Form: DEF 14A

Definitive proxy statements

August 11, 2022

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, DC 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

 

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

 

Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14A-6(E)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12

 

Korn Ferry

 

 

(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 all boxes that apply):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
 

 
 

What We Stand For: Our Values

 

Inclusion

 

We embrace people with different points of view, from all backgrounds. And we think and work as one team.

 

Honesty

 

We say what we mean and we do what we say. We hold ourselves to the highest standards. And we make it safe for people to speak out when they see something wrong.

 

Knowledge

 

We are insatiably curious, always learning new things. And we actively help our colleagues grow and develop, too, with mentoring and support.

 

Performance

 

We never settle for the status quo. We always strive to be better today than we were yesterday and do our best for our clients, colleagues, and stockholders.

 
 

Table of Contents

 

01
Governance
11
Proposal No. 1
Election of Directors
12
   
Recommendation of the Board 12
   
The Board of Directors 13
Governance Insights: Board Refreshment & ESG Matters 13
Director Qualifications 15
Annual Board and Committee Evaluations 15
Snapshot of Director Nominees 16
Background and Qualifications of Director Nominees 17
   
Corporate Governance 22
Board Leadership Structure 22
Director Independence 23
Board’s Oversight of Enterprise Risk and Risk Management 24
Board Committees 25
Board Refreshment Mechanisms 28
Culture of Integrity and Code of Business Conduct and Ethics 28
Commitment to Good Governance Practices 29
   
02
Compensation
31
Proposal No. 2
Advisory Resolution to Approve Executive Compensation
33
   
Recommendation of the Board 33
   
Compensation Discussion and Analysis 34
Our Named Executive Officers 34
Governance Insights: Stockholder Outreach Regarding Compensation Matters 37
Executive Compensation Philosophy and Oversight 38
Our Process: From Strategy to Compensation-Related Metrics 39
Elements of Compensation & Compensation Decisions and Actions 42
Other Compensation Elements 47
Other Policies 48
Compensation and Personnel Committee Report on Executive Compensation 50
Compensation Committee Interlocks and Insider Participation 50
   
Compensation of Executive Officers and Directors 51
Fiscal Year 2022, 2021, and 2020 Summary Compensation Table 51
Fiscal Year 2022 Grants of Plan-Based Awards 52
Employment Agreements 52
Fiscal Year 2022 Outstanding Equity Awards at Fiscal Year-End 54
Stock Vested in Fiscal Year 2022 55
Fiscal Year 2022 Pension Benefits 55
Fiscal Year 2022 Nonqualified Deferred Compensation 56
Potential Payments Upon Termination or Change of Control 56
Pay Ratio Disclosure 62
Fiscal Year 2022 Compensation of Directors 62
   
03
Stock Incentive Plan
65
   
Proposal No. 3
Approval of the Korn Ferry 2022 Stock Incentive Plan
66
Recommendation of the Board 74
Equity Compensation Plan Information 75
   
04
Employee Stock Purchase Plan
77
   
Proposal No. 4
Approval of the Korn Ferry Amended and Restated Employee Stock Purchase Plan
78
Recommendation of the Board 81
   
05
Audit Matters
83
   
Proposal No. 5
Ratification of the Appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm
84
   
Recommendation of the Board 84
   
Audit Committee Matters 85
Fees Paid to Ernst & Young 85
Recommendation to Appoint Ernst & Young as Independent Registered Public Accounting Firm 85
Audit Committee Pre-Approval Policies and Procedures 86
Governance Insights: Active Auditor Oversight 86
Report of the Audit Committee 87
   
06
General Information
89
   
Security Ownership of Certain Beneficial Owners and Management 90
   
Questions and Answers About the Proxy Materials and the Annual Meeting 91
   
Other Matters 95
Certain Relationships and Related Transactions 95
Related Person Transaction Approval Policy 95
Delinquent Section 16(a) Reports 96
Annual Report to Stockholders 96
Communications with Directors 96
Submission of Stockholder Proposals for Consideration at the 2023 Annual Meeting 96
Stockholders Sharing an Address 97
   
Appendix A — Non-GAAP Financial Measures A-1
   
Appendix B — Korn Ferry 2022 Stock Incentive Plan B-1
   
Appendix C — Korn Ferry Amended and Restated Employee Stock Purchase Plan C-1

 

Index of Frequently Accessed Information
   
Beneficial Ownership 90
Stockholder Outreach Regarding Compensation Matters 37
Director Biographies 17
Director Independence 23
Employment Contract or Letter Agreements 48
Board Refreshment & ESG Matters 13
Governance Documents 94
How to Vote 92
Active Auditor Oversight 86
Related Party Transactions and Policies 95
Commitment to Good Governance Practices 29
Risk Oversight 24
Stock Ownership Policy 48
Use of Peer Group 40
Virtual Meeting Information 91
 
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Dear Fellow Stockholders,

 

On behalf of the Board of Directors (the “Board”) of Korn Ferry (the “Company,” “we,” “its,” and “our”) and all of our Korn Ferry colleagues, I am delighted to invite you to attend our 2022 Annual Meeting of Stockholders on September 22, 2022 at 8:00 a.m. Pacific Time.

 

Korn Ferry’s fiscal year 2022 results were outstanding, a testament of the strength and dedication of our management team, the talent and resilience of our workforce, and the continued trust of our clients. Korn Ferry achieved record fee revenue of $2.63 billion (up 45% year over year), record net income attributable to Korn Ferry of $326.4 million (up 185% year over year), and record adjusted EBITDA* of $539 million (up 88% year over year) against the challenging backdrop of the ongoing coronavirus pandemic (“COVID-19”), war in Ukraine, and significant inflationary headwinds.

 

In fiscal year 2022, Korn Ferry continued to pursue a balanced capital allocation framework. The Company repurchased almost $100 million in shares, paid cash dividends of approximately $27 million, and acquired Lucas Group and Patina Solutions Group, Inc. to enhance our professional search and interim solutions business offerings.

 

Looking beyond our financial performance, Korn Ferry delivered for its colleagues and broader communities. As part of our environmental, social, and governance (“ESG”) initiatives:

 

We supported our Ukrainian operations (including by providing lodging, relocation, and wellbeing resources to our colleagues), and the Korn Ferry Charitable Foundation (the “Foundation”) donated to humanitarian organizations focused on the people of Ukraine.
   
We increased our investment in internal talent development through programs such as the Mosaic Emerging Talent Program focused on diverse, high potential early-to-mid career professionals from across our lines of business and corporate functions.
   
We continued to provide financial and resource support for the Foundation’s Leadership U for Humanity program, which is available at no cost to participants, and offers an interactive six-month leadership development program to help mid-level professionals of color and other professionals from underrepresented backgrounds strengthen their leadership skills and empower them to accomplish their career goals.
   
We are on track to meet or exceed our target to reduce total Scope 1 and Scope 2 (market-based) greenhouse gas emissions for our global offices by 30% by 2025, compared to our 2019 emissions.
   
We invested in carbon removal projects in fiscal year 2022.

 

We invite you to learn more about our ESG activities in our recently published 2021 ESG Report.

 

We are committed to pursuing Korn Ferry’s objective to expand its position as the preeminent organizational consulting firm by finding better ways to do our work, developing new capabilities, and creating strategies for success as we build an even stronger and more innovative company that delivers value to its employees, clients, stockholders, and communities. Despite the persistent external difficulties of COVID-19, uncertain economic headwinds, and heightened geopolitical tensions, we believe Korn Ferry is well-positioned for both a successful fiscal year 2023 and for substantial long-term success.

 

I also want to take a moment to mention that I will be retiring from the Board as of the 2022 Annual Meeting. It has been an honor to serve you and the broader Korn Ferry community alongside such a talented group of fellow Board members. After careful consideration, the Board has elected my colleague Jerry Leamon to serve as your new Board Chair following the 2022 Annual Meeting. Jerry has ably served Korn Ferry since joining the Board in 2012, and I know the Board, Korn Ferry, and our stakeholders will benefit from his experienced and thoughtful leadership.

 

In light of the continued public health impact of COVID-19, our 2022 Annual Meeting of Stockholders will be conducted online this year through a live audiocast, which is often referred to as a “virtual meeting” of stockholders. Our digital format allows stockholders to participate safely, conveniently, and effectively. We intend to hold our virtual meeting in a manner that affords stockholders the same general rights and opportunities to participate, to the extent possible, as they would have at an in-person meeting.

 

We look forward to your participation at the 2022 Annual Meeting of Stockholders. Thank you for your interest and investment in Korn Ferry.

 

Christina Gold, our current Board Chair, and George Shaheen will be retiring from our Board as of the Annual Meeting. Over the past years, Christina and George have served Korn Ferry with an abiding focus on safeguarding the best interests of the Company and our stakeholders. On behalf of myself, the rest of the Board, and Korn Ferry’s stockholders, I thank and congratulate Christina and George for their years of outstanding service.

 

Gary Burnison
Chief Executive Officer

   
* Adjusted EBITDA is a non-GAAP financial measure. For a discussion of this measure and for reconciliation to the most directly comparable GAAP measure, see Appendix A to this Proxy Statement.

 

 

 

Sincerely,

 

 

Christina A. Gold,

Chair of the Board

August 11, 2022

Korn Ferry

1900 Avenue of the Stars, Suite 1500

Los Angeles, CA 90067

(310) 552-1834


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Notice of
2022 Annual Meeting

 

Meeting Information

 

Time and Date
8:00 a.m. Pacific Time
September 22, 2022
  Location
Live Audiocast at
www.virtualshareholdermeeting.com/KFY2022
  Record Date
July 29, 2022
               
Meeting Agenda  
1. Elect the eight directors nominated by our Board of Directors (the “Board”) and named in the Proxy Statement to serve on the Board until the 2023 Annual Meeting of Stockholders.
     

FOR each Director Nominee

2. Vote on a non-binding advisory resolution to approve the Company’s executive compensation.
                                                                                                                                                                             
      FOR
3. Approve the Korn Ferry 2022 Stock Incentive Plan.
      FOR
4. Approve the Korn Ferry Amended and Restated Employee Stock Purchase Plan.
      FOR
5. Ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the Company’s 2023 fiscal year.
      FOR
6. Transact any other business that may be properly presented at the Annual Meeting.

 

Virtual Meeting: In light of the ongoing public health and travel safety concerns relating to the coronavirus pandemic (“COVID-19”), Korn Ferry (the “Company,” “we,” “its,” and “our”) will hold its 2022 Annual Meeting of Stockholders (the “Annual Meeting”) online.

 

Who Can Vote: Stockholders who owned our common stock as of the close of business on July 29, 2022 (the “Record Date”) can vote online at the Annual Meeting or any adjournments or postponements thereof.

 

How to Attend: To attend the Annual Meeting online, vote or submit questions during the Annual Meeting, or view the stockholder list, stockholders of record will need to go to www.virtualshareholdermeeting.com/KFY2022 and log in using their 16-digit control number included on their proxy card or Notice of Internet Availability of Proxy Materials (the “Notice”). Beneficial owners should review these proxy materials and their voting instruction form or the Notice for how to vote in advance of, and how to participate in, the Annual Meeting.

     How You Can Vote     
 

Via telephone

1-800-690-6903  
 

Via Internet

Before the Annual Meeting by visiting www.proxyvote.com

 

During the Annual Meeting by visiting www.virtualshareholdermeeting.com/KFY2022

 
 

Via mail

Sign, date, and mail the enclosed proxy card (if you received one)  
 

 

Please read the proxy materials carefully before voting.

 

Your vote is important, and we appreciate your cooperation in considering and acting on the matters presented. For more information, see pages 91 - 94.

 

 

 

Meeting Disruption: In the event of a technical malfunction or situation that the chair of the Annual Meeting determines may affect the ability of the Annual Meeting to satisfy the requirements for a meeting of stockholders to be held by means of remote communication under the Delaware General Corporation Law, or that otherwise makes it advisable to adjourn the Annual Meeting, the chair of the Annual Meeting will convene the meeting at 9:00 a.m. Pacific Time on the date specified above and at the Company’s address at 1900 Avenue of the Stars, Suite 1500, Los Angeles, CA 90067, solely for the purpose of adjourning the Annual Meeting to reconvene at a date, time, and physical or virtual location announced by the chair of the Annual Meeting. Under either of the foregoing circumstances, we will post information regarding the announcement on the Investors page of the Company’s website at https://ir.kornferry.com.

 

August 11, 2022
Los Angeles, California
By Order of the Board of Directors,

 

 

Jonathan Kuai

 

General Counsel, Managing Director of Business Affairs &
ESG, and Corporate Secretary


 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on September 22, 2022:

The Proxy Statement and accompanying Annual Report to Stockholders are available at www.proxyvote.com.

 
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Proxy Summary

 

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. Page references are supplied to help you find further information in this Proxy Statement.

 

Annual Meeting of Stockholders (page 91)

 

Date and Time: September 22, 2022 at 8:00 a.m. Pacific Time
Location: www.virtualshareholdermeeting.com/KFY2022
Admission: To participate in the Annual Meeting online, including to vote during the Annual Meeting, stockholders will need the 16-digit control number included on their proxy card, the Notice or voting instruction form, or contact their bank, broker, or other nominee (preferably at least 5 days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in, or vote at the Annual Meeting.
Who Can Vote: Holders of Korn Ferry’s common stock at the close of business on July 29, 2022.
How to Vote: On or about August 11, 2022, we will mail the Notice to stockholders of our common stock as of July 29, 2022, other than those stockholders who previously requested electronic or paper delivery of communications from us. Stockholders can vote by any of the following methods described on pages 91 – 93.

 

Voting Roadmap (page 91)

 

Proposal Board
Recommendation
Page
Reference
       
1

Election of Directors

•  7 of 8 nominees are independent

•  Diverse slate, including 2 committees led by directors from underrepresented groups (by gender or race/ethnicity)

•  Active Board refreshment, with five new directors or nominees in last five years

•  Robust Board oversight of Company strategy and risks

•  Responsive and evolving corporate governance practices

FOR each Director Nominee


12
       
2

Advisory Resolution to Approve Executive Compensation

•  Program intended to offer competitive total direct compensation opportunities aligned with stockholder interests

•  Executives incentivized to focus on short-and long-term Company performance

•  Returned to the Company’s standard mix of 60% performance-based awards and 40% time-based awards at the beginning of fiscal year 2022

•  Management outreach to 72% of outstanding shares post-2021 Annual Meeting

FOR


33
       
3

Approval of the Korn Ferry 2022 Stock Incentive Plan

•  Allows the Company to continue to maintain a compensation policy that includes a balanced mix of cash and equity

•  Helps the Company compete more effectively for key employee talent

•  Aligns the long-term interests of employees and stockholders

FOR


66
       
4

Approval of the Korn Ferry Amended and Restated Employee Stock Purchase Plan

•  Aids the Company in attracting and retaining employees

•  Aligns the interests of participating employees with those of stockholders by promoting stock ownership

FOR


78
       
5

Ratification of Independent Registered Public Accounting Firm

•  Independent firm with reasonable fees and strong geographic and subject matter coverage

•  Performance annually assessed by the Audit Committee

•  Served as independent registered public accounting firm since 2002

•  Lead audit partner rotated in June 2020

FOR


84

 

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Highlights for Fiscal Year 2022

 

 
** Excludes CoreLogic, Inc. and Nielsen Holdings Plc due to their recent and pending acquisitions, respectively.

 

Business Performance

 

Achieved:

 

I Record Fee Revenue of $2.63 billion, up 45% over fiscal year 2021, and operating margin of 17.9%.
I All-time high Diluted Earnings Per Share of $5.98, up 186% over fiscal year 2021.
I All-time high net income attributable to Korn Ferry of $326.4 million, up 185% over fiscal 2021.
I All-time high Adjusted EBITDA* of $539 million, up 88% over fiscal year 2021, and Adjusted EBITDA margin* of 20.5%.
I All-time high Adjusted Diluted Earnings Per Share* of $6.23, up 148% over fiscal year 2021.
   
* Adjusted Diluted Earnings Per Share, Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures. For a discussion of these measures and for reconciliation to the most directly comparable GAAP measures, see Appendix A to this Proxy Statement.

 

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Environmental, Social, and Governance (“ESG”) Accomplishments

 

I Published 2021 ESG Report and 2021 SASB Report. Received Platinum and Gold honors from MarCom Awards for our 2020 Corporate Responsibility Report and Platinum honors from Hermes Awards for our 2021 ESG Report.
I Awarded the 2021 Silver Status Medal from EcoVadis for sustainability practices for the third consecutive year, and placed in the top 16% of companies assessed by EcoVadis based on our score.
I Again achieved Management Level rating, this time for 2021 submission to the CDP Climate Change survey, which detailed our calendar year 2020 greenhouse gas emissions and climate-related practices.
I Recognized by Seramount (formerly Working Mother Media) as one of the 2021 100 Best Companies for parents to work for the third consecutive year, as one of the 2021 Best Companies for Dads for the second consecutive year, and as one of the 2022 Top Companies for Executive Women for the third consecutive year.
I For the fourth consecutive year, earned a perfect score of 100 on the 2022 Human Rights Campaign Foundation’s Corporate Equality Index and named a “best place to work” for LGBTQ+ equality.
I Awarded $700,000 of scholarships to date through our independent, not-for-profit—the Korn Ferry Charitable Foundation—with the mission of making real, lasting changes by helping people exceed their potential through opportunity.
I Continued to achieve certification to internationally recognized standards for mature global privacy and security programs (ISO/IEC 27001 and ISO/IEC 27018).
I In 2021, named one of the Top Employers for Latino Leaders by the Council for Latino Workplace Equity, an initiative under the National Diversity Council.

 

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Corporate Governance (page 22)

 

Strong Governance Practices
Annual Director Elections for All Directors.
Majority Voting in Uncontested Elections.
Committee Oversight of ESG Program.
No Supermajority Voting Standards.
Stockholder Right (at 25% Threshold) to Call Special Stockholder Meetings.
   
Board Structure       Committees, Attendance, and
Commitments
      Stockholder Engagement

Independent Chair of the Board.

 

 

8 of the 9 Directors on the Board are Independent.

 

 

Independent Directors Meet in Regular Executive Sessions.

 

 

10-Term Service Limit for Non-Executive Directors Joining the Board after October 1, 2020.

 

Independent Audit, Compensation, and Nominating Committees.

 

 

All Directors Attended at Least 75% of Board and Their Respective Committee Meetings.

 

 

No Director Serves on More Than 4 Public Company Boards.

 

 

2 Committees Led by Directors from Underrepresented Groups (by Gender or Race/Ethnicity).

 

Stockholder Communication Process for Communicating with the Board.

 

 

Regular Stockholder Engagement Throughout the Year.

 

 

Outreach to Stockholders Representing Approx. 75% of Outstanding Shares Prior to 2021 Annual Meeting (and Met with Stockholders Representing 55%).

 

 

Outreach to Stockholders Representing Approx. 72% of Outstanding Shares After 2021 Annual Meeting (and Met with Stockholders Representing 21%).

 

Governance Insights (pages 13, 37, and 86)

 

Each of the Company’s three standing Board committees is committed to staying abreast of the latest issues impacting good corporate governance. The Company has included three sets of Questions & Answers (“Q&As”), one with the chair of each of the Company’s standing committees.

 

These Q&As are meant to provide stockholders with insight into committee-level priorities and perspectives on Board refreshment and ESG matters, the return to our traditional approach to compensating our executives and key employees once the Compensation and Personnel Committee of the Board was able to understand better the impact of the COVID-19 pandemic on the Company’s business, and the oversight of our independent registered public accounting firm.

 

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Board Nominees (pages 17 – 21)

 

 

* Tenure is provided for non-executive directors only. The “As of Filing” tenure calculations include Ms. Gold’s service with the Board since 2014 and Mr. Shaheen’s cumulative service with the Board from 2009 to 2019, and from April 2020 to present.
** This graphic represents directors who are members of underrepresented groups (by gender or race/ethnicity).
*** Not included in percentages of directors from underrepresented groups.

 

Audit Audit   Comp. &
Pers.
Compensation and Personnel   Nom. & Corp.
Gov.
Nominating and Corporate Governance   Member of Underrepresented Group (by gender or race/ethnicity)

 

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* Tenure is provided for non-executive directors only.
** This graphic represents directors who are members of underrepresented groups (by gender or race/ethnicity).
*** Not included in percentages of directors from underrepresented groups.

 

Audit Audit   Comp. &
Pers.
Compensation and Personnel   Nom. & Corp.
Gov.
Nominating and Corporate Governance   Member of Underrepresented Group (by gender or race/ethnicity)

 

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2022 Executive Compensation Summary (page 51)

 

    Gary D. Burnison(1)             Robert P. Rozek(2)             Byrne Mulrooney(3)             Mark Arian(4)
         
Salary   $985,000   $616,667   $533,333   $533,333
Stock Awards   $5,052,479   $2,105,429   $1,515,800   $1,515,800
Non-Equity Incentive Plan Compensation   $3,450,000   $1,725,000   $1,170,125   $1,158,108
Change in Pension Value and Nonqualified Deferred Compensation Earnings        
All Other Compensation   $42,219   $34,346   $39,822   $38,971
Total   $9,529,698   $4,481,442   $3,259,080   $3,246,212
(1) President and Chief Executive Officer
(2) Executive Vice President, Chief Financial Officer and Chief Corporate Officer
(3) Chief Executive Officer of RPO and Digital
(4) Chief Executive Officer of Consulting

 

2022 Executive Total Compensation Mix (page 39)

 

 
* Equity awards based upon grant date value.

 

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Compensation Process Highlights (pages 26 and 38 – 41)

 

Our Compensation and Personnel Committee receives advice from its independent compensation consultant.
We review total direct compensation and the mix of the compensation components for our named executive officers relative to our peer group as one of the factors in determining if compensation is adequate to attract and retain executive officers with the unique set of skills necessary to manage and motivate our global people and organizational consulting firm.

 

Elements of Compensation (pages 42 – 48)

 

Element   Purpose   Determination
Base Salary   Compensate for services rendered during the fiscal year and provide sufficient fixed cash income for retention and recruiting purposes.   Reviewed on an annual basis by the Compensation and Personnel Committee taking into account competitive data from our peer group, input from our compensation consultant, and the executive’s individual performance.
Annual Cash Incentives   Motivate and reward named executive officers for achieving performance goals over a one-year period.   Determined by the Compensation and Personnel Committee based upon performance goals, strategic objectives, and competitive data.
Long-Term Incentives   Align the named executive officers’ interests with those of stockholders and motivate and retain top talent.   Determined by the Compensation and Personnel Committee based upon a number of factors including competitive data, total overall compensation provided to each named executive officer, and historical grants.

 

Compensation Practices (page 38)

 

Our Board has adopted a clawback policy applicable to all cash incentive payments and performance-based equity awards granted to executive officers.
Our named executive officers are not entitled to any “single trigger” equity acceleration in connection with a change in control.
We have adopted policies prohibiting hedging, speculative trading, or pledging of Company stock.
All named executive officers are subject to stock ownership requirements.
We do not provide excise tax gross-ups to any of our executive officers.

 

Forward-Looking Statements & Website References

 

This Proxy Statement contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include, but are not limited to, statements regarding the Company’s plans, objectives, expectations, and intentions, including regarding the Company’s goals or expectations with respect to corporate responsibility, sustainability, employees, environmental matters, policy, procurement, philanthropy, data privacy and cybersecurity, and business risks and opportunities. These statements are based on current expectations and are subject to numerous risks and uncertainties, many of which are outside of the control of Korn Ferry. Forward-looking statements are not guarantees or promises that goals or targets will be met. The Company undertakes no obligation to update any forward-looking or other statements, whether as a result of new information, future events, or otherwise, and notwithstanding any historical practice of doing so. In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future—any such information included in, and any ESG issues identified as material for purposes of, this document may not be considered material for Securities and Exchange Commission (“SEC”) reporting purposes. In the context of this Report, the term “material” is distinct from, and should not be confused with, such term as defined for SEC reporting purposes. Actual results may differ materially from those indicated by such forward-looking statements as a result of risks and uncertainties, including those factors discussed or referenced in our most recent annual report on Form 10-K filed with the SEC, under the heading “Risk Factors,” a copy of which is being made available with this Proxy Statement, and subsequent quarterly reports on Form 10-Q.

 

Website references and hyperlinks throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this Proxy Statement, nor does it constitute a part of this Proxy Statement.

 

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Proposal No. 1
Election of Directors

 

Our stockholders will be asked to consider the following eight nominees for election to our Board to serve for a one-year term until the 2023 Annual Meeting of Stockholders and until their successors have been duly elected and qualified, subject to their earlier death, resignation, or removal:

 

Name Position with Korn Ferry
Doyle N. Beneby Director
Laura M. Bishop Director
Gary D. Burnison Director and Chief Executive Officer
Charles L. Harrington Nominee
Jerry P. Leamon Director
Angel R. Martinez Director
Debra J. Perry Director
Lori J. Robinson Director

 

Ms. Gold and Mr. Shaheen will not be standing for re-election at the Annual Meeting. The Company is most grateful to Ms. Gold and Mr.  Shaheen for their valuable service to the Company.

 

Each of the nominees was previously elected by stockholders at the 2021 Annual Meeting of Stockholders, except for Charles L. Harrington. Charles L. Harrington was identified as part of a thorough search process conducted by Korn Ferry’s internal board search consultants. Detailed biographical information regarding each of these nominees is provided in this Proxy Statement under the heading “Background Information Regarding Director Nominees.” Our Nominating and Corporate Governance Committee has reviewed the qualifications of each of the nominees and has recommended to the Board that each nominee be submitted to a vote at the Annual Meeting.

 

All of the nominees have indicated their willingness to serve, if elected, but if any should be unable or unwilling to serve, proxies may be voted for a substitute nominee designated by the Board. The Company did not receive any stockholder nominations for director. Proxies cannot be voted for more than the number of nominees named in this Proxy Statement.

 

Required Vote

 

In uncontested elections, directors are elected by a majority of the votes cast, meaning that each director nominee must receive a greater number of shares voted “for” such nominee than the shares voted “against” such nominee. If an incumbent director does not receive a greater number of shares voted “for” such director than shares voted “against” such director, then such director must tender his or her resignation to the Board. In that situation, the Company’s Nominating and Corporate Governance Committee would make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other action. Within 90 days from the date the election results were certified, the Board would act on the Nominating and Corporate Governance Committee’s recommendation and publicly disclose its decision and rationale behind it.

 

In a contested election, directors are elected by a plurality of the votes cast.

 

 

RECOMMENDATION
OF THE BOARD

 

The Board unanimously recommends that you vote “FOR” each of the nominees named above for election as a director.


 

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The Board of Directors

 

The Company’s Restated Certificate of Incorporation provides that the number of directors shall not be fewer than eight nor more than fifteen, with the exact number of directors within such limits to be determined by the Board. Currently, the Board is comprised of nine directors; effective immediately following the election of directors at the Annual Meeting, the size of the Board will be reduced to eight directors. Upon the recommendation of the Company’s Nominating and Corporate Governance Committee, the Board has nominated the following persons to serve as directors until the 2023 Annual Meeting of Stockholders or their earlier death, resignation or removal:

 

  Doyle N. Beneby Jerry P. Leamon
  Laura M. Bishop Angel R. Martinez
  Gary D. Burnison Debra J. Perry
  Charles L. Harrington Lori J. Robinson

Each of the named nominees is independent under the NYSE rules, except for Mr. Burnison. If re-elected, Mr. Leamon will serve as the Company’s independent Non-Executive Chair of the Board.

 

The Board held 9 meetings during fiscal year 2022. Each of the incumbent directors attended at least 75% of the Board meetings and the meetings of committees of which they were members in fiscal year 2022. Directors are expected to attend each annual meeting of stockholders. Seven of the directors then-serving attended the 2022 Annual Meeting of Stockholders online.

 

 

  Governance Insights  

Board Refreshment & ESG Matters

 

Q & A with Doyle Beneby, Chair of the Nominating and Corporate Governance Committee

 

Question: How has the Board’s membership evolved to garner new ideas and perspectives, and to respond to the ever-changing needs of the Company’s clients and other stakeholders?

 

The Board actively seeks candidates representing a range of tenures, areas of expertise, industry experience, and backgrounds. A central responsibility of the Nominating and Corporate Governance Committee is to identify and recommend individuals to the Board for nomination as members. Our active attention to the evolving landscape in which the Company and its stakeholders operate is reflected in our robust refreshment over the last five years:

 

In 2017, the Board added Angel R. Martinez to, among other benefits, increase its knowledge of products and marketing.
In 2019, the Board added Len J. Lauer (who unexpectedly passed away in April 2020) and Lori J. Robinson, each of whom brought a number of valuable perspectives and experiences to the Board, including, in the case of Gen. (ret.) Robinson, extensive leadership, strategic oversight, and international experience.
In 2021, the Board added Laura M. Bishop to increase the Board’s financial expertise and experience in executive management and corporate governance.
And in 2022, the Board nominated Charles L. Harrington to expand the breadth of the Board’s experience in business and technology transformation for complex organizations, as well as leadership and financial/audit expertise.

 

Question: How is the Company’s ESG Program, and the Board’s oversight of it, continuing to evolve?

 

The Nominating and Corporate Governance Committee is responsible for overseeing the Company’s ESG Program, which includes initiatives that seek to improve the way we work and live, empower diversity, equity, and inclusion, and give back to the communities in which we operate.

 

The Proxy Statement Summary on page 4 highlights a number of recent ESG recognitions of which we are proud, and below are some of our ESG Program’s recent initiatives and accomplishments:

 

 

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Reporting

The Company published its fourth ESG Report, covering 2021 activities and achievements, and its second report in general alignment with the reporting recommendations for its industry by the Sustainability Accounting Standards Board.
Korn Ferry was awarded the 2021 Silver Status Medal from EcoVadis for its sustainability practices for the third consecutive year, and our score placed us in the top 16% of companies that EcoVadis assessed.
For the fifth consecutive year, Korn Ferry responded to the CDP Climate Change survey, reporting on our greenhouse gas emissions and broader practices related to climate change. Korn Ferry again achieved a Management Level rating, this time for our 2021 submission for having a strong awareness of our climate change impacts and opportunities, as well as managing them effectively.
The Company is in the process of preparing its inaugural report in alignment with the standards of the Task Force for Climate-Related Disclosures, with disclosure anticipated in 2023.

 

 

 

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Director Qualifications

 

Our Approach The Board believes that the Board, as a whole, should possess a combination of skills, professional experience, and diversity of backgrounds necessary to oversee the Company’s business. In addition, the Board believes there are certain attributes every director should possess, as reflected in the Board’s membership criteria discussed below. Accordingly, the Board and the Nominating and Corporate Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.
Minimum Criteria

The Nominating and Corporate Governance Committee is responsible for developing and recommending Board membership criteria to the full Board for approval. The criteria, which are set forth in the Company’s Corporate Governance Guidelines include:

   a reputation for integrity,

   honesty and adherence to high ethical standards,

   strong management experience,

   current knowledge of and contacts in the Company’s industry or other industries relevant to the Company’s business,

   the ability and willingness to commit adequate time and attention to Board and Committee activities, and

   the fit of the individual’s skills and personality with those of other directors in building a Board that is effective, collegial, diverse, and responsive to the needs of the Company.

Diverse Experience and Backgrounds The Nominating and Corporate Governance Committee seeks a variety of occupational, educational, and personal backgrounds on the Board in order to obtain a range of viewpoints and perspectives and to enhance the diversity of the Board in such areas as professional experience, geography, race, gender, and ethnicity. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, the Nominating and Corporate Governance Committee believes it is essential that Board members represent diverse viewpoints and backgrounds.
Evaluating Board Composition The Nominating and Corporate Governance Committee periodically evaluates the composition of the Board to assess the skills and experience that are currently represented on the Board, as well as the skills and experience that the Board will find valuable in the future, given the Company’s current business and strategic plans. This periodic assessment enables the Board to update the skills and experience it seeks in the Board as a whole and in individual directors as the Company’s needs evolve and change over time, and to assess the effectiveness of efforts to pursue diversity.
Identifying Director Candidates In identifying director candidates from time to time, the Nominating and Corporate Governance Committee considers recommendations from Board members, management, and stockholders, and may from time to time engage a third- party search firm or utilize Company resources. The Nominating and Corporate Governance Committee may establish specific skills and experience that it believes the Company should seek in order to constitute a balanced and effective board. In evaluating director candidates, and considering incumbent directors for renomination to the Board, the Nominating and Corporate Governance Committee takes into account a variety of factors. These include each nominee’s independence, financial literacy, personal and professional accomplishments, and experience, each in light of the composition of the Board as a whole and the needs of the Company in general, and for incumbent directors, past performance on the Board.
Reviewing Director Commitments The Nominating and Corporate Governance Committee also considers each nominee’s or incumbent director’s ability and willingness to commit adequate time to Board and committee matters.

 

Annual Board and Committee Evaluations

 

Each year, the Board and its committees conduct a self-evaluation to determine that they are functioning effectively and consistently with their purpose and responsibilities. Topics addressed through these processes have included Board structure, director nominations and recruitment, Board and committee meetings and information, Board responsibilities, including management succession planning, and Board and management relations.

 

Solicit Feedback Review By Outside
Counsel
Internal Review Discussion &
Updates
Directors receive via a secure website a detailed questionnaire designed to elicit feedback regarding the functioning and leadership of the Board and each of the committees as a whole. Outside counsel reviews the responses to the questionnaire and consolidates the feedback into a summary presentation. A summary of results are provided by outside counsel, with the anonymized responses, to the Chair of the Board and the Chair of the Nominating and Corporate Governance Committee for review. The results are discussed at both the Board and Nominating and Corporate Governance Committee levels, along with a determination of what, if any, changes should be made in light of the responses.

 

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Snapshot of Director Nominees

 

 

Board Composition: Skills, Tenure*, and Diversity

 

The Board and Company are focused on creating a Board that reflects a wide range of backgrounds, experiences, and cultures.

The following skills are possessed by one or more of our nominees:

 

         
Extensive Senior Leadership / Executive Officer Experience (including as a public company Chief Executive Officer)     Significant Public Company Board, Committee, and Corporate Governance Experience
Risk Management / Oversight Experience   Innovative Thinking
Broad International Experience     High Ethical Standards
Accounting Expertise (including two Accountants)   Appreciation of Diverse Cultures and Backgrounds
Significant Strategic Oversight and Execution Experience     Experience Overseeing Large and Diverse Workforces
Broad Product and Marketing Experience   Breadth of Experience Across Industries
Climate and Energy Experience   Information Security Expertise
         

 

 

* Tenure is provided for non-executive directors only.
** This graphic includes Mr. Shaheen’s cumulative service with the Board of Directors from 2009 to 2019, and from April 2020 to present.
*** These graphics represent directors who are members of underrepresented groups (by gender or race/ethnicity).
**** Not included in percentages of directors from underrepresented groups.

 

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Background and Qualifications of Director Nominees

 

The biographies below set forth information about each of the director nominees, including each such person’s specific experience, qualifications, attributes, and skills that led our Board to conclude that such director nominee should serve on our Board in light of the Company’s current business, structure, and strategic plans. The process undertaken by the Nominating and Corporate Governance Committee in recommending qualified director candidates is described above under “Director Qualifications” and below under “Corporate Governance—Board Committees—Nominating and Corporate Governance Committee.”

 

 

Doyle N. BENEBY

Director Since: 2015

President and Chief Executive Officer, Midland Cogeneration Venture

 

Age: 62

 

Other Directorships:

Public Companies:

•   Quanta Services

•   Capital Power Corporation

 

Other Companies:

•   Midland Business Alliance

 

 

Professional Experience:

President and Chief Executive Officer (Nov. 2018 – Present)

Midland Cogeneration Venture, a natural gas fired combined electrical energy and steam energy generating plant

 

Chief Executive Officer (Nov. 2015 – May 2016)

New Generation Power International, a start-up international renewable energy company

 

President and Chief Executive Officer (July 2010 – Nov. 2015)

CPS Energy, the largest municipal electric and gas utility in the nation

 

President, Exelon Power, and Senior Vice President, Exelon Generation (2009 – 2010)

Vice President, Generation Operations for Exelon Power (2008 – 2009)

Vice President, Electric Operations for PECO Energy (2005 – 2008)

Exelon Corporation, a nuclear electric power generation company

 

Board Qualifications and Skills:

 

Extensive Senior Leadership/Executive Officer Experience: In addition to his experience as a professional director, Mr. Beneby currently serves as President and Chief Executive Officer of Midland Cogeneration Venture, and previously served in a multitude of senior leadership positions, including as former Chief Executive Officer of New Generation Power International, as President and Chief Executive Officer of CPS Energy, and various leadership roles at PECO Energy and Exelon Power, where he served as President.

 

Broad Energy Industry Experience: Over 30 years of experience in the energy industry, with expertise in many facets of the electric and gas utility industry.

 

 

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Laura M. BISHOP

Director Since: 2021

Former Executive Vice President and Chief Financial Officer, USAA

Age: 60

Other Directorships:

Public Companies:

•   N/A

Other Companies:

•   Pie Group Holdings, Inc.

 

 

Professional Experience:

Executive Vice President and Chief Financial Officer (June 2014 – Dec. 2020)

Various Roles, including member of Executive Council (2001 – 2014)

USAA, a Fortune 100 integrated financial services company that provides financial products and services for the military and their families

 

Various Roles, including Senior Vice President and Chief Financial Officer (1992 – 2000)
Luby’s Inc., a publicly traded restaurant company

 

Various Roles, including Senior Manager (1983 - 1992)

Ernst & Young LLP, a multinational professional services network

 

Board Qualifications and Skills:

 

Senior Leadership/Executive Officer Experience: Held senior leadership positions over a nearly 20-year career with USAA, including as Executive Vice President and Chief Financial Officer, and in her near decade of work with Luby’s Inc., including as Senior Vice President and Chief Financial Officer. As a member of USAA’s Executive Council, Ms. Bishop was also responsible for developing and executing strategy while directing activities across enterprise-wide financial management and reporting, including treasury, capital management, controller, tax, planning and forecasting, and strategic cost management. She was also responsible for governance and oversight for investment strategy and management of all institutional and benefit plan portfolios, as well as all capital markets activities, including commercial paper and long-term debt programs, credit facilities, asset-backed securitizations, and reinsurance programs.

Financial Experience and Investment Expertise: At USAA, served as the enterprise Chief Financial Officer for all of USAA’s operating companies spanning the Property and Casualty companies, USAA Federal Savings Bank, and USAA Life Insurance Company. As a Senior Manager at Ernst & Young LLP, she directed audits of publicly traded and privately held companies in a variety of industries. Ms. Bishop also holds a Bachelor of Business Administration in Accounting and is on the Audit Committee of private company Pie Group Holdings, Inc. Ms. Bishop is a certified public accountant.

 

 

 

Gary D. BURNISON

Director Since: 2007

President and Chief Executive Officer

Age: 61

Other Directorships:

Public Companies:

•   N/A

Other Companies:

•   N/A

 

 

Professional Experience:

President and Chief Executive Officer (July 2007 – Present)

Executive Vice President and Chief Financial Officer (March 2002 – June 2007)

Chief Operating Officer (Oct. 2003 – June 2007)
Korn Ferry

 

Principal and Chief Financial Officer (1999 – 2001)
Guidance Solutions, a website development company

 

Executive Officer and Director (1995 – 1999)

Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc., a diversified financial services company

 

Partner

KPMG Peat Marwick, a multinational professional services network

 

Board Qualifications and Skills:

 

High Level of Financial Experience: Substantial financial experience gained in roles as President, Chief Executive Officer, and as former Chief Financial Officer and Chief Operating Officer of the Company, as Chief Financial Officer of Guidance Solutions, as an executive officer of Jefferies & Company, Inc., and as a partner at KPMG Peat Marwick.

Senior Leadership/Executive Officer Experience: In addition to serving as the Company’s President and Chief Executive Officer, served as Chief Financial Officer of Guidance Solutions.

Extensive Knowledge of the Company’s Business and Industry: Over 20 years of service with the Company, in increasingly senior roles.

Thought Leader: Author of eight leadership and career development books, and regular content focused on the intersection of strategy, talent, and leadership, as well as a frequent contributor to media outlets.

 

 

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Charles L. Harrington

Nominee

Age: 63

Other Directorships:

Public Companies:

•   J.G. Boswell Company

•   John Bean Technologies

•   Constellation Energy

Other Companies:

•   Cal Poly Foundation

•   Institute of Digital Engineering USA

 

 

Professional Experience:

President (2009 – 2021)

Chief Executive Officer (2008 – 2021)

Executive Vice President, Chief Financial Officer, and Treasurer (2006 – 2008)

Various Roles, including Group President, PARCOM, Biotechnology, Semiconductors and Telecommunications (1982 – 2006)

Parsons Corporation, a technology-focused defense, intelligence, security, and infrastructure engineering firm

 

Board Qualifications and Skills:

 

Senior Leadership/Executive Officer Experience: Over his nearly 40-year career at Parsons Corporation, held increasing roles of responsibility, including 13 years as Chief Executive Officer, 12 years as President, and two years as Chief Financial Officer, Executive Vice President, and Treasurer. He has deep experience in strategy development and execution, business transformation, operational management, business development, and technology development.

Significant Advisory and Board Experience: More than 14 years of public company board experience, including at Parsons Corporation (as Chairman from 2008 to 2021 and Executive Chairman from 2021 to 2022) and AES Corporation (from 2013 to 2020) where he chaired the Audit Committee. Serves as director of the Cal Poly Foundation since 2010 and as Vice Chair since 2019. Also serves as the director and chairman of the non-profit Institute for Digital Engineering USA, and as an advisor to Glasswing Ventures, and The Holdsworth Group, LLC.

 

 

 

Jerry P. LEAMON

Director Since: 2012

Former Global Managing Director, Deloitte

Age: 71

Other Directorships:

Public Companies:

•   N/A

Other Companies:

•   Credit Suisse USA, a subsidiary of Credit Suisse Group AG

•   Geller & Company

•   Jackson Hewitt Tax Services

•   Business Advisory Council of the Carl H. Lindner School of Business

 

 

Professional Experience:

Various Roles, including Global Managing Director and Partner (1972 – 2012)

Deloitte, a multinational professional services company

 

Board Qualifications and Skills:

 

High Level of Financial Experience: Substantial financial experience gained from an almost 40-year career with Deloitte (ending in 2012), including as leader of the tax practice in the U.S. and globally, and as leader of the M&A practice for more than 10 years.

Accounting Expertise: In addition to an almost 40-year career with Deloitte, Mr. Leamon is a certified public accountant.

Broad International Experience: Served as leader of Deloitte’s tax practice, both in the U.S. and globally, and was Global Managing Director for all client programs, including industry programs, marketing communication and business development.

Service Industry Experience: Deep understanding of operational and leadership responsibilities within the professional services industry, having held senior leadership positions at Deloitte while serving some of their largest clients.

Significant Board Experience: Mr. Leamon serves on a number of boards and non-profit organizations, including Credit Suisse USA, where he chairs the Audit Committee, Geller & Company, and Jackson Hewitt Tax Services. He served as chairman of Americares Foundation for 7 years and a Board member for 17. He is also Trustee Emeritus of the University of Cincinnati Foundation and Board and serves as a member of the Business Advisory Council of the Carl H. Lindner School of Business.

 

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Angel R. MARTINEZ

Director Since: 2017

Former Chairman of the Board of Directors, and former Chief Executive Officer and President, of Deckers Brands

Age: 67

Other Directorships:

Public Companies:

•   Genesco Inc.

Other Companies:

•   N/A

 

 

Professional Experience:

Chief Executive Officer and President (April 2005 – June 2016)

Deckers Brands (formerly known as Deckers Outdoor Corporation), a global leader in designing, marketing and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high performance activities

 

President, Chief Executive Officer and Vice Chairman (April 2003 – March 2005)

Keen LLC, an outdoor footwear manufacturer

 

Executive Vice President and Chief Marketing Officer (1999 – 2001)

Chief Executive Officer and President, The Rockport Company (1995 – 1999)

Reebok International Ltd., an American fitness footwear and clothing manufacturer

 

Board Qualifications and Skills:

 

Extensive Senior Leadership/Executive Officer Experience: Served in numerous senior leadership positions, including as Chief Executive Officer and President of Deckers Brands, Executive Vice President and Chief Marketing Officer of Reebok International Ltd., President of The Rockport Company, and President and Chief Executive Officer of Keen, LLC.

Broad Product and Marketing Experience: Almost 40 years of experience in management, product, and marketing from senior positions with, among other companies, Deckers Brands, Reebok International, and The Rockport Company.

Significant Public Company Board and Corporate Governance Experience: Over 24 years of public company board service, including as a director of Tupperware Brands Corporation from 1998 to 2020, and Executive Chairman (2008 to 2016) and non-Executive Chairman (2016 to 2017) of the Board of Deckers Brands.

 

 

 

Debra J. PERRY

Director Since: 2008

Former senior managing director in the Global Ratings and Research Unit of Moody’s Investors Service, Inc.

Age: 71

Other Directorships:

Public Companies:

•   Assurant, Inc.

Other Companies:

•   The Bernstein Funds, Inc., a mutual fund complex

 

 

Professional Experience:

Senior Managing Director, Global Ratings and Research Unit, Moody’s Investors Service, Inc. (2001 – 2004)

Chief Administrative Officer and Chief Credit Officer (1999 – 2001)

Group Managing Director, Finance, Securities and Insurance Rating Groups (1996 – 1999)

Various Roles (1992 – 1996)

Moody’s Corporation, a business and financial services company

 

Board Qualifications and Skills:

High Level of Financial Experience: Substantial financial experience gained from 23 years of professional experience in financial services, including a 12-year career at Moody’s Corporation, where among other things, Ms. Perry oversaw the Americas Corporate Finance, Leverage Finance, Public Finance and Financial Institutions departments.

Significant Audit Committee Experience: Over 17 years of public company audit committee service, including as a member of MBIA Inc.’s Audit Committee (2004 to 2008), CNO Financial’s Audit Committee (2004 to 2011), PartnerRe’s Audit Committee (from June 2013 to March 2016, including as Chair of the Audit Committee from January 2015 to March 2016), Genworth Financial’s Audit Committee (from Dec. 2016 to May 2022), Korn Ferry’s Audit Committee (since 2008; appointed Chair of Audit Committee in 2010), and The Bernstein Funds, Inc.’s Audit Committee (since 2011).

Significant Public Company Board and Corporate Governance Experience: Previously served as a director of Genworth Financial (Dec. 2016 to May 2022), as a director (June 2013 to March 2016) and Chair of the Audit Committee (January 2015 to March 2016) of PartnerRe, and as a trustee of BofA Funds Series Trust (June 2011 to April 2016), MBIA Inc. (2004 to 2008), and CNO Financial Group, Inc. (2004 to 2011). Actively involved in corporate governance organizations, including the National Association of Corporate Directors (“NACD”). Named in 2014 to NACD’s Directorship 100, which recognizes the most influential people in the boardroom and corporate governance community. Served on the board of the Committee for Economic Development, a non-partisan, business-led public policy organization.

 

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Lori J. ROBINSON

General (ret.)

Director Since: 2019

Commander, U.S. Northern Command and North American Aerospace Defense Command, Department of the Air Force (Ret.)

Age: 63

Other Directorships:

Public Companies:

•   Nacco Industries

•   Centene Corp.

Other Companies:

•   The Robinson Group, LLC

 

 

Professional Experience:

Non-Resident Fellow (2018 – Present)

Harvard Kennedy School, Belfer Center for Science and International Affairs

 

Founder, Director (2018 – Present)

The Robinson Group, LLC

 

Commander (2016 – 2018)

U.S. Northern Command and North American Aerospace Defense Command, Department of Defense

 

Commander (2014 – 2016)

Pacific Air Forces and Air Component Commander for U.S. Pacific Command

 

Vice Commander (2013 – 2014)

Air Combat Command

 

Air Force Fellow (2002)

The Brookings Institution

 

Board Qualifications and Skills:

 

High Level of Leadership Experience: Four Star General and first female U.S. Combatant Commander, with numerous government leadership roles with the U.S. Department of Defense, including serving as Commander of the U.S. Northern Command and North American Aerospace Defense Command, and Commander, Pacific Air Forces and Air Component Commander for U.S. Pacific Command, leading more than 45,000 Airmen. Named by Time Magazine as one of the “Women Who Are Changing The World” in 2017, in recognition of her service as the first woman to lead a top-tier U.S. Combat Command, and as one of “Time’s Most Influential People in 2016.”

Significant Strategic Oversight and Execution Experience: Over three decades of experience with the U.S. Air Force overseeing, among other things, homeland defense, civil support, and security cooperation.

Extensive International Experience: Interacted with counterparts in the Indo-Pacific (including China) and the Middle East, reported directly to the U.S. Secretary of Defense and Chief of the Canadian Defence Staff, served four combat tours, and oversaw U.S. Air Force operations in the Middle East.

 

 

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Corporate Governance

 

The Board oversees the business and affairs of the Company and believes good corporate governance is a critical factor in our continued success and also aligns management and stockholder interests. Through our website, at www.kornferry.com, our stockholders have access to key governing documents such as our Code of Business Conduct and Ethics, Corporate Governance Guidelines, and charters of each committee of the Board, as well as information regarding our Corporate Responsibility Program. The highlights of our corporate governance program are included below:

 

   
         
Board Structure   Stockholder Rights   Other Highlights

  89% of the Board consists of Independent Directors

  Independent Chair of the Board, Separate from CEO

  Independent Audit, Compensation, and Nominating Committees

  Regular Executive Sessions of Independent Directors

  Annual Board and Committee Self-Evaluations

  63% Board Members and nominees from Underrepresented Groups (by Gender or Race/Ethnicity) (if all are elected)

  2 Committees Led by Directors from Underrepresented Groups (by Gender or Race/Ethnicity)

  Annual Strategic Off-Site Meeting

  No Director Serves on More than Four Public Company Boards (including the Company’s Board)

  10-Term Service Limit for Non-Executive Directors Joining the Board after October 1, 2020

 

 

  Annual Election of All Directors

  Majority Voting for Directors in Uncontested Elections

  No Poison Pill in Effect

  Stockholder Communication Process for Communicating with the Board

  Regular Stockholder Engagement

  No Supermajority Voting Standards

  Ability of Stockholders to Call Special Stockholder Meetings

 

  Clawback Policy

  Stock Ownership Policy

  Pay-for-Performance Philosophy

  Policies Prohibiting Hedging, Pledging, and Short Sales

  No Excise Tax Gross-Ups

  Quarterly Education on Latest Corporate Governance Developments

  Committee Oversight of ESG Program

  Board Oversight of Political Contributions and Risk

 

Board Leadership Structure

 

Board Discretion. The Company’s Corporate Governance Guidelines provide that the Board is free to select its Chair and Chief Executive Officer in the manner it considers to be in the best interests of the Company and that the role of Chair and Chief Executive Officer may be filled by a single individual or two different persons. This provides the Board with flexibility to decide what leadership structure is in the best interests of the Company at any point in time.

 

Separate Chair and CEO. Currently, the Board is led by an independent, non-executive Chair, Ms. Gold. Ms. Gold is not standing for re-election at the Annual Meeting. Following the Annual Meeting, Mr. Leamon will serve as Chair of the Board, subject to his re-election as a director at the Annual Meeting. The Board has determined that having an independent director serve as Chair of the Board is in the best interests of the Company at this time as it allows the Chair to focus on the effectiveness and independence of the Board while the Chief Executive Officer focuses on executing the Company’s strategy and managing the Company’s business. In the future, the Board may determine that it is in the best interests of the Company to combine the role of Chair and Chief Executive Officer.

 

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Director Independence

 

Board Determinations. The Board has determined that as of the date hereof a majority of the Board is “independent” under the independence standards of The New York Stock Exchange (the “NYSE”). The Board has determined that the following directors and nominees are “independent” under the independence standards of the NYSE: Doyle N. Beneby, Laura M. Bishop, Christina A. Gold, Charles L. Harrington, Jerry P. Leamon, Angel R. Martinez, Debra J. Perry, Lori J. Robinson, and George T. Shaheen.

 

Independence Standards. For a director to be “independent,” the Board must affirmatively determine that such director does not have any material relationship with the Company. To assist the Board in its determination, the Board reviews director independence in light of the categorical standards set forth in the NYSE’s Listed Company Manual. Under these standards, a director cannot be deemed “independent” if, among other things:

 

the director is, or has been within the last three years, an employee of the Company, or an immediate family member is, or has been within the last three years, an executive officer of the Company;
the director has received, or has an immediate family member who received, during any 12-month period within the last three years, more than $120,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
(1) the director or an immediate family member is a current partner of a firm that is the Company’s internal or external auditor, (2) the director is a current employee of such a firm, (3) the director has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit, or (4) the director or an immediate family member was within the last three years a partner or employee of such firm and personally worked on the Company’s audit within that time;
the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serve or served on that company’s compensation committee; or
the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of the other company’s consolidated gross revenues.

 

Executive Sessions. The independent directors of the Board meet regularly in executive sessions outside the presence of management. Ms. Gold, as Chair of the Board, currently presides at all executive sessions of the independent directors.

 

 

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Board’s Oversight of Enterprise Risk and Risk Management

 

The Board plays an active role, both as a whole and also at the committee level, in overseeing the Company’s management of risks. Management is responsible for the Company’s day-to-day risk management activities. The Company has established an enterprise risk framework for identifying, aggregating, and evaluating risk across the enterprise. The risk framework is integrated with the Company’s annual planning, audit scoping, and control evaluation management by its internal auditor. The review of risk management is a dedicated periodic agenda item for the Audit Committee, and the Company’s other Board committees also consider and address risk during the course of their performance of their committee responsibilities, as summarized in the following graphic.

 

The Board
Oversees Company process for assessing and managing risk
Monitors risks through regular reports from each committee chair and the General Counsel
Apprised of particular risk management matters in connection with its general oversight and approval of corporate matters, including, but not limited to, cybersecurity
     
             
Audit Committee   Nominating and Corporate
Governance Committee
  Compensation and
Personnel Committee
  Management
Periodically reviews management’s financial and operational risk assessment and risk management policies, the Company’s major financial risk exposures (including risks related to cybersecurity vulnerabilities), and the steps management has taken to monitor and control such exposures  

Oversees risks associated with operations of the Board and its governance structure

 

Oversees risks associated with ESG matters

 

Reviews risks related to Company’s compensation programs for senior management and employees

 

Assists Board in determining whether the Company’s compensation programs involve risks that are reasonably likely to have a material adverse effect on the Company

 

General Counsel periodically reports to the Board on litigation and other legal risks that may affect the Company

 

Various members of senior management periodically report to the Board on risk mitigation measures related to business continuity, disaster recovery, COVID-19, data privacy, and cybersecurity

 

We believe the division of risk management responsibilities described above provides an effective framework for evaluating and addressing the risks facing the Company, and that our Board leadership structure supports this approach because it allows our independent directors, through the independent committees and non-executive Chair, to exercise effective oversight of the actions of management.

 

Throughout the year, the Board receives regular training and updates on governance topics ranging from the increasing focus on ESG, diversity, and human capital matters by investors and regulators, legal developments related to corporate governing documents, and evolving SEC disclosure and stockholder proposal requirements, among others.

 

Assessment of Risk Related to Compensation Programs

 

During fiscal year 2022, the Company conducted its annual review of executive and non-executive compensation programs globally, with particular emphasis on incentive compensation plans and programs. Based on this review, the Company evaluated the primary components of its compensation plans and practices to identify whether those components, either alone or in combination, properly balanced compensation opportunities and risk. As part of this inventory, several factors were noted that reduce the likelihood of excessive risk taking. These factors include: balancing performance focus between near-term objectives and strategic initiatives; issuing annual equity awards that vest over multiyear time horizons; and maintaining a stock ownership policy and a clawback policy applicable to our executive officers. Furthermore, the Compensation and Personnel Committee retains its own independent compensation consultant to provide input on executive pay matters, meets regularly, and approves all performance goals, award vehicles, and pay opportunity levels for named executive officers. As a result of this evaluation, the Company concluded that risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse impact on the Company.

 

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Board Committees

 

Although the full Board considers all major decisions, the Company’s Bylaws permit the Board to have the following standing committees to more fully address certain areas of importance: (1) an Audit Committee, (2) a Compensation and Personnel Committee, and (3) a Nominating and Corporate Governance Committee. The members of the standing committees as of the date hereof are set forth in the tables below. Following the Annual Meeting, the Nominating and Corporate Governance Committee intends to evaluate the composition of the standing committees and make recommendations to the Board regarding any appropriate changes to the Committees.

 

Audit Committee

Fiscal 2022 Meetings Held: 8

 

     
Debra J. PERRY   Jerry P. LEAMON   Angel R. MARTINEZ   Laura M. BISHOP
    CHAIR                
   
Independence: All Audit Committee members are “independent directors” under the applicable listing standards of the NYSE and the applicable rules of the SEC.
Financial Literacy: The Board, in its business judgment, has determined that Mses. Bishop and Perry and Messrs. Leamon and Martinez are “financially literate” under the NYSE rules.
Audit Committee  
Financial Experts: The Board determined that Ms. Perry qualifies as an “audit committee financial expert” from her many years of experience in the financial services industry and service on other public company Audit Committees, that Ms. Bishop qualifies based on her years of service as a chief financial officer and certified public accountant with Ernst & Young LLP, and that Mr. Leamon qualifies based on his almost 40 years of experience as a certified public accountant with Deloitte.
Key Responsibilities:
Is directly responsible for the appointment, compensation, retention, evaluation, and oversight of the independent registered public accounting firm, including annual assessments that consider, among other topics, the level of open and professional communication with the Audit Committee;
Reviews the independent registered public accounting firm’s qualifications and independence and has processes in place for the timely communication of corporate changes or other events that could impact the firm’s independence;
Reviews the plans and results of the audit engagement with the independent registered public accounting firm;
Oversees financial reporting principles and policies;
Considers the range of audit and non-audit fees;
Reviews the adequacy of the Company’s internal accounting controls, including through regular discussions at committee meetings;
Oversees the Company’s internal audit function, including annually reviewing and discussing the performance and effectiveness of the Internal Audit Department;
Oversees the Company’s Ethics and Compliance Program, including annually reviewing and discussing the implementation and effectiveness of the program; and
Works to provide for the integrity of financial information supplied to stockholders.

 

The Audit Committee also reviews new accounting standards applicable to the Company with the independent registered public accounting firm, Internal Audit Department, General Counsel and the Chief Financial Officer, and is available to receive reports, suggestions, questions, and recommendations from them. The Audit Committee also confers with these parties in order to help assure the sufficiency and effectiveness of the programs being followed by corporate officers in the areas of compliance with legal and regulatory requirements, business conduct, and conflicts of interest.

 

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Compensation and Personnel Committee

Fiscal 2022 Meetings Held: 8

 

       
Jerry P. LEAMON   Doyle N. BENEBY   Lori J. ROBINSON   George T. SHAHEEN   Laura M. BISHOP
    CHAIR                    
                     
Independence: The Board has determined that all members of the Compensation and Personnel Committee are “independent directors” under the applicable listing standards of the NYSE.  
Key Responsibilities:
Approves and oversees the Company’s compensation programs, including cash, deferred compensation, and equity-based incentive programs provided to members of the Company’s senior management group, including the Company’s Chief Executive Officer, Chief Financial Officer, and other named executive officers, as well as equity-based compensation and deferred compensation programs provided to any Company employee;
Reviews the compensation of directors for service on the Board and its committees; and
Approves or recommends to the Board, as required, specific compensation actions, including salary adjustments, annual cash incentives, equity award grants, and employment and severance arrangements for the Chief Executive Officer and other executive officers.

 

The Compensation Committee also reviews and develops, in conjunction with the CEO, a CEO succession plan, both for use in an emergency situation and in the ordinary course of business, which the committee reports at least annually to the full Board. The Compensation Committee also oversees succession planning for positions held by senior management (other than the CEO) and reviews such plans at least annually with the Board, including recommendations and evaluations of potential successors to fulfill such positions.

 

The Compensation and Personnel Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee consisting solely of members of the Compensation and Personnel Committee who are non-employee directors and outside directors.

 

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Nominating and Corporate Governance Committee

Fiscal 2022 Meetings Held: 5

 

     
Doyle N. BENEBY   Debra J. PERRY   Lori J. ROBINSON   George T. SHAHEEN
    CHAIR                
                 
Independence: The Board has determined that all members of the Nominating and Corporate Governance Committee are “independent directors” under the applicable listing standards of the NYSE.  
Key Responsibilities:
Recommends criteria to the Board for the selection of nominees to the Board;
Evaluates all proposed nominees;
Prior to each annual meeting of stockholders, recommends to the Board a slate of nominees for election to the Board by the stockholders at the annual meeting;
Makes recommendations to the Board from time to time as to changes the Committee believes to be desirable to the size, structure, composition, and functioning of the Board or any committee thereof;
Oversees and monitors the Company’s ESG Program; and
Oversees risks associated with operations of the Board and its governance structure.

 

In evaluating potential nominees, the Nominating and Corporate Governance Committee considers a variety of criteria, including business experience and skills, independence, judgment, integrity, the ability and willingness to commit adequate time and attention to Board activities, and the absence of potential conflicts with the Company’s interests. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, it also takes into account the diversity of the Board when considering director nominees.

 

Stockholder Recommendations. Any stockholder recommendations for director are evaluated in the same manner as all other candidates considered by the Nominating and Corporate Governance Committee. Stockholders may recommend director nominees by mailing submissions to Korn Ferry, 1900 Avenue of the Stars, Suite 1500, Los Angeles, California 90067, Attention: Corporate Secretary.

 

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Board Refreshment Mechanisms

 

The Board seeks to bring together a diverse mix of directors that the Board and senior management can leverage to make well considered strategic decisions in the best interests of the Company and its stockholders. In support of this effort, the Board has adopted or updated refreshment mechanisms in the Corporate Governance Guidelines to balance the desire for Board refreshment with the flexibility to prioritize a director’s contributions to the Board as the most important factor for determining continued service, and allow the Board to retain significantly contributing directors for additional time where warranted.

 

Ten-Term Service Limit. To encourage Board refreshment, new non-executive directors are not eligible to stand for re-election after serving as a director for ten full terms on the Board.

 

Retirement Age Policy. A director is generally not eligible to stand for election after his or her 74th birthday. The Corporate Governance Guidelines, however, reserve the Board’s right, after a formal review of a director’s contributions, to allow a director to stand for election for up to three additional terms of service after reaching his or her 74th birthday. Any such formal review will be conducted prior to nominating a director for any such additional term. The Board and the Nominating and Corporate Governance Committee believe that this policy appropriately enables the Board to retain the experienced insights of current directors while retaining a retirement age limit as a succession mechanism.

 

 

* Tenure is provided for non-executive directors only.

 

Culture of Integrity and Code of Business Conduct and Ethics

 

Korn Ferry is committed to having and maintaining a strong and effective global Ethics and Compliance Program. Consistent with that commitment, the Board has promoted and continues to promote the Company’s culture of ethics and integrity. The Board has adopted a Code of Business Conduct and Ethics that is applicable to all directors, employees, and officers (including the Company’s Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer). Korn Ferry colleagues know that quality and professional responsibility starts with them and the Board has emphasized that with the “tone at the top.”

 

The Code of Business Conduct and Ethics provides a set of shared values to guide our actions and business conduct, including: loyalty, honesty, accountability, observance of ethical standards, and adherence to the law. Among other things, the Code of Business Conduct and Ethics requires directors, employees, and officers to:

 

maintain the confidentiality of all information entrusted to them (except when disclosure is authorized or legally mandated);
deal fairly with the Company’s clients, service providers, suppliers, competitors, and employees;
protect Company assets; and for those who have a role in the preparation and/or review of information included in the Company’s public filings, to report such information accurately and honestly.

 

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It also prohibits directors, employees, and officers from using or attempting to use their position at the Company to obtain an improper personal benefit. We intend to post on the Company’s website amendments or waivers, if any, to the Code of Business Conduct and Ethics, with respect to our officers and directors within four business days following the amendment or waiver.

 

Korn Ferry asks all directors, officers, and personnel, no matter where they are in the world, to make a commitment to abide by the Code, and the Company’s values and ethical business conduct practices. Our ethical business conduct practices and oversight include the following:

 

the Nominating and Corporate Governance Committee selects potential Board candidates who are committed to promoting the Company’s values, including a corporate culture of ethics and integrity;
the Audit Committee is responsible for overseeing the implementation and effectiveness of the Company’s Ethics and Compliance Program, including compliance with the Code of Business Conduct and Ethics;
the Company has a General Counsel and Deputy Compliance Officer with a direct reporting channel to the Audit Committee; and
the Company conducts compliance-related internal audits, investigations, and monitoring.

 

Commitment to Good Governance Practices

 

The Nominating and Corporate Governance Committee and the Board benchmark its practices against its peers and other companies to review and consider “best practices” in corporate governance. The Nominating and Corporate Governance Committee and the Board also value stockholder input. Over the past several years, the Board has implemented various governance changes as a result of the Board’s ongoing review of its governance practices, including in response to the views or input of the Company’s stockholders, including:

 

  Adding oversight of the Company’s ESG Program to the responsibilities of the Nominating and Corporate Governance Committee
  Adopting a special stockholder meeting right for stockholders owning 25% of outstanding shares of Company stock
  Removing supermajority voting requirements and replacing them with majority voting standards
  Declassifying the Board and moving to annual director elections for all directors
  Engaging in outreach with investors related to executive compensation and ESG matters

 

The Board has also adopted Corporate Governance Guidelines, which among other things:

 

limits outside board service to one additional public company board for the Company’s Chief Executive Officer and three additional public company boards for other directors;
specifies director candidate criteria;
establishes the adoption of a stock ownership policy;
assigns the Board oversight of the Company’s political contributions, as well as related policies and procedures;
makes the Board responsible for annually reviewing and monitoring the implementation of the Company’s long-term strategic plan; and
requires non-management directors to meet periodically without management.

 

In addition, the Corporate Governance Guidelines require that, when a director’s principal occupation or business association changes substantially during his or her tenure as a director, that director is required to provide written notice of such change to the chair of the Nominating and Corporate Governance Committee, and agree to resign from the Board if the Board determines to accept such resignation. The Nominating and Corporate Governance Committee must then review and assess the circumstances surrounding such change, and recommend to the Board any appropriate action to be taken.

 

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02
Compensation

 

Proposal No. 2 Advisory Resolution to Approve Executive Compensation 33
Recommendation of the Board 33
   
Compensation Discussion and Analysis 34
Our Named Executive Officers 34
Governance Insights: Stockholder Outreach Regarding Compensation Matters 37
Executive Compensation Philosophy and Oversight 38
Our Process: From Strategy to Compensation-Related Metrics 39
Elements of Compensation & Compensation Decisions and Actions 42
Other Compensation Elements 47
Other Policies 48
Compensation and Personnel Committee Report on Executive Compensation 50
Compensation Committee Interlocks and Insider Participation 50
   
Compensation of Executive Officers and Directors 51
Fiscal Year 2022, 2021, and 2020 Summary Compensation Table 51
Fiscal Year 2022 Grants of Plan-Based Awards 52
Employment Agreements 52
Fiscal Year 2022 Outstanding Equity Awards at Fiscal Year-End 54
Stock Vested in Fiscal Year 2022 55
Fiscal Year 2022 Pension Benefits 55
Fiscal Year 2022 Nonqualified Deferred Compensation 56
Potential Payments Upon Termination or Change of Control 56
Pay Ratio Disclosure 62
Fiscal Year 2022 Compensation of Directors 62

 


 

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Proposal No. 2 
Advisory Resolution to Approve Executive Compensation

 

In accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and more specifically, Section 14A of the Exchange Act, which was added under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are asking stockholders to vote on an advisory resolution to approve the Company’s executive compensation as reported in this Proxy Statement. Our executive compensation program is designed to support the Company’s long-term success. As described below in the “Compensation Discussion and Analysis” section of this Proxy Statement, the Compensation and Personnel Committee has structured our executive compensation program to achieve the following key objectives:

 

provide compensation packages to our executives that are competitive with other major employment services firms, a broader group of human capital companies, and similarly-sized publicly traded companies;
closely tie individual annual cash incentive awards to the performance of the Company as a whole; and
align the interests of senior management with those of our stockholders through direct ownership of Company common stock and by providing a substantial portion of each named executive officer’s direct total compensation in the form of equity-based incentives.

 

We urge stockholders to read the “Compensation Discussion and Analysis” section below, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative below which provide detailed information on the compensation of our named executive officers. The Compensation and Personnel Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” section are effective in achieving our goals and that the compensation of our named executive officers reported in this Proxy Statement has supported and contributed to the Company’s success.

 

We are asking stockholders to approve the following advisory resolution at the 2022 Annual Meeting of Stockholders:

 

RESOLVED, that the stockholders of Korn Ferry (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table, and the related compensation tables and narrative in the Proxy Statement for the Company’s 2022 Annual Meeting of Stockholders.

 

This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation and Personnel Committee will carefully review and consider the voting results when evaluating our executive compensation program. Taking into account the advisory vote of stockholders regarding the frequency of future “say-on-pay” votes at our 2017 Annual Meeting of Stockholders, the Board’s current policy is to include an advisory resolution to approve the compensation of our named executive officers annually. Accordingly, unless the Board modifies its policy on the frequency of future “say-on-pay” votes, the next advisory vote to approve our executive compensation will occur at the 2023 Annual Meeting of Stockholders.

 

 

RECOMMENDATION
OF THE BOARD

 

The Board unanimously recommends that you vote “FOR” the Company’s advisory resolution to approve executive compensation.


 

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Compensation Discussion and Analysis

 

EXECUTIVE SUMMARY: FOCUS ON PAY-FOR-PERFORMANCE

 

Our Named Executive Officers

 

This Compensation Discussion and Analysis (“CD&A”) section provides a detailed description of our compensation philosophy, practices, and the factors and process used in making compensation decisions with respect to our fiscal year 2022 named executive officers (“NEOs”):

 

Name Title
Gary D. Burnison President and Chief Executive Officer
Robert P. Rozek Executive Vice President, Chief Financial Officer and Chief Corporate Officer
Byrne Mulrooney Chief Executive Officer of RPO and Digital
Mark Arian Chief Executive Officer of Consulting

 

Selected Performance Highlights

 

 

 

** Excludes CoreLogic, Inc. and Nielsen Holdings Plc due to their recent and pending acquisitions, respectively.

 

Achieved:

 

I Record Fee Revenue of $2.63 billion, up 45% over fiscal year 2021, and operating margin of 17.9%.

I All-time high Diluted Earnings Per Share of $5.98, up 186% over fiscal year 2021.

I All-time high net income attributable to Korn Ferry of $326.4 million, up 185% over fiscal 2021.

I All-time high Adjusted EBITDA* of $539 million, up 88% over fiscal year 2021, and Adjusted EBITDA margin* of 20.5%.

I All-time high Adjusted Diluted Earnings Per Share* of $6.23, up 148% over fiscal year 2021.

 

* Adjusted Diluted Earnings Per Share, Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures. For a discussion of these measures and for reconciliation to the most directly comparable GAAP measures, see Appendix A to this Proxy Statement.

 

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Spotlight on CEO Pay Alignment

 

Our compensation program is intended to focus on aligning executive pay with stockholder interests. A key element used to achieve this goal is providing annual incentive compensation opportunities that result in payouts based only on the extent of achievement of pre-established performance criteria. As described in more detail below, our Compensation and Personnel Committee sets performance metrics (and associated targets) consisting of financial goals and, other than with respect to fiscal year 2021 due to the unprecedented impact and uncertainty imposed on the Company’s business due to the COVID-19 pandemic, strategic execution key performance indicators (“KPIs”). Executives are not guaranteed payouts under the annual cash incentive plan and payouts from year to year will vary based on achievement of the applicable financial metrics and strategic execution KPIs.

 

The charts below show Mr. Burnison’s annual cash incentive award compensation for fiscal years 2020, 2021, and 2022 and our corresponding achievement of the applicable financial metrics and KPIs under the annual cash incentive plan for each year, as well as our overall Fee Revenue and Adjusted EBITDA in each year. The performance goals under the annual incentive plan were challenging and, as discussed in more detail on page 42 below, the threshold levels of performance each fiscal year—the respective minimum levels of performance required for payout under the annual incentive plan with respect to each metric—are typically set at levels equal to or greater than the prior fiscal year’s actual results. For example, the Adjusted Fee Revenue threshold level as used in the annual incentive plan and described in more detail beginning on page 43 below was set $125 million higher in fiscal year 2022 compared to the fiscal year 2021 actual result. Meeting these threshold goals for fiscal year 2022 would only result in the payout of 50% of the target opportunity for such goal while performance below the threshold level would not result in any payout for the associated performance goal. In fiscal year 2022, our achievement of the applicable metrics and KPIs under the plan for our CEO exceeded the maximum in all cases. In addition, as described in more detail below, a further 15% multiplier was earned based on achievement of stretch performance under a strategically important KPI goal focused on revenue growth for Marquee & Regional accounts, our key account program. This resulted in the maximum payout under the annual incentive plan for Mr. Burnison of 200% of target plus the additional 15% multiplier for achieving stretch performance as referenced above. The Compensation and Personnel Committee will continue to set challenging performance goals in the future to incentivize superior performance year over year.

 

 

* As described above, a 15% multiplier was also earned based on achievement of stretch performance on the Marquee & Regional Accounts KPI.
** Adjusted EBITDA is a non-GAAP financial measure. For a discussion of this measure and for reconciliation to the most directly comparable GAAP measure, see Appendix A to this Proxy Statement.

 

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Stockholder Engagement and Consideration of Last Year’s Say on Pay Vote

 

Korn Ferry interacts with its stockholders to obtain their views on various topics from our Company strategy to capital allocation and executive compensation. These interactions are typically led by our Chief Financial Officer and colleagues from Investor Relations. During these interactions, our stockholders have expressed many viewpoints on a variety of topics generally focused on financial performance.

 

Prior to the 2021 Annual Meeting, the Chair of our Compensation and Personnel Committee, our Chief Financial Officer, and our General Counsel and Managing Director of Business Affairs & ESG, reached out to and met with stockholders to discuss the compensation-related decisions made for fiscal year 2021 and the upcoming say-on-pay advisory vote. Our stockholders have traditionally voted favorably to support the Company’s compensation philosophy that is designed to establish a strong alignment between performance and pay. At the 2021 Annual Meeting of Stockholders, however, as a result of the one-time modifications made to our traditional compensation program in response to the unprecedented uncertainty thrust upon the Company’s business as a result of the sudden outbreak of the global pandemic, and resulting negative recommendations on our say-on-pay vote from stockholder advisory firms ISS and Glass Lewis, our stockholders expressed disapproval of our fiscal year 2021 NEO compensation program. Under 32% of the votes cast were in favor of the advisory vote to approve executive compensation.

 

Following the 2021 Annual Meeting, the Chair of our Compensation and Personnel Committee, our Chief Financial Officer, our Senior Vice President - Investor Relations, our General Counsel and Managing Director of Business Affairs & ESG, our Associate General Counsel and Deputy Compliance Officer, and our Chief Diversity Officer, reached out to and met with stockholders again to discuss executive compensation and ESG matters, including the say-on-pay vote.

 

Highlights from our 2021 Stockholder Engagement

 

 

 

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Changes to Our Compensation Program for Fiscal Year 2022 and Response to Say-On-Pay Vote

 

We are encouraged by the positive engagement sessions held with our stockholders both prior to and after the 2021 Annual Meeting. During these meetings, our stockholders expressed overwhelming support for our return to the same pay for performance program that has received strong approval over the years, and for which stockholders confirmed their continued support during our outreach efforts. As a result, we determined that no additional changes were needed to our compensation program following the say-on-pay vote because we had already addressed our stockholders' concerns. We were happy to hear that our stockholders supported our return to these compensation programs. The Company values stockholders' input and feedback and will continue to consider it in making executive compensation decisions.

 

For more information, refer to the Q&A with the chair of our Compensation & Personnel Committee below and the discussions of our fiscal year 2022 annual bonus program and long-term equity incentives beginning on pages 42 and 46, respectively.

 

 Governance Insights 

Stockholder Outreach Regarding Compensation Matters

 

Q & A with Jerry Leamon, Chair of the Compensation and Personnel Committee

 

Question: When did the Committee determine to return to its traditional compensation program?

 

The Committee returned to the Company’s standard mix of 60% performance-based awards and 40% time-based awards effective May 1, 2021 (the beginning of fiscal year 2022), even prior to the say-on-pay vote held at the 2021 Annual Meeting of Stockholders. As described in last year’s proxy statement, our Company was severely affected by the impacts of the COVID-19 pandemic and the tumultuous social and political environment in the months when the Compensation and Personnel Committee was confronted with making difficult compensation decisions for fiscal year 2021. In the Spring and early Summer of 2020, it was virtually impossible to project the Company’s performance for all of fiscal year 2021 with any confidence. As a prudent response to that uncertainty, the Compensation and Personnel Committee set up a one-time design for the annual bonus plan and long-term equity awards for fiscal year 2021, including setting performance goals for the annual bonus plan only for the first six months for fiscal year 2021 and then ratcheting up the goals on a quarterly basis thereafter and granting long-term equity awards subject solely to time-based vesting. Given the strong support shown over the years for the traditional design of our compensation programs, the Compensation and Personnel Committee always intended to return to our traditional programs as soon as practicable. The Committee made that determination for fiscal year 2022 even before the end of the 2021 fiscal year.

 

Question: Did the Company make any changes to its executive compensation programs for fiscal year 2022 in light of the advisory vote on executive compensation?

 

The Committee made compensation decisions for fiscal year 2022 prior to the 2021 Annual Meeting of Stockholders. Nevertheless, we reached out to 72% of outstanding shares following the 2021 Annual Meeting and were able to secure meetings with stockholders representing 21% of outstanding shares, as we wanted to listen and understand stockholder concerns and reaffirm our commitment to the return to our traditional compensation programs. It was always the Committee’s intention that the modifications made to the compensation program for fiscal year 2021 be temporary to help us face the extraordinary challenges at the time. When fiscal year 2022 compensation decisions were made, despite the ongoing COVID-19 pandemic and turbulent social and political climate, we had a positive outlook for our business and made the decision to return to our more traditional compensation structure, which we have continued for fiscal year 2023, even in the face of a turbulent stock market. We were encouraged by the positive engagement sessions held with our stockholders both prior to and after the 2021 Annual Meeting. As described above, our stockholders expressed overwhelming support for our return to the same pay for performance program that has received strong approval over the years, and for which stockholders confirmed their continued support during our outreach efforts. As a result, we determined that no additional changes were needed to our compensation program following the say-on-pay vote because we had already addressed our stockholders' concerns. We greatly value our stockholders’ input and feedback, and will continue to consider this in all facets of our business, including executive compensation.

 

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Best Practice Highlights

 

Use of Independent Compensation Consultant. The Committee receives objective advice from its independent compensation consultant
Modest Perquisites. NEOs receive only modest perquisites
Clawback Policy. The Board has adopted a clawback policy applicable to all incentive payments and performance-based equity awards granted to executive officers
No Single Trigger Equity Payments. The NEOs are not entitled to any “single trigger” equity acceleration in connection with a change in control
Focus on Performance-Based Equity Awards. A majority of the annual equity awards granted to NEOs are subject to the achievement of rigorous performance goals
Stock Ownership Policy. NEOs are required to hold three times their base salary in Company common stock
Peer Group Analysis. The Company reviews total direct compensation (base salary, annual cash incentive and long-term incentive payments) and the mix of the compensation components for the NEOs relative to the peer group as one of the factors in determining if compensation is adequate to attract and retain executive officers with the unique set of skills necessary to manage and motivate our global organizational consulting firm
No Hedging; No Speculative Trading; No Pledging. The Company has adopted policies prohibiting hedging, speculative trading, or pledging of Company stock
No Excise Tax Gross-Ups. Our NEOs are not entitled to any such gross-up

 

Executive Compensation Philosophy and Oversight

 

Philosophy

 

The Company is a global organizational consulting firm. The Company helps its clients design their organization—the structure, the roles and the responsibilities, as well as how they compensate, develop and motivate their people. As importantly, the Company helps organizations select and hire the talent they need to execute their strategy. The Company’s unique global positioning allows it to maintain enhanced brand visibility and to attract and retain high-caliber consultants. As of April 30, 2022, the Company provides its services to a broad range of clients through the expertise of approximately 3,471 consultants and execution staff who are primarily responsible for originating client services and who are located in 53 countries throughout the world. Accordingly, the Company’s executive officers must have the skills and experience to manage and motivate an organization spread over a large number of countries with varying business and regulatory environments. The market for these talented individuals is highly competitive. The Company’s compensation philosophy focuses on attracting, retaining, and properly rewarding the right candidates for their contributions.

 

The Committee is diligent about establishing an executive compensation program offering competitive total direct compensation opportunities, which are aligned to stockholder return by incentivizing executives to focus on both short-term and long-term Company performance via participation in our annual bonus plan, where payouts require achieving pre-established goals related to Company performance, and the grant of long-term equity incentive awards, where the value realized by executives will proportionately increase in connection with a corresponding increase in our stock price. The performance criteria utilized in our executive compensation program are grounded in the Company’s Strategic Plan and Annual Operating Plan (“AOP”).

 

The Committee remains guided by the following principles in establishing and assessing compensation programs and policies for the NEOs:

 

Individual annual cash incentive and equity-based awards should be closely tied to the performance of the Company as a whole or one or more of its divisions or business units, as well as to the team and individual performance of the NEO;
The interests of senior management and the Company’s stockholders should be aligned through direct ownership of Company common stock and by providing a sizable portion of each NEO’s total direct compensation in the form of equity-based incentives; and
Total direct compensation must be competitive with our peer group, a broader group of human capital companies, and similarly sized publicly traded companies.

 

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Our Process: From Strategy to Compensation-Related Metrics

 

 

The process for setting annual compensation-related metrics begins at an annual off-site meeting where the Company reviews with the Board its Strategic Plan (including goals and objectives). As part of the Strategic Plan, the Company establishes a Strategy Execution Framework “SEF” to drive performance and achievement of its strategic goals. That framework is represented by the five pillars below; each of which is comprised of detailed activities which, when executed, are designed to drive financial performance goals set within the Company’s Strategic Plan:

 

integrated, solutions-based go-to-market strategy,
deliver client excellence and innovation,
create the top-of-mind brand in organizational consulting,
premier career destination, and
pursue transformational opportunities at the intersection of talent and strategy.

 

In setting the financial goals that underlie the Strategic Plan, the Company considers a number of internal and external factors such as:

 

revenue growth in excess of GDP expectations,
projected macro-economic data such as employment trends,
forecasted GDP in the countries where the Company has significant operations,
internal investment activities,
market expectations for revenue and earnings growth for recruiting, staffing and human capital industry public companies,
recent and expected levels of new business activity,
increased productivity of fee earners,
focus on increasing Executive Search, RPO and Professional Search, Digital, and Consulting collaboration efforts, and
leveraging the executive search relationships to drive cross line-of-business revenue growth.

 

Then, the Board approves an AOP for the upcoming fiscal year. For the NEOs, the Committee establishes annual bonus plan targets with financial and strategic execution KPIs that are derived from the SEF and AOP.

 

Such financial targets and strategic execution KPIs form the basis for each NEO’s annual cash incentives and are tracked and measured during the course of the year with the year-end results reported to the Committee for determining year-end annual cash bonus awards.

 

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Use of Independent Advisor

 

The Committee retains compensation consultants to assist it in assessing the competitiveness of the NEOs’ compensation. In fiscal year 2022, the Committee retained Pearl Meyer. Pursuant to the factors set forth in Item 407 of Regulation S-K of the Exchange Act, the Committee has reviewed the independence of Pearl Meyer and conducted a conflicts of interest assessment (taking into consideration factors specified in the NYSE listing standards) and has concluded that Pearl Meyer is independent and its work for the Committee has not raised any conflicts of interest. No other fees were paid to Pearl Meyer except fees related to its services to the Committee.

 

Use of a Peer Group

 

The Company does not target or position NEO pay levels at a specific percentile level relative to a peer group. Rather, the Company reviews total direct compensation and the mix of the compensation components relative to the peer group as one of the factors in determining if compensation is adequate to attract and retain executive officers with the unique set of skills necessary to manage and motivate our global human capital management firm.

 

Because a number of the Company’s direct competitors for talent are privately-held, precise information regarding executive officer compensation practices among the Company’s competitor group is difficult to obtain. In addition, even when such data is available, meaningful differences in size, complexity and organizational structure among the Company’s peer group make direct comparisons of compensation practices challenging and require exercise of judgment. In assessing the competitiveness of the Company’s NEO compensation, the Committee relies on information obtained from the proxy statements of publicly-traded competitors, information derived from data obtained from other public sources with respect to competitor organizations, and the general knowledge of the Committee and its compensation consultant with regard to the market for senior management positions.

 

For fiscal year 2022, the Committee used the following companies as a peer group:

 

ASGN, Inc. Insperity, Inc.
CoreLogic, Inc. Jones Lang LaSalle Incorporated
Cushman & Wakefield Plc Manpower Group, Inc.
FTI Consulting, Inc. Nielsen Holdings Plc
Heidrick & Struggles International, Inc. PageGroup Plc
Huron Consulting Group Inc. Robert Half International Inc.
ICF International, Inc.  

 

This peer group remained consistent with the peer group used for fiscal year 2021. CoreLogic, Inc. was included in the peer group for purposes of making fiscal year 2022 compensation decisions and was later removed due to its acquisition in June of 2021.

 

The selection of commercial real estate companies was predicated on business model and strategy alignment. Real estate companies have very similar business models to professional services firms and face similar personnel and go-to-market issues. We consider the business strategy of such companies as similar to our business strategy because commercial real estate brokers are analogous to our Executive Search partners: they have strong client relationships which the firms are leveraging by building a business with a number of closely related adjacent services that can be sold to clients through those relationships.

 

The selection of staffing industry peers was determined using comparisons of net revenues and global reach. We believe net revenues or gross margins are a better indicator of comparability for staffing industry peers. Staffing industry companies have a very large percentage of pass-through costs for amounts payable to temporary workers which are reported within their gross revenues. We believe that net revenue or gross margin excluding these pass-through costs are more comparable to the net fee revenues we report.

 

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We believe this peer group reflects the size and strategy of our company.

 

    Employment
Services
  Significant
International Exposure
  Business Model /
Strategy Alignment
  Net Revenue
Within 75% of KFY
ASGN, Inc.          
Cushman & Wakefield Plc            
FTI Consulting, Inc.            
Heidrick & Struggles International, Inc.        
Huron Consulting Group Inc.            
ICF International, Inc.            
Jones Lang LaSalle Incorporated            
Manpower Group, Inc.        
Nielsen Holdings Plc            
Insperity, Inc.              
PageGroup Plc        
Robert Half International Inc.          

 

The Committee also evaluated each company on the basis of market capitalization and net revenue. The Committee reviews the peer group on an annual basis. Revenue and market capitalization data for this peer group and the Company are as follows:

 

I Market capitalization (as of July 1, 2022)

 

 

I Revenues***

 

 

* Excluding CoreLogic, Inc., which was acquired by funds managed by Stone Point Capital and Insight Partners on June 4, 2021.
** As of the Company’s fiscal year ended April 30, 2022.
*** Peer company total revenues computed for the most recent four quarters reported as of July 1, 2022.

 

While the Committee does not target a particular position relative to its peer group in determining the salary, annual cash incentive, and long-term incentive levels for each NEO, the Committee does consider the range of salary, annual cash incentive, and long-term incentive levels that the members of the peer group provide to similarly situated executives and generally makes decisions that result in compensation provided to each NEO falling within a range selected by the Committee. The compensation levels for fiscal year 2022 generally fell within the range of the 25th to 75th percentile of the compensation provided to similarly situated executives by members of the peer group.

 

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Elements of Compensation & Compensation Decisions and Actions

 

Base Salary

 

Base salary is intended to compensate NEOs for services rendered during the fiscal year and to provide sufficient fixed cash income for retention and recruiting purposes. NEO base salary levels are reviewed on an annual basis by the Committee. In addition to competitive data from the peer group, data is also obtained from other sources with respect to non-public competitor organizations. The Committee also incorporates its perspective and the market knowledge of its compensation consultant related to senior management positions in assessing base salary levels. Further, the Committee takes into consideration individual performance of each NEO and, with respect to the NEOs other than the Chief Executive Officer, input from the Chief Executive Officer. As described in last year’s proxy statement, in connection with the periodic review of our executive employment arrangements on June 28, 2021, the Company and each NEO entered into new employment agreements. This was done both (1) in recognition of the importance of retaining our NEOs, an experienced and seasoned management team in the middle of leading Korn Ferry through a successful multi-year transformation from an Executive Search firm to a diversified organizational consulting firm; and (2) to provide greater protection to the Company in the event of an NEO departure in the form of an expanded list of competitor companies in each NEO’s noncompetition covenant. Based on a competitive review conducted by Pearl Meyer, the Committee’s independent advisor, the agreements provide for the following annual base salaries, which became effective July 1, 2021: $1,000,000 for Mr. Burnison (increased from $910,000), $625,000 for Mr. Rozek (increased from $575,000), and $550,000 for each of Messrs. Mulrooney and Arian (increased from $450,000). Prior to such increases, there had not been any changes in the base salaries of our NEOs (other than a reduction and subsequent restoration in connection with our cost-saving measures related to the COVID-19 pandemic) since 2014 (for Messrs. Burnison and Mulrooney) and 2015 (for Mr. Rozek). Other than the COVID-19 related reduction and subsequent restoration, Mr. Arian’s base salary had not been changed since he commenced employment in 2017.

 

Annual Cash Incentives

 

Annual cash incentives are intended to motivate and reward NEOs for achieving financial and strategy execution goals over a one-year period. The Committee determines annual cash incentive amounts based upon a number of factors including financial goals, strategy execution objectives, competitive data, and individual performance, as described in more detail below.

 

While the Committee primarily bases annual cash incentive awards on performance against these objectives for the year, it retains negative discretion in determining actual bonus payouts. Annual cash incentives are typically paid in cash, but the Committee may choose to pay a portion of the annual cash incentive in equity or other long-term incentives.

 

Our Metrics: Measuring Performance

 

During the course of our fiscal year, the Company interacts with investors discussing a number of topics, including the financial metrics that investors view as most important. While investors have varied points of view, based upon our interactions we believe the most important metrics for our stockholders are:

 

The Company’s ability to generate revenue growth in excess of its competitors’ revenue growth and market expectations;
The Company’s ability to grow EBITDA and EPS at a rate that is greater than its revenue growth, which provides capital that is necessary to support the Company’s transformational strategy; and
The Company’s ability to allocate and deploy capital effectively so that its return on invested capital exceeds the Company’s cost of capital.

 

The Committee, using the input from investors and the Company’s strategic plan, SEF and AOP as a basis, selects and sets performance metrics and associated targets for our NEOs. These performance metrics typically are separated into two categories: financial metrics and strategy execution KPIs.

 

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For fiscal year 2022, the Committee selected the following financial performance metrics:

 

Financial Metric
Adjusted Fee Revenue
Fee Revenue (as approved for purposes of setting KPIs for the bonus plan) is defined as Fee Revenue of the Company, as reported in the Company’s Form 10-K for the fiscal year ended April 30, 2022 (“Form 10-K”), adjusted to exclude Fee Revenue from the Lucas Group and Patina Solutions Group, Inc. (“Patina”) acquisitions and further adjusted to eliminate the effect of currency fluctuations by translating fiscal year 2022 actual results at a currency rate comparable to the rate used in the Company’s Annual Operating Plan for fiscal year 2022.
Adjusted EBITDA Margin
Adjusted EBITDA Margin (as approved for purposes of setting KPIs for the bonus plan) is defined as GAAP Net Income plus interest expense, income tax provision, depreciation and amortization expenses adjusted to exclude results from the Lucas Group and Patina acquisitions and associated integration and acquisition costs, costs associated with the impairment of fixed assets (i.e., leasehold improvements) and right-of-use assets due to terminating and subleasing some of our office space, and further adjusted to eliminate the effect of currency fluctuations by translating fiscal year 2022 actual results at a currency rate comparable to the rate used in the Company’s Annual Operating Plan for fiscal year 2022, divided by Adjusted Fee Revenue.
Adjusted Diluted EPS
Adjusted Diluted EPS (as approved for purposes of setting KPIs for the bonus plan) is defined as Diluted Earnings per Share, as reported in the Form 10-K, adjusted to exclude results from the Lucas Group and Patina acquisitions and associated integration/acquisition costs, costs associated with the impairment of fixed assets (i.e., leasehold improvements) and right-of-use assets due to terminating and subleasing some of our office space (all on an after-tax basis), and further adjusted to eliminate the effect of currency fluctuations by translating fiscal year 2022 actual results at a currency rate comparable to the rate used in the Company’s Annual Operating Plan for fiscal year 2022.
Adjusted Return on Invested Capital
Adjusted Return on Invested Capital (as approved for purposes of setting KPIs for the bonus plan) is defined as GAAP Net Income, as reported in the Company’s Form 10-K, adjusted to exclude results from the Lucas Group and Patina acquisitions and associated integration/acquisition costs, costs associated with the impairment of fixed assets (i.e., leasehold improvements) and right-of-use assets due to terminating and subleasing some of our office space (all on an after tax basis), and further adjusted to eliminate the effect of currency fluctuations by translating fiscal year 2022 actual results at a currency rate comparable to the rate used in the Company’s Annual Operating Plan for fiscal year 2022, divided by average stockholders’ equity plus average outstanding debt.

 

Strategy execution KPIs constitute the other group of performance metrics. Grounded in the Company’s Strategic Plan, SEF and AOP, the inclusion and use of these KPIs are designed with the intent of aligning compensation with the achievement of the Company’s strategic long-term goals, namely efforts to expand its service offerings. While these KPIs are strategic in nature, each KPI does have identified metrics and measurements assigned to it; some of which tie back to specific financial metrics.

 

Strategy Execution KPIs   Purpose   How the Target Was
Established

Marquee & Regional Accounts

(measured by Fee Revenue from clients designated as Marquee & Regional Accounts divided by total Fee Revenue)*

  Linked to the Company’s integrated solutions that drive its “go-to market” strategy of building deeper, multi-service line relationships with clients   Target set based upon targeted revenues from an agreed-upon list of clients

Top Rated Performers Retention

(based upon the percentage of highly-rated executive search senior client partners and Consulting senior partners/managing directors who are retained throughout the fiscal year)

  Linked to the Company’s strategic goal of being a premier career destination   Target set by Committee derived from the SEF and AOP
* As described above, adjusted to eliminate Fee Revenue from the Lucas Group and Patina acquisitions and further adjusted to eliminate the effect of currency fluctuations by translating fiscal year 2022 actual results at a currency rate comparable to the rate used in the Company’s Annual Operating Plan for fiscal year 2022.

 

The Board, Committee, and Company believe they have set targets with appropriate rigor. When setting fiscal year 2022 targets, and determining fiscal year 2022 actuals, adjustments were made to eliminate the effect of currency fluctuations by translating actual results at a foreign currency rate comparable to the rate used in the Company’s 2022 Annual Operating Plan. Except as described below, in each case, the fiscal year 2022 threshold levels for the financial metrics and Strategy Execution KPIs—the respective minimum levels of performance required for payout under the annual incentive plan with respect to each metric and KPI—were set at levels that were equal to or greater than fiscal year 2021 actual results. In the case of the Marquee & Regional Accounts Strategy Execution KPI and the RPO Adjusted EBITDA Margin metric, the respective threshold goals were set below fiscal year 2021 actual results.

 

In the case of Marquee & Regional Accounts, which are key to the Company’s go-to-market strategy, these accounts were more resilient in the downturn than the rest of the Company’s clients. As the Company’s Fee Revenues dropped to the quarterly trough, the Marquee & Regional Accounts represented a high percentage of the Company’s total Fee

 

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Revenue in the early part of fiscal year 2021 that was not sustainable and, as such, inflated this metric for the full fiscal year 2021. In setting the fiscal year 2022 Marquee & Regional Accounts KPI, the Committee considered the fiscal year 2021 exit run rate of 33.5% to be a more accurate reflection of the current run rate and thus a better benchmark. The Committee set the minimum threshold to start to earn a bonus (50% payout) at the exit run rate of 33.5%.

 

With respect to RPO Adjusted EBITDA Margin, coming through the recovery in the last two quarters of fiscal year 2021, the new business that RPO was winning was starting to ramp up significantly (note that the revenues for RPO actually grew by 7%). When RPO wins a new contract, there are substantial startup costs and with little upfront fee revenues as they are earned based on position requisitions being opened and candidates placed; this results in near-term downward margin pressure. In addition, the Company planned for incremental investment to continue to develop and expand the ability of the RPO business to serve more clients. While a portion of this investment is capitalized, a portion is expensed, which imposes additional downward pressure on the RPO Adjusted EBITDA Margin.

 

The Committee took these factors into consideration when setting the fiscal year 2022 performance goals. Even the full achievement of the aggressive threshold goals for fiscal year 2022 would only result in payout of 50% of the target opportunity for such goal. The table below discusses actual results for fiscal year 2021 and threshold, target, and maximum goals and actual results for fiscal year 2022.

 

Financial Metric / KPI   FY’ 21
Actual*
    FY’ 22
Threshold
    FY’ 22
Target
    FY’ 22
Maximum
    FY’ 22
Actual*
 
Adjusted Fee Revenue ($) (M)   $ 1,810     $ 1,935     $ 2,035     $ 2,135     $ 2,596  
Adjusted EBITDA Margin     15.8 %     17.5 %     18.0 %     18.5 %     20.8 %
Adjusted Diluted EPS ($)   $ 2.51     $ 2.88     $ 3.22     $ 3.56     $ 6.23  
Adjusted ROIC     8.1 %     8.5 %     9.5 %     10.5 %     18.0 %
Marquee & Regional Accounts***     36 %     33.5 %     34.5 %     35.5 %     36.7 %
Top Rated Performers Retention     96 %     **97.9 %     **       **102.1 %     102.3 %
      of Target       of Target               of Target       of Target  
RPO Adjusted Fee Revenue ($) (M)   $ 239     $ 280     $ 305     $ 330     $ 403  
Digital Adjusted Fee Revenue ($) (M)   $ 287     $ 310     $ 334     $ 360     $ 358  
RPO Adjusted EBITDA Margin     13.6 %     11.0 %     12.0 %     13.0 %     15.1 %
Digital Adjusted EBITDA Margin     30.0 %     31.0 %     32.0 %     33.0 %     31.7 %
Consulting Adjusted Fee Revenue ($) (M)   $ 516     $ 575     $ 625     $ 650     $ 663  
Marquee & Regional Accounts Consulting Adjusted Fee Revenue ($) (M)   $ 205     $ 255     $ 276     $ 300     $ 275  
Consulting Adjusted EBITDA Margin     15.8 %     16.0 %     17.0 %     18.0 %     17.9 %
   
* Adjusted as described above, including to eliminate the effect of currency fluctuations by translating actual results at a foreign currency rate comparable to the rate used in the Company’s Annual Operating Plan.
** Threshold, target, and maximum goals not disclosed due to potential competitive harm, but the Committee believes that achievement of the target goal was challenging and would have required substantial performance.
*** An additional 15% stretch goal multiplier was achievable for the Marquee & Regional Accounts goal upon attainment of 36.5%. As stated above, Marquee & Regional Accounts are key to the Company’s strategy. They are long-term client relationships whose Fee Revenues are more resilient than the rest of the Company’s Fee Revenues, they represent a higher proportion of clients that use multiple line of business, and because of the dedicated account teams and disciplined approach to account planning, these accounts perform better than the rest of the portfolio. Because of the importance of this program to the successful execution of the Company’s strategy, the Committee put a one-time, incremental incentive in the form of a 15% multiplier in place if the stretch goal was achieved. No increases in payments associated with this goal would have been paid for partial achievement of this additional stretch goal.

 

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Determinations and Results

 

After the end of the fiscal year, the Committee evaluated each NEO’s achievements against the financial and strategy execution targets. Notwithstanding the structure outlined above, while the Committee primarily bases its determination of annual cash incentives on the metrics previously discussed, the Committee retains negative discretion in determining actual annual cash incentive awards.

 

For fiscal year 2022, the weightings and results for our NEOs were as follows:

 

                Weighting
    Target     Actual*     Burnison/
Rozek
    Mulrooney     Arian  
Adjusted Fee Revenue ($) (M)   $ 2,035     $ 2,596       30 %            
Adjusted EBITDA Margin     18 %     20.8 %     15 %            
Adjusted Diluted EPS ($)   $ 3.22     $ 6.23       15 %            
Adjusted ROIC     9.5 %     18.0 %     15 %            
RPO Adjusted Fee Revenue ($) (M)   $ 305     $ 403             20 %      
Digital Adjusted Fee Revenue ($) (M)   $ 334     $ 358             45 %      
RPO Adjusted EBITDA Margin     12 %     15.1 %           10 %      
Digital Adjusted EBITDA Margin     32 %     31.7 %           10 %      
Consulting Adjusted Fee Revenue ($) (M)   $ 625     $ 663                   55 %
Marquee & Regional Accounts Consulting Adjusted Fee Revenue ($) (M)   $ 276     $ 275                   15 %
Consulting Adjusted EBITDA Margin     17 %     17.9 %                 15 %
Marquee & Regional Accounts***     34.5 %     36.7 %     15 %     15 %     15 %
Top Rated Performers Retention     **       102.3 %     10 %            
              of Target                          
   
* Adjusted as described above, including to eliminate the effect of currency fluctuations by translating fiscal year 2022 actual results at a currency rate comparable to the rate used in the Company’s Annual Operating Plan for 2022.
** Target not disclosed due to potential competitive harm, but the Committee believes that achievement of the target goal was challenging and would have required substantial performance.
*** An additional 15% stretch goal multiplier was achievable for the Marquee & Regional Accounts goal upon attainment of 36.5%. Based on actual performance of 36.7%, the stretch goal was achieved and the additional 15% multiplier was awarded.

 

In keeping with our efforts to reflect stockholder feedback, the table above incorporates detailed disclosure with either actual results or relative results to target. For competitive advantage and confidentiality reasons, we do not disclose the threshold, target, and maximum goals and actual results for our top-rated performance retention strategy execution KPI. However, when the goals were established, they were considered challenging to achieve given the continuing uncertain economic environment.

 

The fiscal year 2022 target bonus was equal to 150% of annual base salary for Mr. Burnison, 120% of annual base salary for Mr. Rozek, and 100% of annual base salary for Messrs. Mulrooney and Arian, with the ability to earn additional amounts up to a maximum cash award of 200% of the applicable target bonus opportunity for each executive, plus an additional 15% multiplier applied to the maximum opportunity if the Marquee & Regional Accounts stretch goal was achieved. For example, Mr. Burnison’s maximum opportunity was equal to $3,000,000 plus an additional 15% of $3,000,000, for a total opportunity equal to $3,450,000.

 

The Committee awarded annual cash incentive amounts as follows: Mr. Burnison—$3,450,000, Mr. Rozek—$1,725,000, Mr. Mulrooney—$1,170,125 and Mr. Arian—$1,158,108 (which amounts represent 200% of Messrs. Burnison’s and Rozek’s target bonuses for the year, 185% of Mr. Mulrooney’s target bonus for the year, and 183% of Mr. Arian’s target bonus for the year, plus, in all cases, an additional 15% multiplier applied on account of achievement of the stretch performance goal for the Marquee & Regional Accounts KPI). These amounts reflect their performance against the financial metrics and strategy execution KPI targets established at the beginning of the fiscal year.

 

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Long-Term Equity Incentives

 

Long-term equity incentives are intended to align the NEOs’ interests with those of stockholders and encourage the achievement of the long-term goals of the Company. Long-term incentives are also designed to motivate and help retain top talent. To accomplish these objectives the Committee has discretion to make grants of options, time-based restricted stock, restricted stock units and/or performance-based awards.

 

The Committee determines long-term incentive award amounts based upon a number of factors including competitive data, total overall compensation provided to each NEO, Company performance during the fiscal year preceding the year of grant, and historic grants. The various factors are not given specific weights; the Committee retains discretion to consider items as it deems appropriate.

 

In fiscal year 2022, our NEOs received annual equity grants comprised of 60% performance-based restricted stock units (discussed in further detail below) and 40% time-based restricted stock. At the time of grant, in consultation with and based on benchmarking data provided by the compensation consultant, the Committee determined that the grant date value of their awards fell within the range of long-term incentives provided by the peer group companies and that this was an appropriate level of equity grant and equity mix to properly align their interests with the Company’s long-term goals, taking into account individual performance and market compensation levels.

 

Below we discuss equity grants made during fiscal year 2022 to Messrs. Burnison, Rozek, Mulrooney, and Arian and the payout of the performance awards granted in fiscal year 2020 for which the three-year performance period ended in fiscal year 2022.

 

Fiscal Year 2022 Equity Awards

 

In fiscal year 2022, 60% (based on the number of units/shares granted at target) of the annual equity awards granted to the NEOs were comprised of performance-based awards tied to three-year relative TSR (“Relative TSR Units”). The NEOs received the remaining portion of their equity awards in the form of time-based restricted stock awards.

 

Performance-Based Equity: Relative TSR Units

 

Mr. Burnison was awarded Relative TSR Units with a target amount of 39,120 units, a maximum amount of 78,240 units, and a minimum amount of zero. These Relative TSR Units have a three-year performance period after which the number of units that vest will depend upon the Company’s TSR over the three-year performance period relative to the fiscal year 2022 peer group of companies listed above. If the Company’s TSR is less than zero, the payouts will be modified to reduce the payout as a percentage of the target.

 

Relative TSR Units were also granted to Mr. Rozek, with a target amount of 16,300 units (maximum of 32,600 units and minimum of zero); and Messrs. Mulrooney and Arian, each with a target amount of 11,740 units (maximum of 23,480 units and minimum of zero).

 

The table below outlines the potential vesting of the percentages of the Relative TSR Units granted in fiscal year  2022 resulting from the Company’s TSR over the three-year performance period relative to the TSR of the fiscal year 2022 peer group.

 

  Payout as a % Target
Relative TSR Percentile Ranking Absolute TSR > 0% Absolute TSR < 0%
>90P 200% 100%
90P 200% 100%
85P 183% 100%
80P 167% 100%
75P 150% 100%
70P 133% 100%
65P 117% 100%
60P 100% 100%
55P 92% 88%
50P 83% 75%
45P 75% 63%
40P 67% 50%
35P 58% 38%
30P 50% 25%
<30P 0% 0%

 

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Time-Based Restricted Stock

 

Each of Messrs. Burnison, Rozek, Mulrooney and Arian received a time-based restricted stock award that vests in four equal annual installments beginning on July 9, 2022. Mr. Burnison received 26,080 shares, Mr. Rozek received 10,870 shares, and Messrs. Mulrooney and Arian each received 7,820 shares.

 

Relative TSR Units for the Three-Year Performance Cycle Ending April 30, 2022

 

April 30, 2022 marked the end of the three-year performance cycle for the performance-based restricted stock units granted to Messrs. Burnison, Rozek, Mulrooney, and Arian in fiscal year 2020 (and discussed in further detail in the Company’s proxy statement for fiscal year 2020). The Company’s relative total stockholder return over the three-year performance period resulted in the Company ranking 2 out of a 13 company peer group (including the Company). This second place ranking translates into 200% of the award (i.e., 107,840, 44,780, 32,760, and 16,220 shares, respectively) vesting.

 

Other Compensation Elements

 

Benefits and Perquisites

 

The Company generally provides NEOs benefits that are provided to all employees, including medical, dental and vision benefits and participation in the Company’s 401(k) plan. Beginning in October 2021, in order to provide the NEOs and certain other employees with market competitive benefits and for retention purposes, the Company implemented a fully insured medical plan. The Company pays the full cost of premiums for this plan. In addition, the NEOs receive the same benefits provided to all employees at the level of vice president and above, including participation in the Company’s nonqualified deferred compensation plan (described below) and executive life insurance.

 

Nonqualified Deferred Compensation Plan

 

The Company maintains a nonqualified deferred compensation plan, known as the Korn Ferry Executive Capital Accumulation Plan (“ECAP”). Pursuant to the ECAP, the NEOs, along with all other U.S.-based vice presidents, may defer up to 80% of their salary and/or up to 100% of their annual cash incentive award into the ECAP. Participants in the ECAP make elections on how they would like their deemed account notionally invested from a group of 15 selected mutual funds. At its discretion, the Company may make contributions to the ECAP on behalf of a participant. All Company matching and performance contributions to the ECAP are approved by the Committee. During fiscal year 2022, no Company contributions were made to the ECAP on behalf of the NEOs. Participants in the ECAP may elect to receive distributions (in lump sum) while employed by the Company (and after such amounts have become vested) or upon termination of their employment with the Company.

 

Long-Term Performance Unit Plan

 

In fiscal year 2017, the Committee approved the Korn Ferry Long Term Performance Unit Plan and subsequently approved amendments and restatements of such plan during fiscal year 2020, fiscal year 2021, and fiscal year 2022 (the “LTPU Plan”). The NEOs are eligible to participate in the LTPU Plan. The purpose of the LTPU Plan is to promote the success of the Company by providing a select group of management and highly-compensated employees with nonqualified supplemental retirement benefits as an additional means to attract, motivate, and retain such employees. Pursuant to the LTPU Plan, the Committee may grant cash-based unit awards (the “Unit Awards”). No Unit Awards were granted to the NEOs in fiscal year 2022, and the last awards made to a named executive officer occurred in fiscal year 2017. Unless a participant dies or makes an election in accordance with the LTPU Plan, each vested Unit Award will pay out an annual benefit of either $25,000 (for an award granted prior to June 1, 2020), $10,000 (for an award granted on or after June 1, 2020 and prior to July 1, 2021), or $12,500 (for an award granted on or after July 1, 2021), in all cases subject to a potential performance adjustment, for each of five years commencing on the seventh anniversary of the grant date. Subject to the terms of the LTPU Plan, participants may elect to have their annual benefits start on a later date and/or pay out in a lower annual amount over a greater number of years. Unit Awards vest upon the following circumstances: (i) the fourth anniversary of the grant date, subject to continued service as of such date; (ii) the later of the grantee’s 65th birthday and the second anniversary of the grant date, subject to continued services as of each such date; (iii) death or disability; or (iv) a change of control event (as defined in the LTPU Plan). Each Unit Award made under the LTPU Plan has a total value of either $125,000 (for an award granted prior to June 1, 2020), $50,000 (for an award granted on or after June 1, 2020 and prior to July 1, 2021), or $62,500 (for an award granted on or after July 1, 2021) and a base value of

 

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either $50,000 (for an award granted prior to June 1, 2020) or $25,000 (for an award granted on or after June 1, 2020). The base value of an LTPU award represents the maximum amount payable upon the partial vesting of such award. If a participant terminates employment prior to death or disability and not for cause, the participant will be entitled to receive a lump sum payment of a portion of the base value of the Unit Award based on the years of service completed since the grant date to the extent that the termination occurs at least 13 months following the grant date. Please refer to the section entitled “Potential Payments Upon Termination or Change of Control” below for further discussion of the LTPU Plan.

 

Employment Agreements

 

Each of the Company’s NEOs is covered by an employment agreement providing for a minimum annual level of salary, target incentives, eligibility for long-term incentives and benefit eligibility and, in the case of Mr.  Burnison, a retention award (the “Retention Award”). The agreements also provide for a severance benefit in the event of a termination of employment without “cause” or for “good reason,” as such terms are defined in the agreements. During fiscal year 2021, the NEOs executed amendments to their then-existing employment contracts and letter agreements, as applicable, formalizing the 50% base salary reductions in place for a portion of fiscal year 2021 and acknowledging that such reductions will not trigger any good reason or other constructive termination rights.

 

On June 28, 2021, the Company and each NEO entered into new employment agreements that superseded each NEO’s prior employment agreement or letter, as applicable. This was done in connection with the periodic review of our executive employment arrangements both (1) in recognition of the importance of retaining our NEOs, an experienced and seasoned management team in the middle of leading Korn Ferry through a successful multi-year transformation from an Executive Search firm to a diversified organizational consulting firm; and (2) to provide greater protection to the Company in the event of an NEO departure in the form of an expanded list of competitor companies in each NEO’s noncompetition covenant. Based on a competitive review conducted by Pearl Meyer, the Committee’s independent advisor, the employment agreements provide for the following annual compensation: (1) an annual base salary, effective July 1, 2021, of $1,000,000 for Mr. Burnison, $625,000 for Mr. Rozek, and $550,000 for each of Messrs. Mulrooney and Arian; (2) participation in the Company’s annual cash incentive plan with an annual target award of 150% of annual base salary for Mr. Burnison, 120% of annual base salary for Mr. Rozek, and 100% of annual base salary for Messrs. Mulrooney and Arian, and the ability to earn additional amounts up to a maximum cash award of 200% of the applicable target bonus opportunity for each executive; and (3) subject to approval of the Committee, the NEOs continue to be eligible to participate in the Company’s equity incentive program and in the employee benefit plans, arrangements, and programs maintained from time to time by the Company for the benefit of senior executives.

 

In addition, the agreement with Mr. Burnison continued to provide the ability to earn the Retention Award (which was originally granted under his previous employment agreement with the Company dated March 30, 2018) in the amount of $5 million, which vested on March 30, 2022. After vesting, payment of this award will be deferred until Mr. Burnison’s termination of employment (except that Mr. Burnison will forfeit this award if his employment is terminated for “cause” or he violates his restrictive covenants). Interest will accrue on the deferral from March  30, 2022 until Mr. Burnison’s termination of employment at 120% of the long-term Applicable Federal Rate as in effect from time to time (currently 4.02% for August 2022).

 

For all NEOs, the agreements provide for severance benefits in the event of a termination of employment without “cause” or for “good reason,” as such terms are defined in the agreements. Mr. Rozek’s agreement also provides for continued vesting of his equity awards (based on actual Company performance in the case of performance awards) in the event of a termination due to his “retirement,” as defined in his agreement, provided he gives the Company at least six months’ prior notice. All of the foregoing benefits are conditioned on the executive’s execution and delivery of a general release and compliance with covenants relating to confidentiality, nonsolicitation, and noncompetition. Please refer to the sections entitled “Employment Agreements” and “Potential Payments Upon Termination or Change of Control” below for further discussion of these agreements.

 

It is the Committee’s belief that the employment agreements are necessary from a competitive perspective and contribute to the stability of the management team.

 

Other Policies

 

Stock Ownership Policy

 

The Nominating and Corporate Governance Committee has determined that in order to further align the long-term interests of the Company’s stockholders and its non-employee directors and executive officers, it is in the best interests of the Company to require such directors and officers to have direct ownership in the Company’s common stock. Therefore, it and the Board have adopted the Company’s Stock Ownership Policy, which provides that all NEOs are required to own three times their annual base salary in Company common stock. In addition, the policy requires non-employee directors to hold three times their annual cash retainer in Company common stock. Stock ownership includes direct stock ownership, but does not include unvested restricted stock awards, unvested restricted stock units or unvested options.

 

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Until the stock ownership level is met, each executive officer and non-employee director must retain at least 75% of the net shares (the shares remaining after payment of transaction costs and applicable taxes owed as a result of vesting of the restricted stock) received upon vesting of restricted stock awards and 50% of the net shares (the shares remaining after payment of transaction costs, the option exercise price and applicable taxes owed as a result of the exercise of the option) received upon exercise of stock options.

 

Clawback Policy

 

Pursuant to the Company’s clawback policy, in the event that the Board determines there has been an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, the Board will review all applicable incentive payments and if such payments would have been lower had they been calculated based on such restated results, the Board may, to the extent permitted by governing law, seek to recoup for the benefit of the Company such payments to and/or equity awards held by executive officers or the principal accounting officer who are found personally responsible for the material restatement, as determined by the Board.

 

Policies Prohibiting Hedging, Speculative Trading and Pledging

 

The Company has adopted policies prohibiting officers, directors, and employees from engaging in speculative transactions (such as puts, calls, and short sales) or in any type of hedging transaction (such as zero cost collars, equity swaps, exchange funds, and forward sale contracts) in Company securities. Further, directors and officers, including all of the NEOs, are expressly prohibited from margining Company securities or pledging Company securities as collateral for a loan.

 

Internal Revenue Code Section 162(m)

 

As one of the factors in the review of compensation matters, the Committee considers the anticipated tax treatment to the Company. The deductibility of some types of compensation for NEOs depends upon the timing of a named executive officer’s vesting or exercise of previously granted rights. Prior to the US Tax Cuts and Jobs Act enacted in December of 2017 (the “US Tax Act”), which became effective for the Company at the beginning of fiscal year 2019, compensation that satisfied conditions set forth under Section 162(m) of the Internal Revenue Code to qualify as “performance-based compensation” was not subject to a $1 million limit on deductibility, and the limit did not apply to compensation paid to the Chief Financial Officer. The US Tax Act eliminated the performance-based compensation exception and applied the limit to the Chief Financial Officer and certain former executive officers. With the elimination of the exemption for performance-based compensation, we expect that we will be unable to deduct compensation in excess of $1 million paid to our Chief Executive Officer, Chief Financial Officer, and our other named executive officers covered by Section 162(m). Notwithstanding the repeal of the exemption for “performance-based compensation,” the Committee intends to maintain its commitment to structuring the Company’s executive compensation programs in a manner designed to align pay with performance.

 

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Compensation and Personnel Committee Report on Executive Compensation

 

The Compensation and Personnel Committee has reviewed and discussed the Compensation Discussion and Analysis (the “CD&A”) for the fiscal year ended April 30, 2022, with management. In reliance on the reviews and discussions with management relating to the CD&A, the Compensation and Personnel Committee has recommended to the Board, and the Board has approved, that the CD&A be included in this Proxy Statement.

 

Compensation and Personnel Committee

 

Jerry P. Leamon, Chair
Doyle N. Beneby
Laura M. Bishop
Lori J. Robinson
George T. Shaheen

 

Compensation Committee Interlocks and Insider Participation

 

During fiscal year 2022, at all times, all members of the Compensation and Personnel Committee were “independent”: none were employees or former employees of the Company and none had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. None of our executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served on our Compensation and Personnel Committee or Board.

 

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Compensation of Executive Officers and Directors

 

Fiscal Year 2022, 2021, and 2020 Summary Compensation Table

 

The following table sets forth information with respect to the total compensation paid to or earned by each of the named executive officers in fiscal 2022, 2021, and 2020.

 

Name and
Principal Position
Fiscal
Year
  Salary
($)
  Bonus
($)
  Stock
Awards
($)
(1)  Non-Equity
Incentive Plan
Compensation
($)
(2)  Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
  All Other
Compensation
($)
  Total
($)
Gary D. Burnison, President and Chief Executive Officer 2022   985,000     5,052,479   3,450,000   (3)  $42,219 (4)  $9,529,698
2021   796,250     5,700,025   4,815,720   15,862 (3)  19,670   11,347,527
2020   910,000     3,448,284     71,951 (3)  12,750   4,442,985
Robert P. Rozek, Executive Vice President, Chief Financial Officer and Chief Corporate Officer 2022   616,667     2,105,429   1,725,000     $34,346 (5)  $4,481,442
2021   503,125     2,300,063   2,535,750     18,347   5,357,285
2020   575,000     1,432,509       12,750   2,020,259
Byrne Mulrooney, Chief Executive Officer, of RPO and Digital 2022   533,333     1,515,800   1,170,125     $39,822 (6)  $3,259,080
2021   393,750     2,500,045   3,087,000     235,688   6,216,483
2020   450,000     1,047,610       235,320   1,732,930
Mark Arian, Chief Executive Officer, of Consulting 2022   533,333     1,515,800   1,158,108     $38,971 (7)  $3,246,212
2021   393,750     1,600,128   2,646,000     262,633   4,902,511
2020   450,000     518,818       262,084   1,230,902
(1) Represents the aggregate grant date fair value of awards granted during the fiscal year, calculated in accordance with Accounting Standards Codification, 718, Compensation-Stock Compensation. Certain assumptions used to calculate the valuation of the awards are set forth in Note 4 to the notes to consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022. For the Relative TSR Units, the grant date fair value is measured using a Monte Carlo simulation valuation model. The simulation model applies a risk-free interest rate and an expected volatility assumption. The risk-free rate is assumed to equal the yield on a three-year Treasury bond on the grant date. Volatility is based on historical volatility for the 36-month period preceding the grant date. For each of the NEOs, the assumed per-share value of Relative TSR Units for the July 9, 2021 annual grant was $83.14 and for the July 9, 2019 annual grant was $37.99. Our Compensation Committee made a one-time decision in early July of 2020 to grant time-based equity awards that provided a stronger incentive to retain our NEOs in the face of economic challenges beyond their control as the Board concluded that supporting the continuity and commitment of the Company’s leadership team to lead the Company through the entire course of the pandemic’s impact on the Company’s business would be essential during such uncertain and challenging times. Accordingly, no performance-based shares were granted in fiscal 2021.
(2) Reflects cash incentive compensation earned under the Company’s annual cash incentive plan in the applicable fiscal year and paid in the following fiscal year.
(3) The values in the table represent, for each applicable fiscal year, the aggregate change in the actuarial present value of Mr. Burnison’s accumulated benefit under the Enhanced Wealth Accumulation Plan (the “EWAP”) from the pension plan measurement date used for financial statement reporting purposes with respect to the Company’s audited financial statements for the prior completed fiscal year to the pension plan measurement date used for financial reporting purposes with respect to the Company’s audited financial statements for the covered fiscal year. For fiscal year 2022, the change in value was negative in the amount of ($71,208) and is reported as $0 in accordance with applicable SEC rules. As discussed under “Fiscal 2022 Pension Benefits,” participants in the EWAP elected to participate in a “deferral unit” that required the participant to contribute a portion of their compensation for an eight-year period, or in some cases, make an after-tax contribution, in return for defined benefit payments from the Company over a fifteen-year period generally at retirement age of 65 or later. Mr. Burnison is the only named executive officer that participates in the EWAP. To date, Mr. Burnison has contributed $55,200 to the EWAP. In June 2003, the Company amended the EWAP plan, so as not to allow new participants or the purchase of additional deferral units by existing participants.
(4) Represents 401(k) company contribution of $3,900, an auto allowance of $5,400, executive medical insurance premium of $21,913, executive long-term disability insurance premium and/or imputed income of $806, and executive short-term life insurance premium and/or imputed income of $10,200.
(5) Represents 401(k) company contribution of $3,967, an auto allowance of $5,400, executive medical insurance premium of $15,267, executive long-term disability insurance premium and/or imputed income of $914, and executive short-term life insurance premium and/or imputed income of $8,798.
(6) Represents 401(k) company contribution of $3,900, an auto allowance of $5,400, executive medical insurance premium of $21,913, executive long-term disability insurance premium and/or imputed income of $914, and executive short-term life insurance premium and/or imputed income of $7,695.
(7) Represents 401(k) company contribution of $3,967, an auto allowance of $5,400, executive medical insurance premium of $21,913, executive long-term disability insurance premium and/or imputed income of $806, and executive short-term life insurance premium and/or imputed income of $6,885.

 

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Fiscal Year 2022 Grants of Plan-Based Awards

 

The following table sets forth information with respect to non-equity incentive plan compensation and equity awards granted in fiscal 2022 to the named executive officers, under the Company’s Fourth Amended and Restated 2008 Stock Incentive Plan.

 

        Estimated Future Payments
Under Non-Equity Incentive
Plan Awards
  Estimated Future Payments
Under Equity Incentive
Plan Awards
  All Other
Stock
Awards:
Number of
Shares of
Stock
(#)
  Grant
Date Fair
Value of
Stock
Awards
Name   Grant Date  

Threshold

($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
   
Gary D. Burnison   7/9/2021               26,080   1,800,042
    7/9/2021         9,780   39,120   78,240     3,252,437
        1,500,000   3,450,000          
Robert P. Rozek   7/9/2021               10,870   750,247
    7/9/2021         4,080   16,300   32,600     1,355,182
        750,000   1,725,000          
Byrne Mulrooney   7/9/2021               7,820   539,736
    7/9/2021         2,940   11,740   23,480     976,064
        550,000   1,265,000          
Mark Arian   7/9/2021               7,820   539,736
    7/9/2021         2,940   11,740   23,480     976,064
        550,000   1,265,000          

 

Employment Agreements

 

Certain elements of compensation set forth in the “Fiscal Year 2022, 2021, and 2020 Summary Compensation Table” and “Fiscal Year 2022 Grants of Plan-Based Awards Table” reflect the terms of employment agreements entered into between the Company and each of the named executive officers that were in effect during fiscal year 2022.

 

Gary D. Burnison. We entered into an amended and restated employment agreement with Mr. Burnison dated June 28, 2021 (the “Burnison Employment Agreement”) pursuant to which Mr. Burnison serves as Chief Executive Officer. Pursuant to the Burnison Employment Agreement, we agreed to provide Mr. Burnison with the following annual compensation: (1) an annual base salary, effective July 1, 2021, of $1,000,000 (previously $910,000); (2) participation in the Company’s annual cash incentive plan with an annual target award of 150% of annual base salary and the ability to earn additional amounts up to a maximum cash award of 200% of the target award; and (3) subject to approval of the Compensation and Personnel Committee of the Board, participation in the Company’s equity incentive program. In addition, the Burnison Employment Agreement continues to provide for a retention award in the amount of $5 million (the “Retention Award”) that vested on March 30, 2022 (the “Retention Vesting Date”). After vesting, payment of this award will be deferred until Mr. Burnison’s termination of employment (except that Mr. Burnison will forfeit this award if his employment is terminated for “cause” or he violates his restrictive covenants). After vesting, interest will accrue on the deferral until Mr. Burnison’s termination of employment at 120% of the long-term Applicable Federal Rate as in effect from time to time (currently 4.02% for August 2022). This deferred award, together with accrued interest, will be paid in equal monthly installments in cash (without further interest) over twelve months following Mr. Burnison’s termination of employment for any reason (other than termination by the Company for “cause”) on or after the Retention Vesting Date provided he provides the Company with an effective release of claims and continues to be in compliance with applicable covenants relating to noncompetition, nonsolicitation, and confidentiality. Mr. Burnison is also eligible to participate in employee benefit plans, arrangements, and programs maintained from time to time by the Company for the benefit of senior executives.

 

Robert P. Rozek. We entered into an amended and restated employment agreement with Mr. Rozek dated June 28, 2021 (the “Rozek Employment Agreement”) pursuant to which Mr. Rozek serves as Executive Vice President, Chief Financial Officer, and Chief Corporate Officer. Pursuant to the Rozek Employment Agreement, we agreed to provide Mr. Rozek with the following annual compensation: (1) an annual base salary, effective July 1, 2021, of $625,000 (previously $575,000); (2) participation in the Company’s annual cash incentive plan with an annual target award of 120% of annual base salary and the ability to earn additional amounts up to a maximum cash award of 200% of the target award; and (3) subject to approval of the Compensation and Personnel Committee of the Board, participation in the Company’s equity incentive program. Mr. Rozek is also eligible to participate in employee benefit plans, arrangements, and programs maintained from time to time by the Company for the benefit of senior executives.

 

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Byrne Mulrooney. We entered into an employment agreement with Mr. Mulrooney dated June 28, 2021 (the “Mulrooney Employment Agreement”) pursuant to which Mr. Mulrooney serves as Chief Executive Officer, RPO and Digital. Pursuant to the Mulrooney Employment Agreement, we agreed to provide Mr. Mulrooney with the following annual compensation: (1) an annual base salary, effective July 1, 2021, of $550,000 (previously $450,000); (2) participation in the Company’s annual cash incentive plan with an annual target award of 100% of annual base salary and the ability to earn additional amounts up to a maximum cash award of 200% of the target award; and (3) subject to approval of the Compensation and Personnel Committee of the Board, participation in the Company’s equity incentive program. Mr. Mulrooney is also eligible to participate in employee benefit plans, arrangements, and programs maintained from time to time by the Company for the benefit of senior executives.

 

Mark Arian. We entered into an employment agreement with Mr. Arian dated June 28, 2021 (the “Arian Employment Agreement”) pursuant to which Mr. Arian serves as Chief Executive Officer, Consulting. Pursuant to the Arian Employment Agreement, we agreed to provide Mr. Arian with the following annual compensation: (1) an annual base salary, effective July 1, 2021, of $550,000 (previously $450,000); (2) participation in the Company’s annual cash incentive plan with an annual target award of 100% of annual base salary and the ability to earn additional amounts up to a maximum cash award of 200% of the target award; and (3) subject to approval of the Compensation and Personnel Committee of the Board, participation in the Company’s equity incentive program. Mr. Arian is also eligible to participate in employee benefit plans, arrangements, and programs maintained from time to time by the Company for the benefit of senior executives.

 

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Fiscal Year 2022 Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information with respect to options to purchase shares of the Company’s common stock, restricted stock, and restricted stock unit grants to the named executive officers outstanding as of April 30, 2022.

 

    Option Awards     Stock Awards
Name   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options (#)
Not
Exercisable
  Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number
of Shares
of Stock
that
Have Not
Vested
(#)
  Market
Value of
Shares of
Stock that
Have Not
Vested
($)
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares
or Other
Rights that
Have Not
Vested (#)
  Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares or
Other Rights
that Have
Not Vested
($)
 
Gary D. Burnison               5,328 (1)      327,352              
              17,970 (2)      1,104,077              
                155,625 (3)      9,561,600              
                26,080 (4)      1,602,355              
                            107,840 (5)      6,625,690  
                            9,780 (6)      600,883  
Robert P. Rozek               2,215 (1)      136,090              
              7,470 (2)      458,957              
                62,798 (3)      3,858,309              
                10,870 (4)      667,853              
                            44,780 (7)      2,751,283  
                            4,080 (8)      250,675  
Byrne Mulrooney               1,618 (1)      99,410              
              5,460 (2)      335,462              
                68,258 (3)      4,193,772              
                7,820 (4)      480,461              
                            32,760 (9)      2,012,774  
                            2,940 (10)      180,634  
Mark Arian               650 (1)      39,936              
              2,705 (2)      166,195              
                43,688 (3)      2,684,191              
                7,820 (4)      480,461              
                            16,220 (11)      996,557  
                            2,940 (10)      180,634  
(1) The time-based restricted stock grant was made on July 9, 2018 and vests in four equal annual installments beginning on July 9, 2019.
(2) The time-based restricted stock grant was made on July 9, 2019 and vests in four equal annual installments beginning on July 9, 2020.
(3) The time-based restricted stock grant was made on July 8, 2020 and vests in four equal annual installments beginning on July 8, 2021.
(4) The time-based restricted stock grant was made on July 9, 2021 and vests in four equal annual installments beginning on July 9, 2022.
(5) This grant of Relative TSR Units was made on July 9, 2019. The award has a three-year vesting period after which between 0 and 107,840 shares may vest depending upon the Company’s total stockholder return over the three-year period relative to a peer group of companies. On July 9, 2022, 107,840 shares vested based upon the Company’s total stockholder return over the three-year performance period relative to a peer group of companies.
(6) This grant of Relative TSR Units was made on July 9, 2021. The award has a three-year vesting period after which between 0 and 78,240 shares may vest depending upon the Company’s total stockholder return over the three-year vesting period relative to a peer group of companies. Calculated based on achievement of 25% of target based on performance to date.
(7) This grant of Relative TSR Units was made on July 9, 2019. The award has a three-year vesting period after which between 0 and 44,780 shares may vest depending upon the Company’s total stockholder return over the three-year period relative to a peer group of companies. On July 9, 2022, 44,780 shares vested based upon the Company’s total stockholder return over the three-year performance period relative to a peer group of companies.
(8) This grant of Relative TSR Units was made on July 9, 2021. The award has a three-year vesting period after which between 0 and 32,600 shares may vest depending upon the Company’s total stockholder return over the three-year vesting period relative to a peer group of companies. Calculated based on achievement of 25% of target based on performance to date.

 

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(9) This grant of Relative TSR Units was made on July 9, 2019. The award has a three-year vesting period after which between 0 and 32,760 shares may vest depending upon the Company’s total stockholder return over the three-year period relative to a peer group of companies. On July 9, 2022, 32,760 shares vested based upon the Company’s total stockholder return over the three-year performance period relative to a peer group of companies.
(10) This grant of Relative TSR Units was made on July 9, 2021. The award has a three-year vesting period after which between 0 and 23,480 shares may vest depending upon the Company’s total stockholder return over the three-year vesting period relative to a peer group of companies. Calculated based on achievement of 25% of target based on performance to date.
(11) This grant of Relative TSR Units was made on July 9, 2019. The award has a three-year vesting period after which between 0 and 16,220 shares may vest depending upon the Company’s total stockholder return over the three-year period relative to a peer group of companies. On July 9, 2022, 16,220 shares vested based upon the Company’s total stockholder return over the three-year performance period relative to a peer group of companies.

 

Stock Vested in Fiscal Year 2022

 

The following table sets forth information with respect to the exercise of options and the vesting of stock awards for each of the named executive officers during the fiscal year ended April 30, 2022.

 

    Option Awards   Stock Awards
Name   Number of
Shares
Acquired on
Exercise
(#)
    Value
Realized on
Exercise
($)
    Number of
Shares
Acquired on
Vesting
(#)
    Value
Realized on
Vesting
($)
 
Gary D. Burnison                                 —                           —                             133,055              9,075,037  
Robert P. Rozek                 56,113       3,829,171  
Byrne Mulrooney                 54,638       3,707,863  
Mark Arian                 26,315       1,777,933  

 

Fiscal Year 2022 Pension Benefits

 

The following table sets forth the pension benefits of the named executive officers as of April 30, 2022.

 

Name   Plan Name   Number of
Years Credited
Service or
Number of
Units Earned
(#)
(1)  Present Value
of Accumulated
Benefit
($)
  Payments
During Last
Fiscal Year
($)
 
Gary D. Burnison                      Executive Wealth Accumulation Plan (“EWAP”)   15           335,705            
(1) Upon attaining 15 years of service, Mr. Burnison qualified for an “early retirement benefit” under the EWAP. Because Mr. Burnison has made the mandatory contributions for the eight-year period as required under the EWAP, he is now entitled to an unreduced benefit.

 

Enhanced Wealth Accumulation Plan

 

The EWAP was established in fiscal year 1994. Certain vice presidents elected to participate in a “deferral unit” that required the participant to contribute a portion of their compensation for an eight-year period, or in some cases, make an after-tax contribution, in return for defined benefit payments from the Company over a 15-year period generally at retirement age of 65 or later. Participants were able to acquire additional “deferral units” every five years.

 

In June 2003, the Company amended the EWAP so as not to allow new participants or the purchase of additional deferral units by existing participants. The assumptions used to calculate the present value of the accumulated benefit under the EWAP are set forth in Note 6 to the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended April 30, 2022.

 

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Fiscal Year 2022 Nonqualified Deferred Compensation

 

The nonqualified deferred compensation plan earnings and withdrawals of the named executive officers as of April 30, 2022, are set forth in the table below.

 

Name   Executive
Contributions
in Last FY
($)
    Registrant
Contributions
in Last FY
($)
    Aggregate
Earnings/(loss)
in Last FY
($)
    Aggregate
Withdrawals/
Distributions
($)
    Aggregate
Balance at Last
FYE
($)
 
Gary D. Burnison                 (101,762)             1,513,072 (1) 
Robert P. Rozek                              
Byrne Mulrooney                             875,000 (2) 
Mark Arian                             1,000,000 (2) 
(1) The “Aggregate Balance at Last FYE” is comprised of contributions made by both Mr. Burnison and the Company of which $209,000 was reported as contributions in Summary Compensation Tables in prior-year proxy statements beginning with the fiscal 2007 proxy statement. The information in this footnote is provided to clarify the extent to which amounts payable as deferred compensation represent compensation reported in our prior proxy statements, rather than additional currently earned compensation.
(2) On July 8, 2016, the Company established the LTPU Plan in order to promote the success of the Company by providing a select group of management and highly compensated employees with nonqualified supplemental retirement benefits as an additional means to attract, motivate and retain such employees. A unit award has a base value of $50,000 for the purpose of determining the payment that would be made upon early termination for a partially vested unit award. The units vest 25% on each anniversary date, with the unit becoming fully vested on the fourth anniversary of the grant date, subject to the participant’s continued service as of each anniversary date. Each vested unit award will pay out an annual benefit of $25,000 for each of five years commencing on the seventh anniversary of the grant date. On July 9, 2016, Mr. Mulrooney received seven units and on April 3, 2017, Mr. Arian received eight units, and the value shown in the table represents the maximum benefit pursuant to such units. Messrs. Mulrooney’s and Arian’s awards became fully vested in fiscal year 2021, and therefore no amounts were required to be reported in the Summary Compensation table for fiscal year 2022.

 

Potential Payments Upon Termination or Change of Control

 

The tables below reflect the amount of compensation that would become payable to each of the named executive officers under existing plans and arrangements if that named executive officer’s employment had terminated on April 30, 2022 (pursuant to his employment agreement then in effect), given the named executive officer’s compensation and service levels as of such date and, if applicable, based on the Company’s closing stock price on that date. These benefits are in addition to benefits available prior to the occurrence of any termination of employment, including benefits generally available to salaried employees, such as distributions under the Company’s 401(k) plan and EWAP, and previously accrued and vested benefits under the Company’s LTPU Plan and nonqualified deferred compensation plan, as described in the tables above. The actual amounts that would be paid upon a named executive officer’s termination of employment can be determined only at the time of such named executive officer’s separation from the Company. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be higher or lower than reported below. Factors that could affect these amounts include the timing during the year of any such event, the Company’s stock price and the named executive officer’s age. In addition, in connection with any actual termination of employment, the Company may determine to enter into an agreement or to establish an arrangement providing additional benefits or amounts, or altering the terms of benefits described below, as the Committee determines appropriate. References to “performance shares” mean any outstanding Relative TSR Units.

 

Gary D. Burnison. Under the Burnison Employment Agreement, because Mr. Burnison remained employed through the Retention Vesting Date, subject to his execution and delivery of a general release of claims and his compliance with restrictive covenants relating to noncompetition, nonsolicitation, and confidentiality (i) his deferred Retention Award, in the amount of $5,000,000, together with interest accrued during the mandatory deferral period, will be paid in equal monthly installments in cash (without further interest) over 12 months following Mr. Burnison’s termination of employment for any reason (other than termination by the Company for cause) and (ii) upon any termination of Mr. Burnison’s employment (other than by the Company for cause or due to death or disability), all unvested equity awards granted on or after March 30, 2018 (and at least 90 days prior to such termination, other than with respect to a termination by the Company without cause or a termination by Mr. Burnison for good reason (an “Involuntary Termination”) during such 90-day period, in which case, there shall be no such 90-day requirement) will continue to vest in accordance with their terms, disregarding such termination. As an exception, the post-change in control double trigger equity severance vesting rules described below would continue to apply in the event of an Involuntary Termination that occurs within 24 months after a change in control.

 

Under the Burnison Employment Agreement, if Mr. Burnison’s employment is terminated due to death or disability, then he, or his legal representatives, would receive: (1) all accrued compensation as of the date of termination; (2) full vesting of all outstanding stock options, other equity-type incentives (excluding performance shares) and benefits under the Executive Capital Accumulation Plan (“ECAP”); (3) a pro

 

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rata portion of his target annual cash incentive award for the fiscal year in which his employment terminated; (4) the number of performance shares that would have been earned if he had served the Company for the entire performance period and the target performance had been achieved; and (5) reimbursement of COBRA coverage premiums for Mr. Burnison and his dependents for as long as such coverage was available under COBRA.

 

If we terminated Mr. Burnison’s employment for cause or he voluntarily terminated his employment without good reason, then we would pay him accrued compensation through the date of termination.

 

Under the Burnison Employment Agreement, if Mr. Burnison’s employment is terminated due to an Involuntary Termination prior to a change in control or more than 24 months after a change in control, then we would provide him with the following: (1) his accrued compensation; (2) a pro rata portion of his annual cash incentive award, based on actual Company performance, for the year in which his employment terminated; and (3) for up to 18 months after termination, reimbursement of COBRA coverage premiums for the executive and his dependents.

 

The Burnison Employment Agreement provides that if there was a change of control and within 24 months, Mr. Burnison’s employment is terminated due to an Involuntary Termination, then we would provide him with the following: (1) his accrued compensation; (2) a pro rata portion of his target annual cash incentive award; (3) cash payments equal to three times his current annual base salary, three times his target annual cash incentive award and the amount of his deferred Retention Award (to the extent not yet paid); (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for him and his dependents and for six months thereafter, if COBRA coverage is no longer available, reimbursement of a portion of the cost of healthcare coverage for him and his dependents; (5) vesting on the date of termination of all outstanding stock options, other equity-type incentives, other long term awards and all benefits held under the ECAP (excluding performance awards) (collectively, the “Time Vested Awards”); and (6) a number of performance awards equal to the greater of (i) the performance awards that would have been earned if the executive had served the Company for the entirety of any open performance period and the Company’s performance during such period had been the Company’s actual performance through the date of the change in control and at the target level for the period subsequent to the change in control and (ii) the performance awards that would have been earned if the executive had served the Company for the entirety of any open performance period and the Company’s performance during such period had been at the target level of performance for the entire performance period.

 

Under the Burnison Employment Agreement, the severance benefits described above are conditioned on Mr. Burnison’s execution and delivery of a general release and compliance with covenants relating to confidentiality, non-solicitation, and non-competition.

 

Gary D. Burnison(1)   Retirement     Prior to a Change
in Control or More
than 24 Months after
a Change in Control
and Termination
Without Cause or
With Good Reason
    Within 24 Months
after a Change
in Control and
Termination
Without Cause or
With Good Reason
    Death or
Disability
 
Equity/ECAP (excluding performance-based shares)   $         12,595,384           $                12,595,384           $              12,595,384           $         12,595,384  
Performance-Based Shares(2)     9,029,222       9,029,222       9,029,222       9,029,222  
Base Salary                 3,000,000        
Bonus           3,450,000       6,000,000       1,500,000  
Health Benefits           56,348       75,130       112,695 (3) 
Retention Award     5,000,000       5,000,000       5,000,000       5,000,000  
TOTAL   $ 26,624,606     $ 30,130,954     $ 35,699,736     $ 28,237,301  
(1) Under all termination scenarios other than a termination by the Company for cause, Mr. Burnison would receive payment of his deferred Retention Award, which fully vested as of March 30, 2022, plus the amount of interest accrued during the mandatory deferral period, as described above.
(2) For the calculations above, if performance shares would vest based on actual Company performance, to the extent the applicable vesting period was still ongoing as of the end of fiscal 2022, it was assumed that the Company achieved target performance. With respect to Mr. Burnison’s grants of performance shares for which the measurement period ended on April 30, 2022 (and vested on July 9, 2022), actual results were used in the calculations. With respect to Mr. Burnison’s grant of performance shares for which the measurement period ended on April 30, 2022, the measurement period was assumed to have concluded prior to his termination for purposes of the table.
(3) Where Mr. Burnison or his dependents are entitled to COBRA for as long as COBRA is available, we have assumed entitlement to 36 months of COBRA as that is the maximum length of time for which such benefits may be available.

 

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Robert P. Rozek. Under the Rozek Employment Agreement, if Mr. Rozek’s employment terminates due to death or disability, then he, or his legal representatives, would receive: (1) all accrued compensation as of the date of termination; (2) full vesting of all outstanding stock options, other equity-type incentives (excluding performance shares) and benefits under the ECAP; (3) a pro rata portion of his target annual cash incentive award for the fiscal year in which his employment terminated; (4) the number of performance shares that would have been earned if he had served the Company for the entire performance period and the target performance had been achieved; and (5) reimbursement of COBRA coverage premiums for the executive and his dependents for as long as such coverage was available under COBRA.

 

If the Company terminates Mr. Rozek’s employment for cause at any time or he voluntarily terminates his employment without good reason, then the Company would pay him accrued compensation through the date of termination.

 

If Mr. Rozek’s employment is Involuntarily Terminated prior to a change in control or more than 24 months after a change in control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his annual cash incentive award, based on actual Company performance, for the year in which his employment terminated; (3) cash payments equal to one and one-half times his then current annual base salary and one and one-quarter times his target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for the executive and his dependents; (5) all outstanding Time Vested Awards will continue to vest in accordance with their terms (disregarding such termination); and (6) the performance awards will vest based on actual performance through the entire performance period.

 

If Mr. Rozek’s employment is Involuntarily Terminated within 24 months following a change in control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his target annual cash incentive award; (3) cash payments equal to two and one-half times the executive’s current annual base salary and two and one-half times the executive’s target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for him and his dependents and for six months thereafter, if COBRA coverage is no longer available, reimbursement of a portion of the cost of healthcare coverage for him and his dependents; (5) vesting on the date of termination of all outstanding Time Vested Awards; and (6) a number of performance awards equal to the greater of (i) the performance awards that would have been earned if the executive had served for the Company for the entirety of any open performance period and the Company’s performance during such period had been the Company’s actual performance through the date of the change in control and at the target level for the period subsequent to the change in control and (ii) the performance awards that would have been earned if the executive had served the Company for the entirety of any open performance period and the Company’s performance during such period had been at the target level of performance for the entire performance period.

 

If Mr. Rozek terminates his employment due to retirement, he will be entitled to the following: (1) his accrued compensation; (2) Time Vested Awards that have been outstanding for more than 90 days will continue to vest in accordance with their terms (disregarding such termination); and (3) performance awards that have been outstanding for more than 90 days will vest based on actual performance through the entire performance period. Mr. Rozek is required to provide six months’ notice prior to terminating his employment due to retirement.

 

The severance benefits described above are conditioned on Mr. Rozek’s execution and delivery of a general release and compliance with covenants relating to confidentiality, non-solicitation, and non-competition.

 

Robert P. Rozek   Retirement     Prior to a Change
in Control or More
than 24 Months after
a Change in Control
and Termination
Without Cause or
With Good Reason
    Within 24 Months
after a Change
in Control and
Termination
Without Cause or
With Good Reason
    Death or
Disability
 
Equity/ECAP (excluding performance-based shares)   $         5,121,208           $                5,121,208           $              5,121,208           $         5,121,208  
Performance-Based Shares(1)     3,752,755       3,752,755       3,752,755       3,752,755  
Base Salary           937,500       1,562,500        
Bonus           2,662,500       2,625,000       750,000  
Health Benefits           39,258       52,344       78,515 (2) 
TOTAL   $ 8,873,963     $ 12,513,221     $ 13,113,807     $ 9,702,478  
(1) For the calculations above, if performance shares would vest based on actual Company performance, to the extent the applicable vesting period was still ongoing as of the end of fiscal 2022, it was assumed that the Company achieved target performance. With respect to Mr. Rozek’s grants of performance shares for which the measurement period ended on April 30, 2022 (and vested on July 9, 2022), actual results were used in the calculations. With respect to Mr. Rozek’s grant of performance shares for which the measurement period ended on April 30, 2022, the measurement period was assumed to have concluded prior to his termination for purposes of the table.
(2) Where Mr. Rozek or his dependents are entitled to COBRA for as long as COBRA is available, we have assumed entitlement to 36 months of COBRA as that is the maximum length of time for which such benefits may be available.

 

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Byrne Mulrooney. Under the Mulrooney Employment Agreement, if Mr. Mulrooney’s employment terminates due to death or disability, then he, or his legal representatives, would receive: (1) all accrued compensation as of the date of termination; (2) full vesting of all outstanding stock options, other equity-type incentives (excluding performance shares) and benefits under the ECAP; (3) a pro rata portion of his target annual cash incentive award for the fiscal year in which his employment terminated; (4) the number of performance shares that would have been earned if he had served the Company for the entire performance period and the target performance had been achieved; and (5) reimbursement of COBRA coverage premiums for the executive and his dependents for as long as such coverage was available under COBRA.

 

If the Company terminates Mr. Mulrooney’s employment for cause at any time or he voluntarily terminates his employment without good reason, then the Company would pay him accrued compensation through the date of termination.

 

If Mr. Mulrooney’s employment is Involuntarily Terminated prior to a change in control or more than 24 months after a change in control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his annual cash incentive award, based on actual Company performance, for the year in which his employment terminated; (3) cash payments equal to one and one-half times his then current annual base salary and one and one-quarter times his target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for the executive and his dependents; (5) the Time Vested Awards that would have vested within 12 months of termination will become fully vested as of the date of such termination; and (6) a pro rata portion of the performance awards will vest based on actual performance during the entire performance period and the number of days the executive was employed during the performance period plus an additional year (provided this number of days does not exceed the number of days in the performance period).

 

If Mr. Mulrooney’s employment is Involuntarily Terminated within 24 months following a change in control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his target annual cash incentive award; (3) cash payments equal to two and one-half times the executive’s current annual base salary and two and one-half times the executive’s target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for him and his dependents and for six months thereafter, if COBRA coverage is no longer available, reimbursement of a portion of the cost of healthcare coverage for him and his dependents; (5) vesting on the date of termination of all outstanding Time Vesting Awards; and (6) a number of performance awards equal to the greater of (i) the performance awards that would have been earned if the executive had served for the Company for the entirety of any open performance period and the Company’s performance during such period had been the Company’s actual performance through the date of the change in control and at the target level for the period subsequent to the change in control and (ii) the performance awards that would have been earned if the executive had served the Company for the entirety of any open performance period and the Company’s performance during such period had been at the target level of performance for the entire performance period.

 

In addition, pursuant to the terms of the LTPU Plan and Mr. Mulrooney’s LTPU award, which fully vested in 2020, in the case of death or disability, payout of the award, which generally occurs in five equal annual installments commencing in the calendar year including the seventh anniversary of the grant date and over four years thereafter (unless elected otherwise), would commence on the 60th day following a termination due to death or would be payable as a single lump sum in the year in which a disability occurs. Each unit awarded under the LTPU Plan has a total value of $125,000. Mr. Mulrooney was awarded seven units under the LTPU Plan and thus the total value of his vested award is $875,000.

 

Byrne Mulrooney   Prior to a Change
in Control or More
than 24 Months after
a Change in Control
and Termination
Without Cause or
With Good Reason
    Within 24 Months
after a Change
in Control and
Termination
Without Cause or
With Good Reason
    Death or
Disability
 
Equity/ECAP (excluding performance-based shares)   $                1,785,201           $              5,109,105           $         5,109,105  
Performance-Based Shares(1)     2,493,864       2,734,080       2,734,080  
Base Salary     825,000       1,375,000        
Bonus     1,857,625       1,925,000       550,000  
Health Benefits     56,348       75,130       112,695 (2) 
LTPU Award(3)     875,000       875,000       875,000  
TOTAL   $ 7,893,038     $ 12,093,315     $ 9,380,880  
(1) For the calculations above, if performance shares would vest based on actual Company performance, to the extent the applicable vesting period was still ongoing as of the end of fiscal 2022, it was assumed that the Company achieved target performance. With respect to Mr. Mulrooney’s grants of performance shares for which the measurement period ended on April 30, 2022 (and vested on July 9, 2022), actual results were used in the calculations. With respect to Mr. Mulrooney’s grant of performance shares for which the measurement period ended on April 30, 2022, the measurement period was assumed to have concluded prior to his termination for purposes of the table.
(2) Where Mr. Mulrooney or his dependents are entitled to COBRA for as long as COBRA is available, we have assumed entitlement to 36 months of COBRA as that is the maximum length of time for which such benefits may be available.
(3) Mr. Mulrooney’s LTPU Award was already fully vested as of the last day of the fiscal year. The full value of the award is payable following any termination of employment in accordance with the terms of the LTPU Plan and as described in more detail above.

 

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Mark Arian. Under the Arian Employment Agreement, if Mr. Arian’s employment terminates due to death or disability, then he, or his legal representatives, would receive: (1) all accrued compensation as of the date of termination; (2) full vesting of all outstanding stock options, other equity-type incentives (excluding performance shares) and benefits under the ECAP; (3) a pro rata portion of his target annual cash incentive award for the fiscal year in which his employment terminated; (4) the number of performance shares that would have been earned if he had served the Company for the entire performance period and the target performance had been achieved; and (5) reimbursement of COBRA coverage premiums for the executive and his dependents for as long as such coverage was available under COBRA.

 

If the Company terminates Mr. Arian’s employment for cause at any time or he voluntarily terminates his employment without good reason, then the Company would pay him accrued compensation through the date of termination.

 

If Mr. Arian’s employment is Involuntarily Terminated prior to a change in control or more than 24 months after a change in control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his annual cash incentive award, based on actual Company performance, for the year in which his employment terminated; (3) cash payments equal to one and one-half times his then current annual base salary and one and one-quarter times his target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for the executive and his dependents; (5) the Time Vested Awards that would have vested within 12 months of termination will become fully vested as of the date of such termination; and (6) a pro rata portion of the performance awards will vest based on actual performance during the entire performance period and the number of days the executive was employed during the performance period plus an additional year (provided this number of days does not exceed the number of days in the performance period).

 

If Mr. Arian’s employment is Involuntarily Terminated within 24 months following a change in control, then he will be entitled to the following: (1) his accrued compensation; (2) a pro rata portion of his target annual cash incentive award; (3) cash payments equal to two and one-half times the executive’s current annual base salary and two and one-half times the executive’s target annual cash incentive award; (4) for up to 18 months after termination, reimbursement of COBRA coverage premiums for him and his dependents and for six months thereafter, if COBRA coverage is no longer available, reimbursement of a portion of the cost of healthcare coverage for him and his dependents; (5) vesting on the date of termination of all outstanding Time Vesting Awards; and (6) a number of performance awards equal to the greater of (i) the performance awards that would have been earned if the executive had served for the Company for the entirety of any open performance period and the Company’s performance during such period had been the Company’s actual performance through the date of the change in control and at the target level for the period subsequent to the change in control and (ii) the performance awards that would have been earned if the executive had served the Company for the entirety of any open performance period and the Company’s performance during such period had been at the target level of performance for the entire performance period.

 

In addition, pursuant to the terms of the LTPU Plan and Mr. Arian’s LTPU award, which fully vested in 2021, in the case of death or disability, payout of the award, which generally occurs in five equal annual installments commencing in the calendar year including the seventh anniversary of the grant date and over four years thereafter (unless elected otherwise), would commence on the 60th day following a termination due to death or would be payable as a single lump sum in the year in which a disability occurs. Each unit awarded under the LTPU Plan has a total value of $125,000. Mr. Arian was awarded eight units under the LTPU Plan and thus the total value of his vested award is $1,000,000.

 

Mark Arian   Prior to a Change
in Control or More
than 24 Months after
a Change in Control
and Termination
Without Cause or
With Good Reason
    Within 24 Months
after a Change
in Control and
Termination
Without Cause or
With Good Reason
    Death or
Disability
 
Equity/ECAP (excluding performance-based shares)   $                1,137,930           $              3,370,783           $         3,370,783  
Performance-Based Shares(1)     1,477,647       1,717,862       1,717,862  
Base Salary     825,000       1,375,000        
Bonus     1,845,608       1,925,000       550,000  
Health Benefits     56,348       75,130       112,695 (2) 
LTPU Award(3)     1,000,000       1,000,000       1,000,000  
TOTAL   $ 6,342,533     $ 9,463,775     $ 6,751,340  
(1) For the calculations above, if performance shares would vest based on actual Company performance, to the extent the applicable vesting period was still ongoing as of the end of fiscal 2022, it was assumed that the Company achieved target performance. With respect to Mr. Arian’s grants of performance shares for which the measurement period ended on April 30, 2022 (and vested on July 9, 2022), actual results were used in the calculations. With respect to Mr. Arian’s grant of performance shares for which the measurement period ended on April 30, 2022, the measurement period was assumed to have concluded prior to his termination for purposes of the table.
(2) Where Mr. Arian or his dependents are entitled to COBRA for as long as COBRA is available, we have assumed entitlement to 36 months of COBRA as that is the maximum length of time for which such benefits may be available.
(3) Mr. Arian’s LTPU Award was already fully vested as of the last day of the fiscal year. The full value of the award is payable following any termination of employment in accordance with the terms of the LTPU Plan and as described in more detail above.

 

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For purposes of the foregoing employment agreements, “cause,” “change in control,” “and “good reason,” generally mean the following:

 

“Cause” means:
  - conviction of any felony or other crime involving fraud, dishonesty or acts of moral turpitude or pleading guilty or nolo contendere to such charges; or
  - reckless or intentional behavior or conduct that causes or is reasonably likely to cause the Company material harm or injury or exposes or is reasonably likely to expose the Company to any material civil, criminal or administrative liability; or
  - any material misrepresentation or false statement made by the executive in any application for employment, employment history, resume or other document submitted to the Company, either before, during or after employment; or
  - for Messrs. Mulrooney and Arian, material violation of the Company’s material written policies or procedures.
“Change in Control” means:
  - an acquisition by any person of beneficial ownership or a pecuniary interest in more than 50% of the common stock of the Company or voting securities entitled to then vote generally in the election of directors (“Voting Stock”) of the Company, after giving effect to any new issue in the case of an acquisition from the Company;
  - the consummation of a merger, consolidation, or reorganization of the Company or of a sale or other disposition of all or substantially all of the Company’s consolidated assets as an entirety (collectively, a “Business Combination”), other than a Business Combination (a) in which all or substantially all of the holders of Voting Stock of the Company hold or receive directly or indirectly 50% or more of the Voting Stock of the entity resulting from the Business Combination (or a parent company), and (b) after which no person (other than certain excluded persons) owns more than 50% of the Voting Stock of the resulting entity (or a parent company) who did not own directly or indirectly at least that percentage of the Voting Stock of the Company immediately before the Business Combination, and (c) after which one or more excluded persons own an aggregate amount of Voting Stock of the resulting entity at least equal to the aggregate number of shares of Voting Stock owned by any persons who (i) own more than 5% of the Voting Stock of the resulting entity, (ii) are not excluded persons, (iii) did not own directly or indirectly at least the same percentage of the Voting Stock of the Company immediately before the Business Combination, and (iv) in the aggregate own more than 50% of the Voting Stock of the resulting entity;
  - consummation of the dissolution or complete liquidation of the Company; or
  during any period of two consecutive years, individuals who at the beginning of such period constituted the Board and any new directors whose appointment, election, or nomination for election was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose appointment, election or nomination for election was previously so approved (all such directors, “Incumbent Directors”), cease for any reason to constitute a majority of the Board. Notwithstanding the above provisions, no “Change in Control” shall be deemed to have occurred if a Business Combination, as described above, is effected and a majority of the Incumbent Directors, through the adoption of a Board resolution, determine that, in substance, no Change in Control has occurred.
“Good Reason” for purposes of Mr. Burnison means, if without Mr. Burnison’s prior written consent:
  - the Company materially reduces Mr. Burnison’s duties or responsibilities as Chief Executive Officer or assigns him duties which are materially inconsistent with his duties or which materially impair his ability to function as Chief Executive Officer;
  - the Company reduces Mr. Burnison’s base salary or target annual incentive award under the Company’s annual cash incentive bonus plan (in each case, other than as part of an across-the-board reduction applicable to all executive officers of the Company);
  - the Company fails to perform or breaches its obligations under any other material provision of the Burnison Employment Agreement and fails to cure such failure or breach within the period required by the Burnison Employment Agreement;
  - Mr. Burnison’s primary location of business is moved by more than 50 miles, subject to certain exceptions set forth in the Burnison Employment Agreement;
  - the Company reduces Mr. Burnison’s title of Chief Executive Officer or removes him; or
  - the Company fails to obtain the assumption in writing of its obligation to perform the Burnison Employment Agreement by any successor to all or substantially all of the assets of the Company within 15 days after a merger, consolidation, sale or similar transaction.
“Good Reason” for purposes of Mr. Rozek means, if without Mr. Rozek’s prior written consent:
  - the Company materially reduces Mr. Rozek’s title, duties or responsibilities as Chief Financial Officer and Chief Corporate Officer, or removes him;
  - the Company reduces Mr. Rozek’s then current base salary or target award opportunity under the Company’s annual cash incentive compensation program (in each case, other than as part of an across-the-board reduction applicable to all “named executive officers” of the Company (as defined under Item 402 of Regulation S-K and to the extent employed by the Company at that time)); or
  - Mr. Rozek’s primary location of business is moved by more than 50 miles (other than in connection with a move of the Company’s corporate headquarters).
“Good Reason” for purposes of Messrs. Mulrooney and Arian means, if without Mr. Mulrooney’s or Mr. Arian’s prior written consent and subject to the Company’s cure right:
  - The Company materially reduces his duties or responsibilities; or
  - The Company materially reduces his then current base salary or target annual incentive award (other than as part of an across-the-board reduction applicable to all “named executive officers” of the Company); or
  - for Mr. Arian, the Company materially breaches a material term of the Arian Employment Agreement.

 

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Pay Ratio Disclosure

 

The 2022 annual total compensation of the median compensated of all our employees, other than our CEO Gary Burnison, was $108,358; Mr. Burnison’s 2022 annual total compensation was $9,529,698, and the ratio of these amounts was 1-to-88.

 

The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.

 

The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. For these purposes, we identified a median compensated employee using base salary paid in fiscal year 2022, annualized to the extent permitted by SEC rules for those employees that were employed for less than the full fiscal year or on an unpaid leave. As permitted by SEC rules, we used a valid statistical sampling methodology applied to all of our employees who were employed as of April 30, 2022, to identify the global median employee.

 

Fiscal Year 2022 Compensation of Directors

 

The compensation of directors, including all restricted stock unit awards, for fiscal year 2022 is set forth in the table below.

 

Name   Fees Earned
or Paid in Cash
($)
    Stock
Awards
($)
(1)    All Other
Compensation
($)
(2)    Total
($)
 
Doyle N. Beneby     97,500 (3)                   150,163                 11,945               259,608  
Laura M. Bishop     92,500 (4)      150,163       492       243,155  
Christina A. Gold     215,000 (5)      150,163       1,759       366,922  
Jerry P. Leamon     112,500 (6)      150,163       1,759       264,422  
Angel R. Martinez     92,500 (7)      150,163       1,759       244,422  
Debra J. Perry     110,000 (8)      150,163       1,759       261,922  
Lori J. Robinson     85,000 (9)      150,163       1,759       236,922  
George T. Shaheen     85,000 (10)      150,163       4,442       239,605  
(1) Represents the aggregate grant date fair value of awards granted during the fiscal year, calculated in accordance with Accounting Standards Codification, 718, Compensation-Stock Compensation. The assumptions used to calculate the valuation of the awards are set forth in Note 4 to the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended April 30, 2022. As of April 30, 2022, the aggregate restricted stock units held by each director was 2,050 restricted stock units representing their annual equity grant. Mr. Shaheen held an additional 8,230 fully vested deferred stock units and Mr. Beneby held an additional 23,860 fully vested deferred stock units.
(2) Represents dividends on unvested restricted stock units.
(3) Mr. Beneby received a director fee of $85,000 and $12,500 for service as Nominating Committee Chair during fiscal 2022.
(4) Ms. Bishop joined the board effective September 29, 2021, and received a director fee of $85,000 and an annual fee of $7,500 for service as an Audit Committee Member during fiscal 2022.
(5) Ms. Gold received an annual fee of $130,000 for her services as Chairperson of the Board and a director fee of $85,000 during fiscal 2022.
(6) Mr. Leamon received a director fee of $85,000, an annual fee of $20,000 for service as Compensation Committee Chair, and an annual fee of $7,500 for service as an Audit Committee Member during fiscal 2022.
(7) Mr. Martinez received a director fee of $85,000 and an annual fee of $7,500 for service as an Audit Committee Member during fiscal 2022.
(8) Ms. Perry received a director fee of $85,000 and an annual fee of $25,000 for service as Audit Committee Chair during fiscal 2022.
(9) Ms. Robinson received a director fee of $85,000 during fiscal 2022.
(10) Mr. Shaheen received a director fee of $85,000 during fiscal 2022.

 

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Directors who are also employees or officers do not receive any additional compensation for their service on the Board. The Committee, in consultation with Pearl Meyer, its independent compensation consultant, periodically reviews non-employee director compensation and recommends changes based on competitive market data. Most recently, increases in director compensation that became effective for fiscal year 2020 were implemented in order to better align director compensation with that of our peer group. No changes were made to director compensation for fiscal year 2022.

 

The non-employee director compensation program provides for an annual equity award of restricted stock units with a value of approximately $150,000 to be awarded on the date of each annual meeting of stockholders. The number of units subject to such award is determined by dividing $150,000 by the closing price of the Company’s common stock on the date of such annual meeting of stockholders (rounded to the nearest ten units). Non-employee directors are permitted to defer settlement of their restricted stock units; during fiscal year 2022, Messrs. Shaheen and Beneby elected to defer their restricted stock units. The restricted stock unit awards vest on the day before the following annual meeting of stockholders. Additionally, non-employee directors receive each year, $85,000 either in cash or in restricted stock units, at their election, on the date of each annual meeting of stockholders. The non-employee director compensation program is intended to compensate the non-employee directors for their services through the next annual meeting of stockholders. In addition, each member of the Audit Committee receives $7,500 in cash annually, the Audit Committee Chair receives $25,000 in cash annually, the Compensation and Personnel Committee Chair receives $20,000 in cash annually, and the Nominating and Corporate Governance Committee Chair receives $12,500 in cash annually. The Chair of the Board receives $120,000 in cash annually. All directors are reimbursed for their out-of-pocket expenses incurred in connection with their duties as directors.

 

The Company’s stock ownership policy for directors requires each non-employee director to own three times their annual cash retainer in Company stock.

 

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Proposal No. 3 
Approval of the Korn Ferry 2022 Stock Incentive Plan

 

Executive Summary

 

In order to continue to provide qualified employees, officers, non-employee directors, and other service providers with stock-based incentives, on August 8, 2022, the Board approved, subject to stockholder approval, the Korn Ferry 2022 Stock Incentive Plan (the “Plan”). The Board is submitting the Plan to the stockholders for their approval at the Annual Meeting. If stockholder approval of this proposal is obtained at the Annual Meeting, we will not grant any additional awards under the Korn Ferry Fourth Amended and Restated 2008 Stock Incentive Plan (the “Fourth A&R 2008 Plan” and, together with any prior version thereof, the “Prior Plan”), and the number of shares remaining available under the Prior Plan as of the effective date of the Plan will become available for grant under the Plan. Awards previously granted under the Prior Plan would be unaffected by the adoption of the Plan, and they would remain outstanding under the terms pursuant to which they were previously granted.

 

As of July 31, 2022, an aggregate of 602,644 shares of common stock remained available for new grants under the Fourth A&R 2008 Plan for the grant of stock-based incentives. The Company believes a compensation policy that includes a balanced mix of cash and equity is the most effective way to attract and retain talented employees whose interests are aligned with stockholders. If the Plan is approved by our stockholders, 1,700,000 shares of common stock, plus any shares that remain available for the grant of future awards under the Prior Plan as of the effective date of the Plan (602,644 shares remain available as of July 31, 2022), will be available for new awards of stock-based incentives. Shares of common stock underlying awards granted between July 31, 2022 and the date of the Annual Meeting, if any, will reduce the number of shares remaining available under the Prior Plan on a one-for-one basis. Without approval of the Plan, the Company will be constrained in its ability to use equity as a component of its compensation philosophy, a result that would put the Company at a considerable competitive disadvantage to its direct and indirect competitors in attracting and retaining the special high level professional employees on which the Company’s success is largely dependent.

 

While approving the Plan, the Board considered, among other things, the following:

 

potential dilution to its current stockholders as measured by burn rate and overhang (as described in “Key Data” below);
the policies and recommendations of stockholder advisory firms like Glass Lewis and Institutional Shareholder Services; and
the continued importance of motivating, recruiting, and retaining key employees who are highly sought after in the current extremely competitive job market.

 

Reasons for the Proposal

 

The Board unanimously recommends that the Company’s stockholders approve the Plan. The Company’s ability to grant an appropriate number of equity-based awards continues to be crucial in helping the Company compete more effectively for key employee talent. It is in the long-term interest of the Company and its stockholders to strengthen the ability to attract, motivate, and retain employees, officers, directors, consultants, agents, advisors and independent contractors, and to provide additional incentive for those persons through stock ownership and other incentives to improve operations, increase profits, and strengthen the mutuality of interest between those persons and the Company’s stockholders.

 

If the Plan is not approved, the number of shares currently available under the Fourth A&R 2008 Plan is not projected to be sufficient to cover all of our future equity compensation needs. Thus, if the Plan is not approved, we may not be able to provide persons eligible for awards who are presently providing services to the Company with compensation packages that are necessary to retain and motivate these individuals. In addition, the Company’s future growth plans as part of the process of its transformation to a global diversified organizational consulting firm is based upon identifying and hiring additional highly talented key employees. If the Plan is not approved, we may not be able to provide those potential new hires with compensation packages necessary to attract and motivate them. If approved, the Board believes that the shares available under the Plan will be sufficient to fund the Company’s equity compensation needs for approximately 2-3 years.

 

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Key Data

 

When approving the Plan, the Board considered the burn rate with respect to the equity awards granted by the Company, as well as the Company’s overhang. The burn rate is equal to the total number of equity awards the Company granted in a fiscal year divided by the weighted average common stock outstanding during the year. Overhang is equal to the total number of equity awards outstanding plus the total number of shares available for grant under the Company’s equity plans divided by the total common stock outstanding. The Company’s three-year average burn rate for the last three fiscal years was approximately 1.69%, which is above the median three-year average burn rate of 1.15% for the Company’s peer group (described in more detail on page 40). The Company’s overhang as of July 31, 2022 was 5.0%, which was below the median overhang of the peer group of 7.2%. If the Plan is approved, the Company’s overhang would increase to 8.1%, which is above the median of the peer group.

 

The following table sets forth information regarding outstanding equity awards and shares available for future equity awards under the Fourth A&R 2008 Plan as of July 31, 2022 (without giving effect to approval of the Plan):

 

Total shares of common stock outstanding 53,501,928
Total shares underlying outstanding stock options
Weighted average exercise price of outstanding stock options $0
Weighted average remaining contractual life of outstanding stock options
Total shares underlying outstanding unvested time-based restricted stock and restricted stock unit awards 1,650,916
Total shares underlying outstanding unearned performance-based restricted stock and restricted stock unit awards 401,890
Total shares currently available for grant under Fourth A&R 2008 Plan 602,644

 

Promotion of Good Corporate Governance Practices

 

The Plan provides for the following:

 

stock options and stock appreciation rights may not have a term in excess of ten years, may not be granted at a discount to the fair market value of our common stock on the grant date;
other than in connection with a change in the Company’s capitalization, the Company may not, without stockholder approval, (i) reduce the exercise price of a stock option or stock appreciation right, (ii) exchange a stock option or stock appreciation right for a new stock option or stock appreciation right with a lower exercise price or (iii) at any time when the exercise price of a stock option or stock appreciation right is above the fair market value of a share of our common stock, exchange such stock option or stock appreciation right for cash or other property;
no single-trigger vesting solely on account of a change in control;
no tax gross-ups;
no liberal share recycling;
annual limits on equity compensation that may be awarded to non-employee directors;
minimum vesting periods on all award types;
in no event will dividends or dividend equivalents be paid during the performance period with respect to unearned performance-based awards; and
the administrator may cancel outstanding awards or, in some cases, “claw back” awards previously granted if an award recipient engages in an act of misconduct described in the Plan document, or for certain senior-level executives, in the event of a violation of the Company’s clawback policy.

 

Plan Summary

 

The following summary of the material terms of the Plan is qualified in its entirety by reference to the complete statement of the Plan, which is set forth in Appendix B to this Proxy Statement. Stockholders are encouraged to read the text of the Plan in its entirety.

 

Purpose

 

The purpose of the Plan is to stimulate the efforts of employees, officers, non-employee directors, and other service providers, in each case who are selected to be participants, by heightening the desire of such persons to continue working toward and contributing to the success and progress of the Company.

 

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Administration

 

The Plan is administered by the Compensation and Personnel Committee of the Board, provided, however, that the Board may exercise any power of the Compensation and Personnel Committee. The administrator is authorized and empowered to do all things it determines to be necessary or appropriate in connection with the administration of the Plan, including accelerating awards in the event the administrator determines, in good faith, that such acceleration is necessary or desirable. Subject to the limitations and requirements set forth in the Plan, the Compensation and Personnel Committee may authorize one or more officers of the Company to perform any or all things that the administrator is authorized and empowered to do or perform under the Plan. The Compensation and Personnel Committee may delegate any or all aspects of day-to-day administration of the Plan to one or more officers or employees of the Company or any subsidiary, and/or to one or more agents.

 

Eligible Participants

 

Any person who is a current or prospective officer or employee of the Company or its subsidiaries, and any non-employee director of the Company or other service provider retained to provide consulting, advisory, or other services to the Company or its subsidiaries, is eligible to be considered for the grant of awards under the Plan. As of July 31, 2022, approximately 11,345 employees and eight non-employee directors were eligible to participate in the Plan. Options intending to qualify as “incentive stock options” (“Incentive Stock Options” or “ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986 (the “Code”) may only be granted to employees of the Company or any subsidiary.

 

Available Shares

 

The aggregate number of shares of common stock of the Company that may be granted under the Plan will not exceed 1,700,000, plus (i) any shares of common stock that remain available for grant under the Prior Plan as of the effective date of the Plan and (ii) any shares of common stock subject to outstanding awards under the Prior Plan that on or after the effective date of the Plan cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares of common stock). This limitation is subject to adjustments to prevent dilution. The shares issued pursuant to awards granted under the Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open market.

 

For purposes of the foregoing share limit, the aggregate number of shares issued under the Plan at any time will equal only the number of shares actually issued upon exercise or settlement of an award. Notwithstanding the foregoing, shares subject to an award under the Plan may not again be made available for issuance under the Plan if such shares are: (1) shares that were subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (2) shares delivered to or withheld by the Company to pay the exercise price of an option, (3) shares delivered to or withheld by the Company to pay the withholding taxes related to an award, or (4) shares repurchased on the open market with the proceeds of an option exercise. Shares subject to awards that have been canceled, expired, forfeited, or otherwise not issued under an award and shares subject to awards settled in cash will not count as shares issued under the Plan.

 

Grant Limitations

 

The aggregate number of shares that may be issued pursuant to the exercise of incentive stock options granted under the Plan may not exceed 1,700,000 (which number is subject to antidilution adjustment to the extent that such adjustment will not affect the status of any option intended to qualify as an Incentive Stock Option).

 

Non-Employee Director Awards

 

Subject to certain exceptions, the aggregate number of shares subject to options and stock appreciation rights granted under the Plan during any calendar year to any one non-employee director will not exceed 50,000, and the aggregate number of shares issued or issuable under all awards granted under the Plan other than options or stock appreciation rights during any calendar year to any one non-employee director will not exceed 25,000; provided, however, that in any calendar year in which a non-employee director first joins the Board or is first designated as Chairman of the Board or Lead Director, the maximum number of shares subject to awards granted to the participant may be up to 200% of the number of shares set forth in the foregoing limits.

 

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Amendments and Termination

 

The Board may amend, alter, or discontinue the Plan or any agreement or other document evidencing an award made under the Plan, but, except as provided pursuant to the anti-dilution adjustment provisions of the Plan, no such amendment may be made without the approval of the stockholders of the Company if it would:

 

increase the maximum number of shares of common stock for which awards may be granted under the Plan;
reduce the price at which options may be granted below the price provided for in the Plan;
reduce the exercise price of outstanding options or stock appreciation rights;
extend the term of the Plan;
change the classes of persons eligible to participate in the Plan; or
otherwise amend the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange (“NYSE”) listing requirements.

 

Any amendment to comply with changes in governing law or accounting standards will not require stockholder approval.

 

No amendment may impair the rights of any holder of an award without his or her consent, provided that no consent is required if the administrator determines in its sole discretion and prior to any change in control of the Company that the amendment is required or advisable in order for the Company, plan, or award to satisfy any law or regulation, or meet the requirements of or avoid adverse financial accounting consequences under any accounting standard or is not reasonably likely to significantly diminish the benefits provided under such award, or that any such diminishment has been adequately compensated.

 

Awards

 

The Plan authorizes the administrator to grant awards to eligible participants in the form of incentive and nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units, any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination thereof.

 

Stock Options

 

The administrator of the Plan may grant an option to purchase common stock of the Company, from time to time in the discretion of the administrator. Options may be ISOs or nonstatutory stock options (“NQSOs”). The exercise price per share of common stock subject to an option granted under the Plan must equal or exceed 100% of the fair market value of such common stock on the date the option is granted, except that the exercise price of an option may be higher or lower in the case of options granted to an employee of a company acquired by the Company in assumption and substitution of options held by such employee at the time such company is acquired and the exercise price of an Incentive Stock Option granted to an individual owning more than 10% of the combined voting power of all classes of Company stock must equal or exceed 110% of the fair market value of such common stock on the date of grant. Other than in connection with a change in the Company’s capitalization, the Company will not, without stockholder approval, (i) reduce the exercise price of an option, (ii) exchange an option for a new option or stock appreciation right with a lower exercise price, or (iii) at any time when the exercise price of an option is above the fair market value of a share of common stock, exchange such option for cash or other property. Unless the administrator provides for a shorter period, the maximum term of an option granted under the Plan, including any Incentive Stock Options, will be 10 years from the date of grant, except that Incentive Stock Options granted to an individual who, at the time the option is granted to such individual, owns more than 10% of the combined voting power of all classes of stock of the Company will have a term no greater than five years from the date of grant. Options granted under the Plan will vest according to a schedule determined by the administrator. The administrator will determine the acceptable forms of payment of the exercise price of an option, which may include: cash, shares of Company common stock, irrevocable commitment by a broker to pay over the amount from a sale of shares of Company common stock issuable under an option, delivery of previously owned shares of Company common stock, withholding of shares of Company common stock or any combination of the foregoing.

 

Incentive Bonus

 

An incentive bonus is an award which confers upon the participant the opportunity to earn a future payment tied to the level of achievement with respect to one or more performance criteria.

 

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Restricted Stock and Restricted Stock Units

 

Restricted stock is an issuance of shares of common stock of the Company under which the retention, vesting, and/ or transferability is subject for a specified period of time to such conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. Restricted stock units are awards denominated in units of shares of common stock of the Company under which the issuance of shares is subject to such conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. The administrator will determine the extent to which awards of restricted stock units may be settled in cash, shares of common stock of the Company, or a combination of the foregoing. Unless determined otherwise by the administrator, participants receiving restricted stock awards are entitled to the voting and dividend rights of the shares of common stock underlying the awards. Participants receiving restricted stock unit awards are not entitled to the voting rights of the underlying shares of common stock, and are entitled to the dividend equivalent rights only to the extent determined by the administrator. Notwithstanding the preceding two sentences, in no event will dividends or dividend equivalent rights be paid with respect to unvested awards of restricted stock or restricted stock units that are subject to performance-based vesting criteria. Dividends or dividend equivalents accrued on or in respect of such awards will become payable (if at all) no earlier than the date the performance-based vesting criteria have been achieved and the underlying restricted stock or restricted stock units have been earned.

 

Stock Appreciation Rights

 

A stock appreciation right provides the right to the monetary equivalent of the increase in value of a specified number of shares over a specified period of time after the right is granted. Stock appreciation rights may be granted to participants either in tandem with or as a component of other awards granted under the Plan (“tandem SARs”) or not in conjunction with other awards (“freestanding SARs”). All freestanding SARs will be granted subject to the same terms and conditions applicable to options as set forth above and in the Plan, including the minimum vesting requirements, and all tandem SARs will have the same exercise price, vesting, exercisability, forfeiture, and termination provisions as the award to which they relate. Other than in connection with a change in the Company’s capitalization, the Company may not, without stockholder approval, (i) reduce the exercise price of such stock appreciation right, (ii) exchange such stock appreciation right for a new option or stock appreciation right with a lower exercise price, or (iii) at any time when the exercise price of a stock appreciation right is above the fair market value of a share, exchange such stock appreciation right for cash or other property.

 

Performance Criteria

 

The administrator may establish performance criteria and level of achievement versus such criteria that will determine the number of shares, units, or cash to be granted, retained, vested, issued, or issuable under or in settlement of or the amount payable pursuant to an award, which criteria may be based on “performance criteria” (as described below) or other standards of financial performance and/or personal performance evaluations.

 

For purposes of the Plan, the term “performance criteria” means any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the company as a whole or to a business unit or subsidiary, either individually, alternatively or in any combination, and measured over the performance period established by the administrator, on an absolute basis or relative to a pre-established target, to previous results or to a designated comparison group, either based upon United States Generally Accepted Principles (“GAAP”) or non-GAAP financial results, in each case as specified by the administrator: (i) cash flow (before or after dividends), (ii) earnings per share (including earnings before interest, taxes, depreciation and amortization), (iii) stock price, (iv) return on equity, (v) total stockholder return, (vi) return on capital (including return on total capital or return on invested capital), (vii) return on assets or net assets, (viii) market capitalization, (ix) economic value added, (x) debt leverage (debt to capital), (xi) revenue, (xii) income or net income, (xiii) operating income, (xiv) operating profit or net operating profit, (xv) operating margin or profit margin, (xvi) return on operating revenue, (xvii) cash from operations, (xviii) operating ratio, (xix) operating revenue, (xx) market share, (xxi) product development or release schedules, (xxii) new product innovation, (xxiii) product cost reduction through advanced technology, (xxiv) brand recognition/acceptance, (xxv) product ship targets, (xxvi) cost reductions, (xxvii) customer service, (xxviii) customer satisfaction, (xxix) the sales of assets or subsidiaries, or (xxx) any other measure or metric the administrator deems appropriate.

 

The administrator may appropriately adjust any evaluation of performance under qualifying performance criteria (i) to eliminate the effects of charges for restructurings, discontinued operations and all items of gain, loss, or

 

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expense that are unusual or infrequently occurring or related to the acquisition or disposal of a segment of a business or related to a change in accounting principle, all as determined in accordance with applicable accounting provisions, as well as the cumulative effect of accounting changes, in each case as determined in accordance with GAAP or identified in the company’s financial statements or notes to the financial statements, (ii) to exclude any of the following events that occurs during a performance period: (a) asset write-downs, (b) litigation, claims, judgments, or settlements, (c) the effect of changes in tax law or other such laws or provisions affecting reported results, (d) accruals for reorganization and restructuring programs, (e) accruals of any amounts for payment under the Plan or any other compensation arrangement maintained by the Company, (f) foreign exchange gains and losses, and (g) acquisitions or divestitures, and (iii) for such other events as the administrator deems appropriate.

 

Minimum Vesting Requirements

 

Notwithstanding any other provision of the Plan to the contrary, awards granted under the Plan (other than cash-based awards) may not become exercisable, vest or be settled, in whole or in part, prior to the one-year anniversary of the date of grant except (i) with respect to an award that is granted in connection with a merger or other acquisition as a substitute or replacement award for awards held by grantees of the acquired business and (ii) with respect to an award granted to a nonemployee director that vests on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting; provided, that up to 5% of the aggregate number of shares authorized for issuance under the Plan may be issued pursuant to awards subject to any, or no, vesting conditions, as the administrator determines appropriate; and, provided, further, that the foregoing restriction does not apply to the administrator’s discretion to provide for accelerated exercisability or vesting of any award, including in cases of retirement, death, disability or a change in control, in the terms of the award or otherwise.

 

Deferral of Gains

 

The administrator may, in an award agreement or otherwise, provide for the deferred delivery of shares or cash upon settlement, vesting or other events with respect to restricted stock units, or in payment or satisfaction of an incentive bonus, to the extent that doing so would not result in the imposition of the additional tax under Section 409A(a)(1)(B) of the Code.

 

Adjustments of and Changes in the Stock

 

In the event that any stock dividend, stock split or a combination or consolidation or the outstanding shares into a lesser number of shares is declared with respect to the Company’s shares of common stock, the authorization limits set forth in the Plan and above will be increased or decreased proportionately, and the shares then subject to each award will be increased or decreased proportionately without any change in the aggregate purchase price therefor. In the event of an extraordinary distribution on the shares or in the event the shares are changed into or exchanged for a different number or class of shares of stock or securities of the Company or of another corporation or other property, whether through recapitalization, reorganization, reclassification, merger, consolidation, split-up, spinoff, combination, repurchase or exchange of shares, or other securities of the Company, issuance of warrants or other rights to purchase shares or other securities of the Company, or any other similar corporate transaction or event affects the shares such that an equitable adjustment would be required in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the authorization limits set forth in the Plan and above will be adjusted proportionately, and an equitable adjustment will be made to each share subject to an award such that no dilution or enlargement of the benefits or potential benefits occurs. Each such share then subject to each award will be adjusted to the number and class of shares or other property into which each outstanding share will be so exchanged such that no dilution or enlargement of the benefits occurs, all without change in the aggregate purchase price for the shares then subject to each award. Such adjustment may be made to any or all of: (i) the number and type of shares (or other securities or other property) that thereafter may be made the subject of awards or be delivered under the Plan; (ii) the number and type of shares (or other securities or other property) subject to outstanding awards; (iii) the purchase price or exercise price of a share under any outstanding award or the measure to be used to determine the amount of the benefit payable on an award; and (iv) any other adjustments the administrator determines to be equitable.

 

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Transferability

 

Awards may not be sold, transferred for value, pledged, assigned, or otherwise alienated or hypothecated by a participant other than by will or the laws of descent and distribution, and each option or stock appreciation right may be exercisable only by the participant during his or her lifetime. Notwithstanding the foregoing, outstanding options may be exercised following a participant’s death by the participant’s beneficiaries or as permitted by the administrator, and to the extent permitted by the administrator, the person to whom an award is initially granted may make certain limited transfers to certain family members, family trusts, or family partnerships.

 

Effective Date and Termination of the Plan

 

The Board adopted the Plan on August 8, 2022, and it will become effective upon approval by the Company’s stockholders at the Annual Meeting (the “Effective Date”). The Plan will remain available for the grant of awards until the 10th anniversary of the Effective Date; provided, however, that Incentive Stock Options may not be granted under the Plan after the 10th anniversary of the date of the Board’s approval thereof.

 

U.S. Federal Income Tax Consequences

 

The following discussion of the federal income tax consequences of the Plan is intended to be a summary of applicable federal law as currently in effect. It should not be taken as tax advice by participants, who are urged to consult their individual tax advisors.

 

Stock Options

 

ISOs and NQSOs are treated differently for federal income tax purposes. ISOs are intended to comply with the requirements of Section 422 of the Code. NQSOs do not comply with such requirements.

 

An optionee is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares on the exercise date will, however, be a preference item for purposes of the alternative minimum tax. If an optionee holds the shares acquired upon exercise of an ISO for at least two years following the option grant date and at least one year following exercise, the optionee’s gain, if any, upon a subsequent disposition of such shares is long term capital gain. The measure of the gain is the difference between the proceeds received on disposition and the optionee’s basis in the shares (which generally equals the exercise price). If an optionee disposes of stock acquired pursuant to the exercise of an ISO before satisfying these holding periods, the optionee will recognize both ordinary income and capital gain in the year of disposition. The Company is not entitled to an income tax deduction on the grant or exercise of an ISO or on the optionee’s disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company will be entitled to a deduction in the year the optionee disposes of the shares in an amount equal to the ordinary income recognized by the optionee.

 

In order for an option to qualify for ISO tax treatment, the grant of the option must satisfy various other conditions more fully described in the Code. The Company does not guarantee that any option will qualify for ISO tax treatment even if the option is intended to qualify for such treatment. In the event an option intended to be an ISO fails to so qualify, it will be taxed as an NQSO as described below.

 

An optionee is not taxed on the grant of an NQSO. On exercise, the optionee recognizes ordinary income equal to the difference between the exercise price and the fair market value of the shares acquired on the date of exercise. The Company is entitled to an income tax deduction in the year of exercise in the amount recognized by the optionee as ordinary income. The optionee’s gain (or loss) on a subsequent disposition of the shares is long term capital gain (or loss) if the shares are held for more than one year following exercise. The Company does not receive a deduction for this gain.

 

Stock Appreciation Rights

 

An optionee is not taxed on the grant of a stock appreciation right. On exercise, the optionee recognizes ordinary income equal to the cash or the fair market value of any shares received. The Company is entitled to an income tax deduction in the year of exercise in the amount recognized by the optionee as ordinary income.

 

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Restricted Stock and Restricted Stock Units

 

Grantees of restricted stock or restricted stock units do not recognize income at the time of the grant. When the award vests or is paid, grantees generally recognize ordinary income in an amount equal to the fair market value of the stock or units at such time, and the Company will receive a corresponding deduction. However, no later than 30 days after a participant receives an award of restricted stock, the participant may elect to recognize taxable ordinary income in an amount equal to the fair market value of the shares at the time of receipt. Provided that the election is made in a timely manner, when the restrictions on the shares lapse, the participant will not recognize any additional income. If the participant forfeits the shares to the Company (e.g., upon the participant’s termination prior to vesting), the participant may not claim a deduction with respect to the income recognized as a result of the election. Dividends paid with respect to unvested shares of restricted stock generally will be taxable as ordinary income to the participant at the time the dividends are received.

 

Incentive Bonuses

 

A participant will have taxable income at the time an incentive bonus award becomes payable, and, if the participant has timely elected deferral to a later date, such later date. At that time, the participant will recognize ordinary income equal to the value of the amount then payable.

 

Company Deduction and Section 162(m)

 

Section 162(m) of the Code generally limits the federal income tax deduction for compensation paid to “covered employees” (in general, the CEO, the CFO, and the three other most highly-compensated executive officers for the year at issue and any person who was part of that group for any other year beginning after December 31, 2016) to $1,000,000. Thus, certain compensation attributable to awards may be nondeductible to the Company due to the application of Section 162(m) of the Code.

 

Withholding Taxes

 

The Company will generally be required to withhold applicable taxes with respect to any ordinary income recognized by a participant in connection with awards made under the Plan. Whether or not such withholding is required, the Company will make such information reports to the Internal Revenue Service as may be required with respect to any income (whether or not that of an employee) attributable to transactions involving awards.

 

New Plan Benefits; Market Value of Securities

 

The benefits that will be awarded or paid in the future under the Plan are not currently determinable. Such awards are within the discretion of the Compensation and Personnel Committee, and the Compensation and Personnel Committee has not determined future awards or who might receive them. However, each non-employee director is expected to receive an annual award of restricted stock units on the date of the 2022 Annual Meeting of Stockholders with a target value of approximately $150,000. Non-employee directors may also elect to receive restricted stock units in lieu of their $85,000 cash retainer. As of August 1, 2022, the closing price of a share of the Company’s common stock was $65.60.

 

Registration With the SEC

 

We intend to file with the SEC a registration statement on Form S-8 covering the shares reserved for issuance under the Plan in the fourth quarter of calendar year 2022.

 

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Required Vote

 

The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote on the proposal is required for the approval of the Plan.

 

RECOMMENDATION
OF THE BOARD

 
The Board unanimously recommends that you vote “FOR” the approval of the Company’s 2022 Stock Incentive Plan.

 

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Equity Compensation Plan Information

 

Plan Category   (a)
Number of Securities
to be Issued
upon Exercise of
Outstanding Options,
Warrants and Rights
    (b)
Weighted-Average
Exercise Price
of Outstanding
Options, Warrants
and Rights
    Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
 
Equity compensation plans approved by security holders     883,875     $       2,076,910  
Equity compensation plans not approved by security holders                  
TOTAL     883,875     $       2,076,910(1)  

 

The values in this table are as of April 30, 2022.

 

(1) This includes 438,427 shares that remained available under the Company’s Employee Stock Purchase Plan as of April 30, 2022, which includes 83,704 shares that were subject to purchase during the period in effect as of April 30, 2022.

 

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Proposal No. 4
Approval of the Korn Ferry Amended and Restated Employee Stock Purchase Plan

 

On June 3, 2003, the Board originally adopted the Employee Stock Purchase Plan and the Company’s stockholders subsequently approved it on September 10, 2003, and approved an increase of shares on September 28, 2011. The Employee Stock Purchase Plan has been subsequently amended and restated by the Board to make certain administrative changes that did not require stockholder approval, most recently on June 3, 2020 (the “ESPP”).

 

On August 8, 2022, the Board approved, subject to stockholder approval, a further Amended and Restated Employee Stock Purchase Plan (the “A&R ESPP”) to increase the number of shares of common stock that may be purchased thereunder by 1,500,000 shares for a total of 4,500,000 shares authorized under the A&R ESPP. Other than the increase in the number of shares authorized for issuance, and certain administrative changes, the ESPP and the A&R ESPP are not materially different.

 

As of July 1, 2022, 354,723 shares of common stock remained available for issuance under the ESPP. The proposed increase in the number of shares authorized for issuance under the A&R ESPP represents approximately 2.8% of the Company’s outstanding common stock as of July 31, 2022. The Board believes that an increase of 1,500,000 shares authorized for issuance under the A&R ESPP represents a reasonable amount of potential equity dilution in light of the purposes of the ESPP described below. If approved, the Board believes that the additional share request will be sufficient to fund the Company’s equity compensation needs under the A&R ESPP for approximately 10 years. If this proposal is rejected by stockholders, the total number of shares authorized and reserved for issuance under the ESPP will remain at 3 million, of which 354,723 remain available for issuance as of July 1, 2022. Based on our current forecasts and estimated participation rates, if the increase is not approved, it is anticipated that the ESPP will run out of available shares in approximately 3 years.

 

Reasons for the Proposed Amendment

 

The Board approved the A&R ESPP so that the Company can continue to grant its employees the ability to purchase shares thereunder at levels determined appropriate by the Board and within the limits allowable by applicable law. The A&R ESPP helps to attract and retain employees because it provides eligible employees with the opportunity to become Company stockholders at favorable prices and participate in the Company’s success, aligning the interests of participating employees with those of stockholders. We believe that the A&R ESPP is an essential tool that helps us compete for talent in the very competitive labor markets in which we operate. We also believe it is a crucial element in rewarding and encouraging current employees that promotes stock ownership by employees, which aligns their interests with those of our stockholders. Without stockholder approval of this proposal, we believe our ability to attract and retain talent would be hampered, and our recruiting, retention, and incentive efforts would become more difficult.

 

Summary of the A&R ESPP

 

The principal provisions of the A&R ESPP are summarized below. This summary is not a complete description of all of the A&R ESPP’s provisions, and is qualified in its entirety by reference to the complete text of the A&R ESPP attached to this Proxy Statement as Appendix C. Capitalized terms not otherwise defined in this summary have the meaning set forth in the A&R ESPP.

 

Purpose

 

The purpose of the A&R ESPP is to assist eligible employees in acquiring a stock ownership interest in the Company, at favorable prices and upon favorable terms, pursuant to a plan which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”).

 

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Administration

 

The A&R ESPP will be administered by the Compensation Committee of the Board. The committee is authorized to decide questions of eligibility and to make rules and regulations for the administration and interpretation of the A&R ESPP. All determinations of the committee with respect to the A&R ESPP are final.

 

Eligibility

 

All employees who work 20 hours or more per week and who have been continuously employed by the Company or a participating subsidiary for at least six months are eligible to participate in the A&R ESPP. However, any employee who would own more than 5% of the voting power of the Company’s stock immediately after a grant under the A&R ESPP is not eligible to participate and no participant may purchase more than $25,000 of the Company’s stock in any one calendar year. Furthermore, no participant may authorize withholding of more than 15% of his or her eligible “Compensation” to purchase shares of the Company’s common stock. “Compensation” basically means a participant’s base salary or base wages, and excludes supplemental forms of compensation such as bonuses and stock award compensation. As of July 1, 2022, approximately 8,987 employees were eligible to participate.

 

Shares Available under the A&R ESPP

 

The maximum number of shares of the Company’s common stock that may be purchased under the A&R ESPP is 4,500,000 shares. Those shares of common stock may be either the Company’s authorized but unissued common stock or any of its shares of common stock held as treasury shares. The maximum number of shares of the Company’s common stock that any one participant may acquire in any offering period is 5,000 and each participant is further limited by the restrictions described above in the “Eligibility” section. The maximum number of shares issuable under the A&R ESPP will be subject to adjustment for any dividend, stock split, or other relevant change in the Company’s capitalization. As of August 1, 2022, the closing price of a share of the Company’s common stock was $65.60.

 

Operation of the A&R ESPP

 

The A&R ESPP operates in successive offering periods. Offering periods are typically six months in duration and, unless otherwise specified by the committee, will commence each January 1 and July 1, and end the following June 30 or December 31, respectively. Each employee who is eligible to participate in the A&R ESPP must file an election to have a portion of his or her compensation contributed to the A&R ESPP on an after-tax basis during each offering period in which he or she participates. On the first day of each offering period, each participant is deemed to have been granted an option to acquire shares of common stock of the Company. The option exercise price for each share is established by the Board or committee administering the A&R ESPP prior to the start of each offering period, provided that in no event will the option price per share be less than 85% of the fair market value of a share of common stock on the last day of the offering period (nor equal to or greater than 100% of the fair market value of a share of common stock on the last day of the offering period). At the end of the offering period, each participant’s option is automatically exercised and the maximum possible number of whole shares of common stock are purchased using the amounts credited to the participant’s account to pay the exercise price of the option.

 

A&R ESPP Amendment and Termination

 

The Board may amend, modify, suspend, or terminate the A&R ESPP at any time. A&R ESPP amendments are not subject to stockholder approval unless required by law, the Internal Revenue Code, or as deemed necessary or advisable by the Board, provided that no amendment, modification or termination will, without written consent, materially adversely affect any rights or benefits of a participant with respect to an option granted under the A&R ESPP prior to the effective date of such change. The A&R ESPP and any outstanding options to purchase shares will terminate upon certain corporate events (such as dissolution of the Company or a merger in which the Company does not survive) and A&R ESPP contributions that have not been used to purchase stock will be refunded to participants.

 

New A&R ESPP Benefits

 

The actual number of shares that may be purchased by any individual under the A&R ESPP is not determinable in advance because the number is determined, in part, on the participant elections, contributed amount, and the purchase price.

 

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Existing ESPP Benefits

 

Pursuant to SEC rules, the following table sets forth, with respect to the groups named below, the number of shares of common stock that were purchased since inception of the ESPP through July 25, 2022.

 

Name and Position   Number of
Shares Purchased
Gary D. Burnison, President and Chief Executive Officer   8,065
Robert P. Rozek, Executive Vice President, Chief Financial Officer and Chief Corporate Officer   4,555
Byrne Mulrooney, Chief Executive Officer of RPO and Digital   667
Mark Arian, Chief Executive Officer of Consulting  
All current executive officers as a group (5 persons)   31,084
All current directors who are not executive officers as a group (8 persons)  
Each nominee for election as a director  
Each associate of any such directors, executive officers or nominees  
Each other person who received or is to receive 5% of such options, warrants or rights  
All current employees, including all current officers who are not executive officers, as a group   1,242,279

 

U.S. Federal Income Tax Consequences

 

The following is a brief description of the federal income tax treatment that will generally apply to the grant and exercise of rights under the A&R ESPP, based on federal income tax laws currently in effect. The exact federal income tax treatment of options will depend on the specific nature of any such option and the individual tax attributes of the participant. This summary is not intended to be a complete analysis and discussion of the federal income tax treatment of the A&R ESPP, and does not discuss any federal employment, gift, or estate taxes or the tax laws, including income tax laws, of any municipality, state, or foreign country.

 

The A&R ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code and, as a result, employees who participate in the A&R ESPP will be afforded favorable tax treatment subject to meeting certain requirements specified by the Internal Revenue Code. In general, there are no federal income tax consequences to a participant upon the grant of the option to purchase shares under the A&R ESPP at the beginning of an offering period or upon its exercise at the end of an offering period. Upon the disposition of shares of common stock acquired upon exercise of an option, the participant will generally be subject to tax and the nature and amount of the tax will depend on whether the employee has satisfied the statutory holding period.

 

If the employee holds shares acquired under the A&R ESPP for at least two years from the grant date of his or her option and at least one year from the date he or she acquired the shares, any gain on the sale of the shares will be taxed as ordinary income to the extent of the lesser of (i) the amount by which the fair market value of the shares on the grant date (i.e., the first day of the offering period) exceeded the exercise price for the option, or (ii) the amount by which the fair market value of the shares on the date of sale exceeds the exercise price of the option. Any additional gain or loss will be taxed as long-term capital gain or loss.

 

If the participant sells or otherwise disposes of the shares before the expiration of the statutory holding period, then in the year of such “disqualifying” disposition, the participant will be required to recognize ordinary income equal to the difference between the fair market value of the shares on the date of the exercise of the option and the exercise price of the option. Any additional gain or loss will be short-term or long-term gain or loss depending on the length of time the employee has held the shares.

 

The Company is not entitled to any deduction with respect to the difference between the fair market value of the common stock and the option exercise price if the participant satisfies the statutory holding period described above. If shares are sold before the statutory holding period is satisfied, the Company receives a tax deduction for any ordinary income recognized by the participant.

 

Registration with the SEC

 

We intend to file with the SEC a registration statement on Form S-8 covering the new shares reserved for issuance under the A&R ESPP in the fourth quarter of calendar year 2022.

 

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Required Vote

 

The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote on the proposal is required for the approval of the A&R ESPP.

 

 

RECOMMENDATION
OF THE BOARD

 

The Board unanimously recommends that you vote “FOR” the approval of the Company’s Amended and Restated Employee Stock Purchase Plan.

 

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Proposal No. 5
Ratification of the Appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm

 

The Audit Committee has approved the appointment of Ernst & Young LLP (“Ernst & Young”) as the Company’s independent registered public accounting firm for fiscal year 2023. Ernst & Young has served as the Company’s independent registered public accounting firm since March 2002. Ernst & Young has unrestricted access to the Audit Committee to discuss audit findings and other financial matters. Neither the Company’s Restated Certificate of Incorporation nor its Bylaws require that the stockholders ratify the selection of Ernst & Young as the Company’s independent registered public accounting firm. However, we are requesting ratification because we believe it is a matter of good corporate practice.

 

If the Company’s stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain Ernst & Young, but may nonetheless retain Ernst & Young as the Company’s independent registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may change the appointment at any time if it determines that such change would be in the best interests of the Company and its stockholders. Representatives of Ernst & Young will attend the Annual Meeting to answer appropriate questions and may also make a statement if they so desire.

 

Required Vote

 

Ratification of the appointment of Ernst & Young as the Company’s independent registered public accounting firm requires the affirmative vote of a majority of those shares present, either online or by proxy, and entitled to vote at the Annual Meeting.

 

RECOMMENDATION
OF THE BOARD

 

The Board unanimously recommends that you vote “FOR” the ratification of the appointment of Ernst & Young as the Company’s independent registered public accounting firm for fiscal year 2023.

 


 

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Audit Committee Matters

 

Fees Paid to Ernst & Young

 

The following table summarizes the fees that Ernst & Young, our independent registered public accounting firm, billed to us for each of the last two fiscal years. All services provided by Ernst & Young were approved by the Audit Committee in conformity with the Audit Committee’s pre-approval process (as discussed below).

 

  2022   2021
Audit fees(1) $ 3,906,044