Fiserv, Inc.
FISERV INC (Form: DEF 14A, Received: 04/10/2018 16:44:38)
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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 Pursuant to §240.14a-12

FISERV, INC.

(Name of Registrant as Specified In Its Charter)

 

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

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255 Fiserv Drive

Brookfield, Wisconsin 53045

April 10, 2018

 

You are cordially invited to attend the annual meeting of shareholders of Fiserv, Inc. to be held at our office in Brookfield, Wisconsin on Wednesday, May 23, 2018 at 10:00 a.m. (CT). Information about the meeting and the matters on which shareholders will act is set forth in the accompanying Notice of 2018 Annual Meeting of Shareholders and Proxy Statement. You can find financial and other information about Fiserv in our Form 10-K for the fiscal year ended December 31, 2017. We welcome your comments or inquiries about our business that would be of general interest to shareholders during the meeting.

 

We urge you to be represented at the annual meeting, regardless of the number of shares you own or whether you are able to attend the annual meeting in person, by voting as soon as possible. Shareholders can vote their shares via the Internet, by telephone or by mailing a completed and signed proxy card (or voting instruction form if you hold your shares through a broker).

 

Sincerely,

 

      LOGO

Jeffery W. Yabuki

President and Chief Executive Officer

 

 

 

 

LOGO     

 

 

 
 
   
 

 

  2018 Proxy Statement


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Notice of 2018 Annual Meeting of Shareholders

 

 

 

 
 
   

Time and Date:

Wednesday, May 23, 2018 at 10:00 a.m. (CT)

 

Place:

Fiserv, 255 Fiserv Drive, Brookfield, Wisconsin 53045

 

Matters To Be Voted On:

1.  Election of ten directors to serve for a one-year term and until their successors are elected and qualified.

 

2.  Approval of the material terms of the performance goals under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan.

 

3.  Approval, on an advisory basis, of the compensation of our named executive officers.

 

4.  Ratification of appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2018.

 

5.  Shareholder proposal relating to executive pay confidential voting, if properly presented.

 

       Any other business as may properly come before the annual meeting or any adjournments or postponements thereof.

 

Who Can Vote:

Holders of Fiserv stock at the close of business on March 23, 2018.

 

Date of Mailing:

On April 10, 2018, we will commence mailing the notice of Internet availability of proxy materials, or a proxy statement, proxy card and annual report, to shareholders.

 

By Order of the Board of Directors,

 

LOGO

 

Lynn S. McCreary

Secretary

April 10, 2018

 

Important notice regarding the availability of proxy materials for the shareholder meeting to be held on May 23, 2018: The proxy statement, 2017 Annual Report on Form 10-K and the means to vote by Internet are available at http://www.proxyvote.com.

 

LOGO     

 

 

 
 
   
 

 

  2018 Proxy Statement


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Proxy Statement Table of Contents

 

 

 

 
 
   

Proxy Statement Summary

    01  

Proxy and Voting Information

    06  

Security Ownership of Certain Beneficial Owners and Management

    09  

Proposal 1. Election of Directors

    11  

Our Board of Directors

    11  

Majority Voting

    11  

Nominees for Election

    12  

Corporate Governance

    18  

Director Compensation

    24  

Proposal 2. Approval of Material Terms of Performance Goals under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan

    28  

Proposal 3. Advisory Vote to Approve Executive Compensation

    40  

Compensation Discussion and Analysis

    42  

Compensation Committee Report

    55  

Compensation Committee Interlocks and Insider Participation

    55  

Executive Compensation

    56  

Summary Compensation Table

    56  

Grants of Plan-Based Awards in 2017

    58  

Outstanding Equity Awards at December 31, 2017

    59  

Option Exercises and Stock Vested During 2017

    61  

Non-Qualified Deferred Compensation in 2017

    62  

Potential Payments Upon Termination or Change in Control

    63  

Pay Ratio

    71  

Section 16(a) Beneficial Ownership Reporting Compliance

    72  

Proposal 4. Ratification of the Appointment of Independent Registered Public Accounting Firm

    73  

Independent Registered Public Accounting Firm and Fees

    74  

Audit Committee Pre-Approval Policy

    74  

Audit Committee Report

    74  

Proposal 5. Shareholder Proposal

    75  

Fiserv’s Statement in Opposition

    76  

Other Matters

    77  

Shareholder Proposals for the 2019 Annual Meeting

    77  

Proxy Statement and Annual Report Delivery

    77  

Appendix A. Non-GAAP Financial Measures

    78  

Appendix B. Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan

    80  

 

    

 

 

 
 
   
 

 

  2018 Proxy Statement


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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 you should consider, and you should read the entire proxy statement carefully before voting.

         

 

Annual Meeting

 

Time and Date:    Wednesday, May 23, 2018 at 10:00 a.m. (CT)
Place:   

Fiserv

255 Fiserv Drive

Brookfield, Wisconsin 53045

Record Date:    March 23, 2018
Voting:    Shareholders as of the record date are entitled to vote: by Internet at www.proxyvote.com; by telephone at 1-800-690-6903; by completing and returning their proxy card or voter instruction card; or in person at the annual meeting (shareholders who hold shares through a bank, broker or other nominee must obtain a legal proxy from their bank, broker or other nominee granting the right to vote).

 

Proxy Statement

 

This proxy statement is furnished in connection with the solicitation on behalf of the board of directors of Fiserv, Inc., a Wisconsin corporation, of proxies for use at our 2018 annual meeting of shareholders. This proxy statement is being made available on or about April 10, 2018 to our shareholders entitled to vote at the annual meeting.

 

Purposes of Annual Meeting

 

 

Agenda Item

 

  

Board Vote
Recommendation

 

  

Page Reference

for More Detail

 

        
1.   

Election of Directors

The board of directors has nominated ten individuals for election as directors. All nominees are currently serving as directors and all, except Mr. Yabuki, our president and chief executive officer, are independent. We believe that each nominee for director has the requisite experience, integrity and sound business judgment to serve as a director.

 

  

FOR each

Director Nominee

   11
        
2.   

Approval of Material Terms of Performance Goals under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan

Our board of directors is seeking shareholder approval of the material terms of the performance goals under the Incentive Plan to potentially permit certain awards granted after the annual meeting of shareholders to continue to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, as amended.

 

   FOR    28

 

 
 
   
 

 

01   2018 Proxy Statement


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Agenda Item

 

  

Board Vote
Recommendation

 

  

Page Reference

for More Detail

 

 

3.

  

 

Advisory Vote on Named Executive Officer Compensation

The board of directors is asking shareholders to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. Our compensation program for our named executive officers is designed to create long-term shareholder value by rewarding performance as described in the “Compensation Discussion and Analysis” section of this proxy statement.

 

  

 

FOR

  

 

40

 

4.

  

 

Ratification of Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm

As a matter of good corporate governance, the audit committee of the board of directors is seeking ratification of its appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2018.

 

  

 

FOR

  

 

73

 

5.

  

 

Shareholder Proposal Relating to Executive Pay Confidential Voting (if properly presented)

Our shareholder communications and proxy solicitation methods are designed to foster an open dialogue with our shareholders, including in the area of executive compensation, while allowing for confidentiality as desired. In light of the potential negative consequences that this proposal could have, as further described herein, we do not believe that this proposal is in the best interest of our company or its shareholders.

 

  

 

AGAINST

  

 

75

 

Executing on Our Strategy

 

In 2017, we generated GAAP revenue growth of 3% and internal revenue growth of 4% compared to 2016 as well as GAAP earnings per share from continuing operations of $2.86 and adjusted earnings per share of $2.56, both as adjusted for the two-for-one split of our common stock completed in March 2018. This represents a 38% and 15% increase in GAAP earnings per share from continuing operations and adjusted earnings per share, respectively, over 2016. We had net cash provided by operating activities of $1.48 billion and free cash flow of $1.22 billion in 2017, a 4% and 13% increase, respectively, compared to the prior year. We also made progress in strategic areas that we believe will enhance our future results, and we continued to enhance our level of competitive differentiation which we believe is essential to sustaining future growth. As discussed further in the “Compensation Discussion and Analysis” section of this proxy statement, our named executive officer compensation for 2017 was paid or awarded in the context of these results.

 

Internal revenue growth, adjusted earnings per share and free cash flow are non-GAAP financial measures. See Appendix A to this proxy statement for information regarding these measures and reconciliations to the most directly comparable GAAP measures.

 

Recent Governance Highlights

 

In 2017, we appointed a new independent chairman of our board of directors and appointed a new chair for each of our compensation and audit committees. In addition, in 2018, we added a new independent director to our board, making him the fourth new independent director to join our board in the last four years.

 

 

 
 
   
 

 

02   2018 Proxy Statement


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Recent Compensation Highlights

 

In 2017, our compensation committee granted performance share units to all our named executive officers other than Mr. Yabuki. These performance share units have a three-year performance period, and the number of shares issued at vesting will be based on the company’s achievement of internal revenue growth goals, subject to attaining a threshold level of adjusted income from continuing operations over such three-year period. In 2017, two-thirds of the compensation we paid to all our named executive officers was in the form of equity.

 

In 2018, to further align the terms of the Incentive Plan with current best practices, our compensation committee approved amendments to our Incentive Plan to, among other things, impose a one-year minimum vesting requirement for equity awards, prohibit the cash buyout of underwater stock options, and clarify that certain shares cannot be re-credited to the Incentive Plan reserve.

 

We encourage you to review the entire “Compensation Discussion and Analysis” section of this proxy statement as well as the tabular and narrative disclosure under “Executive Compensation.”

 

 

 
 
   
 

 

03   2018 Proxy Statement


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Compensation Practices

 

What We Do

 

LOGO

   Our compensation committee seeks to structure compensation that incentivizes our leaders to strive for market-leading performance, which we expect will translate into long-term value for our shareholders, and is balanced by the risk of lower performance-based compensation when we do not meet our performance objectives.

 

LOGO

   We provide cash incentive awards based on achievement of annual performance goals and equity compensation that promotes long-term financial, operating and strategic performance by delivering incremental value to executive officers to the extent our stock price increases over time.

 

LOGO

   In furtherance of our pay-for-performance philosophy, we grant performance share units. The number of shares issued at vesting is determined by the achievement of performance goals over a three-year period.

 

LOGO

   We have a stock ownership policy that requires our directors and executive officers to acquire and maintain a significant amount of Fiserv equity to further align their interests with those of our long-term shareholders.

 

LOGO

   We have a policy that prohibits our directors and executive officers from hedging or pledging Fiserv stock.

 

LOGO

   We have a compensation recoupment, or “clawback,” policy.

 

 
 
   

 

What We Don’t Do

 

 

LOGO

   We don’t have excise tax gross-up arrangements with any of our executive officers, and we have a policy not to enter into such arrangements in the future.  

 

LOGO

   We don’t provide separate pension programs or a supplemental executive retirement plan to our named executive officers.  

 

LOGO

   We generally don’t provide personal-benefit perquisites to our named executive officers.  

 

 
 
   
 

 

04   2018 Proxy Statement


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Board Nominees

 

The board met six times during 2017 and each of our directors attended 75% or more of the aggregate number of meetings of the board and the committees on which he or she served, in each case while the director was serving on our board of directors or such committees, as applicable, during 2017. The following table provides summary information on each director nominee. All candidates were nominated in accordance with the company’s governance guidelines. For more information about each director nominee, please see their full biographies beginning on page 12.

 

 
                     
   

Name

 

         Age    

 

           Director
Since

 

          

Principal Occupation

 

         Independent

 

         Current Committee    
Memberships

 

     
 

Alison Davis

       56          2014        Advisor, Fifth Era      LOGO        Audit    
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

Harry F. DiSimone

       63          2018        President, Commerce Advisors, Inc.      LOGO        Compensation    
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

John Y. Kim

       57          2016       

President, New York Life Insurance Company

     LOGO        Audit    
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

Dennis F. Lynch

       69          2012        Chairman, Cardtronics plc      LOGO       

 



Compensation

 

Nominating
and Corp.
Governance

 

 

 
 
 

 
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

Denis J. O’Leary

       61          2008        Investor      LOGO       

 



Audit *

 

Nominating
and Corp.
Governance

 

 

 
 
 

 
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

Glenn M. Renwick

       62          2001       

Chairman, Fiserv, Inc. and
The Progressive Corporation

     LOGO       
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

Kim M. Robak

       62          2003        Partner, Mueller Robak, LLC      LOGO       

 



Compensation

 

Nominating
and Corp.
Governance *

 

 

 
 
 

 
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

JD Sherman

       52          2015       

President and Chief Operating Officer, HubSpot, Inc.

     LOGO        Audit    
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

Doyle R. Simons

       54          2007       

President and Chief Executive Officer, Weyerhaeuser Company

     LOGO        Compensation *    
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   
 

Jeffery W. Yabuki

       58          2005       

President and Chief Executive Officer, Fiserv, Inc.

           
 

 

    

 

 

      

 

 

      

 

    

 

    

 

 

   

 

* Committee Chair

 

 

 

 
 
   
 

 

05    2018 Proxy Statement


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Proxy and Voting Information

 

 

 

 
 
   

 

The board of directors of Fiserv, Inc., a Wisconsin corporation, is soliciting proxies in connection with our annual meeting of shareholders to be held on Wednesday, May 23, 2018 at 10:00 a.m. (CT), or at any adjournment or postponement of the meeting. On April 10, 2018, we will commence mailing the notice of Internet availability of proxy materials, or a proxy statement, proxy card and annual report, to shareholders entitled to vote at the annual meeting.
 
    

 

Notice of Internet Availability of Proxy Materials

 

In accordance with rules and regulations adopted by the Securities and Exchange Commission, we may furnish our proxy statement and annual report to shareholders of record by providing access to those documents via the Internet instead of mailing printed copies. The notice you received regarding the Internet availability of our proxy materials (the “Notice”) provides instructions on how to access our proxy materials and cast your vote over the Internet, by telephone or by mail.

 

Shareholders’ access to our proxy materials via the Internet allows us to reduce printing and delivery costs and lessen adverse environmental impacts. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions in the Notice for requesting those materials.

 

Solicitation of Proxies

 

We will pay the cost of soliciting proxies on behalf of the board of directors. Our directors, officers and other employees may solicit proxies by mail, personal interview, telephone or electronic communication. None of them will receive any special compensation for these efforts.

 

We have retained the services of Georgeson LLC (“Georgeson”) to assist us in soliciting proxies. Georgeson may solicit proxies by personal interview, mail, telephone or electronic communications. We expect to pay Georgeson its customary fee, approximately $10,000, plus reasonable out-of-pocket expenses incurred in the process of soliciting proxies. We also have made arrangements with brokerage firms, banks, nominees and other fiduciaries to forward proxy materials to beneficial owners of shares. We will reimburse such record holders for the reasonable out-of-pocket expenses incurred by them in connection with forwarding proxy materials.

 

                  

Proxies solicited hereby will be tabulated by an inspector of election, who will be designated by the board of directors and will not be an employee or director of Fiserv, Inc.

 

Holders Entitled to Vote

 

The board of directors has fixed the close of business on March 23, 2018 as the record date for determining the shareholders entitled to notice of, and to vote at, the annual meeting. On the record date, there were 411,172,891 shares of common stock outstanding and entitled to vote, and we had no other classes of securities outstanding.

 

All of these shares are to be voted as a single class, and you are entitled to cast one vote for each share you held as of the record date on all matters submitted to a vote of shareholders.

 

Voting Your Shares

 

You may vote:

 

By Internet

Visit www.proxyvote.com

 

By telephone

Dial toll-free 1-800-690-6903

 

By mailing your proxy card

If you requested a printed copy of the proxy materials, mark your vote on the proxy card, sign and date it, and return it in the enclosed envelope.

 

In person

If you are a shareholder of record you may join us in person at the annual meeting to be held at our Brookfield, Wisconsin headquarters.

 

 

 

 

 

 
 
   
 

 

06   2018 Proxy Statement


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Voting through the Internet or by telephone. You may direct your vote by proxy without attending the annual meeting. You can vote by proxy over the Internet or by telephone until 11:59 p.m. (ET) on May 22, 2018 by following the instructions provided in the Notice. Shareholders voting via the Internet or by telephone will bear any costs associated with electronic or telephone access, such as usage charges from Internet access providers and telephone companies.

Voting by proxy card. If you requested a printed copy of the proxy materials, you may vote by returning a proxy card that is properly signed and completed. The shares represented by that card will be voted as you have specified.

Banks, brokers or other nominees. Shareholders who hold shares through a bank, broker or other nominee may vote by the methods that their bank or broker makes available, in which case the bank or broker will include instructions with the Notice or this proxy statement. If you wish to vote in person at the annual meeting, you must obtain a legal proxy from your bank, broker or other nominee giving you the right to vote the shares at the annual meeting.

401(k) savings plan. An individual who has a beneficial interest in shares of our common stock allocated to his or her account under the Fiserv, Inc. 401(k) savings plan may vote the shares of common stock allocated to his or her account. We will provide instructions to participants regarding how to vote. If no direction is provided by the participant about how to vote his or her shares by 11:59 p.m. (ET) on May 20, 2018, the trustee of the Fiserv, Inc. 401(k) savings plan will vote the shares in the same manner and in the same proportion as the shares for which voting instructions are received from other participants, except that the trustee, in the exercise of its fiduciary duties, may determine that it must vote the shares in some other manner.

Proxies

Glenn M. Renwick, Chairman of the board of directors, Jeffery W. Yabuki, President and Chief Executive Officer, and Lynn S. McCreary, Chief Legal Officer and Secretary, have been selected by the board of directors as proxy holders and will vote

 

 
 
   

shares represented by valid proxies. All shares represented by valid proxies received and not revoked before they are exercised will be voted in the manner specified in the proxies.

If nothing is specified, the proxies will be voted: “FOR” each of the board’s nominees for director; “FOR” proposals two, three and four; and “AGAINST” proposal five, if properly presented at the annual meeting.

Our board of directors is unaware of any other matters that may be presented for action at our annual meeting. If other matters do properly come before the annual meeting or any adjournments or postponements thereof, it is intended that shares represented by proxies will be voted in the discretion of the proxy holders.

You may revoke your proxy at any time before it is exercised by doing any of the following:

 

  entering a new vote using the Internet or by telephone

 

  giving written notice of revocation to Lynn S. McCreary, Chief Legal Officer and Secretary, Fiserv, Inc., 255 Fiserv Drive, Brookfield, Wisconsin 53045

 

  submitting a subsequently dated and properly completed proxy card

 

  attending the annual meeting and voting in person

However, if your shares are held of record by a bank, broker or other nominee, you must obtain a proxy issued in your name from the record holder.

Quorum

The presence, in person or by proxy, of at least a majority of the outstanding shares of common stock entitled to vote at the annual meeting will constitute a quorum for the transaction of business. Holders of shares that abstain from voting or that are subject to a broker non-vote will be counted as present for the purpose of determining the presence or absence of a quorum for the transaction of business. In the event there are not sufficient votes for a quorum or to approve a proposal at the time of the annual meeting, the annual meeting may be adjourned or postponed, in our sole discretion, in order to permit the further solicitation of proxies.

 

 
 
   
 

 

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Required Vote

 

    
 

 

 
 

 

Proposal

 

  

 

Voting Standard

 
 

 

 
 

 

1.

 

 

Election of directors

  

 

A director will be elected if the number of shares voted “for” that director’s election exceeds the number of votes cast “withheld” with respect to that director’s election.

 

 
 

 

 
 

 

2.

 

 

To approve the material terms of the performance goals under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan

 

  

 

To be approved, the number of votes cast “for” the proposal must exceed the number of votes cast “against” the proposal.

 
 

 

 
 

 

3.

 

 

To approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement

 

  

 

To be approved, the number of votes cast “for” the proposal must exceed the number of votes cast “against” the proposal.

 
 

 

 
 

 

4.

 

 

To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2018

 

  

 

To be approved, the number of votes cast “for” the proposal must exceed the number of votes cast “against” the proposal.

 
 

 

 
 

 

5.

 

 

To vote on a shareholder proposal relating to executive pay confidential voting, if properly presented at the annual meeting

 

  

 

To be approved, the number of votes cast “for” the proposal must exceed the number of votes cast “against” the proposal.

 
 

 

 
  For each of these proposals, abstentions and broker non-votes will be entirely excluded from the vote and will have no effect on its outcome.  

 

 
 
   
 

 

08    2018 Proxy Statement


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  Security Ownership of Certain Beneficial Owners and Management

 

 

 

 
 
   

The following table sets forth information with respect to the beneficial ownership of our common stock as of March 7, 2018 by: each current director and director nominee; each executive officer appearing in the Summary Compensation Table; all directors and executive officers as a group; and any person who is known by us to beneficially own more than 5% of the outstanding shares of our common stock based on our review of the reports regarding ownership filed with the Securities and Exchange Commission in accordance with Sections 13(d) and 13(g) of the Securities Exchange Act of 1934 (the “Exchange Act”). In March 2018, we completed a two-for-one split of our common stock. Accordingly, all amounts are presented on a split-adjusted basis.

 

                                

Name and Address of Beneficial Owner (1)

 

       

Number of Shares of
Common Stock
Beneficially Owned (2)

 

        

Percent of Class (3)

 

   

 

   

 

    

 

 

T. Rowe Price Associates, Inc. (4)

100 E. Pratt Street

Baltimore, Maryland 21202

    59,174,660      14.4%  

 

   

 

    

 

 

The Vanguard Group, Inc. (5)

100 Vanguard Blvd.

Malvern, Pennsylvania 19355

    42,682,932      10.4%  

 

   

 

    

 

 

BlackRock, Inc. (6)

55 East 52nd Street

New York, New York 10055

    30,093,092      7.3%  

 

   

 

    

 

 

Jeffery W. Yabuki

    4,518,236      1.1%  

 

   

 

    

 

 

Robert W. Hau

    14,336      *      

 

   

 

    

 

 

Mark A. Ernst (7)

    1,039,694      *      

 

   

 

    

 

 

Devin B. McGranahan

    37,168      *      

 

   

 

    

 

 

Byron C. Vielehr

    391,568      *      

 

   

 

    

 

 

Alison Davis

    19,682      *      

 

   

 

    

 

 

Harry F. DiSimone

    706      *      

 

   

 

    

 

 

John Y. Kim

    7,614      *      

 

   

 

    

 

 

Dennis F. Lynch

    49,900      *      

 

   

 

    

 

 

Denis J. O’Leary

    133,006      *      

 

   

 

    

 

 

Glenn M. Renwick

    294,868      *      

 

   

 

    

 

 

Kim M. Robak

    136,718      *      

 

   

 

    

 

 

JD Sherman

    14,540      *      

 

   

 

    

 

 

Doyle R. Simons

    172,052      *      

 

   

 

    

 

 

All directors and executive officers as a group (17 people)

    7,094,044      1.7%  

 

   

 

    

 

 

* Less than 1%.

          
          

 

(1)   Unless otherwise indicated, the address for each beneficial owner is care of Fiserv, Inc., 255 Fiserv Drive, Brookfield, Wisconsin 53045.

 

(2)   All information with respect to beneficial ownership is based upon filings made by the respective beneficial owners with the Securities and Exchange Commission or information provided to us by such beneficial owners. Except as indicated in the footnotes to this table, the persons named in the table have sole voting and

       

investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws.

 

Includes stock options, which, as of March 7, 2018, were exercisable currently or within 60 days: Mr. Yabuki – 3,715,362; Mr. Hau – 14,336; Mr. Ernst – 930,964; Mr. McGranahan – 7,168; Mr. Vielehr – 370,560; Ms. Davis – 14,862; Mr. Kim – 4,100; Mr. Lynch – 37,720; Mr. O’Leary – 63,952; Mr. Renwick – 79,268;

 

 
 
 

 

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Ms. Robak – 50,224; Mr. Sherman – 7,964; Mr. Simons – 91,516; and all directors and executive officers as a group – 5,556,084.

 

Includes shares deferred under vested restricted stock units: Ms. Davis – 4,652; Mr. Kim – 1,200; Mr. Lynch – 12,180; Mr. O’Leary – 25,412; Mr. Renwick – 32,392; Ms. Robak – 15,648; Mr. Simons – 32,392; and all directors and executive officers as a group – 123,876.

 

Also includes shares eligible for issuance in connection with the deferral of cash compensation pursuant to the non-employee director deferred compensation plan: Mr. Kim – 2,184; Mr. O’Leary – 34,842; Mr. Renwick – 42,220; Ms. Robak – 15,862; Mr. Simons – 37,212; and all directors as a group – 132,320.

 

Mr. Yabuki is a trustee of the Yabuki Family Foundation which holds 236,428 shares of our common stock. As a trustee, Mr. Yabuki has voting and investment power over the shares held by the foundation. These shares are, accordingly, included in his reported beneficial ownership.

 

 

(3)   On March 7, 2018, there were 412,202,114 shares of common stock outstanding. Percentages are calculated pursuant to Rule 13d-3(d) under the Exchange Act. Shares not outstanding that are subject to options exercisable by the holder thereof within 60 days, shares due upon vesting of restricted stock units within 60 days, shares deferred pursuant to vested restricted stock units and shares eligible for issuance pursuant to the non-employee director deferred compensation plan are deemed outstanding for the purposes of calculating the number and percentage owned by such shareholder but not deemed outstanding for the purpose of calculating the percentage of any other person.

 

 

(4)   Based on a Schedule 13G filed by T. Rowe Price Associates, Inc. (“Price Associates”) on February 14, 2018 with the Securities and Exchange Commission, which indicates that these securities are owned by various individual and institutional investors for which Price Associates serves as investment adviser and with power to direct investments and/or sole power to vote the securities. According to the

       

Schedule 13G, Price Associates exercises sole voting power over 17,547,536 of the securities and sole dispositive power over 59,174,660 of the securities. For purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities.

 

 

(5)   Based on a Schedule 13G filed by The Vanguard Group, Inc. (“Vanguard Group”) on February 9, 2018 with the Securities and Exchange Commission, which indicates that the Vanguard Group exercises sole voting power over 603,548 of the securities, shared voting power over 121,996 of the securities, sole dispositive power over 41,977,408 of the securities and shared dispositive power over 705,524 of the securities. According to the Schedule 13G, Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of Vanguard Group, is the beneficial owner of 467,116 of the securities as a result of VFTC serving as investment manager of collective trust accounts, and Vanguard Investments Australia, Ltd. (“VIA”), a wholly-owned subsidiary of Vanguard Group, is the beneficial owner of 371,828 of the securities as a result of VIA serving as investment manager of Australian investment offerings.

 

 

(6)   Based on a Schedule 13G filed by BlackRock, Inc. (“BlackRock”) on January 25, 2018 with the Securities and Exchange Commission, which indicates that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, these securities. According to the Schedule 13G, BlackRock exercises sole voting power over 26,381,270 of the securities and sole dispositive power over 30,093,092 of the securities.

 

 

(7)   Mr. Ernst served as our chief operating officer until April 1, 2018 and is included in the amounts shown above for all directors and executive officers as a group.

 

 

 

 
 
 

 

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Proposal 1. Election of Directors

 

 

 

 
 

Our Board of Directors

All directors will be elected to hold office for a term expiring at the next annual meeting of shareholders and until their successors have been elected and qualified.

All of the nominees for election as director at the annual meeting are incumbent directors. No nominee for director has been nominated pursuant to any agreement or understanding between us and any person, and there are no family relationships among any of our directors or executive officers. These nominees have consented to serve as a director if elected, and management has no reason to believe that any nominee will be unable to serve. Unless otherwise specified, the shares of common stock represented by the proxies solicited hereby will be voted in favor of the nominees proposed by the board of directors. In the event that any director nominee becomes unavailable for re-election as a result of an unexpected occurrence, shares will be voted for the election of such substitute nominee, if any, as the board of directors may propose. The affirmative vote of a majority of votes cast is required for the election of directors.

 

 
 
   

Majority Voting

Our by-laws provide that each director will be elected by the majority of the votes cast with respect to that director’s election at any meeting of shareholders for the election of directors, other than a contested election. A majority of the votes cast means that the number of votes cast “for” a director’s election exceeds the number of votes cast “withheld” with respect to that director’s election. In a contested election, each director will be elected by a plurality of the votes cast with respect to that director’s election. Once our chairman of the board determines that a contested election exists in accordance with our by-laws, the plurality vote standard will apply at a meeting at which a quorum is present regardless of whether a contested election continues to exist as of the date of such meeting.

Our by-laws further provide that, in an uncontested election of directors, any nominee for director who is already serving as a director and receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will promptly tender his or her resignation. The nominating and corporate governance committee of the board of directors will then promptly consider the tendered resignation, and the committee will recommend to the board whether to accept or reject it. Following the board’s decision, we will promptly file a Current Report on Form 8-K with the Securities and Exchange Commission that sets forth the board’s decision whether to accept the resignation as tendered, including a full explanation of the process by which the decision was reached and, if applicable, the reasons for rejecting the tendered resignation. Any director who tenders a resignation pursuant to this provision will not participate in the committee recommendation or the board consideration regarding whether to accept the tendered resignation.

 

 
 
   
 

 

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Nominees for Election

 

Each person listed below is nominated for election to serve as a director until the next annual meeting of shareholders and until his or her successor is elected and qualified. The board of directors recommends that you vote “FOR” each of its nominees for director.

 

 

    

 

 

Alison Davis, 56

 

•  Director since 2014

 

•  Audit Committee member

 

•  Principal occupation:
   Advisor, Fifth Era

 

•  Experience in global financial

   services, corporate strategy and

   financial management

    

 

Ms. Davis is an advisor to Fifth Era, a firm that invests in and incubates early stage technology companies, and previously served as its Managing Partner from 2011 to 2015. Prior to Fifth Era, she was the Managing Partner of Belvedere Capital Partners, Inc., a private equity firm serving the financial services sector, from 2004 to 2010. Prior to joining Belvedere, she served as Chief Financial Officer for Barclays Global Investors, an institutional asset manager that is now part of BlackRock, Inc., from 2000 to 2003, a senior partner at A.T. Kearney, Inc., a leading global management consulting firm, from 1993 to 2000, and a consultant at McKinsey & Company, another leading global management consulting firm, from 1984 to 1993.

 

In the past five years, in addition to Fiserv, Ms. Davis has served as a director at the following publicly traded companies: Royal Bank of Scotland Group plc (current), a British bank holding company, Unisys Corporation (current), a global information technology company, Ooma, Inc. (current), a consumer telecommunications company, Diamond Foods, Inc. (former), a packaged food company, and Xoom Corporation (former), a digital money transfer provider. Ms. Davis has announced her decision not to stand for reelection as a director of Unisys Corporation at Unisys’s 2018 annual meeting of shareholders scheduled for April 2018.

 

The board concluded that Ms. Davis should be a director of the company because of her extensive experience in global financial services, corporate strategy and financial management.

 

    

 

 

 
 
   
 

 

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Harry F. DiSimone, 63

 

•  Appointed in 2018

 

•  Compensation Committee member

 

•  Principal occupation:
   President, Commerce Advisors,

   Inc.

 

•  Extensive experience in the

   banking, payments and financial

   services industries

    

 

Mr. DiSimone founded and has served as President of Commerce Advisors, Inc., a consulting and advisory services firm for the retail financial services and payments industries, since 2008. From 2010 to 2015, he served as Co-Managing Partner of Encore Financial Partners, Inc., a company focused on the acquisition and management of banking organizations in the United States, which Mr. DiSimone also co-founded. Prior to 2008, Mr. DiSimone spent over 30 years at J.P. Morgan Chase & Company and its predecessor organizations holding various senior level positions including Executive Vice President, Chief Operating Officer of the Chase credit card business, Private Label Card and Merchant Processing Executive, Retail Bank Chief Marketing Officer, Consumer Banking, Investments and Insurance Executive and Chase Personal Financial Services Executive.

 

Mr. DiSimone also currently serves as a director at iovation, Inc., a privately held global provider of consumer authentication and fraud prevention solutions, Reliant Funding, Inc., a privately held provider of short-term small business loans, and ClearBalance Inc., a privately held provider of patient loan programs to hospitals and health care systems nationwide.

 

Mr. DiSimone previously advised a number of retail banking and payment organizations, including The Direct Marketing Association (now known as The Data & Marketing Association), the NYCE Payment Network, Chase Paymentech, MasterCard’s U.S. Business Committee, Visa Global Advisors, the New York Clearing House’s Strategic Planning Committee and the Federal Reserve Bank’s Payment Card Council.

 

Mr. DiSimone was recommended to the nominating and corporate governance committee by one of the company’s independent directors. The board concluded that Mr. DiSimone should be a director of the company because of his extensive experience in the banking, payments and financial services industries.

 

 

    

 

 

John Y. Kim, 57

 

•  Director since 2016

 

•  Audit Committee member

 

•  Principal occupation:

   President, New York Life Insurance

   Company

 

•  Experience in the financial services

   industry

    

 

Mr. Kim has served as President of New York Life Insurance Company, a mutual life insurance company, since 2015. Since 2008, Mr. Kim served in various other positions at New York Life, including as its Chief Investment Officer from 2011 to 2015; President of the Investments Group from 2012 to 2015; and Chief Executive Officer and President of New York Life Investments from 2008 to 2012. Prior to joining New York Life in 2008, Mr. Kim was President of Prudential Retirement, a provider of retirement plan solutions, and its predecessor organization, CIGNA Retirement and Investment Services, from 2002 to 2007. Mr. Kim also served as Chief Executive Officer of Bondbook, an electronic bond trading company, from 2001 to 2002; President and CEO of Aeltus Investment Management Inc., now known as ING Investment Management Company, from 1994 to 2000; and Managing Director of Mitchell Hutchins Asset Management, Inc., now part of UBS Global Asset Management, from 1993 to 1994.

 

In the past five years, in addition to Fiserv, Mr. Kim has served on the board of trustees of Eversource Energy (current), a publicly traded public utility holding company, and as a director at New York Life Insurance and Annuity Corporation (current), a wholly owned life insurance subsidiary of New York Life and registered investment company.

 

The board concluded that Mr. Kim should be a director of the company because of his extensive experience in the financial services industry.

 

    

 

 

 
 
 

 

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Dennis F. Lynch, 69

 

•  Director since 2012

 

•  Compensation Committee and

   Nominating and Corporate

   Governance Committee member

 

•  Principal occupation:

   Chairman, Cardtronics plc

 

•  Experience in the payments

   industry

    

 

Mr. Lynch is Chairman of Cardtronics plc, a publicly traded company and the largest owner and operator of retail ATMs worldwide. He was appointed Chairman in 2010 and has served as a director of Cardtronics since 2008. Mr. Lynch is also a director, and former Chairman, of the Secure Remote Payments Council, a cross-industry organization dedicated to accelerating the growth, development and market adoption of more secure e-commerce and mobile payments. He previously served as: Chairman and Chief Executive Officer of RightPath Payments, Inc. from 2005 to 2008; a director of Open Solutions, Inc. from 2005 to 2007; President and Chief Executive Officer of NYCE Corporation from 1996 to 2004; and Chairman of Yankee 24 ATM Network from 1988 to 1990.

 

In the past five years, in addition to Fiserv, Mr. Lynch has served as a director at Cardtronics plc (current).

 

The board concluded that Mr. Lynch should be a director of the company because he has over 30 years of experience in the payments industry and is a leader in the introduction and growth of payment solutions.

 

 

    

 

 

Denis J. O’Leary, 61

 

•  Director since 2008

 

•  Audit Committee chair and

   Nominating and Corporate

   Governance Committee member

 

•  Principal occupation:

   Investor

 

•  Experience in the banking,

   technology and information

   services industries

    

 

Mr. O’Leary is a private investor, and from 2009 to 2015, he served as Co-Managing Partner of Encore Financial Partners, Inc., a company focused on the acquisition and management of banking organizations in the United States. From 2006 to 2009, he was a senior advisor to The Boston Consulting Group with respect to the enterprise technology, financial services and consumer payments industries. Through early 2003, he spent 25 years at J.P. Morgan Chase & Company and its predecessors in various capacities, including Director of Finance, Chief Information Officer, Head of Retail Banking, Managing Executive of Lab Morgan, and, from 1994 to 2003, Executive Vice President.

 

Mr. O’Leary also currently serves as a director at CrowdStrike, Inc., a privately held computer security software company, Hamilton State Bancshares, Inc., a privately held bank holding company, and The Warranty Group, Inc., a privately held provider of extended warranty programs and related benefits.

 

The board concluded that Mr. O’Leary should be a director of the company because of his extensive knowledge and experience in the banking, technology and information services industries.

 

    

 

 

 
 
   
 

 

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Glenn M. Renwick, 62

 

•  Chairman since 2017

 

•  Director since 2001

 

•  Principal occupations:

   Chairman, Fiserv, Inc. and

   The Progressive Corporation

 

•  Experience in business leadership

   and information technology

    

 

Mr. Renwick became the chairman of our board of directors in May 2017. He is also the non-executive Chairman of The Progressive Corporation, a publicly traded property and casualty insurance company, and also served as its President and Chief Executive Officer from 2001 to 2016. Before being named Chief Executive Officer in 2001, Mr. Renwick served as Chief Executive Officer – Insurance Operations and Business Technology Process Leader from 1998 through 2000. Prior to that, he led Progressive’s consumer marketing group and served as president of various divisions within Progressive. Mr. Renwick joined Progressive in 1986 as Auto Product Manager for Florida.

 

In the past five years, in addition to Fiserv, Mr. Renwick has served as a director at the following publicly traded companies: The Progressive Corporation (current) and UnitedHealth Group Incorporated (current), a provider of health insurance. Mr. Renwick has announced his decision to retire from The Progressive Corporation’s board of directors when his current term ends at Progressive’s annual meeting of shareholders scheduled for May 2018.

 

The board concluded that Mr. Renwick should be a director of the company because he is an accomplished business leader with information technology experience.

 

 

    

 

 

 

Kim M. Robak, 62

 

•  Director since 2003

 

•  Nominating and Corporate

   Governance Committee chair and

   Compensation Committee member

 

•  Principal occupation:

   Partner at Mueller Robak, LLC

 

•  Experience in law, government

   and technology

    

 

 

Ms. Robak has been a partner at Mueller Robak, LLC, a government relations firm, since 2004. Prior to that, Ms. Robak was Vice President for External Affairs and Corporation Secretary at the University of Nebraska from 1999 to 2004. Ms. Robak served as the Lieutenant Governor of the State of Nebraska from 1993 to 1999, as Chief of Staff from 1992 to 1993, and as Legal Counsel from 1991 to 1992. During her tenure in state government, she chaired the Governor’s Information Resources Cabinet and led the Information Technology Commission of Nebraska.

 

Ms. Robak also currently serves as a director at Ameritas Mutual Holding Company, a privately held provider of life insurance, annuities, and mutual funds, Ameritas Life Insurance Corporation, a privately held life insurance company, and Union Bank & Trust Company, a privately held financial institution.

 

The board concluded that Ms. Robak should be a director of the company because she is an accomplished businessperson who brings a variety of experiences to the board through her work in law, government and technology.

 

    

 

 

 
 
   
 

 

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JD Sherman, 52

 

•  Director since 2015

 

•  Audit Committee member

 

•  Principal occupation:

   President and Chief Operating

   Officer, HubSpot, Inc.

 

•  Experience in financial management

   and the information technology

   industry

    

 

Mr. Sherman has served as Chief Operating Officer of HubSpot, Inc., a publicly traded provider of marketing software, since 2012 and as its President since 2014. Prior to joining HubSpot, Mr. Sherman was Chief Financial Officer of Akamai Technologies, Inc., a provider of content delivery network services, from 2005 to 2012. Prior to 2005, Mr. Sherman served in various positions at International Business Machines Corporation, an information technology company.

 

In the past five years, in addition to Fiserv, Mr. Sherman has served as a director at Cypress Semiconductor Corporation (former), a publicly traded provider of programmable technology solutions. He also previously served as a director at 3Com Corporation, a global enterprise networking solutions provider, and AMIS Holdings, Inc., a designer and manufacturer of mixed-signal and digital products for the automotive, medical, industrial, military and aerospace sectors.

 

The board concluded that Mr. Sherman should be a director of the company because of his strong financial management experience in the information technology industry.

 

 

    

 

 

Doyle R. Simons, 54

 

•  Director since 2007

 

•  Compensation Committee chair

 

•  Principal occupation:

   President and Chief Executive

   Officer, Weyerhaeuser Company

 

•  Experience in senior management,

   financial and legal matters

    

 

Mr. Simons is President and Chief Executive Officer of Weyerhaeuser Company, a publicly traded company focused on timberlands and forest products. Prior to joining Weyerhaeuser in 2013, Mr. Simons served in a variety of roles for Temple-Inland, Inc., a manufacturing company focused on corrugated packaging and building products which was acquired in 2012. From 2007 to early 2012, he served as the Chairman and Chief Executive Officer; from 2005 to 2007, he was Executive Vice President; from 2003 to 2005, he served as its Chief Administrative Officer; from 2000 to 2003, he was Vice President – Administration; and from 1994 to 2000, he served as Director of Investor Relations.

 

In the past five years, in addition to Fiserv, Mr. Simons has served as a director at Weyerhaeuser Company (current).

 

The board concluded that Mr. Simons should be a director of the company because he is an accomplished businessperson with diverse experiences in senior management, financial and legal matters.

 

    

 

 

 
 
   
 

 

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Jeffery W. Yabuki, 58

 

•  Director since 2005

 

•  Principal occupation:

   President and Chief Executive

   Officer, Fiserv, Inc.

 

•  Experience in senior management

   positions including as chief

   executive officer of the company

    

 

Mr. Yabuki has served as our President and Chief Executive Officer since 2005. Before joining Fiserv, Mr. Yabuki served as Executive Vice President and Chief Operating Officer for H&R Block, Inc., a financial services firm, from 2002 to 2005. From 2001 to 2002, he served as Executive Vice President of H&R Block and from 1999 to 2001, he served as the President of H&R Block International. From 1987 to 1999, Mr. Yabuki held various executive positions with American Express Company, a financial services firm, including President and Chief Executive Officer of American Express Tax and Business Services, Inc.

 

In the past five years, in addition to Fiserv, Mr. Yabuki has served as a director at Royal Bank of Canada (current), a publicly traded financial institution. Mr. Yabuki also currently serves as a director at Ixonia Bancshares, Inc., a privately held bank holding company.

 

The board concluded that Mr. Yabuki should be a director of the company because he has extensive senior management experience and serves as the chief executive officer of the company.

 

    

 

 

 
 
   
 

 

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Corporate Governance

 

At a Glance

Name

 

        

Independent         

 

      

Audit Committee        

 

      

Compensation
Committee              

 

      

Nominating and
Corporate Governance
Committee

 

 

    

 

    

 

    

 

    

 

 

Glenn M. Renwick

Chairman of the Board

 

    

LOGO

 

              

 

    

 

    

 

    

 

    

 

 

Alison Davis

 

     LOGO      LOGO          

 

    

 

    

 

    

 

    

 

 

Harry F. DiSimone

 

     LOGO           LOGO     

 

    

 

    

 

    

 

    

 

 

John Y. Kim

 

     LOGO      LOGO          

 

    

 

    

 

    

 

    

 

 

Dennis F. Lynch

 

     LOGO           LOGO      LOGO

 

    

 

    

 

    

 

    

 

 

Denis J. O’Leary

 

     LOGO      C           LOGO

 

    

 

    

 

    

 

    

 

 

Kim M. Robak

 

     LOGO           LOGO      C

 

    

 

    

 

    

 

    

 

 

JD Sherman

 

     LOGO      LOGO          

 

    

 

    

 

    

 

    

 

 

Doyle R. Simons

 

     LOGO           C     

 

    

 

    

 

    

 

    

 

 

Jeffery W. Yabuki

 

                   

 

    

 

    

 

    

 

    

 

 

C  = Committee Chair

 

                   
                   

Director Independence

 

Our board of directors has determined that Alison Davis, Harry F. DiSimone, John Y. Kim, Dennis F. Lynch, Denis J. O’Leary, Glenn M. Renwick, Kim M. Robak, JD Sherman and Doyle R. Simons are “independent” within the meaning of NASDAQ Marketplace Rule 5605(a)(2). Prior to their retirement on May 24, 2017, Daniel P. Kearney and Thomas C. Wertheimer were also determined to be independent within the meaning of that rule. Mr. Yabuki is not independent because he is a current employee of Fiserv.

 

Board Meetings and Attendance

 

During our fiscal year ended December 31, 2017, our board of directors held six meetings. Each director attended at least 75% of the aggregate of the number of meetings of the board of directors and the number of meetings held by all committees of the board on which she or he served, in each case while the director was serving on our board of directors or such committees as applicable. Our directors meet in executive session without management present at each regular meeting of the board of directors.

               

Directors are expected to attend each annual meeting of shareholders. All of the directors serving on the board at the time of our 2017 annual meeting of shareholders attended the meeting.

 

Board Leadership

 

We separate the roles of chief executive officer and chairman of the board to allow our leaders to focus on their respective responsibilities. Our chief executive officer is responsible for setting our strategic direction and providing day-to-day leadership. Our chairman provides guidance to our chief executive officer, sets the agenda for board meetings and presides over meetings of the full board.

 

Our board recognizes the time, effort and energy that our chief executive officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our chairman. Our board believes that having separate positions provides a clear delineation of responsibilities for each position and enhances the ability of each leader to discharge his duties effectively which, in turn, enhances our prospects for success.

 

 

 

 
 
   
 

 

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Annual Board and Committee Self-Assessments

The board of directors considers the performance of the board and of individual directors, and each committee of the board reviews its performance, on an annual basis. Our board believes that a meaningful annual evaluation process promotes good governance practices and the effective functioning of the board.

Questionnaires

Directors anonymously complete individual, board and board committee evaluations.

Annual Results

With respect to individual director performance evaluations, the chairman of the board reviews the survey results and discusses each director’s performance with the relevant director. The results of the board evaluations are reviewed and discussed by the nominating and corporate governance committee and the board. Each committee discusses the results of its performance survey and shares the results with the full board.

Action Plans

The board and its committees take the foregoing discussions into account and, as appropriate, update their practices or areas of focus to continuously improve the operation and performance of the board, and its committees.

 

 
 
   

 

 
 
   
 

 

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Committees of the Board of Directors

Our board of directors has three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. The directors currently serving on these committees satisfy the independence requirements of the NASDAQ Marketplace Rules applicable to such committees, including the enhanced independence requirements for members of the audit committee and compensation committee. Each of these committees has the responsibilities set forth in written charters adopted by the board of directors. We make copies of each of these charters available free of charge on our website at http://investors.fiserv.com/corporate-governance.cfm. Other than the text of the charters, we are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this proxy statement.

 

 

 

Audit Committee

 

    

 

    

 

 

Mr.  O’Leary (Chair)

Ms. Davis

Mr. Kim

Mr. Sherman

Number of Meetings held in 2017:

7

    

 

Duties:

 

The audit committee’s primary role is to provide independent review and oversight of our financial reporting processes and financial statements, system of internal controls, audit process and results of operations and financial condition. The audit committee is directly and solely responsible for the appointment, compensation, retention, termination and oversight of our independent registered public accounting firm. Each of the members of the audit committee is independent, as defined by applicable NASDAQ and Securities and Exchange Commission rules. The board of directors has determined that Ms. Davis and Messrs. Kim, O’Leary and Sherman are “audit committee financial experts,” as that term is used in Item 407(d)(5) of Regulation S-K.

 

Compensation Committee

 

 

    

 

 

Mr.  Simons (Chair)

Mr. DiSimone (as of February 21, 2018)

Mr. Lynch

Ms. Robak

Number of Meetings held in 2017:

5

    

 

Duties:

 

The compensation committee of the board of directors is responsible for overseeing executive officer compensation. The compensation committee’s responsibilities include: approval of executive officer compensation and benefits; administration of our equity incentive plans including compliance with executive stock ownership requirements; and approval of severance or similar termination payments to executive officers. Each of the members of the compensation committee is a non-employee director and “independent” as defined by applicable NASDAQ rules. Additional information regarding the compensation committee and our policies and procedures regarding executive compensation, including, among other matters, our use of compensation consultants and their role, and management’s role, in determining compensation, is provided below under the heading “Compensation Discussion and Analysis – Determining and Structuring Compensation – Determining Compensation.”

 

Nominating and Corporate Governance Committee

 

 

    

 

 

Ms. Robak (Chair)

Mr. Lynch

Mr. O’Leary

Number of Meetings held in 2017:

3

    

 

Duties:

 

The nominating and corporate governance committee assists the board of directors to identify and evaluate potential director nominees, and recommends qualified nominees to the board of directors for consideration by the shareholders. The nominating and corporate governance committee also oversees our corporate governance policies and practices and manages the chief executive officer evaluation process. Each of the members of the nominating and corporate governance committee is independent as defined by applicable NASDAQ rules.

 

 
 
   
 

 

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Nominations of Directors

The nominating and corporate governance committee recommends to the full board of directors the nominees to stand for election at our annual meeting of shareholders and to fill vacancies occurring on the board. In this regard, the nominating and corporate governance committee regularly assesses the appropriate size of the board of directors and whether any vacancies on the board of directors are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the committee utilizes a variety of methods to identify and evaluate director candidates. Candidates may come to the attention of the committee through current directors, professional search firms, shareholders or other persons.

The committee evaluates prospective nominees in the context of the then current constitution of the board of directors and considers all factors it believes appropriate, which include those set forth in our governance guidelines. Our governance guidelines provide that a majority of our board of directors should have diverse backgrounds with outstanding business experience, proven ability and significant accomplishments through other enterprises to enable the board of directors to represent a broad set of capabilities and viewpoints. The board of directors and the nominating and corporate governance committee believe the following minimum qualifications must be met by a director nominee to be recommended by the committee:

 

  Each director must display the highest personal and professional ethics, integrity and values.

 

  Each director must have the ability to exercise sound business judgment.

 

  Each director must be highly accomplished in his or her respective field.

 

  Each director must have relevant expertise and experience and be able to offer advice and guidance to our chief executive officer based on that expertise and experience.

 

  Each director must be independent of any particular constituency, be able to represent all of our shareholders, and be committed to enhancing long-term shareholder value.

 

 
 
   
  Each director must have sufficient time available to devote to activities of the board of directors and to enhance his or her knowledge of our business.

In addition, the nominating and corporate governance committee seeks to have at least one director who is an “audit committee financial expert” under Item 407(d)(5) of Regulation S-K under the Exchange Act, and we must have at least one director (who may also be an “audit committee financial expert”) who, in accordance with the NASDAQ Marketplace Rules, has past employment experience in finance or accounting, requisite professional certification in accounting or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.

In making recommendations to the board of directors, the nominating and corporate governance committee examines each director candidate on a case-by-case basis regardless of who recommended the candidate. The committee will consider shareholder-recommended director candidates in accordance with the foregoing and other criteria set forth in our governance guidelines and the Nominating and Corporate Governance Committee Charter. Recommendations for consideration by the committee must be submitted in writing to the chairman of the board and/or president and the chairman of the nominating and corporate governance committee together with appropriate biographical information concerning each proposed candidate. The committee does not evaluate shareholder-recommended director candidates differently than any other director candidate.

In 2016, we amended our by-laws to include a provision pursuant to which a shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of our stock representing an aggregate of at least 3% of our outstanding shares may nominate and include in our proxy material director nominees constituting up to 20% of our board of directors – so called “proxy access.” Alternatively, a shareholder may nominate director nominees under our by-laws that the shareholder does not intend to have included in our proxy materials. In either case, such shareholders must comply with the procedures set forth in our by-laws,

 

 
 
   
 

 

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including that the shareholders and nominees satisfy the requirements in our by-laws and our corporate Secretary receives timely written notice, in proper form, of the intent to make a nomination at an annual meeting of shareholders. The detailed requirements for nominations are set forth in our by-laws, which were attached as an exhibit to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 19, 2016. A copy of our by-laws will be provided upon written request to our corporate Secretary. Additional requirements regarding shareholder proposals and director nominations, including the dates by which notices must be received, are described below under the heading “Other Matters – Shareholder Proposals for the 2019 Annual Meeting.”

Risk Oversight

Our management is responsible for managing risk, and our board of directors is responsible for overseeing management. To discharge this responsibility, the board seeks to be informed about the risks facing the company so that it may evaluate actual and potential risks and understand how management is addressing such risks. To this end, the board, as a whole and at the committee level, regularly receives reports from management about risks faced by the company. For example, the board of directors regularly receives reports directly from our chief executive officer about, among other matters, developments in our industry so that the board may evaluate the competitive and other risks faced by the company. In addition, our chief financial officer, at each meeting of the board, presents information regarding our financial performance and condition in an effort to understand financial risks faced by the company.

Cybersecurity is a significant area of focus for our board of directors. At regularly scheduled meetings, the board of directors receives cybersecurity updates regarding cybersecurity events, evolving cybersecurity threats, the status of our ongoing cybersecurity programs, and planned initiatives designed to continue to enhance our cybersecurity practices. The audit committee of the board receives reports on a regular basis from our chief risk officer, our chief audit officer and senior management regarding our operations, including operational risks and security matters. Our chief risk officer oversees Fiserv’s enterprise risk management program. The program encompasses

 

 
 
   

our business continuity planning, incident management, risk assessment, operational regulatory compliance, insurance and information security policies across all Fiserv businesses and support functions. Our chief audit officer audits, among other matters, our compliance with Fiserv operating protocols and ensures the remediation of any variations. These regular reports are periodically augmented with presentations focused on cybersecurity.

As discussed above, the positions of chief executive officer and chairman are held by different individuals. We believe a separate chairman position enhances the effectiveness of our board’s risk oversight function by providing leadership to the board that is independent from those tasked with managing the risk profile of our company.

The committees of the board also play a critical role in the board’s ability to collect and assess information. The audit committee’s charter charges it with a variety of risk-related oversight duties, including:

 

  coordinating the board’s oversight of our significant internal controls and disclosure controls and procedures;

 

  administering our code of business conduct and ethics;

 

  reviewing legal and regulatory matters that could have a material impact on the financial statements;

 

  considering and approving related party transactions as required by our related party transactions policy; and

 

  establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters.

Our compensation committee regularly receives reports about our compensation programs and policies to enable it to oversee management’s administration of compensation-related risks.

The nominating and corporate governance committee also works closely with our chief legal officer and the members of the board to seek to manage risks associated with director and executive officer succession, the independence of the directors, conflicts of interest and other corporate governance related matters.

 

 
 
   
 

 

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Communications with the Board of Directors

Shareholders may communicate with our board of directors or individual directors by submitting communications in writing to us at 255 Fiserv Drive, Brookfield, Wisconsin 53045, Attention: Lynn S. McCreary, Chief Legal Officer and Secretary. Communications will be delivered directly to our board of directors or individual directors, as applicable.

Review, Approval or Ratification of Transactions with Related Persons

We have adopted a written policy requiring that any related person transaction that would require disclosure under Item 404(a) of Regulation S-K under the Exchange Act be reviewed and approved by our audit committee or, if the audit committee is not able to review the transaction for any reason, a majority of our disinterested directors. Compensation matters regarding our executive officers or directors are

 

 
 
   

reviewed and approved by our compensation committee. The policy also provides that, at least annually, any such ongoing, previously approved related person transaction is to be reviewed by the body that originally approved the transaction: to ensure that it is being pursued in accordance with all of the understandings and commitments made at the time that it was previously approved; to ensure that the commitments being made with respect to such transaction are appropriately reviewed and documented; and to affirm the continuing desirability of and need for the related person arrangement.

All relevant factors with respect to a proposed related person transaction will be considered, and such a transaction will only be approved if it is in our and our shareholders’ best interests or, if an alternate standard of review is imposed by applicable laws, statutes, governing documents or listing standards, if such alternate standard of review is satisfied.

 

 
 
   
 

 

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Director Compensation

Objectives for Director Compensation

Quality non-employee directors are critical to our success. We believe that the two primary duties of non-employee directors are to effectively represent the long-term interests of our shareholders and to provide guidance to management. As such, our compensation program for non-employee directors is designed to meet several key objectives:

 

  Adequately compensate directors for their responsibilities and time commitments and for the personal liabilities and risks that they face as directors of a public company

 

  Attract the highest caliber non-employee directors by offering a compensation program consistent with those at peer companies

 

  Align the interests of directors with our shareholders by providing a significant portion of compensation in equity and requiring directors to own our stock

 

  Provide compensation that is simple and transparent to shareholders and reflects corporate governance best practices

 

  Where possible, provide flexibility in form and timing of payments

 

 
 
   

Elements of Director Compensation

The compensation committee of the board of directors reviews non-employee director compensation every other year and considers our financial performance, general market conditions and non-employee director compensation at the peer group companies set forth below under “Compensation Discussion and Analysis – Structuring Compensation – Peer Group.”

We believe that the following components of our director compensation program support the objectives above:

 

  We provide cash compensation through retainers for board and committee service, as well as separate retainers to the chairpersons of our board committees. Compensation in this manner simplifies the administration of our program and creates greater equality in rewarding service on committees of the board. The committee and committee chair retainers compensate directors for the additional responsibilities and time commitments involved with those positions.

 

  To compensate the chairman for his involvement in board and committee matters, he receives an annual cash retainer of $145,000 in addition to the standard board retainer. The chairman receives equity grants in the same manner as the other non-employee directors.

 

  Non-employee directors receive grants of stock options and restricted stock units which vest 100% on the earlier of (i) the first anniversary of the grant date or (ii) immediately prior to the first annual meeting of shareholders following the grant date.

 

  To promote long-term share ownership and to further align our directors’ long-term interests with those of our shareholders, in 2017, our non-employee directors executed amendments to their outstanding stock option award agreements providing that any vested stock options upon cessation of service from the board will remain exercisable until the earlier of five years following cessation of service or the original expiration date of the option.

 

  Our stock ownership policy requires non-employee directors to own shares of our common stock having a total value equal to six times the annual board retainer amount.

 

  We maintain a non-employee director deferred compensation plan that provides directors with flexibility in managing their compensation and promotes alignment with the interests of our shareholders.

 

 
 
   
 

 

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Non-Employee Director Deferred Compensation Plan

Under our non-employee director deferred compensation plan, each non-employee director may defer up to 100% of his or her cash fees. Based on his or her deferral election, the director is credited with a number of share units at the time he or she would have otherwise received the portion of the fees being deferred. In addition, each non-employee director may defer receipt of up to 100% of shares due upon vesting of restricted stock units, and based on his or her election, the director is credited with one share unit for the receipt of each such share that is deferred. Share units are equivalent to shares of our common stock except that share units have no voting rights.

Upon cessation of service on the board, the director receives a share of our common stock for each share unit. Directors elect whether the shares are received in a lump sum distribution or in annual installments over two to fifteen years, and any fractional share units are paid in cash. Share units credited to a director’s account are considered awards granted under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan (the “Incentive Plan”) and count against that plan’s share reserve.

Stock Ownership Requirements

Under our stock ownership policy, non-employee directors are required to accumulate and hold our common stock having a market value equal to at least six times the amount of the annual board retainer.

Non-employee directors have five years after they become subject to the policy to meet the ownership requirements provided that interim ownership milestones are achieved during the five-year period. All non-employee directors are in compliance with our stock ownership policy.

 

 
 
   

Director Compensation Program

Our 2017 non-employee director compensation program is summarized below on an annualized basis:

 

Element of Compensation

 

        

2017

 

 

 

    

 

 

 

Board Retainer

 

     $

 

    78,000

 

 

 

 

    

 

 

 

Chairman’s Retainer (1)

 

      

 

145,000

 

 

 

 

    

 

 

 

Committee Retainer

 

    

 

    

 

 

 

 

Audit

 

    

 

 

 

 

15,000

 

 

 

 

 

    

 

 

 

 

Compensation

 

    

 

 

 

 

15,000

 

 

 

 

 

    

 

 

 

 

Nominating and Corporate Governance

 

    

 

 

 

 

15,000

 

 

 

 

 

    

 

 

 

Committee Chair Retainer (1)

 

    

 

    

 

 

 

 

Audit

 

    

 

 

 

 

10,000

 

 

 

 

 

    

 

 

 

 

Compensation

 

    

 

 

 

 

10,000

 

 

 

 

 

    

 

 

 

 

Nominating and Corporate Governance

 

    

 

 

 

 

10,000

 

 

 

 

 

    

 

 

 

Equity Awards ($) (2)

 

    

 

    

 

 

 

 

Stock Options

 

    

 

 

 

 

86,000

 

 

 

 

 

    

 

 

 

 

Restricted Stock Units

 

    

 

 

 

 

86,000

 

 

 

 

 

    

 

 

 

 

(1)    The chairman’s retainer is in addition to the standard board retainer, and the committee chair retainer is in addition to the standard committee retainer.

 

 

 

(2)    Upon being elected as a director at our annual meeting of shareholders in 2017, each non-employee director received stock options and restricted stock units each having approximately $86,000 in value.

 

 

 

 

 
 
   
 

 

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2017 Director Compensation

 

Name

 

         Fees Earned or
Paid in Cash ($) (1)         

 

           Stock Awards ($) (2)     

 

           Option Awards ($) (2)(3)     

 

           Total ($)                    

 

 

 

Alison Davis (4)

    

 

 

 

93,000

 

 

    

 

 

 

86,055

 

 

    

 

 

 

102,303

 

 

    

 

 

 

281,358

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Daniel P. Kearney (5)

    

 

 

 

88,832

 

 

    

 

 

 

 

 

    

 

 

 

39,959

 

 

    

 

 

 

128,791

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

John Y. Kim (6)

    

 

 

 

90,834

 

 

    

 

 

 

86,055

 

 

    

 

 

 

93,379

 

 

    

 

 

 

270,267

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Dennis F. Lynch (7)

    

 

 

 

108,000

 

 

    

 

 

 

86,055

 

 

    

 

 

 

112,758

 

 

    

 

 

 

306,812

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Denis J. O’Leary (8)

    

 

 

 

114,044

 

 

    

 

 

 

86,055

 

 

    

 

 

 

108,915

 

 

    

 

 

 

309,014

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Glenn M. Renwick (9)

    

 

 

 

175,596

 

 

    

 

 

 

86,055

 

 

    

 

 

 

111,821

 

 

    

 

 

 

373,471

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Kim M. Robak (10)

    

 

 

 

112,066

 

 

    

 

 

 

86,055

 

 

    

 

 

 

110,905

 

 

    

 

 

 

309,026

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

JD Sherman (11)

    

 

 

 

93,000

 

 

    

 

 

 

86,055

 

 

    

 

 

 

95,914

 

 

    

 

 

 

274,969

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Doyle R. Simons (12)

    

 

 

 

99,044

 

 

    

 

 

 

86,055

 

 

    

 

 

 

102,532

 

 

    

 

 

 

287,630

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Thomas C. Wertheimer (13)

    

 

 

 

41,030

 

 

    

 

 

 

 

 

    

 

 

 

40,163

 

 

    

 

 

 

81,193

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 
                   

 

(1)   This column includes the following amounts deferred under our non-employee director deferred compensation plan, a non-qualified defined contribution plan: Mr. Kim – $90,834; Mr. O’Leary – $114,044; Mr. Renwick – $175,596; Ms. Robak – $56,033; and Mr. Simons – $99,044.

 

 

(2)   In March 2018, we completed a two-for-one split of our common stock. Accordingly, all amounts are presented on a split-adjusted basis. We granted each non-employee director, other than Messrs. Kearney and Wertheimer, a number of restricted stock units determined by dividing $86,000 by $61.38, the closing price of our common stock on May 24, 2017, the date of the grant, rounded up to the next whole restricted stock unit. Accordingly, each non-employee director, other than Messrs. Kearney and Wertheimer, received 1,402 restricted stock units. The restricted stock units vest 100% on the earlier of the first anniversary of the grant date or immediately prior to the first annual meeting of shareholders following the grant date.

 

We granted each non-employee director, other than Messrs. Kearney and Wertheimer, a number of stock options determined by dividing $86,000 by a binomial valuation of an option of one share of our common stock on May 24, 2017, the grant date, rounded up to the next whole option. Accordingly, we granted an option to purchase 4,288 shares of our common stock at an exercise price of $61.38

 

         

to each non-employee director, other than Messrs. Kearney and Wertheimer. The options vest 100% on the earlier of the first anniversary of the grant date or immediately prior to the first annual meeting of shareholders following the grant date.

 

The dollar amount shown in the table is the grant date fair value of the award. Information about the assumptions that we used to determine the fair value of equity awards is set forth in our Annual Report on Form 10-K in Note 7 to our Consolidated Financial Statements for the year ended December 31, 2017.

 

 

(3)   The amounts shown in this column also include the following incremental fair values associated with the execution by our non-employee directors in 2017 of amendments to their outstanding stock option award agreements to enable them to exercise vested stock options following cessation of service from the board for a period of five years or, if earlier, until the original expiration date of the option: Ms. Davis – $16,286, Mr. Kearney – $39,959, Mr. Kim– $7,361, Mr. Lynch – $26,740, Mr. O’Leary – $22,898, Mr. Renwick – $25,803, Ms. Robak – $24,888, Mr. Sherman – $9,897, Mr. Simons – $16,514, and Mr. Wertheimer – $40,163. We believe this modification further aligns our directors’ long-term interests with those of our shareholders.

 

 

 

 

 

 

 
 
   
 

 

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(4)   As of December 31, 2017, Ms. Davis held 19,150 options to purchase shares of our common stock, 14,862 of which were vested, and 1,402 unvested restricted stock units.

 

 

(5)   Mr. Kearney’s term as a director ended at the 2017 annual meeting on May 24, 2017, and, as a result, Mr. Kearney did not receive an equity grant in 2017. As of December 31, 2017, Mr. Kearney held 63,952 vested options to purchase shares of our common stock and no restricted stock units.

 

 

(6)   As of December 31, 2017, Mr. Kim held 8,388 options to purchase shares of our common stock, 4,100 of which were vested, and 1,402 unvested restricted stock units.

 

 

(7)   As of December 31, 2017, Mr. Lynch held 42,008 options to purchase shares of our common stock, 37,720 of which were vested, and 1,402 unvested restricted stock units.

 

 

(8)   Mr. O’Leary’s cash compensation includes pro rata compensation for service as chair of our audit committee beginning in the second quarter of 2017. As of December 31, 2017, Mr. O’Leary held 83,556 options to purchase shares of our common stock, 79,268 of which were vested, and 1,402 unvested restricted stock units.

 

 

(9)   Mr. Renwick’s cash compensation includes pro rata compensation for service as a member and chair of our compensation committee through, and as our chairman beginning on, May 24, 2017. As of December 31, 2017, Mr. Renwick held 95,804 options to purchase shares of our common stock, 91,516 of which were vested, and 1,402 unvested restricted stock units.

 

 

       

(10)  Ms. Robak’s cash compensation includes pro rata compensation for service as a member of our compensation committee beginning in the second quarter of 2017. As of December 31, 2017, Ms. Robak held 54,512 options to purchase shares of our common stock, 50,224 of which were vested, and 1,402 unvested restricted stock units.

 

 

(11)  As of December 31, 2017, Mr. Sherman held 12,252 options to purchase shares of our common stock, 7,964 of which were vested, and 1,402 unvested restricted stock units.

 

 

(12)  Mr. Simons’s cash compensation includes pro rata compensation for service as chair of our compensation committee beginning in the second quarter of 2017. As of December 31, 2017, Mr. Simons held 95,804 options to purchase shares of our common stock, 91,516 of which were vested, and 1,402 unvested restricted stock units.

 

 

(13)  Mr. Wertheimer’s term as a director ended at the 2017 annual meeting on May 24, 2017, and, as a result, Mr. Wertheimer did not receive an equity grant in 2017. As of December 31, 2017, Mr. Wertheimer held 91,516 vested options to purchase shares of our common stock and no restricted stock units.

 

 

 

 
 
   
 

 

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Proposal 2. Approval of Material Terms of Performance Goals under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan

 

 

 

 
 

Summary of Proposal

Our board of directors is seeking shareholder approval of the material terms of the performance goals under the Amended and Restated Fiserv, Inc. 2007 Omnibus Incentive Plan (the “Incentive Plan”) to potentially permit certain awards granted after the annual meeting of shareholders to continue to qualify as performance-based compensation under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code, as amended (the “Code”).

A copy of the Incentive Plan is attached to this proxy statement as Appendix B. The Incentive Plan was most recently approved by our shareholders on May 22, 2013. Our board of directors is not currently seeking shareholder approval for any amendments to, or additional shares under, the Incentive Plan.

Section 162(m) and the Tax Cuts and Jobs Act

Section 162(m) of the Code imposes a $1 million annual limit on the amount that a public company may deduct for compensation paid to certain of the company’s officers. Until recently, this limitation did not apply to “performance-based” compensation that met the requirements under Section 162(m). However, the Tax Cuts and Jobs Act, enacted into law in December of 2017, removed the exception for “performance-based” compensation unless such compensation is payable pursuant to a written contract that was in effect on November 2, 2017 (“Grandfathered Awards”).

Because certain employment agreements that were in effect on November 2, 2017 provide for the grant of future awards under the Incentive Plan, it is possible that such awards could qualify as Grandfathered Awards to the extent such awards meet the “performance-based” requirements under Section 162(m). In order for us to potentially qualify such awards as performance-based, the material terms of the performance goals under the Incentive Plan must be approved by our shareholders. Consequently, our board of directors is seeking shareholder approval of the material terms of the performance goals under the Incentive Plan.

 

 
 
   

Recent Enhancements to the Incentive Plan

The Incentive Plan was initially approved by our shareholders and became effective on May 23, 2007, and was last re-approved by shareholders on May 22, 2013. The Incentive Plan was most recently amended and restated two times. The first time was on February 20, 2018 (the “Restatement Date”) to make the following changes:

 

To add a requirement that awards have a minimum one-year vesting period

 

To eliminate provisions that could be considered to provide for “liberal” share recycling

 

To include a prohibition on the ability of the company to cancel underwater options or stock appreciation rights in exchange for a cash payment or the issuance of other securities by the company to the award holder

 

To require that dividends or dividend equivalents granted with respect to awards may not be paid until the related awards vest or are earned

 

To provide that the prior requirements that were included in the Incentive Plan in order to qualify awards as performance-based under Section 162(m) will now apply only to Grandfathered Awards

 

To permit withholding of shares to cover withholding taxes due upon exercise, vesting or payment of an award having a fair market value of up to the maximum statutory tax rate

The second time was on March 19, 2018 to make adjustments required by the Incentive Plan as a result of the two-for-one split of our common stock effective as of the close of business on such date. All share numbers in the Incentive Plan have been adjusted to reflect the stock split.

Material Terms of the Performance Goals Under the Incentive Plan

For purposes of Section 162(m), the material terms of the performance goals include: (a) the employees eligible to receive compensation; (b) the description of the business criteria on which the performance goals may be based; and (c) the maximum amount, or the formula used to calculate

 

 
 
   
 

 

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the maximum amount, of compensation that can be paid to an employee under the performance goals. Each of these aspects is discussed below, and shareholder approval of this Proposal 2 constitutes approval of each of these aspects for purposes of the Section 162(m) shareholder approval requirements.

The following summary is qualified in its entirety by reference to the complete text of the Incentive Plan, which is attached hereto as Appendix B.

Eligibility

The compensation committee of the board of directors with respect to employee participants, and the board of directors with respect to director participants (at times we refer to such committee or board, as the case may be, as the “administrator”) may designate any of the following as a participant under the Incentive Plan to the extent consistent with its authority: any of our or our affiliates’ officers or other employees or individuals engaged to become such an officer or employee, consultants who provide services to us or our affiliates, and our non-employee directors. The selection of participants will be based upon the administrator’s opinion that the participant is in a position to contribute materially to our continued growth and development and to our long-term financial success. We currently have nine non-employee directors and approximately 3,600 employees who are eligible to participate in the Incentive Plan.

Performance Goals

With respect to Grandfathered Awards, the performance goals must relate to one or more of the following with respect to us or any one or more of our subsidiaries, affiliates or other business units, as determined by the administrator: net sales; cost of sales; revenue; gross income; net income; operating income; income from continuing operations; earnings (including before taxes, and/or interest and/or depreciation and amortization); earnings per share (including diluted earnings per share); price per share; cash flow; net cash provided by operating activities; net cash provided by operating activities less net cash used in investing activities; net operating profit; ratio of debt to debt plus equity; return on shareholder

 

 
 
   

equity; return on capital; return on assets; operating working capital; average accounts receivable; economic value added; customer satisfaction; operating margin; profit margin; sales performance; sales quota attainment; new sales; cross/integrated sales; client engagement; client acquisition; net promoter score; internal revenue growth; and client retention.

As to each such performance goal, the relevant measurement of performance will be computed in accordance with generally accepted accounting principles, if applicable; provided that, the compensation committee of the board of directors may, at the time of establishing the performance goal or goals, exclude the effects of extraordinary, unusual and/or non-recurring items of gain or loss, gains or losses on the disposition of a business, changes in tax or accounting regulations or laws, or the effect of a merger or acquisition. Where applicable, the performance goals may be expressed, without limitation, in terms of attaining a specified level of the particular criterion or the attainment of an increase or decrease (expressed as absolute numbers or a percentage) in the particular criterion or achievement in relation to a peer group or other index. The performance goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be paid (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur).

Award Limits

With respect to Grandfathered Awards, subject to adjustment as described below, no participant may be granted awards in any fiscal year of our company that would result in the participant receiving: options for, and/or stock appreciation rights with respect to, more than 2,000,000 shares; awards of restricted stock and/or restricted stock units relating to more than 480,000 shares; awards of performance shares, and/or awards of performance units the value of which is based on the fair market value of shares, for more than 480,000 shares; awards of performance units, the value of which is not based on the fair market value of shares, for more than $3,000,000; other stock-based awards described below under “– Other Awards” relating to more than 480,000

 

 
 
   
 

 

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shares; an annual incentive award that would pay more than $3,000,000; or a long-term incentive award that would pay more than $6,000,000. In all cases, determinations under this paragraph should be made in a manner that is consistent with the exemption for performance-based compensation that Section 162(m) provides.

Authorized Shares and Stock Price

Our restated articles of incorporation authorize the issuance of 1,800,000,000 shares of common stock. There were 411,172,891 shares of our common stock issued and outstanding as of March 23, 2018 and the market value of a share of our common stock as of that date was $70.01.

Summary of the Terms of the Incentive Plan

The following is a summary of the material provisions of the Incentive Plan other than the material terms of the performance goals, which are summarized above. This summary is qualified in its entirety by reference to the full and complete text of the Incentive Plan. Any inconsistencies between this summary and the text of the Incentive Plan will be governed by the text of the Incentive Plan.

Administration

The Incentive Plan is administered by the compensation committee or the board of directors with respect to employee participants and the board of directors with respect to director participants (again, at times we refer to such committee or board, as the case may be, as the “administrator”), and the administrator has the authority to interpret the provisions of the Incentive Plan; make, change and rescind rules and regulations relating to the Incentive Plan; prescribe the terms of any agreements under the Incentive Plan; and change or reconcile any inconsistency in any award or agreement covering an award.

The board may delegate some or all of its authority under the Incentive Plan to a committee of the board, and the compensation committee may delegate some or all of its authority under the Incentive Plan to a sub-committee or one or more of our officers. Delegation is not permitted, however, with respect to stock-based awards made to

 

 
 
   

individuals subject to Section 16b-3 of the Exchange Act unless the delegation is to a committee of the board that consists only of outside directors.

For purposes of administering a Grandfathered Award, each member of the compensation committee of the board of directors must qualify as an “outside director” within the meaning of Code Section 162(m).

Shares Reserved under the Incentive Plan

The Incentive Plan provides that a total of 51,146,300 shares of common stock will be reserved for issuance under the plan. We may issue only an aggregate of 10,000,000 shares upon the exercise of incentive stock options and may issue only an aggregate of 37,785,788 shares pursuant to “full-value awards” (“full-value awards” include awards of restricted stock, restricted stock units, performance shares, performance units valued in a relation to a share of common stock, dividend equivalent units, and any other similar award under which the value of the award is measured as the full value of a share of common stock, rather than the increase in the value of a share). These share limits are subject to adjustment as described below under “– Adjustments.” If more than the target number of shares with respect to an award are earned, then the number of shares reserved under the Incentive Plan will be depleted at the time of settlement by the additional shares. In general, to the extent that shares covered by an award are not issued due to the lapse, expiration, termination or cancellation of an award, or if shares are forfeited under an award, or if shares are issued under any award and we reacquire them pursuant to rights we reserved upon the issuance of the shares, then such shares will again be available for issuance under the Incentive Plan. However, in no event will the following shares be recredited to the Incentive Plan’s reserve: shares issued under the Incentive Plan that are purchased by us using proceeds from option exercises; shares tendered or withheld in payment of the exercise price of an option or as a result of the net settlement of an outstanding stock appreciation right; or shares tendered or withheld to satisfy federal, state or local tax withholding obligations.

 

 
 
   
 

 

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Types of Awards

Awards under the Incentive Plan may consist of stock options, stock appreciation rights, performance shares, performance units, restricted stock, restricted stock units, dividend equivalent units, incentive cash awards or other equity-based awards. The administrator may grant any type of award to any participant it selects, but only our and our subsidiaries’ employees may receive grants of incentive stock options. Awards may be granted alone or in addition to, in tandem with, or in substitution for any other award (or any other award granted under another plan of ours or of any of our affiliates). The administrator has the authority to grant awards and to determine the terms and conditions of each award, subject to the terms of the Incentive Plan.

Options

The administrator has the authority to grant stock options. Stock options will be granted to participants at such time as the administrator may determine. The administrator will also determine the number of options granted and whether an option is to be an incentive stock option or non-qualified stock option. The administrator will fix the option price per share of common stock, which may not be less than the fair market value of the common stock on the date of grant. Fair market value is defined as the last sales price of a share of our common stock for the date in question, or if no sales of our common stock occur on such date, on the last preceding date on which there was such a sale. The administrator will determine the expiration date of each option, but the expiration date will not be later than 10 years after the grant date. Options will be exercisable at such times and be subject to such restrictions and conditions as the administrator deems necessary or advisable. The stock option exercise price will be payable in full upon exercise in cash or its equivalent, by tendering shares of previously acquired common stock having a fair market value at the time of exercise equal to the exercise price, or by a combination of the two.

Stock Appreciation Rights

The administrator has the authority to grant stock appreciation rights. A stock appreciation right is the right of a participant to receive cash, common

 

 
 
   

stock, or both cash and stock, with a fair market value equal to the appreciation of the fair market value of a share of common stock during a specified period of time. The Incentive Plan provides that the administrator will determine all terms and conditions of each stock appreciation right, including: whether the stock appreciation right is granted independently of a stock option or relates to a stock option; the number of shares of common stock to which the stock appreciation right relates; a grant price that is not less than the fair market value of the common stock subject to the stock appreciation right on the date of grant; the terms and conditions of exercise or maturity; a term that must be no later than 10 years after the date of grant; and whether the stock appreciation right will settle in cash, common stock or a combination of the two.

Performance and Stock Awards

The administrator has the authority to grant awards of restricted stock units, restricted stock, performance shares or performance units. Restricted stock unit means the right to receive a payment equal to the fair market value of one share of common stock. Restricted stock means shares of common stock that are subject to a risk of forfeiture, restrictions on transfer or both a risk of forfeiture and restrictions on transfer. Performance shares means the right to receive shares of common stock to the extent performance goals are achieved. Performance unit means the right to receive a payment valued in relation to a unit that has a designated dollar value or the value of which is equal to the fair market value of one or more shares of common stock, to the extent performance goals are achieved.

The administrator will determine all terms and conditions of the awards, including: the number of shares of common stock and/or units to which such award relates; whether performance goals need to be achieved for the participant to realize any portion of the benefit provided under the award; whether the restrictions imposed on restricted stock or restricted stock units will lapse, and any portion of the performance goals subject to an award will be deemed achieved, upon a participant’s death, disability or retirement, or such other circumstances as the administrator may specify; with respect to performance units, whether to

 

 
 
   
 

 

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measure the value of each unit in relation to a designated dollar value or the fair market value of one or more shares of common stock; and, with respect to performance units, whether the awards will settle in cash, in shares of common stock, or in a combination of the two.

The discretion of the compensation committee of the board of directors to deem some or all of the performance goals under a Grandfathered Award to have been achieved (in whole or part) upon retirement or other termination of employment will be exercised in a manner that is consistent with the requirements of Section 162(m).

Incentive Awards

The administrator has the authority to grant annual and long-term incentive awards. An incentive award is the right to receive a cash payment to the extent that one or more performance goals are achieved. The administrator will determine all terms and conditions of an annual or long-term incentive award, including the performance goals, performance period, the potential amount payable and the timing of payment. The administrator must require that payment of all or any portion of the amount subject to the incentive award is contingent on the achievement of one or more performance goals during the period the administrator specifies. The administrator may deem that performance goals subject to an award are achieved upon a participant’s death, disability or retirement, or such other circumstances as the administrator may specify. The performance period for an annual incentive award must relate to a period of one fiscal year, and the performance period for a long-term incentive award must relate to a period of more than one fiscal year, except that, in each case, if the award is made in the year the Incentive Plan becomes effective, at the time of commencement of employment with us or on the occasion of a promotion, then the award may relate to a shorter period. Nothing in this summary or in the Incentive Plan will preclude the administrator from providing other cash incentive payments outside of the terms of the Incentive Plan.

The discretion of the compensation committee of the board of directors to deem some or all of the performance goals under a Grandfathered Award to have been achieved (in whole or part) upon

 

 
 
   

retirement or other termination of employment will be exercised in a manner that is consistent with the requirements of Section 162(m).

Dividend Equivalent Units

The administrator has the authority to grant dividend equivalent units. A dividend equivalent unit is the right to receive a payment, in cash or shares of common stock, equal to the cash dividends or other distributions that we pay with respect to a share of common stock. The administrator will determine all terms and conditions of a dividend equivalent unit award, including whether: the award will be granted in tandem with another award; payment of the award be made currently or credited to an account for the participant which provides for the deferral of such amounts until a stated time; and the award will be settled in cash or shares of common stock. However, each dividend equivalent unit granted in tandem with another award on and after the Restatement Date shall provide for payment only if, when, and only to the same extent, such other award vests.

Other Awards

The administrator has the authority to grant other types of awards, which may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, shares of common stock, either alone or in addition to or in conjunction with other awards, and payable in shares of common stock or cash. Such awards may include shares of unrestricted common stock, which may be awarded, without limitation, as a bonus, in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right, or upon the attainment of performance goals or otherwise, or rights to acquire shares of our common stock from us. The administrator will determine all terms and conditions of the award, including the time or times at which such award will be made and the number of shares of common stock to be granted pursuant to such award or to which such award will relate. Any award that provides for purchase rights must be priced at 100% of the fair market value of our common stock on the date of the award.

 

 
 
   
 

 

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Minimum Vesting Period

All awards granted on and after the Restatement Date will have a minimum vesting period of one year from the date of grant. However, the administrator may grant awards with less than a one-year vesting requirement, provided the awards do not relate to more than 5% of the Incentive Plan’s shares available for awards as of the Restatement Date.

Transferability

Awards are not transferable other than by will or the laws of descent and distribution, unless the administrator allows a participant to designate in writing a beneficiary to exercise the award or receive payment under an award after the participant’s death or to transfer an award for no consideration.

Adjustments

If: (A) we are involved in a merger or other transaction in which our common stock is changed or exchanged; we subdivide or combine our common stock or we declare a dividend payable in our common stock, other securities (other than stock purchase rights issued pursuant to a shareholder rights agreement) or other property; we effect a cash dividend, the amount of which, on a per share basis, exceeds 10% of the fair market value of a share of common stock at the time the dividend is declared, or we effect any other dividend or other distribution on our common stock in the form of cash, or a repurchase of shares of common stock, that the board of directors determines is special or extraordinary in nature or that is in connection with a transaction that we characterize publicly as a recapitalization or reorganization involving our common stock; or any other event occurs, which, in the judgment of the board of directors or compensation committee necessitates an adjustment to prevent an increase or decrease in the benefits or potential benefits intended to be made available under the Incentive Plan; then (B) the administrator will, in a manner it deems equitable to prevent an increase or decrease in the benefits or potential benefits intended to be made available under the Incentive Plan and subject to certain provisions of the Code, adjust the number and type of shares of common stock

 

 
 
   

subject to the Incentive Plan and which may, after the event, be made the subject of awards; the number and type of shares of common stock subject to outstanding awards; the grant, purchase or exercise price with respect to any award; and performance goals of an award.

In any such case, the administrator may also provide for a cash payment to the holder of an outstanding award in exchange for the cancellation of all or a portion of the award. However, if the transaction or event constitutes a change of control, as defined in the Incentive Plan, then the payment must be at least as favorable to the holder as the greatest amount the holder could have received for such award under the change of control provisions of the Incentive Plan. The administrator may, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, and without affecting the number of shares of common stock otherwise reserved or available under the Incentive Plan, authorize the issuance or assumption of awards upon terms it deems appropriate.

Change of Control

Unless otherwise provided in an applicable employment, retention, change of control, severance, award or similar agreement, and notwithstanding any provision in the Incentive Plan to the contrary, in the event of a change of control, the successor or purchaser in the change of control transaction may assume an award or provide a substitute award with similar terms and conditions and preserving the same benefits as the award it is replacing. If the awards are not so assumed or replaced, then unless otherwise determined by the board of directors prior to the date of the change of control, immediately prior to the date of the change of control:

 

  each stock option or stock appreciation right that is then held by a participant who is employed by or in the service of us or one of our affiliates will become fully vested, and all stock options and stock appreciation rights will be cancelled in exchange for a cash payment equal to the excess of the change of control price (as determined by the administrator) of the shares of common stock covered by the stock option or stock appreciation right over the purchase or grant price of such shares of common stock under the award;

 

 
 
   
 

 

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  restricted stock and restricted stock units that are not vested will vest;

 

  each holder of a performance share and/or performance unit that has been earned but not yet paid will receive cash equal to the value of the performance share and/or performance unit, and each performance share and/or performance unit for which the performance period has not expired will be cancelled in exchange for a cash payment equal to the value of the performance share and/or performance unit multiplied by a percentage based on the portion of the performance period that has elapsed as of the date of the change of control;

 

  all incentive awards that are earned but not yet paid will be paid, and all incentive awards that are not yet earned will be cancelled in exchange for a cash payment equal to the amount that would have been due if the performance goals (measured at the time of the change of control) continued to be achieved through the end of the performance period multiplied by a percentage based on the portion of the performance period that has elapsed as of the date of the change of control; and

 

  all dividend equivalent units that are not vested will vest (to the same extent as the award granted in tandem with the dividend equivalent unit, if applicable) and be paid in cash.

 

  All other awards that are not vested will vest, and if an amount is payable under such vested award, then such amount will be paid in cash based on the value of the award.

The Incentive Plan generally defines a “change of control” as the occurrence of any of the following events:

 

  any person becoming the beneficial owner of our securities representing 20% of our then-outstanding common stock or our then-outstanding voting securities (excluding persons specified in the Incentive Plan who are affiliates, underwriters or, in some cases, persons who acquired stock in the ordinary course of business for investment purposes and without the purpose or effect of changing or influencing the control of Fiserv, Inc.);

 

  certain changes in the majority of our directors that are not the result of director appointments or elections approved by a vote at least 2/3 of the incumbent board members;

 

 
 
   
  a merger, consolidation or share exchange of Fiserv, Inc. with any other corporation is consummated or voting securities of Fiserv, Inc. are issued in connection with a merger, consolidation or share exchange pursuant to applicable stock exchange requirements, other than certain transactions in which a majority of our ownership does not change and certain recapitalizations in which no person becomes a beneficial owner of 20% or more of our then-outstanding common stock or our then-outstanding voting securities; or

 

  a plan of complete liquidation or dissolution of Fiserv, Inc. is effected or there is a sale or disposition by us of all or substantially all of our assets (in one transaction or a series of related transactions within any period of 24 consecutive months), other than a sale or disposition by us of all or substantially all of our assets to an entity at least 75% of the combined voting power of the voting securities of which are owned by persons in substantially the same proportions as their ownership of Fiserv, Inc. immediately prior to such sale.

A change of control does not include any transaction or series of integrated transactions immediately following which our shareholders immediately prior to such transaction or series continue to own in the same proportions as their ownership in Fiserv, Inc. an entity that owns all or substantially all of our assets or voting securities immediately following such transaction or series.

If an award under the Incentive Plan is considered deferred compensation subject to the provisions of Code Section 409A, and if a payment under such award is triggered upon a “Change of Control,” then the foregoing definition shall be deemed amended as necessary to comply with Code Section 409A, and the administrator may include such amended definition in the award agreement issued with respect to such award.

Adjustments With Respect to Grandfathered Awards

Upon the occurrence of an event described in “– Adjustments” or “– Change of Control” above, the compensation committee of the board of directors shall have the discretion to adjust the individual award limits described in “– Award Limits” above and the performance goals under a Grandfathered Award in the manner permitted by the provisions in “– Adjustments” or “– Change of Control,” but only to the extent such discretion does not cause a

 

 
 
   
 

 

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Grandfathered Award to cease to qualify as performance-based compensation under Code Section 162(m).

Term of Incentive Plan

Unless earlier terminated by our board of directors, the Incentive Plan will remain in effect until all

common stock reserved for issuance under the Incentive Plan has been issued. If the term of the Incentive Plan extends beyond 10 years, no incentive stock options may be granted after such time unless our shareholders approve an extension of the Incentive Plan.

Termination and Amendment

The board of directors or the compensation committee may amend, alter, suspend, discontinue or terminate the Incentive Plan at any time, except:

 

  the board of directors must approve any amendment to the Incentive Plan if we determine such approval is required by action of the board, applicable corporate law or any other applicable law;

 

  shareholders must approve any amendment to the Incentive Plan if we determine that such approval is required by Section 16 of the Exchange Act, the listing requirements of any principal securities exchange or market on which our common stock is then traded, or any other applicable law;

 

  shareholders must approve any amendment to the Incentive Plan that materially increases the number of shares of common stock reserved under the Incentive Plan or that diminishes the provisions on repricing or backdating stock options and stock appreciation rights; and

 

  to the extent required by Code Section 162(m), shareholders must approve any amendments to the provisions of the Incentive Plan pertaining to Grandfathered Awards (except as permitted by the provisions in “– Adjustments” or “– Change of Control” above).

The administrator may modify, amend or cancel any award or waive any restrictions or conditions applicable to any award or the exercise of the award. Any modification or amendment that materially diminishes the rights of the participant or any other person that may have an interest in the award will be effective only if agreed to by that participant or other person. The administrator does

 

 
 
   

not need to obtain participant or other interested party consent, however, for the adjustment or cancellation of an award pursuant to the adjustment provisions of the Incentive Plan or the modification of an award to the extent deemed necessary to comply with any applicable law, the listing requirements of any principal securities exchange or market on which our common stock is then traded, or to preserve favorable accounting or tax treatment of any award for us. The authority of the administrator to terminate or modify the Incentive Plan or awards will extend beyond the termination date of the Incentive Plan. In addition, termination of the Incentive Plan will not affect the rights of participants with respect to awards previously granted to them, and all unexpired awards will continue in force after termination of the Incentive Plan except as they may lapse or be terminated by their own terms and conditions.

Repricing and Backdating Prohibited

Neither the administrator nor any other person may decrease the exercise price for any outstanding stock option or stock appreciation right after the date of grant, allow a participant to surrender an outstanding stock option or stock appreciation right to us as consideration for the grant of a new stock option or stock appreciation right with a lower exercise price, or cancel an outstanding option or stock appreciation right with an exercise price above the current fair market value of a share of common stock in exchange for cash or other securities. The administrator may not grant a stock option or stock appreciation right with a grant date that is effective prior to the date the administrator takes action to approve such award.

Foreign Participation

To assure the viability of awards granted to participants employed or residing in foreign countries, the administrator may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the administrator may approve such supplements to, or amendments, restatements or alternative versions of, the Incentive Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the administrator approves for purposes of

 

 
 
   
 

 

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using the Incentive Plan in a foreign country will not affect the terms of the Incentive Plan for any other country.

Certain Federal Income Tax Consequences

The following summarizes certain federal income tax consequences relating to the Incentive Plan. The summary is based upon the laws and regulations in effect as of the date of this proxy statement and does not purport to be a complete statement of the law in this area. Furthermore, the discussion below does not address the tax consequences of the receipt or exercise of awards under foreign, state or local tax laws, and such tax laws may not correspond to the federal income tax treatment described herein. The exact federal income tax treatment of transactions under the Incentive Plan will vary depending upon the specific facts and circumstances involved, and participants are advised to consult their personal tax advisors with regard to all consequences arising from the grant or exercise of awards and the disposition of any acquired shares.

Stock Options

The grant of a stock option under the Incentive Plan will create no income tax consequences to us or to the recipient. A participant who is granted a non-qualified stock option will generally recognize ordinary compensation income at the time of exercise in an amount equal to the excess of the fair market value of the common stock at such time over the exercise price. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes ordinary income. Upon the participant’s subsequent disposition of the shares of common stock received with respect to such stock option, the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the exercise date).

In general, a participant will recognize no income or gain as a result of the exercise of an incentive stock option, except that the alternative minimum tax may apply. Except as described below, the participant will recognize a long-term capital gain or loss on the disposition of the common stock

 

 
 
   

acquired pursuant to the exercise of an incentive stock option and we will not be allowed a deduction. If the participant fails to hold the shares of common stock acquired pursuant to the exercise of an incentive stock option for at least two years from the grant date of the incentive stock option and one year from the exercise date, then the participant will recognize ordinary compensation income at the time of the disposition equal to the lesser of the gain realized on the disposition and the excess of the fair market value of the shares of common stock on the exercise date over the exercise price. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes ordinary income. Any additional gain realized by the participant over the fair market value at the time of exercise will be treated as a capital gain.

Stock Appreciation Rights

The grant of a stock appreciation right under the Incentive Plan will create no income tax consequences to us or to the recipient. A participant who is granted a stock appreciation right will generally recognize ordinary compensation income at the time of exercise in an amount equal to the excess of the fair market value of the common stock at such time over the grant price. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes ordinary income. If the stock appreciation right is settled in shares of our common stock, upon the participant’s subsequent disposition of such shares, the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the exercise date).

Restricted Stock

Generally, a participant will not recognize income, and we will not be entitled to a deduction, at the time an award of restricted stock is made under the Incentive Plan, unless the participant makes the election described below. A participant who has not made such an election will recognize ordinary income at the time the restrictions on the stock lapse in an amount equal to the fair market value of the restricted stock at such time. We will generally

 

 
 
   
 

 

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be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. Any otherwise taxable disposition of the restricted stock after the time the restrictions lapse will result in a capital gain or loss to the extent the amount realized from the sale differs from the tax basis (i.e., the fair market value of the common stock on the date the restrictions lapse). Dividends paid in cash and received by a participant prior to the time the restrictions lapse will constitute ordinary income to the participant in the year paid, and we will generally be entitled to a corresponding deduction for such dividends. Any dividends paid in stock will be treated as an award of additional restricted stock subject to the tax treatment described herein.

A participant may, within 30 days after the date of the award of restricted stock, elect to recognize ordinary income as of the date of the award in an amount equal to the fair market value of such restricted stock on the date of the award (less the amount, if any, the participant paid for such restricted stock). If the participant makes such an election, then we will generally be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. If the participant makes the election, then any cash dividends the participant receives with respect to the restricted stock will be treated as dividend income to the participant in the year of payment and will not be deductible by us. Any otherwise taxable disposition of the restricted stock (other than by forfeiture) will result in a capital gain or loss. If the participant who has made an election subsequently forfeits the restricted stock, then the participant will not be entitled to claim a credit for the tax previously paid. In addition, we would then be required to include as ordinary income the amount of any deduction we originally claimed with respect to such shares.

Restricted Stock Units

A participant will not recognize income, and we will not be entitled to a deduction, at the time an award of a restricted stock unit is made under the Incentive Plan. Upon the participant’s receipt of shares (or cash) at the end of the restriction period, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of the shares received, and we will be entitled to a

 

 
 
   

corresponding deduction in the same amount and at the same time. If the restricted stock units are settled in whole or in part in shares, upon the participant’s subsequent disposition of the shares the participant will recognize a capital gain or loss (long-term or short-term, depending on the holding period) to the extent the amount realized upon disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).

Performance Shares

The grant of performance shares will create no income tax consequences for us or the participant. Upon the participant’s receipt of shares at the end of the applicable performance period, the participant will recognize ordinary income equal to the fair market value of the shares received, except that if the participant receives shares of restricted stock in payment of performance shares, recognition of income may be deferred in accordance with the rules applicable to restricted stock as described above. In addition, the participant will recognize ordinary compensation income equal to the dividend equivalents paid on performance shares prior to or at the end of the performance period. We will generally be entitled to a deduction in the same amount and at the same time as the participant recognizes income. Upon the participant’s subsequent disposition of the shares, the participant will recognize a capital gain or loss (long-term or short-term depending on the holding period) to the extent the amount realized from the disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).

Performance Units

The grant of a performance unit will create no income tax consequences to us or the participant. Upon the participant’s receipt of cash and/or shares at the end of the applicable performance period, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of the shares received, and we will be entitled to a corresponding deduction in the same amount and at the same time. If performance units are settled in whole or in part in shares, upon the participant’s subsequent disposition of the shares the participant will recognize a capital gain or loss (long-term or

 

 
 
   
 

 

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short-term, depending on the holding period) to the extent the amount realized upon disposition differs from the shares’ tax basis (i.e., the fair market value of the shares on the date the participant received the shares).

Incentive Awards

A participant who is paid an incentive award will recognize ordinary income equal to the amount of cash paid, and we will be entitled to a corresponding income tax deduction.

Dividend Equivalent Units

A participant who is paid a dividend equivalent with respect to an award will recognize ordinary income equal to the value of cash or common stock paid, and we will be entitled to a corresponding deduction in the same amount and at the same time.

Section 162(m) Limit on Deductibility of Compensation

Section 162(m) of the Code limits our tax deduction for compensation paid in any taxable year to certain current or former executive officers to $1,000,000 per individual. Amounts in excess of $1,000,000 are not deductible unless the compensation is paid pursuant to a written contract in effect on November 2, 2017 that is not materially modified and that would otherwise meet certain requirements.

Code Section 409A

Awards under the Incentive Plan may constitute, or provide for, a deferral of compensation under Section 409A of the Code. If the requirements of Section 409A or an exemption from Section 409A

 

 
 
   

are not met, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax and, potentially, interest and penalties. We have sought to structure the Incentive Plan, and we expect to seek to structure awards under the Incentive Plan, to comply with Section 409A and the Department of Treasury regulations and other interpretive guidance that may be issued pursuant to Section 409A. To the extent that we determine that any award granted under the Incentive Plan is subject to Section 409A, the award agreement evidencing such award will generally incorporate the terms and conditions required by Section 409A. The Incentive Plan and any applicable awards may be modified to exempt the awards from Section 409A or comply with the requirements of Section 409A.

Other Considerations

Awards that are granted, accelerated or enhanced upon the occurrence of a change of control may give rise, in whole or in part, to excess parachute payments within the meaning of Section 280G of the Code to the extent that such payments, when aggregated with other payments subject to Section 280G, exceed the limitations contained in that provision. Such excess parachute payments are not deductible by us and are subject to an excise tax of 20% payable by the participant.

Future Plan Benefits

The compensation committee annually determines the benefits or amounts that will be received by or allocated to key employees and directors under the Incentive Plan. Accordingly, such benefits and amounts in the future are not currently determinable.

 

 
 
   
 

 

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Equity Compensation Plan Information

The table below sets forth information with respect to compensation plans under which equity securities are authorized for issuance as of December 31, 2017, adjusted to reflect the two-for-one split of our common stock effective as of the close of business on March 19, 2018.

 

           (a)           (b)           (c)  

Plan Category

         Number of shares to be issued
upon exercise of outstanding
options, warrants and rights
          Weighted-average
exercise price of
outstanding options,
warrants and rights
          Number of shares remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
 

 

 

Equity compensation plans approved by our shareholders (1)

       14,324,510 (2)       $ 28.17 (3)         36,961,838 (4)  

 

    

 

 

     

 

 

     

 

 

 

 

 

Equity compensation plans not approved by our shareholders

       N/A         N/A         N/A  

 

    

 

 

     

 

 

     

 

 

 

 

 

Total

       14,324,510       $ 28.17 (3)         36,961,838  

 

    

 

 

     

 

 

     

 

 

 

 

(1)   Columns (a) and (c) of the table above do not include 1,809,200 unvested restricted stock units outstanding under the Incentive Plan or 22,055,424 shares authorized for issuance under the Fiserv, Inc. Amended and Restated Employee Stock Purchase Plan. The number of shares remaining available for future issuance under the employee stock purchase plan is subject to an annual increase on the first day of each fiscal year equal to the lesser of (A) 4,000,000 shares, (B) 1% of the shares of our common stock outstanding on such date or (C) a lesser amount determined by our board of directors.

 

 

(2)   Consists of options outstanding under the Incentive Plan as well as 401,678 shares subject to performance share units at the target award level under the Incentive Plan and 132,320 shares subject to non-employee director deferred compensation notional units under the Incentive Plan.

 

 

               

 

(3)   Represents the weighted average exercise price of outstanding options and does not take into account outstanding performance share units or non-employee director deferred compensation notional units.

 

 

(4)   Reflects the number of shares available for future issuance under the Incentive Plan.

 

 

Vote Required and Recommendation of the Board of Directors

To approve the material terms of the performance goals under the Incentive Plan, the votes cast “for” the proposal must exceed the votes cast “against” the proposal. Unless otherwise specified, the proxies solicited hereby will be voted to approve the Incentive Plan.

The board of directors recommends that you vote “FOR” Proposal 2.

 

 
 
   
 

 

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Proposal 3. Advisory Vote to Approve Executive Compensation

 

 

 

 
 
   

Background

We are conducting a non-binding, advisory vote to approve the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, in accordance with Section 14A of the Exchange Act (commonly referred to as “Say-on-Pay”). Our shareholders previously expressed a preference that we hold Say-on-Pay votes on an annual basis, and our board of directors accordingly determined to hold Say-on-Pay votes every year until the next required advisory vote on the frequency of future Say-on-Pay votes.

Proposed Resolution

We encourage shareholders to review the “Compensation Discussion and Analysis” section of this proxy statement as well as the tabular and narrative disclosure under the heading “Executive Compensation.” Our compensation program for our named executive officers is designed to create long-term shareholder value by rewarding performance and includes the following key factors for 2017:

 

•  We delivered solid results in 2017 highlighted by GAAP revenue growth of 3% and internal revenue growth of 4% compared to 2016 and a 38% and 15% increase in GAAP earnings per share from continuing operations and adjusted earnings per share, respectively, over 2016. Net cash provided by operating activities and free cash flow also increased 4% and 13%, respectively, compared to the prior year. We also made progress in strategic areas that we believe will enhance our future results, and we continued to enhance our level of competitive differentiation which we believe is essential to sustaining future growth. Internal revenue growth, adjusted earnings per share and free cash flow are non-GAAP financial measures. See Appendix A to this proxy statement for information regarding these measures and reconciliations to the most directly comparable GAAP measures.

 

•  Our compensation committee seeks to structure compensation that incentivizes our leaders to strive for market-leading performance, which we expect will translate into long-term value for our shareholders, and is balanced by the risk of lower performance-based compensation when we do not meet our performance objectives.

 

•  We have: (i) a stock ownership policy that requires our executive officers to maintain a substantial investment in Fiserv; (ii) a policy that prohibits executive officers from hedging or pledging our stock; and (iii) a compensation recoupment, or “clawback,” policy, all of which we believe align the interests of our named executive officers with those of our shareholders.

 

•  We do not have excise tax gross-up arrangements with any of our executive officers, and we have a policy not to enter into such arrangements in the future.

 

               

•  We provided compensation in the form of cash incentive awards based on achievement of annual performance goals and equity compensation that promotes long-term financial, operating and strategic performance by delivering incremental value to executive officers to the extent our stock price increases over time. Specifically:

 

•  We increased the portion of the cash incentive award subject to the achievement of internal revenue growth as we continue focusing on driving revenue growth and profitability.

 

•  Our compensation committee granted performance share units to certain executive officers. The number of shares issued at vesting is determined by the company’s achievement of performance goals over a three-year period.

 

•  Two-thirds of the compensation that we paid to our named executive officers was in the form of equity.

 

•  Almost two-thirds of the aggregate equity awards granted to our named executive officers was in the form of performance share units and stock options.

 

•  We generally did not provide perquisites to our named executive officers in 2017.

 

 

 

 

 

 

 

 
 
   
 

 

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The board endorses the compensation of our named executive officers and recommends that you vote in favor of the following resolution:

“RESOLVED, that the shareholders hereby approve, on an advisory basis, the compensation of the company’s named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including under the heading ’Compensation Discussion and Analysis’ and in the tabular and narrative disclosures under the heading ’Executive Compensation.’”

Vote Required, Effect of Vote and Recommendation of the Board of Directors

To approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement, the number of votes cast “for”

 

 
 
   

the proposal must exceed the number of votes cast “against” the proposal. Unless otherwise specified, the proxies solicited hereby will be voted in favor of this proposal.

Because the vote is advisory, it will not be binding upon the board or the compensation committee, and neither the board nor the compensation committee will be required to take any action as a result of the outcome of the vote on this proposal. Although the outcome of this vote is advisory, the compensation committee will carefully consider the outcome of the vote when considering future executive compensation decisions to the extent it can determine the cause or causes of any significant negative voting results.

The board of directors recommends that you vote “FOR” Proposal 3.

 

 
 
   
 

 

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Compensation Discussion and Analysis

Executive Summary

 

Named Executive Officer

 

      

Title

 

 

Jeffery W. Yabuki

    

 

President and Chief Executive Officer

 

    

 

 

Robert W. Hau

    

 

Chief Financial Officer and Treasurer

 

    

 

 

Mark A. Ernst

    

 

Former Chief Operating Officer

 

    

 

 

Devin B. McGranahan

    

 

Group President, Billing and Payments Group

 

    

 

 

Byron C. Vielehr

    

 

Group President, Depository Institution Services Group

 

    

 

 

Overview

 

The Compensation Discussion and Analysis portion of this proxy statement is designed to provide you with information regarding our executive compensation philosophy, how we determine and structure executive compensation, including the factors we consider in making compensation decisions, and our executive compensation policies. The Compensation Discussion and Analysis focuses on the compensation of the executive officers identified above (our “named executive officers”). Mr. Ernst retired on April 1, 2018. During 2017, Mr. Vielehr held the role of Group President, Depository Institution Services Group, and in 2018, he was promoted to Chief Administrative Officer.

 

Our Business

 

Our mission is to provide integrated technology and services solutions that enable best-in-class results for our clients. We pursue this goal with strategies focused on innovative product development, service quality, improved cost effectiveness, aggressive solicitation of new clients and disciplined capital deployment, including strategic acquisitions and divestitures. We face significant competition from domestic and international companies that are aggressive and well financed. Our industry is characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. In order to implement our strategic plan, we need to assemble and maintain a leadership team with the integrity, skills and dedication to execute our initiatives. We believe that executive officer compensation can be used to help us achieve our objectives by “paying for performance,” thereby aligning the interests of our executive officers with those of our shareholders.

 

               

Stock Split

 

In March 2018, we completed a two-for-one split of our common stock. Accordingly, all per share amounts are presented on a split-adjusted basis and, where applicable, rounded up to the nearest whole cent.

 

2017 Business Highlights

 

In 2017, we generated GAAP revenue growth of 3% and internal revenue growth of 4% compared to 2016 as well as GAAP earnings per share from continuing operations of $2.86 and adjusted earnings per share of $2.56. This represents a 38% and 15% increase in GAAP earnings per share from continuing operations and adjusted earnings per share, respectively, over 2016. We had net cash provided by operating activities of $1.48 billion and free cash flow of $1.22 billion in 2017, a 4% and 13% increase, respectively, compared to the prior year. We also made progress in strategic areas that we believe will enhance our future results, and we continued to enhance our level of competitive differentiation which we believe is essential to sustaining future growth. Executive officer compensation for 2017 was paid or awarded in the context of these results.

 

Internal revenue growth, adjusted earnings per share and free cash flow are non-GAAP financial measures. See Appendix A to this proxy statement for information regarding these measures and reconciliations to the most directly comparable GAAP measures.

 

 

 

 

 
 
   
 

 

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Executive Compensation Practices

Our compensation program is designed to create long-term value for our shareholders by rewarding performance and sustainable growth. The table below summarizes our current compensation practices as well as those practices we have not implemented because we do not believe they advance the goals of our compensation program:

 

What We Do         What We Don’t Do  
 

LOGO

 

Our compensation committee seeks to structure compensation that incentivizes our leaders to strive for market-leading performance, which we expect will translate into long-term value for our shareholders, and is balanced by the risk of lower performance-based compensation when we do not meet our performance objectives.

       

LOGO    We don’t have excise tax gross-up arrangements with any of our executive officers, and we have a policy not to enter into such arrangements in the future.

 

LOGO    We don’t provide separate pension programs or a supplemental executive retirement plan to our named executive officers.

 

LOGO    We generally don’t provide personal-benefit perquisites to our named executive officers.

 

 

 

LOGO

 

 

We provide cash incentive awards based on achievement of annual performance goals and equity compensation that promotes long-term financial, operating and strategic performance by delivering incremental value to executive officers to the extent our stock price increases over time.

         

 

 

LOGO

 

 

In furtherance of our pay-for-performance philosophy, we grant performance share units. The number of shares issued at vesting is determined by the achievement of performance goals over a three-year period.

         

 

LOGO

 

 

We have a stock ownership policy that requires our directors and executive officers to acquire and maintain a significant amount of Fiserv equity to further align their interests with those of our long-term shareholders.

         

 

LOGO

 

 

We have a policy that prohibits our directors and executive officers from hedging or pledging Fiserv stock.

         

 

LOGO

 

 

We have a compensation recoupment, or “clawback,” policy.

         

 

 
 
   
 

 

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2017 Compensation Matters

In 2017, we increased the portion of the cash incentive award subject to the achievement of internal revenue growth for all named executive officers as we continue focusing on driving revenue growth and profitability. With respect to the financial results that impacted compensation in 2017, we exceeded our target adjusted earnings per share performance goal for cash incentive awards, but our internal revenue growth results and target consolidated net operating profit results were below target.

Two-thirds of the compensation we paid to all our named executive officers was in the form of equity and almost two-thirds of the aggregate equity awards granted to all our named executive officers was in the form of performance share units and stock options. Our named executive officers, other than Mr. Yabuki, received annual equity incentive awards in 2017 near or above target levels, which included performance share units. One-third of the aggregate annual equity awards granted to our named executive officers, other than Mr. Yabuki, was in the form of performance share units which vest only upon the company’s achievement of internal revenue growth goals, subject to attaining a threshold level of adjusted income from continuing operations over the three-year period, and will range from 0% to 200% of the target award.

Recent Developments

In 2018, our compensation committee approved amendments to our Incentive Plan to, among other things, impose a one-year minimum vesting requirement for equity awards, prohibit the cash buyout of underwater stock options, and clarify that certain shares cannot be re-credited to the Incentive Plan reserve.

Determining and Structuring Compensation

Compensation Philosophy and Objectives

Our executive officers are critical to our long-term success; therefore, we need to be competitive with companies that require talent aligned to our product, technology and service roadmaps. We

 

 
 
   

seek to pay our executive officers at levels that are competitive with other employers, both within and outside of our industry, to secure the best talent possible for all our stakeholders. Consistent with Fiserv’s “pay for performance” philosophy, the compensation committee seeks to structure compensation that incentivizes our leaders to strive for market-leading performance, which we expect will translate into long-term value for our shareholders, and is balanced by the risk of lower performance-based compensation when we do not meet our performance objectives. We also seek to structure our compensation plans in a manner that is understandable to our shareholders and that is consistent with good corporate governance practices.

The goal of our executive compensation program is the same as our goal for operating our company: to create long-term value for our shareholders and clients. To this end, we design our compensation program to reward our executive officers for sustained financial, operating and strategic performance, to align their interests with those of our shareholders, and to encourage them to remain with the company for long and productive careers.

Determining Compensation

The Compensation Committee’s Role

The compensation committee of the board of directors is responsible for:

 

  approving executive officer compensation

 

  approving compensation programs and plans in which our executive officers participate

 

  reviewing compensation-related risk

 

  administering our equity incentive plans including compliance with executive stock ownership requirements

 

  approving severance or similar termination payments to executive officers

 

  overseeing regulatory compliance with respect to compensation matters

With respect to executive officers, at the beginning of each year, the compensation committee sets base salaries, approves cash incentive awards for

 

 
 
   
 

 

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the prior year’s performance, approves equity incentive awards, and establishes objective performance targets.

Management’s Role

Our chief executive officer makes recommendations to our compensation committee concerning the compensation of executive officers other than himself, although performance measures included in his recommendations may apply generally to all executive officers. For example, when formulating recommendations to the compensation committee regarding the compensation of a group president, our chief executive officer considers, among other factors, the group’s internal revenue growth, net operating profit, strategic progress, talent development, operational excellence and market data. Our chief executive officer annually completes a self-appraisal of his performance. For 2017, his self-appraisal focused on strategic impact, growth, leadership development, risk management and financial results. The appraisal, and the recommendations of the nominating and corporate governance committee, which administers the annual evaluation of the chief executive officer by the board, is considered by the committee in its annual review of our chief executive officer’s performance and compensation. Our chief executive officer does not attend the portion of any compensation committee meeting during which the committee deliberates on matters related specifically to his compensation.

Consultant’s Role

The compensation committee engaged Meridian Compensation Partners, LLC (“Meridian”) in 2017 to analyze our director compensation structure and market competitiveness and to advise the committee regarding the design of our director compensation program. In addition, Meridian provided management with market compensation data and assistance with tally sheet calculations. Management also obtained market compensation data from Willis Towers Watson in 2017 pursuant to a standard data subscription. As further described herein, management used this market data to make recommendations to the committee regarding compensation matters. The committee concluded that management’s work with Meridian did not impair Meridian’s ability to provide independent advice regarding executive compensation matters

 

 
 
   

because of the de minimis revenue associated with the services that Meridian provided and Meridian’s policies and procedures ensuring independence.

Tally Sheets

The compensation committee reviews executive officer compensation tally sheets each year. These summaries set forth the dollar amount of all components of each named executive officer’s compensation, including base salary, annual target cash incentive compensation, annual target equity incentive compensation, value of unvested equity, potential severance, and employer contributions to 401(k) savings plans, allowing the committee to see what an executive officer’s total compensation is and how a potential change to an element of our compensation program would affect an executive officer’s overall compensation.

Shareholder Advisory Vote on Named Executive Officer Compensation

At our 2017 annual meeting, our shareholders approved, by approximately 85% of the votes cast, the compensation of our named executive officers as disclosed in our 2017 proxy statement. The compensation committee considered the results of the 2017 advisory vote at its meeting in February 2018. Because a substantial majority of our shareholders approved the compensation program described in the proxy statement for the 2017 annual meeting, the compensation committee did not implement changes to our executive compensation program as a result of the shareholder advisory vote. The compensation committee will continue to consider the results of shareholder advisory votes about our named executive officer compensation.

In addition, at our 2017 annual meeting, our shareholders approved holding the shareholder advisory vote about our named executive officer compensation every year by approximately 92% of the votes cast. Our board of directors considered the results of the 2017 advisory vote on the frequency of the shareholder advisory vote about our named executive officer compensation. Because a substantial majority of our shareholders approved holding this vote every year, the board determined to hold the shareholder advisory vote about our named executive officer compensation every year.

 

 
 
   
 

 

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Structuring Compensation

Components of Compensation

The elements of compensation that we provided to our named executive officers for 2017 were base salary, annual cash incentive awards and equity incentive awards.

 

Type

 

       

Elements

 

       

Description

 

 

Short-Term Compensation

    

 

Base Salary

    

 

 

 

Fixed annual amount

Provides a level of income security

Used to determine pay-based incentives

 

    

 

        

 

Annual Cash Incentive

      

 

 

 

Annual cash award based on achievement of defined performance metrics

 

 

Long-Term Compensation

    

 

Stock Options and
Restricted Stock Units

    

 

 

 

Equity grants that vest over a period of several years

 

    

 

        

 

Performance Share Units

      

 

 

 

Equity grants where the number of shares issued at vesting is determined by the achievement of performance goals

 

 

Base Salary

 

We provide base salary to compensate an executive officer for his or her regular work. When determining base salaries, the compensation committee considers market data, an executive officer’s scope of responsibilities, the market value of their experience, overall effectiveness, and, except in the case of the base salary of our chief executive officer, the recommendations of our chief executive officer.

 

Cash Incentive Awards

 

We believe it is important to provide annual cash incentives to motivate our executive officers to attain specific short-term performance objectives that, in turn, further our achievement of long-term objectives. We seek to offer cash awards in large enough proportion to base salary to ensure that a significant portion of each executive officer’s cash compensation is “at risk” and payable only upon the achievement of defined objectives. Our compensation committee annually determines the performance goals for and potential amounts of our cash incentive awards.

 

Equity Incentive Awards

 

We use three forms of equity to deliver compensation to our named executive officers: time-vesting stock options, time-vesting restricted stock units and performance share units.

 

         

Stock options deliver compensation to an executive officer only to the extent our stock price increases over the term of the award. Restricted stock units are settled in shares of common stock upon vesting. We believe restricted stock units serve as a strong reward and retention device, encouraging our executive officers to stay with the company until the restricted stock units vest.

 

Performance share units further align the long-term interests of our named executive officers with those of our shareholders. Our performance share units have a three-year performance period. The number of shares issued at vesting ranges from 0% to 200% of the target award based on the company’s achievement of financial and strategic performance goals.

 

When making equity award decisions, we do not consider existing equity ownership because we do not want to discourage executive officers from holding significant amounts of our common stock. We also do not review realized compensation from prior equity awards when making current compensation decisions. If the value of equity awards granted in prior years increases significantly in future years, we do not believe that this positive development should impact current compensation decisions.

 

  

 

 
 
   
 

 

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Mix of Compensation Components

We believe that the mix of compensation that we pay helps us to achieve our compensation objectives.

 

Components

 

       

Objectives

 

 

Fixed and variable compensation

      

 

We seek to increase the percentage of total pay that is “at risk” as executive officers move to greater levels of responsibility, with direct impact on company results.

 

 

Short-term and long-term focus

      

 

We seek to create incentives to achieve near-term goals by providing annual cash incentives, which are based on annual performance measures. We seek to create incentives to achieve long-term goals by granting equity awards with multi-year performance periods to promote the achievement of long-term performance objectives linked to our enterprise strategic goals. We also grant equity awards with multi-year vesting periods, the ultimate value of which depends on our share price. These awards promote retention and further align the interests of our executive officers and shareholders.

 

 

Cash and equity compensation

      

 

We believe that executive officers in positions that more directly affect corporate performance should have as their main priority profitably growing the company. Accordingly, we generally structure the target compensation of these executive officers so that they receive a significant portion of their compensation in the form of equity. Using equity in this manner further aligns executive officers’ interests with those of our shareholders, encourages retention and rewards our executive officers if we succeed.

 

Peer Group

In setting compensation levels for our executive officers, the committee considers, among other things, the compensation of similarly situated executives at companies in our peer group. To determine peer group compensation for an executive officer, the committee reviewed publicly available proxy and survey data regarding comparable executive officer positions and the compensation paid to our other executive officers in light of their relative functional responsibilities and experience. Notwithstanding the use of benchmarking as a tool to set compensation, comparison data only provides a context for the decisions that the compensation committee makes. The committee may also consider, among other matters, market trends in executive compensation, the percentage that each component of compensation comprises of an executive officer’s total compensation and the executive officer’s tenure in position. The compensation committee-approved peer group that we used for 2017 compensation is set forth below:

 

Alliance Data Systems Corporation

 

 

Equifax Inc.

 

    

Paychex, Inc.

 

Automatic Data Processing, Inc.

 

 

Fidelity National Information Services, Inc.

 

    

Total System Services, Inc.

 

Convergys Corporation

 

 

Intuit Inc.

 

    

Unisys Corporation

 

Discover Financial Services

 

 

Jack Henry & Associates, Inc.

 

    

Visa Inc.

 

DST Systems, Inc.

 

 

MasterCard Incorporated

 

    

The Western Union Company

 

The Dun & Bradstreet Corporation   NCR Corporation     

After a comprehensive review, the committee updated the peer group that it considered in determining 2018 compensation to include Broadridge Financial Solutions, Inc., First Data Corporation, Global Payments Inc.,

 

 
 
   
 

 

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PayPal Holdings, Inc. and Vantiv, Inc. and to eliminate Convergys Corporation, DST Systems, Inc., The Dun & Bradstreet Corporation and NCR Corporation to reflect shifts in our industry, our businesses and changes at the peer group companies.

We believe our peer group is comprised of companies comparable to ours based on our industry, company size and competition for managerial talent. In this regard, we include: companies that compete with us for managerial talent; companies that directly compete with us in our primary businesses; companies with similar business models in similar industries because they reflect the complexities inherent in managing an organization with multiple business lines and revenue sources; and other publicly traded business-to-business, service-based companies that are of similar size based primarily on annual revenue and market capitalization.

2017 Named Executive Officer Compensation

Base Salaries

We increased the base salary of Mr. Vielehr in 2017 from $470,000 to $510,000 to reflect his role as Group President and to align his base salary to our other executive officers with a similar scope of responsibility. We did not increase the base salaries of any other named executive officers in 2017. We have not increased the base salary of our chief executive officer in the last twelve years.

Cash Incentive Awards

Certain Terminology

In this section of the proxy statement, we use a number of financial terms. Adjusted earnings per share, internal revenue growth and consolidated net operating profit are non-GAAP financial measures. See Appendix A to this proxy statement for a definition of these measures.

Messrs. Yabuki and Hau

The cash incentive payments to Messrs. Yabuki and Hau for 2017 were based on adjusted earnings per share and internal revenue growth. We use adjusted earnings per share as a performance measure because we believe that there is a direct correlation between the increase in adjusted earnings per share and shareholder value. We use internal revenue growth because we believe that the long-term value of our enterprise depends on our ability to grow revenue without regard to acquisitions. For 2017, we set the target adjusted earnings per share performance goal at $2.52, which represented a 14% increase over our 2016 adjusted earnings per share. For 2017, we set the target internal revenue growth performance goal at 3.8% compared to internal revenue growth of 3.7% in 2016. We increased the portion of the cash incentive award for Messrs. Yabuki and Hau determined by the achievement of internal revenue growth from 40% for 2016 to 50% for 2017 to further align with our focus on growing revenue. The threshold, target, maximum and actual amounts for Messrs. Yabuki and Hau for 2017 were as follows:

 

Performance Measure (weighting)

 

        

Threshold          

 

          

Target                 

 

          

Maximum          

 

          

Actual                

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Adjusted Earnings Per Share (50%)

    

 

 

 

$2.45

 

 

    

 

 

 

$2.52

 

 

    

 

 

 

$2.65 or more

 

 

    

 

 

 

$2.56

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Internal Revenue Growth (50%)

    

 

 

 

2.0%

 

 

    

 

 

 

3.8%

 

 

    

 

 

 

6.0% or more

 

 

    

 

 

 

3.7%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

    Award as a Percentage of Base Salary (on an annualized basis, as applicable)

                   

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

J. Yabuki

    

 

 

 

88%

 

 

    

 

 

 

175%

 

 

    

 

 

 

350%

 

 

    

 

 

 

187%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

R. Hau

    

 

 

 

55%

 

 

    

 

 

 

110%

 

 

    

 

 

 

220%

 

 

    

 

 

 

120%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

 
 
   
 

 

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Mr. Ernst

The cash incentive payment to Mr. Ernst for 2017 was based on achievement of adjusted earnings per share, internal revenue growth and consolidated net operating profit. Similar to other named executive officers, these company-wide performance measures are designed to drive internal revenue growth and profitability, and in furtherance of that goal, the portion of Mr. Ernst’s award determined by the achievement of internal revenue growth increased from 40% to 60% for 2017. In addition, we used consolidated net operating profit because we believed Mr. Ernst had the ability to drive high quality revenue growth and effectively manage our costs through operational effectiveness programs. For 2017, the threshold, target, maximum and actual amounts for Mr. Ernst were as follows:

 

Performance Measure (weighting)

 

        

Threshold         

 

          

Target                

 

          

Maximum         

 

          

Actual                

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Adjusted Earnings Per Share (20%)

    

 

 

 

$2.45

 

 

    

 

 

 

$2.52

 

 

    

 

 

 

$2.65 or more

 

 

    

 

 

 

$2.56

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Internal Revenue Growth (60%)

    

 

 

 

2.0%

 

 

    

 

 

 

3.8%

 

 

    

 

 

 

6.0% or more

 

 

    

 

 

 

3.7%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Consolidated Net Operating Profit

(in millions) (20%)

       $1,797          $1,847          $1,947          $1,830  

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

    Award as a Percentage of Base Salary

    

 

 

 

68%

 

 

    

 

 

 

135%

 

 

    

 

 

 

270%

 

 

    

 

 

 

123%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

Messrs. McGranahan and Vielehr

The cash incentive payment to each of Messrs. McGranahan and Vielehr for 2017 was based on the achievement of adjusted earnings per share, internal revenue growth and group-level results (group net operating profit and group adjusted revenue weighted at 20% and 30%, respectively). Similar to other named executive officers, adjusted earnings per share and internal revenue growth are designed to drive internal revenue growth and profitability, and Mr. McGranahan and Mr. Vielehr had the ability to significantly impact those results as the president of our Billing and Payments Group and Depository Institution Services Group, respectively, during 2017. We used the group-level results because we believed they were most relevant to, and could be most directly influenced by, Messrs. McGranahan and Vielehr. As with other named executive officers, for 2017, we increased the portion of their awards subject to the achievement of internal revenue growth, and we also increased the weighting of group adjusted revenue from 20% to 30%. The adjusted earnings per share and internal revenue growth threshold, target and maximum goals for Messrs. McGranahan and Vielehr were set at the same levels set forth above for our other named executive officers. With respect to group net operating profit and group adjusted revenue, we set the performance goal levels for each of Mr. McGranahan and Mr. Vielehr such that we believed that it would be unlikely that the top end of the range would be achieved, but it would be reasonably likely that the target could be achieved. In addition, for 2017, the compensation committee increased the threshold, target and maximum cash incentive awards available to Mr. Vielehr to provide him with a short-term incentive opportunity that aligned with other executive officers with a similar scope of responsibility and his role as Group President. For 2017, the threshold, target, maximum and actual results were as follows:

 

Performance Measure (weighting)

 

        

Threshold         

 

          

Target                

 

          

Maximum

 

          

Actual                

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Adjusted Earnings Per Share (10%)

    

 

 

 

$2.45

 

 

    

 

 

 

$2.52

 

 

    

 

 

 

$2.65 or more

 

 

    

 

 

 

$2.56

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Internal Revenue Growth (40%)

    

 

 

 

2.0%

 

 

    

 

 

 

3.8%

 

 

    

 

 

 

6.0% or more

 

 

    

 

 

 

3.7%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

Group-Level Results (50%)

                   

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

    Award as a Percentage of Base Salary (on an annualized basis, as applicable)

                   

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

D. McGranahan

    

 

 

 

58%

 

 

    

 

 

 

115%

 

 

    

 

 

 

230%

 

 

    

 

 

 

103%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

B. Vielehr (1)

    

 

 

 

58%

 

 

    

 

 

 

115%

 

 

    

 

 

 

230%

 

 

    

 

 

 

93%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

(1) Mr. Vielehr’s actual award, expressed as a percentage of base salary, is based on his base salary of $510,000 at the time the award was approved.

 

 
 
   
 

 

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Equity Incentive Awards

Overview

On February 22, 2017, we granted equity awards to the named executive officers based on the level of an executive officer’s responsibilities within the company and the committee’s judgment of each executive’s performance with respect to strategic impact, building of organizational capacity, talent development, risk management, financial results, including adjusted earnings per share and internal revenue growth, and, other than with respect to his own awards, the recommendation of our chief executive officer. Two-thirds of the compensation we paid to all our named executive officers was in the form of equity.

The equity mix awarded by the committee to each of our named executive officers is consistent with our objective of emphasizing performance-based compensation and aligning our executive officers’ economic interests with those of our shareholders. The grant date fair value of performance share units, at target, and stock options granted to all named executive officers is almost two-thirds of the aggregate value of all equity awards made to our named executive officers in 2017. For those who received performance share units as part of their annual award, the committee determined the number of performance share units that would vest at target based on anticipated performance and ability to drive high quality revenue growth over the three-year performance period. Performance share units, at target, represent one-third of the aggregate grant date fair value of all equity granted to the named executive officers who received performance share units in 2017. The mix of options and restricted stock units granted is determined by the committee based in part on the recommendation of the chief executive officer and an understanding of individual preference.

Annual Equity Awards – Messrs. Hau, Ernst, McGranahan and Vielehr

For 2017, the compensation committee increased the maximum equity award available to Messrs. McGranahan and Vielehr to account for the increased usage of performance share units and to provide them with an equity opportunity that was further aligned with the equity compensation available to individuals holding a similar position at our peer companies. Otherwise, the threshold, target and maximum equity awards for our named executive officers were set at levels commensurate with their experience and responsibilities and comparable to the equity compensation available to individuals holding similar positions at our peer companies. The grant date fair value of the annual equity incentive awards, performance share units at target, restricted stock units and options combined, as a percentage of base salary were as follows:

 

          

 

Percent of Base Salary (%)

 
    

 

 

 
          

 

Threshold            

 

          

 

Target                  

 

          

 

Maximum            

 

          

 

Actual Award (1)      

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

R. Hau

    

 

 

 

100%

 

 

    

 

 

 

320%

 

 

    

 

 

 

480%

 

 

    

 

 

 

368%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

M. Ernst

    

 

 

 

100%

 

 

    

 

 

 

333%

 

 

    

 

 

 

500%

 

 

    

 

 

 

333%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

D. McGranahan

    

 

 

 

100%

 

 

    

 

 

 

196%

 

 

    

 

 

 

400%

 

 

    

 

 

 

176%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

B. Vielehr

    

 

 

 

100%

 

 

    

 

 

 

200%

 

 

    

 

 

 

400%

 

 

    

 

 

 

319%

 

 

 

    

 

 

      

 

 

      

 

 

      

 

 

 

 

(1) The actual awards expressed as a percentage of base salary include the grant date fair value of the performance share units granted in 2017 at the target award level. The value realized by each of them at the end of the three-year performance period will depend on the company’s achievement of internal revenue growth goals, subject to attaining a threshold level of adjusted income from continuing operations, over the three-year period and will range from 0% to 200% of the target award. The actual award expressed as a percentage of base salary for Mr. Vielehr is based on his base salary of $470,000 at the time of grant.

For performance share units granted in 2017, the target level of shares will be issuable if the three-year cumulative annual internal revenue growth rate is equal to 4.0%, consistent with our original internal revenue growth guidance for 2017. The threshold level of shares, equaling 25% of the target, will be issuable if the

 

 
 
   
 

 

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three-year cumulative annual internal revenue growth rate is not less than 3.0%; and the maximum level of shares, equaling 200% of the target, will be issuable if the three-year cumulative annual internal revenue growth rate is 5.5% or more. The three-year cumulative annual internal revenue growth rate will be calculated using the actual annual internal revenue growth rates for each of the three years in the performance period. The performance share units are also subject to attaining a threshold level of adjusted income from continuing operations for the three-year period which, if not met, will result in no performance share units vesting. All named executive officers, other than Mr. Yabuki, received a grant of performance share units in 2017.

The compensation committee used adjusted income from continuing operations as the threshold performance measure because we believe there should be a minimum level of income generated before long-term, performance-based awards pay out, and it focused on internal revenue growth as the performance measure to determine the level of vesting because we believe that the long-term value of our enterprise is linked to our ability to grow revenue without regard to acquisitions.

Annual Equity Award - Mr. Yabuki

In 2017, the compensation committee granted Mr. Yabuki stock options having a grant date fair value of approximately $3.5 million and restricted stock units having a grant date fair value of approximately $4.5 million. The compensation committee considered Mr. Yabuki’s performance with respect to strategic impact, building of organizational capacity, leadership development, risk management and financial results, including adjusted earnings per share and internal revenue growth, in connection with his award. The compensation committee did not grant performance share units to Mr. Yabuki in 2017.

The performance share units granted to Mr. Yabuki in 2016 vest at the end of a three-year performance period based upon the company’s internal revenue growth (80% weighting) and, as determined by the committee in its discretion, talent development goals (20% weighting), subject to attaining a threshold level of adjusted income from continuing operations which, if not met, will result in no vesting of the performance share units. The three-year cumulative annual internal revenue growth rate goal ranges from 4.0% at the threshold level, below which no performance share units vest, to 6.5% or greater at the maximum level. This results in an aggressive target three-year cumulative annual internal revenue growth rate for this grant. As of December 31, 2017, or two years into the three-year performance period, the portion of the award subject to internal revenue growth was anticipated to vest below target.

 

 
 
   
 

 

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Other Elements of Compensation

Employee Stock Purchase Plan

We maintain a tax-qualified employee stock purchase plan that is generally available to all employees, including executive officers, which allows employees to acquire our common stock at a discounted price on an after-tax basis. This plan allows employees to buy our common stock at a 15% discount to the market price with up to 10% of their salary and incentives (up to a maximum of $25,000 in any calendar year), with the objective of allowing employees to benefit when the value of our stock increases over time.

Post-Employment Benefits

We provide severance and change-in-control protections to our named executive officers through agreements which are discussed below under the heading “Employment and Other Agreements with Executive Officers.”

Perquisites

In 2017, we did not provide any personal-benefit perquisites to our named executive officers other than relocation-related expenses disclosed in footnote 4 to the Summary Compensation Table below and participation in an executive physical program.

Retirement Savings Plan and Health and Welfare Benefits

We provide subsidized health and welfare benefits which include medical, dental, life insurance, disability insurance and paid time off. Executive officers are entitled to participate in our health, welfare and 401(k) savings plans on generally the same terms and conditions as other employees, subject to limitations under applicable law. We subsidize supplemental long-term disability coverage for executive officers. We do not provide a separate pension program or a supplemental executive retirement plan. Our employees, including executive officers, are immediately eligible for matching contributions under our 401(k) savings plan. Our matching contributions are capped at 3% of annual cash compensation and vest after two years.

 

 
 
   

Nonqualified Deferred Compensation Plan

Our named executive officers, along with other highly compensated employees, are eligible to participate in a non-qualified deferred compensation plan pursuant to which they can defer cash compensation and have their accounts credited with earnings based on the participant’s selection of investment choices similar to our 401(k) savings plan. We do not make any contributions to this plan. Please see “Executive Compensation – Non-Qualified Deferred Compensation Plan in 2017” below for additional information.

Additional Compensation Policies

Securities Trading Policy

We prohibit our executive officers from trading in our common stock during certain periods at the end of each quarter until after we disclose our financial and operating results unless such trading occurs under an approved Rule 10b5-1 plan. We may impose additional restricted trading periods at any time if we believe trading by executive officers would not be appropriate because of developments that are, or could be, material. In addition, we require pre-clearance by our chief legal officer and our chief executive officer of all stock transactions by designated senior members of management and our board of directors, including the establishment of a Rule 10b5-1 trading plan.

We also prohibit our employees, officers and directors from hedging or engaging in short sales of our stock. Furthermore, directors and executive officers are prohibited from pledging our stock and from entering into transactions in derivative instruments in connection with our stock.

Stock Ownership

We believe that stock ownership by our executive officers is essential for aligning management’s long-term interests with those of our shareholders. To emphasize this principle, we maintain a stock ownership policy that requires our chief executive officer to own equity having a value of at least six times his base salary and our other executive officers to own equity having a value of at least four times their respective base salaries. We believe

 

 
 
   
 

 

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that these levels are sufficiently high to demonstrate a commitment to value creation, while satisfying our executive officers’ needs for portfolio diversification. All executive officers are expected to satisfy the stock ownership requirements within five years after they become subject to them with minimum attainment levels beginning at the end of the second year. All named executive officers are in compliance with these requirements.

Compensation Recoupment Policy

In the event that we restate our financial results, we may recover all or a portion of the incentive awards that we paid or granted, or that vested, on the basis of such results. Recovery may be sought, in the discretion of the board, from any person who was serving as an executive officer of the company at the time the original results were published. Both cash and equity incentive awards are subject to recoupment; there is no time limit on our ability to recover such amounts, other than limits imposed by law; and recoupment is available to us regardless of whether the individuals subject to recoupment are still employed by us when repayment is required. To the extent recoupment is sought, the board of directors may, in its discretion, seek to recover interest on amounts recovered and/or costs of collection, and we have the right to offset the repayment amount from any compensation owed by us to any executive officer. The independent members of our board of directors, or a committee thereof comprised solely of independent directors, are responsible for determining whether recoupment is appropriate and the specific amount, if any, to be recouped by us.

Equity Award Grant Practices

The compensation committee generally approves annual equity awards during its regularly-scheduled February meeting, after we issue our financial results for the prior year. In addition, in order to accommodate the need for periodic awards, such as in connection with newly hired employees, promotions or retention awards, the compensation committee delegates its authority to our chief executive officer to enable him to grant equity awards within certain parameters; provided that all grants to directors and executive officers are specifically made by the compensation committee. Our equity grant policy prescribes the timing of

 

 
 
   

awards or specific grant dates. Under the Incentive Plan, the exercise price of all options to purchase shares of our common stock may not be less than the closing price of our common stock on the NASDAQ stock market on the grant date.

Deductibility of Compensation

Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation that we may deduct from our taxable income for federal income tax purposes in any one year with respect to our named executive officers. Pursuant to the Tax Cuts and Jobs Act of 2017 (the “Act”), performance-based compensation is now also subject to the deduction limit; provided that, under the Act, certain performance-based compensation paid pursuant to written binding agreements entered into prior to November 2, 2017 may still qualify for an exception from the deduction limit and we will consider how and whether compensation we pay in the future could qualify for this transitional relief under the Act. Notwithstanding our intentions, because of uncertainties as to the application and interpretation of Section 162(m), as amended by the Act, and any regulations to be issued thereunder, no assurance can be given that such compensation intended to satisfy the transitional relief for deductibility under Section 162(m) will so qualify.

Employment and Other Agreements with Executive Officers

Yabuki Employment Agreement

In 2016, we amended the employment agreement with Mr. Yabuki to provide that Mr. Yabuki will continue to serve as our president and chief executive officer for at least another three-year term and, subject to election by our shareholders, as a director. After the current three-year term ends in 2019, the agreement automatically renews for one-year terms unless either party gives the other 90 days prior written notice of his or its desire to terminate the agreement.

Under his employment agreement, as amended, Mr. Yabuki is entitled: (i) to receive an annual salary of at least $840,000; (ii) to participate in our executive incentive compensation plan with a target and maximum cash incentive award of not less than 175% and 350% of his base salary,

 

 
 
   
 

 

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respectively; (iii) to receive grants of options, restricted stock and/or other awards under our long-term incentive compensation program commensurate with his position, with each year’s award having a grant date fair value of at least $8 million; and (iv) to participate in our employee benefit plans, welfare benefit plans, retirement plans and other standard benefits as are generally made available to our executive officers. The 2016 amendment eliminated the excise tax gross-up provision in his then-existing employment agreement and provided for a one-time grant of performance share units. In the event of a conflict between his employment agreement and the terms of an equity award agreement, his employment agreement will control unless the equity award agreement provides a more favorable benefit. The terms of Mr. Yabuki’s employment agreement and key executive employment and severance agreement, or “KEESA,” resulted from an arm’s-length negotiation, and, as a result, we believe the terms reflect the market terms for the leader of a company of our size in our industry.

Other Employment Agreements

We entered into an agreement with each of Messrs. Hau, McGranahan, Ernst and Vielehr in connection with the start of their employment with us. Under Mr. Hau’s agreement, he is entitled to: (i) receive an annual salary of at least $625,000; (ii) participate in our annual cash incentive plan with a target and maximum award of 110% and 220% of base salary, respectively; (iii) participate in our annual equity incentive plan with an annual target of $2,000,000; (iv) a sign-on equity grant of $2,500,000 of restricted stock units and $3,000,000 of stock options, each of which will vest one-half on each of the third and fourth anniversaries of grant; (v) a one-time cash award of $500,000 which was paid in full in 2016 and must be repaid if he leaves Fiserv within 24 months; and (vi) reimbursement of relocation expenses.

Under his agreement, Mr. McGranahan is entitled to: (i) receive an annual salary of at least $510,000; (ii) participate in our annual cash incentive plan with a target and maximum award of 115% and 230% of base salary, respectively; (iii) participate in our annual equity incentive plan with an annual target of $1,000,000; (iv) a sign-on equity grant of $1,000,000 of restricted stock units and $2,200,000 of stock

 

 
 
   

options, each of which will vest one-half on each of the third and fourth anniversaries of grant; (v) a one-time cash award of $500,000 which was paid in full in 2017 and must be repaid if he leaves Fiserv within 24 months; (vi) an additional equity award of $3,000,000 in February 2020, subject to his continued full-time employment in good standing, which will vest in equal installments on the third and fourth anniversaries of grant; and (vii) reimbursement of relocation expenses.

We agreed to employ each of Messrs. Ernst and Vielehr under their respective employment agreements until one party provides the other with a notice of termination. Under their employment agreements, Mr. Ernst was, and Mr. Vielehr is, entitled to: (i) receive an annual salary of at least $525,000 and $470,000, respectively; (ii) participate in our executive cash incentive compensation plan; and (iii) participate in our executive long-term equity incentive compensation program with an annual target of at least 200% of base salary.

In addition, Mr. Ernst was, and Messrs. Hau, McGranahan and Vielehr are, entitled to participate in our employee benefit plans, welfare benefit plans, retirement plans and other standard benefits as are generally made available to our executive officers. The terms of each of their agreements and KEESAs resulted from arm’s-length negotiations, and, as a result, we believe the terms reflect the market terms for a leader of a company of our size in our industry.

Key Executive Employment and Severance Agreements

We have entered into KEESAs, with our executive officers that provide for potential benefits in connection with a change in control. A complete discussion of the terms of the KEESAs, together with an estimate of the amounts potentially payable under each KEESA, appears below under the heading “Potential Payments Upon Termination or Change in Control.”

 

 
 
   
 

 

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Compensation Committee Report

The compensation committee has reviewed and discussed the “ Compensation Discussion and Analysis ” contained in this proxy statement with management. Based on our review and the discussions with management, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2017.

Doyle R. Simons, Chairman

Harry F. DiSimone

Dennis F. Lynch

Kim M. Robak

 

 
 
   

Compensation Committee Interlocks and Insider Participation

During the last fiscal year, there were no compensation committee interlocks between us and other entities involving our executive officers and directors who serve as executive officers or directors of such other entities. During the last completed fiscal year, no member of the compensation committee was a current or former officer or employee.

 

 
 
   
 

 

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Executive Compensation

Summary Compensation Table

The following table sets forth in summary form the compensation of our chief executive officer, our chief financial officer and our next three highest paid executive officers (collectively, our “named executive officers”) for the year ended December 31, 2017.

 

 

 

Name and

Principal Position

 

        Year

 

          Salary      

 

          Bonus      

 

          Stock
Awards (1)(2)   

 

          Option
Awards (1)   

 

          Non-Equity
Incentive Plan
Compensation (3)

 

          All Other
Compensation (4)

 

          Total

 

 

 

 

Jeffery W. Yabuki

   

 

 

 

2017

 

 

   

 

$

 

840,000

 

 

   

 

 

 

 

 

   

 

$

 

  4,525,256

 

 

   

 

$

 

3,474,815

 

 

   

 

 

 

$1,569,431

 

 

   

 

 

 

$    7,860

 

 

   

 

$

 

10,417,362

 

 

   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
President and Chief       2016         840,000                 14,680,135         4,320,031         1,389,679         11,937         21,241,782  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Executive Officer

 

     

 

2015

 

 

 

     

 

840,000

 

 

 

     

 

 

 

 

     

 

1,288,041

 

 

 

     

 

6,535,501

 

 

 

     

 

1,328,040

 

 

 

     

 

9,737

 

 

 

     

 

10,001,319

 

 

 

 

   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

Robert W. Hau (5)

   

 

 

 

2017

 

 

   

 

 

 

625,000

 

 

   

 

 

 

 

 

   

 

 

 

1,500,148

 

 

   

 

 

 

800,023

 

 

   

 

 

 

749,788

 

 

   

 

 

 

83,139

 

 

   

 

 

 

3,758,098

 

 

   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
Chief Financial Officer       2016         499,599       $ 500,000         2,500,008         3,000,004         649,935         151,244         7,300,790  

and Treasurer

 

                    </