|FIRST DATA CORP filed this Form DEF 14A on 03/15/2017|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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:
First Data Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notice of 2017 Annual Meeting of Shareholders
April 25, 2017
The 2017 Annual Meeting of Shareholders of First Data Corporation will be held on April 25, 2017, at 8:00 a.m. Eastern Time, at The Park Lane Hotel, 36 Central Park South, New York, New York 10019. Shareholders will be asked to:
The Proxy Statement accompanying this Notice describes each of these items in detail. The Proxy Statement contains other important information that you should read and consider before you vote.
The record date for the Annual Meeting is February 27, 2017. If you held First Data Class A common stock or Class B common stock at the close of business on that date, you are entitled to vote at the Annual Meeting.
First Data is furnishing proxy materials to its shareholders through the Internet as permitted under the rules of the Securities and Exchange Commission. Under these rules, many shareholders will receive a Notice of Internet Availability of Proxy Materials instead of a paper copy of the Notice of Annual Meeting of Shareholders and Proxy Statement, our proxy card, and our Annual Report on Form 10-K. We believe this process gives us the opportunity to serve you more efficiently by making the proxy materials available quickly online and reducing costs associated with printing and postage. Shareholders who do not receive a Notice of Internet Availability of Proxy Materials will receive a paper copy of the proxy materials by mail.
Your vote is important. Instructions on how to vote are contained in our Proxy Statement and in the Notice of Internet Availability of Proxy Materials. Please cast your vote by telephone or over the Internet as described in those materials. Alternatively, if you requested a copy of the proxy/voting instruction card by mail, you may mark, sign, date, and return the proxy/voting instruction card in the envelope provided.
Proxy Statement Summary
2017 Annual Meeting of Shareholders
Voting Matters and Board Recommendations
This Proxy Statement Summary contains highlights of certain information in this Proxy Statement. Because it is only a summary, it does not contain all the information that you should consider before voting. Please review the complete Proxy Statement and First Datas Annual Report on Form 10-K for additional information.
The Board of Directors of First Data Corporation is furnishing this Proxy Statement and the accompanying form of proxy in connection with the solicitation of proxies for the 2017 Annual Meeting of Shareholders. The Annual Meeting will be held on April 25, 2017, beginning at 8:00 a.m. Eastern Time, at The Park Lane Hotel, 36 Central Park South, New York, New York 10019.
Important Notice Regarding the Availability of Proxy Materials for the
2017 Annual Meeting of Shareholders to be held on April 25, 2017
The Notice of 2017 Annual Meeting of Shareholders and Proxy Statement, our proxy card, our Annual Report on Form 10-K and other annual meeting materials are available free of charge on the Internet at www.proxyvote.com. We intend to begin mailing our Notice of Internet Availability of Proxy Materials to shareholders on or about March 15, 2017. At that time, we also will begin mailing paper copies of our proxy materials to shareholders who requested them.
If you hold your shares in street name and want to attend the Annual Meeting, you must bring your government-issued photo identification or an employee badge issued by First Data, together with:
All packages and bags are subject to inspection.
If your shares are held in street name, your broker, bank or other holder of record may provide you with a Notice of Internet Availability of Proxy Materials that contains instructions on how to access our proxy materials and vote online or to request a paper or email copy of our proxy materials. If you received these materials in paper form, the materials included a voting instruction card so you can instruct your broker, bank or other holder of record how to vote your shares.
Please see the Notice of Internet Availability of Proxy Materials or the information your bank, broker or other holder of record provided you for more information on these voting options.
If your shares are held in street name, you cannot vote those shares at the Annual Meeting unless you have a legal proxy from the holder of record. If you plan to attend and vote your street-name shares at the Annual Meeting, you should request a legal proxy from your broker, bank or other holder of record and bring it with you to the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, we strongly encourage you to vote your shares by proxy before the Annual Meeting.
First Data Corporation
225 Liberty Street, 29th Floor
New York, New York 10281
Attn: Corporate Secretary
If your shares are held in street name, you should contact your broker, bank or other holder of record about revoking your voting instructions and changing your vote before the Annual Meeting.
If you are eligible to vote at the Annual Meeting, you also can revoke your proxy or voting instructions and change your vote at the Annual Meeting by submitting a written ballot before the polls close.
If any other item is properly presented for a vote at the meeting, the shares represented by your properly submitted proxy will be voted at the discretion of the proxies.
If your shares are held in street name, your broker, bank or other holder of record may vote your shares on certain routine matters. The ratification of independent auditors is currently considered to be a routine matter. On this matter, your broker, bank or other holder of record can:
The other matters you are being asked to vote on are not routine and cannot be voted by your broker, bank or other holder of record without your instructions. When a broker, bank or other holder of record is unable to vote shares for this reason, it is called a broker non-vote.
Proposal No. 2, the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017, will be determined by the affirmative vote of a majority of the voting power of the shares of our Class A common stock and Class B common stock (voting together as a single class) present in person or represented by proxy at the Annual Meeting.
Broker non-votes and abstentions by stockholders from voting (including brokers holding their clients shares of record who cause abstentions to be recorded) will be counted towards determining whether or not a quorum is present. However, as the two nominees receiving the highest number of affirmative votes will be elected, abstentions and broker non-votes will not affect the outcome of the election of Directors. With regard to the affirmative vote of the shares present at the meeting required for Proposal 2, it is a routine matter so there will be no broker non-votes but abstentions will have the effect of a negative vote.
For Proposal No. 2, you may vote FOR, AGAINST, or ABSTAIN. If you elect to ABSTAIN, the abstention has the same effect as a vote AGAINST.
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If no instructions are indicated on a properly executed proxy card or over the telephone or Internet, the shares will be voted as recommended by our board of directors.
Our Board of Directors is divided into three classes serving staggered three-year terms. The terms of office of two current directors, Mr. Nuttall and Mr. Plumeri, expire at the 2017 Annual Meeting of Shareholders. Mr. Forehand has decided not to seek re-election and his term will expire at the 2017 Annual Meeting. The Board of Directors has approved a reduction in the size of the Board to eight members effective as of the 2017 Annual Meeting. Mr. Nuttall and Mr. Plumeri have been nominated for re-election through the 2020 Annual Meeting of Shareholders or until a successor is elected and qualified. The nominees were recommended to the Board by the Governance, Compensation and Nominations Committee. In making its recommendation, the Committee considered the experience, qualifications, attributes, and skills of each nominee. All nominees have indicated their willingness to serve if elected.
You have the opportunity to vote on the election of Mr. Nuttall and Mr. Plumeri. Additional information regarding each director nominees experience, skills, and qualifications to serve as a member of our Board can be found beginning on page 10.
The terms of Mr. Olson, Mr. Nevels, and Ms. Yastine expire at the 2018 Annual Meeting of Shareholders. The terms of Mr. Bisignano, Mr. Kravis, and Ms. Miller expire at the 2019 Annual Meeting of Shareholders.
If unforeseen circumstances (such as death or disability) make it necessary for the Board to substitute another person for any of the nominees, the proxies have the authority to vote your shares for that other person.
The Board of Directors recommends that you vote to RE-ELECT Mr. Nuttall and Mr. Plumeri as directors.
The Board of Directors recommends to the shareholders the ratification of the selection of Ernst & Young LLP, independent registered public accounting firm, to audit the accounts of First Data and its subsidiaries for 2017. Ernst & Young LLP has served as the independent registered public accounting firm for First Data or its predecessor entities since 1980. Consistent with regulations adopted under the Sarbanes-Oxley Act of 2002, the lead audit partner having primary responsibility for the audit and the concurring audit partner are rotated every five years.
A representative of Ernst & Young LLP will be present at the meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions.
Audit Fees and All Other Fees
The following table shows the fees for audit and other services provided by Ernst & Young LLP for 2016 and 2015:
This category includes fees related to the audit of our annual consolidated financial statements; the review of our quarterly consolidated financial statements; comfort letters, consents, and assistance with and review of documents filed with the SEC; offering memoranda, purchase accounting and other accounting, and financial reporting consultation; statutory audits required domestically and internationally; and research work billed as audit fees or necessary to comply with the standards of the Public Company Accounting Oversight Board (United States).
This category consists of fees for audit-related services that are reasonable related to the performance of the audit or review of our consolidated financial statements. Audit-related fees primarily include fees related to service auditor examinations, due diligence related to mergers and acquisitions, attest services that are not required by statute or regulation, and consultation concerning financial accounting and reporting standards not classified as audit fees.
This category consists of fees for tax compliance, tax advice and tax planning services.
All Other Fees
This category consists of fees for services that are not included in the above categories. We did not pay Ernst & Young LLP any other fees for services that are not included in the categories above.
Audit Committee Pre-approval of Service of Independent Registered Public Accounting Firm
Our Audit Committee has established a policy to pre-approve all audit and non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services, and other services. Under the policy, our Audit Committee reviews and pre-approves services that may be provided by the independent registered public accounting firm. The pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. Once pre-approved, the services and pre-approved amounts are monitored against actual charges incurred and modified if appropriate. The Chairperson of the Committee has the authority to pre-approve such services between meetings of our Audit Committee and such pre-approvals are reported to our Audit Committee at the next regularly scheduled meeting.
During 2016, all audit and non-audit services provided by Ernst & Young LLP were pre-approved by our Audit Committee or, consistent with the pre-approval policy of our Audit Committee, by the Chairperson of our Audit Committee for inter-meeting pre-approvals.
In the event the shareholders fail to ratify the appointment, the Audit Committee will consider it a direction to select other auditors for the subsequent year. Even if the selection is ratified, the Audit Committee, in its discretion, may select a new independent registered public accounting firm at any time during the year if it feels that such a change would be in the best interest of First Data and its shareholders.
The Board of Directors recommends that you vote FOR proposal 2.
Frank J. Bisignano
Director Since: 2013
Frank J. Bisignano has been Chairman of our Board since March 2014 and Chief Executive Officer and a member of our Board since April 2013. Before joining us, Mr. Bisignano was the Co-Chief Operating Officer for JPMorgan Chase & Co. from July 2012 to April 2013, CEO of Mortgage Banking at JPMorgan Chase & Co. from February 2011 until December 2012, and Chief Administrative Officer of JPMorgan Chase & Co. from 2005 until July 2012. From 2002 to 2005, Mr. Bisignano served as the chief executive officer for Citigroups Global Transactions Services business and a member of Citigroups Management Committee.
Mr. Bisignano brings many years of executive experience in the financial industry.
Joe W. Forehand
Director Since: 2009
Committees: Governance, Compensation and Nominations
Joe W. Forehand has been a member of our Board since September 2009 and was Chairman of the Board from March 2010 to March 2014. Mr. Forehand has decided not to seek re-election and his term will expire at the 2017 Annual Meeting. He was our interim Chief Executive Officer from March 2010 until October 2010. In his more than 30 years with Accenture Ltd., Mr. Forehand served as the CEO from 1999 until 2004. Before that, as chief executive of the Communications and High Technology Operating Group, and as Chairman of the board of directors of Accenture Ltd. from 2001 until 2006. Mr. Forehand is a Senior Advisor of Kohlberg Kravis Roberts & Co. L.P. (KKR) and has also been involved with KKRs growth and emphasis on the technology industry sector.
Mr. Forehand brings many years of experience at a publicly held consulting and technology services company, including service as Chairman of our Board.
Henry R. Kravis
Director Since: 2009
Committees: Governance, Compensation and Nominations
Henry R. Kravis has been a member of our Board since September 2009. Mr. Kravis, a pioneer of the private equity industry, co-founded KKR in 1976 and is its Co-Chairman and Co-Chief Executive Officer. He is actively involved in managing KKR and serves on its regional Private Equity Investment and Portfolio Management Committees. In addition to serving on the board of the general partner of KKR, Mr. Kravis currently serves on the board of ICONIQ Capital, LLC. He also serves as a director, chairman emeritus or trustee of several cultural, professional and education institutions, including The Business Council, Claremont McKenna College, Columbia Business School, Mount Sinai Hospital, Partnership for New York City, Partnership Fund for New York City, Sponsors for Educational Opportunity, Rockefeller University, and Tsinghua University School of Economics and Management. He earned a B.A. from Claremont McKenna College in 1967 and a M.B.A. from the Columbia Business School in 1969. Mr. Kravis has more than four
decades of experience financing, analyzing, and investing in public and private companies, as well as serving on the boards of a number of KKR portfolio companies in the past.
Mr. Kravis provides significant experience and expertise in private equity investments, including his involvement in KKRs diverse investments.
Heidi G. Miller
Independent Director Since: 2014
Committees: Audit, Risk
Heidi G. Miller has been a member of our Board since April 2014. Prior to retiring in 2012, Ms. Miller had been president of JPMorgan International, a division of JPMorgan Chase & Co., since June 2010. She served as Executive Vice President, Chief Executive Officer - Treasury and Securities Services of JPMorgan Chase & Co. from January 2004 to June 2010. From 2002 to 2004, Ms. Miller served as Executive Vice President and Chief Financial Officer of Bank One Corporation. Previously, she had been Chief Financial Officer of Citigroup Inc. She is a director of General Mills Inc. and HSBC Holdings plc. and Chairman of HSBC North America Holdings Inc. (HNAH), a wholly owned subsidiary of HSBC Holdings, and previously served as a director of Progressive Casualty Insurance Company. Ms. Miller graduated from Princeton University with a bachelors degree in history and completed her doctorate in Latin American History at Yale University.
Ms. Miller brings executive experience in the financial services industry and her service as a director of a publicly held company.
James E. Nevels
Independent Director Since: 2014
Committees: Audit, Risk
James E. Nevels has been a member of our Board since November 2014. Mr. Nevels is Chairman of The Swarthmore Group, an investment advisory firm that he founded in 1991. He is also Lead Independent Director of The Hershey Company, Lead Independent Director of WestRock Company, and director of Alcoa Corporation. In 2004, Mr. Nevels was appointed by the President of the United States to a three-year term on the advisory committee to the Pension Benefit Guaranty Corporation, where he served as Chairman from 2005 to 2007. In 2001, he was appointed by the Governor of Pennsylvania as Chairman of the Philadelphia School Reform Commission overseeing the turnaround of the Philadelphia School System, at that time the ninth-largest school district in the United States. Mr. Nevels was a member of the board of directors of the Federal Reserve Bank of Philadelphia from January 2010 until December 2015, and served as its Deputy Chairman from January 2012 until his appointment as Chairman in January 2014. Mr. Nevels was formerly a director of Tasty Baking Company from May 2005 to May 2011. He holds a bachelors degree, cum laude and Phi Beta Kappa, in political science and philosophy from Bucknell University, a Masters of Business Administration degree from the Wharton School of the University of Pennsylvania and a Juris Doctor degree from the University of Pennsylvania Law School.
Mr. Nevels provides expertise in the securities and investment industry with decades of experience in finance, law and corporate governance.
Scott C. Nuttall
Director Since: 2007
Committees: Governance, Compensation and Nominations
Scott C. Nuttall has been a member of our Board since September 2007 and is a Member of KKR. Mr. Nuttall joined KKR in 1996 and is head of KKRs Global Capital and Asset Management Group, which includes Credit, Hedge Funds, KKR Capital Markets and KKRs Client and Partner Group. He has played a significant role in several of KKRs private equity investments. Before joining KKR, he was with the Blackstone Group where he was involved in numerous merchant banking and merger and acquisition transactions. He received a B.S., summa cum laude, from the University of Pennsylvania.
Mr. Nuttall brings a broad perspective brought by his involvement in KKRs diverse investments and his extensive knowledge of our business and capital structure through his involvement with First Data since our 2007 acquisition by KKR.
Tagar C. Olson
Director Since: 2007
Tagar C. Olson has been a member of our Board since September 2007. Mr. Olson joined KKR in 2002 and is a Member and Head of KKRs Financial Services industry team and on the Investment Committee within KKRs Americas Private Equity platform. Mr. Olson is on the board of directors of Alliant Insurance Services, PURE, Sedgwick, and WMIH Corp. He has been involved in many of KKRs investments in the financial services sector, including Latitude Financial, Legg Mason, Nephila, and Santander Consumer USA. Before joining KKR, Mr. Olson was with Evercore Partners Inc., where he was involved in a number of private equity transactions and mergers and acquisitions. He holds a B.S. and B.A.S., summa cum laude, from the University of Pennsylvania. Mr. Olson is a member of the Board of Overseers at NYU Langone Medical Center.
Mr. Olson provides expertise in the financial services industry and extensive knowledge of our business and capital structure through his involvement with First Data since our 2007 acquisition by KKR.
Joseph J. Plumeri
Director Since: 2013
Committees: Governance, Compensation and Nominations
Joseph J. Plumeri has been a member of our Board and a Senior Advisor of KKR since August 2013 and our Vice Chairman since May 2014. Mr. Plumeri was also our Head of Client Delivery, Innovation and Marketing from June 2014 until June 2015. Before joining us, Mr. Plumeri was Chief Executive Officer of Willis Group Holdings plc from October 2000 to January 2013 and Chairman of its board of directors from 2001 to July 2013. Before joining the Willis Group, Mr. Plumeri spent 32 years as an executive with Citigroup Inc. and its predecessors, where his responsibilities included overseeing the 450 North American retail branches of Citigroups Citibank unit. Before that, Mr. Plumeri served as Chairman and Chief Executive Officer of Citigroups Primerica Financial Services from 1995 to 1999. In 1994, Mr. Plumeri was appointed Vice Chairman of Citigroups predecessor, Travelers Group Inc. In 1993, Mr. Plumeri became the President of a predecessor of Citigroups Salomon Smith Barney unit after overseeing the merger of Smith Barney and
Shearson and serving as the President and Managing Partner of Shearson since 1990. He also serves on the boards of the National Center on Addiction and Substance Abuse; Mount Sinai Medical Center; the Intrepid Sea, Air & Space Museum; the Jackie Robinson Foundation and the Churchill Centre and Museum at the Cabinet War Rooms in London.
Mr. Plumeri brings many years of experience as chief executive officer and chairman of the board of a publicly held company.
Barbara A. Yastine
Director Since: 2016
Barbara A. Yastine has been a member of our Board since September 2016. She served as a director and Co-Chief Executive Officer of Lebenthal Holdings, LLC from September 2015 to June 2016. Ms. Yastine previously served as Chair, President, and Chief Executive Officer of Ally Bank from March 2012 to September 2015, and as Chief Administrative Officer of Ally Financial, overseeing the risk, compliance, legal and technology areas, and Chair of Ally Bank, from May 2010 to March 2012. Prior to joining Ally Financial, she served as a Principal of Southgate Alternative Investments, a start-up diversified alternative asset manager, beginning in June 2007. She served as Chief Financial Officer for investment bank Credit Suisse First Boston from October 2002 to August 2004. From 1987 through 2002, Ms. Yastine worked at Citigroup and its predecessor companies. Ms. Yastine also is a member of the Board of Directors of Primerica, Inc. She received a B.A. in Journalism and an M.B.A. from New York University.
Ms. Yastine brings expertise in general management, risk and asset management, finance and strategic planning from her experience serving in senior management positions in the investment banking and capital markets industries.
Board Leadership Structure
Our governance framework provides the Board with flexibility to select the appropriate leadership structure. In making leadership structure determinations, the Board considers many factors, including the specific needs of the business and what is in the best interests of the our shareholders. The current leadership structure is comprised of a combined Chairperson of the Board and Chief Executive Officer, a Lead Director, and three Board committees. The directors believe that the positions of Chairperson and CEO currently should be held by the same person, as this combination has served us well by providing unified leadership and direction for the Board.
If the individual elected as Chairperson is also an employee of First Data, the Board believes that a Lead Director should be appointed to help ensure robust leadership on the Board. Accordingly, the non-management directors have elected Scott Nuttall as Lead Director. As Lead Director, Mr. Nuttall assists in optimizing the effectiveness of the Board by performing the duties described below and such other duties as determined by the Board or non-management directors:
Board Role in Risk Oversight
Our Board has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight through the regular reporting by the Audit Committee and the Risk Committee. The Risk Committee represents the Board by overseeing our risk governance structure, risk assessment, and risk management practices, and making recommendations to the Board regarding our willingness to accept risks and strategies related to key risks. The Audit Committee represents the Board by periodically reviewing our accounting, reporting, and financial practices, including the integrity of our consolidated financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal, and internal audit functions, the Audit Committee reviews and discusses all significant areas of our business and summarizes for the Board all areas of financial risk and the appropriate mitigating factors. In addition, our Board receives periodic detailed operating performance reviews from management.
Our executive officers regularly report to the Board, including the non-management directors, and the Audit, the Governance, Compensation and Nominations, and the Risk Committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. The Head of Internal Audit reports administratively to our Chief Control Officer and directly to the Audit Committee. We believe that the leadership structure of our Board provides appropriate risk oversight of our activities given the controlling interest held by KKR.
Controlled Company Exception
Kohlberg Kravis Roberts & Co. L.P. and its affiliates control a majority of the voting power of our outstanding common stock. As a result, we are a controlled company within the meaning of the corporate governance standards of the New York Stock Exchange. Under these rules, if more than 50% of the voting power of a company is held by an individual, group or another entity, the company is a controlled company and may elect not to comply with certain corporate governance requirements, including:
directors with a written charter addressing the committees purpose and responsibilities; and
As a result, we do not have a majority of independent directors on our Board and we do not have a nominating and corporate governance committee or a compensation committee that is composed entirely of independent directors. In the event that we cease to be a controlled company, we will comply with these provisions within the transition periods specified in the corporate governance rules of the NYSE.
Meetings of the Board and Director Attendance at Annual Meeting
Our Board held 7 meetings in 2016. Each director attended at least 90% of all of the meetings of the Board and committees of the Board on which he or she served in 2016.
Periodically at the end of Board meetings our Lead Director presides at an executive session without any management directors present. These sessions allow the directors to discuss important issues, including the business and affairs of First Data as well as matters concerning management, without any member of management present. In addition, an executive session including only independent directors is held at least once a year. Ms. Miller, as Chairperson of the Risk Committee, presides at such executive sessions. Members of the Audit Committee, Governance, Compensation and Nominations Committee, and Risk Committee also meet in executive session as needed.
Directors are expected to attend our annual meetings of shareholders absent extraordinary circumstances, and all directors except one attended the 2016 Annual Meeting of Shareholders.
Our Board is responsible for nominating directors for election by the shareholders and filling any new positions or vacancies on the Board that may occur. The Governance, Compensation and Nominations Committee is responsible for identifying, screening, and recommending candidates to the Board for Board membership. Shareholders may also propose nominees for consideration by the Committee by writing to First Data Secretary, c/o General Counsel Office, First Data Corporation, 225 Liberty Street, 29th Floor, New York, New York 10281.
Nominees for director are selected on the basis of experience, integrity, skills, diversity, independence, ability to make independent analytical inquiries, understanding of First Datas business environment, and willingness to devote adequate time to Board duties -- all in the context of an assessment of the perceived needs of the Board at that point in time. The Board believes that its membership should reflect a diversity of experience, gender, race, ethnicity, and age. In formulating its recommendations, the Governance, Compensation and Nominations Committee will consider recommendations offered by any shareholder, director, or officer of First Data.
Each year our Board determines which of our directors are independent. Under our Corporate Governance Guidelines, to be considered independent a director (1) must meet the independence standards under the NYSE listing standards; and (2) the Board must affirmatively determine that the director otherwise has no material relationship with First Data directly, or as an officer, shareholder, or partner of an organization that has a relationship with First Data. In making its independence determinations, the Board reviews any material direct and indirect relationships between each director and First Data, as well as the compensation and other payments each director received from or made to First Data. Our Board has determined that Ms. Miller, Mr. Nevels, and Ms. Yastine are independent directors. For Ms. Miller, our Board considered her sons
employment with First Data in a non-officer and non-strategic position. Given his position in the company and amount of compensation, the Board determined that his employment did not create a material relationship with First Data that would impair Ms. Millers independence.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines that, along with the charters of the Board committees, provide the basic framework for the Boards operation and role in the governance of First Data. You can find our Corporate Governance Guidelines on our website at www.firstdata.com under Investors and Corporate Governance.
Code of Ethics
We have adopted an Employee Code of Conduct, which applies to all employees, a Code of Ethics for Senior Financial Officers, which applies to our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer, and a Directors Code of Ethics, which applies to our directors. These Codes can be viewed on our website at www.firstdata.com under Investors and Corporate Governance. On the same website, we will post amendments to a provision of such codes and waivers from the Code of Ethics for Senior Financial Officers.
Our Board has an Audit Committee, a Governance, Compensation and Nominations Committee, and a Risk Committee. Information about each committee is provided below.
Members: Heidi G. Miller, James E. Nevels, and Barbara A. Yastine (Chairperson). Ms. Yastine replaced Mr. Olson on September 21, 2016.
Meetings Held in 2016: 9
The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to: (1) the integrity of First Datas financial statements, (2) First Datas compliance with legal and regulatory requirements, (3) the qualifications, performance and independence of First Datas independent registered public accounting firm, and (4) the performance of First Datas internal auditing department.
Ms. Miller, Mr. Nevels, and Ms. Yastine meet the independence requirements of the NYSE, the Securities Exchange Act of 1934, and our Corporate Governance Guidelines.
Our Board has unanimously determined that all Audit Committee members are financially literate under the NYSE listing standards and all members qualify as audit committee financial experts within the meaning of SEC regulations and have accounting or related financial management expertise as required by the NYSE listing standards.
The Audit Committee Charter can be viewed on our website at www.firstdata.com under Investors and Corporate Governance.
The Audit Committee Charter prohibits any member of the Audit Committee from serving on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of the director to effectively serve on the Committee
The Audit Committee report begins on page 51.
Governance, Compensation and Nominations Committee
Members: Joe W. Forehand, Henry R. Kravis, Scott C. Nuttall (Chairperson), and Joseph J. Plumeri. Mr. Plumeri joined the Committee on May 11, 2016.
Meetings Held in 2016: 6
The Governance, Compensation and Nominations Committee: (1) oversees First Datas compensation and benefits plans generally, (2) evaluates and sets compensation for our CEO and other members of the management committee, (3) produces the annual report on executive compensation included in this Proxy Statement, (4) identifies individuals qualified to become members of the Board and recommend to the Board nominees for election as directors at each annual meeting of shareholders and to fill vacancies or newly created directorships on the Board that may occur between such meetings, (5) recommends to the Board directors for appointment to Board committees, (6) evaluates and recommends compensation for our directors, (7) develops and recommends to the Board corporate governance guidelines, and (8) oversees the evaluation of the Board and its committees and management.
At this time, there are no independent directors on the Governance, Compensation and Nominations Committee. When First Data is no longer is a controlled company within the meaning of the NYSE listing standards, all of the Committees members will be independent as defined under the NYSE listing standards within the time period permitted for such a transition by the NYSE listing standards.
The Governance, Compensation and Nominations Committee Charter can be viewed on our website at www.firstdata.com under Investors and Corporate Governance.
The Governance, Compensation and Nominations Committee report begins on page 36.
Members: Heidi G. Miller (Chairperson) and James E. Nevels
Meetings Held in 2016: 5
The Risk Committee oversees the management of risks to First Data. The Risk Committee oversees risk governance structure, risk assessment, and risk management practices. It oversees and makes recommendations to the Board regarding First Datas willingness to accept risks and strategies related to key risks. The Risk Committee also oversees the appointment and, if necessary, replacement of First Datas Chief Control Officer.
The Risk Committee Charter can be viewed on our website at www.firstdata.com under Investors and Corporate Governance.
Compensation Committee Interlocks and Insider Participation
None of our Governance, Compensation and Nominations Committee members has been one of our executive officers or employees at any time, except for Joseph J. Plumeri who was an employee of First Data until March 31, 2016 and Joe W. Forehand who served as interim Chief Executive Officer during 2010. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board or Committee. We are parties to certain transactions with KKR described in the Certain Relationship and Related Transactions beginning on page 24.
The following table summarizes compensation for our directors for fiscal year 2016.
Description of Director Compensation
Each non-employee director associated with KKR receive an annual cash retainer of $40,000, payable in semi-annual installments.
Each director not employed by us or KKR receive the following:
All cash compensation may be deferred under the Director Deferred Comp Plan based upon the election made prior to each calendar year by each director. All amounts deferred will accrue earnings based on the performance of our Class A common stock and be paid to the director upon termination of the directors service, subject to acceleration of the payout under certain circumstances.
In connection with Mr. Forehands decision not to run for reelection as a director, his existing equity awards were modified so that following his last day of service as a Director:
The section below provides information regarding our executive officers, other than Frank Bisignano, as of March 1, 2017:
Cynthia A. Armine-Klein
Position: Executive Vice President, Chief Control Officer
Cynthia A. Armine-Klein has been our Executive Vice President, Chief Control Officer since May 2014. Before joining us, Ms. Armine-Klein was Executive Vice President and Chief Compliance Officer for JPMorgan Chase & Co. from July 2012 to May 2014. Before joining JPMorgan Chase & Co., she spent 31 years at Citigroup and its predecessor firms and was Citigroups Global Chief Compliance Officer from 2008 until 2012.
Daniel J. Charron
Position: Executive Vice President, Head of Global Business Solutions
Daniel J. Charron has been our Executive Vice President, Head of Global Business Solutions since February 2015. Before joining us, Mr. Charron spent 14 years with Chase Paymentech, the global payment processing business of JPMorgan Chase & Co., most recently as its President from May 2013 until December 2014. From March 2013 to May 2013, Mr. Charron was acting head of Chase Paymentech and before that he served as Executive Vice President, Head of Client Services from November 2008 until March 2013.
Guy Chiarello has been our President since July 2013. Before joining us, Mr. Chiarello was the Chief Information Officer of JPMorgan Chase & Co. for the prior five and a half years and served in various technology roles for Morgan Stanley for 23 years before that.
Ivo M. Distelbrink
Position: Executive Vice President, Head of Asia Pacific Region
Ivo M. Distelbrink joined us in August 2016 as Executive Vice President, Head of Asia Pacific (APAC) Region. Before joining us, Mr. Distelbrink was the Managing Director - Region Head, Asia-Pacific & Japan for global transaction services for Bank of America Merrill Lynch from 2010 until July 2016. Previously, Mr. Distelbrink served in a number of roles for CitiBank N.A., most recently as Managing Director Region Head, Asia Pacific & Japan, Treasury & Trade Solutions, Global Transaction Services.
Position: Executive Vice President, Head of Corporate and Business Development
Christopher Foskett joined us in May 2014 as Head of Global, Strategic & National Accounts and has been our Executive Vice President, Head of Corporate and Business Development since June 2015. Before joining us, Mr. Foskett served as the Managing Director, Head of North American Treasury Services and Global Head of Sales for Treasury Services at JPMorgan Chase Bank from 2011 to April 2014. He was Managing Director, Global Head of Financial Institutions at National Australia Bank from 2009 to 2011. Previously, Mr. Foskett was a Managing Director in Citigroups Corporate & Investment Bank leading several global businesses from 1991 to 2008. He was previously employed in the merger department at Goldman Sachs & Co. and had Merrill Lynch & Co. He has been a member of the Board of Directors of Verisk Analytics, Inc. since 1999, where he serves on the Finance Committee, the Compensation Committee, and as Chairman of the Audit Committee.
Position: Executive Vice President, Head of Global Financial Solutions
Andrew Gelb has been our Executive Vice President, Head of Global Financial Solutions since February 2016. He joined us in November 2014 as Executive Vice President and Head of Financial Services and was our Executive Vice President, Co-Head of Global Financial Solutions between June 2015 and February 2016. Previously, Mr. Gelb spent 17 years at Citigroup Inc. and was Managing Director and Head of North America Treasury and Trade Solutions business from June 2012 until July 2014. Previously, Mr. Gelb was Head of Securities & Fund Services for EMEA (Europe, Middle East & Africa) of Citigroup Inc. from June 2008 until June 2012.
Position: Executive Vice President, Chief Administrative Officer
Thomas Higgins joined us in December 2013 and has been our Executive Vice President, Chief Administrative Officer since May 2014. Before joining us, he was the head of Operational Control at JPMorgan Chase & Co. from January 2011 until December 2013. In 2010, Mr. Higgins retired after a 24-year career with the U.S. Government. He worked in the national security and foreign policy areas and was a member of the Senior Executive Service.
Christine E. Larsen
Position: Executive Vice President, Chief Operations Officer
Christine E. Larsen joined us as Executive Vice President, Chief Operations Officer in June 2013. Before joining us, she was Executive Vice President of JPMorgan Chase & Co. since January 2012 responsible for firm-wide process improvement and enterprise program management, with a focus on control and integration efforts. From 2006 to January 2012, she was responsible for various senior operations and technology roles at JPMorgan Chase & Co.
Position: Executive Vice President, Head of Latin America Region
Gustavo Marin joined us as our Executive Vice President, Head of Latin America Region since February 2015. Before joining us, Mr. Marin spent 32 years with Citibank, most recently as Senior Advisor from July 2012 until July 2013. He was CEO of Citibank Argentina, Brazil, Paraguay and Uruguay from 2001 until 2012 and Country and Business Manager of Citibank Peru from 1996 to 1998. Mr. Marin served on the Conselho de Desenvolvimento Economico e Social, the advisory body of the Presidency of the Republic, and as a member of the Board of Directors of the Brazilian Federation of Banks. He also served on the Advisory Board of the Brazilian Futures Exchange and as a member of the International Advisory Board of Thomson Reuters.
Anthony S. Marino
Position: Executive Vice President, Head of Human Resources
Anthony S. Marino joined us in March 2015 as Executive Vice President, Head of Human Resources. Before joining us, Mr. Marino was Executive Vice President and Chief Human Resources Officer for The Guardian Life Insurance Company from September 2014 until February 2015. Previously, he was Chief Human Resources Officer and General Manager at Bank of Tokyo-Mitsubishi UFJ from January 2011 until September 2014. From September 2007 until December 2010, Mr. Marino was Chief Human Resources Officer at Ally Financial.
Barry C. McCarthy
Position: Executive Vice President, Network & Security Solutions
Barry C. McCarthy has been our Executive Vice President, Network & Security Solutions since June 2015. Previously, Mr. McCarthy was Executive Vice President, Head of Consumer and Network Solutions from November 2014 until June 2015 and president of our U.S. Financial Services segment from February 2013 until October 2014. Mr. McCarthy joined us in 2004 and has served in various roles of increasing responsibility including head of the merchant product organization, new technologies and general manager of our Asia-Pacific merchant business. Before joining us, he co-founded MagnaCash, a Silicon Valley-based micropayments company, and held various executive roles at VeriSign, Wells Fargo Bank, and Procter & Gamble.
Michael K. Neborak
Position: Executive Vice President, Head of EMEA Region
Michael K. Neborak has been our Executive Vice President, Head of EMEA Region since January 2016. He joined us in July 2014 as our Executive Vice President, Director of Finance. Previously, Mr. Neborak was Group Chief Financial Officer of Willis Group Holdings plc from July 2010 to June 2014. Mr. Neborak also served as Chief Financial Officer of MSCI Inc. from 2006 to 2010. Earlier in his career, from 1982 to 2006, Mr. Neborak served in roles of increasing responsibility within business units of Citigroup and its predecessor companies. He began his career with Arthur Andersen & Co.
Himanshu A. Patel
Position: Executive Vice President, Chief Financial Officer
Himanshu A. Patel has been our Executive Vice President, Chief Financial Officer since September 2015. Mr. Patel previously was our Executive Vice President, Strategy, Planning and Business Development and served in that role since joining us in June 2013. Before joining us, he served in various roles at JPMorgan Chase & Co. since 1997, including as a Managing Director from 2011 to 2013 leading strategy for the mortgage banking division and as a Senior Equity Analyst from 2001 to 2011.
Adam L. Rosman
Position: Executive Vice President, General Counsel and Secretary
Adam L. Rosman has been our Executive Vice President, General Counsel and Secretary since October 2014. Before joining us, Mr. Rosman served as Group General Counsel of Willis Group Holdings plc from May 2012 until September 2014. He joined Willis Group in 2009, serving as Deputy Group General Counsel until May 2012. Previously, Mr. Rosman was Senior Vice President and Associate General Counsel at Cablevision Systems Corporation in Bethpage, New York, and before that he was a partner at the Washington D.C.-based law firm of Zuckerman Spaeder LLP. Between 1997 and 2003, Mr. Rosman was an Assistant United States Attorney in Washington, D.C. He also worked in 2000 and 2001 as Deputy Assistant to the President and Deputy Staff Secretary for President Clinton.
Policies Regarding the Approval of Transactions with Related Parties
Our Related Party Transaction Policy requires Board approval of any transactions over $120,000 between First Data and an executive officer, director, 5% or more shareholder, or an immediate family member of any of such individual.
In addition, under our Director Code of Conduct, each director must report to our General Counsel upon learning of any prospective transaction or relationship in which the director will have a financial or personal interest (direct or indirect) that is with us, involves the use of our assets, or involves competition against us (consistent with any confidentiality obligation the director may have). Our General Counsel must then advise our Board of any such transaction or relationship and our Board must pre-approve any material transaction or relationship.
Under our Code of Conduct, executive officers may not use their personal influence to get us to do business with a company in which they, their family members or their friends have an interest. In situations where an executive officer is in a position of influence or where a conflict of interest would arise, the prior approval of our General Counsel is required.
Certain Relationships and Related Transactions
Since January 2016, KKR Capital Markets LLC, an affiliate of KKR, acted as an arranger and bookrunner for various financing transactions related to our credit agreements, and as an initial purchaser relating to issuances of our notes, and received underwriter and transaction fees totaling $17 million.
Messrs. Kravis, Nuttall, and Olson are associated with KKR. Mr. Nuttall also serves as a director on the board of KKR Capital Markets LLC.
In September 2016, Mr. Bisignanos daughter married a current employee of First Data, Sam Lituchy. For fiscal 2016, First Data paid Mr. Lituchy compensation and benefits of $159,615 and granted him 1,856 restricted stock units having a value of approximately $20,000 on the date of grant.
Directors, Management, and Certain Beneficial Owners
The following table shows the amount of our Class A common stock and Class B common stock beneficially owned by each of our directors, each of our named executive officers, all of our directors and executive officers as a group, and each person or group known by us to be the beneficial owner of more than 5% of either Class A or Class B common stock.
We have determined beneficial ownership in accordance with the rules of the SEC. Applicable percentage ownership is based on 371,979,947 shares of Class A common stock and 544,031,779 shares of Class B common stock outstanding at February 1, 2017. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options, restricted stock or other convertible securities held by that person or entity that are currently exercisable or vested or that will become exercisable or vested within 60 days of February 1, 2017. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
Except as indicated by the footnotes below, (a) all amounts are as of February 1, 2017, (b) we believe, based on the information furnished to us, that the persons and entities listed have sole voting and investment power with respect to the shares they beneficially own, and (c) the address of each beneficial owner is c/o First Data Corporation, 225 Liberty Street, 29th Floor, New York, New York 10281.
* Less than one percent
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of reports filed with the SEC by our directors and executive officers regarding their ownership and transactions in our common stock and written representations from those directors and officers, we believe that each director and executive officer has filed timely reports under Section 16(a) of the Securities Exchange Act of 1934 during 2016, except for a Form 4 filed on June 13, 2016 for James Nevels that reported a purchase of 250 shares of Class A common stock.
Our executive compensation program is designed to attract and retain quality individuals, as well as to motivate them to help us achieve our financial goals and create shareholder equity value. Our named executive officers (NEOs) are paid based on performance, primarily in time- and performance-vested equity, and competitively to the market.
How We Determine Compensation
Role of the Governance, Compensation and Nominations Committee
During 2016, the Governance, Compensation and Nominations Committee (the Committee) consisted of Messrs. Forehand, Kravis, Plumeri and Nuttall, with Mr. Nuttall serving as Chairperson.
Mr. Plumeri joined the Governance, Compensation and Nominations Committee on May 11, 2016. First Data recognizes that it is atypical for a named executive officer to make a mid-year transition from a management position to a committee member position. Due to the fact Mr. Plumeri transitioned roles in May of 2016, he had no input on his 2016 total compensation package. His 2016 total compensation was approved by the Governance, Compensation and Nominations Committee irrespective of Mr. Plumeri joining mid-year.
The Committee approves all aspects of compensation for executive officers, including the form and compensation amounts as well as performance metrics and targets under our incentive plans. Specifically, the Committee:
The Board of Directors, however, approves equity grants to executive officers, generally after Committee recommendations, to exempt the grants from short-swing profit rules.
Since we were privately owned until October 2015, the Committee has not participated in shareholder outreach on matters of executive compensation.
Role of Independent Consultant
Our Compensation Committee has the sole authority to retain and replace, as necessary, compensation consultants to provide it with independent advice. The Compensation Committee has engaged Johnson Associates, Inc. as its independent consultant to advice on executive and non-employee director compensation matters. This selection was made without the input or influence of management.
Role of Management in Executive Officer Compensation Decisions
Our Chief Executive Officer, Chief Human Resources Officer, and General Counsel generally provide information, data, analysis, updates, and compensation recommendations to the Committee. Management periodically engages compensation consultants to assist it in this process, and it utilizes market data from a wide variety of sources. As part of the Committees compensation setting process, our Chief Executive Officer makes recommendations to the Committee regarding compensation for executive officers other than himself.
Highlights of our Compensation Practices
Although we are a controlled company, we adhere to certain best practices regarding compensation.
Transition to Public Company Pay Practices
Our common stock first became publicly traded on October 15, 2015. The Committee is committed to adopting additional public company best pay practices over time, if it determines such changes are in the best interest of shareholders.
Our Compensation Philosophy and Strategy
We structure our compensation to reinforce growth goals and sustained share value creation. In particular:
Use of Equity and Share Retention Requirements
The Committee seeks to align management with shareholders by granting a significant portion of our NEOs total compensation in equity that increases in value as our financial performance improves. The Committee also seeks to retain management by requiring employment through equity vesting periods to receive the full value of equity-based awards. As further described below, the Committees first quarter 2017 equity-based awards reflect this approach: the awards generally vest over three years and generally require continued employment through each vesting date.
As described in more detail below, our CEO must retain at least 90% of the stock acquired from equity compensation, net of taxes, transaction costs, and charitable donations, until employment termination. Our other NEOs must retain at least 75% of the stock from equity compensation, net of taxes, transaction costs and charitable donations, through employment termination. These are among the most rigorous share retention requirements of any public company.
Pay our NEOs Based on Performance
We are committed to rewarding executives based on our performance. At the end of each year, the Committee determines how First Data performed across various financial and qualitative objectives. The Committee then determines awards for each NEO, based both on company and individual performance.
The Committee also determines how the award for prior year performance will be paid. For 2016, the award was paid in two forms:
Market Competitive Pay
The Committee wants to ensure executives are paid competitively. In order to successfully attract and retain top performing executives, our Human Resources Department annually reviews market data and aims to provide our executives with competitive total compensation opportunities.
The Chief Executive Officer, Human Resources Department, and the Committee periodically review our executive compensation practices against a peer group of companies. Our peer group includes direct competitors, frequently identified peer companies to our direct competitors, and other companies comparable to us in terms of industry, pay practices, revenue and market value. In 2016, Johnson Associates assisted the Committee in adjusting the peer group to reflect First Data today. The peer group considered by the Committee to determine 2016 NEO compensation included the following 17 companies:
For 2016, the Committee used peer group data as one factor regarding pay. The Committee did not seek to benchmark NEO positions against the market data, nor did it pay NEOs at any particular peer group market percentile.
Summary of 2016 Compensation
For 2016, we considered the following aspects of our performance to determine our NEO compensation:
*Non-GAAP financial measures. For information on how these metrics are calculated, see Explanation of Non-GAAP Financial Measures on page 36.
Elements of 2016 Compensation
In January 2017, the Committee determined our NEOs total compensation packages based on company and individual performance. Compensation included the following elements:
Base salary provides executives with a level of cash income predictability. The Committee believes base salaries for executives should reflect market competitive levels and factors such as experience and breadth of responsibilities, performance, individual skill set, pay relative to peers within First Data, and base pay in previous roles outside of First Data. Initial base salaries for our NEOs are agreed to at the time of hiring. Each executive officer is reviewed annually and is eligible for a discretionary annual merit increase. Base salaries may also be adjusted at other times to deal with competitive pressures or changes in job responsibilities. Mr. Bisignanos salary was decreased in 2016 from $1,500,000 in 2015 to $1,320,000. Mr. Bisignano will not receive a base salary increase for 2017.
The following table shows our NEOs annual base salaries as of December 31, 2016:
2016 Incentive Compensation
Each NEO is eligible for an annual discretionary cash incentive and equity based on First Datas performance against our strategic growth objectives and individual performance. Consistent with our overall compensation philosophy, cash incentives are generally much smaller than long-term equity awards.
For 2016, the Board, with input from management, set strategic goals for our performance. These goals included growing revenue and adjusted EBITDA, improving free cash flow, and managing expenses. These were the basis of First Datas performance portion of incentive pay for 2016.
The Committee also considers individual performance and contribution in meeting our strategic goals. The Committee considers a number of factors, including:
The size of awards is based primarily on our annual financial performance, but individual performance is also considered. To best accomplish this, the Committee approved a fully discretionary funding structure for 2016 annual incentive compensation. This structure allowed the Committee to maintain the ability to appropriately reward the performance of each NEO.
Although many of our strategic goals were met, we did not meet our revenue growth goal, which was a key performance metric. As a result, the Committee exercised its discretion and determined that total incentive compensation for 2016 performance would be reduced compared to 2015.
After determining the total compensation for each NEO, the Committee determines the mix between cash and equity. For 2016, we elected to pay only a small portion (0% - 20%) of annual incentive compensation in cash. The reminder was paid in time-vested restricted stock awards which the Committee granted on February 1, 2017. We believe this cash/equity ratio best aligns the NEOs interest with creating value for shareholders.
2016 Cash Incentive Awards
The annual cash incentives for 2016 performance under the SEIP were as follows:
2017 Equity-Based Grants Based on 2016 Performance
In the first quarter of 2017, the Committee granted the awards shown below under the 2015 Omnibus Incentive Plan. The grants reflect the portion of 2016 incentives made in time vested equity. The awards have the following terms:
2016 Equity-Based Grants Based on 2015 Performance
In the first quarter of 2016, the Committee determined the award for 2015 performance and determined to grant a small portion of the award under the SEIP in cash, and the bulk of the award in a combination of time vested restricted stock and time vested options under the 2015 Omnibus Incentive Plan. The grants shown in the table below reflect the portion of the 2015 incentive award that was made in time vested equity. The awards have the following terms:
Cash Retention Award
During the year, the Committee granted a $2.5 million cash retention award to Mr. McCarthy. The Committee reviewed Mr. McCarthys total compensation and made the award to provide an ongoing incentive for Mr. McCarthy to remain with us for several years. The cash retention award is subject to certain repayment provisions. In the 3-year period between September 8, 2016 and September 8, 2019, if the company terminates the recipients employment for cause or the recipient voluntarily resigns without good reason, First Data has the right to require the recipient to pay back a pro-rata portion of the award based on the period of time the recipient worked over the 3-year term.
Other Fiscal 2016 Compensation
From time to time, the Committee may award sign-on bonuses or equity-based awards in connection with an NEO joining us. Sign-on awards are used only when necessary to attract highly skilled individuals. Often, they are used to offset the loss of unvested compensation as a result of leaving their current employer.
Benefits and Perquisites
We focus on performance-based compensation while providing only minimal executive benefits. We do provide to all of our employees, including our NEOs, broad-based employee benefits that are intended to attract and retain employees while providing them with retirement and health and welfare security. These include:
We do not currently offer defined benefit pension benefits or non-qualified retirement benefits to our NEOs. We also do not currently offer a company match in our 401(k) savings plan.
We provide our NEOs with limited perquisites and personal benefits not generally available to all employees such as reimbursements for relocation, housing, and moving expenses. In limited instances NEOs are also authorized to use the corporate aircraft for personal purposes. Per his employment agreement, Mr. Bisignano is provided with use of a car and driver and is eligible for financial planning assistance and use of the corporate aircraft. In addition, from time to time we provide tax gross-ups on perquisites in order to allow our NEOs to enjoy the full benefit of the perquisite.
Severance and Change in Control Agreements
We believe that reasonable and appropriate severance and change in control benefits are necessary in order to be competitive in First Datas executive attraction and retention efforts. Our severance and change in control policy provides for payment rights, and benefits to the NEOs (other than Mr. Bisignano) on an involuntary termination of employment without cause. Under the policy, the cash severance is equal to one years base pay plus the bonus paid for the prior year before termination, if any, and a prorated bonus based on time worked during the year of termination. For Mr. McCarthy, this amount may not be less than twelve (12) months of salary plus his target bonus current set at $1,750,000. As a condition to receiving severance, all participating NEOs must release First Data and its employees from all claims they may have against them and agree to a number of restrictive covenants which are structured to protect us from potential loss of customers or employees and to prohibit the release of confidential company information. For Mr. Bisignano, his employment agreement described below provides for a cash severance payment equal to (1) the greater of (a) $9.5 million or (b) two times the sum of his base salary and the average of his annual incentive payments paid in cash in respect of the two fiscal years prior to the date of his termination and (2) a pro rata portion of the annual incentive payment that would have otherwise been payable if he had remained employed through such year.
Share Ownership Guidelines
We have an equity retention policy for our directors, NEOs, and all other members of our Management Committee, which require them to maintain a minimum share ownership level throughout their employment. Equity retention requirements are also in place for our highly compensated employees.
Members of our Management Committee must retain at least 75% of the stock they acquire through equity compensation (net of taxes, transaction costs, and charitable donations) as long as they are employed by us. Our Chief Executive Officer and directors must retain at least 90% of the stock they acquire through equity compensation (net of taxes, transaction costs and charitable donations) as long as they are either employed by us or serve as a director. Under the policy, stock acquired through compensation plans includes vested restricted stock, restricted stock units, stock held after exercising options and vested equity contributed to qualified or non-qualified retirement plans, but does not include unvested restricted stock, unvested restricted stock units or vested or unvested stock options.
Exceptions to this policy may be granted by the Chief Executive Officer, in consultation with the chairperson of the Committee, as follows:
If the Chief Executive Officer or a director requests an exception, that request must be submitted to the chairperson of the Committee for their review and approval.
We have a policy to clawback incentive compensation of executive officers in the event of a subsequent accounting restatement to ensure that incentive compensation is rightfully earned by the executives.
Hedging and Pledging Prohibition
As part of our insider trading policy, all employees, including our named executive officers, and non-employee directors are prohibited from engaging in short sales or hedging transactions involving our securities. They are also prohibited from establishing margin accounts or otherwise pledging our securities. Pledging First Data stock may be permissible if the employee or director receives the written consent of our General Counsel.
Compensation and Risk
The Committee believes that the design and objectives of our executive compensation program provide an appropriate balance of incentives for executives and avoid inappropriate risks. In this regard, our executive compensation program includes, among other things, the following design features:
Tax and Accounting Considerations
The Committee recognizes the tax and regulatory factors that can influence the structure of executive compensation programs. Section 162(m) of the Internal Revenue Code will limit our federal income tax deduction for compensation in excess of $1 million paid to NEOs except for the Chief Financial Officer.
However, performance-based compensation can be excluded from the limitation as long as specified requirements are met.
We expect to be able to claim the benefit of a special exemption rule that applies to compensation paid (or compensation in respect of equity awards such as stock options or restricted stock granted) during a specified transition period following the IPO. This transition period may extend until the first annual stockholders meeting that occurs after the close of the third calendar year following the calendar year in which the IPO occurred, unless the transition period is terminated earlier under the Section 162(m) post-offering transition rules.
The Committee also considers the accounting implications of the various elements of our compensation program, including the impact on our financial results and the dilutive impact to stockholders of various forms of compensation.
The Governance, Compensation and Nominations Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Governance, Compensation and Nominations Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Form 10-K.
Explanation of Non-GAAP Financial Measures
Information on how we calculate free cash flow, net debt reduction, and adjusted EBITDA (all presented on page 31) is disclosed on pages 50, 48 and 87 respectively in our Annual Report on Form 10-K for the year ended December 31, 2016. Additionally, the table below describes how we calculate revenue excluding the impacts from currency and divestiture of the Australian ATM business in the third quarter of 2016.
Executive Compensation Tables
For 2016, our NEO compensation was substantially lower than 2015 because of one-time equity and cash retention awards related to our successful completion of an initial public offering on October 15, 2015. The Board of Directors decided to make these one-time awards primarily in equity with strict retention requirements to incentivize our NEOs to remain with us for the long term and ensure executive and shareholder interests are aligned.
Summary Compensation Table
The following table shows the compensation earned by, awarded to, or paid to our NEOs during fiscal years ended December 31, 2016, 2015, and 2014.
All Other Compensation
The table below provides a breakdown of all other compensation for 2016 for the named executive officers:
Grants of Plan-Based Awards in 2016
The following table sets forth certain information with respect to awards granted during 2016 to our named executive officers. All equity awards were made under the 2015 Omnibus Incentive Plan.
In general, we do not enter into employment agreements with employees, including the NEOs, except in the case of Messrs. Bisignano and McCarthy.
Employment Agreement with Mr. Bisignano
We entered into an employment agreement with Mr. Bisignano, effective as of September 18, 2015 (Employment Agreement), which replaced Mr. Bisignanos prior employment agreement with First Data and First Data Holdings Inc. dated April 28, 2013. The Employment Agreement provides for an initial term beginning on September 18, 2015 and ending on December 31, 2020. Beginning January 1, 2021, the term will be automatically extended for successive one-year periods unless terminated by either party with prior written notice.
Under the terms of the Employment Agreement, Mr. Bisignano will earn an annual base salary of $1,320,000, which base salary may be increased but not decreased; and, with respect to the 2015 fiscal year and each full fiscal year commencing with the 2016 fiscal year, is eligible to receive a discretionary annual incentive payment in such amount as determined in the sole discretion of the Committee, based upon its assessment of Mr. Bisignanos performance, payable in the form of cash, equity-based awards or a combination thereof.
Mr. Bisignano is eligible to receive executive perquisites, fringe and other benefits consistent with what is provided to other executive officers of First Data. In addition, he is eligible to receive use of a car and driver, financial planning and use of private aircraft. Mr. Bisignano is also eligible to participate in First Datas 401(k), medical, dental, short and long-term disability, and life insurance plans.
Under the terms of the Employment Agreement, Mr. Bisignano is subject to covenants not to (1) disparage First Data or interfere with existing or prospective business relationships, (2) disclose confidential information, (3) solicit customers and certain employees of First Data, and (4) compete with First Data. In the event of an alleged material breach of the covenant not to solicit certain employees of First Data and not to compete, any unpaid severance amounts will be suspended until a final determination has been made that Mr. Bisignano has in fact materially breached such covenants at which time the right to any further payment is forfeited.
2017 Incentive Compensation for Mr. McCarthy
First Data has agreed that Mr. McCarthy will receive cash incentive compensation for 2017 of $1,250,000.
Outstanding Equity Awards at December 31, 2016
The following table sets forth information with respect to all unexercised option and unvested restricted stock awards to our named executive officers that were outstanding as of December 31, 2016.
2015 Omnibus Incentive Plan
Unless otherwise governed by the applicable award agreement and/or grant notice for the applicable grant(s) at issue, the First Data Corporation 2015 Omnibus Incentive Plan (2015 Omnibus Incentive Plan) provides for the treatment of awards granted under the 2015 Omnibus Incentive Plan upon certain terminations.
The award agreements under the 2015 Omnibus Incentive Plan have been amended to provide that a Participants Termination due to death or Disability will result in each outstanding unvested time-based Option, Restricted Stock, or Restricted Stock Unit grant to immediately vest and all outstanding vested Options will remain exercisable for the following three years. For each unvested performance-based Option,
Restricted Stock, or Restricted Stock Unit award, the award will remain outstanding for three-years after a Participants Termination due to death or Disability and will vest and, for Options, be exercisable if the performance criteria is satisfied within a three-year period. In no event will an option be exercisable after the expiration of the original Option period.
Under the 2015 Omnibus Incentive Plan a participants Termination for Cause will result in all outstanding Options granted to the Participant immediately terminating and expiring. A Participants Termination for any other reason will result in each outstanding unvested Option granted to such Participant immediately terminating and expiring and each outstanding vested Option remaining exercisable for ninety (90) days thereafter, but in no event beyond the expiration of the Option Period.
Stock Appreciation Rights granted under the 2015 Plan have the same treatment as Options upon the termination of a Participant as discussed above.
In the event of a Participants Termination for any reason, the Participants Restricted Stock and Restricted Stock Units granted under the 2015 Plan that are unvested will result in all vesting with respect to such Participants Restricted Stock and Restricted Stock Units ceasing and unvested shares shall be forfeited to First Data by the Participant for no consideration as of the date of such Termination.
In the event of a Change in Control, the Compensation Committee of the Board shall make such proportionate substitutions or adjustments, if any, as it deems equitable to the terms of any outstanding awards.
2007 Stock Incentive Plan
Unless otherwise governed by First Data Corporation Severance/Change in Control Policy and/or any other employment agreements, offer letters, the applicable award agreement and/or grant notice for the applicable grant(s) at issue, or any other arrangements between the applicable executive and First Data, the 2007 Stock Incentive Plan for Key Employees of First Data Corporation and its Affiliates (2007 Stock Incentive Plan) provides for the treatment of awards granted under the 2007 Stock Incentive Plan upon certain events and terminations.
Upon a Change in Control (as defined under the 2007 Stock Incentive Plan), if determined by the Compensation Committee of the Board in the applicable grant agreement or otherwise determined by the Compensation Committee of the Board in its sole discretion, any outstanding grants then held by Participants which are unexercisable or otherwise unvested or subject to lapse restrictions may automatically be deemed exercisable or otherwise vested or no longer subject to lapse restrictions as of immediately prior to the Change in Control and the Compensation Committee of the Board may, as allowed under Section 409A of the Code, cancel such awards for fair value as determined under the Plan, provide for the issuance of substitute awards or provide that for a period of at least ten business days prior to the Change in Control, any Stock Options or Stock Appreciation Rights shall be exercisable as to all shares subjected thereto.
The 2007 Stock Incentive Plan provides that the grant agreements issued under the 2007 Stock Incentive Plan must provide for the treatment of the grant in the event of the termination of employment or other service relationship, death or disability of the Participant and may also include provisions concerning the treatment of the grant in the event of a Change in Control.
The 2007 Stock Incentive Plan Form Stock Option grant agreement also provides that all unexercisable options as of the date of Participants termination of employment for any reason shall immediately expire. Options that are unvested Time Options that would have vested on the next anniversary of the Closing Date shall vest pro rata for terminations of employment resulting from death or Disability, termination without Cause or resignation by the Participant for Good Reason.
Exercisable options expire as follows with regards to the various terminations of employment unless the option expires first due to its expiration date on the tenth (10th) anniversary of the Closing Date. Options expire immediately upon the date of the Participants termination of employment for Cause or termination of employment by the Participant without Good Reason. Options expire one hundred and eighty (180) days from the date of the Participants termination of employment without Cause or by the Participant for Good Reasons.
The 2007 Stock Incentive Plan Form Stock Option and Restricted Stock grant agreements have been amended to provide that a Participants Termination due to death or Disability will result in each outstanding unvested Option or Restricted Stock Unit grant to immediately vest and all outstanding vested Options will remain exercisable for the following three years. In no event will an option be exercisable after the expiration of the original Option period.
Option Exercises and Stock Vested in 2016
The following table shows the number of shares acquired and the value realized during 2016 upon the exercise of stock options and the vesting of restricted stock previously granted to each of the Named Executive Officers.
During 2016, no NEOs participated in either a tax-qualified or non-qualified defined benefit plan sponsored by First Data.
Non-Qualified Deferred Compensation for 2016
During 2016, no NEOs participated in a non-qualified deferred compensation plan sponsored by First Data.
Potential Payments Upon Termination or Change in Control
The following table shows potential payments to our named executive officers under existing contracts for various scenarios involving a change in control or termination of employment, assuming a December 31, 2016 termination date or change in control. Please see the narrative above under Employment Agreements and Certain Other Severance and Change in Control Agreements for a description of payments contemplated by these agreements.
Termination and Change in Control Payments and Benefits
Description of Termination Provisions
Employment Agreement Termination Provisions
Upon termination of Mr. Bisignanos employment by First Data without cause (as defined in the Employment Agreement), by Mr. Bisignano for good reason (as defined in the Employment Agreement), due to Mr. Bisignanos death or disability (as defined in the Employment Agreement) or due to First Datas non-renewal of the employment term, conditioned upon the execution and effectiveness of a release of claims against First Data and its affiliates and in addition to certain accrued amounts, Mr. Bisignano will be entitled to receive (1) payment, in installments ratably over a 24 month period (Severance Period), of an amount equal to the greater of (X) $9.5 million or (Y) two times the sum of his base salary and the average of his annual incentive payments paid in cash in respect of the two fiscal years prior to the date of his termination (provided, that if Mr. Bisignanos employment is terminated by him for good reason following a change of control (within the meaning of Section 409A of the Code) within two years following such change of
control, the payment will be made in a lump sum cash payment) and (2) a pro rata portion of the annual incentive payment, if any, that would have otherwise been payable in respect of such year if he had remained employed through such year. In addition, Mr. Bisignano is entitled for continued health insurance coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), including medical and dental coverage and excess disability and life insurance coverage during the COBRA period. First Datas portion of the cost of such coverage and the provision of the coverage itself will be borne/provided by First Data in a manner that does not affect its medical plan or otherwise result in adverse tax consequences as determined in its sole discretion. Thereafter, and until Mr. Bisignanos death (Retiree Benefits), First Data shall provide Mr. Bisignano with health insurance, excess disability and life insurance coverage that is reasonable comparable to the coverage provided to Peer Executives under such policies at such time. However, in the event that First Data determines in its reasonable judgment that maintaining the Retiree Benefits would adversely affect its medical plan or the benefits paid thereunder or would result in penalties under Public Health Service Act section 2716 or related provisions of the Internal Revenue Code or the Employee Retirement Income Security Act of 1974, as amended, or any other applicable law, then First Data may cease providing the Retiree Benefits to Mr. Bisignano and in lieu thereof agrees to pay Mr. Bisignano, on the first business day of each month, a monthly amount equal to First Datas allocable portion of the cost of such Retiree Benefits. Mr. Bisignanos rights to the Retiree Benefits shall terminate as of (i) the date on which reasonably comparable health insurance is made available to Mr. Bisignano by a subsequent employer, including First Data, or through the employment of his spouse, if any, or (ii) if Mr. Bisignanos employment with First Data was terminated by Mr. Bisignano without Good Reason or due to Mr. Bisignanos election not to extend the Term, in each case, the date on which Mr. Bisignano commences any employment, consulting, advisory, directorship, agency, promotional or independent contractor arrangement with any person or Entity (as defined in the Employment Agreement) (other than any such arrangement in which Mr. Bisignano serves solely as a non-executive director).
In addition to the amounts described above, on the 60th day after Mr. Bisignanos termination of employment, to the extent not theretofore paid, Mr. Bisignano shall be entitled to: (A) any other accrued but unpaid Base Salary to the date of termination of employment; (B) any Annual Incentive Payments earned but unpaid for fiscal years ended prior to the year in which the date of termination occurs; (C) contingent upon the execution and effectiveness of the Release prior to the 60th day after Mr. Bisignanos termination of employment, a pro rata portion of the Annual Incentive Payment, if any, for the fiscal year in which the termination of employment occurs, equal to the product of (x) the full Annual Incentive Payment amount that would otherwise be payable in respect of such year if Mr. Bisignano had remained employed through such year, if any, without any reduction due to individual performance factors, and (y) a fraction, the numerator of which is equal to the number of days elapsed in such fiscal year to the date of termination and the denominator of which is 365, with such incentive payment amount to be paid in the calendar year following the year in which Mr. Bisignanos termination occurred at the time that the full Annual Incentive Payment amount would have been paid had Mr. Bisignanos employment not been terminated, (D) to the extent applicable to Mr. Bisignano and to the extent provided under the terms of the Severance/Change in Control Policy (as defined in the Employment Agreement), if any outstanding cash incentive awards granted to Executive are eligible to become fully vested and payable solely contingent upon Mr. Bisignanos continued employment hereunder and the passage of time, continued vesting of such awards, with payment of such awards to be made in accordance with the awards terms, notwithstanding Mr. Bisignanos earlier termination of employment, (E) any unreimbursed business expenses incurred prior to the date of termination and to which Mr. Bisignano is entitled to be reimbursed under Section 5(f) of the Employment Agreement and (F) other amounts or accrued benefits required to be paid or provided or which Mr. Bisignano is eligible to receive (whether on such 60th day or thereafter) under any employee benefit plan, program, policy or practice or contract or agreement of First Data (all of such other amounts and benefits referred to Section 9(a)(ii) of the Employment Agreement shall be referred to as the Other Benefits). For the avoidance of doubt, Mr. Bisignano shall not be a participant in that certain Company Severance/Change in Control Policy as amended and restated effective as of September 24, 2007 and amended by Amendment No. 1 thereto, as it may be further amended from time to time.
Severance/Change in Control Policy
We believe that reasonable and appropriate severance and Change in Control benefits are necessary in order to be competitive in our executive attraction and retention efforts. As such, we adopted the First Data Corporation Severance/Change in Control Policy (Management Committee Level) (Policy) which provides for certain payments, rights and benefits to the NEOs (other than Mr. Bisignano) upon an involuntary termination of employment without cause or for good reason with or without a Change in Control.
The Policy provides for the following payments, rights and benefits for Eligible Executives (as defined in the Policy) who are involuntarily terminated (other than for Cause or due to Disability) or who voluntarily terminate for Good Reason, after January 1, 2015:
In addition, in the Committees sole discretion, executive officers may also be eligible for outplacement services selected by First Data. Under a 2009 agreement with Mr. McCarthy, his amount may not be less than twelve (12) months of salary plus his target bonus current set at $1,750,000.
As a condition to receiving severance payments and benefits under the Policy, all employees are required to release First Data and its affiliates from all claims they may have against them and agree to a number of restrictive covenants which are structured to protect First Data from potential loss of customers or employees and to prohibit the release of confidential company information. Severance payments under the Policy that are not subject to Code Section 409A may be paid in installments or a lump sum payment and severance payments that are subject to Code Section 409A are paid in installments.
We have reserved the right to amend or terminate the Policy at any time in our sole discretion, provided, however, that during the period commencing on the closing of the 2007 merger and ending on the 36 month anniversary of a Change in Control (other than the 2007 merger), we are not permitted to amend or terminate the Policy without the consent of each affected executive officer.
The following table sets forth information regarding equity compensation plans of First Data as of December 31, 2016.
The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to the integrity of First Datas financial statements, First Datas compliance with legal and regulatory requirements, the qualifications, performance and independence of First Datas independent registered public accounting firm, and the performance of First Datas internal auditing department.
The Audit Committee is responsible for appointing and retaining our independent auditor and approving the audit and non-audit services to be provided by the independent auditor.
Our management is responsible for preparing our financial statements and ensuring they are complete and accurate and prepared in accordance with generally accepted accounting principles. Ernst & Young LLP, our independent registered public accounting firm for 2016, was responsible for performing an independent audit of our consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles and as to the effectiveness of our internal control over financial reporting.
The Audit Committee has reviewed and discussed our audited financial statements for the year ended December 31, 2016 with management and with EY. These audited financial statements are included in our Annual Report on Form 10-K for the year ended December 31, 2016.
The Audit Committee has also discussed with EY the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding Communication with Audit Committees.
The Audit Committee also has received and reviewed the written disclosures and the letter from EY required by applicable requirements of the Public Company Accounting Oversight Board regarding EYs communications with the Audit Committee concerning independence, and has discussed with EY its independence from us.
Based on the Audit Committees review and discussions referred to above, the Audit Committee recommended to First Datas board of directors that First Datas audited financial statements be included in the annual report on Form 10-K for the fiscal year ended December 31, 2016 for filing with the SEC.
Barbara A. Yastine, Chairperson
Heidi G. Miller
James E. Nevels
Our 2016 Annual Report to Shareholders, which includes our consolidated financial statements for the fiscal year ended December 31, 2016, is available on our website at www.firstdata.com under Investors and Annual Reports. Otherwise, please call (212) 266-3565 and a copy will be sent to you without charge. You may also request a free copy of our annual report on Form 10-K for the fiscal year ended December 31, 2016 by writing to First Data Corporation, c/o Investor Relations, 225 Liberty Street, 29th Floor, New York, New York 10281, or e-mail at Peter.Poillon@firstdata.com.
Communications with the Board
An interested party may communicate with the Chairperson of any of the Audit and Governance, Compensation and Nominations Committee, or to the non-management directors or independent directors as a group by writing to First Data Secretary, c/o General Counsel Office, First Data Corporation, 225 Liberty Street, 29th Floor, New York, New York 10281. Communications that are intended specifically for non-management directors should be addressed to the attention of the Chairperson of the Governance, Compensation and Nominations Committee. In general, any shareholder communication about bona fide issues concerning First Data delivered to the First Data Secretary for forwarding to the Board or specified member or members will be forwarded in accordance with the shareholders instructions.
Submission of Shareholder Proposals
Shareholders may present proper proposals for inclusion in our proxy statement and for consideration at the 2018 Annual Meeting of Shareholders by submitting their proposals in a timely manner. To be eligible for inclusion in the proxy materials for the 2018 Annual Meeting, a shareholder proposal must be received by our Corporate Secretary by no later than December 1, 2017, and must comply in all respects with applicable rules of the SEC. Shareholder proposals should be addressed to First Data Corporation, c/o Corporate Secretary, 225 Liberty Street, 29th Floor, New York, New York 10281.
A Shareholder may present a proposal not included in our proxy materials from the floor of the 2018 Annual Meeting of Shareholders only if our Corporate Secretary receives notice of the proposal, along with additional information required by our by-laws, between December 16, 2017 and January 15, 2018. Notice should be addressed to First Data Corporation, c/o Corporate Secretary, 225 Liberty Street, 29th Floor, New York, New York 10281.
Delivery of Proxy Materials to Households
SEC rules allow us to deliver a single copy of an annual report and proxy statement to any household at which two or more shareholders reside. We believe this rule benefits everyone. It eliminates duplicate mailings that shareholders living at the same address receive, and it reduces our printing and mailing costs. This rule applies to any annual reports, proxy statements, proxy statements combined with a prospectus and information statements.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.