DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.                )

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under §240.14a-12

 

LPL Financial Holdings Inc.

(Name of Registrant as Specified In Its Charter)

 

             

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

 

Title of each class of securities to which transaction applies:

 

     

 

(2)

 

Aggregate number of securities to which transaction applies:

 

     

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

 

(4)

 

Proposed maximum aggregate value of transaction:

 

     

 

(5)

 

Total fee paid:

 

     

 

Fee paid previously with preliminary materials.

  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 

(1)

 

Amount Previously Paid:

 

     

 

(2)

 

Form, Schedule or Registration Statement No.:

 

     

 

(3)

 

Filing Party:

 

     

 

(4)

 

Date Filed:

 

     


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LOGO


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LOGO

March 22, 2021

Dear Fellow Stockholders:

It is my pleasure to invite you to attend the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of LPL Financial Holdings Inc. The meeting will be held on Wednesday, May 5, 2021, at 10:30 a.m., Eastern Time, and holders of record of our common stock as of March 8, 2021 are entitled to notice of and to vote at the Annual Meeting. The Notice of Annual Meeting of Stockholders and the proxy statement that follow describe the business to be conducted at the meeting.

In light of continuing public health and safety precautions related to COVID-19, we will hold the Annual Meeting virtually through the internet. Stockholders of record will be able to access and attend the live annual meeting webcast at www.virtualshareholdermeeting.com/LPLA2021. To gain access to the meeting, stockholders will be required to enter the 16-digit control number provided on the proxy card, voting instruction form or notice regarding the availability of proxy materials that have been distributed to our stockholders of record as of March 8, 2021. Stockholders will have the same rights and opportunities to participate in the virtual meeting as they would have at an in-person meeting. The virtual meeting website will contain participation instructions.

Consistent with our focus on sustainability, we are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders through the internet. We believe this approach allows us to reduce the environmental impact of the Annual Meeting while expediting your receipt of these materials and lowering our costs of delivery. If you would like us to send you printed copies of our proxy statement and accompanying materials, we will be happy to do so upon your request at no charge. For more information, please refer to the Notice Regarding the Availability of Proxy Materials that we mailed to holders of record on or about March 22, 2021.

YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.

Please vote your shares promptly to ensure they are represented at the Annual Meeting. You may submit your proxy through the internet or by telephone, as described in the following materials, or if you request printed copies of these materials, by completing and signing the proxy card and returning it in the envelope provided. If you decide to attend the virtual Annual Meeting and wish to change your proxy, you may do so automatically by voting at the meeting.

Please refer to page 1 of the accompanying proxy statement for further information concerning attendance.

On behalf of the Board of Directors, I thank you for your continued support of LPL Financial Holdings Inc.

 

Sincerely,

 

LOGO

 

James S. Putnam

Chair


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LOGO

Notice of Annual Meeting of Stockholders

 

Time and Date   

10:30 a.m., Eastern Time, on Wednesday, May 5, 2021

Items of Business   

(1) Elect the nine nominees named in the proxy statement to the Board of Directors of LPL Financial Holdings Inc. (the “Company”);

 

(2) Ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021;

 

(3) Approve, in an advisory vote, the compensation paid to the Company’s named executive officers;

 

(4) Approve the LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan;

 

(5) Approve the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan; and

 

(6) Consider and act upon any other business properly coming before the 2021 annual meeting of stockholders (the “Annual Meeting”) and at any adjournment or postponement thereof.

Location   

www.virtualshareholdermeeting.com/LPLA2021

Record Date    Stockholders of record as of 5:00 p.m., Eastern Time, on March 8, 2021 (the “Record Date”) will be entitled to vote at the Annual Meeting and any postponements or adjournments thereof.

Information relating to the matters to be considered and voted on at the Annual Meeting is set forth in the proxy statement accompanying this Notice.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SUBMIT YOUR PROXY BY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE FOLLOWING MATERIALS. YOU MAY VOTE YOUR SHARES AND SUBMIT A PROXY THROUGH THE INTERNET OR BY TELEPHONE AS DESCRIBED HEREIN OR, IF YOU REQUESTED PRINTED COPIES OF THESE MATERIALS, BY SIGNING AND RETURNING A PROXY CARD.

 

By Order of the Board of Directors,

 

LOGO

Gregory M. Woods

Secretary

Boston, Massachusetts

March 22, 2021

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 5, 2021: THE PROXY STATEMENT, THE PROXY CARD, AND LPL FINANCIAL HOLDINGS INC.’S 2020 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.LPL.COM. ADDITIONALLY, IN ACCORDANCE WITH SECURITIES AND EXCHANGE COMMISSION RULES, YOU MAY ACCESS THESE MATERIALS ON THE WEBSITE INDICATED IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS.


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Proxy Statement Summary

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

2021 Annual Meeting of Stockholders

 

   
Time and Date   

10:30 a.m., Eastern Time, on Wednesday, May 5, 2021

Location   

www.virtualshareholdermeeting.com/LPLA2021

Record Date   

5:00 p.m., Eastern Time, on March 8, 2021

Voting   

Stockholders as of the Record Date are entitled to one vote per share on each matter to be voted upon at the Annual Meeting.

Entry   

We invite all stockholders to attend the Annual Meeting. To gain access to the meeting, stockholders will be required to enter the 16-digit control number provided on the proxy card, voting instruction form or notice regarding the availability of proxy materials that have been distributed to our stockholders of record as of March 8, 2021.

Voting Proposals

 

Proposal   Board
Recommendation
  Page
Reference

Proposal 1:  Election of Directors

  FOR all nominees   7

Proposal 2:  Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm

  FOR   63

Proposal 3:  Approval, in an Advisory Vote, of the Compensation Paid to Our Named Executive Officers

  FOR   66

Proposal 4:  Approval of Our 2021 Omnibus Equity Incentive Plan

  FOR   68

Proposal 5:  Approval of Our 2021 Employee Stock Purchase Plan

  FOR   75


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General Information
    
     1  
General Information About Corporate Governance and the Board of Directors
    
     6  
Proposal 1: Election of Directors
    
     7  
Information Regarding Board and Committee Structure
    
     17  
Board of Directors Compensation
    
     28  
Compensation Discussion and Analysis
    
     30  
Report of the Compensation and Human Resources Committee of the Board of Directors
    
     46  
Compensation of Named Executive Officers
    
     47  
Security Ownership of Certain Beneficial Owners and Management
    
     60  
Certain Relationships and Related Party Transactions
    
     62  
Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm
    
     63  
Report of the Audit Committee of the Board of Directors
    
     65  
Proposal 3: Approval, in an Advisory Vote, the Compensation Paid to the Company’s Named Executive Officers
    
     66  
Proposal 4: Approval of Our 2021 Omnibus Equity Incentive Plan
    
     68  
Proposal 5: Approval of Our 2021 Employee Stock Purchase Plan
    
     75  
Stockholder Proposals and Other Matters
    
     78  
Other Information
    
     79  
Appendix A: Non-GAAP Financial Measures
    
     80  
Appendix B: LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan
    
     82  
Appendix C: LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan
    
     96  


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General Information

 

    

 

 

LPL FINANCIAL HOLDINGS INC.

Proxy Statement

2021 Annual Meeting of Stockholders

General Information

Introduction

 

This proxy statement and the accompanying Notice of Annual Meeting of Stockholders are being furnished to the holders of common stock, $0.001 par value per share (the “Common Stock”), of LPL Financial Holdings Inc., a Delaware corporation (the “Company” or “we”), in connection with the Company’s 2021 annual meeting of stockholders (the “Annual Meeting”).

As a stockholder of the Company as of 5:00 p.m. Eastern Time on March 8, 2021 (the “Record Date”), you are entitled and requested to vote on the items of business described in this proxy statement.

The Annual Meeting will be held on Wednesday, May 5, 2021, virtually through the Internet at www.virtualshareholdermeeting.com/LPLA2021, at 10:30 a.m., Eastern Time.

 

 

 

We invite all stockholders to attend the virtual Annual Meeting. Please see “Attending the Annual Meeting” below for instructions if you plan to attend.

 

Notice of Internet Availability of Proxy Statement and Annual Report

As permitted by the Securities and Exchange Commission (the “SEC”), we are making this proxy statement, the accompanying proxy card and our 2020 annual report on Form 10-K (the “Annual Report”) available to our stockholders electronically through the internet in lieu of mailing printed copies to each record holder of Common Stock as of the Record Date. You will not receive a printed copy of our proxy materials unless you request one, which we will deliver free of charge.

On or about March 22, 2021, a Notice Regarding the Availability of Proxy Materials (the “Notice”) was mailed to stockholders of record as of the Record Date. The Notice instructs you how to access and review through the internet all of the important information contained in these proxy materials or request a printed copy. The Notice also instructs you as to how you may vote your proxy.

The Notice, this proxy statement, the Annual Report and the proxy card are also available through the internet at www.proxyvote.com. You will need your 16-digit control number located on the Notice or your proxy card in order to access the materials. The website does not use “cookies” to track or identify visitors to the website.

Record Date, Shares Outstanding and Quorum

Stockholders of record as of the Record Date will be entitled to vote at the Annual Meeting. On the Record Date, there were 79,900,338 outstanding shares of Common Stock.

A list of stockholders of record as of the Record Date will be available at the Annual Meeting. In addition, you may contact our corporate secretary, at LPL Financial Holdings Inc., 75 State Street, 22nd Floor, Boston, Massachusetts 02109, to make arrangements to review a copy of the stockholder list at our offices, for any purpose germane to the Annual Meeting, between the hours of 9:00 a.m. and 5:00 p.m., local time, on any business day from April 25, 2021 up to the time of the Annual Meeting.

A quorum at the Annual Meeting will consist of the presence, in person or by proxy, of a majority of shares of Common Stock outstanding and entitled to vote at the Annual Meeting. Both abstentions and broker non-votes will be counted as present in determining the presence of a quorum. A “broker non-vote” is a proxy from a broker or other nominee indicating that such person has not received instructions from the beneficial owner on a particular matter with respect to which the broker or other nominee does not have discretionary voting power. Brokers have the discretion to vote their clients’ proxies only on routine matters. At the Annual Meeting, only the ratification of our auditors is a routine matter. Each share of Common Stock is entitled to one vote.

 

 

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General Information

 

    

 

 

Attending the Annual Meeting

Stockholders of record will be able to access and attend the live annual meeting webcast at www.virtualshareholdermeeting.com/LPLA2021. The Annual Meeting will begin at 10:30 a.m., Eastern Time, with log-in beginning at 10:15 a.m., on Wednesday, May 5, 2021. To gain access to the meeting, stockholders will be required to enter the 16-digit control number provided on the proxy card,

voting instruction form or notice regarding the availability of proxy materials that have been distributed to our stockholders of record as of March 8, 2021. Stockholders will have the same rights and opportunities to participate in the virtual meeting as they would have at an in-person meeting. The virtual meeting website will contain participation instructions.

 

 

 

 

Items of Business to be Voted upon at the Annual Meeting

 
 

  To elect each of the nine nominees named in this proxy statement to the Board of Directors of the Company (the “Board of Directors” or the “Board”) for a term to end at our annual meeting of stockholders in 2022;

 
 

  To ratify the appointment of Deloitte & Touche LLP by the audit committee of the Board of Directors (the “Audit Committee”) as our independent registered public accounting firm for the fiscal year ending December 31, 2021;

 
 

  To approve, in an advisory vote, the compensation paid to the Company’s named executive officers;

 
 

  To approve the LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan;

 
 

  To approve the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan; and

 
 

  To consider and act upon any other business properly coming before the Annual Meeting and at any adjournment or postponement thereof.

 

 

 

 

 

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General Information

 

    

 

 

Manner of Voting

If you are a holder of record of our Common Stock as of the Record Date, you may vote in one of the following ways:

 

LOGO

  

By Internet: by following the internet voting instructions included in the proxy card and Notice at any time until 11:59 p.m., Eastern Time, on May 4, 2021.

 

LOGO

  

By Telephone: by following the telephone voting instructions included in the proxy card and Notice at any time until 11:59 p.m., Eastern Time, on May 4, 2021.

 

LOGO

  

By Mail: by marking, dating and signing your printed proxy card (if received by mail) in accordance with the instructions on it and returning it by mail in the pre-addressed reply envelope provided with the proxy materials for receipt prior to the Annual Meeting.

 

LOGO

  

During the Meeting: Stockholders should follow the instructions at www.virtualshareholdermeeting.com/LPLA2021 to vote during the Annual Meeting. Voting online during the meeting will replace any previous votes.

 

 

 

If your shares are held in street name through a broker, bank or other intermediary, your broker, bank or other intermediary should give you instructions for voting your shares. In these cases, you may vote by internet, telephone or mail, as instructed by your broker, bank or other intermediary.

 

 

 

 

 

Shares of Common Stock represented by properly executed proxy cards received by the Company in time for the meeting will be voted in accordance with the instructions specified in the proxies. If you submit a proxy but do not indicate any voting instructions, your shares will be voted “FOR” the election of each director nominee named in this proxy statement; “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm; “FOR” the approval, in an advisory vote, of the compensation paid to the Company’s named executive officers; “FOR” the approval of the LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan; and “FOR” the approval of the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan.

Our management and Board of Directors know of no other matters to be brought before the Annual Meeting. If other matters are properly presented to the stockholders for action at the Annual Meeting or any adjournments or postponements thereof, it is the intention of the proxy holders named in the proxy card to vote in their discretion on all matters on which the shares of Common Stock represented by such proxy are entitled to vote.

 

 

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General Information

 

    

 

 

Voting Requirements

 

Proposal One—Election of Directors

 

 

Our bylaws provide that a nominee for director will be elected if the number of votes properly cast “for” such nominee’s election exceeds the number of votes properly cast “against” such nominee’s election; however, if the number of persons properly nominated for election to the Board of Directors exceeds the number of directors to be elected, the directors will be elected by the plurality of the votes properly cast. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the election of directors.

 

 

 

 

Proposal Two—Ratification of Appointment of Deloitte & Touche LLP

 

 

The proposal to ratify the appointment of Deloitte & Touche LLP will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.

 

 

 

 

Proposal Three—Approval, in an Advisory Vote, of the Compensation Paid to the Company’s Named Executive Officers

 

 

Because the proposal to approve, on an advisory basis, the compensation awarded to named executive officers for the fiscal year ended December 31, 2020 is a non-binding, advisory vote, there is no required vote that would constitute approval. Although the vote is advisory and non-binding in nature, the compensation and human resources committee (the “Compensation Committee”) will consider the outcome of the vote when considering future named executive officer compensation arrangements. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.

 

 

 

 

Proposal Four—Approval of the LPL Financial Holdings Inc. 2021 Omnibus Equity Compensation Plan

 

 

The proposal to approve the LPL Financial Holdings Inc. 2021 Omnibus Equity Compensation Plan will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.

 

 

 

 

Proposal Five—Approval of the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan

 

 

The proposal to approve the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.

 

 

 

 

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General Information

 

    

 

 

Revocation of Proxies

If you submit a proxy, you are entitled to revoke your proxy at any time before it is exercised in one of the following ways:

 

   

by attending and voting during the Annual Meeting;

 

   

by submitting a duly executed proxy bearing a later date; or

 

   

by sending written notice of revocation to our corporate secretary at LPL Financial Holdings Inc., 75 State Street, 22nd Floor, Boston, Massachusetts 02109.

A stockholder of record as of the Record Date who voted through the internet or by telephone may also change his or her vote with a timely and valid later internet or telephone vote, as the case may be. Any stockholder of record as of the Record Date attending the Annual Meeting may vote during the meeting whether or not a proxy has previously been given, but a stockholder’s attendance at the Annual Meeting (without further action) will not constitute revocation of a previously given proxy. If you hold your shares in street name and would like to change your voting instructions, please follow the instructions provided to you by your broker, bank or other intermediary.

Solicitation of Proxies

The Board of Directors of LPL Financial Holdings Inc. is soliciting proxies. Copies of proxy materials and the Annual Report will be supplied to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners, and we will reimburse such record holders for their reasonable expenses. Stockholders who elect to vote through the internet or by telephone may incur costs such as telecommunication and internet access charges for which the stockholder is solely responsible. The Company will otherwise pay the expenses of solicitation of proxies. The telephone and internet voting facilities for stockholders of record will close at 11:59 p.m., Eastern Time, on May 4, 2021.

Householding

Only one copy of the Notice is being delivered to multiple stockholders sharing an address, unless we have received contrary instructions from one or more of the stockholders. We will undertake to deliver promptly, upon written or oral request, a separate

copy of the Notice, or copies of the proxy statement and/or Annual Report to a stockholder at a shared address to which a single copy of the Notice was delivered. You may make a written or oral request by sending a written notification to our corporate secretary at LPL Financial Holdings Inc., 75 State Street, 22nd Floor, Boston, Massachusetts 02109, or by calling our offices at (617) 423-3644, extension 4574, and providing your name, your shared address and the address to which we should direct the copies of the proxy statement and Annual Report. Multiple stockholders sharing an address who have received one copy of the Notice and would prefer us to mail each stockholder a separate copy of future mailings should contact us at the address or telephone number above. Additionally, if current stockholders with a shared address received multiple copies of the Notice and would prefer us to mail one copy of future mailings to stockholders at the shared address, please notify us at the address or telephone number above.

 

 

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General Information About Corporate

Governance and the Board of Directors

 

    

 

 

General Information About Corporate Governance and the Board of Directors

We believe that good corporate governance is important to ensure that we are managed for the long-term benefit of our stakeholders. In support of that philosophy, we have adopted many leading corporate governance practices, including those summarized below and elsewhere in this proxy statement.

 

    BOARD PRACTICES    
  Independence   

A majority of our directors must be independent. All of our director nominees other than our chief executive officer are independent, and all of the Board committees are composed exclusively of independent directors.

 
  Non-executive Chair   

We currently separate the offices of chair of the Board and chief executive officer of the Company. The current chair of our Board, James S. Putnam, is an independent director.

 
  Director Diversity   

Our goal is a balanced and diverse Board, with members who bring a diversity of skills, expertise, experiences, perspectives, tenures and personal characteristics, including with respect to age, race, gender and ethnicity.

 
  Board Refreshment   

Our Board’s composition represents a balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors as well as fresh perspectives from newer directors. The nominating and governance committee of the Board (the “Nominating and Governance Committee”) has developed a skills matrix to inform director searches and succession planning.

 
  Director Overboarding   

Any director who is not serving as chief executive officer of a public company is expected to serve on no more than four public company boards (including our Board), and any director serving as chief executive officer of a public company is expected to serve on no more than three public company boards (including the board of his or her own company).

 
  Committee Membership   

The Board appoints members of its committees on an annual basis, with the Nominating and Governance Committee reviewing and recommending committee membership based in part on the need to ensure a succession plan for each committee chair.

 
  Board Self-evaluations   

The Board conducts an annual evaluation of its performance, operations, size and composition, with the Nominating and Governance Committee overseeing the evaluation process, which also encompasses the Board’s committees.

 
  Strategy Oversight   

The Board holds an annual two-day session focused on the Company’s long-term strategy, which informs the Board’s oversight and work plan for the following year.

 
  Executive Succession Planning   

The Compensation Committee conducts regular reviews of executive talent, development and succession planning, and our Board reviews the succession plans for the chief executive officer position annually.

 
    STOCKHOLDER RIGHTS    
  Annual Election of Directors   

All directors are elected annually, which reinforces our Board’s accountability to our stockholders.

 
 

Majority Voting Standard for

Director Elections

  

Our bylaws require that directors be elected under a “majority voting” standard in uncontested elections. Any director who does not receive more votes “for” his or her election than votes “against” must tender his or her resignation and, if our Board accepts the resignation, step down from our Board.

 
  Single Voting Class   

Our Common Stock is the only class of voting shares outstanding.

 
  COMPENSATION PRACTICES  
  Follow Leading Practices   

See “Compensation Discussion and Analysis—Compensation Governance.”

 

 

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Proposal 1: Election of Directors

 

    

 

 

Proposal 1: Election of Directors

 

As of March 22, 2021, our Board of Directors consisted of nine directors: eight independent directors and our chief executive officer, Dan H. Arnold. Each of our current directors is standing for reelection at the Annual Meeting, and each has been nominated by our Board based on the recommendation of the Nominating and Governance Committee. Each director nominee would hold office until our annual meeting of stockholders in 2022 and until his or her respective successor has been elected.

As described below, each of our nominees has considerable professional and business expertise. Our Board of Directors recommends a vote “FOR” each nominee based on its carefully considered judgment that the experience, qualifications, attributes and skills of each nominee qualify him or her to serve on our Board of Directors.

Board Membership Criteria

The Nominating and Governance Committee reviews annually the appropriate skills and characteristics required of directors in the context of the current make-up of the Board. As reflected in the corporate governance guidelines applicable to the Company (the “Corporate Governance Guidelines”), it is the policy of the Board that all directors should:

 

   

possess unimpeachable integrity and a personal reputation for transparency, honesty and ethical behavior;

 

   

have considerable personal accomplishment and professional expertise;

 

   

demonstrate strong business acumen, financial literacy and strategic agility;

 

   

contribute to boardroom dialogue through critical thinking and independent judgment, and candid and constructive communication;

 

   

be passionate about the vision of the Company and enthusiastic about the commitments entailed in serving as a director; and

 

   

understand their role as stewards in representing the long-term interests of our stakeholders.

Director Diversity

Our Corporate Governance Guidelines reflect our commitment to director diversity. Our goal is a balanced and diverse Board, with members who bring

a diversity of skills, expertise, experiences, perspectives, tenures and personal characteristics, including with regard to age, race, gender and ethnicity. When conducting director searches, the Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which Board nominees are selected.

In recent years, our Nominating and Governance Committee has focused on the refreshment and continued diversity of the Board. Since 2018, we have added three new independent directors: Edward C. Bernard, Allison H. Mnookin and Corey E. Thomas. Through the addition of these directors, the Board of Directors has gained seasoned leaders, as well as particularly relevant experience related to our industry, strategic planning, oversight and execution, business innovation, technology and digital transformation, and risk management. The addition of these directors also reflects our commitment to diversity in the context of considering directors and a balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors as well as fresh perspectives from newer directors.

The average age of our independent director nominees is 61, and the average tenure of our independent director nominees is seven years.

 

Age

 

 

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Tenure

 

 

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Proposal 1: Election of Directors

 

    

 

 

The charts below reflect the diversity of our Board based on the self-identified characteristics of our director nominees, including Mr. Arnold. We have also included diversity statistics that would be required by the new listing rules proposed by Nasdaq in December 2020, which our Nominating and Governance Committee have discussed. The new listing rules, which remain pending with the SEC as of the date of this proxy statement, seek to require all companies listed on Nasdaq’s U.S. exchange to publicly disclose consistent, transparent diversity statistics regarding their board of directors through a uniform disclosure matrix.

One-third of our director nominees are women, which places our Board among the top in our industry in gender diversity.

 

Gender Diversity   Racial and Ethnic Diversity

 

 

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The following diversity statistics are reported in the standardized disclosure matrix that was proposed by Nasdaq in December 2020:

 

 

Board Diversity Matrix (As of March 22, 2021)

 

 

Board Size:

        

Total Number of Directors

     9  

Gender:

     Female      Male    Non-Binary      Gender Undisclosed  

Number of Directors Based on Gender Identity

     3      6    -      -  

Number of Directors Who Identify in Any of the Categories Below:

        

African American or Black

     -      1    -      -  

Alaskan Native or American Indian

     -      -    -      -  

Asian

     -      -    -      -  

Hispanic or Latinx

     -      -    -      -  

Native Hawaiian or Pacific Islander

     -      -    -      -  

White

     3      5    -      -  

Two or More Races or Ethnicities

     -      -    -      -  

LGBTQ+

         -   

Demographic Background Undisclosed

         -   

 

8      

    2021 Proxy Statement


Table of Contents

    

 

LOGO

  

    

    

Proposal 1: Election of Directors

 

    

 

 

Recommendation of the Nominating and Governance Committee

In recommending that the Board nominate each of our current directors to stand for election at the Annual Meeting, the Nominating and Governance Committee evaluated those directors according to the principles set forth in the Corporate Governance Guidelines and considered the pertinent qualifications and experience of each nominee, as further set forth below.

If any of our nominees is unable or unwilling to serve on our Board of Directors, the shares represented by your proxy will be voted for the election of such other person as may be nominated by our Board of Directors. In addition, in full compliance with all applicable state and federal laws and regulations, we will file an amended proxy statement and proxy card that, as applicable:

   

identifies the alternate nominee(s);

 

   

discloses that any such nominee has consented to being named in the revised proxy statement and to serve if elected; and

 

   

includes the disclosure required by Item 7 of Schedule 14A with respect to any such nominee.

We know of no reason why any nominee would be unable or unwilling to serve. All nominees have consented to be named in this proxy statement and to serve if elected.

 

 

Director Qualifications and Experience

The Board believes that the director nominees possess experience, skills and qualifications that are complementary and, together, cover the spectrum of areas that impact the Company’s current and evolving business circumstances. The Board believes that the combination of backgrounds, skills and experiences will result in a Board that continues to be well-equipped to exercise oversight responsibilities on behalf of the Company’s stakeholders.

The table below provides a summary of the skills and qualifications of each director nominee:

 

    Dan    
Arnold    
  Edward    
Bernard    
  Paulett    
Eberhart    
  William    
Glavin Jr.    
  Allison    
Mnookin    
  Anne    
Mulcahy    
  James    
Putnam    
  Richard    
Schifter    
  Corey    
Thomas    

CEO Experience

  LOGO            LOGO        LOGO        LOGO        LOGO        LOGO            LOGO     

Brokerage/Advisory Experience

  LOGO     

  LOGO        LOGO     

  LOGO                LOGO             

Digital Technology Experience

  LOGO     

  LOGO        LOGO     

  LOGO        LOGO     

  LOGO                LOGO     

Mergers & Acquisitions

  LOGO     

      LOGO     

  LOGO        LOGO        LOGO        LOGO        LOGO        LOGO     

Corporate Governance

  LOGO     

  LOGO        LOGO     

  LOGO        LOGO        LOGO        LOGO        LOGO        LOGO     

Financial Literacy

  LOGO     

  LOGO        LOGO     

  LOGO        LOGO        LOGO        LOGO        LOGO        LOGO     

Law/Regulatory

  LOGO     

  LOGO        LOGO     

  LOGO            LOGO        LOGO        LOGO         

Sales & Marketing

  LOGO     

  LOGO        LOGO     

  LOGO        LOGO        LOGO        LOGO            LOGO     

Human Resources

  LOGO     

  LOGO        LOGO     

  LOGO        LOGO        LOGO                LOGO     

Risk Management

  LOGO     

  LOGO        LOGO     

  LOGO        LOGO        LOGO        LOGO            LOGO     

Entrepreneurial Experience

  LOGO            LOGO            LOGO            LOGO            LOGO     

 

2021 Proxy Statement    

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Table of Contents

    

 

LOGO

  

    

    

Proposal 1: Election of Directors

 

    

 

 

Board of Director Nominees

The name, age and a description of the business experience, principal occupation, and past employment and directorships of each of the nominees during at least the last five years are set forth below. In addition, we have summarized the particular experience, qualifications, attributes and skills that led the Board of Directors, including our Nominating and Governance Committee, to determine that each nominee should serve as a director.

 

        
 

Dan H. Arnold

 

BACKGROUND

 

 
 

 

LOGO

 

Age 56

 

Director Since 2017

 

Mr. Arnold has served as our chief executive officer and a director since January 2017. Mr. Arnold has served as our president since March 2015, with responsibility for our primary client-facing functions and long-term strategy for growth. Mr. Arnold served as our chief financial officer from June 2012 to March 2015 and was responsible for formulating financial policy, leading our capital management efforts, and ensuring the effectiveness of the organization’s financial functions. Prior to 2012, he was managing director, head of strategy, with responsibility for long-term strategic planning for the firm, product and platform development, and strategic investments, including acquisitions. He has also served as divisional president of our Institution Services. Mr. Arnold joined the Company in January 2007 following our acquisition of UVEST Financial Services Group, Inc. (“UVEST”), a broker-dealer and investment adviser that provided services to banks, credit unions, and other financial institutions. Prior to joining us, Mr. Arnold worked at UVEST for 13 years, serving most recently as president and chief operating officer. Mr. Arnold earned a B.S. in electrical engineering from Auburn University and holds an M.B.A. in finance from Georgia State University.

 

 
   

QUALIFICATIONS

 

 
   

Mr. Arnold’s pertinent qualifications include his unique perspective and insights into our operations as our current president and chief executive officer, including knowledge of our business relationships, competitive and financial positioning, senior leadership, and strategic opportunities and challenges; operating, business and management experience as the chief financial officer, president, and now chief executive officer of a public company; and expertise in the financial industry and in particular brokerage and investment advisory services, including service as a director of the American Securities Association since April 2019 and past service as a director of the Securities Industry and Financial Markets Association from April 2015 to July 2018.

 

 
   

OTHER PUBLIC COMPANY BOARDS

 

 
       

Current

None

  

Past 5 Years

Optimum Fund Trust

   
        

 

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Proposal 1: Election of Directors

 

    

 

 

          
  Edward C. Bernard  

BACKGROUND

 

 
 

 

LOGO

 

Age 65

 

Director Since 2020

 

Independent

 

Committee:

 

Audit Committee

 

Mr. Bernard served as the vice chair of the board of directors of T. Rowe Price Group, Inc. (“TRP”), a global investment management firm, from 2007 to April 2019. Mr. Bernard served as a vice president of TRP from 1989 to December 2018 and as a member of the management committee of TRP from 2000 to December 2018. He oversaw TRP’s marketing, distribution, client service, information technology and communications activities from 2006 until December 2018. He also served as chair of the board of all sponsored TRP mutual funds and trusts during that period and as president and/or chair of T. Rowe Price Investment Services, a registered broker/dealer, from 1996 to 2018. Mr. Bernard served as a director of TRP from 1999 to April 2019 and currently serves as a director of UTI Asset Management Company of India. He previously served as chair of the board of governors, and as a member of the executive committee, of the Investment Company Institute, the national trade association for the mutual fund industry. Mr. Bernard received his B.A. from Brown University and an M.B.A. from New York University.

 

   
 

QUALIFICATIONS

 

 
 

 

Mr. Bernard’s pertinent qualifications include expertise in the wealth management industry, gained through his 30 years of experience in investment management and leadership roles as a member of the board of governors the Investment Company Institute; his high level of operating, management and strategic planning experience, gained through his executive positions and roles as vice chair of the board of directors of TRP and chair of all sponsored TRP mutual funds and trusts; and his deep understanding of financial product distribution, compliance requirements and the perspectives of advisors and their retail clients, including with respect to the use of technology, product and analytics as a competitive differentiator.

 

   
   

OTHER PUBLIC COMPANY BOARDS

 

 
       

Current

UTI Asset Management Company (India)

  

Past 5 Years

T. Rowe Price Group, Inc.

       
          

 

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Proposal 1: Election of Directors

 

    

 

 

         
  H. Paulett Eberhart  

BACKGROUND

 

  
 

 

LOGO

 

Age 67

 

Director Since 2014

 

Independent

 

Committees:

 

Audit Committee

(Chair)

 

Compensation Committee

 

Ms. Eberhart currently serves as chair and chief executive officer of HMS Ventures, a privately-held business involved with technology services and the acquisition and management of real estate. From 2011 through 2014, she served as president and chief executive officer of CDI Corp. (“CDI”), a provider of engineering and information technology outsourcing and professional staffing services that was then a public company. Ms. Eberhart also served as chair and chief executive officer of HMS Ventures from January 2009 until January 2011. She served as president and chief executive officer of Invensys Process Systems, Inc. (“Invensys”), a process automation company, from January 2007 to January 2009. From 1978 to 2004, she was an employee of Electronic Data Systems Corporation (“EDS”), an information technology and business process outsourcing company that was subsequently acquired by the Hewlett-Packard Company, and held roles of increasing responsibility over time, including senior level financial and operating roles at the company, including as president of Americas of EDS from 2003 until March 2004 and senior vice president of EDS and president of Solutions Consulting from 2002 to 2003. She is a Certified Public Accountant and received her B.S. from Bowling Green State University.

 

  
 

QUALIFICATIONS

 

  
 

 

Ms. Eberhart’s pertinent qualifications include her wealth of managerial and executive experience, gained through her leadership as the chief executive officer of CDI, formerly an NYSE-listed public company, and Invensys, as well as her numerous years of service as an executive officer of EDS, including president of Americas; financial and accounting expertise gained through various other operating and financial positions during her 26 years at EDS; strong knowledge of the intersection of technology, data and finance industries; and knowledge and experience gained through her leadership and service on the boards of other public companies, including as lead director and chair of the governance and risk committee of the board of directors of Anadarko Petroleum Corporation.

 

  
   

OTHER PUBLIC COMPANY BOARDS

 

  
       

 

Current

Valero Corporation

Fluor Corporation

  

 

Past 5 Years

Anadarko Petroleum Corporation

Cameron International Corporation

Ciber Corporation

    
         

 

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Proposal 1: Election of Directors

 

    

 

 

      
  William F. Glavin Jr.  

BACKGROUND

 

  
 

 

LOGO

 

Age 62

 

Director Since 2017

 

Independent

 

Committees:

 

Audit Committee

 

Nominating and

Governance Committee

 

Mr. Glavin served as chair of OppenheimerFunds, Inc., a global asset management firm (“OppenheimerFunds”), from 2009 until 2015, as chief executive officer from 2009 until 2014, and as president from 2009 until 2013. OppenheimerFunds was a majority owned subsidiary of MassMutual Financial Group (“MassMutual”), a mutual life insurance company, at which Mr. Glavin held several senior executive positions prior to joining OppenheimerFunds. He served as co-chief operating officer of MassMutual from 2007 to 2008, executive vice president, U.S. Insurance Group of MassMutual from 2006 to 2008, president and chief executive officer of Babson Capital Management LLC (“Babson”), an asset management firm and subsidiary of MassMutual, from 2005 until 2006 and chief operating officer of Babson from 2003 to 2005. Prior to joining MassMutual, Mr. Glavin was president and chief operating officer of Scudder Investments, an asset management firm, from 2000 to 2003. OppenheimerFunds was acquired by Invesco Ltd. (“Invesco”) in 2019, and Mr. Glavin was designated to serve as a director of Invesco pursuant to a shareholder agreement between MassMutual and Invesco. Mr. Glavin received his B.A. in Economics and Accounting from the College of the Holy Cross.

 

  
 

QUALIFICATIONS

 

  
 

 

Mr. Glavin’s pertinent qualifications include his experience over the course of a 25-year career in the financial services industry, including as a chief executive officer and chief operating officer; extensive experience in strategic planning and talent management, in part based on his success in leading Oppenheimer through a period of significant market turbulence; a deep understanding of financial product distribution, compliance and operations, including technology demands in the financial services industry; and experience overseeing broker-dealers, including MassMutual’s broker-dealer MML Investor Services, LLC.

 

  
   

OTHER PUBLIC COMPANY BOARDS

 

  
   

Current

Invesco Ltd.

  

Past 5 Years

None

  
         

 

2021 Proxy Statement    

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Table of Contents

    

 

LOGO

  

    

    

Proposal 1: Election of Directors

 

    

 

 

      
  Allison H. Mnookin  

BACKGROUND

 

  
 

 

LOGO

 

Age 50

 

Director Since 2018

 

Independent

 

Committees:

 

Compensation Committee

 

Nominating and

Governance Committee

 

Ms. Mnookin has served since July 2017 as a senior lecturer of business administration in the technology and operations management unit at the Harvard Business School. From April 2016 to November 2016, Ms. Mnookin served as the chief executive officer of QuickBase, Inc. (“QuickBase”), a provider of online application software which was spun-off by Intuit, Inc., a business and financial software company, in 2016. Ms. Mnookin was an employee of Intuit from 1998 to 2016 and held roles of increasing responsibility over time, including vice president and general manager of Intuit’s QuickBase business from July 2010 to March 2016. She previously served as a director of Quartz Holding Company, the holding company of QuickBase, from November 2016 until its sale in April 2019, and as a director of Fleetmatics Group PLC, a SaaS fleet management provider, from March 2014 until its sale in November 2016. Ms. Mnookin received her A.B. with honors from Harvard College and her M.B.A. from the Harvard Business School.

 

  
 

QUALIFICATIONS

 

  
 

 

Ms. Mnookin’s pertinent qualifications include her 20-year career in the technology industry, including executive leadership of high-growth cloud and business software companies, as well as service as a director of Bill.com Holdings, Inc., a public company that provides cloud-based software to simplify and automate back-office financial transactions for small- and mid-sized businesses. These experiences, including general management in Intuit’s small business division where she was responsible for leading a portfolio of Intuit’s business products, shaped her understanding of how businesses have transformed their technologies to increase strategic advantage.

 

  
 

OTHER PUBLIC COMPANY BOARDS

 

  
   

Current

Bill.com Holdings, Inc.

  

Past 5 Years

Fleetmatics Group PLC

  
         

 

14      

    2021 Proxy Statement


Table of Contents

    

 

LOGO

  

    

    

Proposal 1: Election of Directors

 

    

 

 

      
  Anne M. Mulcahy  

BACKGROUND

 

  
 

 

LOGO

 

Age 68

 

Director Since 2013

 

Independent

 

Committees:

 

Compensation Committee (Chair)

 

Nominating and

Governance Committee

 

Ms. Mulcahy served as chair of the board of trustees of Save The Children Federation, Inc., a non-profit organization dedicated to creating lasting change in the lives of children throughout the world, from March 2010 to February 2017. She continues to serve as a trustee of Save the Children. She previously served as chair of the board of Xerox Corporation (“Xerox”), a global business services and document technology provider, from January 2002 to May 2010, and chief executive officer of Xerox from August 2001 to July 2009. Prior to serving as a chief executive officer, Ms. Mulcahy was president and chief operating officer of Xerox. Ms. Mulcahy received a B.A. from Marymount College of Fordham University.

 

  
 

QUALIFICATIONS

 

  
 

 

Ms. Mulcahy’s pertinent qualifications include her extensive experience in all areas of business management and strategic execution as she led Xerox through a transformational turnaround; valuable insights into organizational and operational management issues, including business innovation, financial management and talent development; and leadership roles in other public companies, including as lead independent director of Johnson & Johnson, which provide the Board with additional expertise in the area of organizational effectiveness.

 

  
 

OTHER PUBLIC COMPANY BOARDS

 

  
 

Current

Graham Holdings Company

Johnson & Johnson

Williams-Sonoma, Inc.

  

Past 5 Years

Target Corporation

  
         

 

         
  James S. Putnam  

BACKGROUND

 

  
 

 

LOGO

 

Age 66

 

Director Since 2005

 

Independent

 

Chair of the Board

 

Committee:

 

Compensation Committee

 

Mr. Putnam has served as chair of the Board of Directors since March 2017, and he served as our lead director from June 2016 until March 2017. He was employed by LPL Financial from 1983 to 2005 and served as its managing director of national sales from 1987 to 2005. In that role, he was responsible for the recruitment, retention and management of LPL Financial advisors, as well as branch development, marketing and all product sales. Mr. Putnam also previously served as the chief executive officer of Global Portfolio Advisors (“GPA”), formerly a global brokerage clearing services provider that sold substantially all of its operations in 2014. GPA was under common ownership with LPL Financial until 2005, and Mr. Putnam served as chief executive officer of GPA from 2004 until 2014. He began his securities career as a retail representative with Dean Witter Reynolds in 1979. Mr. Putnam received a B.A. from Western Illinois University.

 

  
 

QUALIFICATIONS

 

  
 

Mr. Putnam’s pertinent qualifications include his unique historical perspective and insights into our operations as our former managing director of national sales; operating, business and management experience as the chief executive officer at GPA; and expertise in the financial industry and deep familiarity with our advisors.

 

  
 

OTHER PUBLIC COMPANY BOARDS

 

  
       

Current

None

  

Past 5 Years

None

    
         

 

2021 Proxy Statement    

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Table of Contents

    

 

LOGO

  

    

    

Proposal 1: Election of Directors

 

    

 

 

         
 

Richard P. Schifter

 

BACKGROUND

 

  
 

 

LOGO

 

Age 68

 

Director Since 2005

 

Independent

 

Committee:

 

Nominating and

Governance Committee (Chair)

 

Mr. Schifter is a senior advisor of TPG, a leading global private investment firm. He was a partner at TPG from 1994 through 2013. Prior to joining TPG, Mr. Schifter was a partner at the law firm of Arnold & Porter in Washington, D.C., where he specialized in bankruptcy law and corporate restructuring. He joined Arnold & Porter in 1979 and was a partner from 1986 through 1994. Mr. Schifter currently serves on the board of advisors of the University of Pennsylvania Law School. Mr. Schifter received a B.A. with distinction from George Washington University and a J.D. cum laude from the University of Pennsylvania Law School.

 

  
 

QUALIFICATIONS

 

  
 

Mr. Schifter’s pertinent qualifications include his high level of financial literacy gained through his investment experience as a TPG partner; experience on other company boards and board committees; and nearly 15 years of experience as a corporate attorney with an internationally-recognized law firm.

 

  
 

OTHER PUBLIC COMPANY BOARDS

 

  
 

Current

Avianca Holdings SA

ProSight Global, Inc.

EnLink Midstream, LLC

  

Past 5 Years

American Airlines Group

Caesars Entertainment Corporation

EverBank Financial Corporation

    
         

 

         
 

Corey E. Thomas

 

BACKGROUND

 

  
 

 

 

LOGO

 

Age 45

 

Director Since 2019

 

Independent

 

Committee:

 

Audit Committee

 

Mr. Thomas serves as the chair of the board and chief executive officer of Rapid7, Inc. (“Rapid7”), a public company that provides analytics for security and information technology operations. Mr. Thomas has been chief executive officer and a director since October 2012. From November 2008 to September 2012, Mr. Thomas held various other roles at Rapid7, including serving as chief operating officer. He also currently serves on the board of directors of Blue Cross Blue Shield of Massachusetts, nonprofit private health insurance company, and the Federal Reserve Bank of Boston. Mr. Thomas received a B.E. in electrical engineering and computer science from Vanderbilt University and an M.B.A. from the Harvard Business School.

 

  
 

QUALIFICATIONS

 

  
 

Mr. Thomas’ pertinent qualifications include his general management experience, including his top-level perspective on strategy and organization management as the chief executive officer of a public company; strategic insights with regard to information technology, cybersecurity and global sales and marketing gained through his career in the technology industry; an entrepreneurial mindset focused on solving the needs of clients ranging widely in size and industry; and experience leading operations involving multiple product delivery models, including his past role as a chief operating officer.

 

  
 

OTHER PUBLIC COMPANY BOARDS

 

  
 

Current

Rapid7, Inc.

  

Past 5 Years

None

    
         

In the vote on the election of the director nominees, stockholders may:

 

 

Vote FOR any of the nominees;

 

 

Vote AGAINST any of the nominees; or

 

 

ABSTAIN from voting as to any of the nominees.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES AS A DIRECTOR.

 

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Information Regarding Board and Committee Structure

 

    

 

 

Information Regarding Board and Committee Structure

 

During 2020, the Board of Directors held eight meetings, six of which were held by remote videoconference, one of which was held in person and one of which was held by conference call. Each of our directors attended at least 75% of the aggregate of:

 

 

the total number of meetings of the Board of Directors during 2020; and

 

 

the total number of meetings held by all committees of the Board on which the director served during 2020.

Our Corporate Governance Guidelines provide that each director who is nominated for election is expected to attend the Annual Meeting. Each of the nine nominees for election at the 2020 annual meeting of stockholders attended such meeting, which was held virtually.

Corporate Governance Guidelines, Committee Charters and Code of Conduct

We believe that good corporate governance is important to ensure that we are managed for the long-term benefit of our stakeholders.

Our Board of Directors has adopted our Corporate Governance Guidelines to set clear parameters for the operation of our Board. Our Board of Directors has also adopted charters for the Audit Committee,

Nominating and Governance Committee, and Compensation Committee, as well as a code of conduct for our non-employee directors. We have also adopted a code of conduct that applies to, among others, our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions.

Copies of our Annual Report, committee charters, Corporate Governance Guidelines and codes of conduct are available, free of charge, by writing to us at the following address:

LPL Financial Holdings Inc.

75 State Street, 22nd Floor

Boston, MA 02109

Attn: Investor Relations

Our Annual Report, committee charters, Corporate Governance Guidelines and codes of conduct are also available on our website at www.lpl.com under the “Investor Relations” section. If we make substantive amendments to, or grant waivers from, the code of conduct for certain of our executive officers, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

  Corporate Governance Highlights  
 

We have implemented several important measures that are designed to promote long-term stakeholder value:

 
 

 Our Board consists of a single class of directors elected on an annual basis who may be removed with or without cause. Accordingly, our stockholders are able to register their views on the performance of all directors on an annual basis, enhancing the accountability of our Board to our stockholders.

 
 

 We currently separate the offices of the chair of the Board and chief executive officer of the Company, although the Board maintains the flexibility to select the chair of the Board and its leadership structure based on the criteria that it deems to be in the best interests of the Company and its stakeholders.

 
 

 Our bylaws provide for a majority voting standard in uncontested director elections. We also have adopted a director resignation policy in our Corporate Governance Guidelines pursuant to which a director who does not receive support from holders of a majority of shares voted in an uncontested election must tender his or her resignation and, if our Board accepts the resignation, step down from our Board. This makes director elections more meaningful for our stockholders and promotes accountability.

 
 

 To facilitate Board refreshment, we have adopted a director retirement policy in our Corporate Governance Guidelines pursuant to which any director who reaches the age of 75 while serving as a director will retire from the Board effective as of the end of his or her then current term.

 
 

 We seek an advisory vote on the compensation of our named executive officers annually, which underscores the careful consideration we give to our stockholders’ views on our compensation practices.

 
 

 We have established a compensation clawback policy that enables the Company to recoup cash and equity incentive compensation from executive officers in the event of certain financial restatements.

 
 

 Our executive officers are subject to equity ownership guidelines that set minimum ownership requirements based on a multiple of annual base salary, which aligns the interests of senior management with the interests of our stockholders.

 
 

 We have also adopted equity ownership guidelines for directors, which set minimum ownership requirements based on a multiple of the cash portion of the annual base retainer then in effect.

 
 

 Our Insider Trading Policy prohibits our executives and directors from pledging and hedging our Common Stock, in order to further the alignment between stockholders and our executives that our equity awards are designed to create.

 

 

Director Independence

The listing standards of the Nasdaq Global Select Market (“Nasdaq”) require that, subject to specified exceptions, each member of a listed company’s audit, nominating and governance, and compensation committees be independent. Nasdaq listing rules further provide that a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and compensation committee members are also subject to heightened independence criteria under Nasdaq rules.

After its evaluation of director independence, the Board of Directors has affirmatively determined that Messrs. Bernard, Glavin, Putnam, Schifter and

Thomas, and Mses. Eberhart, Mnookin and Mulcahy are independent directors under applicable Nasdaq rules.

Board Composition and Leadership Structure of the Board of Directors

Our business and affairs are managed under the direction of the Board of Directors. As of March 22, 2021, our Board of Directors was composed of nine directors. Under our Amended and Restated Certificate of Incorporation, the number of directors shall not be fewer than three or more than 15. The authorized number of directors may be changed only by resolution of the Board of Directors.

The Board does not have a fixed policy regarding the separation of the offices of chair of the Board and chief executive officer of the Company. Rather, the Board believes that it should maintain the flexibility to select the chair of the Board and its Board leadership structure, from time to time, based on the criteria that

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

it deems to be in the best interests of the Company and its stakeholders.

At this time, the Company believes that having a separate chief executive officer and chair allows Mr. Arnold to focus on his role as president and chief executive officer and increases the Board’s independence from management, leading to effective monitoring and oversight. As non-executive chair, Mr. Putnam serves as a key source of communication between the independent directors and our chief executive officer, coordinates the agenda for each meeting of the Board and establishes the agenda for and leads meetings of the independent directors.

Board Oversight

Strategic Planning

Oversight of the Company’s business strategy and strategic planning is a key responsibility of our Board.    At the beginning of the year, the chair of the Board and our chief executive officer prepare an annual Board work plan that is tied to our strategic execution framework. As a result, elements of our strategy and operating plans are embedded in the agenda for every quarterly meeting of the Board. All members of our management committee, as well as other senior leaders, regularly attend Board and committee meetings and discuss the Company’s strategy, plans and operating results with the Board and its committees. In addition to these quarterly discussions of strategy topics, the Board dedicates a multi-day session each year to focus on the refinement of the Company’s long-term strategy and related planning. This session, which is led by our Corporate Strategy team and includes senior management, enables a deep discussion between directors and management regarding the Company’s operating environment, near- and longer-term strategic opportunities, current and emerging risks, changing client needs and preferences, and financial outcomes associated with execution of the strategic plan.

The Board also dedicates significant attention to reviewing our capital allocation strategy, which is focused on disciplined capital management to drive long-term stockholder value. Key elements of our current strategy are:

 

   

maintaining a strong and flexible balance sheet;

 

   

prioritizing investments that drive organic business growth;

   

positioning the Company to take advantage of attractive merger and acquisition opportunities; and

 

   

as appropriate, returning capital to stockholders through share repurchases and dividends.

Human Capital Management

Effective human capital management is an important driver of the Company’s continued success. We believe our employees are key to creating long-term value for our stockholders, and that our corporate culture is a critical foundation to the success of our business strategy. We are committed to being a great place to work for our employees and fostering a culture that enables us to build and grow a diverse, equitable and inclusive team. We also recognize that attracting, retaining and developing employee talent helps deliver value to our clients and ensure the sustainability of our business.

The Compensation Committee generally oversees our human capital management, although our Board also provides oversight for certain strategies, programs and practices, including our diversity, equity and inclusion (“DEI”) programs for the Company’s employees and financial advisors. The Compensation Committee and our Board engage with our leadership team on a regular basis on the following human capital management topics:

 

   

employee compensation and benefits programs encompassing salary, equity awards and other programs that are competitive in the market;

 

   

performance management and succession planning for our chief executive officer and each of our other executive officers;

 

   

executive talent acquisition, including forward-looking talent assessments based on our evolving business and strategy;

 

   

employee engagement, including the results of our annual confidential company-wide surveys;

 

   

employee development and retention, including achievement of related key performance metrics;

 

   

employee health and well-being; and

 

   

corporate culture.

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

We are committed to fostering a respectful, rewarding workplace in which all of our employees and advisors are positioned for success. As part of that commitment, in 2020 our Board and the Compensation Committee particularly focused on:

 

   

supporting our employees’ physical, emotional and financial wellness in the context of the uncertainties created by the COVID-19 pandemic and the onset of remote work;

 

   

the focus, transparency and progress of our DEI initiatives, including action plans for increasing representation of women and people of color in our leadership and advisor ranks; and

 

   

continued progress in the cultural transformation that the Company began in 2018 to instill a client-centric mindset and mission-driven alignment throughout the Company.

These areas of focus, among others, are described in more detail in the Company’s 2021 sustainability report, which we expect to issue prior to the Annual Meeting.

The Company’s chief human capital officer and its chief legal officer provide a report to the Board on an annual basis on the Company’s culture, including historical workplace conduct claims, investigations and trends.

Environmental, Social and Governance Program

Our mission is to take care of our financial advisors so they can take care of their clients. We enable our advisors to provide objective financial guidance to millions of American families as they work toward their life’s aspirations. Our advisors are a diverse community of entrepreneurial financial services professionals, and we are committed to supporting their vital work by operating responsibly and ethically, and strengthening trust with our mutual stakeholders. In short, our work makes a positive difference, and we believe that the Company’s sustainability depends not only on the business we conduct but also on how we conduct it.

Our Board supports the Company’s efforts to serve its stakeholders’ interests, including stockholders, employees, advisors and their clients, and local communities. The Nominating and Governance

Committee oversees our environmental, social and governance (“ESG”) program, which is reflected in its committee charter.

Our ESG program was an area of significant focus for the Nominating and Governance Committee in 2020, as it monitored the continuing maturation of the program into a more consistent, enterprise-wide approach. The Company issued its inaugural sustainability report in November 2019 and made progress throughout 2020 in:

 

   

reviewing ESG-related opportunities and risks with the Nominating and Governance Committee and senior management;

 

   

integrating ESG considerations into the Company’s business strategies and practices;

 

   

improving data capture and analytical capabilities to enable quantitative performance measurement;

 

   

formalizing its goal-setting and performance monitoring processes, including quarterly progress reports to the Nominating and Governance Committee;

 

   

clarifying oversight responsibilities among the Board, the Nominating and Governance Committee and the Compensation Committee; and

 

   

improving the scope, quality and comparability of the Company’s ESG disclosures, including through engagement with third-party rating agencies.

The Company’s goal is a sustainability strategy that drives long-term value through strong alignment with the Company’s strategy and culture. Our material ESG topics are keyed to a framework that focuses on three strategic focus areas: our operations, our culture and our business. Within these focus areas, we pursue a variety of programs and initiatives designed to create value for our stakeholders.

To learn more, please see the “Social Responsibility” section of our website at www.lpl.com, through which our 2020 sustainability report is also available. Our 2021 sustainability report, which we expect to issue prior to the Annual Meeting, describes in more detail our ESG progress and milestones over the last year and will also be available on our website.

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

Cybersecurity

The Audit Committee and the Board are each involved in overseeing the Company’s management of cybersecurity risk. We believe that cybersecurity protection is critical to maintaining our proprietary information and the trust of our advisors and their clients, particularly in the context of a remote work environment, market volatility and the accelerating pace of technological change and digital innovation. In 2020, management provided regular updates to the

Audit Committee and the Board on cybersecurity matters, including the threat landscape, third-party risks, projects to strengthen controls and defenses, the Company’s incident response plans and cybersecurity insurance coverage. In 2020, the Board toured the Company’s security and network operations center and also received a presentation from an external consultant on sources of cybersecurity risk for financial services firms, best practices and the role of the Board in addressing cybersecurity risk.

 

 

Our Material ESG Topics

Below are the ESG topics that we believe are most significant to our stakeholders and to our ability to create long-term value

 

    

 

Important to LPL

 

 

 

Very important to LPL

 

 

 

Most important to LPL

 

   
Environment  

 

•  Energy Efficiency

 

•  Greenhouse Gas
   Emissions

 

•  Renewable Energy

 

•  Waste and Water
   Management

 

 

 

•  Climate Risk

 

 

 

•  Reduction of Paper Use

 

   
Social  

 

•  Local Employment

 

•  Human Rights and Supply
   Chain Management

 

 

 

•  Developing Financial
   Literacy

 

•  Employee Compensation

 

•  Employee Well-being

 

•  Training and Professional
   Development

 

•  Employee Volunteering

 

•  Corporate Giving

 

•  Service Affordability

 

 

 

•  Attracting and Retaining
   Talent

 

•  Advisor Diversity, Equity
   and Inclusion

 

•  Employee Diversity, Equity
   and Inclusion

 

•  Employee Engagement

 

   
Governance      

 

•  Preventing Anti-
Competitive    Practices

 

•  Executive Compensation

 

 

 

•  Sustainable Investing

 

•  Board Diversity

 

•  Legal and Regulatory
   Compliance

 

•  Corporate Governance and
   Risk Management

 

•  Business Ethics

 

•  Consumer and Advisor
   Protection

 

•  Cybersecurity

 

•  Data Privacy and
   Protection

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

Stockholder and Client Engagement

We interact with our stockholders in a variety of ways and value the input that we receive from them. We provide our Board with regular updates on our investor relations program, including engagements with stockholders and analysts, and related sentiment and feedback themes. In addition, we have a structured, proactive engagement program that enables our directors to hear directly from stockholders outside the presence of senior management. Our goal is to ensure that our Board understands stockholders’ observations and topics of interest, including with regard to the Company’s performance, strategy, corporate governance and ESG initiatives.

Our directors also engage directly with our financial advisor clients. In addition to engagement opportunities through our advisor conferences, our directors meet annually with clients in order to hear first-hand feedback on areas of importance to them. These sessions are structured to present directors with a diverse range of client practices, programs and experiences, and are intended to ensure that our Board understands our clients’ current and future needs, particularly in the context of an evolving competitive environment, and that our company is delivering what advisors need in order to deliver sustained value to their clients.

Annual Board Evaluation

Our Board recognizes that a robust and constructive self-evaluation process is an important aspect of good corporate governance and board effectiveness. The Nominating and Governance Committee conducts an annual evaluation of our Board, each of its standing committees and individual directors following the end of each year. The goal is to provide a meaningful assessment of whether the Board’s performance, operations, size and composition are effective for the Company, both in the short- and longer-term.

Following discussion by the Nominating and Governance Committee, the 2021 annual evaluation included the following elements:

 

   

a written questionnaire completed by each director;

 

   

a written questionnaire for each Board committee completed by each committee member;

   

individual director interviews conducted by the chair of the Board and our chief legal officer (who elicited confidential feedback about the chair from directors outside the presence of the chair); and

 

   

written questionnaires completed by our executive officers.

The director and executive officer questionnaires provided feedback on an unattributed basis and informed the individual director interviews, which provided further opportunity for candid discussion.

The primary topics of the 2021 annual evaluation were:

 

   

Board composition, diversity and size, including desired director skills and attributes;

 

   

quality of materials and information provided to the Board;

 

   

structure and conduct of Board meetings, including the effectiveness of virtual meetings;

 

   

Board leadership and decision-making processes;

 

   

Board committee structure and performance;

 

   

Board culture and dynamics;

 

   

Board and director interactions with management;

 

   

the efficacy of the annual evaluation process; and

 

   

effectiveness of Board oversight, including attention to issues and opportunities that affect long-term stockholder value.

As part of the 2021 annual evaluation, directors had the opportunity to provide feedback on individual directors, in order to help improve performance or contributions to the Board.

Our Board discussed the results of the 2021 annual evaluation in a closed session led by the chair of the Nominating and Governance Committee.

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

Board Committees

The Board of Directors has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Compensation Committee, each with the composition and responsibilities described below. The members of each committee were appointed by the Board of Directors and will serve until their successors are

elected and qualified, unless they are removed earlier or resign. In addition, from time to time, special committees may be established under the direction of the Board of Directors when necessary to address specific issues. Each of the standing committees of our Board is composed solely of independent directors.

 

 

The table below reflects the composition of the Board’s three standing committees as of March 22, 2021:

 

        

          Audit Committee          

 

 

Nominating and Governance Committee

 

 

Compensation Committee

 

         

 

 Edward Bernard

 

      

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 H. Paulett Eberhart

 

      

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LOGO

 

         
 William F. Glavin, Jr.       

LOGO

 

 

LOGO

 

   
       

 Allison H. Mnookin

          

LOGO

 

 

LOGO

 

         
 Anne M. Mulcahy           

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LOGO

 

       

 James S. Putnam

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 Richard P. Schifter           

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 Corey E. Thomas

 

      

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  LOGO

 

Member

 

LOGO

 

Chair

  LOGO  

Chair of the Board

 

Our Nominating and Governance Committee will reassess the composition and leadership of the standing committees of the Board following the election of directors at the Annual Meeting. Following its assessment after the 2020 annual meeting of stockholders, the Nominating and Governance Committee recommended the appointment of Mr. Bernard to the Audit Committee and otherwise recommended to maintain the composition and leadership of the Board’s committees.

Audit Committee

Our Audit Committee is composed of the following members: Edward C. Bernard, H. Paulett Eberhart, William F. Glavin, Jr. and Corey E. Thomas. Ms. Eberhart serves as the chair of the Audit Committee.

Each of the Audit Committee members is independent under the listing standards of Nasdaq, including under Rule 10A-3 of the Exchange Act. None of the Audit Committee members is an employee of ours or any of our subsidiaries, nor simultaneously serves on the audit committees of more than three public companies, including ours. All

of the Audit Committee members meet the requirements for financial literacy and are able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement. Our Board has affirmatively determined that each of Ms. Eberhart and Mr. Bernard qualifies as an audit committee financial expert under the applicable rules and regulations of the SEC.

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

 

 

Our Audit Committee is responsible for, among other things, the appointment, compensation, oversight and replacement, if necessary, of the Company’s independent auditor and assisting the Board in overseeing and monitoring:

 
 

 the integrity of the Company’s financial statements and other financial information provided by the Company to its stockholders;

 
 

 the integrity of the accounting and financial reporting processes of the Company, and the audit of the Company’s financial statements;

 
 

 the Company’s compliance with legal, regulatory and public disclosure requirements;

 
 

 enterprise risk management, privacy and data security (except for risks assigned to other committees or retained by the Board);

 
 

 the Company’s independent auditor, including its qualifications, performance and independence; and

 
 

 the performance of the Company’s internal audit function.

 

The Audit Committee reviews and discusses our annual and quarterly financial statements, our disclosures in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual and quarterly reports filed with the SEC, and our earnings announcements prior to their release. The Audit Committee also reviews matters related to the Company’s related party transaction policy, the operations of the Company’s Technology department and the Company’s whistle-blower and integrity program. For additional information on the Audit Committee’s role in our enterprise risk management framework, please see    “ — Risk Management and Compensation Policies and Practices.”

In addition, the Audit Committee is responsible for overseeing the fee negotiations associated with our retention of Deloitte & Touche LLP, our independent registered public accounting firm (“Deloitte”).

The Audit Committee has authority under its charter to obtain advice and assistance from outside legal counsel, accounting or other outside advisors as deemed appropriate to perform its duties and responsibilities.

The Audit Committee met seven times during 2020.

Nominating and Governance Committee

Our Nominating and Governance Committee is composed of the following members: William F. Glavin, Jr., Allison H. Mnookin, Anne M. Mulcahy and Richard P. Schifter. Mr. Schifter serves as the chair of the Nominating and Governance Committee.

Each member of the Nominating and Governance Committee is independent under the listing standards of Nasdaq.

 

 

 

The Nominating and Governance Committee is responsible for:

 
 

 developing a profile of attributes that a potential director should possess in order to contribute effectively to the Board, taking into account the overall diversity and composition of the Board;

 
 

 identifying, evaluating and recruiting qualified persons to serve on our Board of Directors;

 
 

 selecting, or recommending to the Board for selection, nominees for election as directors;

 
 

 reviewing and recommending the composition of the Board’s standing committees;

 
 

 reviewing and assessing the Company’s corporate governance guidelines;

 
 

 overseeing our ESG program; and

 
 

 annually evaluating the performance, operations, size and composition of our Board of Directors.

 

 

As described under “Board Oversight — Environmental, Social and Governance Program,” the Nominating and Governance Committee was particularly focused in 2020 in overseeing the progress of our ESG program, including improvements to the scope and quality of the Company’s internal and external ESG reporting. In addition, the Nominating and Governance Committee actively monitored corporate governance trends and best practices.

The Nominating and Governance Committee met four times during 2020.

Compensation and Human Resources Committee

The Compensation Committee is composed of the following members: H. Paulett Eberhart, Allison H. Mnookin, Anne M. Mulcahy and James S. Putnam. Ms. Mulcahy serves as the chair of the Compensation Committee.

 

 

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Each member of the Compensation Committee is independent under the listing standards of Nasdaq, including the heightened standards that apply to compensation committee members. The Compensation Committee is composed entirely of “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.

 

 

 

The Compensation Committee is responsible for:

 
 

 reviewing and approving goals and objectives relevant to executive officer compensation and evaluating the performance of executive officers in light of those goals and objectives;

 
 

 reviewing and approving the chief executive officer’s compensation based upon the Compensation Committee’s evaluation of the chief executive officer’s performance;

 
 

 reviewing and approving executive officer compensation;

 
 

 reviewing the performance, development and leadership capabilities of senior management and succession planning strategies for such senior management;

 
 

 making recommendations to the Board regarding the adoption of new incentive compensation and equity-based plans, and administering our existing incentive compensation and equity-based plans;

 
 

 making recommendations to the Board regarding compensation of our directors and applicable stock ownership and holding guidelines;

 
 

 reviewing and approving the general design and terms of any significant non-executive compensation and benefits plans;

 
 

 reviewing our DEI policies, programs and initiatives;

 
 

 reviewing our significant policies, practices and procedures concerning human resource-related matters;

 
 

 establishing and monitoring compliance with stock ownership and holding guidelines applicable to executive officers; and

 
 

 reviewing an annual compensation risk assessment.

 

As described under “Board Oversight — Human Capital Management,” in the context of the COVID-19 pandemic and the social events of 2020, the Compensation Committee devoted particular focus to

human capital management matters, including the priorities, transparency and progress of our employee and advisor DEI programs, and non-executive compensation, including pay equity.

In addition, the Compensation Committee continued to focus on robust performance management, and ongoing development and coaching for future leadership positions, through:

 

   

annual succession planning for all managing director roles to ensure we are identifying and investing in key talent for critical positions; and

 

   

talent reviews of individual leaders at quarterly committee meetings to provide the Compensation Committee with insight into our talent pipeline, as well as development feedback to those leaders.

The Compensation Committee has authority under its charter to access such internal and external resources, including retaining legal, financial or other advisors, as the Compensation Committee deems necessary or appropriate to fulfill its responsibilities. In 2020, the Compensation Committee engaged an independent compensation consultant, Meridian Compensation Partners, LLC (the “Compensation Consultant”), to advise on compensation matters and provide experiential guidance on what is considered fair and competitive practice in our industry, primarily with respect to the compensation of our executive officers, and also with regard to director compensation.

The Compensation Committee has the authority to delegate to subcommittees of the Compensation Committee any responsibilities of the full committee. The Compensation Committee may also delegate to a committee of one or more directors, or one or more of our executive officers, subject to certain restrictions, the power to grant restricted stock units, performance stock units or other equity awards, and amend the terms of such awards, pursuant to our equity plans. References to the Compensation Committee in this proxy statement also refer to its subcommittees and its delegates, where applicable.

The Compensation Committee met six times during 2020.

 

 

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Information Regarding Board and Committee Structure

 

    

 

 

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee is or was during 2020 an officer or employee of ours or any of our subsidiaries. Mr. Putnam, a member of the Compensation Committee, served as an officer of LPL Financial prior to 2006. None of our executive officers serves or has served as a member of the board of directors, compensation committee, or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.

Risk Management and Compensation Policies and Practices

We employ an enterprise risk management (“ERM”) framework that is intended to address key risks and responsibilities, enable us to execute our business strategy, and protect our firm and its franchise. Our framework is designed to promote clear lines of risk management accountability and a structured escalation process for key risk information and events. In addition to the ERM framework, we have written policies and procedures that govern the conduct of business by our employees and independent financial advisors, and the terms and conditions of our relationships with financial product sponsors.

Our risk management governance approach is discussed in our Annual Report under “Item 7A. Quantitative and Qualitative Disclosures About Market Risk Risk Management.” This approach includes the Board of Directors, the Audit Committee and the Compensation Committee, as well as the Company’s Risk Oversight Committee (the “ROC”) and its subcommittees, the Company’s Internal Audit department, the Company’s Compliance, Legal and Risk department, and business line management.

Role of the Audit Committee

In addition to its other responsibilities, the Audit Committee reviews our policies with respect to risk assessment and risk management, as well as our major regulatory, litigation and financial risk exposures and the steps management has undertaken to monitor and control them. The Audit Committee generally provides reports to the Board at each of the Board’s regularly scheduled quarterly meetings.

The Audit Committee has mandated that the ROC oversee our risk management activities, including those of our subsidiaries. The Company’s chief legal officer provides updates on pertinent ROC discussions to the Audit Committee on a regular basis and, if necessary or requested, to the Board. In addition, our Internal Audit department provides independent and objective assurance of the effectiveness of the Company’s governance, risk management and internal controls by conducting risk assessments and audits designed to identify and cover important risk categories. Our Internal Audit department reports directly to the Audit Committee, which provides oversight of the department’s activities and approves its annual plan. Our Internal Audit department provides regular reports to the ROC and reports to the Audit Committee at least quarterly.

Role of the Compensation Committee

In addition to its other responsibilities, the Compensation Committee assesses whether our compensation arrangements encourage inappropriate risk-taking, and whether risks arising from our compensation arrangements are reasonably likely to have a material adverse effect on the Company.

The Compensation Committee has reviewed and evaluated the development and implementation of our compensation practices across our Company. It is our belief, and the belief of the Compensation Committee, that our compensation practices do not encourage inappropriate actions by our executive officers or other employees and are not reasonably likely to have a material adverse effect on the Company. Specifically, we believe that our compensation practices avoid:

 

 

a compensation mix overly weighted toward annual bonus awards;

 

 

an excessive focus on short-term equity incentive awards that could cause behavior to drive short-term stock price gains in lieu of long-term value creation; and

 

 

unreasonable financial goals or thresholds that could encourage efforts to generate near-term revenue with an adverse impact on long-term success.

 

 

 

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We believe that the following serve to mitigate the potential for adverse risk that may be caused by the actions of our executive officers or other key employees:

 

 

defined processes for developing strategic and annual operating plans, and approving capital investments;

 

 

Board approval of the Company’s annual corporate goals, which aligns these goals with our annual operating plan, strategic plan and compensation programs to achieve an appropriate risk-reward balance;

 

 

annual review of peer group practices and compensation surveys to develop compensation arrangements and practices;

 

 

annual incentive awards based on a review by the Compensation Committee of a variety of metrics, including both financial performance and strategic achievements, reducing the potential to concentrate on one metric as the basis of an annual incentive award;

 

 

mix of fixed and performance-based, annual and long-term, and cash and equity compensation, encouraging decisions and actions that are in our long-term best interests;

 

 

specified discretionary authority is maintained by the Compensation Committee to adjust annual bonus funding and payments, which reduces business risk associated with our cash bonus program;

 

 

long-term equity incentive awards, including performance-based awards, vest over a period of time, and as a result of the longer time horizon to receive the value of an equity award, the prospect of short-term or risky behavior is mitigated;

 

 

use of more than one long-term equity incentive vehicle mitigates the risk of any one vehicle creating undue incentive to take on excessive risk; and

 

 

stock ownership requirements for all executive officers, a “claw-back” policy and anti-hedging policies, which help to mitigate the possibility of short-term risk-taking at the expense of long-term value creation.

 

 

 

Communicating with the
Board of Directors

 
 

Any stockholder who wishes to contact a member of our Board of Directors may do so by writing to the following address:

 

 
 

Board of Directors
c/o Secretary
LPL Financial Holdings Inc.
75 State Street
Boston, MA 02109

 

 
 

Communications will be distributed to the chair of the Board or the other members of the Board as appropriate depending on the facts and circumstances outlined in the communication received.

 
 

 

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Board of Director Compensation

 

    

 

 

Board of Directors Compensation

 

Director Compensation Policy

Our director compensation policy provides that each of our non-employee directors receives an annual service retainer of $235,000. Of this amount, $80,000 is paid in a lump sum in cash (or, at the director’s election, in the form of shares of our Common Stock as described below) and $155,000 is paid in the form of restricted shares of our Common Stock granted under our Amended and Restated 2010 Omnibus Equity Incentive Plan (the “2010 Plan”).

The following table sets forth the additional annual service retainers under our director compensation policy that a committee member received for his or her additional duties during 2020:

 

    

Chair

 

    

Each Other 
Member 

 

 

Audit Committee

    $      30,000        $          15,000 

Compensation Committee

    $      25,000        $          12,500 

Nominating and Governance Committee

    $      20,000        $          10,000 

Our director compensation policy also provides that the chair of the Board receives an additional annual service retainer of $140,000 in connection with his or her additional duties. The retainers for committee and chair service are paid in cash in installments following the end of each quarter of service. Our directors are also reimbursed for expenses incurred in connection with their attendance at Board and committee meetings. Mr. Arnold does not receive additional compensation for his service as a director.

As noted above, in 2020, each of our non-employee directors was granted an annual award of restricted stock having a grant date value of $155,000 (based on the average of the closing price of our Common Stock for the trailing thirty consecutive trading days including the grant date). These awards vest in full on May 4, 2021, which is the day prior to the Annual Meeting, generally subject to the director’s continued service through that date. We believe these equity grants serve to further align our directors’ interests with the interests of our stockholders.

Our director compensation policy permits non-employee directors to make an election to be issued, in lieu of the cash portion of their annual service retainer, fully vested shares of our Common Stock. In 2020, the number of fully vested shares was determined by dividing $80,000 by the average of the closing price of our Common Stock for the trailing thirty consecutive trading days ending on and including the date such shares were granted.

The Compensation Committee reviews the director compensation practices of our compensation peer group annually, as described under “Benchmarking” in the Compensation Discussion and Analysis, with the assistance of the Compensation Consultant. The Compensation Committee did not recommend any changes to our director compensation policy in 2020, as result of the 2020 benchmarking analysis or otherwise.

Deferred Compensation Plan

Under the LPL Financial Holdings Inc. Non-Employee Director Deferred Compensation Plan (the “Deferred Plan”), non-employee directors may make an annual election to defer receipt of the equity portion, or both the equity and cash portion, of their annual service retainer for Board service. For directors who make such a deferral election, a book-entry account is established and credited with a number of deferred stock units granted under our 2010 Plan equal in value to the shares and, if so elected by the director, the cash, that would otherwise be granted or paid absent such deferral election, with each deferred stock unit representing the right to receive a share of our Common Stock. Dividend equivalent rights are credited to a director’s book-entry account, in the form of additional stock units, on both vested and unvested deferred stock units. All such shares will be paid only upon a director’s separation from service or a change in control, as defined in the Deferred Plan.

Equity Ownership Guidelines

Our Corporate Governance Guidelines include equity ownership guidelines for non-employee directors. Within five years of the date of his or her election to the Board, each non-employee director must maintain ownership of shares of Common Stock equal to five times the cash portion of the annual service retainer for Board service then in effect, not including any retainers for committee or chair service. All shares owned outright and beneficially owned by a non-employee director, including all shares of unvested restricted stock and all shares issuable pursuant to vested and unvested deferred stock units, are counted in determining compliance with such minimum ownership requirement. As of March 8, 2021, each of our non-employee directors satisfied this minimum ownership requirement.

 

 

 

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Board of Director Compensation

 

    

 

 

The following table sets forth the compensation received by each non-employee director for service on the Board for the fiscal year ended December 31, 2020. In addition to the payments disclosed in the table below, our directors were reimbursed for out-of-pocket expenses incurred in connection with their attendance at Board and committee meetings.

 

Name

 

  

Fees Earned
or Paid in Cash
($)

 

  

Stock

Awards

($)(1)(2)

 

    

Total
($)

 

 

 Edward C. Bernard

   $ 101,652     (3)(4)    $ 179,977       (5)      $ 281,629     

 H. Paulett Eberhart

   $ 135,402     (4)    $ 179,977       (5)      $ 315,379     

 William F. Glavin, Jr.

   $ 117,902     (4)    $ 179,977       (5)      $ 297,879     

 Allison Mnookin

   $ 102,500        $ 179,977       (5)      $ 282,477     

 Anne M. Mulcahy

   $ 127,902     (4)    $ 179,977        $ 307,879     

 James S. Putnam

   $ 245,402     (4)    $ 179,977        $ 425,379     

 James S. Riepe(6)

   $ 6,250        $        $ 6,250     

 Richard P. Schifter

   $ 112,902     (4)    $ 179,977       (5)      $ 292,879     

 Corey E. Thomas

   $ 107,902     (4)    $ 179,977       (5)      $ 287,879     

            Non-Employee Director Compensation Mix

 

 

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(1)

The amounts shown in this column represent the aggregate grant date fair value of restricted stock awards granted to our non-employee directors in 2020. The aggregate grant date fair value of the restricted stock awards, as determined under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, was determined by multiplying the number of shares underlying the award by $64.74, which was the closing price per share of our Common Stock on the grant date. For information regarding the number of shares of restricted stock held by each non-employee director as of December 31, 2020, see the table in footnote 2 below. The amounts shown in this column do not include the value of any fully vested shares of Common Stock that certain of our non-employee directors elected to receive in lieu of the cash portion of the annual service retainer. In accordance with SEC rules, such amounts are shown in the column “Fees Earned or Paid in Cash”.

 

(2)

The following table shows the aggregate number of shares of restricted stock held by each of our non-employee directors as of December 31, 2020. All restricted stock awards reported in the table below will vest in full on May 4, 2021.

 

 Name

 

  

Restricted  
Stock Awards  

(#)

 

 Edward C. Bernard

   2,780   

 H. Paulett Eberhart

   2,780   

 William F. Glavin, Jr.

   2,780   

 Allison Mnookin

   2,780   

 Anne M. Mulcahy

   2,780   

 James S. Putnam

   2,780   

 Richard P. Schifter

   2,780   

 Corey E. Thomas

   2,780   

 

(3)

This amount includes Mr. Bernard’s prorated retainer for service on the Audit Committee following his appointment on May 6, 2020.

 

(4)

This amount includes the value of fully vested shares of Common Stock that the director elected to receive in lieu of the cash portion of the director’s annual service retainer. The aggregate grant date fair value of these shares, as determined under FASB ASC Topic 718, was determined by multiplying the number of shares underlying the award by $64.74, which was the closing price per share of our Common Stock on the grant date. Each of Messrs. Bernard, Glavin, Schifter and Thomas delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the fully vested shares of Common Stock in lieu of the cash portion of the annual service retainer.

 

(5)

Each of Messrs. Bernard, Glavin, Schifter and Thomas, and Mses. Eberhart and Mnookin delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the equity portion of his or her annual service retainer.

 

(6)

Mr. Riepe served as a director until May 6, 2020. This amount includes the prorated portion of his retainer for service during 2020 on the Audit Committee.

 

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Compensation Discussion and Analysis

 

    

 

 

Compensation Discussion and Analysis

Executive Summary

This Compensation Discussion and Analysis (“CD&A”) describes the actions taken by the Compensation Committee with respect to 2020 compensation for our executive officers, including our named executive officers (“NEOs”). Under SEC rules, our NEOs for 2020 were:

 

Executive

 

  

Title

 

Dan H. Arnold

   President and Chief Executive Officer

Matthew J. Audette

   Chief Financial Officer

Scott Seese

   Managing Director, Chief Information Officer

Dayton Semerjian

   Managing Director, Chief Customer Care Officer

Richard Steinmeier

   Managing Director, Divisional President, Business Development

Summary of 2020 Corporate Performance

The following summary of the Company’s corporate performance is intended to provide additional context for the Compensation Committee’s evaluation of the Company’s performance in 2020 for compensation-related purposes. As discussed below, the Compensation Committee established a bonus pool funding framework in January of 2020 that assigned equal weighting to achievement of the Company’s financial performance targets and its pre-established 2020 corporate goals. The Compensation Committee did not adjust either the Company’s financial performance target or any of its corporate goals in 2020 as a result of the COVID-19 pandemic.

Adjusted EBITDA was the primary metric used in the bonus pool funding framework to evaluate the Company’s financial performance in 2020, because the Compensation Committee believes that it is a useful metric in understanding the Company’s earnings from operations. The Compensation Committee also considered the Company’s gross profit and expense management results, and their effect on the Company’s Adjusted EBITDA results, in determining bonus payouts. EBITDA, Adjusted EBITDA, gross profit and core G&A are non-GAAP financial measures that are described under “Non-GAAP Financial Measures” in Appendix A.

Under the bonus pool funding framework, the Compensation Committee assessed the achievement of the following four corporate goals for 2020, which were approved by the Board of Directors at the beginning of the year along with underlying key performance metrics and program deliverables:

 

   

Drive growth and expand our addressable market (the “Growth Goal”);

 

   

Develop an industry-leading client care experience (the “Service Goal”);

 

   

Help our advisors run successful businesses (the “Support Goal”); and

 

   

Improve execution and infrastructure (the “Execution Goal”).

In the context of a volatile operating environment, the Company delivered solid financial results in 2020. The Company’s gross profit of $2.1 billion in 2020 decreased 3% from $2.2 billion in 2019, primarily as a result of lower short-term interest rates in response to the COVID-19 pandemic. This macroeconomic challenge was partially offset by the Company’s core business results for 2020, which included a record level of organic net new assets. Core general and administrative expense (“core G&A”) was $925 million, within the Company’s target range for 2020 and an increase of 6.5% year-over-year as the Company maintained its focus on expense discipline while increasing investments to drive additional growth. The decrease in gross profit and increase in investments in 2020 resulted in Adjusted EBITDA of $946 million, a decrease of 12% year-over-year and below the Company’s 2020 performance target for purposes of the annual bonus plan. The Company’s solid financial performance in 2020, despite market volatility, was reflected in share price appreciation of 13% over the 12-month period. For additional discussion and analysis of the Company’s 2020 financial performance, please refer to the Annual Report.

 

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Compensation Discussion and Analysis

 

    

 

 

As further discussed below, the Compensation Committee determined that the Company performed well against its four 2020 corporate goals, particularly in the context of the pandemic. The Company’s total advisory and brokerage assets ended the year at a new high of $903 billion, a year-over-year increase of 18%, which was driven by continued organic growth and equity market appreciation. The Company’s total organic net new assets for 2020 were $56 billion, translating to a 7% annualized growth rate compared to 5% in 2019. The year-over-year increase was driven by recruited assets of $40.9 billion, compared to $35.0 billion in 2019, and improved asset retention year-over-year. The Company’s advisors continued to shift their business mix from brokerage to advisory solutions, and increase their use of both the Company’s corporate advisory and centrally managed platforms, which benefit the Company’s gross profit return on assets over time. In addition, the Company made progress in its multi-year efforts to expand its addressable markets through new affiliation models and to transform its service model into a client care model. The Company’s net promoter scores increased by 15 points year-over-year as it focused on delivering differentiated service and support for its advisors through expanded capabilities and LPL Business Solutions. Finally, the Company executed well against its acquisition strategy, completing three transactions in 2020, and with respect to the operational challenges resulting from the pandemic, including with regard to employee health and safety, service quality and continuity, and technology systems performance and resiliency. In short, the Company’s performance in 2020 enhanced the overall appeal of its model and value proposition for advisors and their clients, which we believe will drive long-term growth and shareholder value.

After taking into account the Company’s overall performance against financial and non-financial goals for 2020, the Compensation Committee determined that the 2020 bonus pool would be funded above target level, and the annual cash bonus awards to our NEOs (as well to our other executives and employees) would generally be paid at target, or above target level for high performing employees, including our NEOs. This approach is consistent with our compensation philosophy and past practice.

 

 

 

Gross profit decreased to $2.1 billion in 2020, down 3% from the prior year, primarily as a result of lower short-term interest rates resulting from the COVID-19 pandemic.

Gross Profit

($ in millions)

 

 

LOGO

 

 

The decrease in the Company’s gross profit combined with continued investments in organic growth led to Adjusted EBITDA of $946 million. This result was down 12% year-over-year and below our 2020 performance target, which was set prior to the pandemic and not subsequently adjusted.

Adjusted EBITDA

($ in millions)

 

 

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Compensation Discussion and Analysis

 

    

 

 

Total advisory and brokerage assets, which reflect market movement in addition to net new assets, were $903 billion as of December 31, 2020, an 18% increase from the prior year-end balance of $764 billion. Total net new assets in 2020 were $60.2 billion, including $4.0 billion from completed acquisitions.

Total Brokerage and Advisory Assets

($ in billions)

 

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As of December 31, 2020, advisory assets, which are a component of total advisory and brokerage assets, had grown to $461 billion, up 26% from the prior year, and represented 51% of total advisory and brokerage assets at year-end. Corporate advisory assets and centrally managed assets each grew 28% year-over-year.

Advisory Assets

($ in billions)

 

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Capital was returned to stockholders in 2020 through $79 million of dividends and $150 million of share repurchases. These shareholder capital returns of $229 million translated to $2.84 per share. The Company suspended share repurchases in early 2020 in light of the business and financial uncertainties created by the pandemic and focused capital deployment on organic and inorganic growth opportunities.

Capital Returned to Shareholders

($ in millions, except amount per share)

 

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Compensation Discussion and Analysis

 

    

 

 

Compensation Philosophy

Under the oversight of the Compensation Committee, our executive compensation program rewards sustained positive financial and operating performance. Our executive compensation program is designed to align our executives’ compensation to the performance of the Company while avoiding practices that may create unwarranted risk.

The design and operation of our executive compensation program reflect the following basic objectives:

  aligning the interests of our executive officers with the interests of our Company and its stakeholders;

  linking our executive officers’ compensation to the achievement of both short-term and long-term strategic and operational goals; and

  attracting, motivating and retaining highly qualified executive officers who are passionate about the mission of our Company.

We seek to achieve these objectives through the following guiding compensation principles:

  paying compensation that is competitive with that offered for similar positions within our peer companies;

  striking an appropriate balance between current and long-term compensation as well as cash and equity compensation;

  linking short-term and long-term total compensation largely to objective and, to the extent possible, quantifiable performance measures;

  rewarding Company and business unit performance, as well as individual performance and potential; and

  using equity-based compensation for a significant portion of total compensation.

 

 

 

Compensation Governance

 

In order to implement our compensation philosophy, and to promote strong governance and alignment with stockholder interests, we do the following:

 
 

maintain a pay mix that is weighted more heavily on variable, performance-based compensation than fixed compensation;

 
 

maintain stock ownership guidelines for executives;

 
 

maintain a compensation claw-back policy that enables the Company to recoup cash and equity incentive compensation from executive officers in the event of certain financial restatements;

 
 

retain an independent compensation consultant engaged by, and reporting directly to, the Compensation Committee;

 
 

benchmark executive compensation against peers with which we compete for talent;

 
 

conduct annual risk assessments of our executive compensation policies and practices;

 
 

hold an annual stockholder “say on pay” vote; and

 
 

hold Compensation Committee executive sessions without management present.

 

In addition, we do not do the following:

 
 

re-price stock options without stockholder approval;

 
 

permit hedging transactions or short sales by executives;

 
 

permit pledging or holding company stock in a margin account by executives;

 
 

enter into individual employment agreements; or

 
 

provide excise tax gross-ups to executives.

 

We have designed our compensation practices to align with competitive market practices, strengthen the alignment between compensation paid and Company performance, and provide greater transparency for our employees and investors. These practices are discussed below.

 

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Compensation Discussion and Analysis

 

    

 

 

Components of Compensation

The core components of our executive compensation program are:

 

 

Base salary;

 

 

Annual cash bonus awards;

 

 

Long-term equity incentive (“LTI”) awards; and

 

 

Severance and change-in-control benefits.

The Compensation Committee retains flexibility to determine the appropriate level and mix of the various compensation components consistent with our business needs. The mix of compensation components is intended to provide our NEOs with a competitive total compensation package that both rewards short-term results and drives long-term corporate performance.

 

The annual cash bonus awards incentivize our NEOs to achieve pre-determined annual Company and individual performance goals. The long-term equity incentive awards incentivize our NEOs to increase stockholder value over a sustained period of time and to achieve pre-determined long-term Company performance goals, which align the interests of our NEOs with the interests of our stockholders.

The charts below show that variable compensation comprised 88% of Mr. Arnold’s 2020 total target compensation mix and 77% of our other NEOs’ 2020 average total target compensation mix. Total target compensation consists of base salary, target annual cash bonus and the grant date fair value of LTI awards, with performance stock units (“PSUs”) valued at target.

 

 

 

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Base Salary

 

We pay our NEOs base salaries in order to provide a level of competitive and stable income. The base salaries of our NEOs are set based on the responsibilities of the individual, taking into account the individual’s skills, experience and prior compensation levels, as well as market compensation levels of our peer group and other survey data, as described below. The Compensation Committee reviews base salaries for our NEOs on an annual basis, although salary changes may occur on a less frequent basis.

Generally, the Compensation Committee will increase an NEO’s base salary when individual performance, job scope or market compensation data indicate that an increase is warranted. As the responsibilities of our NEOs increase in the future, the Compensation Committee generally plans to adjust compensation through increases in the size of long-term equity awards and, to a lesser extent, annual cash bonus opportunities, rather than through adjustments to base salaries.

 

 

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With regard to our NEOs’ base salaries for 2020:

 

 

The base salaries of Messrs. Arnold, Audette, Seese and Semerjian were unchanged from 2019 at $850,000, $600,000, $500,000 and $500,000, respectively; and

 

 

Mr. Steinmeier’s base salary increased from $450,000 to $500,000.

In determining that the salaries of Messrs. Arnold, Audette, Seese and Semerjian remained appropriate, the Compensation Committee considered, among other things, the competitiveness and mix of each executive’s total compensation opportunity based on benchmarking data prepared by the Compensation Consultant. This benchmarking data included compensation data for comparable roles at relevant peer companies and other survey data, as described further in the “Benchmarking” section (“Benchmarking Data”).

In increasing Mr. Steinmeier’s base salary, the Compensation Committee considered his role, the scope of which had expanded to include responsibility for corporate strategy, his individual performance and his enterprise-wide contribution to the Company’s performance, as well as Benchmarking Data and internal equity considerations.

The 2020 salaries for all of our NEOs appear in the Summary Compensation table that follows this CD&A.

Annual Cash Bonus Awards

We provide annual cash bonus awards in order to tie a significant portion of the overall cash compensation of each of our NEOs to the achievement of annually-established, key short-term corporate objectives and financial goals of the Company. See “2020 Goals and Performance Evaluation” below for a description of these objectives and goals and our 2020 performance against them. The Compensation Committee believes that our NEOs, as key members of the Company’s leadership team, share responsibility for supporting the corporate and financial goals and performance of the Company.

At the beginning of 2020, the Compensation Committee established:

 

 

Target award amounts for each NEO;

 

 

Financial and non-financial Company performance goals, which were also approved by the Board; and

 

 

A bonus funding framework that provided a potential range of bonus pool funding based on the level of achievement of the Company’s financial and non-financial performance goals.

Target Award Amounts

The Compensation Committee sets each NEO’s individual target award amount by taking into account Benchmark Data, the nature of the NEO’s role and the NEO’s potential contribution to the execution of the Company’s overall performance goals, rather than focusing only on their individual business unit or function.

Bonus Funding Framework

In establishing the 2020 bonus pool funding framework at the beginning of 2020, the Compensation Committee maintained the same approach to assessing corporate performance that it has used since 2018. This approach combined quantitative assessments with a level of discretion for the Compensation Committee, given the variety of factors that affect the Company’s Adjusted EBITDA results, including prevailing interest rates and equity market performance. The Compensation Committee did not make any subsequent adjustments to the 2020 bonus pool funding framework as a result of the COVID-19 pandemic.

To determine the bonus pool funding for 2020, the Compensation Committee reviewed the following criteria, with the indicated weightings:

Criteria Weightings

 

 

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Compensation Discussion and Analysis

 

    

 

 

Target performance as it related to the financial and corporate goals would yield a 2020 bonus funding pool of $62 million (“Target Funding”), subject to the discretion of the Compensation Committee to increase or decrease the funding by up to 20%. Bonuses to our NEOs, other executives and employees were paid from this pool.

Financial Performance Goals. For the Company’s 2020 financial performance goals, the Compensation Committee established in January 2020 a range of bonus funding based on the Company’s actual Adjusted EBITDA results relative to a specified performance target. The range of bonus funding was scaled such that performance above target would yield a proportionately greater payout and performance below target would yield a proportionately lesser payout, as illustrated in the table below. This approach was intended to ensure that the financial results were a motivating element in the funding framework:

 

Percentage of Target

 

  

Percent payout

 

120%

   150%

100%

   100%

80%

   50%

The Company generated Adjusted EBITDA of $946 million in 2020, excluding the impact of the Company’s 2020 acquisitions and integration of two large financial institutions, which was 70% of the performance target. This level of achievement resulted in a funding level below target for this component of the funding framework.

Corporate Goals. The Compensation Committee established the following weights for each of the Company’s 2020 corporate goals:

 

Goal

 

  

Weight

 

Growth Goal

   10%

Service Goal

   10%

Support Goal

   10%

Execution Goal

   10%

Total Goals Contribution

   40%

The Compensation Committee assigned equal weighting to each of the goals because it determined that each was a priority element of the Company’s longer-term strategy.

The Committee also established a range of bonus funding per goal using the performance rating scale below.

 

Performance Rating

 

  

Payout

 

Exceeds

   150%

Meets

   100%

Partially Meets

   75%

As further described under “2020 Goals and Performance Evaluation,” the Compensation Committee rated:

 

   

the Growth Goal and Service Goal as “exceeds;”

 

   

the Support Goal as “meets;” and

 

   

the Execution Goal as “partially meets.”

The collective achievement of these corporate goals resulted in a funding level above target for this component of the funding framework.

Committee Discretion. In establishing the bonus framework in January 2020, the Compensation Committee discussed the appropriate level of discretion, if any, to be retained by the Compensation Committee to adjust bonus pool funding up or down based on its subjective assessments of key drivers of performance. Consistent with practice in prior years, the 2020 bonus funding framework enabled the Committee to consider the following factors in assessing the achievement of the Company’s financial performance and its corporate goals:

 

   

macroeconomic environment;

 

   

quality of financial results;

 

   

competitive intensity; and

 

   

degree of difficulty in goal achievement.

For 2020, the collective level of achievement of the Company’s financial and corporate goals yielded a total bonus pool funding of $60 million. After considering the subjective factors above, the Compensation Committee exercised its discretion to increase the level of funding to $64 million. The 2020 bonus pool was 6.8% of 2020 Adjusted EBITDA, the same percentage of Adjusted EBITDA as the 2019 bonus pool.

 

 

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Compensation Discussion and Analysis

 

    

 

 

2020 Goals and Performance Evaluation

At the beginning of 2020, our Board determined, with the input of the Company’s chief executive officer, the corporate goals for the year, including the Adjusted EBITDA target and corporate goals described above. In evaluating incentive compensation at the end of the year, the Compensation Committee considered the level of achievement of the Company’s financial and non-financial performance goals.

The Compensation Committee determined that the Company generally performed well against its 2020 corporate goals based on the achievements listed below.

 

2020 Corporate Goals    Performance Commentary
Drive growth and expand our addressable market   

Exceeds Target. Organic net new assets of $56 billion represented a 7% growth rate, compared to 5% in 2019. Recruited assets of $40.9 billion exceeded our 2020 performance target and our prior annual record of $35 billion in 2019. In addition, the Company scaled its Strategic Wealth Services affiliation model, with five practices joining in 2020, and launched its new independent employee advisor model. It also entered into agreements to support BMO Harris Financial Advisors and M&T Securities, Inc. in 2021 through the Company’s Institution Services platform and to acquire the wealth management business of Waddell & Reed Financial, Inc.

Develop an industry-leading client care experience   

Exceeds Target. The Company made progress on this multi-year initiative, as reflected in a more than 15-point improvement in its net promoter score year-over-year, which exceeded the 2020 performance target, and an improvement of more than 60 points in the past three years. The Company delivered improvements to the functionality of its ClientWorks platform, including additional integrated advisor workflows and capabilities to enable digital practice management, and progressed the implementation of its client care platform through the launch of omni-channel service capabilities with skills-based routing.

Help our advisors run successful businesses   

Meets Target. The Company supported advisors with new capabilities and a resilient technology platform as they pivoted their practices to a remote work environment. It also broadened and commercialized its LPL Business Solutions offerings, finishing 2020 with approximately 1,400 monthly subscriptions, which was more than double the level of year-end 2019. The Company’s production retention rate was 97.7% for 2020, exceeding its 2020 performance goal, and an increase from 96.5% last year.

Improve execution and infrastructure   

Partially Meets Target. The Company deployed capital to drive organic growth, including approximately $160 million in technology-related investments, implemented SEC Regulation Best Interest and completed three acquisitions. A 78.6% overall favorability score in the annual employee engagement survey exceeded the Company’s 2020 performance target and validated its employee-focused initiatives during the pandemic and subsequent social justice events. However, the Company’s operating margin, business-generated cash flows and relative total shareholder return were below 2020 performance targets.

As we look forward to 2021, the Board has recommitted our management team to goal categories that are generally consistent with those adopted in 2020, although the Company has transitioned to a new goal-setting framework composed of objectives, priority initiatives and key results that are based on the Company’s strategy.

 

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Compensation Discussion and Analysis

 

    

 

 

Individual Cash Bonus Award Determinations

The Compensation Committee evaluates each NEO’s contribution to the Company’s overall performance, as well as the NEO’s performance against additional, previously established individual goals. In determining whether and to what extent bonuses are paid, the Compensation Committee takes into account discussions with management and the Compensation Consultant. For additional information, including the assessment process for our chief executive officer, please see “How Compensation Decisions Were Made” on page 42 of this proxy statement.

The Compensation Committee generally has the discretion to pay bonuses above or below the established targets based upon its assessment of each NEO’s contributions, performance and potential, and other considerations such as internal pay equity.

Our chief financial officer provided updates on the Company’s actual performance compared to its financial and corporate goals for 2020 at each quarterly meeting of the Compensation Committee, and he also presented updates at meetings of the Compensation Committee in July 2020 and January 2021. In February 2021, the Compensation Committee reviewed the individual performance in 2020 of each of our NEOs, including their respective contributions to the Company’s overall performance against its financial and corporate goals. The Compensation Consultant participated in each of the meetings.

Based primarily on these assessments, the Compensation Committee exercised its discretion to award annual cash bonuses to our NEOs above each executive’s target award amount for 2020. In making its individual determinations, the Compensation Committee considered the collective level of achievement of the Company’s financial and corporate goals and each

NEO’s individual performance during an unprecedented time, including:

 

   

Mr. Arnold’s strategic vision and leadership of the Company in delivering strong core business results, navigating a changing industry landscape and advancing the Company’s cultural transformation to support and engage employees during the uncertainties of the pandemic;

 

   

Mr. Audette’s development and execution of an operating plan that balanced expense discipline and financial strength with capital deployment for organic and inorganic growth, as well as his contributions to the Company’s acquisition strategy and LPL Business Solutions offerings;

 

   

Mr. Seese’s leadership in ensuring the performance and resiliency of the Company’s technology systems, which enabled the Company’s employees and advisors to transition successfully to a remote work environment, and his contributions to an “exceeds” level of achievement of the Service Goal described above through technology enhancements;

 

   

Mr. Semerjian’s vision and progress in transforming our service model into a client care model, which contributed to the Company’s year-over-year improvement in net promoter scores and the “exceeds” level of achievement of the Service Goal described above; and

 

   

Mr. Steinmeier’s leadership in improving the efficacy of our business development efforts, which again delivered record recruited assets in 2020, and strategies to expand the Company’s addressable markets and deliver sustained growth and competitive advantage.

 

 

The table and chart below show the target annual cash bonus award opportunity established for each of our NEOs at the beginning of 2020, as well as the actual cash bonus awarded to each of our NEOs for 2020, as determined by the Compensation Committee:

 

NEO

 

  

Target

Award

 

           

Target Award
as a
Percentage of
Base Salary

 

   

Cash

Bonus

 

    

Cash Bonus
Awarded as a
Percentage of
Base Salary

 

   

Cash Bonus
Awarded as a
Percentage of
Target Award

 

 

Dan H. Arnold

   $ 1,912,500        225   $ 2,199,375      259     115

Matthew J. Audette

   $ 1,050,000        175   $ 1,192,000      199     114

Scott Seese

   $ 800,000        160   $ 882,000      176     110

Dayton Semerjian

   $ 800,000        160   $ 922,000      184     115

Richard Steinmeier

   $ 800,000              160   $ 982,000      196     123

 

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Compensation Discussion and Analysis

 

    

 

 

Annual Cash Bonus Awards

($ in thousands)

 

 

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Long-Term Equity Incentive Awards

The purposes of our long-term equity incentive program are to promote the achievement of corporate goals that drive long-term stockholder value, to align the interests of our executive officers and other key employees with our stakeholders and to retain key executives. Our long-term equity incentive program is critical to our efforts to hire and retain the best talent in the financial services industry.

At the beginning of each year, the Compensation Committee establishes annual LTI award targets for executive officers after reviewing the recommendations of our chief executive officer and additional information, including Benchmarking Data. Annual target award amounts are based on an executive’s position, including job scope, and base salary, after consideration of Benchmarking Data and prior years’ awards to the executive.

After the conclusion of the year, the Compensation Committee determines the actual amounts of the LTI award to be granted to each of our NEOs. Because the value of the LTI awards depends on the Company’s longer-term performance, LTI awards are an element of our executive retention strategy. In determining the LTI awards, the Compensation Committee takes into account discussions with management and the Compensation Consultant, and an NEO’s actual LTI award may vary from the target amount previously established by the Compensation Committee.    

In accordance with SEC rules, the equity awards shown in our Summary Compensation table and Grants of Plan-Based Awards table reflect LTI awards that were granted during calendar year 2020. The awards shown in such tables include the LTI awards

granted in February 2020 described below but not the LTI awards granted in February 2021, which we also describe below.

LTI Awards in 2020

For 2019, the Compensation Committee established annual LTI award targets for our NEOs that ranged from 133% to 471% of base salary.

In February 2020, the Compensation Committee approved equity grants to our NEOs. These awards were based on each NEO’s 2019 LTI award target as well as his individual performance during 2019, leadership responsibilities and potential, as well as retention considerations.

The equity grant to Mr. Arnold consisted of 70% performance share units (“PSUs”) and 30% time-based restricted stock units (“RSUs”), and equity grants to Messrs. Audette, Seese, Semerjian and Steinmeier consisted of 60% PSUs and 40% RSUs. We believe that this blended approach provided appropriate incentives for long-term stockholder value creation while also serving as a retention tool for the Company. We also believe that the use of PSUs aligned with our pay-for-performance principles and put appropriate focus on long-term alignment and pay relative both to market peers and stockholder returns.

2020 Performance Share Unit Awards. The PSUs granted in 2020 are eligible to become earned PSUs based on the Company’s total stockholder return (“TSR”) relative to the TSR of a predetermined comparator group over a three-year performance period ending on December 31, 2022 (the “Performance Period”). The comparator group consists of the Standard & Poor’s 1500 Capital Markets Companies (the “Comparator Group”), and

 

 

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the number of earned PSUs is based on the Company’s relative ranking between the 25th and 80th percentiles of the Comparator Group’s TSR results. Based on the Company’s relative performance, the number of earned PSUs can range between 50% (threshold) and 200% (maximum) of the target award as shown below:

 

Performance Level    Relative TSR
Percentile Rank
(based on
Comparator
Group)
  Common
Shares
Earned (as a
% of Target)

 Maximum

   80th   200%

 Target

   50th   100%

 Threshold

   25th   50%

 Below Threshold

   Below 25th   0%

The beginning and ending share price for TSR calculations will be based on the average closing price of our Common Stock for the trailing thirty consecutive trading days including each of the beginning and end dates of the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee certifies achievement of the performance criteria associated with the award. The number of earned PSUs is capped at 100% of the target award if the Company’s TSR is negative over the Performance Period.

In granting PSUs in 2020, the Compensation Committee calculated the number of shares underlying each award using a price per share equal to the average closing price of our Common Stock for the trailing thirty consecutive trading days including

the grant date. This approach was intended to mitigate the effect of stock price volatility.

2020 Restricted Stock Unit Awards. Upon vesting, each RSU granted in 2020 entitles the grantee to receive one share of our Common Stock. RSUs vest over time, in three equal annual installments in the case of grants to our NEOs. In granting RSUs in 2020, the Compensation Committee calculated the number of shares underlying each award using a price per share equal to the average closing price of our Common Stock for the trailing thirty consecutive trading days including the grant date, consistent with the approach for PSUs.

LTI Awards in 2021

For 2020, the Compensation Committee established annual LTI award targets for our NEOs that ranged from 160% to 588% of base salary.

In February 2021, our chief executive officer and chief human capital officer met with the Compensation Committee and discussed the target award previously set by the Compensation Committee for each NEO, as well as each NEO’s individual performance both during 2020 and over time, leadership responsibilities and potential, and retention considerations. The Compensation Consultant participated in the meeting.

Based on these considerations, including those listed under “Individual Cash Bonus Award Determinations,” the Compensation Committee exercised its discretion to award LTI awards to our NEOs at or above each executive’s target award amount for 2020.

 

 

The table and chart below show the target LTI award established for each of our NEOs for 2020, as well as the actual LTI award granted to our NEOs in February 2021 for 2020 performance, as determined by the Compensation Committee:

 

 Executive    2020 Annual
Base Salary
     LTI Target %
of Base
Salary
  LTI Target $     

LTI $

Granted(1)

 

 Dan H. Arnold

   $ 850,000      588%   $ 5,000,000      $ 6,000,000  

 Matthew J. Audette

   $ 600,000      175%   $ 1,050,000      $ 1,150,000  

 Scott Seese

   $ 500,000      180%   $ 900,000      $ 900,000  

 Dayton Semerjian

   $ 500,000      160%   $ 800,000      $ 875,000  

 Richard Steinmeier

   $ 500,000      200%   $ 1,000,000      $ 1,300,000  

 

(1)

These LTI awards were granted on February 25, 2021 for services provided during fiscal year 2020. Mr. Arnold received 70% of his LTI award as PSUs and 30% as RSUs. The remaining NEOs received 60% of their awards as PSUs and 40% as RSUs. PSUs are eligible to become earned and vested based on the achievement of performance criteria over a three-year period, as described above. RSUs are scheduled to vest in equal annual installments over a three-year period.

 

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Compensation Discussion and Analysis

 

    

 

 

Long-Term Incentive Awards

($ in thousands)

 

 

LOGO

 

Because the NEO LTI awards described in the table above were granted in 2021, they are not reflected in our Summary Compensation table or Grants of Plan-Based Awards table.

Payout of 2018 PSUs

In March 2018, the Compensation Committee granted PSUs with terms substantially similar to the 2020 PSUs described above.    Each of Messrs. Arnold, Audette and Seese received an award of PSUs in 2018, the Performance Period for which ended on December 31, 2020. The Company’s TSR during this Performance Period ranked in the 89th percentile of the Comparator Group, which resulted in a number of earned PSUs of 200% of the target award for each of Messrs. Arnold, Audette and Seese. The earned PSUs vested on February 23, 2021.

Effect of Termination of Employment and Retirement on Equity Awards

Unvested stock options, RSUs and PSUs generally are forfeited if an NEO voluntarily leaves the Company other than upon retirement. In the event of retirement, stock options and RSUs will become fully vested, stock options will generally remain exercisable for a period of two years following termination and PSUs will generally remain outstanding and eligible to become earned PSUs in accordance with the terms of the award. “Retirement” means the termination of employment other than for cause following either:

 

 

attainment of age 65 and completion of five years of continuous service with the Company; or

 

 

attainment of age 55 and completion of ten years of continuous service with the Company.

Mr. Arnold has attained the age of 55 and completed more than ten years of continuous service with the Company.

Additional Compensation Elements

Severance and Change-in-Control Benefits

Our Executive Severance Plan enables us to offer protection to our NEOs in the event their employment with us is involuntarily terminated by the Company or is terminated for good reason by the executive (each, a “qualifying termination”). We believe that providing these benefits helps us compete for executive talent and may help us retain current key employees. All of our NEOs are eligible for severance benefits under the Executive Severance Plan.

Executive Perquisites

Executive perquisites are not a core component of our executive compensation program, however, we offer an executive health and wellness program as well as an executive financial services policy, pursuant to which our NEOs are eligible to receive annual reimbursement of up to $15,000 for qualifying personal financial planning services. We also provide for reimbursement of relocation expenses in connection with an executive’s work-related relocation.

Other Compensation Components

401(k) Plan. We maintain a retirement savings plan (the “401(k) Plan”), for the benefit of all eligible employees, including our NEOs. Under the terms of the 401(k) Plan, employees may elect to make pre-tax 401(k) and Roth 401(k) contributions up to the statutorily prescribed limit. We provide a match in an amount equal to 75% of an employee’s elective deferral up to 8% of his or her eligible compensation on a pay period basis after six months of service. We provide this benefit to all of our eligible employees, and it is provided to our NEOs on the same basis as all other eligible employees.

 

 

 

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Compensation Discussion and Analysis

 

    

 

 

Nonqualified Deferred Compensation. Messrs. Arnold and Audette participate in our Executive Nonqualified Excess Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan allows certain highly compensated or management employees to defer up to 100% of their current compensation, which includes for this purpose base salary, service bonus, performance-based compensation, and commissions. Distributions of deferred amounts may be made only upon a qualifying distribution event, and at the time an election is made to defer compensation under the Deferred Compensation Plan, participants may choose, with respect to each potential qualifying distribution event, to receive amounts in either a lump sum or in equal annual installments over a number of years (but not to exceed five years). Deferred

amounts are credited with an investment return determined as if the amounts were invested in one or more investment funds made available by the Deferred Compensation Plan and selected by a participant. The amounts of compensation Messrs. Arnold and Audette elected to defer under the Deferred Compensation Plan in 2020 are described in the table titled “Nonqualified Deferred Compensation for the Year Ended December 31, 2020.”

The chart below shows the total 2020 compensation paid or granted to our NEOs, by component, including the value of the NEO’s LTI award that was granted in February 2021 in respect of services performed in 2020 as described above under “LTI Awards in 2021.”

 

 

NEO Compensation Mix

($ in thousands)

 

 

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How Compensation Decisions Were Made

Role of Compensation Committee

The Compensation Committee is composed entirely of directors who meet the Nasdaq standards for independence, including the heightened standards applicable to compensation committee members. The Compensation Committee is responsible for establishing our human resources policies, including our compensation philosophy and principles, and

overseeing our executive compensation policies and program. The Compensation Committee reviews and gives final approval of the total compensation payable to each of our NEOs, as well as the structure and implementation of the Company’s overall compensation programs. In establishing total target compensation levels for our NEOs, the Compensation Committee, with input from the Compensation Consultant, determines the ranges of market compensation that it believes will enable us to effectively compete for and retain high-performing,

 

 

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qualified executives. The Compensation Committee’s charter sets forth the Compensation Committee’s responsibilities.

CEO Assessment Process

At the beginning of each year, our chief executive officer sets and reviews with the Board his priorities based on the corporate goals approved by our Board and additional feedback from our non-employee directors. For 2020, Mr. Arnold’s priorities related to the Company’s strategic direction, cultural transformation and accountability for executing plans to deliver value to its stakeholders, as well as personal development goals related to his position as chief executive officer.

At the end of each year, the Compensation Committee requests that our chief executive officer prepare a written self-evaluation of performance against the year’s corporate goals and CEO priorities. The chair of the Compensation Committee distributes the completed self-evaluation to each non-employee director, who completes an assessment of the chief executive officer’s performance relative to these priorities.

Our chief human capital officer provides a summary of the results of the assessments to each of the non-employee directors, including the members of the Compensation Committee, who consider the chief executive officer’s self-evaluation and the results of the non-employee directors’ assessments in evaluating the chief executive officer’s performance for the year. The materials are also discussed by the Board in an executive session led by the chair of the Compensation Committee and, after such discussion, feedback and compensation decisions are provided to the chief executive officer by the chair of the Compensation Committee and the chair of the Board.

Role of Executive Officers

Prior to the beginning of each year, our executive officers develop the corporate goals and objectives that they believe should be achieved for the Company to be successful, which are approved by the Board and used by the Compensation Committee for the purpose of establishing how executive performance will be assessed for compensation-setting purposes. These objectives are derived largely from the Company’s annual financial and strategic planning sessions, and are prioritized and aligned with the Company’s long-term strategic plan. The objectives include both quantitative financial and operating

metrics and operational deliverables and goals. The chief financial officer provides quarterly reports to the Compensation Committee assessing the Company’s performance against the corporate goals and objectives.

Our chief executive officer annually reviews the individual performance of each of his direct reports, including the NEOs (but excluding himself), and provides the Compensation Committee with evaluations of each such direct report as well as recommendations regarding such person’s base salary level, annual cash bonus and LTI award. Our chief human capital officer also attends Compensation Committee meetings and assists the Compensation Committee and the chief executive officer in recommending the final compensation levels for our NEOs and other executive officers (other than herself). Both the chief executive officer and the chief human capital officer leave the meetings during discussions of compensation actions affecting them personally.

Role of Compensation Consultant

The Compensation Committee has the authority to engage its own advisors to assist it in carrying out its responsibilities. The Compensation Committee engaged the Compensation Consultant to advise it on compensation matters and provide experiential guidance on what is considered fair and competitive practice in our industry, primarily with respect to the compensation of our executive officers, and also with respect to director compensation.

In 2020, the Compensation Consultant worked directly with the Compensation Committee to develop recommendations for compensation levels for our executive officers and non-employee directors. In addition, the Compensation Consultant provided competitive compensation program data and policy data as well as information concerning compensation plan design. Finally, the Compensation Consultant conducted a risk assessment of the Company’s executive compensation policies and practices.

The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to SEC rules and has determined that the work provided by the Compensation Consultant did not raise a conflict of interest.

Benchmarking

We believe that a competitive pay package is a critical tool in our efforts to attract and retain qualified

 

 

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executives. The Compensation Committee’s goal is to ensure that we continue to measure our compensation practices against organizations that compete with us for key executives, that are considered important benchmarks in our industry, and that are comparable in size and scope to our business.

During 2020, the Compensation Committee engaged the Compensation Consultant to prepare analyses to benchmark and assess our overall compensation program and practices against marketplace standards. The Compensation Committee’s purpose in requesting these analyses was to ensure that the Company’s executive compensation practices are competitive with our peers, as well as other companies, including technology companies, with which we increasingly compete for talent.

Working with the Compensation Consultant, the Compensation Committee reviewed each NEO’s total target compensation against the compensation levels of comparable positions within our peer group. In addition to peer group data, the Compensation Committee also reviewed pay data from Equilar’s Executive Compensation survey covering financial services and investment services companies, as well as supplemental market data from asset management, data processing and investment firms.

The companies within our 2020 peer group consisted of:

 

   Alliance Data Systems
Corporation
     Legg Mason, Inc.
   Ameriprise Financial      Raymond James
Financial, Inc.
   Broadridge Financial
Solutions, Inc.
     SEI Investments
Company
   Charles Schwab & Co., Inc.      SS&C Technologies Holdings, Inc.
   E*Trade Financial Corp      Stifel Financial Corp.
   Eaton Vance Corp.      TD Ameritrade Holding Corporation
   Invesco Ltd.      Waddell & Reed Financial, Inc.

The chart below compares the 2020 revenues and market capitalization as of December 30, 2020 of the Company and the median of the peer group above (in billions), excluding TD Ameritrade, E*TRADE and Legg Mason, which were acquired prior to 2020 year-end:

      Revenue      Market
Capitalization
 

Peer Group (Median)

   $   4.7      $   8.3  

LPL Financial Holdings Inc.

   $ 5.9      $ 8.3  

The Compensation Committee conducted a focused review of the composition of the Company’s peer group during 2020, including the continued appropriateness of the peer companies, merger and acquisition activity affecting certain members of the group and consideration of additional candidates for potential inclusion in the group. Following this assessment, the Compensation Committee determined not to make changes to the peer group for 2020 but to consider changes in 2021 as a result of changes due to pending merger and acquisition activity.

Compensation Policies and Practices

No Employment Agreements

We do not have individual employment agreements with any of our executive officers, including our NEOs, although we have a practice of entering into offer letters with new executive officers that generally lay out the expected terms and conditions of their employment, including potential levels of compensation. Our executives serve at the will of the Board, and their rights to severance benefits following a termination of employment, if any, are determined under our Executive Severance Plan, which applies uniformly to executives at the managing director level and above.

Executive Severance Plan

Under our Executive Severance Plan, participants who experience a qualifying termination of employment are eligible to receive continued payment of base salary for one year, an amount equal to the most recent annual bonus paid or payable to the executive and a subsidy of COBRA continuation benefits for one year.

Additional benefits, including possible accelerated vesting of equity-based awards, are described elsewhere in this proxy statement under “Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2020.”

Equity Ownership Guidelines

We have adopted equity ownership guidelines that are intended to better align the interests of our executive officers with the interests of our stockholders. Each executive at the managing

 

 

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director level and above (which includes our NEOs) is required to achieve and maintain ownership of our Common Stock at a threshold equal to three times his or her base salary, while our chief executive officer is required to achieve and maintain a threshold equal to six times his base salary. Generally, executive officers have five years from the time they become an executive officer to meet the minimum ownership requirements. The after-tax spread value of all vested stock options, as well as all outstanding shares, held by the executive count as shares for purposes of satisfying the minimum ownership requirement. Unvested stock options, unvested PSUs and unvested RSUs do not count. Our equity ownership guidelines may be found on our website at www.lpl.com.

As of March 8, 2021, Messrs. Arnold, Audette and Seese had satisfied the minimum stock ownership requirement pursuant to our guidelines. Mr. Steinmeier, who joined the Company in 2018, and Mr. Semerjian, who joined the Company in 2019, have not satisfied this requirement. Under the stock ownership guidelines, an NEO is not required to purchase additional shares to satisfy the ownership requirement in the event of a decline in the Company’s stock price, but the NEO is generally prohibited from selling or transferring shares until the minimum ownership requirement has been achieved, except as otherwise determined by the Compensation Committee.

Anti-Hedging and Anti-Pledging Policy

We believe that hedging transactions may permit executives to own Company securities obtained through our executive compensation program or otherwise without the full risks and rewards of ownership. When that occurs, an executive may no longer have the same interests as the Company’s other stockholders. As a result, we have adopted a policy, included within our Insider Trading Policy and applicable to all employees, officers, directors and consultants of the Company, which prohibits short sales, hedging or engaging in monetization transactions, including through the use of puts and call options, collars, exchange funds, prepaid variable forwards, and equity swaps. The policy also prohibits holding Company securities in a margin account or pledging Company securities as collateral for a loan, because a margin or foreclosure sale may occur when an executive is aware of material nonpublic information or otherwise not permitted to trade.

Rule 10b5-1 Plan Policy

The Company has adopted a policy (the “10b5-1

Policy”) for all executive officers and directors of the Company who adopt Rule 10b5-1 plans for trading in Company securities. The 10b5-1 Policy is designed to prevent inadvertent violations of the federal securities laws when implementing Rule 10b5-1 plans.

Annual Compensation Risk Assessment

The Compensation Committee annually reviews our executive compensation policies and practices to ensure that they do not encourage unnecessary and excessive risks. The Compensation Consultant provided a “comfort letter” in connection with the 2020 review, the results of which are discussed elsewhere in this proxy statement under “Information Regarding Board and Committee Structure—Risk Management and Compensation Policies and Practices.”

Say-on-Pay Feedback from Stockholders

In 2017, we held an advisory vote on the frequency with which our NEO compensation program would be submitted to our stockholders for an advisory vote, commonly referred to as a “say-on-pay” vote. Our stockholders recommended that say-on-pay votes occur every year. Each year, the Compensation Committee considers the results of the prior year’s advisory vote as it reviews and determines the total compensation packages for our NEOs in the current year. In 2020, we received support for our NEO compensation program at our 2020 annual meeting of stockholders, as 98% of the total votes cast on the advisory vote on say-on-pay voted to approve the proposal.

Impact of Tax Treatment on Compensation

Section 162(m) of the Internal Revenue Code generally limits the deductibility of compensation in excess of $1 million paid to certain executive officers, subject to certain grandfathering rules for compensation arrangements in effect on November 2, 2017 and not materially modified thereafter. The Compensation Committee believes that its primary responsibility is to provide a compensation program that attracts, motivates and retains highly qualified executive officers who are passionate about the mission of our Company. Accordingly, the Compensation Committee has authorized and will continue to authorize compensation that is not tax deductible or otherwise limited as to tax deductibility in order to provide competitive levels of total compensation to our executive officers in a manner designed to incentivize the achievement of our strategic goals and objectives.

 

 

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Report of the Compensation and Human Resources

Committee of the Board of Directors

 

    

 

 

Report of the Compensation and Human Resources Committee of the Board of Directors

The following independent directors, who constitute the Compensation Committee, have reviewed the Compensation Discussion and Analysis with our management and recommended that it be included in this proxy statement.

Anne M. Mulcahy, Chair

H. Paulett Eberhart

Allison H. Mnookin

James S. Putnam

March 22, 2021

 

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Compensation of Named Executive Officers

 

    

 

 

Compensation of Named Executive Officers

 

Except where otherwise noted, the equity awards shown in the Summary Compensation table and Grants of Plan-Based Awards table for the fiscal year 2020 were granted in February 2020 in respect of services performed in 2019. Please refer to the Compensation Discussion and Analysis included in last year’s proxy statement for a discussion of these awards. Equity awards in respect of services performed in 2020 that were granted in 2021 do not appear in the Summary Compensation Table or Grants of Plan-Based Awards table in accordance

with SEC rules. Please refer to the Compensation Discussion and Analysis in this proxy statement for a discussion of these awards.

The tables in the following sections of this proxy statement provide information required by the SEC regarding compensation paid to or earned by our NEOs. The footnotes to these tables provide important information to explain the values presented in the tables and are an important part of our disclosures.

 

 

Summary Compensation Table

The following table sets forth information for our NEOs concerning the total compensation for the years ended December 31, 2020, 2019 and 2018, as applicable to such NEO:

 

Name and

Principal Position

   Year     

Salary

($)

         

Bonus

($)

           

Stock

Awards

($)(1)

         

Option

Awards

($)(1)

    

Non-Equity

Incentive Plan

Compensation

($)(2)

         

All Other

Compensation

($)(3)

    

Total

($)

 

Dan H. Arnold

President and Chief Executive Officer

     2020        850,000                 4,171,168               2,199,375        36,170      7,256,713
     2019        842,308    (4)              2,616,773        1,679,993      2,486,250        44,630      7,669,954
     2018        800,000                 2,328,641        1,539,982      2,430,000        29,728      7,128,351

Matthew J. Audette

Chief Financial Officer

     2020        600,000                 1,005,422               1,192,000        27,611      2,825,033
     2019        600,000                 977,792        314,980      1,400,000        32,155      3,324,927
     2018        600,000                 959,950        314,997      1,420,000        26,207      3,321,154

Scott Seese

Managing Director, Chief Information Officer

     2020        500,000                 933,305               882,000        35,175      2,350,480
     2019        500,000                 931,203        299,992      1,024,000        22,748      2,777,943
     2018        500,000                 777,065        254,990      1,120,000        250,676      2,902,731

Dayton Semerjian(5)

Managing Director, Chief Customer Care Officer

     2020        500,000                 788,991               922,000        102,496      2,313,487
     2019        407,692    (6)              794,714   (7)             975,000        228,785      2,406,191
                               

Richard Steinmeier(8)

Managing Director, Divisional President

     2020        493,716    (9)              883,689               982,000        80,841      2,440,246
     2019        450,000                 557,281        179,546      780,000        253,359      2,220,186
     2018        173,836    (10)     500,000      (11     1,869,879   (12)             265,000   (13)      234,643      3,043,358

 

(1)

Represents the aggregate grant date fair value of PSUs, RSUs and stock options, in each case computed in accordance with FASB ASC Topic 718 and, in the case of PSUs, based on the probable outcome of the performance conditions associated with such awards on the grant date. The aggregate grant date fair value of RSUs was determined using the closing price of our Common Stock on the grant date. The aggregate grant date fair value of stock option awards was determined using the Black-Scholes model. The underlying valuation assumptions for PSUs and stock option awards are further disclosed in Note 16, Share-Based Compensation, to our consolidated financial statements filed with our annual report on Form 10-K for the year ended December 31, 2020, Note 16, Share-Based Compensation, to our consolidated financial statements filed with our annual report on Form 10-K for the year ended December 31, 2019 and Note 15, Share-Based Compensation, to our consolidated financial statements filed with our annual report on Form 10-K for the year ended December 31, 2018. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The table below shows the grant date fair value of PSU awards granted in 2020, 2019 and 2018 assuming target and maximum levels of performance are achieved (amounts under the “Stock Awards” column represent the aggregate grant date fair value of PSUs based on the probable outcome of performance conditions, which for each of 2020, 2019 and 2018 assumed target level of performance was achieved).

 

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Compensation of Named Executive Officers

 

    

 

 

     2020      2019      2018  
Name    Target ($)      Maximum ($)      Target ($)      Maximum ($)      Target ($)      Maximum ($)  

Dan H. Arnold

     2,968,063      5,936,127      2,616,773      5,233,545      2,328,641      4,657,281

Matthew J. Audette

     616,627      1,233,254      654,193      1,308,386      635,050      1,270,100

Scott Seese

     572,382      1,144,764      623,036      1,246,071      514,093      1,028,185

Dayton Semerjian

     483,893      967,786                            

Richard Steinmeier

     541,953      1,083,906      372,863      745,725              

 

(2)

Represents the dollar value of annual cash bonus awards earned by each NEO under our cash bonus plan for the relevant year (the “Bonus Plan”).

 

(3)

See “All Other Compensation” table below for additional information.

 

(4)

Mr. Arnold received an increase in base salary from $800,000 to $850,000 on February 17, 2019.

 

(5)

Mr. Semerjian joined the Company on February 28, 2019.

 

(6)

Mr. Semerjian’s base salary for 2019 of $500,000 was prorated based on commencement of his employment on February 28, 2019.

 

(7)

Includes a sign-on grant of 10,772 RSUs in connection with Mr. Semerjian’s commencement of employment.

 

(8)

Mr. Steinmeier joined the Company on August 13, 2018.

 

(9)

Mr. Steinmeier received an increase in base salary from $450,000 to $500,000 on February 16, 2020.

 

(10)

Mr. Steinmeier’s base salary for 2018 of $450,000 was prorated based on commencement of his employment on August 13, 2018.

 

(11)

Represents a signing bonus paid in connection with Mr. Steinmeier’s commencement of employment.

 

(12)

Includes a sign-on grant of 30,143 RSUs in connection with Mr. Steinmeier’s commencement of employment.

 

(13)

Mr. Steinmeier’s bonus for 2018 was prorated based on commencement of his employment on August 13, 2018.

All Other Compensation

The following table sets forth information for our NEOs concerning All Other Compensation in the table above for the years ended December 31, 2020, 2019 and 2018, as applicable to such NEO:

 

Name    Year     

Taxable
Travel
and
Related
Expenses

($)

   

Taxable
Relocation

and

Related
Expenses

($)

    Reimbursement
for Financial
Planning
Services($)(1)
    

Executive
Health
and
Wellness
Program

($)(2)

    

401(k)
Employer
Match

($)

     Other
($)(3)
    

Total

($)

 

Dan H. Arnold

     2020                        15,000      4,070      17,100             36,170
     2019        8,760       (4)               15,000      4,070      16,800             44,630
     2018                        15,000             14,300      428      29,728

Matthew J. Audette

     2020                        9,800      3,186      14,625             27,611
     2019                        13,400      4,070      14,250      434      32,154
     2018                        13,325             12,025      857      26,207

Scott Seese

     2020                        15,000      3,075      17,100             35,175
     2019                        2,438      3,075      16,800      434      22,747
     2018                249,814       (5)                            862      250,676

Dayton Semerjian

     2020                66,326       (6)       15,000      4,070      17,100             102,496
     2019        6,511       (7)       208,701       (8)              3,186      9,952      434      228,784

Richard Steinmeier

     2020                49,584       (9)       13,488      3,145      14,625             80,842
     2019        3,345       (10)       232,307       (11)              4,070      13,082      555      253,359
       2018                      233,786       (12)                            857      234,643

 

(1)

Consists of taxable reimbursements received under the Company’s executive financial services policy.

 

(2)

Includes membership expenses for a health and wellness program and related tax gross-up payments, which in 2020 totaled $1,870 for each of Messrs. Arnold and Semerjian, $986 for Mr. Audette, $1,425 for Mr. Seese and $945 for Mr. Steinmeier, and which in 2019 totaled $1,870 for each of Messrs. Arnold, Audette and Steinmeier, $1,425 for Mr. Seese and $986 for Mr. Semerjian.

 

 

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(3)

Consists of the value of a year-end gift received by the NEO at the Company’s expense and, in 2019, related tax gross-up payments in the amount of $134 for each of Messrs. Audette, Seese and Semerjian and $255 for Mr. Steinmeier.

 

(4)

Includes $4,025 in tax gross-up payments for hotel, air travel and conference expenses related to the attendance in 2019 of Mr. Arnold and his spouse at a conference hosted by the Company for its top-producing financial advisors.

 

(5)

Includes tax gross-up payments of $109,814 made to Mr. Seese in 2018 related to relocation expenses.

 

(6)

Includes tax gross-up payments of $30,630 made to Mr. Semerjian in 2020 related to relocation expenses.

 

(7)

Includes $2,015 in tax gross-up payments for hotel, air travel and conference expenses related to the attendance in 2019 of Mr. Semerjian and his spouse at a conference hosted by the Company for its top-producing financial advisors.

 

(8)

Includes tax gross-up payments of $65,457 made to Mr. Semerjian in 2019 related to relocation expenses.

 

(9)

Includes tax gross-up payments of $24,584 made to Mr. Steinmeier in 2020 related to relocation expenses.

 

(10)

Includes $1,537 in tax gross-up payments for hotel, air travel and conference expenses related to the attendance in 2019 of Mr. Steinmeier and his spouse at a conference hosted by the Company for its top-producing financial advisors.

 

(11)

Includes tax gross-up payments of $82,307 made to Mr. Steinmeier in 2019 related to relocation expenses.

 

(12)

Includes tax gross-up payments of $72,356 made to Mr. Steinmeier in 2018 related to relocation expenses.

2020 Grants of Plan-Based Awards

The following table provides additional information about non-equity and equity-based awards granted to our NEOs during the year ended December 31, 2020:

 

Name    Grant Date      Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
     Estimated Future Payouts Under
Equity Incentive Plan Awards(2)
     All
Other
Stock
Awards:
Shares
of Stock
or Units
(#)(3)
     Grant Date
Fair Value of
Stock
($)(4)
 
   Threshold
($)
     Target
($)
     Maximum
($)
     Threshold
(#)
     Target
(#)
     Maximum
(#)
 

Dan H. Arnold

           1,912,500                  
     2/25/2020                          14,547      1,203,105  
     2/25/2020                 16,972      33,944      67,888         2,968,063  

Matthew J. Audette

           1,050,000                  
     2/25/2020                          4,701      388,795  
     2/25/2020                 3,526      7,052      14,104         616,627  

Scott Seese

           800,000                  
     2/25/2020                          4,364      360,923  
     2/25/2020                 3,273      6,546      13,092         572,382  

Dayton Semerjian

           800,000                  
     2/25/2020                          3,689      305,098  
     2/25/2020                 2,767      5,534      11,068         483,893  

Richard Steinmeier

           800,000                  
     2/25/2020                          4,132      341,736  
     2/25/2020       

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

     3,099      6,198      12,396     

 

 

 

 

 

     541,953  

 

(1)

Represents potential target payouts under awards pursuant to the Bonus Plan.

 

(2)

Represents the number of threshold, target and maximum potential future payouts under the PSUs awarded under our 2010 Plan. PSUs are eligible to become earned PSUs based on the Company’s TSR relative to the TSR of the Comparator Group (as defined above) over the Performance Period (as defined above). The number of PSUs that is earned is determined based on the Company’s relative ranking between the 25th and the 80th percentile of the Comparator Group’s TSR results. Amounts in the threshold column (50% of the target award) reflect the number of PSUs that would be earned if threshold performance were achieved (a TSR percentile rank at 25%); amounts in the target column (100% of the target award) reflect the number of PSUs that would be earned if target performance were achieved (a TSR percentile rank at 50%); and amounts in the maximum column (200% of the target award) reflect the number of PSUs that would be earned if maximum performance were achieved (a TSR percentile rank at or above 80%). The number of PSUs earned between threshold, target and maximum performance levels is interpolated on a straight-line basis. No PSUs will be earned if performance is below the threshold level. The number of earned PSUs is capped at 100% of the target award if the Company’s TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee determines the level of achievement of the performance criteria associated with the award and the number of PSUs that have become earned under the award agreement.

 

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(3)

Represents the number of RSUs awarded under our 2010 Plan. RSUs are scheduled to vest over a three-year period in equal tranches, with the first tranche scheduled to vest on the first anniversary of the grant date.

 

(4)

Represents the grant date fair value of PSUs and RSUs, in each case computed in accordance with FASB ASC Topic 718, and in the case of PSUs, based on the probable outcome of the performance conditions associated with such awards on the grant date. The aggregate grant date fair value of RSUs was determined using the closing price of the Common Stock on the grant date. See Note (1) to the Summary Compensation Table above.

Outstanding Equity Awards at December 31, 2020

The following table sets forth information with respect to unexercised stock option awards, unvested RSUs and unearned PSUs as of December 31, 2020.

 

Option Awards

           Stock Awards  
Name    Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
   

Number of
Securities

Underlying
Unexercised

Options

(#)

Unexercisable

     Option
Exercise
Price
($)
    Option
Expiration
Date
           Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
     Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)(1)
     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 That
Have Not
Vested ($)(2)
 

Dan H. Arnold

     15,594           (3)      $ 54.81       2/24/2024                 $               $  
     78,031           (4)      $ 19.85       2/25/2026                 $               $  
     123,131           (5)      $ 39.48       3/13/2027                 $               $  
     51,738     25,868     (6)      $ 65.50       2/23/2028                 $               $  
     22,940     45,880     (7)      $ 77.53       2/25/2029                 $               $  
                  $            25,873     (8)      $ 2,696,484               $  
                  $          14,547     (9)      $ 1,516,088               $  
                  $            50,170     (10)      $ 5,228,717               $  
                  $                   $        45,856       (11    $ 4,779,112  
                  $                   $        33,944       (11    $ 3,537,644  

Matthew J. Audette

     17,605           (12)      $ 42.60       10/30/2025                 $               $  
     94,110           (4)      $ 19.85       2/25/2026                 $               $  
     27,704       (5)      $ 39.48       3/13/2027                 $               $  
     10,584     5,290     (6)      $ 65.50       2/23/2028                 $               $  
     4,301     8,602     (7)      $ 77.53       2/25/2029                 $               $  
                  $            1,709     (6)      $ 178,112               $  
                  $            2,866     (7)      $ 298,695               $  
                  $            4,701     (9)      $ 489,938               $  
                  $            13,682     (10)      $ 1,425,938               $  
                  $                   $        11,464     (11    $ 1,194,778  
                  $                   $        7,052     (11    $ 734,959  

Scott Seese

     8,568     4,282     (6    $   65.50       2/23/2028                 $               $  
     4,097     8,192     (7    $ 77.53       2/25/2029                 $               $  
                  $            1,383     (6)      $ 144,136               $  
                  $            2,729     (7)      $ 284,416               $  
                  $            4,364     (9)      $ 454,816               $  
                  $            11,076     (10)      $   1,154,341               $  
                  $                   $        10,918       (11    $   1,137,874  
                  $                   $        6,546       (11    $ 682,224  

Dayton Semerjian

                  $            5,386     (13)      $ 561,329               $  
                  $            3,689     (9)      $ 384,468               $  
                          $                                                  5,534     (11    $ 576,753  

 

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Option Awards

           Stock Awards  
Name    Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
   

Number of
Securities

Underlying
Unexercised

Options

(#)

Unexercisable

     Option
Exercise
Price
($)
    Option
Expiration
Date
           Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
     Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)(1)
     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 That
Have Not
Vested ($)(2)
 

Richard Steinmeier

     2,452       4,903       (7)      $   77.53       2/25/2029                 $               $  
                  $            15,072     (14)      $   1,570,804               $  
                  $            1,633     (7)      $ 170,191               $  
                  $            4,132     (9)      $ 430,637               $  
                  $                   $        6,534       (11)      $   680,973  
                          $                                     $        6,198       (11)      $ 645,956  

 

(1)

Amounts were determined by multiplying the number of RSUs by a price per share of our Common Stock of $104.22, the closing price per share of our Common Stock on December 31, 2020, the last business day of 2020.

 

(2)

Amounts were determined by multiplying the number of PSUs that would be earned at maximum performance levels by a price per share of our Common Stock of $104.22, the closing price per share of our Common Stock on December 31, 2020, the last business day of 2020.

 

(3)

These awards vested over a three-year period in equal tranches and became fully vested on February 24, 2017.

 

(4)

These awards vested over a three-year period in equal tranches and became fully vested on February 25, 2019.

 

(5)

These awards vested over a three-year period in equal tranches and became fully vested on March 13, 2020.

 

(6)

These awards vest over a three-year period in equal tranches, with the first tranche having vested on the first anniversary of the grant date, the second tranche having vested on the second anniversary of the grant date and the third tranche scheduled to vest on the third anniversary of the grant date.

 

(7)

These awards vest over a three-year period in equal tranches, with the first tranche having vested on the first anniversary of the grant date, and the second and third tranches scheduled to vest on the second and third anniversaries of the grant date, respectively.

 

(8)

These awards vest over a five-year period in three equal tranches beginning the third anniversary of the grant date. One tranche of the award vested on the third anniversary of the grant date, and the second and third tranches are scheduled to vest on the fourth and fifth anniversaries of the grant date, respectively.

 

(9)

These awards vest over a three-year period in equal tranches, with the first tranche scheduled to vest on the first anniversary of the grant date and each subsequent tranche scheduled to vest on each subsequent anniversary of the grant date.

 

(10)

Amounts represent PSUs that were earned with respect to the Performance Period ended on December 31, 2020 and that vested on February 23, 2021, the third anniversary of the grant date. The number of earned PSUs was 200% of the target award, as discussed under “Compensation Discussion and Analysis — Long-Term Equity Incentive Awards — Payout of 2018 PSUs.”

 

(11)

Amounts represent PSUs and assume achievement of performance at maximum levels. PSUs are eligible to become earned PSUs based on the Company’s TSR relative to the TSR of the Comparator Group over the Performance Period. The number of PSUs that is earned is determined based on the Company’s relative ranking between the 25th and 80th percentiles of the Comparator Group’s TSR results, and can range from 50% of the target award (if the Company’s TSR is at or above the 25th percentile of the Comparator Group’s TSR results) to a maximum of 200% of the target award (if the Company’s TSR is at or greater than the 80th percentile of the Comparator Group’s TSR results). The number of PSUs earned between threshold and maximum performance levels is interpolated on a straight-line basis. The number of earned PSUs is capped at 100% of the target award if the Company’s TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee determines achievement of the performance criteria associated with the award and the number of PSUs that have become earned under the award agreement.

 

(12)

These awards vested over a three-year period in equal tranches and became fully vested on October 30, 2018.

 

(13)

These awards vest over a two-year period in equal tranches, with the first tranche vesting on the first anniversary of the grant date and the second tranche scheduled to vest on the second anniversary of the grant date.

 

(14)

These awards vest over a four-year period in equal tranches. One tranche of the award vested on the first anniversary of the grant date, one tranche of the award vested on the second anniversary of the grant date and the third and fourth tranches are scheduled to vest on the third and fourth anniversaries of the grant date, respectively.

 

 

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2020 Option Exercises and Stock Vested

The following table sets forth the options exercised and stock vested during the year ended December 31, 2020:

 

    Option Awards         Stock Awards
  Name   Number of
Shares Acquired
on Exercise
(#)
    Value
Realized
on Exercise
($)(1)
         Number of
Shares Acquired
on Vesting
(#)
    Value
Realized
on Vesting
($)(2)
      

Dan H. Arnold

    20,000   $   1,317,030     (3)     12,936   $ 1,229,567     (13)
    1,999   $ 61,009     (4)     70,368   $ 4,205,192     (14)
    12,753   $ 506,760     (5)         $    
    400   $ 15,799     (6)         $    
    200   $ 6,103     (7)         $    
    756   $ 30,147     (8)         $    
    200   $ 6,107     (9)         $    
    800   $ 31,936     (10)         $    
    2,239   $ 67,595     (11)         $    
    10,653   $ 420,261     (12)         $    

Matthew J. Audette

        $         1,711   $ 162,305     (15)
        $         1,433   $ 121,060     (16)
        $         21,110   $ 1,261,534     (14)
        $         2,638   $ 157,647     (17)

Scott Seese

        $         1,385   $ 131,381     (15)
        $         1,365   $ 115,315     (16)

Dayton Semerjian

        $         5,386   $ 428,079     (18)

Richard Steinmeier

        $         817   $ 69,020     (16)
          $           7,536   $ 631,215     (19)

 

(1)

For purposes of calculating the value realized on the exercise of option awards, we use the market price of our Common Stock at the time the option was exercised.

 

(2)

For purposes of calculating the value realized on the vesting of stock awards, we use the closing price of our Common Stock on the vesting date.

 

(3)

These options were granted on February 25, 2016 with an exercise price of $19.85 per share and were exercised on June 9, 2020, on which date our Common Stock was trading at $85.70 per share.

 

(4)

These options were granted February 24, 2014 with an exercise price of $54.81 per share and were exercised on August 11, 2020, on which date our Common Stock was trading at $85.33 per share.

 

(5)

These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on August 11, 2020, on which date our Common Stock was trading at $85.29 per share.

 

(6)

These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on August 13, 2020, on which date our Common Stock was trading at $85.05 per share.

 

(7)

These options were granted on February 24, 2014 with an exercise price of $54.81 per share and were exercised on September 3, 2020, on which date our Common Stock was trading at $85.33 per share.

 

(8)

These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on September 3, 2020, on which date our Common Stock was trading at $85.43 per share.

(9)

These options were granted on February 24, 2014 with an exercise price of $54.81 per share and were exercised on September 4, 2020, on which date our Common Stock was trading at $85.34 per share.

 

(10)

These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on September 4, 2020, on which date our Common Stock was trading at $85.47 per share.

 

(11)

These options were granted on February 24, 2014 with an exercise price of $54.81 per share and were exercised on November 9, 2020, on which date our Common Stock was trading at $85.00 per share.

 

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(12)

These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on November 9, 2020, on which date our Common Stock was trading at $85.00 per share.

 

(13)

These RSUs vested on February 13, 2020, on which date the closing price of our Common Stock was $95.05 per share.

 

(14)

These PSUs vested on March 13, 2020, on which date the closing price of our Common Stock was $59.76 per share.

 

(15)

These RSUs vested on February 23, 2020, on which date the most recent closing price of our Common Stock, as of February 21, 2020, was $94.86 per share.

 

(16)

These RSUs vested on February 25, 2020, on which date the closing price of our Common Stock was $84.48 per share.

 

(17)

These RSUs vested on March 13, 2020, on which date the closing price of our Common Stock was $59.76 per share.

 

(18)

These RSUs vested on February 28, 2020, on which date the closing price of our Common Stock was $79.48 per share.

 

(19)

These RSUs vested on September 7, 2020, on which date the most recent closing price of our Common Stock, as of September 4, 2020, was $83.76 per share.

Nonqualified Deferred Compensation for the Year Ended December 31, 2020

The Deferred Compensation Plan allows certain highly compensated or management employees to defer up to 100% of their current compensation, which includes for this purpose base salary, service bonus, performance-based compensation, and commissions. Distributions of deferred amounts may be made only upon a qualifying distribution event, which, depending on the individual’s election, may be a separation from service, disability (as defined in the Deferred Compensation Plan), death, a change-in-control event (as defined in the Deferred Compensation Plan), an unforeseeable emergency, or a specified date, or may be the earliest of one or more of these events. At the time an election is made to defer compensation under the Deferred Compensation Plan, participants may choose, with respect to each potential qualifying distribution event, to receive amounts in either a lump sum or in equal annual installments over a number of years (but not to exceed five years). Deferred amounts are credited with an investment return determined as if the amounts were invested in one or more investment funds made available by the Deferred Compensation Plan and selected by a participant.

The following table sets forth information relating to nonqualified deferred compensation for each NEO for the year ended December 31, 2020:

 

Name    Executive
Contributions
in Last
Fiscal Year
($)(1)
     Registrant
Contributions
in Last Fiscal
Year
($)
     Aggregate
Earnings in Last
Fiscal Year
($)(2)
     Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance at
Last Fiscal
Year End
($)(3)
 

Dan H. Arnold (4)

     52,000             597,353             5,567,108

Matthew J. Audette (4)

     100,000             41,339             141,239

Scott Seese

                                  

Dayton Semerjian

                                  

Richard Steinmeier

                                  

 

(1)

Amounts in this column are also reported in the “Summary Compensation Table” above for 2020 under “Salary.”

 

(2)

Amounts in this column do not constitute above-market or preferential earnings and therefore are not reported as compensation in the “Summary Compensation Table” above.

(3)

Amounts in this column, excluding earnings, were previously reported in the “Summary Compensation Table” for the years in which Mr. Arnold was an NEO.

 

(4)

Amounts included herein relate to Messrs. Arnold and Audette’s participation in the Deferred Compensation Plan.

 

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Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2020

Set forth below the table is a description of certain post-employment arrangements with our NEOs, including the severance benefits and change-in-control benefits to which they would have been entitled under the Executive Severance Plan as of December 31, 2020, if a termination of employment and/or a change-in-control had occurred on such date. Amounts reported for the accelerated vesting of stock options, RSUs and PSUs are based on a price per share of our Common Stock of $104.22, the closing price per share of our Common Stock on December 31, 2020, the last business day of 2020.

 

Named
Executive Officer
   Benefit    Without Cause or
For Good Reason
($)
     Disability,
Death, Retirement
($)
     Double-Trigger