 1, 2018; 5,277 on January 1, 2019; 8,299 shares on March 1, 2019; 5,027 shares on July 1, 2019; 3,050 shares on March 1, 2020; 5,027 shares on July 1, 2020; and 5,027 shares on July 1, 2021.
|
|
|
(19)
|
These shares are eligible to vest on March 1, 2021 based on the achievement of a three-year relative TSR metric of percentile ranking against a peer group established by our compensation committee.
|
|
|
(20)
|
These shares are eligible to vest on March 1, 2018 based on the achievement of a three-year relative TSR metric of percentile ranking against a peer group established by our compensation committee.
|
|
|
(21)
|
These shares are eligible to vest on March 1, 2019 based on the achievement of a three-year relative TSR metric of percentile ranking against a peer group established by our compensation committee.
|
|
|
(22)
|
These shares are eligible to vest on March 1, 2020 based on the achievement of a three-year relative TSR metric of percentile ranking against a peer group established by our compensation committee.
|
|
|
(23)
|
Awards to Mr. Thompson are subject to a post-termination exercise period ending on January 6, 2018.
|
Option Exercises and Stock Vested
The following table shows for the fiscal year ended December 31, 2017 certain information regarding option exercises and stock awards accrued on vesting during the last fiscal year with respect to the Named Executives:
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of Shares Acquired on Exercise (#)
|
|
Value Realized on Exercise ($)
|
|
Number of Shares Acquired on Vesting (#)(1)
|
|
Value Realized on Vesting ($)(2)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
Enrique Rodriguez
|
|
--
|
|
--
|
|
--
|
|
--
|
Thomas Carson
|
|
--
|
|
--
|
|
233,505
|
|
4,424,686
|
Peter Halt
|
|
--
|
|
--
|
|
98,093
|
|
1,858,764
|
Dustin Finer
|
|
--
|
|
--
|
|
82,848
|
|
1,569,432
|
Pamela Sergeeff
|
|
--
|
|
--
|
|
45,245
|
|
857,347
|
Pete Thompson
|
|
--
|
|
--
|
|
20,533
|
|
407,560
|
|
|
(1)
|
Represents the vesting of restricted stock.
|
|
|
(2)
|
The value realized is based on the closing price of our common stock on the vest date multiplied by the number of restricted stock or restricted stock units vested, less the par value of the stock issued.
|
Potential Payments upon Termination or Change of Control
We entered into executive severance and arbitration agreements with: (i) Mr. Finer, Mr. Halt and Ms. Sergeeff following the expiration of their original executive severance and arbitration agreements (see Exhibit 10.22 to the company’s Annual Report on Form 10-K filed with the SEC on February 27, 2018); and (ii) Mr. Thompson with his appointment as Executive Vice President and Chief Operating Officer. Under the agreements, in the event of a change in control of TiVo, each of these executives is entitled to receive minimum severance payments in the form of up to twelve months of salary continuation calculated on base salary (excluding bonus) upon termination of employment by the company for any reason other than cause or by the executive with good reason within 90 days prior or 12 months following a change in control of the company. In addition, upon such event all unvested stock awards held by these executives shall become immediately vested. The only severance payments payable to these executives are those that require (1) a change in control of TiVo and (2) the executive’s termination of employment by the company without cause or by the executive with good reason. The executives are also entitled to receive all welfare benefits we have provided to them immediately prior to a change in control during the period we are obligated to make their severance payments, or if sooner, until the executive is entitled to welfare benefits from any entity employing the executive after the executive’s employment with the company terminates. The
executive’s right to receive benefits under these agreements, including the executive’s right to exercise any options that have accelerated under these agreements, will cease if the executive accepts employment with one of our competitors. In addition, the executive agrees not to solicit, for one year following termination, any employee of ours to work for another business.
We originally entered into an executive severance and arbitration agreement with Mr. Carson in December 2009 to replace his employment agreement and align his benefits with those of the Named Executives other than the Chief Executive Officer. In connection with Mr. Carson’s appointment as President and Chief Executive Officer, on December 14, 2011, the company entered into an amended and restated executive severance and arbitration agreement with Mr. Carson (see Exhibit 10.2 to the company’s Current Report on Form 8-K filed with the SEC on December 16, 2011). The agreement provides, among other things, that if, at any time, the company terminates Mr. Carson’s employment without cause, and other than as a result of Mr. Carson’s death or disability, or Mr. Carson resigns for good reason, then: (i) the company shall continue to pay Mr. Carson at his regular base pay and shall provide certain welfare benefits for a period of 12 months immediately following the termination of employment; (ii) the company shall pay Mr. Carson an amount equal to Mr. Carson’s target bonus (assuming full performance, but no over-performance, of targets, and for clarity excluding any discretionary bonuses) for the year in which Mr. Carson’s termination occurs, payable in a lump-sum, less applicable deductions and withholdings, on the 60
th
day following his termination date; and (iii) stock awards (other than performance-based awards and future grants of similar performance-based vesting shares) held by Mr. Carson as of the date of termination will immediately vest and become exercisable as to the number of shares that would have vested in accordance with the applicable vesting schedule as if Mr. Carson had been in service for an additional twelve months after the termination date. Additionally, in the event that a change in control of the company occurs and, within the period beginning 90 days before the date of the change in control and ending 12 months thereafter, Mr. Carson’s employment either is terminated by the company without cause or Mr. Carson voluntarily terminates his employment with the company with good reason: (i) the company shall pay Mr. Carson the severance benefits discussed above; provided, that if Mr. Carson commences within such 12 month period new employment with compensation that is substantially comparable to such severance pay, Mr. Carson’s salary continuation and welfare benefits shall cease on the later of the date six months after the termination of employment with the company or the date Mr. Carson commences new employment; and (ii) all stock awards held by Mr. Carson as of the date of termination will immediately vest and become exercisable. Payment of the severance benefits is conditioned, among other things, on Mr. Carson delivering an effective, general release of claims in favor of the company and on his resignation from our Board of Directors. On October 4, 2017, we entered into a transition agreement with Mr. Carson, the terms of which are described below.
We entered into an offer letter and an executive severance and arbitration agreement with Mr. Rodriguez in connection with his appointment as President and Chief Executive Officer, on November 13, 2017 (see Exhibits 10.1 and 10.2, respectively, to the company’s Current Report on Form 8-K filed with the SEC on November 13, 2017). The agreement provides, among other things, for severance payments to Mr. Rodriguez under certain conditions as follows:
If, at any time, the company terminates Mr. Rodriguez’s employment without Cause (as defined in the agreement) and other than as a result of Mr. Rodriguez’s death or Disability (as defined in the agreement), or Mr. Rodriguez resigns for Good Reason (as defined in the agreement), and in each case such termination is not a termination in anticipation of or following a Change in Control (as defined in the agreement), then: (i) the company shall continue to pay Mr. Rodriguez at his regular base pay for a period of 12 months immediately following such termination; (ii) the company shall pay Mr. Rodriguez an amount equal to 125% of his annual
base salary, in a lump sum, on the 90
th
day following such termination; (iii) if such termination occurs on or after July 1 but on or before December 31 of any fiscal year, the company shall pay Mr. Rodriguez a prorated amount of Mr. Rodriguez’s SECIP bonus for such fiscal year, as determined by the compensation committee of our Board of Directors based on achievement of the applicable performance goals and the number of days Mr. Rodriguez was employed by the company during the year in which his termination occurs, payable in a lump sum, less applicable deductions and withholdings, no later than March 15th of the year following the year of such termination (and if such termination occurs after December 31 but prior to the date that SECIP bonuses are paid for the fiscal year just ended, the company shall pay Mr. Rodriguez the full amount of his SECIP bonus, as determined by the compensation committee of our Board of Directors based on achievement of the applicable performance goals, with such amount to be paid in a lump sum on the 90
th
day following such termination); (iv) the company will accelerate the vesting of the six Replacement RSUs that are outstanding and unvested as of the termination date, with such acceleration to be effective as of the 90
th
day following Mr. Rodriguez’s separation from service; (v) the company will accelerate a portion of the Front-Loaded Performance RSU, if it is outstanding and unvested as of the date of such termination, for a number of shares equal to the greater of (1) the Target Number of Shares (400,000), multiplied by the applicable percentage of the Target Number of Shares that would otherwise vest based on Average Annual TSR (as determined by the Compensation Committee) through his employment period, multiplied by the percentage of the original performance period during which Mr. Rodriguez was employed, and (2) the number of TiVo Stock Price Achievement Shares (as defined in Mr. Rodriguez’s Offer Letter) that became eligible to vest prior to the date of termination, multiplied by the percentage of the original performance period during which Mr. Rodriguez was employed, with such acceleration to be effective as of the 90
th
day following Mr. Rodriguez’s separation from service; (vi) the company will accelerate any annual equity award that is outstanding and unvested as of the termination date and that vests based solely on continued service to the company as if Mr. Rodriguez had remained in continuous service to the company for an additional 12 months, with such acceleration to be effective as of the 90
th
day following Mr. Rodriguez’s separation from service; and (vii) during the period in which the company is obligated to pay salary continuation pursuant to clause (i) above, the company shall provide Mr. Rodriguez (and his spouse and other qualified dependents, if any) all Welfare Benefits (as defined in the agreement) that the company provided to Mr. Rodriguez immediately prior to his termination. Payment of the severance benefits is conditioned, among other things, on Mr. Rodriguez’s execution, delivery and non-revocation of a release of claims against the company.
In the event that a Change in Control occurs and, within the period beginning 90 days before the date of the Change in Control and ending 24 months thereafter, Mr. Rodriguez’s employment either is terminated by the company without Cause and other than as a result of Mr. Rodriguez’s death or Disability, or Mr. Rodriguez resigns for Good Reason, then: (i) the company shall continue to pay Mr. Rodriguez at his regular base pay for a period of 24 months immediately following such termination; (ii) the company shall pay Mr. Rodriguez an amount equal to 250% of his annual base salary, in a lump sum, on the 90
th
day following such termination; (iii) if such termination occurs on or after July 1 but on or before December 31 of any fiscal year, the company shall pay Mr. Rodriguez a prorated amount of Mr. Rodriguez’s target SECIP bonus for such fiscal year based on the number of days Mr. Rodriguez was employed by the company during the year in which his termination occurs, payable in a lump sum, less applicable deductions and withholdings, on the 90
th
day following such termination (and if such termination occurs after December 31 but prior to the date that SECIP bonuses are paid for the fiscal year just ended, the company shall pay Mr. Rodriguez the full amount of his SECIP bonus, as determined by the compensation committee of our Board of Directors based on achievement of the applicable performance goals, with such amount to be paid in a lump sum on the 90
th
day following such termination); (iv) the company will accelerate the vesting of the six Replacement
RSUs that are outstanding and unvested as of the termination date, with such acceleration to be effective as of the 90
th
day following Mr. Rodriguez’s separation from service; (v) the company will accelerate a portion of the Front-Loaded Performance RSU, if it is outstanding and unvested as of the date of such termination, for a number of shares equal to the greater of (1) the Target Number of Shares (400,000), multiplied by the greater of (x) 100% and (y) the applicable percentage of the Target Number of Shares that would otherwise vest based on Average Annual TSR (as determined by the Compensation Committee) from the date of his commencement of employment to the date immediately prior to the Change in Control, and (2) the number of TiVo Stock Price Achievement Shares (as defined in Mr. Rodriguez’s Offer Letter) that became eligible to vest prior to the date of termination, with such acceleration to be effective as of the 90
th
day following Mr. Rodriguez’s separation from service; (vi) the company will fully accelerate any annual equity award that is outstanding and unvested as of the termination date and that vests based solely on continued service to the company, with such acceleration to be effective as of the 90
th
day following Mr. Rodriguez’s separation from service; (vii) the company will accelerate any annual equity award that is outstanding and unvested as of the termination date and that vests on a performance basis in an amount equal to (1) the number of shares that would vest under the award upon achievement of the applicable performance goals at the target level, multiplied by the greater of (x) 100% and (y) the percentage of such target number of shares that would otherwise vest based on achievement of the applicable performance goals if the applicable performance period ended on the date immediately prior to the Change in Control (as determined by the Compensation Committee), multiplied by the percentage of the applicable performance period during which Mr. Rodriguez was employed by the company, with such acceleration to be effective as of the 90
th
day following Mr. Rodriguez’s separation from service; and (viii) during the period in which the company is obligated to pay salary continuation pursuant to clause (i) above, the company shall provide Mr. Rodriguez (and his spouse and other qualified dependents, if any) all Welfare Benefits (as defined in the Severance Agreement) that the company provided to Mr. Rodriguez immediately prior to his termination. Payment of the severance benefits is conditioned, among other things, on Mr. Rodriguez’s execution, delivery and non-revocation of a release of claims against the company.
In the event that Mr. Rodriguez’s employment is terminated by the company as a result of Mr. Rodriguez’s death or Disability, then: (i) if such termination occurs on or after July 1 but on or before December 31 of any fiscal year, the company shall pay Mr. Rodriguez or his estate a prorated amount of Mr. Rodriguez’s SECIP bonus for such fiscal year, as determined by the compensation committee of our Board of Directors based on achievement of the applicable performance goals and the number of days Mr. Rodriguez was employed by the company during the year in which his termination occurs, payable in a lump sum, less applicable deductions and withholdings, no later than March 15th of the year following the year of such termination (and if such termination occurs after December 31 but prior to the date that SECIP bonuses are paid for the fiscal year just ended, the company shall pay Mr. Rodriguez or his estate the full amount of his SECIP bonus, as determined by the compensation committee of our Board of Directors based on achievement of the applicable performance goals, with such amount to be paid in a lump sum on the 90
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day following such termination); (ii) the company will accelerate the vesting of the six Replacement RSUs that are outstanding and unvested as of the termination date, with such acceleration to be effective as of the 90
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day following Mr. Rodriguez’s separation from service; and (iii) the company will accelerate a portion of the Front-Loaded Performance RSU, if it is outstanding and unvested as of the date of such termination, for a number of shares equal to the greater of (1) the Target Number of Shares (400,000), multiplied by the applicable percentage of the Target Number of Shares that would otherwise vest based on Average Annual TSR (as determined by the Compensation Committee), multiplied by the percentage of the original performance period during which Mr. Rodriguez was employed, and (2) the number of TiVo Stock Price Achievement Shares (as defined in Mr.
Rodriguez’s Offer Letter) that became eligible to vest prior to the date of termination, multiplied by the percentage of the original performance period during which Mr. Rodriguez was employed, with such acceleration to be effective on the date that the Compensation Committee certifies the Average Annual TSR and the TiVo Stock Price, which certification shall occur no later than the earlier of (a) the first regularly scheduled Compensation Committee meeting following the end of the performance period and (b) March 15, 2021. Payment of the severance benefits is conditioned, among other things, on Mr. Rodriguez’s or his successors’ execution, delivery and non-revocation of a release of claims against the company.
In July 2017, we approved an Executive Severance Plan (the “2017 Plan”) for certain company executive vice presidents and senior vice presidents designated by the committee, including the following Named Executives: (i) Mr. Finer (ii) Ms. Sergeeff and (iii) Mr. Thompson. Under the terms of the 2017 Plan, upon termination of employment by the company for any reason other than cause or by the 2017 Plan participant with good reason (each, a “Termination Event”), each designated executive vice president is entitled to receive up to twelve (12) months of base salary (excluding bonus) and each designated senior vice president is entitled to receive up to six (6) months of base salary (excluding bonus), along with certain health and outplacement severance benefits, subject in each case to offset of benefits provided under any then-existing change in control severance agreements. If the 2017 Plan participant commences new employment within the time period in which benefits are payable under the 2017 Plan, the salary, health and outplacement severance benefits shall cease on the later of (i) the date on which 50% of the severance pay has been paid or (ii) the date on which the Plan participant commences new employment. In addition to the 2017 Plan benefits, upon a Termination Event, (i) the vesting of non-performance-based equity awards held by the designated executive will be accelerated by twelve (12) months and (ii) performance-based equity awards held by the designated executive will vest, if the Termination Event occurs within the last twelve (12) months of a given performance-based award’s performance period, if and to the extent that the performance criteria are achieved for the entire performance period of such original award. A 2017 Plan participant’s right to receive benefits under the 2017 Plan is conditioned, among other things, on the participant (i) timely executing an effective release of claims against the company following the Termination Event, and (ii) agreeing not to solicit, for two years following the Termination Event, any employee of the company to work for another business.
Other than Mr. Rodriguez, none of our Named Executives is entitled to any payments from the company in the event his or her employment by the company terminates as a result of death or disability.
In the event that the company had terminated the employment of Mr. Halt, Ms. Sergeeff, or Mr. Finer without “cause” or any of such executives had voluntarily terminated with good reason on December 31, 2017, and this was within 90 days prior or 12 months following a change in control of the company, then: (i) Mr. Halt would be entitled to salary continuation having a value of $413,751, accelerated vesting of stock options having a value of $0, accelerated vesting of restricted stock having a value of $1,798,992, and healthcare benefit continuation having a value of $31,778, for a total value of $2,244,521; (ii) Ms. Sergeeff would be entitled to salary continuation having a value of $390,000, accelerated vesting of stock options having a value of $0, accelerated vesting of restricted stock having a value of $1,811,394, and healthcare benefit continuation having a value of $12,187, for a total value of $2,213,581 and (iii) Mr. Finer would be entitled to salary continuation having a value of $391,498, accelerated vesting of stock options having a value of $287, accelerated vesting of restricted stock having a value of $1,701,118, and healthcare benefit continuation having a value of $25,528, for a total value of $2,213,581.
In October 2017, Mr. Thompson resigned from his position as the company’s chief operating officer effective October 6, 2017. Therefore, as of December 31, 2017, Mr. Thompson was not eligible to receive any payments under his executive severance and arbitration agreement or the 2017 Plan.
In November 2017, effective as of Mr. Rodriguez’s appointment as the company’s President and Chief Executive Officer, Mr. Carson ceased to serve as the company’s President and Chief Executive Officer. Pursuant to a transition agreement entered into in October 2017, Mr. Carson agreed to work in a strategic advisory capacity from the date of Mr. Rodriguez’s appointment through the beginning of the second quarter of 2018, reporting to the company’s chairman of the Board, to assist Mr. Rodriguez in transition matters and to help advise the Board as requested. In connection with that agreement, during the transition period, Mr. Carson’s base salary and 2017 SECIP bonus eligibility remain unchanged, unvested equity awards continue to vest in accordance with their terms, and standard health, welfare and other employee benefits shall continue; provided that Mr. Carson is not eligible to participate in the 2018 SECIP. Following the end of the transition period, or sooner if Mr. Carson’s employment is terminated by the company prior to the end of the transition period, in exchange for Mr. Carson’s execution, delivery and non-revocation of a release of claims against the company and his continued assistance of the company during the following twelve month period on matters of historical knowledge, Mr. Carson shall be paid: (i) an amount equal to twelve months of base salary (having a value of $625,000), less applicable deductions and withholdings, paid over such twelve-month period; (ii) the company shall pay Mr. Carson an amount equal to Mr. Carson’s target bonus (assuming full performance, but no over-performance, of targets, and for clarity excluding any discretionary bonuses) for the year in which Mr. Carson’s termination occurs (having a value of $625,000), payable in a lump-sum, less applicable deductions and withholdings, on the 60
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day following his termination date; (iii) stock awards (other than performance-based awards and future grants of similar performance-based vesting shares) held by Mr. Carson as of the date of termination will immediately vest and become exercisable as to the number of shares that would have vested in accordance with the applicable vesting schedule as if Mr. Carson had been in service for an additional twelve months after the termination date, and vested stock options (after taking into account any acceleration) may be exercised for a period of twelve months following Mr. Carson’s date of termination (accelerated vesting of stock options having a value of $0 and restricted stock having a value of $549,604, in each case based on the closing price of our common stock on December 31, 2017); and (iv) the company shall provide certain Welfare Benefits as provided in Mr. Carson’s existing executive severance and arbitration agreement with the company (having a value of $27,299), for a total value of $1,826,903. The company shall also continue to provide Mr. Carson with directors’ and officers’ liability insurance as to insurable events which occurred while Mr. Carson was a director or officer of the company or its subsidiaries, and Mr. Carson’s indemnification agreement with the company shall continue with respect to claims arising out of his employment with the company as provided thereunder.
In the event the company had terminated Mr. Rodriguez’s employment without cause, or Mr. Rodriguez resigned for good reason on December 31, 2017, then Mr. Rodriguez would be entitled to regular base pay, target bonus and certain welfare benefits for a period of 12 months immediately following the termination of employment having a total value of $6,670,885 comprised of the following: (i) salary continuation having a value of $1,687,500; (ii) a target bonus payment of $123,288; (iii) accelerated vesting of restricted stock having a value of $4,842,599; and (iv) healthcare benefit continuation having a value of $17,498; provided, however, if such termination or resignation took place within a period beginning 90 days before or 12 months after a change in control: these amounts would be adjusted in accordance with Mr. Rodriguez’s executive severance and arbitration agreement as described above if, within the 12 month period immediately following his termination of employment, Mr. Rodriguez commences new
employment with compensation that is substantially comparable to his severance pay, and all stock awards held by Mr. Rodriguez as of the date of termination would immediately vest and become exercisable, with additional accelerated vesting of restricted stock having a value of $11,082,599.
CEO Pay Ratio Disclosure
For 2017, the median of the annual total compensation of all employees of our company (other than our CEO) was $110,042 and the annual total compensation of our President and Chief Executive Officer, Enrique Rodriguez, was $16,744,091. Based on this information, for 2017 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 152 to 1. This ratio is a reasonable estimate calculated in a manner consistent with SEC rules.
During 2017, Mr. Carson served as our President and Chief Executive Officer until November 13, 2017, at which time Mr. Rodriguez was appointed our President and Chief Executive Officer. As permitted by SEC rules, we chose to use the annual total compensation of Mr. Rodriguez, who was serving as our Chief Executive Officer on December 31, 2017, to calculate our pay ratio. We determined Mr. Rodriguez’s annual total compensation for the fiscal year ended December 31, 2017 was $16,744,091, which, as required by SEC rules, includes his annualized base salary for 2017. Because we are required to annualize his compensation for purposes of this disclosure, Mr. Rodriguez’s annual total compensation is greater than the total compensation as reported for him in our 2017 Summary Compensation Table. As described above in our Compensation Discussion and Analysis under “CEO Transition,” in addition to the compensation granted and earned during 2017 for his service as our President and Chief Executive Officer, Mr. Rodriguez’s annual total compensation for 2017 reflects certain transition-related awards and payments in consideration of various cash compensation and equity awards at his former employer that he was foregoing, as well as certain expenses that he was incurring (together the “Transition Payments”), to accept our employment offer as well as a new-hire performance-based RSU award that was front-loaded to provide him with a meaningful equity stake in the company.
If we were to omit the Transition Payments, Mr. Rodriguez’s 2017 annual total compensation (assuming a full year of base salary and full year bonus payment based on actual 2017 results) would have been $8,851,050. Using this amount, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees would have been 80 to 1. This amount includes the $7,032,000 front-loaded performance-based RSU grant designed to vest, if at all, based on the achievement of significant TSR or stock price appreciation as described above in the section entitled “
Employment Agreements with Named Executives.
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Because the annual equity grants going forward are expected to be lower than a typical long-term incentive award during the three-year performance period in light of the front-loaded grant already made, we anticipate that Mr. Rodriguez’s annual total compensation for 2018 will be significantly lower than his annual total compensation for 2017 as reported in our 2017 Summary Compensation Table and, consequently, our 2018 pay ratio will be lower than our 2017 pay ratio.
To identify our median employee, we calculated annual base pay and the grant date fair value of equity awards for the 12-month period from January 1, 2017 through December 31, 2017. For simplicity, we calculated annual base pay using a reasonable estimate of the hours worked during 2017 for hourly employees and actual salary paid for our remaining employees. We
annualized base pay for any full-time and part-time employees who commenced work during 2017. Equity awards granted during the year were included using the same methodology we use for our named executive officers in our Summary Compensation Table. Once we had
formulated a distribution of our employee population based on annual base pay and equity awards, we then added the actual annual cash incentive bonuses for the employees within a reasonable range of the middle of our employee population to identify the median employee.
In determining our employee population, we considered the employees of our subsidiaries and all of our worldwide employees other than our Chief Executive Officer, whether employed on a full-time, part-time, temporary or seasonal basis as of December 31, 2017. We did not include any contractors or other non-employee workers in our employee population. We did not make any cost-of-living adjustment.
Using this approach, we selected the individual at the median of our employee population, who was a Senior Software Developer based in the United States. We then calculated annual total compensation for this individual using the same methodology we use for our named executive officers as set forth in our Summary Compensation Table (which excludes any retirement and health benefits).
Because SEC rules for identifying the median of the annual total compensation of all employees allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their employee population and compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio, as other companies have different employee populations and compensation practices and may have used different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. As explained by the SEC when it adopted these rules, the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures.