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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

 

Filed by the Registrant  ☒		Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☐	Preliminary Proxy Statement

 

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

 

☒	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material Pursuant to §240.14a-12

NCR CORPORATION

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

 

☒	No fee required.

 

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

 

 

☐	Fee paid previously with preliminary materials.

 

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

 

 

 

 

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March 17, 2017

Dear Fellow NCR Stockholder:

In 2016, NCR produced impressive business results that consistently exceeded expectations and created new value for our stockholders, our customers and our employees.

This is a testament to our strategic planning and the strength of our business.  From software and services to hardware, as well as our leadership in the Omni-Channel market, I have never felt more confident about our market position.  We are living the growth we knew we were capable of achieving when we began our journey ten years ago.  At that time, we established a clear vision to lead how the world connects, interacts and transacts.

Today, with our foundation firmly in place, NCR is now moving from vision to execution and preparing for the future of Omni-Channel – Omni-Channel 2.0.  Through our Vision 2020 strategy, we are growing our strategic revenue streams and driving next-practice leadership in productivity, quality and customer satisfaction.  Our Omni-Channel Software Platform, Channel Transformation and Digital Enablement strategic offers are powering efficiency, differentiation, loyalty, competitive advantage and profitable revenue growth for our customers around the globe.  And we are evolving our organizational structure around Software, Services and Hardware to more effectively execute our strategy.

Throughout 2016, a common theme for NCR was the underlying momentum in our business, driven by improved operational execution and strategic traction with our Omni-Channel solutions.  This led to strong revenue trends and cash flow generation as seen in our 2016 results.

Just a few of our business highlights from 2016 include:

 

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Launching NCR’s Vision 2020 strategy and defining NCR’s Omni-Channel 2.0 architecture, going beyond the transformation and integration of channels to include real-time, insightful access to actionable data to fully enable the digitally-integrated business.

 

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Helping our customers respond to the disruptive changes in globalization, digitization, consumerism and technology.

 

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Announcing the NCR Innovation Lab, a brand new research and development hub, which will focus on cross-functional research, innovation and design thinking.  The NCR Innovation Lab will drive a unified Omni-Channel focus and build upon NCR’s position as a leader in the digitally-connected economy.

 

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Unveiling plans to further expand our new world headquarters campus under construction in Midtown Atlanta.  The expansion will add a second tower to provide the space needed to prepare for

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future growth.  Additionally, we strengthened our presence in key solution support locations such as Belgrade, Serbia and Hyderabad, India.

 

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Announcing that Mark D. Benjamin joined the company as President and Chief Operating Officer.  Mark reports to me and is responsible for Sales, Industry Solutions Management, Product Development, Services and Supply Chain Operations.

 

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Investing in our culture and people.  Our overall Sustainable Engagement Score this year was up to 83 percent, which out-performs many other high-tech companies and is a reflection of the iNCRedible culture we are building that engages, enables and energizes employees every day.

 

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Giving back through the NCR Foundation, which is dedicated to helping build stronger communities around the world by investing in innovative solutions that help people become self-sufficient.  In 2016, we worked with 13 nonprofit partners to develop and support strategic programs within our focus areas of education, disability issues and health support programs across the globe.  Additionally, our iNCRedible employees organized a multitude of volunteer events in 2016 donating their time and talents towards making a difference.

Today, the Omni-Channel market has become a large, standalone technology category and the pace of change is unrelenting.  We have taken Software, Services and Hardware and built powerful end-to-end solutions for the next evolution in Omni-Channel – Omni-Channel 2.0 or digitization – when every business, in every industry, races towards building out a digitally-enabled, real-time enterprise.

NCR enters 2017 in a very healthy state, well positioned to:

 

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Continue to invest in innovation, the backbone of our company, especially new product and solution development; in fact, we have increased our investment in R&D in 2017, especially as it relates to our NCR Software Platform and bringing new hardware products to market.

 

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Drive Software growth, specifically enterprise software, which fuels recurring revenue streams and higher margins; our 8,000 employees in the Software Line of Business are motivated and driven to execute.

 

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Generate improved Services performance, including a higher mix of managed services, productivity and efficiency improvements, remote diagnostics and repair, and product lifecycle management.

 

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Drive Hardware growth, a key component of NCR’s strategy, as every unit of ATM and Self-Checkout can drive higher-margin Attached Software, Professional Services, Implementation Services and important recurring revenue streams in Software and Hardware maintenance.

 

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Organize and recruit the best talent for the future.

NCR’s vision and strategy are perfectly aligned with the major market trends and customer activity we are seeing, and nobody is better positioned than NCR to help companies with their business challenges.  This is the most exciting time at NCR in decades.  We have both company and market momentum and are organized for even greater success in 2017.  This is our time.

Thank you for your continued confidence in our company and for your support.

Sincerely,

 

 

William R. Nuti

Chairman of the Board and

Chief Executive Officer

 

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NOTICE OF 2017 ANNUAL MEETING

AND PROXY STATEMENT

March 17, 2017

Dear Fellow NCR Stockholder:

I am pleased to invite you to attend the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) for NCR Corporation, a Maryland corporation (“NCR” or the “Company”), that will be held on April 26, 2017, at 9:00 a.m. Eastern Time.  This year’s Annual Meeting will again be a virtual meeting of stockholders.  You will be able to attend the Annual Meeting and vote and submit questions during the Annual Meeting via a live webcast by visiting www.virtualshareholdermeeting.com/NCR2017.  As in the past, prior to the Annual Meeting you will be able to authorize a proxy to vote your shares at www.proxyvote.com on the matters submitted for stockholder approval at the Annual Meeting, and we encourage you to do so.

The accompanying notice of the Annual Meeting and proxy statement tell you more about the agenda and procedures for the Annual Meeting.  They also describe how the Board of Directors of the Company operates and provide information about our director candidates, director and executive officer compensation and certain corporate governance matters.  I look forward to sharing more information with you about NCR at the Annual Meeting.

As in prior years, we are offering our stockholders the option to receive NCR’s proxy materials on the Internet.  We believe this option allows us to provide our stockholders with the information they need in an environmentally conscious form and at a reduced cost.

Your vote is important.  Whether or not you plan to virtually attend the Annual Meeting, I urge you to authorize a proxy to vote your shares as soon as possible.  You may authorize a proxy to vote your shares on the Internet or by telephone, or, if you received the proxy materials by mail, you may also authorize a proxy to vote your shares by mail.  Your vote will ensure your representation at the Annual Meeting regardless of whether you attend via webcast on April 26, 2017.

Sincerely,

 

 

William R. Nuti

Chairman of the Board and

Chief Executive Officer

 

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF NCR CORPORATION

 

Time:

9:00 a.m. Eastern Time

Date:

Wednesday, April 26, 2017

Place:

Virtual Meeting via webcast at www.virtualshareholdermeeting.com/NCR2017

Purpose:

The holders of shares of common stock, par value $0.01 per share (the “common stock”), and shares of Series A Convertible Preferred Stock, liquidation preference $1,000 per share (the “Series A Convertible Preferred Stock”), of NCR Corporation, a Maryland corporation (“NCR” or the “Company”) will, voting together as a single class, be asked to:

 

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Consider and vote upon the election of two directors identified in this proxy statement to hold office until the next annual meeting of stockholders following their election and until their respective successors are duly elected and qualify;

 

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Consider and vote to approve, on an advisory basis, executive compensation (“Say On Pay”), as described in these proxy materials;

 

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Consider and vote, on an advisory basis, on the frequency of future advisory votes on the compensation of our named executive officers (“Say On Frequency”), as described in these proxy materials;

 

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Consider and vote upon a proposal to approve the amendment and restatement of the NCR Management Incentive Plan for purposes of Internal Revenue Code Section 162(m), as described in these proxy materials;

 

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Consider and vote upon a proposal to approve the NCR Corporation 2017 Stock Incentive Plan, as described in these proxy materials;

 

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Consider and vote upon the ratification of the appointment of PricewaterhouseCoopers LLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017;

 

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Consider and vote upon a stockholder proposal described in these proxy materials, if properly presented at the meeting; and

 

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Transact such other business as may properly come before the meeting and any postponement or adjournment of the meeting.

The holders of the Series A Convertible Preferred Stock will, voting as a separate class, be asked to:

 

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Consider and vote upon the election of one director identified in this proxy statement to hold office until the next annual meeting of stockholders following his election and until his successor is duly elected and qualifies.

Other Important Information:

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Record holders of NCR’s common stock and Series A Convertible Preferred Stock at the close of business on February 27, 2017 may vote at the meeting.

 

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Your shares cannot be voted unless they are represented by proxy or in person by the record holder attending the meeting via webcast.  Even if you plan to attend the meeting via webcast, please authorize your proxy to vote your shares.

 

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If you wish to watch the webcast at a location provided by the Company, the Company’s Maryland counsel, Venable LLP, will air the webcast at its offices located at 750 E. Pratt Street, Suite 900, Baltimore, MD 21202.  Please note that no members of management or the Board of Directors will be in attendance at this location.  If you wish to view the meeting via webcast at Venable LLP’s office, please follow the directions for doing so set forth on the “2017 Annual Meeting of Stockholders Reservation Request Form” in this proxy statement.

By order of the Board of Directors,

 

 

Edward Gallagher

Senior Vice President, General Counsel and Secretary

March 17, 2017

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to Be Held on April 26, 2017

This proxy statement and NCR’s 2016 Annual Report on Form 10-K are available at www.proxyvote.com.

NCR Corporation

3097 Satellite Boulevard

Duluth, Georgia 30096

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NCR  CORPORATION

2017 ANNUAL MEETING PROXY STATEMENT

 

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Proxy Statement – General Information

 

 

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NCR Stock Ownership

 

Officers and Directors

The following table reflects the NCR common stock beneficially owned, as determined under applicable SEC rules, as of the close of business on February 17, 2017 (the “Table Date”) by: (i) each executive officer named in the Summary Compensation Table below on page 69 (the “named executives”), (ii) each non-employee director and nominee, and (iii) all current directors and executive officers as a group.  Except to the extent indicated in the footnotes below, to NCR’s knowledge each person named in the table below has sole voting and investment power over the shares reported.  As of the Table Date, 122,949,502 shares of the Company’s common stock were issued and outstanding.

 

NCR Stock Ownership By Officers and Directors
Beneficial Owners		Total Shares Beneficially Owned(1)(2)				Percent				Number of Shares Subject to Options Exercisable Within 60 Days of February 17, 2017				Number of RSUs That Vest Within 60 Days of February 17, 2017(3)
Non-Employee Directors
Gregory R. Blank, Director(4)							*				—				—
Edward “Pete” Boykin, Director			116,044				*				—				—
Chinh E. Chu, Independent Lead Director(5)			8,211				*				—				—
Richard L. Clemmer, Director			151,785				*				61,167				—
Gary J. Daichendt, Director			134,836				*				54,015				—
Robert P. DeRodes, Director			136,789				*				61,167				—
Kurt P. Kuehn, Director			40,593				*				10,039				—
Linda Fayne Levinson, Director			192,703				*				64,419				—
Named Executive Officers
William R. Nuti, Director and Officer			141,073				*				63,552				77,521
Mark D. Benjamin, Officer			—				*				—				—
Robert P. Fishman, Officer			51,253				*				—				14,022
Frederick J. Marquardt, Officer			93,531				*				16,407				12,963
Paul E. Langenbahn, Officer			9,654				*				—				7,994
Current Directors, Named Executive Officers and remaining Executive Officers as a Group (17 persons)			1,232,436				1.0%

* Less than 1%.

(1) The number of shares beneficially owned by each person as of the Table Date includes shares of NCR common stock that such person had the right to acquire on or within 60 days after that date, including, but not limited to, upon the exercise of options and vesting and payment of restricted stock units.  This does not include restricted stock units granted as of the Table Date that vest more than 60 days after the Table Date which, in the case of our named executives, is as follows: Mr. Nuti 1,137,718; Mr. Benjamin 244,183; Mr. Fishman 297,746; Mr. Marquardt 246,846; and Mr. Langenbahn 202,904.

(2) Some of NCR’s executive officers and directors own fractional shares of NCR common stock.  For purposes of this Table, all fractional shares have been rounded up to the nearest whole number.  This column also includes 116,044 shares granted to Mr. Boykin; 85,618 shares granted to Mr. Clemmer; 33,346 shares granted to Mr. DeRodes; 28,674 shares granted to Mr. Kuehn; and 8,077 shares granted to Ms. Levinson.

(3) This column reflects those shares the officers and directors have the right to acquire through vesting of restricted stock units on or within 60 days after the Table Date, before the withholding of shares of NCR common stock to cover applicable taxes.  These shares are also included in the Total Shares Beneficially Owned column.

 

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(4) Mr. Blank disclaimed all interest in NCR director compensation payable in 2016 and future years.  As a result, he did not receive any restricted stock units or shares in 2016, and will not receive any units or shares in 2017, under the NCR Director Compensation Program.  While Mr. Blank is an officer of an affiliate of Blackstone, he disclaims beneficial ownership of, and the shares reported in the Table exclude, NCR securities beneficially owned by Blackstone.

(5) While Mr. Chu is a senior advisor to an affiliate of Blackstone, he disclaims beneficial ownership of, and the shares reported in the table exclude, NCR securities beneficially owned by Blackstone.

 

Other Beneficial Owners

To the Company’s knowledge, and as reported as of the close of business on March 15, 2017 (except as otherwise specified), the following stockholders beneficially own more than 5% of the Company’s outstanding stock.

 

Other Beneficial Owners of NCR Stock
		Common Stock								Series A Convertible Preferred Stock
Name and Address of Beneficial Owner		Total Number of Shares				Percent of Class				Total Number of Shares				Percent of Class
Entities affiliated with The Blackstone Group(1)			—				—				446,855				50.8	%
345 Park Avenue
New York, NY 10154
The Vanguard Group(2)			12,393,189				10.07	%			—				—
100 Vanguard Boulevard
Malvern, PA 19355
BlackRock Inc.(3)			10,075,642				8.1	%			—				—
55 East 52nd Street
New York, NY 10055

(1) Based in part on information provided by The Blackstone Group L.P. (the “Blackstone Group”) and set forth in the Company’s Prospectus Supplement, dated March 13, 2017, filed with the SEC pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended.  The filing reflects that: (i) as of March 10, 2017, partnerships affiliated with the Blackstone Group beneficially owned 878,855 shares of Series A Convertible Preferred Stock as follows: 1,300 shares directly held by Blackstone BCP VI SBS ESC Holdco L.P. (“BCP VI”), 654,710 shares directly held by Blackstone NCR Holdco L.P. (“NCR Holdco”), 778 shares directly held by BTO NCR Holdings - ESC L.P. (“BTO ESC”), and 222,067 shares directly held by BTO NCR Holdings L.P. (“BTO NCR” and, together with BCP VI, NCR Holdco and BTO ESC, the “Partnerships”); (ii) 342,000 shares of Series A Convertible Preferred Stock were offered for sale by the Partnerships in a secondary offering that is expected to be consummated on or about March 17, 2017, as follows: BCP VI 506 shares, NCR Holdco 254,776 shares, BTO ESC 302 shares and BTO NCR 86,416 shares; (iii) pursuant to a stock repurchase agreement entered into by the Company and the Partnerships, 90,000 shares of Series A Convertible Preferred Stock will be converted into shares of the Company’s common stock, and will be repurchased by the Company simultaneously with or shortly after the closing of the secondary offering; and (iv) following consummation of the secondary offering and share repurchase, the Partnerships will hold 446,855 shares of Series A Convertible Preferred Stock, which includes dividends-in-kind payable within 60 days after March 15, 2017. See Related Person Transactions on page 111 for further information on these transactions.

The general partner of NCR Holdco is Blackstone NCR Holdco GP L.L.C.  The managing member of Blackstone NCR Holdco GP L.L.C. is Blackstone Management Associates VI L.L.C.  The sole member of Blackstone Management Associates VI L.L.C. is BMA VI L.L.C.  The general partner of BCP VI is BCP VI Side-by-Side GP L.L.C.  The general partner of each of BTO NCR and BTO ESC is BTO Holdings Manager L.L.C.  The managing member of BTO Holdings Manager L.L.C. is Blackstone Tactical Opportunities Associates L.L.C. The sole member of Blackstone Tactical Opportunities Associates L.L.C. is BTOA L.L.C.  The sole member of BCP VI Side-by-Side GP L.L.C., and the managing member of BTOA L.L.C. and BMA VI L.L.C., is Blackstone Holdings III L.P. The general partner of Blackstone Holdings III L.P. is Blackstone Holdings III GP L.P.  The general partner of Blackstone Holdings III GP L.P. is Blackstone Holdings III GP Management L.L.C.  The sole member of Blackstone Holdings III GP Management L.L.C. is The Blackstone Group L.P. The general partner of The Blackstone Group L.P. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman.  Each of such Blackstone entities (other than each of the Partnerships to the extent of their direct holdings) and Mr. Schwarzman may be deemed to beneficially own the shares beneficially owned by the Partnerships directly or indirectly controlled by it or him, but each disclaims beneficial ownership of such shares.

As of the Record Date, the Partnerships held of record 866,934 shares of Series A Convertible Preferred Stock, which were convertible into 28,897,511 shares of common stock.

 

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(2) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on March 10, 2017 by The Vanguard Group (“Vanguard Group”), reporting beneficial ownership of 12,393,189 shares of the Company’s stock as of February 28, 2017. In this filing, Vanguard Group reported sole dispositive power with respect to 12,311,471 of such shares, sole voting power with respect to 72,046 of such shares, shared dispositive power with respect to 81,718 of such shares and shared voting power with respect to 15,708 of such shares. Vanguard Group also reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc. may be deemed to have beneficial ownership of 65,967 of such shares as investment manager of certain collective trust accounts, and that Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., may be deemed to have beneficial ownership of 21,787 of such shares as a result of serving as investment manager of certain Australian investment offerings.

(3) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on January 25, 2017 by BlackRock, Inc. (“BlackRock”), reporting beneficial ownership of 10,075,642 shares of the Company’s stock as of December 31, 2016, as a parent holding company or control person for its subsidiaries, BlackRock (Netherlands) B.V., BlackRock (Singapore) Limited, BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management North Asia Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Managers Ltd, BlackRock Institutional Trust Company, N.A., BlackRock International Limited, BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC, BlackRock Japan Co Ltd, BlackRock Life Limited and FutureAdvisor, Inc. In this filing, BlackRock reported sole voting power with respect to 9,376,371 of such shares, and sole dispositive power with respect to all 10,075,642 of such shares.

 

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Proposal 1 – Election of Two Directors

FOR		The Board of Directors recommends that you vote FOR Richard L. Clemmer and Kurt P. Kuehn.

 

Proposal Details

At our 2016 Annual Meeting of Stockholders, our stockholders approved a proposal to amend and restate NCR’s charter to eliminate the classification of our Board and instead provide for the annual election of directors.  In May 2016, we filed Articles of Amendment and Restatement with the State Department of Assessments and Taxation of Maryland to implement the proposal.  Our amended and restated charter phases out the classification of the Board over a three-year period, beginning with the Annual Meeting.

The current terms for the three directors in Class A and the three directors in Class B of the Board expire at the annual meetings of stockholders in 2018 and 2019, respectively, and the terms for the three directors in Class C of the Board expire at the Annual Meeting.  Under our amended and restated charter, the nominees to replace our three Class C directors will be elected at the Annual Meeting to hold office for a term ending at the 2018 annual meeting of stockholders (or sooner if they are filling a vacancy) and until their successors are duly elected and qualify.  Our Class A and Class B directors will continue to serve the balance of their existing terms, and upon expiration of their terms, such directors as may be elected to replace them shall serve until the next annual meeting of stockholders following their election and until their successors are duly elected and qualify.

The holders of shares of common stock and Series A Convertible Preferred Stock, voting together as a single class, are being asked to vote on two of the three director nominees to succeed our Class C directors, to hold office until the 2018 annual meeting of stockholders and until their successors are duly elected and qualify. Proxies solicited by the Board will be exercised for the election of each of the two nominees, Richard L. Clemmer and Kurt P. Kuehn, unless you elect to withhold your vote on your proxy.  The Board has no reason to believe that either of these nominees will be unable to serve.  However, if one of them should become unavailable prior to the Annual Meeting, the Board may reduce the size of the Board or designate a substitute nominee.  If the Board designates a substitute, shares represented by proxies will be voted for the substitute nominee.

The holders of Series A Convertible Preferred Stock will vote on one additional director nominee to succeed our third Class C director, to hold office until the 2018 annual meeting of stockholders and until his successor is duly elected and qualifies.  The nominee, Gregory R. Blank, is a current Board member who was designated by Blackstone under the terms of the Investment Agreement.  The holders of Series A Convertible Preferred Stock will vote separately, as a class, on the election of Mr. Blank. Only the holders of Series A Convertible Preferred Stock have the right to vote on the election of Mr. Blank.

The name, age, principal occupation, other business affiliations and certain other information regarding each nominee for election as a director, and each director whose term of office continues, is set forth below.  The age reported for each director is as of the filing date of this proxy statement.

Directors to Be Elected by Holders of Common Stock and Series A Convertible Preferred Stock, Voting Together as a Single Class

 

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Class C—Current Term Expiring at Annual Meeting

Richard L. Clemmer, 65, is President and Chief Executive Officer of NXP Semiconductors N.V., a semiconductor company, a position he has held since January 1, 2009.  Prior to that, he was a senior advisor to Kohlberg Kravis Roberts & Co., a private equity firm, a position he held from May 2007 to December 2008.  He previously served as President and Chief Executive Officer of Agere Systems Inc., an integrated circuits components company that was acquired in 2007 by LSI Logic Corporation, from October 2005 to April 2007.  Mr. Clemmer became a director of NCR on April 23, 2008.  In determining if Mr. Clemmer should continue serving as a director of the Company, the Committee on Directors and Governance considered his experience in his position at NXP and his former positions with Kohlberg Kravis Roberts & Co. and Agere Systems Inc.  Mr. Clemmer’s demonstrated management experience, independence and financial literacy were also attributes that led the Committee on Directors and Governance to conclude that his skills would meet the needs of the Board.

Kurt P. Kuehn, 62, is a member of the Board of Directors of Henry Schein, Inc., and was Chief Financial Officer at United Parcel Service, Inc. (“UPS”), a global leader in logistics, from 2008 until July 2015.  Prior to his appointment as CFO at UPS, Mr. Kuehn was Senior Vice President, Worldwide Sales and Marketing, leading the transformation of the sales organization to improve the global customer experience.  Mr. Kuehn was UPS’s first Vice President of Investor Relations, taking the company public in 1999 in one of the largest IPOs in U.S. history.  Since he joined UPS as a driver in 1977, Mr. Kuehn’s UPS career has included leadership roles in sales and marketing, engineering, operations and strategic cost planning.  Mr. Kuehn became a director of NCR on May 23, 2012.  In recommending Mr. Kuehn as a nominee for election as a director of the Company, the Committee on Directors and Governance considered his role as CFO at UPS, his previous experience at UPS as Senior Vice President, Worldwide Sales and Marketing, and Vice President of Investor Relations, and the responsibilities associated with these positions.  Mr. Kuehn’s demonstrated management experience, independence, and financial literacy were also attributes and skills that led the Committee on Directors and Governance to conclude that his abilities would meet the needs of the Board.

Directors to Be Elected Separately by Holders of Series A Convertible Preferred Stock

Class C—Current Term Expiring at Annual Meeting

Gregory R. Blank, 36, is a Managing Director of Blackstone in the Private Equity Group based in New York where he focuses on investments in the technology, media and telecommunications sectors.  Since joining Blackstone in 2009, Mr. Blank has been involved in the execution of many of Blackstone’s investments, including most recently in Kronos, JDA, Ipreo and Optiv.  Prior to joining Blackstone, Mr. Blank was an associate at Texas Pacific Group (TPG) in San Francisco where he was involved in the evaluation and execution of private equity transactions.  Before joining TPG, Mr. Blank worked in investment banking at Goldman, Sachs & Co. focused on technology, media and telecommunications clients.  Mr. Blank graduated with a bachelor’s degree in economics from Harvard College and received an MBA from the Harvard Business School.  He currently serves as a director of Ipreo, Kronos and Optiv, and previously served as a director of Travelport Worldwide Limited and The Weather Company.  Mr. Blank became a director of NCR on December 4, 2015.  Only the holders of the Series A Convertible Preferred Stock may vote on the election of Mr. Blank as a director at the Annual Meeting.  In addition to the Company’s obligation under the Investment Agreement, in making its nomination the Committee on Directors and Governance considered Mr. Blank’s independence, his experience as a director of other public and private

 

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companies, his experience evaluating and managing acquisitions and investments in the technology and telecommunications industries, his prior service on Travelport’s Audit committee and his financial literacy in concluding that his abilities would meet the needs of the Board.

Directors Whose Terms of Office Continue

The following directors will hold office as disclosed below.

Class A—Current Term Expiring in 2018

William R. Nuti, 53, is NCR’s Chairman of the Board and Chief Executive Officer, and prior to October 2016, Mr. Nuti also served as NCR’s President.  Mr. Nuti became Chairman of the Board on October 1, 2007.  Before joining NCR in August 2005 Mr. Nuti served as President and Chief Executive Officer of Symbol Technologies, Inc., an information technology company.  Prior to that, he was Chief Operating Officer of Symbol Technologies.  Mr. Nuti joined Symbol Technologies in 2002 following a 10 plus year career at Cisco Systems, Inc., where he advanced to the dual role of Senior Vice President of the company’s Worldwide Service Provider Operations and U.S.  Theater Operations.  Prior to his Cisco experience Mr. Nuti held sales and management positions at International Business Machines Corporation, Netrix Corporation and Network Equipment Technologies.  Mr. Nuti is also a director of Coach, Inc., where he is a member of its Human Resources and Compensation Committee, and of United Continental Holdings, Inc., where he is a member of its Human Resources and Compensation, and Public Responsibility committees.  Mr. Nuti previously served as a director of Sprint Nextel Corporation.  Mr. Nuti is also a member of the Georgia Institute of Technology advisory board and a trustee of Long Island University.  Mr. Nuti became a director of NCR on August 7, 2005.  In determining if Mr. Nuti should continue serving as a director of the Company, the Committee on Directors and Governance considered his current role as Chief Executive Officer of the Company, his experience as a director of other public companies, his previous experience as President and Chief Executive Officer of Symbol Technologies, his previous experience as Senior Vice President at Cisco Systems, and the responsibilities associated with these positions.  Mr. Nuti’s demonstrated management and leadership experience and global sales and operations experience were also skills and attributes that led the Committee on Directors and Governance to conclude that his abilities would meet the needs of the Board.

Gary J. Daichendt, 65, has been principally occupied as a private investor since June 2005 and has been a managing member of Theory R Properties LLC, a commercial real estate firm, since October 2002.  He served as President and Chief Operating Officer of Nortel Networks Corporation, a global supplier of communication equipment, from March 2005 to June 2005.  Prior to that and until his retirement in December 2000, Mr. Daichendt served as Executive Vice President, Worldwide Operations for Cisco Systems, Inc.  Mr. Daichendt became a director of NCR on April 26, 2006.  Mr. Daichendt also serves on the board of directors of Juniper Networks, Inc., where he is a member of its Compensation committee, and previously served on the board of directors of Polycom Inc., where he served on the Governance committee.  In determining if Mr. Daichendt should continue serving as a director of the Company, the Committee on Directors and Governance considered his previous experience as President and Chief Operating Officer of Nortel Networks Corporation, his previous experience as Executive Vice President, Worldwide Operations for Cisco Systems, and the responsibilities associated with these positions.  Mr. Daichendt’s demonstrated management experience, financial literacy and independence were also attributes and skills that led the Committee on Directors and Governance to conclude that his abilities would meet the needs of the Board.

 

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Robert P. DeRodes, 66, leads DeRodes Enterprises, LLC, an information technology, business operations and management advisory firm.  Most recently, Mr. DeRodes served from April 2014 to April 2015 as the Executive Vice President and Chief Information Officer for Target, Inc., a general merchandising retailer, leading their post-breach information security efforts and developing a long-term technology transformation roadmap.  Previously, Mr. DeRodes served as Executive Vice President, Global Operations & Technology of First Data Corporation, an electronic commerce and payments company, from October 2008 to July 2010.  Prior to First Data Corporation, Mr. DeRodes served as Executive Vice President and Chief Information Officer of The Home Depot, Inc., a home improvement retailer, from February 2002 to October 2008 and as President and Chief Executive Officer of Delta Technology, Inc. and Chief Information Officer of Delta Air Lines, Inc., from September 1999 until February 2002.  Prior to working at Delta, Mr. DeRodes held various executive positions in the financial services industry with Citibank (1995-99) and with USAA (1983-93).  During the 10 years prior to 1983, Mr. DeRodes held technology positions working for regional Midwestern banks.  Mr. DeRodes became a director of NCR on April 23, 2008.  In determining if Mr. DeRodes should continue serving as a director of the Company, the Committee on Directors and Governance considered the scope of his previous experience and the responsibilities associated with the aforementioned positions.  Mr. DeRodes’s demonstrated management experience, information technology experience, cyber-security expertise, understanding of the financial services, retail and transportation industries, financial literacy and independence led the Committee on Directors and Governance to conclude that his abilities would meet the needs of the Board.

Class B—Current Term Expiring in 2019

Edward “Pete” Boykin, 78, was President and Chief Operating Officer of Computer Sciences Corporation (CSC), an information technology services company he joined in 1966, from July 2001 to June 2003.  He was Chair of the Board of Directors of Capital TEN Acquisition Corp., a special purpose acquisition company, from October 2007 to May 2008.  Mr. Boykin was also a director of Teradata Corporation from October 2007 until his retirement in April 2016, and he was Chairman of the Board of Engility Corporation from July 2012 until May 2015.  Mr. Boykin became a director of NCR on June 5, 2002 and was appointed independent Lead Director effective July 25, 2013 and continued to serve in that role through February 22, 2016.  In determining if Mr. Boykin should continue serving as a director of the Company, the Committee on Directors and Governance considered Mr. Boykin’s independence and his previous experience at CSC, a multi-billion dollar international company with complex accounting issues, including among other things, his extensive experience evaluating financial statements in his former position as CSC’s President and Chief Operating Officer, his past experience managing major acquisitions at CSC and his former role on CSC’s disclosure committee.  In addition to these attributes, the Committee on Directors and Governance considered Mr. Boykin’s financial literacy in concluding that his abilities would meet the needs of the Board.

Chinh E. Chu, 50, is a Managing Partner and Founder of CC Capital Management, LLC, a special purpose acquisition company.  Before forming CC Capital Management, Mr. Chu was a Senior Managing Director of Blackstone in the Corporate Private Equity Group from January 2000 to November 2015, and currently acts as a senior advisor to Blackstone.  Before joining Blackstone in 1990, Mr. Chu worked at Salomon Brothers in the Mergers & Acquisitions Department.  Mr. Chu led Blackstone’s investments in AlliedBarton, Celanese, Graham Packaging, Interstate Hotels, Kronos, LIFFE, Nalco, Nycomed, and Stiefel Laboratories.  Mr. Chu graduated with a bachelor’s degree in finance from the University of Buffalo.  He currently serves as a director of Biomet, Inc., Freescale Semiconductor, Inc., HealthMarkets Inc., and Kronos Incorporated.  Mr. Chu became a director of NCR on December 4, 2015 and was appointed

 

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independent Lead Director effective February 22, 2016.  In addition to the Company’s obligations under the Investment Agreement, in determining if Mr. Chu should continue serving as a director of the Company, the Committee on Directors and Governance considered Mr. Chu’s independence, his experience as a director of other public and private companies and his extensive experience evaluating and managing acquisitions and investments in multiple industries in concluding that his abilities would meet the needs of the Board.

Linda Fayne Levinson, 75, is a director of Jacobs Engineering Group where she serves as the Company’s Independent Lead Director, and was Chair of the Board of Hertz Global Holdings, Inc. until January 2, 2017, when she chose to resign.  Ms. Levinson was also a director of IngramMicro Inc. until December 2016 when the company was acquired by HNA Group, and a director of The Western Union Company until May 2016 when she retired from that Board.  Ms. Levinson became a director of NCR on January 1, 1997 and was appointed the independent Lead Director of the Board on October 1, 2007 and continued to serve in that role through July 24, 2013.  Ms. Levinson is also on the U.S. advisory board of CVC Capital Partners, and a senior advisor to RRE Ventures, a venture capital firm committed to helping founders build category-defining companies.  Ms. Levinson was a Partner at GRP Partners, a private equity investment fund investing in start-up and early-stage retail, technology and e-commerce companies, from 1997 to December 2004.  Prior to that, she was a Partner in Wings Partners, a private equity firm, an executive at American Express running its leisure travel and tour business, and a Partner at McKinsey & Company.  Ms. Levinson was a director of DemandTec, Inc.  from June 2005 until February 2012 when it was acquired by International Business Machines Corporation.  In determining if Ms. Levinson should continue serving as a director of the Company, the Committee on Directors and Governance considered her long experience as a public company director and a committee chair, starting in 1991, as well as her general management experience at American Express, her strategic experience at McKinsey & Company and her investment experience at GRP Partners and Wings Partners.  Ms. Levinson’s extensive management and leadership experience, her broad industry knowledge, independence, in-depth knowledge of corporate governance issues and diversity of perspective were also skills and attributes that led the Committee on Directors and Governance to conclude that her abilities would meet the needs of the Board.

 

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How does the Board Recommend that I Vote on this Proposal?

 

Board Recommendation

The Board of Directors recommends that you vote FOR Richard L. Clemmer, Kurt P. Kuehn and, solely with respect to the holders of Series A Convertible Preferred Stock, Gregory R. Blank, as directors to hold office until the next annual meeting of stockholders following their election and until their respective successors are duly elected and qualify.  Proxies received by the Board will be voted FOR all nominees for which the stockholder may vote unless they specify otherwise.

 

Vote Required for Approval

A majority of all the votes cast by holders of our common stock and Series A Convertible Preferred Stock, voting together as a single class (in person via attendance at the virtual Annual Meeting or by proxy), is required to elect Richard L. Clemmer and Kurt P. Kuehn (two of the three director nominees).  Abstentions and broker “non-votes” will be counted as votes cast and will have no effect on the vote required to elect either Mr. Clemmer or Mr. Kuehn.

The vote of the holders of a majority of the outstanding shares of our Series A Convertible Preferred Stock, voting separately as a class, is required to elect Mr. Gregory R. Blank, the third director nominee.  Only the holders of Series A Convertible Preferred Stock have the right to vote on the election of Mr. Blank.  Pursuant to the Company’s charter and bylaws, as given effect under Maryland law, abstentions by holders of Series A Convertible Preferred Stock will have the effect of votes against Mr. Blank.

 

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More Information About Our Board of Directors

The Board oversees the overall performance of the Company on behalf of the stockholders of the Company.  Members of the Board stay informed of the Company’s business by participating in Board and committee meetings (including regular executive sessions of the Board), by reviewing materials provided to them prior to meetings and otherwise, and through discussions with the Chief Executive Officer and other members of management and staff.

 

Corporate Governance

The Board is elected by the stockholders of the Company (with certain members of the Board being elected solely by the holders of the Series A Convertible Preferred Stock) to oversee and direct the management of the Company.  The Board selects the senior management team, which is charged with managing the Company’s business and affairs.  Having selected the senior management team, the Board acts as an advisor to senior management and monitors its performance.  The Board reviews the Company’s strategies, financial objectives and operating plans.  It also plans for management succession of the Chief Executive Officer, as well as other senior management positions, and oversees the Company’s compliance efforts.

To help discharge its responsibilities, the Board has adopted Corporate Governance Guidelines on significant corporate governance issues, including, among other things: the size and composition of the Board; director independence; Board leadership; roles and responsibilities of the Board; director compensation and stock ownership; committee membership and structure, meetings and executive sessions; and director selection, training and retirement.  The Corporate Governance Guidelines, as well as the Board’s committee charters, are found under “Corporate Governance” on the “Company” page of NCR’s website at http://www.ncr.com/company/corporate-governance.  You also may obtain a written copy of the Corporate Governance Guidelines, or any of the Board’s committee charters, by writing to NCR’s Corporate Secretary at the address listed on page 5 of this proxy statement.

In keeping with the requirements of our Corporate Governance Guidelines and the NYSE listing standards, a substantial majority of our Board must be independent.  Under the standards of independence set forth in the Corporate Governance Guidelines, which meet, and in some cases exceed, the independence standards provided in the NYSE listing standards, a Board member may not be independent unless the Board affirmatively determines that the Board member has no material relationship with the Company (whether directly or indirectly), taking into account, in addition to those other factors it may deem relevant, whether the director:

 

·

has not been an employee of the Company or any of its affiliates, or affiliated with the Company, within the past five years;

 

·

has not been affiliated with or an employee of the Company’s present or former independent auditors or its affiliates for at least five years after the end of such affiliation or auditing relationship;

 

·

has not for the past five years been a paid advisor, service provider or consultant to the Company or any of its affiliates or to an executive officer of the Company, or an employee or owner of a firm that is such a paid advisor, service provider or consultant;

 

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·

does not, directly or indirectly, have a material relationship (such as being an executive officer, director, partner, employee or significant stockholder) with a company that has made payments to or received payments from the Company that exceed, in any of the previous three fiscal years, the greater of $1 million or 2% of the other company’s consolidated gross revenues;

 

·

is not an executive officer or director of a foundation, university or other non-profit entity receiving significant contributions from the Company, including contributions in the previous three years that, in any single fiscal year, exceeded the greater of $1 million or 2% of such charitable organization’s consolidated gross revenues;

 

·

has not been employed by another corporation that has (or had) an executive officer of the Company on its board of directors during the past five years;

 

·

has not received compensation, consulting, advisory or other fees from the Company, other than Director compensation and expense reimbursement or compensation for prior service that is not contingent on continued service for the past five years; and

 

·

is not and has not been for the past five years a member of the immediate family of: (i) an officer of the Company; (ii) an individual who receives or has received during any twelve-month period more than $120,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service that is not contingent on continued service; (iii) an individual who, with respect to the Company’s independent auditors or their affiliates, is a current partner or a current employee personally working on the Company’s audit or was a partner or employee and personally worked on the Company’s audit; (iv) an individual who is an executive officer of another corporation that has (or had) an executive officer of the Company on its board of directors; (v) an executive officer of a company that has made payments to, or received payments from, the Company in a fiscal year that exceeded the greater of $1 million or 2% of the other company’s consolidated gross revenues; or (vi) any director who is not considered an independent director.

Consistent with the Corporate Governance Guidelines and the NYSE listing standards, on an annual basis the Board, with input from the Committee on Directors and Governance, determines whether each non-employee Board member is considered independent.  In doing so, the Board takes into account the factors listed above and such other factors as it may deem relevant.

The Board has determined that all of the Company’s non-employee directors and nominees, namely Gregory R. Blank, Edward “Pete” Boykin, Chinh E. Chu, Richard L. Clemmer, Gary J. Daichendt, Robert P. DeRodes, Kurt P. Kuehn and Linda Fayne Levinson are independent in accordance with the NYSE listing standards and the Company’s Corporate Governance Guidelines.

 

Board Leadership Structure and Risk Oversight

As set out in the Corporate Governance Guidelines, the Board does not have a guideline on whether the role of Chairman should be held by a non-employee director.  Instead, our Board has the flexibility to select a Chairman as it deems best for the Company from time to time.  Under the Corporate Governance Guidelines, if the positions of Chairman and Chief Executive Officer are held by the same person, the independent directors of the Board will select a Lead Director from the independent directors.  Additionally, if the positions of Chairman and Chief Executive Officer are held by the same person, the Board has set out the roles of both Chairman and Chief Executive Officer and the independent Lead Director in Exhibit C to the Corporate Governance Guidelines.

 

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Currently the Board has an integrated leadership structure in which William R. Nuti serves in the combined roles of Chairman and Chief Executive Officer, and Chinh E. Chu serves as the Board’s independent Lead Director.  The Board believes that this structure promotes greater efficiency through more direct communication of critical information between the Company and the Board.  In addition, the Chief Executive Officer’s extensive knowledge of the Company uniquely qualifies him, in close consultation with the independent Lead Director, to lead the Board in discussing strategic matters and assessing risks, and focuses the Board on the issues that are most material to the Company.  Combining the roles of Chairman and Chief Executive Officer also has allowed the Company to more effectively develop and communicate a unified vision and strategy to the Company’s stockholders, employees and customers.

Consistent with the Corporate Governance Guidelines, the independent Lead Director has broad authority, as follows.  The independent Lead Director, among other things: presides at the executive sessions of the non-employee directors and at all Board meetings at which the Chairman is not present; serves as liaison between the Chairman and the independent directors; frequently communicates with the Chief Executive Officer; is authorized to call meetings of the independent directors; obtains Board member and management input and, with the Chief Executive Officer, sets the agenda for the Board; approves meeting schedules to assure that there is sufficient time for discussion of all agenda items; works with the Chief Executive Officer to ensure that Board members receive the right information on a timely basis; stays current on major risks and focuses the Board members on such risks; molds a cohesive Board to support the success of the Chief Executive Officer; works with the Committee on Directors and Governance to evaluate Board and committee performance; facilitates communications among directors; assists in the recruiting and retention of new Board members (with the Committee on Directors and Governance and the Chief Executive Officer); in conjunction with the Chairman and Committee on Directors and Governance, ensures that committee structure and committee assignments are appropriate and effective; works with the Committee on Directors and Governance to ensure outstanding governance processes; leads discussions regarding Chief Executive Officer performance, personal development and compensation; and, if requested by major stockholders of the Company, is available for consultation and direct communication with such stockholders.  Additionally, the leadership and oversight of the Board’s other independent directors continues to be strong, and further structural balance is provided by the Company’s well-established corporate governance policies and practices, including its Corporate Governance Guidelines.  Independent directors currently account for eight out of nine of the Board’s members, and make up all of the members of the Board’s Compensation and Human Resource Committee (the “CHRC”), Audit Committee and Committee on Directors and Governance.  Additionally, among other things, the Board’s non-employee directors meet regularly in executive session with only the non-employee directors present.

The Board has had over nine years of successful experience with this leadership structure – in which the roles of Chairman and Chief Executive Officer are combined and an independent Lead Director is selected – and, taking these factors into account, has determined that this leadership structure is the most appropriate and effective for the Company at this time.

The Board’s involvement in risk oversight includes receiving regular reports from members of senior management and evaluating areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and reputational risks.  The Audit Committee of the Board is responsible for overseeing the assessment of financial risk as well as general risk management programs.  In carrying out this responsibility, the Audit Committee regularly evaluates the Company’s risk identification, risk management and risk mitigation strategies and practices.  The Audit Committee and the full Board receive and review reports prepared by members of the Company’s Enterprise Risk Management team on an annual basis.  In

 

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general, the reports identify, analyze, prioritize and provide the status of major risks to the Company.  In addition, the CHRC regularly considers potential risks related to the Company’s compensation programs as discussed below, and the Committee on Directors and Governance also considers risks within the context of its responsibilities (as such responsibilities are defined in its committee charter), including legal and regulatory compliance risks.  After each committee meeting, the Audit Committee, CHRC and Committee on Directors and Governance each reports at the next meeting of the Board all significant items discussed at each committee meeting, which includes a discussion of items relating to risk oversight.  We believe the leadership structure of the Board effectively facilitates risk oversight by the Board as a result of: (i) the role of the Board committees in risk identification and mitigation, (ii) the direct link between management and the Board achieved by having one leader serve as Chairman and Chief Executive Officer, and (iii) the role of our active independent Lead Director whose duties include ensuring the Board reviews and evaluates major risks to the Company, as well as measures proposed by management to mitigate such risks.  These elements work together to ensure an appropriate focus on risk oversight.

 

Compensation Risk Assessment

The Company takes a prudent and appropriately risk-balanced approach to its incentive compensation programs to ensure that these programs promote the long-term interests of our stockholders and do not contribute to unnecessary risk-taking.  The CHRC regularly evaluates whether the Company’s executive and broad-based compensation programs contribute to unnecessary risk-taking to achieve above-target results, and directly engages its independent compensation consultant, Frederic W. Cook & Co., Inc. (“FWC”), to assist the CHRC in its evaluation.  In accordance with the CHRC’s direction, FWC performs a compensation risk assessment of the Company’s executive and broad-based compensation programs and makes an independent report to the CHRC.  The last risk assessment from FWC was completed in 2011.  At that time, FWC concluded that the Company’s executive and broad-based compensation programs do not present any area of significant risk, noting that the plans are well-aligned with the CHRC’s compensation design principles.  In 2016 and early 2017, the Company conducted its own compensation risk assessment of the incentive compensation programs and concluded that the Company’s executive and broad-based compensation programs do not present any area of significant risk.  The only significant changes to our compensation programs since FWC’s 2011 risk assessment were the following, each of which the Company and FWC determined did not present an area of significant risk: (i) the adoption of the NCR Corporation 2011 Economic Profit Plan (which was amended in 2015 with stockholder approval) and the NCR Executive Severance Plan (including amendments); (ii) the 2016 modifications to our long-term incentive program; (iii) the amendment and restatement of the NCR Management Incentive Plan for purposes of Code Section 162(m); (iv) adoption of the NCR Corporation 2017 Stock Incentive Plan; and (v) establishment of the “Bonus Uplift” feature of the 2017 Annual Incentive Plan.

 

Committees of the Board

The Board has four standing committees: the Audit Committee, the Compensation and Human Resource Committee, the Committee on Directors and Governance and the Executive Committee.  The Board has adopted a written charter for each such committee that sets forth the committee’s mission, composition and responsibilities.  Each charter can be found under “Corporate Governance” on the “Company” page of NCR’s website at http://www.ncr.com/company/corporate-governance.

 

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The Board met six times in 2016 and each incumbent member of the Board attended 75% or more of the aggregate of: (i) the total number of meetings of the Board (held during the period for which such person has been a director), and (ii) the total number of meetings held by all committees of the Board on which such person served (during the periods that such person served).  The Company has no formal policy regarding director attendance at its annual meeting of stockholders.  The directors then in office, except Mr. Nuti, were not in attendance at the Company’s 2016 Annual Meeting of Stockholders, which was a virtual, and not an in-person, meeting.

The members of each committee as of the end of fiscal 2016 and the number of meetings held in fiscal 2016 are shown below:

 

Name

Audit Committee

Compensation and Human Resource Committee

Committee on Directors and Governance

Executive Committee

Gregory R. Blank

X

X

Edward “Pete” Boykin

X

X

X

Chinh E. Chu

X

X

Richard L. Clemmer

X

Gary J. Daichendt

X

X

*

X

Robert P. DeRodes

X

Kurt P. Kuehn

X

*

Linda Fayne Levinson

X

*

X

X

William R. Nuti

X

*

Number of meetings in 2016

9

7

4

0

* Chair

 

Audit Committee

The Audit Committee is the principal agent of the Board in overseeing: (i) the quality and integrity of the Company’s financial statements; (ii) the assessment of financial risk and risk management programs; (iii) the independence, qualifications, engagement and performance of the Company’s independent registered public accounting firm; (iv) the performance of the Company’s internal auditors; (v) the integrity and adequacy of internal controls; and (vi) the quality and adequacy of disclosures to stockholders.  Among other things, the Audit Committee also:

 

·

selects, evaluates, sets compensation for and, where appropriate, replaces the Company’s independent registered public accounting firm;

 

·

pre-approves all audit and non-audit services to be performed by the Company’s independent registered public accounting firm;

 

·

reviews and discusses with the Company’s independent registered public accounting firm its services and quality control procedures and the Company’s critical accounting policies and practices;

 

·

regularly reviews the scope and results of audits performed by the Company’s independent registered public accounting firm and internal auditors;

 

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·

prepares the report required by the SEC to be included in the Company’s annual proxy statement;

 

·

meets with management to review the adequacy of the Company’s internal control framework and its financial, accounting, reporting and disclosure control processes;

 

·

reviews the Company’s periodic SEC filings and quarterly earnings releases;

 

·

reviews and discusses with the Company’s Chief Executive Officer and Chief Financial Officer the procedures they follow to complete their certifications in connection with NCR’s periodic filings with the SEC;

 

·

discusses management’s plans with respect to the Company’s major financial risk exposures;

 

·

reviews the Company’s compliance with legal and regulatory requirements; and

 

·

reviews the effectiveness of the Internal Audit function, including compliance with the Institute of Internal Auditors’ International Professional Practices Framework for Internal Auditing consisting of the Definition of Internal Auditing, Code of Ethics and the Standards.

Each member of the Audit Committee is independent and financially literate as determined by the Board under applicable SEC rules and NYSE listing standards.  In addition, the Board has determined that Messrs. Blank, Clemmer and Kuehn are each an “audit committee financial expert,” as defined under SEC regulations.  The Board has also determined that each member of the Audit Committee is independent based on independence standards set forth in the Board’s Corporate Governance Guidelines, which meet, and in some cases exceed, the listing standards of the NYSE and the applicable rules of the SEC. No member of the Audit Committee may receive any compensation, consulting, advisory or other fees from the Company, other than the Board compensation described below under the caption “Director Compensation,” as determined in accordance with applicable SEC rules and NYSE listing standards.  Members serving on the Audit Committee are limited to serving on no more than two other audit committees of boards of directors of public companies, unless the Board evaluates and determines that these other commitments would not impair the member’s effective service to the Company.

 

Compensation and Human Resource Committee

The CHRC provides general oversight of the Company’s management compensation philosophy and practices, benefit programs and strategic workforce initiatives and oversees the Company’s leadership development plans.  In doing so, the CHRC reviews and approves the Company’s total compensation goals, objectives and programs covering executive officers and key management employees as well as the competitiveness of NCR’s total executive officer compensation practices.  Among other things, the CHRC also:

 

·

evaluates and reviews the performance levels of the Company’s executive officers and determines base salaries, equity awards, incentive awards and other compensation for such officers;

 

·

discusses its evaluation of, and determination of compensation for, the Chief Executive Officer at executive sessions of the Board;

 

·

reviews and recommends to the Board for its approval, the Company’s executive compensation plans;

 

·

oversees the Company’s compliance with compensation-related requirements of the SEC and NYSE rules;

 

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·

reviews and approves employment, severance, change in control and similar agreements and arrangements for the Company’s executive officers;

 

·

reviews management’s proposals to make significant organizational changes or significant changes to existing executive officer compensation plans;

 

·

periodically assesses the risks associated with the Company’s compensation programs; and

 

·

oversees the Company’s plans for management succession and development.

The CHRC may delegate its authority to the Company’s Chief Executive Officer to make equity awards to individuals (other than executive officers) in limited instances.

The CHRC retains and is advised by an independent compensation consultant, Frederic W. Cook & Co., Inc.  The CHRC has directly engaged FWC to review the Company’s long-term incentive program, the Stock Incentive Plan (which we refer to as the Stock Plan), the Annual Incentive Plan (which includes the Management Incentive Plan and Customer Success Bonus), the Economic Profit Plan and other key programs related to the compensation of executive officers.  As directed by the CHRC, FWC provides a competitive assessment of the Company’s executive compensation programs relative to our compensation philosophy; reviews our compensation peer group companies; provides expert advice regarding compensation matters for our executive officers, including the Chief Executive Officer; provides information about competitive market rates; assists in the design of the variable incentive plans and the establishment of performance goals; assists in the design of other compensation programs and perquisites; assists with Section 162(m) and Section 409A compliance, disclosure matters and other technical matters; conducts a risk assessment of the Company’s compensation programs; and is readily available for consultation with the CHRC and its members regarding such matters.  FWC did not perform any additional work for the Company or its management in 2016.  In keeping with NYSE listing standards, the CHRC retained FWC after taking into consideration all factors relevant to FWC’s independence from management.  The CHRC has reviewed the independence of FWC in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that FWC’s work for the CHRC is independent and does not raise any conflict of interest.

The Board has determined that each member of the CHRC is independent based on independence standards set forth in the Board’s Corporate Governance Guidelines which meet, and in some cases exceed, the listing standards of the NYSE and satisfy the additional provisions specific to compensation committee membership set forth in the listing standards of the NYSE.

 

Committee on Directors and Governance

The Committee on Directors and Governance is responsible for reviewing the Board’s corporate governance practices and procedures, including the review and approval of each related party transaction under the Company’s Related Person Transaction Policy (unless the Committee on Directors and Governance determines that the approval or ratification of such transaction should be considered by all of the disinterested members of the Board), and the Company’s ethics and compliance program.  Among other things, the CHRC also:

 

·

recommends to the Board the principles of director compensation and compensation to be paid to directors and reviews and makes recommendations to the Board concerning director compensation;

 

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·

reviews the composition of the Board and the qualifications of persons identified as prospective directors, recommends the candidates to be nominated for election as directors, and, in the event of a vacancy on the Board, recommends any successors;

 

·

recommends to the Board the assignment of directors to various committees;

 

·

establishes procedures for evaluating the performance of the Board and oversees such evaluation;

 

·

reviews the Company’s charter, bylaws and Corporate Governance Guidelines and makes any recommendations for changes, as appropriate;

 

·

monitors compliance with independence standards established by the Board; and

 

·

reviews any stockholder proposals the Company receives for inclusion in its proxy statement and submission at its annual meeting of stockholders.

The Committee on Directors and Governance is authorized to engage consultants to review the Company’s director compensation program.

The Board has determined that each member of the Committee on Directors and Governance is independent based on independence standards set forth in the Board’s Corporate Governance Guidelines, which meet, and in some cases exceed, the listing standards of the NYSE.

 

Executive Committee

The Executive Committee has the authority to exercise all powers of the full Board, except those reserved to the full Board by applicable law, such as amending the Company’s bylaws, issuing stock, declaring dividends or distributions of stock or approving a merger that requires stockholder approval.  The Executive Committee meets between regular Board meetings if urgent action is required.

 

Selection of Nominees for Directors

The Committee on Directors and Governance and our other directors are responsible for recommending nominees for membership to the Board.  The director selection process is described in detail in the Board’s Corporate Governance Guidelines.  In determining candidates for nomination, the Committee on Directors and Governance will seek the input of the Chairman of the Board and the Chief Executive Officer, and, in the event the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the independent Lead Director, and will consider individuals recommended for Board membership by the Company’s stockholders in accordance with applicable law.  It is a qualification of each of the directors to be elected by the holders of shares of Series A Convertible Preferred Stock that they have been designated by Blackstone pursuant to the Investment Agreement.

The Board’s Corporate Governance Guidelines include qualification guidelines for directors standing for re-election and new candidates for membership on the Board.  All candidates are evaluated by the Committee on Directors and Governance using these qualification guidelines.  In accordance with the guidelines, as part of the selection process, in addition to such other factors as it may deem relevant, the Committee on Directors and Governance will consider a candidate’s:

 

·

management experience (including with major public companies with multinational operations);

 

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·

other areas of expertise or experience that are desirable given the Company’s business and the current make-up of the Board (such as expertise or experience in information technology businesses, manufacturing, international, financial or investment banking or scientific research and development);

 

·

desirability of range in age to allow staggered replacement and appropriate Board continuity;

 

·

independence;

 

·

knowledge and skills in accounting and finance, business judgment, general management practices, crisis response and management, industry knowledge, international markets, leadership, and strategic planning;

 

·

personal characteristics such as integrity, accountability, financial literacy and high performance standards;

 

·

ability to devote the appropriate amount of time and energy to serving the best interests of stockholders; and

 

·

commitments to other entities, including the number of other public-company boards on which the candidate serves.

In addition, although there is no specific policy on considering diversity, the Board and the Committee on Directors and Governance believe that Board membership should reflect diversity in its broadest sense, including persons diverse in geography, gender, ethnicity, functional background and professional experience.  The Board and the Committee on Directors and Governance are committed to finding proven leaders who are qualified to serve as NCR directors and may from time to time engage outside search firms to assist in identifying and contacting qualified candidates.

The directors nominated by the Board for election at the Annual Meeting were recommended by the Committee on Directors and Governance.  All of the candidates for election are currently serving as directors of the Company and have been determined by the Board to be independent.

Stockholders wishing to recommend individuals for consideration as directors should contact the Committee on Directors and Governance by writing to the Company’s Corporate Secretary at NCR Corporation, 250 Greenwich Street, 35^th Floor, New York, NY 10007.  Recommendations by stockholders that are made in this manner will be evaluated in the same manner as other candidates.

Stockholders who wish to nominate directors for inclusion in NCR’s proxy statement pursuant to the proxy access provisions in the Company’s bylaws, or to otherwise nominate directors for election at NCR’s next annual meeting of stockholders, must follow the procedures described in the Company’s bylaws, which are available under “Corporate Governance” on the “Company” page of NCR’s website at http://www.ncr.com/company/corporate-governance.  See “Procedures for Nominations Using Proxy Access,” “Procedures for Stockholder Proposals and Nominations Outside of SEC Rule 14a-8” and “Stockholder Proposals for 2018 Annual Meeting Pursuant to SEC Rule 14a-8” beginning on page 123 of this proxy statement for further details regarding how to nominate directors.

 

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Communications with Directors

Stockholders or interested parties wishing to communicate directly with the Board, the independent Lead Director or any other individual director, the Chairman of the Board, or NCR’s independent directors as a group are welcome to do so by writing to the Company’s Corporate Secretary at NCR Corporation, 250 Greenwich Street, 35^th Floor, New York, NY 10007.  The Corporate Secretary will forward appropriate communications.  Any matters reported by stockholders relating to NCR’s accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee as appropriate.  Anonymous and/or confidential communications with the Board may also be made by writing to this address.  For more information on how to contact the Board, please see the Company’s Corporate Governance website at http://www.ncr.com/company/corporate-governance.

 

Code of Conduct

The Company has a Code of Conduct that sets the standard for ethics and compliance for all of its directors and employees.  The Code of Conduct is available on the Company’s Corporate Governance website at http://www.ncr.com/company/corporate-governance/code-of-conduct.  To receive a copy of the Code of Conduct, please send a written request to the Corporate Secretary at the address provided above.

 

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the Company is required to report in this proxy statement any failure to file or late filing occurring during the fiscal year ended December 31, 2016.  Based solely on a review of filings furnished to the Company from reporting persons, the Company believes that all of these filing requirements were satisfied by its directors, officers and 10% beneficial owners.

 

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Director Compensation

 

Director Compensation Program

Pursuant to authority granted by our Board, the Committee on Directors and Governance adopted the NCR Director Compensation Program (the “Program”), effective as of April 23, 2013.  The Program provides for the payment of annual retainers and annual equity grants to non-employee members of the Board.

Mr. Nuti does not receive remuneration for his service as Chairman of the Board. In addition, because he has disclaimed all interest in NCR director compensation payable under the Program or otherwise, Mr. Blank received no NCR director compensation in 2016.

On February 24, 2016, Deanna W. Oppenheimer resigned from her positions as a member of the Board and as a member of the Audit Committee of the Board, effective as of the completion of the 2016 Annual Meeting.  Upon resignation, Ms. Oppenheimer received no further compensation under the Program.

 

 

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Director Compensation Tables

This Table shows 2016 compensation for our non-employee directors:

 

Director Compensation for 2016
Director Name		Fees Earned in Cash ($)(1)				Stock Awards ($)(2)				Total ($)
Gregory R. Blank(3)			—				—				—
Edward “Pete” Boykin			—				326,443				326,443
Chinh E. Chu			139,055				291,355				430,410
Richard L. Clemmer			—				318,822				318,822
Gary J. Daichendt			53,875				278,950				332,825
Robert P. DeRodes			93,750				225,019				318,769
Kurt P. Kuehn			112,750				225,019				337,769
Linda Fayne Levinson			56,875				321,949				378,824
Deanna W. Oppenheimer(4)			22,500				—				22,500

(1) This column shows annual retainers earned in cash in 2016.  Messrs. Boykin and Clemmer elected to receive their retainers in deferred shares in lieu of cash.  Ms. Levinson and Mr. Daichendt elected to receive one-half of their retainers in current shares.  These deferred and current shares are reported in the “Stock Awards” column.  Messrs. Chu, DeRodes and Kuehn and Ms. Oppenheimer elected to receive their retainers in cash.

(2) This column shows the aggregate grant date fair value, as determined in accordance with FASB ASC Topic 718, of RSU awards, as well as deferred shares (also referred to as “phantom stock units”) and current shares paid in lieu of annual cash retainers.  See Note 8 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for an explanation of the assumptions we make in the valuation of our equity awards.

(3) Because he has disclaimed all interest in NCR director compensation, Mr. Blank did not receive NCR director compensation under the Program in 2016.

(4) On February 24, 2016, Ms. Oppenheimer resigned from her positions as a member of the Board and as a member of the Audit Committee of the Board, effective as of the completion of the 2016 Annual Meeting.  Upon resignation, Ms. Oppenheimer received no further compensation under the Program.    

This Table shows the grant date fair values of shares received for retainer payments and RSU awards:

 

Value of Director 2016 Retainer and Equity Grant Shares
Director Name		Annual Equity RSU Grant ($)				Current Stock in lieu of cash ($)				Deferred Stock in lieu of cash ($)
Gregory R. Blank(1)			—				—				—
Edward “Pete” Boykin			225,019				—				101,424
Chinh E. Chu			291,355				—				—
Richard L. Clemmer			225,019				—				93,803
Gary J. Daichendt			225,019				53,931				—
Robert P. DeRodes			225,019				—				—
Kurt P. Kuehn			225,019				—				—
Linda Fayne Levinson			265,008				56,940				—
Deanna W. Oppenheimer(2)			—				—				—

(1) Because he has disclaimed all interest in NCR director compensation, Mr. Blank did not receive NCR director compensation under the Program in 2016.

(2) On February 24, 2016, Ms. Oppenheimer resigned from her positions as a member of the Board and as a member of the Audit Committee of the Board, effective as of the completion of the 2016 Annual Meeting.  Upon resignation, Ms. Oppenheimer received no further compensation under the Program.

 

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This Table shows the number of shares underlying non-employee director options, RSUs and deferred shares outstanding as of December 31, 2016:

 

Shares Underlying Director Equity Awards – as of December 31, 2016
Director Name		Options Outstanding as of 12/31/16				RSUs Outstanding as of 12/31/16				Deferred Shares Outstanding as of 12/31/16
Gregory R. Blank(1)			—				—				—
Edward “Pete” Boykin			—				—				117,877
Chinh E. Chu			—				4,344				—
Richard L. Clemmer			61,167				—				87,451
Gary J. Daichendt			64,419				3,666				—
Robert P. DeRodes			61,167				3,666				33,346
Kurt P. Kuehn			10,039				—				30,507
Linda Fayne Levinson			64,419				4,318				8,077
Deanna W. Oppenheimer(2)			—				—				—

(1) Because he has disclaimed all interest in NCR director compensation as noted above, Mr. Blank has not received any NCR director compensation under the Program.    

(2) On February 24, 2016, Ms. Oppenheimer resigned from her positions as a member of the Board and as a member of the Audit Committee of the Board, effective as of the completion of the 2016 Annual Meeting. Upon resignation, Ms. Oppenheimer received no further compensation under the Program.

 

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Proposal 2 – Say On Pay: Advisory Vote on the Compensation of the Named Executives

FOR		The Board of Directors recommends that		✓		Robust oversight by the Compensation Committee.
		you vote FOR the proposal to approve		✓		Excellent pay for performance alignment.
		the compensation of the named executives.		✓		Strong link between management and stockholder interests.

 

Proposal Details

We currently conduct a Say On Pay vote every year at our annual meeting of stockholders, as required by Section 14A of the Securities Exchange Act of 1934, as amended.  While this vote is non-binding, the Board and the Compensation and Human Resource Committee (the “Committee” as referenced throughout the various sections of this Proposal 2, including the Executive Compensation – Compensation Discussion & Analysis section) value the opinions of our stockholders.  The Committee will consider the outcome of the Say On Pay vote as part of its annual evaluation of our executive compensation program.

Please read the following Executive Compensation – Compensation Discussion & Analysis section and our Executive Compensation Tables for information necessary to inform your vote on this proposal.

 

How does the Board Recommend that I Vote on This Proposal?

 

Board Recommendation

The Board of Directors recommends that you vote to approve, on a non-binding and advisory basis, executive compensation as disclosed in these proxy materials.  Proxies received by the Board will be voted FOR this proposal unless they specify otherwise.

 

Vote Required for Approval

A majority of all the votes cast by holders of our common stock and Series A Convertible Preferred Stock voting together as a single class (in person via attendance at the virtual meeting or by proxy) is required to approve the non-binding advisory vote on executive compensation.  Under Maryland law, abstentions and broker “non-votes” will not be counted as votes cast and will have no effect on the votes for this proposal.

 

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Executive Compensation – Compensation Discussion & Analysis

 

Executive Summary

 

 

Company 2016 Financial Performance

 

2016 Financial Highlights*
✓		Our revenue grew 3% to $6.54 billion in 2016, our Software revenue grew 5% to $1.84 billion and Cloud revenue grew 4% to $556 million in 2016.
✓		Our Free Cash Flow increased 54% to $628 million in 2016, which exceeded our threshold performance funding objective of $450 million for our Annual Incentive Plan.
✓		Our Non-GAAP Operating Income grew by 2% to $840 million in 2016, which is a record high for NCR, but fell short of our threshold performance funding objective of $865 million for our Annual Incentive Plan.
✓		Our Non-GAAP Earnings Per Share (EPS) grew 9% to $3.02 in 2016.
✓		While our annualized three-year total stockholder return of 6% is slightly below our peer group, our annualized one-year total stockholder return of 65.8% and our annualized five-year total stockholder return of 19.8% significantly exceed the total stockholder return for both our peer group and the S&P 500 over the same time period.

* See “Supplementary Non-GAAP Information” for a description of non-GAAP measures and reconciliations of those non-GAAP measures to their most directly comparable GAAP measures.

 

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Our 2016 and 2015 Performance

These charts compare our performance results for 2016 vs. 2015:*

 

 

* See “Supplementary Non-GAAP Information” for a description of non-GAAP measures and reconciliations of those non-GAAP measures to their most directly comparable GAAP measures.

 

Our Total Stockholder Return

This chart compares our one-year, three-year and five-year annualized total stockholder return with the performance of our 2016 compensation peer group and other relevant major indices:

 

 

 

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Summary of 2016 Compensation Program Actions by Our Committee

The Company’s 2016 compensation program was consistent with its philosophy and objectives of paying for performance, aligning the interests of executives with the interests of stockholders, attracting and retaining executive talent, and adopting competitive, best-practice compensation programs that are appropriate for our Company.  Specific examples of actions taken by the Company in 2016 and early 2017 to carry out this philosophy include:

 

·

2016 Annual Incentive Plan – Revised Core Financial Metrics.  In 2016, we evaluated the financial metrics under our Annual Incentive Plan and revised the 2016 financial metrics to use Non-GAAP Operating Income (which includes ongoing pension expense) as our Core Financial Objective, and to retain Free Cash Flow as a modifier to increase the bonus payout when we exceed our annual financial goal.  This better aligns our compensation with key financial metrics that our investors monitor when evaluating our Company’s ongoing performance, and continues to differentiate our Annual Incentive Plan’s financial metrics from the performance goals used for our Long-Term Incentive Program (“LTI Program”).

 

·

2016 LTI Program – Vision 2020 LTI Awards and Revised Financial Metrics.  We evaluated our 2016 LTI Program and modified our equity award mix and terms to make a special grant for a portion of our long-term value as front-loaded, multi-year “Vision 2020 LTI Awards” with vesting terms tied to the Company’s achievement of aggressive stock price targets.  These awards strongly align management and stockholder interests, further align to the Company’s focus on pursuing its Vision 2020 strategy, and generate excitement and reinforce a sense of urgency among our key executives to continue our transformation and deliver on our strategy.  We granted the remaining portion of our 2016 long-term value in a mix of traditional performance-based and time-based restricted stock units (“RSUs”).  For performance-based units, Non-GAAP Diluted Earnings Per Share (NGDEPS) and Software-Related Margin Dollars (SRMD) are the two performance metrics that will determine the payout.  This better aligns our compensation with these two key strategic measures (one external and one internally focused), and continues to differentiate our Annual LTI Program financial metrics from our Annual Incentive Plan metrics.

 

·

No New Economic Profit Plan Awards in 2016 or 2017.  In 2016, the Committee determined that the NCR Corporation Economic Profit Plan established in 2011 the (“EPP”) has achieved its intended purpose of driving the Company’s profitable growth with an efficient use of capital during a period of acquisition oriented growth.  As such, the Committee did not grant any new opportunity for our executives to earn future awards under the EPP during 2016 or 2017, and does not expect to grant any opportunity to earn future awards under the EPP in the future.

 

·

More Robust Stock Ownership Requirements.  The Committee realizes the importance of aligning long-term interests of executive officers with those of our stockholders, and the importance of senior executive officers maintaining a significant personal ownership stake in NCR.  For these reasons, in 2016 the Committee significantly increased the NCR stock ownership requirements for most of our named executives.

 

·

2017 Cash Bonus Uplift for Strategic Growth above our Stretch Goals.  For 2017, the Committee established a cash “Bonus Uplift” program for certain named executives and other key leaders focused on our Software and Cloud transformation initiatives (representing supplemental bonus funding under our Annual Incentive Plan) when we deliver results at or above our 2017 “stretch” performance goals on both SRMD and Cloud revenue as growth for these metrics is essential for the Company to successfully deliver on our Vision 2020 Strategy.

 

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·

2017 Long-Term Incentive (LTI) Awards – Grant all LTI Awards with Performance Conditions and adopt a 3-year Performance Period.  For 2017, the Committee returned to our traditional annual LTI award practice, but also established that all annual LTI awards for executive officers will now require a performance condition for vesting.  The 2017 Annual LTI Award values are sized appropriately to reflect that the front-loaded, multi-year Vision 2020 LTI Award values granted in 2016 included a portion of 2017 annual LTI award values.  In addition, the Committee adopted a new performance-vesting RSU award for 2017 to replace the traditional time-based RSUs; and also adopted a three-year performance period (2017-2019) for our 2017 performance-based RSUs, which extends management’s focus on sustained performance over a longer time period.

 

Our Named Executive Officers

 

 

William Nuti – Chairman of the Board and Chief Executive Officer (CEO)   Robert Fishman – Executive Vice President and Chief Financial Officer (CFO)   Mark Benjamin – President and Chief Operating Officer (COO)   Frederick Marquardt – Executive Vice President, Services, Enterprise Quality and Telecom & Technology   Paul Langenbahn – Executive Vice President, Software (1)

⁽¹⁾ Mr. Langenbahn served in his role as Senior Vice President & President, Hospitality during the 2016 performance year and was promoted to Executive Vice President, Software on January 1, 2017.

 

Our Executive Compensation Philosophy

 

 

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Executive Compensation Program Design – Factors We Consider

When designing our executive compensation program, the Committee considers actions that:

 

 

 

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Impact of Most Recent Say On Pay Vote

 

 

Stockholder Outreach

Consistent with our strong commitment to engagement, communication and transparency, we periodically solicit our stockholders’ views on NCR’s executive compensation program, corporate governance and other strategic issues.  We appreciate the opportunity to have an open dialogue with our stockholders, and highly value their honest feedback and the exchange of ideas and perspectives.  The feedback received from our stockholder outreach is regularly communicated to and considered by our Board, and when appropriate, the Board implements changes in response to stockholder feedback.

The table below summarizes some of the recent feedback and input received from our stockholders, including the feedback received during our 2016 outreach efforts, and our Board’s response:

 

Recent Stockholder Feedback
What We Heard...				Our Board’s Response...
Declassify Board of Directors				✓		Adoption of Declassified Board
Implement Stockholder Proxy Access				✓		Adoption of Proxy Access
Consider Director Pay Cap				✓		Adoption of a Director Pay Cap
Consider increasing Executive Stock Ownership Requirements				✓		Adoption of More Robust Executive Stock Ownership Requirements
Consider extending performance period for long-term equity incentives				✓		Adoption of a Three-Year Performance Period for our Performance-Based Restricted Stock Units
Tell us more about who (other than named executives) receives NCR Equity Grants				✓		Additional Disclosure in our 2017 Stock Incentive Plan proposal (starting on page 93).

 

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During our 2016 stockholder outreach meetings, the stockholders we met with also generally expressed a very positive view of NCR’s business strategy, and nearly all expressed support for:

 

·

Our 2016 executive compensation program structure (see discussion starting on page 38), which included, among other things, the multi-year Vision 2020 LTI Awards made in 2016 to our CEO and his core team.  During our outreach meetings, our stockholders generally expressed an understanding of, and support for, the Vision 2020 LTI Awards.  They also acknowledged that the total disclosed compensation of our named executives reported for 2016 would appear elevated as a result of the front-loaded nature of those awards, but that because the 2017 LTI award values would be correspondingly adjusted, average compensation over the 2016-2017 time period would be normalized; and

 

·

Our overall use of equity compensation, including our request for additional shares under our 2017 Stock Incentive Plan Proposal (see discussion starting on page 93).  Nearly all of the stockholders we met with during our outreach meetings shared our belief that NCR’s equity plan share usage rates are reasonable, and understood our methodology of treating the shares of Series A Convertible Preferred Stock as common shares on an “as-converted” basis when evaluating our share usage rates (see details starting on page 95).  They generally concurred with our assessment that our burn rate and dilution are reasonable, even when taking into account the additional shares requested under our 2017 Stock Plan Proposal.  They also supported a selective and market competitive allocation of equity compensation to our critical talent driving the Vision 2020 strategy across NCR’s broader leadership, software and professional services teams, as well as our use of equity-based compensation for a selective group of those employees to drive greater focus on stockholder value creation.

We expect to continue our stockholder outreach efforts in 2017 and beyond as part of our annual compensation review process, and have been encouraged by our stockholders to do so.

 

Independent Compensation Consultant

The Committee retains and is advised by Frederic W. Cook & Co., Inc., a national executive compensation consulting firm, to assist in review and oversight of our executive compensation programs.  The Committee considers FWC’s advice and recommendations when making executive compensation decisions.  FWC is independent of the Company’s management, and reports directly to the Committee.  FWC representatives attended substantially all meetings of the Committee in 2016.  Our CEO is not present during Committee and FWC discussions about CEO compensation.  Also, FWC reports on CEO compensation are not shared with our CEO.  For more about FWC’s role as advisor to the Committee, see the Compensation and Human Resource Committee section (starting on page 21).

 

Management Recommendations

 

 

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Best Practices in NCR Executive Compensation

Our executive compensation program features many best practices:

 

WHAT WE DO

WHAT WE DON’T DO

✓

Pay for Performance.  A significant portion of our named executives’ compensation is “at-risk” and delivered only if rigorous performance goals established by the Committee are achieved.

×

No Guaranteed Annual Salary Increase or Bonus.  Salary increases are based on individual performance evaluations, while annual cash incentives are tied to corporate and individual performance, as well as customer satisfaction.

✓

Strong Link between Performance Goals and Strategic Objectives.  We link performance goals for incentive pay to operating priorities designed to create long-term stockholder value.

×

No Plans that Encourage Excessive Risk Taking.  Based on the Committee’s annual review, none of our pay practices incentivize employees to engage in unnecessary or excessive risk-taking.

✓

Independent Compensation Consultant. The Committee retains an independent compensation consultant to evaluate and advise on our executive compensation programs and practices, as well as named executive pay mix and levels.

×

No Hedging or Pledging of NCR Securities.  Our policies prohibit hedging and pledging of the Company’s equity securities.

✓

Benchmark Peers with Similar Business Attributes and Business Complexity.  The Committee benchmarks our executive compensation program and annually reviews peer group membership with its independent compensation consultant.

×

No Repricing Stock Options.  Our Stock Plan prohibits repricing of stock options without prior stockholder approval.

✓

Strong Compensation Clawback Policy. Executive awards are subject to clawback in specified circumstances.

×

No Excessive Perquisites.  We offer only limited perks to be competitive, to attract and retain highly talented executives and ensure their safety and focus on critical business activities.

✓

Robust Stock Ownership Guidelines. We require named executives to meet our guidelines, and to maintain the guideline ownership level after any transaction.  Our stock ownership guidelines, which we significantly increased in 2016 for almost all named executives, range from two to six times base salary.

×

No Dividends or Dividend Equivalents Paid on Unvested Equity Awards.  Equity awards must vest before dividends are payable.

✓

Double Trigger Benefits in the Event of a Change in Control.  Equity awards do not automatically vest in a change in control of NCR unless employment also ends in a qualifying termination.

×

No Excise Tax Gross-ups for new Change in Control Severance Plan participants (since 2010), and no tax gross-ups on any perquisites other than standard relocation benefits.

✓

Reasonable Change in Control Severance.  Change in control severance benefits are three times target cash pay for the CEO and COO, and two times target cash pay for other eligible senior executives.

×

No Special Executive Pension Benefits for any executives, and no broad-based pension benefits except for limited benefits under closed and/or frozen pension plans covering only one of our named executives.

✓

Stockholder Outreach.  We engage with our stockholders to better understand and consider their views on our executive compensation programs and corporate governance practices.

×

Trading of NCR Stock.  We require that all executive officers trade in NCR common stock only pursuant to a Rule 10b5-1 trading plan.

 

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Key Elements of 2016 Executive Compensation

The key elements of our 2016 executive compensation program are shown in the chart below.  Each element of the program has a specific purpose in furthering our compensation objectives.

 

Fixed

Variable

Base Salary

Annual Incentives

Long-Term Incentives: Traditional Equity LTI Awards

Long-Term Incentives: Vision 2020 LTI Awards

Key Features

–   –

Competitive fixed level of cash income Reviewed annually and adjusted when appropriate

–

Variable compensation payable annually in cash if performance goals achieved

–   –   –

Traditional RSUs payable based on achieving performance goals and continued service Traditional performance-based RSUs vest 42 months after grant based on actual performance Time-based RSUs vest 1/3 on each anniversary of the grant date

–     –

Performance-based RSUs payable based on achieving aggressive stock price targets within a 5-year period and continued service RSUs vest in part on the third, fourth, or fifth anniversary of the grant date, subject to achievement of price targets

Why We Pay This Element

–     –

Provides a base level of competitive cash pay for executive talent Promotes appropriate risk taking

–     –

Motivates and rewards executives for performance on key Company-wide financial metrics and customer satisfaction Executive-specific objectives motivate our team to achieve goals in areas they can influence

–   –

Aligns executive pay and stockholder interests and serves to retain executive talent Motivates executive performance on key long-term measures to build multi-year stockholder value

–   –   –

Creates immediate stockholder alignment by emphasizing stock price performance Strongly incentivizes key executive team to deliver a high level of performance Provides enhanced retention in an increasingly competitive environment

How We Determine Amount

–

Committee approves based on role, position against external market, and internal comparable salary levels

–   –   –

NPOI performance threshold must be achieved for any payout Maximum award as % of NPOI is 1.5% for CEO and 0.75% for other named executives Award payout ranges: - Financial Metrics: 0%  –  200% - Individual Goals: 0%  –  150% - Customer Success: 0% or 10%

–     –   –

RSU grant mix: -75% Traditional Performance-based RSUs -25% Time-based RSUs Performance threshold of 20% ROC must be achieved for any payout Performance–based RSU payout ranges from 0% to 150%

–   –   –

50% earned if NCR’s stock price closes at or above $35 for any twenty consecutive trading days during the five-year performance period 50% earned if NCR’s stock price closes at or above $40 for any twenty consecutive trading days during the five-year performance period No more than 50% of the award “earned” will vest on the three-year anniversary of the grant date, and up to 100% of the award “earned” can vest on the fourth or fifth anniversary of the grant date

 

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2016 Executive Compensation Program Highlights

 

 

2016 Pay for Performance Highlights

 

 

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2016 Target Total Direct Compensation Pay Mix

 

NCR CEO: Target Pay Mix		Peer Group CEO: Target Pay Mix
NCR Other Named Executives: Target Pay Mix		Peer Group Other Named Executive Officers Target Pay Mix

 

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2016 “At Risk” Pay vs. Fixed Pay Mix at Target

For our CEO and our other named executives, the 2016 ratio between performance-based pay (including performance-based equity and annual cash incentives) and fixed pay (base salary and time-based equity) is meaningfully more “at-risk” than the pay mix of other CEOs and named executive officers in our peer group.

 

NCR CEO: At-Risk vs. Fixed Pay		Peer Group CEO: At-Risk vs. Fixed Pay
NCR Named Executives: At-Risk vs. Fixed Pay		Peer Group Named Executive Officers: At-Risk vs. Fixed Pay

 

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Understanding Our CEO’s Target Pay vs. Realizable Pay

Because such a significant portion of the compensation of our named executives is performance-based and therefore “at risk,” we review the “target” versus the “realizable” compensation levels of our CEO to track the alignment and effectiveness of our pay-for-performance executive compensation design.  To complete this analysis, we compare the value of the targeted compensation levels at the time of grant to the value of the realizable compensation levels each calendar year as a result of the performance of the organization in achieving its short-term and long-term goals and the year-end price of the Company’s stock.  This Table shows the “target” versus “realizable” compensation for the CEO for the previous three fiscal years:

 

		Our CEO’s Target Pay vs. Actual “Realizable” Pay
		Target Pay (1) ($M)																				“Realizable” Pay (2) ($M)																				“Realizable” vs. Target Pay
Year		Base				Target Bonus				RSUs				EPP				Total				Base				Actual Bonus				RSUs				EPP				Total
2016		$	1.0			$	1.5			$	15.0			$	0.0			$	17.5			$	1.0			$	1.0			$	25.4			$	0.0			$	27.4			157%
2015		$	1.0			$	1.5			$	8.0			$	1.5			$	12.0			$	1.0			$	0.0			$	7.3			$	2.0			$	10.3			86%
2014		$	1.0			$	1.5			$	5.0			$	7.1			$	14.6			$	1.0			$	0.0			$	2.5			$	0.0			$	3.5			24%

(1) Target pay includes: base salary, target annual incentive, grant date fair market value of all equity awards, plus the projected EPP Bonus Credit award based on the financial plan established for 2014 and 2015.

(2) Compensation “realizable” for each year includes: base salary, actual bonus received, the fair market value of outstanding awards granted each year as of December 31, 2016, and any actual EPP Bonus Credit award based on the actual economic profit for the applicable year. The 2014 annual performance-based LTI award granted on February 24, 2014 is reflected at 43.6% of target (payout earned). The 2015 annual performance-based LTI award granted on February 23, 2015 is reflected at 114.5% of target (payout earned). The 2016 annual traditional performance-based LTI award granted on February 24, 2016 is reflected at 148.2% of target, and is subject to the Company achieving a two-year average ROC threshold of 20% during the performance period. The Vision 2020 LTI Award granted on February 24, 2016 with the $35 price target contingency is reflected at 100% of target (payout earned on December 6, 2016).

The above Table shows that our executive compensation program is designed so that the amount of compensation that our CEO actually receives may be higher or lower than the Target amount approved by the Committee, depending on our stock price performance, level of achievement of financial goals, Committee discretionary reductions and other relevant factors. Because it highlights how clearly our CEO’s actual realizable pay is tied to Company performance, this Table demonstrates the very strong alignment of the interests of our executives with those of our stockholders. This Table is supplementary to, and is not intended to be a substitute for, the Summary Compensation Table included in these proxy materials.

 

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Comparing our CEO’s Realizable Pay with Company Performance

This Table compares our CEO’s realizable compensation to Company performance over the last three years:

 

		CEO Realizable Pay vs. Company Performance
		CEO Realizable Pay												Company Performance
Year		“Realizable” vs. Target Pay				Bonus Payout Earned				Performance LTI Award Earned(1)				NGOI Results ($M)				NCR 1-Year Total Shareholder Return (TSR)(2)				NCR 1-Year TSR Percentile Rank for Peer Group(2)
2016			157	%			68	%			148.2	%		$	840				66	%			100	%
2015			86	%			0	%			114.5	%		$	820				-16	%			33	%
2014			24	%			0	%			43.6	%		$	817				-14	%			0	%

(1) The 2014 annual performance-based LTI award granted on February 24, 2014 is reflected at 43.6% of target (payout earned). The 2015 annual performance-based LTI award granted on February 23, 2015 is reflected at 114.5% of target (payout earned). The 2016 annual performance-based LTI award granted on February 24, 2016 is reflected at 148.2% of target, and is subject to the Company achieving a two-year average ROC threshold of 20% during the performance period. The Vision 2020 LTI Award granted on February 24, 2016 with the $35 price target contingency is reflected at 100% of target (payout earned on December 6, 2016).

(2) The TSR Percentile Rank measurement is from calendar year-end to calendar year-end.

The strong correlation between the compensation realizable by our CEO over the past three years, and our performance as measured by total shareholder return, demonstrates the strong alignment between our CEO’s realizable pay and Company performance. The above Table is supplementary to, and is not intended to be a substitute for, the Summary Compensation Table included in these proxy materials.

 

Our Process for Establishing 2016 Compensation

Our Committee has the sole authority to establish compensation levels for our named executives. When making compensation decisions, the Committee carefully examines:

 

 

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External Market Analysis – Peer Group and Survey Data

We use several methods to examine the various elements of our executive compensation program to determine the competitive market and understand current compensation practices.  In general, the Committee considers the median of the peer group data described below when establishing base salary, annual incentive and long-term incentive opportunities.  The Committee retains the flexibility to make adjustments in order to respond to market conditions, promotions, individual performance and internal equity.  The Committee also reviews broad-based survey data prepared by its independent compensation consultant, and considers key business decisions that can impact compensation.

 

 

Final 2016 Peer Group.  The Committee carefully reviewed our prior peer group, and with the advice of its independent compensation consultant, made these changes to our 2015 peer group for purposes of benchmarking our 2016 executive compensation program:

 

(i)	Citrix Systems and VMware were added as they are software/services companies and better align with the continuing shift of NCR’s business profile towards software/services; and

 

(ii)	Agilent Technologies was replaced by Keysight Technologies, the recently spun-off tech equipment business of Agilent (the remaining Agilent business is focused on life-sciences).

Our 2016 peer group therefore consisted of the following companies:

 

Our Peer Group Companies – 2016 Compensation
Adobe Systems		Harris		Salesforce
CA Technologies		Intuit		SanDisk
Citrix Systems		Juniper		Seagate
Diebold		Keysight Technologies		Symantec
Fidelity Info Services		NetApp		VMware
Fiserv		Pitney Bowes		Western Digital

 

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External Market Surveys.  The Committee reviewed a comprehensive analysis and assessment prepared by its independent compensation consultant, which showed the competitive position of our named executive pay mix and levels compared to the marketplace using a combination of proxy data from our peer group, as well as general market data provided by the Company.  Market survey data includes surveys concentrated on companies in both general and high-tech industries, which encompass the Company’s competitors and non-competitors.  The broad-based surveys give us access to market data for numerous companies under a consistent methodology to assist our understanding of market trends and practices.  The market surveys used were:

 

 

The Committee considers market median levels when setting compensation levels, but retains flexibility to set compensation above or below the median based on individual considerations.  When setting 2016 compensation levels, the Committee considered our peer group’s proxy data for chief executive officer, chief financial officer and chief operating officer with a 100% weighting for Mr. Nuti, Mr. Fishman, and Mr. Benjamin.  For Mr. Marquardt and Mr. Langenbahn, the Committee considered our peer group’s proxy data for Unit Heads with a 75% weighting, and general market survey data for similar Sector Heads with a 25% weighting.

 

Internal Compensation Analysis –Tally Sheets and Internal Equity

 

 

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Recommendations

The Committee also considers recommendations from our CEO and our Executive Vice President, Chief Administration Office & Chief Human Resources Officer when establishing compensation levels for named executives other than the CEO.  The CEO and management do not participate in any Committee discussions about CEO compensation.

 

2016 Executive Compensation Program Details

 

Base Salaries for 2016

We attempt to set base salaries at a level competitive with our peer group.  This helps us attract and retain top quality executive talent, while keeping our overall fixed costs at a reasonable level.

For 2016, the Committee approved these base salaries for our named executives:

 

Summary of 2016 Base Salary Actions
Named Executive		Effective Date of Most Recent Base Salary Action				Base Salary on December 31, 2016				Rationale for Base Salary Actions
William Nuti			August 8, 2005			$	1,000,000			No Change – Protect tax deduction under Internal Revenue Code Section 162(m)
Robert Fishman			March 26, 2016			$	625,000			Competitive position, individual performance, and promotion to Executive Vice President
Mark Benjamin			October 17, 2016	(1)		$	750,000			Newly Hired – Competitive
Frederick Marquardt			March 26, 2016			$	625,000			Competitive position and individual performance
Paul Langenbahn			March 26, 2016			$	475,000			Competitive position and individual performance

(1) Mark Benjamin joined NCR on October 17, 2016 in the role of President and Chief Operating Officer.

 

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Annual Incentives for 2016

 

Annual Incentive Plan Opportunity for 2016

The 2016 Annual Incentive Plan opportunity for our named executives was comprised of our:

 

Management Incentive Plan Bonus		+		Customer Success Bonus

 

Setting Annual Incentive Targets

At the beginning of the performance year, the Committee establishes a total target bonus for each named executive as a percentage of their base salary for purposes of both the Management Incentive Plan (“MIP”) and the Customer Success Bonus. This total target bonus percentage has three components:

 

·

MIP—Core Financial Objectives Target Bonus, which is a target bonus percentage that is then multiplied by a Company-wide performance factor generated by achieving a Non-GAAP Operating Income (NGOI) core financial goal with an Adjusted Free Cash Flow (FCF) modifier (the “Core Financial Objectives”);

 

·

MIP—Individual Performance Modifier, which is a MIP percentage modifier based on the particular named executive’s achievement of individual performance goals (“MBOs”); and

 

·

Customer Success Target Bonus, which is a target bonus percentage linked to the Company’s overall customer success survey results.

 

Calculating Annual Incentive Awards

The calculation of Annual Incentive Plan awards includes our MIP and Customer Success Bonus components as follows:

Total Annual Bonus Opportunity – 2016

 

Management Incentive Plan  (MIP)

Customer Success Bonus

MIP Target Bonus (%)

x

Core Financial Objectives

x

Individual Performance Modifier

+

Payout Linked to Our Customer Success Survey Results

=

Actual Bonus (%)

(Range: 0% - 200%)

(Range: 0% - 150%)

(Range: 0% or 10%)

 

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MIP Core Financial Objectives for 2016

The Committee established the MIP Financial Objectives for 2016 based on:

 

Non-GAAP Operating Income (NGOI)		and		Adjusted Free Cash Flow

 

NGOI Objective

For 2016, the Committee established NGOI as the primary core Financial Objective. NGOI replaced Non-Pension Operating Income (NPOI), which was used in prior years when ongoing pension expense had more of a significant impact on NCR’s annual financial results.  The Company’s aggressive pension de-risking strategy has reduced the Company’s exposure to pension expense as it relates to our financial performance and operational success.

We use NGOI as the primary MIP bonus funding mechanism because it:

 

 

 

Adjusted Free Cash Flow Objective

The Committee retained Adjusted Free Cash Flow as the other Core Financial Objective, which is used as a modifier to the MIP bonus funding mechanism once a threshold level of NGOI is achieved. We use Adjusted Free Cash Flow because it:

 

 

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MIP Core Financial Objectives – Definitions and Impacts

The 2016 MIP core financial objectives, including the definitions and impact of each, are shown in this chart:

 

MIP – Core Financial Objectives for 2016
Financial Objective		Definition		Impact on Our Financials		Impact on Our Behavior
NGOI*		Our income (loss) from operations as reported under generally accepted accounting principles, excluding certain special items as described in our annual financial report (see reconciliation on page 94 of Form 10-K – referred to as “segment operating income”).		Profit (Loss) on our Income Statement (non-GAAP).		Forces decision-making to produce results aligned to achieving our long-term strategic objectives. Management can only be rewarded financially each year when they drive profitable growth.
Adjusted Free Cash Flow*		Our net cash provided by operating activities and discontinued operations, less capital expenditures for property, plant and equipment, less additions to capitalized software, discretionary pension contributions and pension settlements (see reconciliation on page 32 of Form 10-K).		Income Statement and Statement of Cash Flows (non-GAAP).		Forces decision-making to provide available cash for investment in our existing businesses, strategic acquisitions and investments, repurchase of NCR stock, and repayment of debt obligations.

* NGOI and Adjusted Free Cash Flow are non-GAAP measures. Income from operations and net cash provided by operating activities, respectively, are the most directly comparable GAAP measures.

 

MIP Core Financial Objectives –2016 Performance Hurdles and Payout  Cap

New for 2016, the Committee established a 40% minimum MIP funding for 2016, coupled with a success sharing mechanism that provides additional bonus funding for Company performance achieved above an aggressive performance hurdle.  Additional MIP funding above the 40% minimum is earned when the Company achieves results above the 2016 NGOI Performance Hurdle, where 50% of every dollar of NGOI earned above the NGOI Hurdle will be added to the 2016 MIP funding, and further, where 60% of every dollar of NGOI earned above the NGOI Hurdle will be added to the 2016 MIP funding if the Adjusted Free Cash Flow Hurdle is also achieved; but in no event can the 2016 MIP funding exceed 200%.

 

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On February 22, 2016, the Committee decided when establishing our 2016 MIP that performance results would be determined on a constant currency basis to eliminate the impact of foreign currency fluctuations during the performance period, based on the same foreign exchange rates used to establish the Company’s 2016 financial plan.

 

 

The Committee’s establishment of challenging MIP performance thresholds requires our named executives to achieve significant annualized NGOI and Adjusted Free Cash Flow growth in order to receive any payout above minimum funding for the MIP portion of their annual bonus.

Absolute Limit on MIP Payouts and Committee Discretion.  The annual bonus otherwise payable under the MIP is also subject to an absolute limit based on the Company’s performance.  For 2016, the maximum annual bonus payout opportunity is 1.5% of Non-Pension Operating Income (NPOI) for our CEO, and 0.75% of NPOI for our other named executives.  Consistent with Section 162(m) of the Internal Revenue Code (the “Code”), the Committee retains the discretion to decrease, but not increase, the final Annual Incentive Plan payout earned. For the definition of NPOI, see Proposal 4, page 87 below.

 

MIP – Management By Objectives (MBOs)

In addition to the Core Financial Objectives, we establish multiple individual objectives, called MBOs, for each of our named executives.  These individual objectives are assigned to our named executives based on their areas of influence, and on objectives that are critical for the Company’s achievement of its overall financial goals and stretch internal objectives.  Based on the extent to which a named executive satisfies his MBOs, the Committee determines an “individual performance modifier” that increases or decreases the preliminary MIP bonus determined by the Core Financial Objectives.  The individual performance modifier can range from 0% for poor performance to 150% for exceptional performance.

The Committee established multiple MBOs for our CEO, and in conjunction with the CEO, for each named executive.  The MBOs selected directly complement our 2016 corporate strategic goals to:

 

 

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Customer Success Bonus for 2016

Because of the critical importance of customer retention, customer referrals and customer relationships, we retain our Customer Success Bonus as a separate component of our Annual Incentive Plan, with its own separate reward structure.  We link our Customer Success objective to a semi-annual survey of customers conducted by an independent third party.  The actual payout for this component is determined at the discretion of the Committee for our CEO, and at the discretion of the CEO for our other named executives.

 

Annual Incentive Plan – Total Bonus Opportunity for 2016

For 2016, the Committee established MIP annual incentive targets for our named executives based on peer group data and positioning within the senior leadership team.  The 2016 target MIP and Customer Success annual incentive opportunities for our named executives were:

 

2016 Annual Incentive Plan – Targets and Total Bonus Opportunity (% of Base Salary)
Named Executive		MIP Target				Customer Success Target				Total Annual Bonus Target (MIP Target + Customer Success Target)				Total Annual Bonus Opportunity
William Nuti			140	%			10	%			150	%			0% to 430%
Robert Fishman			100	%			10	%			110	%			0% to 310%
Mark Benjamin			115	%			10	%			125	%			0% to 355%
Frederick Marquardt			100	%			10	%			110	%			0% to 310%
Paul Langenbahn			100	%			10	%			110	%			0% to 310%

By way of illustration, in the case of our CEO, if the Core Financial Objectives were achieved at the maximum level, this could generate a preliminary MIP bonus funding of 280% (200% of his 140% target bonus).  Further, if he were to achieve the maximum individual performance modifier of 150%, his bonus payout could increase to 420% (150% of his preliminary MIP bonus funding of 280%).  If the Customer Success objective (10%) were also met, his total Annual Incentive Plan bonus payout could be as high as 430% of his base salary.

 

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Annual Incentive Plan – Objectives, Results and Payouts for 2016

 

MIP Core Financial Objective and Customer Success Results and Payout Funding

 

 

The 2016 Annual Incentive Plan objectives, results, earned payout and funded payout are shown in this Chart:

 

2016 Annual Incentive Plan – Performance Hurdles, Results and Funding
		Performance Hurdles & Results ($M)(1)
Discretionary Objectives		NGOI Below Hurdle (% Funded)		NGOI Above Hurdle (% Funded)		NGOI Above Hurdle (Maximum %)		Performance Results		Final Payouts
Adjusted Free Cash Flow Results “Below” Hurdle?		40%		50% of NGOI Results above $871		200%		NGOI = $840 (“below” hurdle) AFCF = $628 (“above” hurdle)		Payout “Earned” = 40% Payout “Funded” = 60%(2)
Adjusted Free Cash Flow Results “Above” Hurdle?		40%		60% of NGOI Results above $871
Customer Success Objective		Payout Linked to Overall Satisfaction of Our Customers						At or Above Expectations		10%

(1) The NGOI Hurdles is shown on a constant currency basis as determined appropriate by the Committee.

(2) While NGOI Results did not exceed the NGOI Hurdle, the Committee exercised its discretion and increased MIP funding by 20% for a “funded” payout of 60%.

 

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Annual Incentive Plan “Earned” vs. “Funded” Payout History

While the Committee exercised discretion to increase the “funded” payout by an additional 20% over the amount “earned” for 2016, at the recommendation of the CEO the Committee previously exercised its discretion to reduce “funded” payouts in several prior years where the Company’s financial results were in line with external guidance, but the CEO and the Committee determined that the Company fell short or executed poorly against other key strategic goals for the performance year. A summary of the Committee’s discretion on the bonus payout “funding” in prior years is shown in this chart:

 

Annual Incentive Plan “Earned” vs. “Funded” Payout History
Performance Year		Bonus Payout “Earned”		Committee Discretion Applied		Bonus Payout “Funded”
2015		114.1%		(114.1%)		0%
2014		0%		0%		0%
2013		103.3%		(58.3%)		45%
2012		132.8%		(57.8%)		75%

This demonstrates that the CEO and the Committee set aggressive annual financial goals and set very high internal performance expectations. It also demonstrates the Committee’s willingness to utilize its discretion to ensure that both design and execution of the Company’s incentive plans have good alignment with our pay-for-performance philosophy.

 

Individual Performance Modifier Assessment

The following is a summary of the MBOs established by the Committee and the 2016 MIP payouts approved for each participating named executive for the 2016 performance year.

William Nuti’s 2016 Objectives:

Mr. Nuti’s objectives for 2016 included successful execution on the next phase of the Vision 2020 strategy including delivering significant growth on software and cloud revenue necessary to achieve 2016 financial plan goals, delivering core financial results at or above the top end of the Company’s guidance provided to investors throughout the year, and continued performance above guidance on capital efficiency and return of capital to stockholders through the Company’s ongoing share repurchase program.    Mr. Nuti’s 2016 MBO’s are outlined in more detail below:

 

 

The Committee determined that Mr. Nuti’s 2016 individual performance modifier is 110% to reflect his individual performance relative to the achievement of the stated 2016 MBOs. This determination was based on the strong growth in software & cloud orders and revenue, exceptional Free Cash Flow results above

 

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guidance, core financial results at the top of the investor guidance range, and key executive talent acquisition and organizational re-alignment to put the Company in position for delivering the stated Vision 2020 strategy over the performance years subsequent to 2016.

Robert Fishman’s 2016 Objectives:

Mr. Fishman’s 2016 MBO’s are outlined below:

 

The Committee determined that Mr. Fishman’s 2016 individual performance modifier is 105% to reflect his individual performance relative to the achievement of his stated 2016 MBOs. This determination was based on the exceptional Free Cash Flow results above guidance, successful implementation of the ZBB platform to help drive the efficient deployment and execution of the 2017 financial plan across the enterprise and strong forecast accuracy for the CFO organization.

Mr. Benjamin’s 2016 Objectives:

Mr. Benjamin’s 2016 MIP payout reflects the minimum payout to be made under the terms of his offer to join NCR in October 2016. As such, no individual performance modifier was determined for the 2016 performance year.

Mr. Marquardt’s 2016 Objectives:

Mr. Marquardt’s 2016 MBO’s are outlined below:

 

 

The Committee determined that Mr. Marquardt’s 2016 individual performance modifier is 105% to reflect his individual performance relative to the achievement of his stated 2016 MBOs. This determination was based on the strong Services revenue growth, exceptional operating income forecast accuracy, improvements in Services customer loyalty scores and continuous cost reduction improvements.

 

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Mr. Langenbahn’s 2016 Objectives:

Mr. Langenbahn’s 2016 MBO’s are outlined below:

 

 

The Committee determined that Mr. Langenbahn’s 2016 individual performance modifier is 110% to reflect his individual performance relative to his MBO’s based on the strong Hospitality software and cloud revenue growth and strong operating income forecast accuracy. However, Mr. Langenbahn did not receive the Customer Success payout as a result of the weakness in our customer loyalty scores during 2016 for the Hospitality business.

 

Annual Incentive Plan – Final 2016 Payouts

The total annual bonus payments approved for each named executive for the 2016 performance year were:

 

2016 Annual Incentive Plan – Final Payout Calculation
Named Executive		MIP Target (1)				Funded MIP Payout (% of Target)				Funded MIP Payout (Before IPM)				Individual Performance Modifier				MIP Payout (After IPM)				Customer Success Payout (10% of Target)				Total Bonus Payout
William Nuti		$	1,400,000				60	%		$	840,000				110	%		$	924,000				10	%		$	1,024,000
Robert Fishman		$	613,388				60	%		$	368,033				105	%		$	386,435				10	%		$	447,774
Mark Benjamin(1)		$	215,625				—			$	215,625				—			$	215,625				10	%		$	234,375
Frederick Marquardt		$	613,388				60	%		$	368,033				105	%		$	386,435				10	%		$	447,774
Paul Langenbahn		$	462,227				60	%		$	277,336				110	%		$	305,070				0	%		$	305,070

(1) Reflects proration for mid-year salary and/or target bonus changes, and for Mr. Benjamin, reflects a pro-rated amount given his start date of 10/17/2016.  Pursuant to his employment offer, Mr. Benjamin will receive a guaranteed minimum bonus award of $215,625 for his period of employment with the Company during 2016.

 

2016 Long-Term Incentives

Our Long-Term Incentive Program directly aligns a large portion of the total compensation of our named executives with Company performance and changes in stockholder value.  In 2016, the Committee granted all long-term incentives to our named executives in the form of equity awards under our Stock Plan.  Unlike in prior years, no new Bonus Credit awards were made under the NCR Corporation Economic Profit Plan in 2016.

 

2016 Equity Award Mix

The use of equity for our LTI Program links our executives and stockholders to a common goal: sustainable stockholder value creation.  In February 2016 the Committee approved the 2016 annual equity awards under

 

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our Stock Plan in the form of a special grant of multi-year Vision 2020 Awards together with traditional performance-based and time-based RSUs.

We generally use equity awards in our LTI Program to create commonality of interests with stockholders and help manage our ability to retain our key executives.  These awards also provide a good balance to our executives and protection to our stockholders, because wealth creation can be “realizable” by an executive only when both long-term performance goals and service-based milestones are achieved.  The special grant of Vision 2020 Awards was approved by the Committee in 2016 for the additional reasons described below.

 

2016 LTI Program with Multi-Year Vision 2020 Awards

 

 

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Vision 2020 LTI Awards in 2016

Price-Contingent RSUs: In a special grant, all named executives were awarded price-contingent RSUs with these terms:

 

·

50% would be earned if NCR’s stock price closes at or above $35 per share for any twenty consecutive trading days at any time during the five-year period after the grant date.

 

·

50% would be earned if NCR’s stock price closes at or above $40 per share for any twenty consecutive trading days at any time during the five-year period after the grant date.

 

·

Vesting is also conditioned on continued service with the Company, where no more than 50% of the award “earned” will vest on the three-year anniversary of the grant date, and up to 100% of the award “earned” can vest on the four-year anniversary of the grant date, and finally, if not previously vested, up to 100% of the award “earned” can vest on the five-year anniversary of the grant date conditioned entirely on NCR achieving the $35 and $40 stock price hurdles prior to these potential vesting dates.

The five-year performance period for the Vision 2020 LTI Awards was intended to provide a longer-term focus on sustained share price growth.  Unless earned based on the stock price hurdles outlined above, all unvested Vision 2020 LTI Awards are forfeited in the event of employment termination, except in the event of death, disability or other limited circumstances as described in the award agreements.

On December 8, 2016, the Committee certified that the $35 per share price hurdle for our Vision 2020 LTI Awards had been satisfied, based on NCR’s stock price closing above $35 per share for twenty consecutive trading days (November 8, 2016 through December 6, 2016).  On January 24, 2017, the Committee certified that the $40 per share price hurdle for our Vision 2020 LTI Awards had been satisfied, based on NCR’s stock price closing above $40 per share for twenty consecutive trading days (December 7, 2016 through January 5, 2017).  These awards are not currently vested and are subject to continued employment with the Company where 50% of these awards will vest on the three-year anniversary of the grant date and the remaining 50% of the award will vest on the four-year anniversary of the grant date.

 

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Traditional Performance-Based and Time-Based Equity

The remaining portion of the 2016 equity award mix for our named executives consisted of 75% performance-based RSUs, and 25% time-based RSUs.

 

 

For our 2016 equity awards, the number of shares subject to restricted stock units was determined by converting the dollar value approved by the Committee into a specific number of shares, based on the grant date closing price of our common stock as provided under our Stock Plan.

 

Performance-Based Equity – Performance Metrics

 

ROC – Primary Performance Metric

 

 

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Non-GAAP Diluted EPS – Secondary Performance Metric with 60% Weighting

 

·

Non-GAAP Diluted EPS Performance Threshold – 60% Weighting: If the ROC performance threshold is met, the number of shares earned for each performance-based unit depends on our NGDEPS results over the two-year performance period.  The Committee established a NGDEPS performance target of $2.85 with a 60% weighting for 2016 awards.

 

·

Non-GAAP Diluted EPS Defined: We calculate NGDEPS by excluding pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles, from GAAP earnings per share.

 

·

Why We Use This Metric: NGDEPS is a good external measure of the Company’s annual performance that investors can compare against our quarterly/annual guidance on this metric.  This is also a common financial metric that investors use to evaluate company performance against peer groups and other performance benchmarks.

 

Software-Related Margin Dollars – Secondary Performance Metric with 40% Weighting

 

·

Software-Related Margin Dollars Performance Threshold – 40% Weighting: If the ROC performance threshold is met, the number of shares earned for each performance-based unit depends on our SRMD results over the two-year performance period.  The Committee established a SRMD performance target of $950.0 million for 2016 awards, with a 40% weighting.

 

•

Software-Related Margin Dollars Defined: SRMD is determined by taking gross margin for software licenses, software maintenance, cloud and professional services excluding pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles.

 

•

Why We Use This Metric: SRMD is a good internal measure of the Company’s annual performance against one of our core strategic financial goals, the growth for which is essential to achieving our Vision 2020 strategy.  Also, this is another metric where investors can compare our performance against our quarterly/annual guidance.

 

2016 Financial Objective Results

 

•

2016 NGDEPS Achieved: NGDEPS achieved for 2016 was $3.02.

 

•

2016 SRMD Achieved: SRMD achieved for 2016 was $996 million.

 

Impact of 2016 Financial Results on 2016 Awards

 

•

Impact on 2016 Performance-Based Equity Awards: The 2016 NGDEPS of $3.02 exceeded the target NGDEPS of $2.85, resulting in a preliminary award of 90% with respect to 60% of the target number of units granted on February 24, 2016.  The 2016 SRMD of $996 million exceeded the target SRMD of $950 million, resulting in a preliminary award of 58.2% with respect to 40% of the target number of units granted on February 24, 2016.  These results and weightings resulted in a final award of 148.2% of the total target number of units granted.  This RSU payout of 148.2% is now subject to

 

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NCR achieving at least $2.85 of NGDEPS and $950 million of SRMD for the 2017 performance year (and if not, the payout will be reduced to 100%), achieving a two-year average ROC of at least 20%, and continued employment with the Company through August 24, 2019.

 

History of Annual LTI Equity Awards

This Chart shows our three-year payout history for annual performance-based equity awards:

 

Annual LTI Equity Awards: Historical Goals, Results and Payouts
Award Year		Performance Period		Performance Metric / Weighting		Performance Range ($M)												Return on Capital Results				Performance Metric Results ($M)				Final Calculated Payout
						Threshold				Target				Max
2016		2016 – 2017		NGDEPS – 60%		$	2.72			$	2.85			$	3.00				67.1	%(1)		$	3.02				148.2	%
				SRMD – 40%		$	855			$	950			$	1,000							$	996
2015		2015 – 2016		NPOICC(2) – 100%		$	631			$	709			$	750				70.1	%		$	721				114.5	%
2014		2014 – 2015		NPOICC(2) – 100%		$	665			$	785			$	865				67.9	%		$	695				43.6	%

(1) Our Return on Capital (ROC) for the 2016 performance year was 67.1% (NGOI of $840 million ÷ Controllable Capital of $1,252 million). However, this will be adjusted after the 2017 performance period is completed since the ROC goal of 20% is measured over the two-year performance period.

(2) In 2014 and 2015, our discretionary Performance Metric was Non-Pension Operating Income Minus Capital Charge (NPOICC).

 

2016 Total Annual LTI Equity Award Values

This Chart shows the 2016 total annual LTI equity award values for our named executives:

 

2016 Total Annual LTI Equity Awards and Value(1)
Named Executive		Vision 2020 LTI Awards: Price-Contingent RSUs(2)				Traditional Performance- Based RSUs				Traditional Time-Based RSUs				Total 2016 LTI Award Value(3)
William Nuti		$	9,999,995			$	3,749,988			$	1,250,012			$	14,999,995
Robert Fishman		$	3,000,004			$	1,124,999			$	374,992			$	4,499,995
Mark Benjamin(4)		$	0			$	0			$	0			$	0
Frederick Marquardt		$	2,199,995			$	825,010			$	274,996			$	3,300,001
Paul Langenbahn		$	1,999,993			$	750,007			$	250,002			$	3,000,002

(1) Represents the “grant date fair value” of RSUs, as shown in the Grants of Plan-Based Awards—2016 Table on page 72.

(2) Includes half of the total target long-term incentive program value approved by the Committee for our named executives in 2016, plus the “front-loaded” half of the total target long-term incentive program value that the Committee anticipated that it would grant to our named executives in 2017.

(3) Represents the 2016 total target long-term incentive program value approved by the Committee for our named executives, plus the front-loaded half of the total target long-term incentive program value that the Committee anticipated it would grant to our named executives in 2017.

(4) Mr. Benjamin was not employed by the Company at the time we granted our 2016 annual LTI awards.

 

2016 Ad Hoc LTI Awards

 

•

2016 Ad Hoc Awards: The Committee approved an Ad Hoc LTI award during 2016 for Mr. Benjamin in the amount of $8,500,000 which was granted at the time of his hire.  Mr. Benjamin’s new hire award was in the form of single-metric performance-based RSUs with Committee-approved SRMD goals, in compliance with our policy that retention awards to executive officers will include performance-based vesting conditions.  The award may be earned based on the Company’s achievement of such SRMD goals during the performance periods from January 1, 2017 through

 

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June 30, 2017, and January 1, 2017 through December 31, 2017.  If earned, this award vests over a three-year period, with 25% vesting on the first anniversary of the grant date, 35% vesting on the second anniversary of the grant date, and 40% vesting on the third anniversary of the grant date, subject to Mr. Benjamin’s continued service with the Company through the applicable vesting dates.  The Committee believes that the SRMD performance thresholds established for this award will be difficult to achieve, but attainable.

No other named executives received Ad Hoc LTI awards during 2016.

 

Update on 2014 and 2015 LTI Equity Awards

 

 

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EPP – Payout of Amounts Earned in Prior Years
Named Executive		2016 Bonus Credit Award(1)				Bank Balance (Earned Before 2016 under Prior Year Awards)(2)				2016 Cash Payout from Bank Balance(3)				2016 Ending Bank Balance (After 2016 Payout)
William Nuti		$	0			$	5,250,944			$	1,732,812			$	3,518,132
Mark Benjamin(4)		$	0			$	0			$	0			$	0
Robert Fishman		$	0			$	1,456,181			$	480,540			$	975,641
Frederick Marquardt		$	0			$	1,500,230			$	495,076			$	1,005,154
Paul Langenbahn		$	0			$	488,189			$	161,102			$	327,087

(1) As noted above, no new EPP Bonus Credit Awards were made to any participants for the 2016 performance year.

(2) 33% of the Bank Balance (before 2016 payout) is the 2016 EPP Cash Payout.

(3) The EPP provides that the 2016 Cash Payout will be made in August 2017.

(4) Mr. Benjamin joined the Company in October 2016, and therefore did not participate in the EPP.

 

2017 LTI Program – Return to Our Traditional RSU Awards

For 2017, we returned to our more traditional approach on equity award mix for our named executives, but also established that all annual LTI awards for executive officers will now require a performance condition for vesting. The LTI awards for 2017 consisted of a mix of 75% traditional performance-based RSUs, with a performance period that has been extended to three years for 2017 awards. In addition, 25% consisted of a new performance-vesting RSU award that replaces the traditional time-based RSUs. These changes for 2017 reflect the Committee’s efforts to have a significant portion of the long-term incentive awards “at risk” based

 

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on achievement of performance goals that reward our named executive officers for creating sustainable value creation that further aligns management’s compensation with stockholder interests.

The 2017 LTI program is described as follows;

 

 

For our 2017 LTI equity awards, the number of shares subject to RSUs was determined by converting the dollar value approved by the Committee into a specific number of shares, based on the grant date closing price of our common stock as provided under our Stock Plan.

This Chart shows the 2017 total annual LTI equity award values for our named executives:

 

2017 Total Annual LTI Equity Award Values
Named Executives		Traditional Performance Vesting RSUs (25% of value)				Traditional Performance-Based RSUs (75% of value)				Total LTI Award Value(1)
William Nuti		$	2,500,000			$	7,500,000			$	10,000,000
Robert Fishman		$	375,000			$	1,125,000			$	1,500,000
Mark Benjamin(2)		$	875,000			$	2,625,000			$	3,500,000
Frederick Marquardt		$	300,000			$	900,000			$	1,200,000
Paul Langenbahn		$	625,000			$	1,875,000			$	2,500,000

(1) Represents the 2017 total target long-term incentive program value approved by the Committee for our named executives, which considers the LTI award values planned for 2017 as part of the Vision 2020 LTI Award granted in 2016 to our named executives, plus any discretionary additional LTI award value to recognize individual performance and expected critical contribution towards the achievement of our Vision 2020 strategy.

(2) Reflects the 2017 Annual LTI award value committed to Mark Benjamin as part of his offer to join NCR.

 

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Other Employee Benefits

 

 

Change in Control and Post-Termination Benefits

 

 

Change in Control Severance Benefits

 

 

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Significantly Increased Stock Ownership Requirements

 

 

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Tax Considerations in Setting Compensation

Under Federal tax rules, compensation over $1 million annually for certain named executives cannot be deducted unless paid under a performance-based plan satisfying Internal Revenue Code standards (or otherwise meeting certain IRS requirements).  While we generally pay compensation intended to be deductible, the Committee has not adopted a policy requiring all pay to be deductible, so as to preserve the ability to award non-deductible compensation if determined to be in the best interests of our stockholders.  In addition, these tax rules are complex and may change (including with retroactive effect), thus even compensation that is intended to be deductible may not qualify.

 

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Board and Compensation and Human Resource Committee Report on Executive Compensation

The Compensation and Human Resource Committee, comprised of independent directors, reviewed and discussed the above Compensation Discussion & Analysis with management.  Based on that review and those discussions, the Committee recommended to our Board of Directors that the Compensation Discussion & Analysis be included in these proxy materials.

The Compensation and Human Resource Committee:

Linda Fayne Levinson (Chair)

Edward “Pete” Boykin

Chinh E. Chu

Gary J. Daichendt

 

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Executive Compensation Tables

 

Summary Compensation Table

Our Summary Compensation Table below shows the total compensation paid to or earned by each of our named executive officers with respect to the fiscal years ending December 31, 2016, 2015 and 2014.

 

Summary Compensation Table ($)
Name and Principal Position (a)		Year (b)				Salary (c)				Bonus (d)				Stock Awards (e)(1)				Non-Equity Incentive Plan Compensation (f)(2)				Change in Pension Value (g)(3)				All Other Compensation (h)(4)				Total (i)
William Nuti Chairman of the Board and Chief Executive Officer			2016				1,000,000				—				14,999,995				2,756,812				—				433,460				19,190,267
			2015				1,000,000				—				8,000,014				2,586,286				—				360,391				11,946,691
			2014				1,000,000				—				4,999,999				2,888,154				—				396,744				9,284,897
Robert Fishman Executive Vice President and Chief Financial Officer			2016				611,539								4,499,995				928,314				21,666				26,645				6,088,159
			2015				575,000				100,000				1,099,991				717,224				(13,008	)			23,593				2,502,800
			2014				538,502				—				750,011				352,719				42,507				24,242				1,707,981
Mark Benjamin(5) President and Chief Operating Officer
			2016				129,808				215,625				8,500,010				18,750				—				32,194				8,896,387
Frederick Marquardt Executive Vice President, Services, Enterprise Quality and Telecom & Technology			2016				611,539								3,300,001				942,850				—				26,645				4,881,035
			2015				575,000				136,500				1,499,993				738,919				—				23,490				2,973,902
			2014				499,038				100,000				899,994				130,891				—				23,425				1,653,348
Paul Langenbahn(6) Executive Vice President, Software
			2016				460,193								3,000,002				466,172				—				26,490				3,952,857

(1) This column shows the aggregate grant date fair value, as determined in accordance with FASB ASC Topic 718, of the stock awards granted to each named executive in the applicable year.  See Note 8 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (our “2016 Annual Report”) for an explanation of the assumptions we make in the valuation of our equity awards.  Assuming achievement of the highest level of performance, the aggregate grant date fair values of the performance-based restricted stock units granted in 2016 are as follows: Nuti: $15,624,989; Fishman: $4,687,503; Benjamin: $8,500,010; Marquardt: $3,437,522; and Langenbahn; $3,125,015.  For additional information about awards made in 2016, see the Grants of Plan-Based Awards—2016 Table on page 73 of this proxy statement.

(2) The amounts reported for 2016 are comprised of amounts earned under our 2016 Annual Incentive Plan: Nuti: $1,024,000; Fishman: $447,774; Benjamin: $18,750; Marquardt: $447,774; and Langenbahn $305,070, plus amounts for performance under the 2016 EPP to be paid in August 2017: Nuti: $1,732,812; Fishman: $480,540; Marquardt: $495,076; and Langenbahn $161,102.  The entire amounts reported in 2015 and 2014 are for EPP.  Mr. Benjamin joined the Company in October 2016, and is not a participant in the EPP.

(3) The aggregate change in actuarial values of the accumulated pension benefit under the Company’s qualified pension benefit plans is applicable only to Mr.  Fishman and was $21,666.  For more information regarding pension benefits, see the 2016 Pension Benefits Table on page 75 of this proxy statement.

(4) The amounts in this column consist of the aggregate incremental cost to the Company of the perquisites provided to the named executives, any insurance premiums paid by the Company with respect to life insurance for the benefit of the named executives, and contributions made by the Company to the Savings Plan on behalf of the named executives.  Additional details regarding these amounts are included in the All Other Compensation Table and Perquisites Table, both of which can be found below.

(5) Mr. Benjamin became President and Chief Operating Officer on October 17, 2016.

(6) Mr. Langenbahn became Executive Vice President, Software, on January 1, 2017. Before that he served as Senior Vice President & President, Hospitality.

 

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All Other Compensation Table

This Table shows the value of Company-paid perquisites and life insurance premiums, and Company matching contributions to the NCR Savings Plan, our 401(k) plan, on behalf of our named executives in 2016:

 

All Other Compensation – 2016 ($)
Named Executive		Perquisites and Other Personal Benefits (1)				Insurance Premiums (2)				Company Contributions to Retirement / 401(k) Plans (3)				Total
William Nuti			423,428				1,032				9,000				433,460
Robert Fishman			17,000				645				9,000				26,645
Mark Benjamin			32,000				194	(4)			0				32,194
Frederick Marquardt			17,000				645				9,000				26,645
Paul Langenbahn			17,000				490				9,000				26,490

(1) This column shows the Company’s aggregate incremental cost for the perquisites and other personal benefits described in the Perquisites Table below.

(2) This column shows the value of Company-paid premiums for life insurance for the benefit of our named executives.

(3) The column shows Company matching contributions to our 401(k) plan, which the Company also makes for our non-executive employee participants in that plan.

(4) Mr. Benjamin joined the Company in October 2016.  This amount represents three months of Company-paid life insurance premiums.

 

Perquisites Table

This Table shows the aggregate incremental cost to the Company for perquisites for our named executives in 2016.

 

Perquisites – 2016 ($)
Named Executive		Corporate Aircraft Usage (1)				Lodging (2)				Vehicle and Security (3)				Legal Expenses (4)		Executive Medical Program (5)				Financial Planning Allowance (6)				Total
William Nuti			324,581				778				81,069			—			5,000				12,000				423,428
Robert Fishman			—				—				—			—			5,000				12,000				17,000
Mark Benjamin			—				—				—			15,000			5,000				12,000				32,000
Frederick Marquardt			—				—				—			—			5,000				12,000				17,000
Paul Langenbahn			—				—				—			—			5,000				12,000				17,000

(1) This column shows the Company’s incremental cost for personal usage of the corporate aircraft.  We calculated this incremental cost by determining the variable operating cost to the Company, including items such as fuel, landing and terminal fees, crew travel expenses and operational maintenance.  Expenses determined to be less variable in nature, such as general administration, depreciation, and pilot compensation, were not included in this incremental cost.  On occasion, other individuals traveled with our CEO on corporate aircraft; however, the Company incurred de minimis incremental costs as a result of such travel and no amounts for such travel are included in the Table.

(2) This column shows the Company’s cost of providing Mr. Nuti occasional overnight hotel accommodations near our New York City office not in connection with Board meetings or monthly executive team meetings.

(3) This column shows Company payments for the Company-provided car and driver that the Company requires Mr. Nuti to use for security purposes.

(4) This column shows reimbursement, provided under Mr. Benjamin’s new hire employment offer to join the Company, for legal fees he incurred in connection with review and acceptance of the Company’s employment terms and conditions.

(5) This column shows the Company-paid maximum amount available to named executives for medical diagnostic services under our Executive Medical Exam Program.  Though some executives may not use the maximum, for privacy reasons we choose to disclose the maximum benefit (rather than the amount actually used).

(6) This column shows the Company-paid amounts for financial planning assistance under our Executive Financial Planning Allowance Program, which were earned by named executives in 2016.

 

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Agreements with Our Named Executives

Our named executives have agreements with the Company that describe, among other things, their initial base salaries, bonus opportunities and equity awards, as well as benefit plan participation.  Changes to named executive compensation may be made from time to time, as noted in the Compensation Discussion & Analysis.  The agreements generally are not updated to reflect these changes.

 

 

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Grants of Plan-Based Awards Table

The Table below shows the Committee’s equity and non-equity incentive plan awards to our named executives in 2016.  Equity awards were made under our Stock Plan.  Non-equity awards were made under our Annual Incentive Plan (MIP and Customer Success Bonus) and EPP.  These plans and related awards are described in the Compensation Discussion & Analysis.

 

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		Grants of Plan-Based Awards – 2016 ($)
								Estimated Future Payouts Under Non- Equity Incentive Plan Awards(1)												Estimated Future Payouts Under Equity Incentive Plan Awards(2)
Named Executive		Award Type		Grant Date				Threshold				Target				Max				Threshold				Target				Max				All Other Stock Awards: Number of Units(3)				Grant Date Fair Value of Stock Awards(4)
William Nuti		Management Incentive Plan							560,000				1,400,000				4,200,000				—				—				—				—				—
		Customer Success							—				100,000				100,000				—				—				—				—				—
		Economic Profit Plan							—				1,732,812				—				—				—				—				—				—
		Vision 2020 Awards-$35			02/24/16				—				—				—				—				334,896				—				—				4,999,998
		Vision 2020 Awards-$40			02/24/16				—				—				—				—				334,896				—				—				4,999,997
		Performance-Based RSU			02/24/16				—				—				—				40,098				160,393				240,590				—				3,749,988
		Time-Based RSU			02/24/16				—								—				—				—				—				53,465				1,250,012
Robert Fishman		Management Incentive Plan							245,355				613,388				1,840,164				—				—				—				—				—
		Customer Success							—				61,339				61,339				—				—				—				—				—
		Economic Profit Plan							—				480,540				—				—				—				—				—				—
		Vision 2020 Awards-$35			02/24/16				—				—				—				—				100,469				—				—				1,500,002
		Vision 2020 Awards-$40			02/24/16				—				—				—				—				100,469				—				—				1,500,002
		Performance-Based RSU			02/24/16				—				—				—				12,030				48,118				72,177				—				1,124,999
		Time-Based RSU			02/24/16				—				—				—				—				—				—				16,039				374,992
Mark Benjamin		Management Incentive Plan							—				—				—				—				—				—				—				—
		Customer Success							—				18,750				18,750				—				—				—				—				—
		Economic Profit Plan							—				—				—				—				—				—				—				—
		Performance-Based RSU			11/01/16	(5)			—				—				—				—				244,183				—				—				8,500,010
		Time-Based RSU							—				—				—				—				—				—				—				—
Frederick Marquardt		Management Incentive Plan							245,355				613,388				1,840,164				—				—				—				—				—
		Customer Success							—				61,339				61,339				—				—				—				—				—
		Economic Profit Plan							—				495,076				—				—				—				—				—				—
		Vision 2020 Awards-$35			02/24/16				—				—				—				—				73,677				—				—				1,099,998
		Vision 2020 Awards-$40			02/24/16				—				—				—				—				73,677				—				—				1,099,997
		Performance-Based RSU			02/24/16				—				—				—				8,822				35,287				52,931				—				825,010
		Time-Based RSU			02/24/16				—				—