DEF 14A 1 csgs-def14a_20210520.htm DEF 14A csgs-def14a_20210520.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.         )

Filed by the Registrant  

Filed by a Party Other Than the Registrant  

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

CSG SYSTEMS INTERNATIONAL, INC.

 

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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

 

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DEAR shareholders

 

Good companies survive crises; great companies thrive in them.

At CSG, we could not be more grateful to and proud of our 4,800 dedicated employees who rose above the challenges of 2020 to move our business forward.


No doubt, 2020 was an unprecedented year. Millions tragically lost their lives and health to COVID-19, countless companies went out of business, societal inequalities were laid bare again for all to confront, and every organization in the world had to re-think how they operate. CSG was not immune to these disruptive forces.

 

Yet, amidst this turbulence, CSG found a way to rise. We proved, yet again, the resiliency of our platform-based, SaaS business model. We served our customers well, kept our employees safe with more than 88% working from home, and re-solidified what we stand for and why we exist. Purpose and principles continue to guide us.

 

CSG delivered strong results by staying true to one of our core values — putting our customers’ success at the center of everything we do. The strength of our customer relationships with leading global brands in a wide variety of industry verticals propels us forward and up. Customers in Communications, Cable, Media, Financial Services, Healthcare, Retail, and Government (just to name a few) trust CSG to help them solve their toughest business problems for one simple reason: our people and our innovative platforms deliver.

We also continue to return cash to you, our shareholders, exceeding $57 million dollars in combined cash dividends and share repurchases in 2020. Since 2016, we have returned over $250 million to shareholders, representing close to 50% of free cash flows.

Even more importantly, headwinds notwithstanding, 2020 became the springboard for our future market momentum. CSGers around the globe are tenaciously accelerating our organic and inorganic strategic growth with the humble confidence and discipline that defines who we are.

Turning our sights to 2021 and the decade ahead, we are energized by a mission that began nearly 40 years ago: By channeling the power of all, we make ordinary customer and employee experiences extraordinary. As we turn this mission into reality, CSG is more resolute than ever to turbocharge our growth, diversify our industry vertical revenues and amplify the social impact we make by unleashing the full potential of our people and culture.

Together, we will deliver significant value expansion for all CSG stakeholders by relentlessly driving three key strategic priorities:

 

 

1.

Obsessing over the success of our customers as we help them design and digitally-enable exceptional customer and employee experiences: We believe in innovating jointly with customers to redesign and technologically-enable personalized engagements with their consumer and enterprise customers. Because our modular solutions are mission-critical systems at the heart of customers’ businesses, reliability and operational excellence remain high priorities for us. Finally, adding more value than and being easier to do business with than our competitors are important CSG differentiators.

 


 

 

2.

Developing breakthrough technology platforms and solutions that address the market’s most pressing needs: Our product platforms and pre-integrated solutions in revenue management/digital monetization, customer engagement and cloud payments give our customers a cost and marketplace advantage in an increasingly real-time, data-driven, digital world. Speed, agility, and market-responsive innovation combined with excellent operations will continue to distinguish CSG from our competitors.

 

3.

Winning big in Communications, Cable and Media revenue management, while simultaneously accelerating higher growth revenue diversification in digital engagement and cloud payments: Expanding CSG’s market share in Telecom and Wireless, while growing our Cable/Media leadership is key to outpacing industry growth in the largest market where we compete. Equally important, CSG will accelerate our organic and inorganic growth as we help leading brands in many industry verticals improve and digitize their customer engagement and payment processes. The business synergies and cross-selling benefits that CSG gets from our increasingly higher growth product portfolio and more partner-friendly approach strengthen our market positioning as we help great brands worldwide acquire, monetize, engage, and retain their customers.


As CSG leans into becoming a more diverse, equitable and inclusive company, our commitment to real and lasting impact starts at the top. The CSG Board of Directors continues to add the talent to support our accelerated growth and strategic evolution. With five new Board members since 2016, CSG’s diverse Board now has 27% of Directors who are female and 45% of Directors who are people of color, and the Board spans four generations representing multiple disciplines and industries.

Similarly, the CSG Executive Leadership Team (now comprised of leaders who are 30% female and 20% people of color) is strengthening our inclusive culture as we recruit, retain, and develop the best, most energized, and diverse talent to help us transform the industries we serve. Along with our new Chief Diversity & Social Responsibility Officer, CSG is building a company that reflects the communities where we operate, elevates our people to be the best they can be, makes a more profound social impact, and ensures every single CSG employee’s true authentic self is seen, heard, accepted, valued, celebrated and represented more fully.

In closing this year’s message, I ask that when you think of CSG and what we aspire to be, please remember this: While our solutions are securely in the cloud, our people and the results we deliver to great global brands leave lasting daily footprints on the ground. We put customer success before our own ambitions. We listen while others talk. We step forward when others fall back. We deliver where competitors come up short.

On behalf of the global CSG leadership team, on our watch, CSG will continue to envision, invent, influence, and shape a better, more future-ready world.

I sincerely
thank you, our shareholders, for your commitment to the company; our customers for your continued trust, and our talented people for the impact you make. I am honored to lead CSG as together we commit to outperforming on our shared journey of making employees, customers, and shareholders proud and financially rewarded.

Best Regards,

Brian A. Shepherd

President and Chief Executive Officer

 


 

 


 

 

CSG Systems International, Inc.

6175 S. Willow Drive, Greenwood Village, Colorado 80111

 

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS

OF CSG SYSTEMS INTERNATIONAL, INC.

 

Date:

 

 

May 20, 2021

 

 

 

 

Time:

 

 

9:00 a.m. Mountain Daylight Time

 

 

 

 

Virtual Meeting:

 

 

This year’s meeting is a virtual shareholders meeting at www.virtualshareholdermeeting.com/CSGS2021

 

 

 

 

Agenda:

 

 

1.

 

To elect four Class III Directors nominated by our Board of Directors;

 

 

 

2.

 

To approve, on an advisory basis, the compensation of our named executive officers;

 

 

 

3.

 

To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2021; and

 

 

 

4.

 

To transact any other business that properly comes before the meeting or any adjournment or postponement of the meeting.

 

 

 

 

Record Date:

 

 

The Board of Directors fixed the close of business on March 25, 2021, as the record date for determining the stockholders who are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof.

All stockholders are cordially invited to attend the meeting.

During this virtual meeting, you may ask questions and will be able to vote your shares electronically. You may also submit questions in advance of the meeting by visiting www.virtualshareholdermeeting.com/CSGS2021. The Company will respond to as many inquiries at the meeting as time allows.

If you plan to attend the meeting online, you will need the 16-digit control number included in your Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”), on your proxy card or on the instructions that accompany your proxy materials. The 2021 annual meeting will begin promptly at 9:00 a.m. (Mountain Daylight Time). Online check-in will begin at 8:45 a.m. (Mountain Daylight Time), and you should allow ample time for the online check-in procedures. There will be no physical location for stockholders to attend.

 

By Order of the Board of Directors of CSG Systems International, Inc.

 

 

Gregory L. Cannon

Secretary

April 6, 2021

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE STOCKHOLDER MEETING TO BE HELD ON MAY 20, 2021: The proxy statement and

our Annual Report on Form 10-K are available at www.proxyvote.com.

 

 

 


 

table of contents

 

 

Page

Proxy Summary

i

Questions and Answers About the 2021 Annual Meeting and Voting

1

Corporate Governance and Board of Directors

4

Overview

4

Directors

4

Director Independence

4

Corporate Governance Practices and Documents

5

Majority Voting

5

Communications with the Board

6

Director Attendance at Board Meetings

6

Annual Meeting Attendance

6

Board Committees

6

Audit Committee

6

Compensation Committee

7

Determining Executive Officer Compensation and Use of Independent Compensation Consultant

7

Determining Non-Employee Director Equity Awards

7

Risks Related to Compensation Policies and Practices for All Employees

7

Nominating and Corporate Governance Committee

7

What We Look for in Director Nominees

8

Stockholder Recommended Director Candidates

8

Annual Board Evaluation Process

9

Risk and Compliance Oversight

9

Risk Management Structure and Responsibilities

10

Information Security Governance Program

11

Human Capital Management

11

Talent Acquisition

11

Talent Retention and Professional Development

11

Diversity and Community

12

Environment, Health and Safety

12

Board Leadership Structure

13

Code of Ethics and Business Conduct

13

Other Board Information

13

Compensation of Directors

14

2020 Director Compensation

14

Proposal 1 – Election of Directors

15

Nominees for Class III Directors – Term to Expire in 2021

16

Class I Directors – Term to Expire in 2022

18

Class II Directors – Term to Expire in 2023

20

Beneficial Ownership of Common Stock

22

Principal Stockholders

22

Directors and Executive Officers

23

Share Ownership Guidelines

24

Anti-Hedging and Anti-Pledging Policy

24

Delinquent Section 16(a) Reports

24

Executive Compensation – Compensation Discussion and Analysis

25

Leadership Transition

25

Executive Summary

26

Company Overview and Business Strategy Transition

26

Our Overall 2020 Performance

26

2020 Executive Compensation Highlights

27

 

Page

Pay-for-Performance Compensation Program

27

Say-on-Pay Results

28

Governance and Compensation Practices

29

Key Compensation Governance Factors

29

Determining Executive Compensation

30

Role of the Independent Compensation Consultant and Management

30

Compensation Mix

31

Role of Benchmarking in Determining Compensation and Peer Group

32

Role of Benchmarking in Determining Compensation

32

Peer Group Used for Benchmarking

32

2020 Compensation

33

Annual Base Salaries

33

Annual Performance Bonuses

33

Long-Term Incentive Awards

35

Other Considerations

38

Other Benefits and Employment Agreements

38

Tax Deductibility of Executive Compensation

38

Accounting Considerations

38

Report of the Compensation Committee

39

Executive Compensation Tables

40

2020 Summary Compensation Table

40

2020 Grants of Plan-Based Awards

41

Outstanding Equity Awards at Fiscal Year-End

42

2020 Stock Vested

43

2020 Non-Qualified Deferred Compensation

44

Employment and Separation Agreements

45

Employment Agreements with Mr. Griess, Mr. Johns, Mr. Kennedy, and Mr. Shepherd

45

Separation Agreement with Mr. Griess

47

Potential Payments Upon Termination of Employment

48

Termination for Death, Disability or Voluntary Resignation

48

Termination for Cause

48

Termination Without Cause Prior to a Change of Control

48

Termination Without Cause After a Change of Control

49

CEO Pay Ratio

50

Proposal 2 – Advisory Vote to Approve the Compensation of Our Named Executive Officers

51

Proposal 3 – Ratification of the Appointment of KPMG LLP As Our Independent Registered Public Accounting Firm for Fiscal 2021

52

Pre-approval Policies and Procedures

52

Report of the Audit Committee

53

Related Party Transactions

54

Stockholder Proposals

54

Householding

54

Annual Report on Form 10-K and Other SEC Filings

55

Other Matters

55

 

 

 

 


 

Proxy Summary

 

2021 ANNUAL MEETING

This summary highlights information contained in this Proxy Statement. It is intended to assist you in your review of the proposals to be acted upon, and to provide key information about CSG Systems International, Inc. For more complete information on any specific topic, please refer to the Table of Contents on the previous page.

 

 

Meeting:

  

2021 Annual Meeting of Stockholders

Date:

  

May 20, 2021

Time:

  

9:00 a.m. Mountain Daylight Time

Virtual Meeting:

  

www.virtualshareholdermeeting.com/CSGS2021  

Record Date:    

 

March 25, 2021

 

 

 

These proxy materials are first being made available to stockholders starting on or about April 6, 2021. See Participate in the Annual Meeting for information on accessing the virtual meeting.

 

Proposals To Be Voted Upon

Proposal

Board Recommendation

Page

1. To elect four Class III Directors nominated by our Board of Directors

For Each Nominee

16

2. To approve, on an advisory basis, the compensation of our named executive officers

For

51

3. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2021

 

For

52

 

DIRECTOR NOMINEES

Name

  

Age

  

Director

Since

  

Occupation

  

Independent

  

Committee

Membership

Brian A. Shepherd

  

53

  

2021

  

President and Chief Executive Officer

  

No

  

None

Frank V. Sica

  

70

  

1994

 

Partner of Tailwind Capital, director on the boards of Kohl’s Corporation and Safe Bulkers, Inc.

  

Yes

  

Compensation

Silvio Tavares

 

49

 

2020

 

President of the Board of Directors and Chief Executive Officer of Digital Commerce Alliance (formerly The CardLinx Association)

 

Yes

 

Audit

Compensation

Tse Li “Lily” Yang

 

48

 

2021

  

Chief Accounting Officer of Pinterest, Inc.

 

 

 

 

 

 

Yes

  

Audit

 

 

 

 

 

 

i


 

 

COMPANY OVERVIEW AND BUSINESS STRATEGY

 

 

We are one of the world’s leading providers of revenue management, customer experience, and payment solutions that enable a growing list of companies around the world to monetize relationships with their customers in an era of rapid change and digital transformation. We leverage more than 35 years of experience to deliver innovative customer engagement solutions that help our customers solve their toughest challenges. Our 4,800-plus diverse, worldwide workforce draws from real-world knowledge and extensive expertise to design and implement business solutions that make our customers’ hardest decisions simpler so that they can focus on delivering differentiated and real-time experiences to their customers.

Our proven solutions are built on a combination of on-premise, public and private cloud platforms, either customized or pre-integrated, as well as managed services models that adapt to fit our customers’ unique business needs and enable the transformative change

required to create personalized experiences that drive loyalty and retention.

Our Mission is to channel the power of all to make ordinary customer and employee experiences extraordinary. We believe that by successfully executing on this goal we can grow our revenues and earnings, and thereby create long-term value for our customers, employees, and stockholders. Our strategic focus to accomplish this goal is as follows:

Accelerate Profitable Growth and Industry Vertical Revenue Diversification;

Lead with Technology Innovation;

Deliver an Exceptional Customer Experience; and

Attract and Retain the Best Talent.

 

 

 

 

 

 

 

 

 

2020 Business Highlights

 

 

Despite the COVID-19 pandemic, we had a very strong finish to 2020, which proves the health and resilience of our business. We reported profitable operating results with strong cash flows and a solid balance sheet as we continued to execute upon our strategic initiatives. Key highlights of our 2020 performance include the following:

Generated $991 million in revenues, despite the headwinds resulting from the pricing adjustments associated with the five-year extension with Comcast (our largest customer) that were effective at the beginning of 2020, foreign currency movements, and the COVID-19 pandemic;

Delivered cash flows from operations to $173 million, driven by our solid revenues and profitable, recurring business model as well as working capital management;

Maintained our strength in the North American cable and satellite business, by continuing to deepen our relationships with current customers by deploying new solutions that help differentiate the customer experience, and increasing our market share with additional customer wins;

Positioned ourselves as the top challenger brand in the wireless and telecommunications revenue

management market with several new large customer wins; and

Grew our sales pipeline to an all-time high, as our global sales team continues to compete and win in the markets, resulting in continued high visibility into our revenue over the next twelve months.

Additionally, we believe our holistic approach to capital allocation, which balances internal investments with shareholder remuneration, will maximize long-term stockholder value. During the year, we:

Drove innovation and technology leadership with $123 million of research and development investments in our revenue management, customer engagement, and payment solutions, enabling a growing list of companies around the world to provide a more personalized customer experience while introducing new digital products and services; and

Returned $57 million to stockholders through a combination of $31 million in quarterly dividend payments and $26 million in repurchase of common stock under a stock repurchase program. Our 2020 dividend increased 6% from the prior year.

 

 

 

 

 

 

 

ii


 

 

 

 

GOVERNANCE PRACTICES

 

 

Our corporate governance practices are reviewed regularly. We believe they reflect best practices, as highlighted below:

Majority voting for uncontested director elections with plurality voting for contested director elections;

Independent Chair of the Board;

All directors are independent (other than our Chief Executive Officer (“CEO”));

Regular executive sessions of independent directors;

Independent Audit, Compensation, and Nominating and Corporate Governance Committees;

Audit Committee is updated quarterly on accounting, audit, legal, compliance, privacy and cybersecurity matters;

Independent compensation consultant;

Structured annual Board member evaluation process conducted by an independent third-party governance expert;

Board engagement in long-term succession planning and talent management discussions;

Meaningful director and executive share ownership guidelines;

Anti-hedging and anti-pledging policy for all directors and executive officers;

Annual independent director evaluation of the CEO;

Code of Ethics and Business Conduct applicable to directors, officers, and employees;

Regular stockholder engagement to understand stockholders’ views and insights;

Annual advisory approval of named executive officer compensation;

Limitations on consideration given to our named executive officers (to include no excise tax gross-ups) upon the occurrence of a change of control;

Compensation recovery and clawback policy;

Limited perquisites or other benefits; and

No evergreen provisions for equity plans.

 

 

 

 

 

 

 

COMPENSATION HIGHLIGHTS

 

 

Our compensation program is designed to attract and retain highly qualified executives and create incentive compensation opportunities aligned with our strategic goals, long-term stockholder value and evolving competitive and governance practices.

Executive compensation highlights for 2020 include:

Of the votes cast on our 2020 say-on-pay proposal, over 94.9% were in favor of our executive compensation program and policies;

The portion of total target compensation based on the achievement of key financial and operational measures was 60% for our former CEO and, on average, approximately 55% for our other named executive officers (“NEOs”);

We had strong financial performance, finishing at the high-end of our guidance ranges, and as a result our NEOs earned an annual performance bonus payout for the 2020 fiscal year at 88.8% of target; and

Even with the COVID-19 pandemic taking centerstage in 2020, we delivered on two of our three 2019 performance-based long-term incentive (“LTI”) award’s objectives, resulting in our NEOs earning an overall weighted achievement of 132% of the target shares.

 

 

 

iii


 

PARTICIPATE IN THE ANNUAL MEETING

 

 

Due to travel and community gathering restrictions related to the coronavirus pandemic (COVID-19), we are keeping the online format for the 2021 Annual Meeting of Stockholders (the “Annual Meeting”), which will be accessible through the Internet. By hosting the Annual Meeting online, we are able to communicate more effectively with our stockholders, enable increased attendance and participation from locations around the world, reduce costs and increase overall safety for participants.

You can access the virtual Annual Meeting at www.virtualshareholdermeeting.com/CSGS2021. There will be no physical location for stockholders to attend. Whether or not you participate in the Annual Meeting, it is important that your shares be part of the voting process. To vote prior to the Annual Meeting, log on to www.proxyvote.com and enter your 16-digit control number (“Control Number”) included in your Notice of Internet Availability, on your proxy card or on the instructions that accompany your proxy materials.

You are entitled to participate in the Annual Meeting if you were a shareholder as of the close of business on March 25, 2021, the record date for the Annual Meeting. If you plan to attend the Annual Meeting online, you will need your Control Number. The Annual Meeting will begin promptly at 9:00 a.m. (Mountain Daylight Time). Online check-in will begin at 8:45 a.m. (Mountain Daylight Time).

The virtual meeting platform is fully supported across browsers (Edge, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in the Annual Meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the Annual Meeting.

This year’s shareholders question and answer session will include questions submitted in advance of, and those submitted live during, the Annual Meeting. If you are a stockholder and would like to ask a question related to the business of the meeting, you may submit a question in advance of the meeting at www.proxyvote.com after logging in with your Control Number, or you may email that question to john.rea@csgi.com no later than May 13, 2021. Only questions relating to the business of the meeting will be answered at the Annual Meeting. Questions may also be submitted live during the Annual Meeting through www.virtualshareholdermeeting.com/CSGS2021. You may type your question into the “Ask a Question” field and click “Submit.” An audio webcast of the Annual Meeting will be posted online at the “Investor Relations” section of our website at www.csgi.com and will remain available for approximately thirty (30) days) after posting.

 

 

 

 

iv


 

QUESTIONS AND ANSWERS ABOUT THE

2021 ANNUAL MEETING AND VOTING

Why am I receiving these materials?

 

 

CSG Systems International, Inc. (“we,” “us,” “our,” or the “Company”) will hold its 2021 Annual Meeting of Stockholders on May 20, 2021 (the “Annual Meeting”). These proxy materials explain the items of business that will be brought to a vote at the Annual Meeting.

As a stockholder, you are invited to attend and vote at our Annual Meeting, or at any adjournment or postponement thereof. To ensure your vote is counted, our Board of Directors (the “Board”) is soliciting your proxy to vote on your behalf.

 

What information is contained in this proxy statement?

This proxy statement explains the proposals to be voted on at the Annual Meeting, describes the voting process, and provides information about corporate governance, our Board, and the compensation of our directors and certain executive officers.

 

How do I get electronic access to the proxy materials?

You may view our proxy materials at www.proxyvote.com.

What items of business will be voted on at the Annual Meeting and what is the Board’s recommendation with respect to these items?

 

Three proposals are scheduled to be voted on at the Annual Meeting: 

Proposal

 

Board
Recommendation

Proposal 1—To elect four Class III Directors nominated by our Board

 

FOR each nominee

Proposal 2—To approve, on an advisory basis, the compensation of our named executive officers

 

FOR

Proposal 3—To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2021

 

FOR

 

Each of these proposals is discussed in this proxy statement. We also will transact any other business that properly comes before the Annual Meeting.

What shares can I vote?

You are entitled to one vote for each share of our common stock that you owned as of the close of business on March 25, 2021 (the “record date”). You also can vote all shares for which you hold a valid proxy. At the close of business on the record date, there were 32,966,560 shares of our common stock outstanding and entitled to notice of, and to vote at, the Annual Meeting.

May I attend the Annual Meeting?

 

 

You may attend the Annual Meeting only if you were a stockholder of the Company as of the record date or you hold a valid proxy for the Annual Meeting. You can vote your shares prior to the Annual Meeting even if you do not attend the Annual Meeting, and we encourage you to do so. To vote your shares or attend the virtual Annual Meeting, you will need the 16-digit control number included in your Notice of Internet Availability, on your proxy card or on the instructions that accompany your proxy materials.

 

1


 

May I vote my shares at the Annual Meeting?

 

 

If you are a stockholder of record—meaning you hold our common stock in your name with our transfer agent (Computershare Trust Company, N.A.)—you may vote those shares online at the Annual Meeting. If you are a beneficial owner—meaning that a broker, bank, trustee, or other nominee holds your common stock in “street name”—you can vote online at the Annual Meeting only if you obtain a valid proxy from the record holder giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the Annual Meeting.

May I vote my shares without attending the Annual Meeting?

 

 

You may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you will receive a Notice of Internet Availability, which explains how to access the proxy materials online, contains a listing of matters to be considered at the Annual Meeting, and describes how shares can be voted by telephone, online, or by completing and returning a proxy card. If you hold shares beneficially in “street name”, your broker, bank, trustee, or other nominee should provide you a means to instruct how your shares should be voted.

May I change or revoke my vote?

 

You may change or revoke your vote at any time before we take the vote at the Annual Meeting.

If you are a stockholder of record, there are three ways to change or revoke your vote before the conclusion of voting at the Annual Meeting: (1) deliver a new proxy bearing a later date (which automatically revokes your earlier proxy) by mail, telephone, or over the Internet; (2) provide a written notice of revocation to our Secretary at our principal offices listed on the first page of this proxy statement; or (3) vote online during the Annual Meeting. If you attend the Annual Meeting but do not specifically revoke your previously granted proxy pursuant to these procedures, your proxy will remain in effect.

If you are a beneficial owner, you may change your vote by submitting new voting instructions to your broker, bank, trustee, or other nominee. Alternatively, if you have obtained a valid proxy from your broker, bank, trustee, or other nominee giving you the right to vote your shares, you can vote online during the Annual Meeting.

How many shares must be present or represented to conduct business at the Annual Meeting?

We can transact business at the Annual Meeting if a majority of the issued and outstanding shares of common stock entitled to vote are present in person, or by remote communication, or represented by proxy at the Annual Meeting. Abstentions are counted for the purpose of determining whether there is a quorum.

“Broker non-votes” are counted for the purpose of determining whether there is a quorum as long as the bank, broker, or nominee uses its “discretionary authority” to vote on Proposal 3, Auditor Ratification. A broker non-vote occurs when a broker, bank, trustee, or other nominee returns a proxy card, but does not vote on one or more matters because such broker, bank, trustee, or other nominee does not have the authority to do so without instructions from the beneficial owner. Broker non-votes and discretionary authority are further described below.

What is the voting requirement to approve each of the proposals?

For Proposal 1, Election of Directors, each nominee who receives a majority of the votes cast for his or her election will be elected as a director. A majority of votes cast means that the number of votes cast FOR a director’s election exceeds the number of votes cast AGAINST that director’s election. Cumulative voting is not permitted. Each of Proposals 2 and 3 will be approved if the proposal receives the affirmative vote FOR the proposal by a majority of the shares present in person, or by remote communication, or represented by proxy and entitled to vote at the Annual Meeting.

Abstentions and broker non-votes are not considered votes cast on Proposal 1, Election of Directors, and will not affect the outcome of the election of directors. With respect to Proposals 2 and 3, abstentions will have the same effect as AGAINST votes and broker non-votes will have no effect on the outcome of these proposals. With respect to the election of directors, in the event a director does not receive a majority of the votes cast FOR his or her election, that director will be required to submit his or her resignation to the Board, with a presumption that the resignation will be accepted, unless the Board determines that there is a compelling reason for the director to remain on the Board.

 

2


 

Although the advisory vote to approve the compensation of our NEOs is non-binding, our Board and the Compensation Committee will review the results of the votes and will consider the results in making future decisions on executive compensation.

How are votes counted?

Votes cast in person, or by remote communication, or by proxy will be tabulated by the inspector of elections appointed for the Annual Meeting. If you provide specific instructions on your proxy card, your shares will be voted as you instruct. If you do not give specific instructions on your signed proxy card, your shares will be voted as recommended by the Board as follows:

 

FOR the election of each of the four Class III Directors nominated by our Board and named in this proxy statement;

 

FOR the approval, on an advisory basis, of the compensation of our named executive officers; and

 

FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2021.

What happens if additional matters are presented at the Annual Meeting?

We are not aware of any business to be acted upon at the Annual Meeting other than the three proposals described in this proxy statement. If you grant a proxy, the individuals named as proxy holders, Kenneth M. Kennedy and Gregory L. Cannon, and each or either of them, will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. If for any reason a nominee is not available as a candidate for director, the proxy holders will vote your proxy for such other candidate or candidates as the Board may nominate.

Who will bear the cost of soliciting votes for the Annual Meeting?

 

We will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials, and soliciting votes. If you choose to access the proxy materials or vote over the Internet, including by attending the Annual Meeting online, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. Our directors, executives, and regular employees, without additional remuneration, and their appointed agents, may solicit proxies or votes in person, by telephone, or by electronic communication. We will request banks, brokers, and other fiduciaries to forward proxy materials to the owners of stock held in their names and will reimburse their reasonable out-of-pocket expenses incurred in connection with that distribution. We have also retained Innisfree M&A Incorporated to assist in the solicitation of proxies and related services for an estimated fee of $15,000, plus reimbursement of reasonable expenses.

Where can I find the voting results of the Annual Meeting?

We will announce voting results of the Annual Meeting in a Current Report on Form 8-K filed with the SEC no later than four business days after the Annual Meeting.

 

 

3


 

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

Overview

We are committed to maintaining sound corporate governance practices. The Board has formalized several policies, procedures, and standards of corporate governance, including our Corporate Governance Guidelines, some of which are further described in this section. We continue to monitor best practices and legal and regulatory developments with a view to further revising our governance policies and procedures, as appropriate.

Directors

 

The Board currently consists of twelve directors: David G. Barnes, Ronald H. Cooper, Marwan H. Fawaz, Dr. Rajan Naik, Janice I. Obuchowski, Donald B. Reed, Brian A. Shepherd, Frank V. Sica, Haiyan Song, Silvio Tavares, Tse Li “Lily” Yang and James A. Unruh. See Proposal 1, Election of Directors, for more information regarding our directors. To further our Board refreshment goals, Mr. Unruh was not re-nominated for election to the Board and his term will end at the Annual Meeting. Following the Annual Meeting, the Board will consist of eleven directors.

Director Independence

 

The Board has determined that each Board member, except Mr. Shepherd, our President and CEO, is an “independent director” as defined in the applicable rules of The Nasdaq Stock Market, Inc. (“Nasdaq”) and applicable SEC rules and regulations. We believe that having a Board made up predominantly of independent, experienced directors with independent oversight by a non-executive Chair (as further described in this section) is in the best interests of our Company and our stockholders.

In addition, our Board believes a balance of director diversity and tenure is a strategic asset to our Company. The range of our Board’s tenure encompasses directors who have historical institutional knowledge of our company and the competitive environment, complemented by newer directors with varied backgrounds and skills. Over the past few years, our Board has made a concerted effort to refresh their composition by bringing on new directors that combine experience and continuity with new perspectives. It is of critical importance to our Company to recruit and nominate directors who help achieve the goal of a well-rounded, diverse Board that functions respectfully as a unit. For our directors whose terms of office will continue after the Annual Meeting, the following charts represent director independence, tenure and diversity.

DIRECTOR INDEPENDENCE

TENURE

     


 

4


 

 

 

Corporate Governance Practices and Documents

 

 

The Board encourages you to visit our corporate governance page on our website at http://ir.csgi.com/documents.cfm, which provides information about our corporate governance practices and includes the following documents:

 

Board Committee charters;

 

Code of Ethics and Business Conduct;

 

Corporate Governance Guidelines; and

 

Share Ownership Guidelines.

Information contained on, or accessible through, our website is not part of, or incorporated by reference in, this proxy statement.

Majority Voting

 

 

We use a majority voting standard in the election of directors. Thus, in any “uncontested election” of directors (i.e., an election where the number of nominees does not exceed the number of directors to be elected), each nominee to the Board will be elected by the vote of a “majority of the votes cast,” meaning that the number of votes cast FOR a director’s election must exceed the number of votes cast AGAINST that director’s election. The election of directors at the Annual Meeting is an uncontested election. Abstentions and broker non-votes will not count as votes cast for purposes of this proposal.

If any incumbent director does not receive a majority of votes cast in favor of his or her re-election to the Board, that director will be required to submit his or her resignation to the full Board, with a presumption that the resignation will be accepted unless the Board determines that there is a compelling reason for the director to remain on the Board. In the case of a contested election, directors will be elected by a plurality vote, meaning that the nominees who receive the greatest number of votes cast FOR their election will be elected.

 

5


 

Communications with the Board

We invite stockholders or any other interested party to send written communications to the Board or to individual Board members. Please send your letter in care of the Secretary of the Company at the address of our principal offices as shown on the first page of this proxy statement or directly via email to john.rea@csgi.com. If a letter relates to publicly available information about the Company or our stock, the Secretary will respond to the writer directly. If a letter is primarily commercial in nature or, at the discretion of the Secretary, relates to an improper or irrelevant topic, the Secretary will make a record of it, but will not transmit the communication to the Board. Any letter that relates to accounting, internal accounting controls, or auditing matters will be forwarded to the Chair of the Audit Committee. All other letters will be forwarded to the entire Board or to the individual Board member(s) to whom they are addressed.

Director Attendance at Board Meetings

During 2020, the Board held nine meetings. All directors attended at least 75% of the aggregate of the total number of meetings of the Board and of the committees on which they served during 2020. In addition, during 2020 the Board held eight executive sessions during which only independent directors were present. The Board expects to continue to conduct executive sessions limited to non-employee directors at least twice a year and our non-employee directors may schedule additional executive sessions at their discretion.

Annual Meeting Attendance

Historically, very few stockholders have attended our annual meetings; almost all stockholders who vote do so by proxy. Accordingly, directors are not required to attend our annual meetings. We expect, but do not require, employee director(s) to attend if their schedules permit, and non-employee directors are welcome to attend if they wish. All of our nominated directors and continuing directors attended our 2020 Annual Meeting. The Board scheduled our 2020 Annual Meeting to coincide with a regular quarterly meeting of the Board so that all members present at the quarterly meeting of the Board could attend the Annual Meeting as well, and we are proceeding on the same basis for the 2021 Annual Meeting.

Board Committees

 

Director

    

Audit
Committee

    

Compensation
Committee

    

Nominating and
Corporate Governance
Committee

David G. Barnes

    

    

 

    

 

Ronald H. Cooper

    

    

    

 

Marwan H. Fawaz

 

 

 

 

 

Dr. Rajan Naik

 

 

 

 

 

Janice I. Obuchowski

    

    

 

    

Donald B. Reed

    

    

 

    

 

Brian A. Shepherd

 

 

 

 

 

 

Frank V. Sica

    

 

    

    

 

Haiyan Song

 

 

 

 

Silvio Tavares

 

 

 

 

James A. Unruh (1)

 

 

 

 

Tse Li “Lily” Yang

 

 

 

 

 

 

 

Chair

 

 

Member

 

Financial Expert

 

(1)

 

Due to Board refreshment activity, Mr. Unruh was not re-nominated for election to the Board, but he remains on the Compensation Committee and Nominating and Corporate Governance Committee through the Annual Meeting.

 

Audit Committee

The Audit Committee’s primary purposes are to oversee our accounting and financial reporting processes, the audits of our financial statements, and our risk and compliance management programs, including cybersecurity.

As required by the Audit Committee charter (located at http://ir.csgi.com/documents.cfm), all members of the Audit Committee satisfy all Nasdaq and SEC requirements applicable to audit committee members and are “independent” as defined by the rules promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),

 

6

 


 

and by Nasdaq. The Board has determined that Mr. Barnes, Mr. Cooper, Mr. Reed, Mr. Tavares, and Ms. Yang are “audit committee financial experts” as defined by applicable SEC rules. The Audit Committee held four meetings during 2020.

Compensation Committee

The Compensation Committee’s primary purposes are to review and recommend senior management compensation and benefit policies, evaluate the performance of our executive officers, and review and recommend the compensation of our executive officers. In addition, the Compensation Committee has independent authority to administer and grant equity awards under our equity plans and annual performance bonuses for executive officers. The Compensation Committee also is responsible for ongoing oversight and evaluation of our compensation policies and practices for employees generally as they relate to risk management. The Compensation Committee may delegate any of its responsibilities to a subcommittee or the Chair of the Compensation Committee. The Compensation Committee may also delegate to one or more of our officers the authority to grant awards to non-executive officers and employees of our Company under our equity compensation plans. In 2020, the Compensation Committee delegated to the CEO the authority to grant equity awards to non-executive officers and other employees.

As required by the Compensation Committee charter (located at http://ir.csgi.com/documents.cfm), all members of the Compensation Committee are “independent” as defined by the rules promulgated by the SEC under the Exchange Act, and by Nasdaq, applicable to compensation committee members. The Compensation Committee held five meetings during 2020.

Determining Executive Officer Compensation and Use of Independent Compensation Consultant. To assist the Compensation Committee with its responsibilities, the Compensation Committee retains an independent compensation consultant, consults with our CEO (other than with respect to compensation decisions for the CEO) and our Chief People and Places Officer, and draws upon the extensive business experience of its members. The Compensation Committee directs the independent compensation consultant to prepare a comprehensive formal assessment of the competitiveness of our executive officer compensation program, including a comparison of the principal components of our program (base salaries, performance bonuses, and equity awards) with those of a peer group of other public companies. The Compensation Committee considers this assessment and other data provided by the independent compensation consultant in arriving at its decisions or recommendations to the Board with respect to base salaries, performance bonuses, and long-term incentives for our executive officers. For additional information about our executive compensation program, processes, and procedures, see Compensation Discussion and Analysis.

The Compensation Committee periodically evaluates the qualifications of its independent compensation consultant. For 2020, the Compensation Committee engaged Exequity as its independent compensation consultant. During 2020, Exequity provided executive compensation guidance to the Compensation Committee and did not provide any other services to the Company. During 2020, the Compensation Committee requested information from Exequity, our executives, and our Board members in order to assess the independence of Exequity as the Committee’s compensation consultant and to determine whether Exequity’s work raised any conflict of interest. Based on the information provided, the Compensation Committee determined that Exequity was independent and that the work of Exequity did not raise a conflict of interest.

Determining Non-Employee Director Equity Awards. In making equity awards to our non-employee directors, the Compensation Committee considers relevant information provided by the independent compensation consultant and the recommendations of our Nominating and Corporate Governance Committee and the Board.

Risks Related to Compensation Policies and Practices for All Employees. The Compensation Committee does not believe that risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company. A number of the factors considered by the Compensation Committee when it develops executive compensation recommendations have the effect of mitigating risk. Additionally, executive officers and certain members of senior management regularly review our employee compensation policies and practices, including the elements of our compensation programs, to determine whether any element or program design encourages excessive risk taking. For additional information about the factors the Board and senior management consider that reduces the likelihood of excessive risk taking, see Risk and Compliance Oversight and Compensation Discussion and Analysis.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee’s primary purposes are to: (1) identify individuals qualified to become Board members; (2) recommend to the Board nominees for election as directors and directors for appointment to Board committees; (3) evaluate the Board’s performance, in conjunction with the formal and structured annual Board evaluation process conducted by an independent third-party governance expert; (4) review and recommend the

 

7

 


 

compensation of our directors; and (5) develop and recommend for Board approval our Corporate Governance Guidelines and Code of Ethics and Business Conduct.

The Nominating and Corporate Governance Committee charter (located at http://ir.csgi.com/documents.cfm) requires that a majority of the members be “independent” directors. All members of the Nominating and Corporate Governance Committee are “independent” as defined by the SEC Nasdaq rules and regulations. The Nominating and Corporate Governance Committee held five meetings during 2020.

What We Look for in Director Nominees. In recommending nominees for election as directors, the Nominating and Corporate Governance Committee reviews the present composition of the Board to determine the qualities, skills, and areas of expertise needed to enable the Board and its committees to properly discharge their responsibilities. When there is a need, the Nominating and Corporate Governance Committee utilizes the services of executive search firms with well-established board practices to assist in the identification and recruitment of qualified director nominees. This process supports our objective of recruiting highly qualified and diverse candidates that meet our specific criteria for skills, professional and governance experience, diversity, and the personal attributes we are seeking, as discussed in more detail below. When identifying and assessing a candidate’s qualifications, the Nominating and Corporate Governance Committee considers, among other things: (1) the candidate’s background, reputation, independence, experience, skills, and judgment; (2) the candidate’s ability and willingness to devote the required amount of time to serve as a Board member and as a member of one or more Board committees; (3) the candidate’s other business and professional commitments and potential conflicts of interest; and (4) the number and type of other boards on which the candidate serves.

Although we do not currently have a written policy on diversity, the current practices of the Nominating and Corporate Governance Committee value and leverage the diversity of the Board’s membership when searching for and nominating directors. We define “diversity” in its broadest sense and believe it encompasses many attributes, including but not limited to background, experience, skills, substantive expertise, age, gender, ethnicity, geography, and education. Our Board is particularly interested in maintaining a group of individuals that represents our customers and with experience in operations, finance, accounting, marketing, human resources, sales, and domestic and international business, particularly in the technology and communication service provider and related industries. We also consider whether nominees are active or retired executive officers of public or private companies and whether they have ever served on the board of a public company.

Our Board members should display the personal attributes necessary to be effective directors: integrity, sound judgment, independence, ability to operate collaboratively, and a fiduciary commitment to the Company and our stockholders. We believe the current members of our Board have a diverse set of business and personal experiences, backgrounds, and expertise, and that they all share the personal attributes described above.

The Board engages a third-party search firm, Heidrick & Struggles, in its search for new director candidates. As part of its engagement, Heidrick & Struggles identified Mr. Silvio Tavares and Ms. Tse Li “Lily” Yang as nominees for director, and in May 2020 and February 2021 the Board appointed Mr. Tavares and Ms. Yang, respectively, as new directors. Mr. Tavares and Ms. Yang are the fourth and fifth new independent Board members to join our Board in the past five years. We believe the appointment of these new Board members shows our ongoing emphasis on good corporate governance, as we continue to refresh the talent, skills, diversity and experience that are represented by the members of our Board. Mr. Tavares is an experienced CEO and recognized industry leader with deep experience in the technology, payments, digital commerce and fin-tech industries. He has a proven track record of executive leadership at public and private companies including Visa and First Data. He currently serves as President of the Board of Directors and CEO of Digital Commerce Alliance (formerly The CardLinx Association). He has previously served as a public company Audit Committee chairman and designated financial expert. Ms. Yang has a strong financial and accounting background with leadership experience in regulatory compliance, investment management, mergers and acquisitions (“M&A”), credit and business risk across the technology, healthcare and other high growth industries. She currently serves as the Chief Accounting Officer of Pinterest, Inc.

Stockholder Recommended Director Candidates. The Nominating and Corporate Governance Committee will consider qualified nominees recommended by our stockholders for election as directors in the same manner that the Nominating and Corporate Governance Committee considers other director candidates. A stockholder who wishes to recommend a nominee for the Board should submit the recommendation in writing to the Secretary of the Company indicating the proposed nominee’s qualifications and other relevant biographical information and providing written confirmation that the proposed nominee consents to serve as a director if nominated and elected. See Stockholder Proposals for additional

 

8

 


 

requirements and information. Our Secretary will forward qualifying recommendations from stockholders to the Chair of the Nominating and Corporate Governance Committee for further review and consideration. Our bylaws provide that stockholder nominations for election to the Board are subject to certain advance notice and informational requirements. Stockholders may obtain a copy of the relevant bylaw provisions from our Secretary at CSG Systems International, Inc., 6175 S. Willow Drive, Greenwood Village, Colorado, 80111.

Annual Board Evaluation Process

The Board is committed to a rigorous annual self-evaluation process. The Chair of the Nominating and Corporate Governance Committee coordinates an annual evaluation process, conducted by an independent, third-party consultant, Spencer Stuart. For 2020, the consultant surveyed the full Board and select management team members to evaluate the Board's and the Board committees' performance and procedures to determine whether they were functioning effectively, and the consultant collected and provided peer-to-peer feedback on the performance and contributions of each individual Board member. The results of the annual evaluation were reviewed by the Nominating and Corporate Governance Committee and provided to the full Board for their consideration. Regular annual Board evaluations will continue to include a Board survey process, with additional emphasis on the Board’s nominees for election at the then upcoming Annual Meeting.

Risk and Compliance Oversight

The Board is responsible for oversight of our risks, including establishment of our risk appetite and overseeing our risk management framework. The Board recognizes the importance of effective risk oversight to the success of our strategy and to the fulfillment of its fiduciary duties to the Company and our stockholders. The Board believes taking well-considered risks is a critical component of innovation and effective leadership. The Board also recognizes that imprudently accepting risk or failing to appropriately identify and mitigate risks could negatively impact our business and stockholder value. The Board therefore seeks to foster a risk-aware culture demonstrated through an established risk appetite framework while encouraging thoughtful risk taking in pursuit of the Company’s strategic initiatives.

The Board exercises its risk oversight primarily through management, an Executive Business Risk Committee and the Audit Committee. To administer our overall risk and compliance management program, we established an Executive Business Risk Committee comprised of our executive officers, chaired by our Chief Financial Officer (“CFO”), and coordinated by our Internal Audit and Risk Management department. The VP of Internal Audit and Risk Management reports directly to the Chair of the Audit Committee and prepares a quarterly report for the Audit Committee summarizing material existing and emerging business risks, along with a summary of existing or proposed risk mitigation efforts.

We also maintain a formal risk assessment and risk mitigation program that is administered by our CFO. Our executive officers, in conjunction with members of our Internal Audit and Risk Management department, review this program periodically throughout the year. This program is intended to: (1) identify those risks that are most likely to affect our business; (2) assign an executive to be responsible for monitoring and mitigating those risks; and (3) provide a formal mechanism for the assigned executive to report back periodically on the adequacy and effect of mitigation efforts. The Audit Committee and the Board review the results of this program at each regularly scheduled meeting. In addition, our Chief Compliance Officer has a reporting relationship to the Audit Committee and provides a quarterly report to the Committee on compliance risks, issues, and activities. Our Chief Information Officer provides a quarterly report to the Audit Committee on our information security governance program, and related risks, issues and activities. Our Compensation Committee and Nominating and Corporate Governance Committee also monitor risks in their respective areas of responsibility, and keep the Board informed of any specific risks through regular reports to the Board.

The Board believes our current leadership structure facilitates its oversight of risk by combining independent leadership through the Board and the Audit Committee, along with an experienced Executive Business Risk Committee with intimate knowledge of our business, industry, and challenges.

 

9

 


 

Risk Management Structure and Responsibilities

The following chart outlines our risk management structure and responsibilities:

 

 

 

 

 

10

 


 

Information Security Governance Program

The following chart outlines our information security governance program structure and controls:

Human Capital Management

Talent Acquisition Our success and competitive differentiation depend on hiring and developing the right people. Our strategy focuses on attracting the best talent and then continually working to develop, engage and retain them by recognizing and rewarding their performance, as well as driving professional growth through learning opportunities. We make ongoing efforts to remain an employer of choice within our markets and peer groups, while continuing to build support for the diverse capabilities and skill sets our employees will need in the future.

Simultaneously, we maintain a robust pipeline of talent throughout the organization. In addition to offering talent roles in other areas to provide growth opportunities, we work diligently to attract world-class and diverse talent from a wide range of sources, reflective of the communities and industries we serve, to meet the current and future demands of our business. We nurture existing relationships and constantly seek out new ones in order to proactively draw talent to our company, such as our association with over 200 universities, relationships with external branding and networking partners, and other professional associations and industry groups.

Talent Retention and Professional Development We understand that our talent is one of our differentiators. Our commitment to continuously developing our internal pipeline centers around two priorities. The first is upskilling all employees to future-proof their careers and to keep pace with our strategy and the rapidly changing business environment. We have invested in a best-in-class learning experience platform which provides all employees with real-time, on-demand learning linked to the most critical skills needed to succeed in their current roles and to prepare them for their future aspirations. We continually re-evaluate the content for its relevance to our employees and our business strategy.

Our second priority is developing our leaders, as we understand they are the linchpin to ensuring an energized culture with an engaged and motivated workforce. We provide targeted development programs to address the unique challenges leaders face at different levels within the company. This includes a month-long program for all front-line leaders to provide them with a solid foundation in the fundamentals of managing other people. At the mid-level, we are rolling out a three-month development program to accelerate leadership capabilities for our top talent. At the more senior levels, we address development needs of our leaders with an individualized approach of assessments and executive coaching, as needed.

 

11

 


 

Diversity and Community The Company is committed to building and fostering a diverse, supportive and inclusive work environment where individuality is valued, and our people can flourish. We believe our workforce should reflect the world in which we live and that we are stronger because of our differences. By embracing various backgrounds, attributes, experiences and perspectives, we will help our employees, customers and communities thrive while, together, we work toward making social equality a reality.

In December 2020, we hired our first Chief Diversity & Social Responsibility Officer who, in collaboration with the Executive Leadership Team and Human Resources, will guide our shared vision, identify priorities, and create strategies to transform us into an even more equitable and inclusive culture. The four focus areas guiding this work are as follows:

 

Governance

 

Culture

 

People

 

External & Social Impact

The Company is committed to giving back to the communities where we live and work. At various times throughout the year, we support our employees in volunteering their time and talents to serve others. In 2021, we are restructuring our Volunteer Policy and adopting two corporate days of service. Additionally, we are building a social impact strategy focused on innovative and sustainable impacts including protecting the environment and bridging the digital divide.

Environment, Health and Safety Environment, Health and Safety (“EHS”) is an umbrella term for the laws, rules, guidance, and processes designed to help protect employees, the public and the environment from harm. Our global EHS programs, headed up by our EHS Director, strive to provide all employees with not only a safe and healthy work environment but also with guidance and training regarding EHS issues. The Company’s Health and Safety Policy statement is signed annually by our CEO and states the Company will comply with all local/regional Health and Safety legislation, requirements, and approved codes of practice. It is the duty of each employee to take reasonable care of their own and other people’s welfare and to report any situation which may pose a threat to the wellbeing of any person or the Company in general. The Company recognizes the need to ensure that all employees adhere to this health and safety policy and will be prepared to invoke the disciplinary procedures as necessary where an individual deliberately disregards its requirements.

Throughout the COVID-19 crisis, we have remained focused on protecting the health and safety of our employees, while meeting the needs of our customers. During the early stages of the COVID-19 pandemic, we formed a COVID-19 Steering Team that has been leading and coordinating our overall response. These efforts have included moving a large percentage of our workforce to a remote working environment and significantly reducing travel. For those locations that remain open, we require daily temperature checks and self-assessments. Additionally, we have reconfigured our office spaces to ensure proper social distancing, distributed personal protective equipment, and secured additional cleaning services and supplies. We are also continuing to provide work from home options to those employees who are able to conduct business remotely through December 31, 2021, or such later date as conditions warrant.

The Company has a solid environmental compliance record. We recognize that we have a responsibility to the environment beyond legal and regulatory requirements, and we continue to mature our program in this area. We are committed to reducing our environmental impact and continually improving our environmental performance as an integral part of our business strategy and operating methods, with regular review points. Our environmental goals include continuing to seek opportunities to reduce our consumption of natural resources through improved processes and upgrades, reduce the amount of non-hazardous materials sent to landfills by increasing the amount of materials and products that are donated and through increased recycling opportunities, and maintaining an environmentally aware work force and corporate function.

 

12

 


 

Board Leadership Structure

The Board does not have a policy regarding separation of the roles of CEO and Chair of the Board. The Board believes it is in the best interests of the Company to make that determination based on current circumstances. The Board has determined that an independent director serving as Chair is in our best interests at this time. Since 2010, Mr. Reed has served as Chair of the Board, and in February 2021, the Board appointed Mr. Cooper as Vice-Chair of the Board. Our Board believes this structure ensures a greater role for independent directors in the active oversight of our business, including risk management oversight, and in setting agendas and establishing Board priorities and procedures. This structure also allows our CEO to focus to a greater extent on the management of our day-to-day operations.

In the future, if the Board believes it would be in the best interests of the Company and our stockholders, the Board may decide that one person should serve as both CEO and Chair of the Board.

Code of Ethics and Business Conduct

 

 

Our Board has adopted a Code of Ethics and Business Conduct applicable to all directors, officers, and employees of the Company. Our Code of Ethics and Business Conduct and Corporate Governance Guidelines are available on our website on the Investor Relations page, under Governance Documents (located at http://ir.csgi.com/documents.cfm). We will disclose on our website any amendments to our Code of Ethics and Business Conduct, or any waiver of a provision of our Code of Ethics and Business Conduct that is required to be disclosed under applicable rules of the SEC.

Other Board Information

 

 

There are no family relationships between any of our directors or executive officers. There are no arrangements between any director, nominee, or executive officer of the Company and any other person pursuant to which such director, nominee, or executive officer was selected for such position. There are no material legal proceedings pending where any of our directors, officers, affiliates of the Company, or stockholders of more than 5% of our stock (or any associates of any of the foregoing) is a party adverse to the Company.

 

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COMPENSATION OF DIRECTORS

After consultation with the Compensation Committee's independent compensation consultant, including an analysis of peer and market practices, the Board sets the director compensation program to be in line with similar companies in our industry. Periodically, our Board of Directors reviews the competitiveness of our compensation program for non-employee directors. Based on such analysis, supported by the Compensation Committee’s independent compensation consultant, the Nominating and Corporate Governance Committee decided not to change the director compensation program in 2020. Our non-employee director compensation program consists of the following:

Cash Compensation (1)

Annual retainer for non-employee director service (2)

 

 

$

75,000

 

Additional annual retainer for Chair of the Board

 

 

$

50,000

 

Additional annual retainer for committee member service (3)

 

 

$

7,500

 

Additional annual retainer for committee Chair service

 

 

 

 

 

 

Audit Committee

 

 

$

16,000

 

 

Compensation Committee

 

 

$

16,000

 

 

Nominating and Corporate Governance Committee

 

 

$

10,000

 

Equity Compensation (4)

Annual equity

 

 

$

175,000

 

 

 

 

 

 

 

(1)

 

Cash retainers are paid in advance in quarterly installments, subject to such non-employee director's continued service on the Board.

(2)

 

A director who is an officer or employee of the Company does not receive additional compensation for serving as a director or committee member. Mr. Shepherd is the only current officer or employee of the Company who serves as a director, and he does not currently serve on any Board committee.

(3)

 

Each non-employee director who serves as a committee member is entitled to only one Member retainer irrespective of the number of Committees on which such non-employee director serves.

(4)

 

Each non-employee director receives an annual equity grant in the form of restricted stock awards as determined by the Compensation Committee, which vests one year from the grant date. Numbers of shares awarded are calculated by dividing the annual equity grant amount by the twenty-day trailing average of our common stock closing share price on Nasdaq (“CSGS 20-day Trailing Average”), calculated through the date of the grant.

 

 

 

2020 Director Compensation

 

The following table contains information about the compensation of our non-employee directors for 2020. A director who is an officer or employee of the Company does not receive additional compensation for serving as a director or committee member. Mr. Shepherd is the only current officer or employee of the Company who serves as a director. All amounts have been rounded to the nearest dollar and pro-rated for actual time of service on the Board or committees.

Name

 

Fees Earned

 

 

Stock Awards (1)(2)

 

 

Total

 

David G. Barnes

 

$

98,500

 

 

$

160,276

 

 

$

258,776

 

Ronald H. Cooper

 

$

98,500

 

 

$

160,276

 

 

$

258,776

 

Marwan H. Fawaz

 

$

92,500

 

 

$

160,276

 

 

$

252,776

 

Dr. Rajan Naik

 

$

82,500

 

 

$

160,276

 

 

$

242,776

 

Janice I. Obuchowski

 

$

82,500

 

 

$

160,276

 

 

$

242,776

 

Donald B. Reed

 

$

132,500

 

 

$

160,276

 

 

$

292,776

 

Frank V. Sica

 

$

82,500

 

 

$

160,276

 

 

$

242,776

 

Donald V. Smith (3)

 

$

41,250

 

 

$

160,276

 

 

$

201,526

 

Haiyan Song

 

$

82,500

 

 

$

160,276

 

 

$

242,776

 

Silvio Tavares (4)

 

$

60,000

 

 

$

160,276

 

 

$

220,276

 

James A. Unruh

 

$

82,500

 

 

$

160,276

 

 

$

242,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

This column reflects the aggregate grant date fair value of restricted stock awards granted during the year computed in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718. The value reported excludes the impact of estimated forfeitures, if any.

(2)

 

The aggregate number of restricted stock awards that had not vested as of December 31, 2020, was 4,096 shares for each non-employee director.

(3)

 

Mr. Smith retired from the Board on May 21, 2020.

(4)

 

Mr. Tavares was appointed to the Board on May 18, 2020 and to the Audit Committee mid-year.

 

 

 

 

14


 

PROPOSAL 1 – ELECTION OF DIRECTORS

 

 

The Board is divided into three classes presently consisting of three Class I Directors, four Class II Directors, and five Class III Directors. Class I consists of Ronald H. Cooper, Janice I. Obuchowski, and Donald B. Reed, whose terms will expire at the 2022 annual meeting of stockholders. Class II consists of David G. Barnes, Marwan H. Fawaz, Dr. Rajan Naik, and Haiyan Song, whose terms will expire at the 2023 annual meeting of stockholders. Class III consists of Brian A. Shepherd, Frank V. Sica, Silvio Tavares, James A. Unruh, and Tse Li “Lily” Yang whose terms will expire at the Annual Meeting.

The Board, upon recommendation by the Nominating and Corporate Governance Committee, has nominated Mr. Shepherd, Mr. Sica, Mr. Tavares and Ms. Yang to be elected as Class III Directors at the Annual Meeting. In the interests of Board refreshment, Mr. Unruh was not re-nominated for election to the Board and his term will end at the Annual Meeting. Accordingly, after the Annual Meeting, the number of Class III Directors will be reduced to four. Unless the proxy is marked otherwise, the person acting under the accompanying proxy will vote to elect Mr. Shepherd, Mr. Sica, Mr. Tavares and Ms. Yang as the Class III Directors to serve until the 2024 annual meeting of stockholders. If a nominee is unable to serve, then the person acting under the proxy may vote the proxy for the election of a substitute nominee. The Company presently expects that all four nominees will be able to serve, and each of the director nominees has consented to serve as directors on the Board.

The following chart outlines the areas of expertise that each continuing director on the Board possesses. In addition, we have provided a brief summary of those skills with each director’s biographical information.

 

 

 

 

BOARD OF DIRECTORS

Skills & Experience

 

Name

Accounting / Financial Management

Corporate Governance

Cyber-

security

Executive Leadership

Global Business

Human Capital Management

Marketing /

Sales

Mergers / Acquisitions

Strategy

Technology / Innovation

David G. Barnes

 

 

 

Ronald H. Cooper

 

 

Marwan H. Fawaz

 

 

Dr. Rajan Naik

 

 

 

 

Janice I. Obuchowski

 

 

Donald B. Reed

 

Brian A. Shepherd

 

 

 

Frank V. Sica

 

 

Haiyan Song

Silvio Tavares

 

Tse Li “Lily” Yang

 

 

 

The Board Recommends a Vote FOR the Election of Each of the Four Nominees for Class III Director.

 

The following information relates to the Board’s nominees for election at the Annual Meeting and to the other directors of the Company whose terms of office will continue after the Annual Meeting:

 

 

 

15


 

Nominees for Class III Directors – Term to Expire in 2021:

 

 

BRIAN A. SHEPHERD

Mr. Shepherd was appointed President and CEO of CSG and a member of our Board in January 2021. He joined the Company in 2016 and before becoming CEO, he was Executive Vice President and Group President of CSG, where he led the profit and loss organization for the entire global organization. He also served as Executive Vice President and President of Global Broadband, Cable and Satellite Business from 2016 to 2017, where he focused on accelerating the growth and strategic direction of CSG’s global broadband, cable and direct broadcast satellite business. Mr. Shepherd received an M.B.A. from Harvard Business School and graduated magna cum laude from Wabash College with a B.A. in Economics.

SKILLS & QUALIFICATONS

Industry & Innovation:  With 20 years of experience in the cable and communications industries, he has built wide and deep relationships with C-suite leaders, decision-makers and policy influencers who have shaped these industries globally. Known for his ability to lead and grow profitable businesses engaged in enterprise software as a service (“SaaS”) and cloud-based solutions.

Experience: In previous executive roles at companies such as TeleTech, Amdocs, DST Innovis and McKinsey & Company. Successfully led the acquisition and integration over two dozen software, payments, analytic and consulting companies. Brings extensive global sales, services and delivery, strategy, corporate development and marketing expertise.

 

Age 53

Director Since January 2021

President and CEO

 

 

FRANK V. SICA

Mr. Sica has been a Partner of Tailwind Capital (a private equity firm) since 2006. He currently serves as a director on the boards of Kohl’s Corporation (since 1988) and Safe Bulkers, Inc. (since 2008), and formerly served as a director on the board for JetBlue Airways (December 1998 to May 2020). Mr. Sica holds an M.B.A. degree from the Tuck School of Business at Dartmouth College and a B.A. degree from Wesleyan University.

SKILLS & QUALIFICATIONS

Industry & Innovation:  Comprehensive understanding of the CSG business and markets, having served as a Company director for more than 25 years.

Experience:  Wide-ranging experience in venture capital, private equity, M&A, capital markets, management recruitment, executive compensation, and strategic planning across a broad range of industries. Broad experience serving as a director of multiple large public companies.

 

Age 70

Director Since October 1994

Member of

Compensation Committee

 

 


 

16


 

 

 

SILVIO TAVARES

Mr. Tavares has served as President of the board of directors and CEO of Digital Commerce Alliance (formerly The CardLinx Association), a leading global trade association for the digital commerce, payments, and fin-tech industries, since 2013. Prior to that, Mr. Tavares was Senior Vice President and the Global Head of Information Products Business Unit at Visa, Inc., and before that was with First Data Corp. (now part of Fiserv) from 2006 to 2012, where he was Senior Vice President and the Head of Global Information and Analytics Business Unit and also held other senior finance roles. Mr. Tavares formerly served as a board director, Audit committee chairman and designated financial expert for CPI Card Group (September 2016 to August 2018). He holds a J.D. degree from the Boston University School of Law; an M.B.A. degree from the Boston College Carroll School of Management; and a B.S. degree in Electrical and Computer Engineering from Tufts University.

SKILLS & QUALIFICATIONS

Industry & Innovation:  15-year payment industry veteran. Sought after digital innovator with extensive industry relationships and know-how in the technology, fin-tech and payments industries.

Experience:  CEO and business unit president with proven track record of executive leadership at public and private companies including Visa and First Data. Held executive management positions at several multi-billion dollar public companies. Experience serving as director and Audit committee chairman of a public company in the payments sector.

 

Age 49

Director Since May 2020

Member of

Audit Committee and

Compensation Committee

 

TSE LI “LILY” YANG

Ms. Yang is currently Chief Accounting Officer of Pinterest, Inc., where she is responsible for accounting, tax, treasury, and internal audit. From 2015 to 2017, she spent two years with Medivation as the Vice President of Finance and Accounting where she was tasked with driving strategic growth and expansion before the company was acquired by Pfizer. Ms. Yang worked at Gilead Sciences from 2003 to 2015, finishing her tenure as Vice President and Corporate Controller. Ms. Yang holds a B.S. in Accounting and Managerial Information Systems from Boston University and is a certified public accountant.

SKILLS & QUALIFICATIONS

Industry & Innovation:  Nearly 30 years of experience in diverse organizations across the technology, healthcare and other high growth industries.

Experience:  Strong financial and accounting background with leadership experience in regulatory compliance, investment management, M&A, credit and business risk.

 

Age 48

Director Since February 2021

Member of

Audit Committee

 

 

 

 

17


 

Class I Directors – Term to Expire in 2022:

 

RONALD H. COOPER

Mr. Cooper is presently retired. He most recently served as the President and CEO of Clear Channel Outdoor Americas, Inc. (an outdoor advertising company) from 2009 through 2012. Prior to this position, he was a Principal at Tufts Consulting LLC from 2006 through 2009. Previously, he spent nearly 25 years in the cable and telecommunications industry, most recently at Adelphia Communications where he served as President and COO from 2003 to 2006. Prior to Adelphia, Mr. Cooper held a series of executive positions at AT&T Broadband, RELERA Data Centers & Solutions, MediaOne and its predecessor Continental Cablevision, Inc. He has served on various boards of directors and committees with the National Cable Television Association, California Cable & Telecommunications Association, Cable Television Association for Marketing, New England Cable Television Association, and Outdoor Advertising Association of America. Mr. Cooper holds a B.A. degree from Wesleyan University.

SKILLS & QUALIFICATIONS

Industry & Innovation:  Nearly 25 years of experience in the communications industry at multiple enterprises.

Experience: Significant experience in operational finance. Held executive management positions at several multi-billion-dollar corporations in telecommunications and other related industries, with a focus on risk assessment and mitigation, capital planning, M&A, and the linkage between finance and strategy. Director and committee positions with various industry associations and non-profit boards of directors.

 

Age 64

Director Since November 2006

Vice Chair of the Board Since

February 2021

Chair of Compensation Committee

Member of Audit Committee

 

 

JANICE I. OBUCHOWSKI

Ms. Obuchowski is the founder and President of Freedom Technologies, Inc. (a firm providing public policy, strategic, and engineering advice to companies in the communications sector, government agencies, and international clients), a position she has held since 1992. In 2003, Ms. Obuchowski was appointed by President George W. Bush to serve as Ambassador and Head of the U.S. Delegation to the World Radiocommunication Conference. She has served as Assistant Secretary for Communications and Information at the Department of Commerce, Administrator for the National Telecommunications and Information Administration (“NTIA”), and as the head of international government relations at NYNEX Corporation. Ms. Obuchowski also served as Senior Legal Advisor to Chairman Fowler of the Federal Communications Commission. Ms. Obuchowski formerly served as a director on the board for Inmarsat plc. (May 2009 to December 2019) and Orbital ATK (February 2015 to June 2018) and also served earlier on the boards of Qualcomm Technologies, Inc. and Stratos Global Corporation (then TSE traded). She also serves or has served on several non-profit and private company boards. She holds a J.D. degree from Georgetown University and a B.A. degree from Wellesley College, and also attended the University of Paris.

SKILLS & QUALIFICATIONS

Industry & Innovation:  Extensive knowledge of CSG’s competitive environment and the government regulations impacting the communications and information technology sectors. Experience in international business affairs through her current and prior board positions, as well as government appointments related to international communications policies.

Experience: Broad governance and Audit Committee experience from her service as a director of multiple public companies and non-profit organizations. Led the NTIA, the government agency responsible for Internet and telecommunications policy, federal spectrum management, and government research. Responsible for major U.S. delegations and support personnel at international conferences.

Age 69

Director Since November 1997

Member of

Audit Committee and

Nominating and Corporate Governance Committee

 

18


 

 

 

DONALD B. REED

Mr. Reed is presently retired. From 2000 to 2003, he served as CEO of Cable & Wireless Global (a subsidiary of Cable & Wireless plc), a provider of Internet Protocol (“IP”) and data services to business customers in the U.S., United Kingdom, Europe, and Japan. From June 1998 until May 2000, Mr. Reed served Cable & Wireless in various other executive positions. Prior to that he was CEO of Cabletron Systems and held numerous executive positions over a 30 year career at NYNEX Corporation (now part of Verizon), a regional telephone operating company, including President and Group Executive of Nynex, Executive Vice President at Bell Atlantic, and President of Nynex New England (New England Telephone). While serving from 1995 to 1997 as President and Group Executive of NYNEX Corporation, Mr. Reed had responsibility for directing the company’s regional, national, and international government affairs, public policy initiatives, legislative and regulatory matters, and public relations. Mr. Reed holds a B.A. degree in History from Virginia Military Institute and served in the United States military as an officer with the 82nd Airborne and 1st Infantry Divisions in Vietnam.

SKILLS & QUALIFICATIONS

Industry & Innovation:  More than 30 years of experience in the domestic and international telecommunications industry.

Experience: Held executive management positions at several multi-billion-dollar corporations including NYNEX Corporation, Bell Atlantic Corporation and Cable & Wireless Global, with expertise in financial management, risk assessment, investments, and strategic business development. Significant experience serving as a director of several multi-national companies, including Intervoice Inc., Idearc Media LLC and Aggregate Industries UK Limited. Extensive experience in developing and implementing strategies and policies for the acquisition and development of executive talent.

 

Age 76

Director Since May 2005

Chair of the Board Since

January 2010

Member of

Audit Committee

 

 

 

19


 

Class II Directors – Term to Expire in 2023:

 

DAVID G. BARNES

Mr. Barnes is Chief Financial Officer of Trimble Inc., a position he assumed in January 2020. Previously, he served as Executive Vice President, Global Operations of Stantec Inc., a publicly traded global provider of engineering, consulting, and construction services from 2016 through 2018. From 2009 through 2016, he served as Executive Vice President and CFO of MWH Global Inc., an employee-owned engineering and construction firm. MWH Global Inc. was acquired by Stantec Inc. in 2016. From 2006 to 2008, he was Executive Vice President of Western Union Financial Services. From 2004 to 2006, Mr. Barnes served as CFO of Radio Shack Corporation, and from 1999 to 2004, he was Vice President, Treasurer, and U.S. CFO for Coors Brewing Company. Mr. Barnes holds an M.B.A. degree from the University of Chicago and a B.A. degree from Yale University.

SKILLS & QUALIFICATIONS

Industry & Innovation:  Hands-on strategic, financial, and business development experience in emerging and mature markets at both domestic and global companies. Extensive experience in driving stockholder value in a variety of complex international businesses.

Experience: Has served as a member of senior leadership teams of large businesses in diverse industries, with a strong emphasis on finance and strategy development. Significant knowledge of public company governance functions, such as approval of annual budgets, compensation, and financial performance accountability mechanisms for key stakeholders. Also served as a director of privately-held MWH Global, Inc. from 2009 through 2016, when it was acquired by Stantec, Inc.

 

Age 59

Director Since February 2014

Chair of

Audit Committee

 

 

MARWAN H. FAWAZ

Mr. Fawaz is currently an Executive Advisor to Google and Alphabet Inc., after joining Alphabet as the CEO of Nest Labs, Inc. With more than 30 years of experience in the media, cable, telecommunications, and broadband industries, Mr. Fawaz offers a wealth of knowledge and expertise, developed from his time as Executive Vice President and CEO of Google/Motorola Mobility from 2012 to 2013 and Executive Vice President of Strategy and Operations and Chief Technology Officer of Charter Communications from 2006 to 2011. In addition, he served as Senior Vice President and Chief Technology Officer of Adelphia Communications from 2003 to 2006 and held leadership positions for other cable industry companies such as MediaOne, among others. He was the founder and principal of Sarepta Advisors, a strategic advisory and consulting group supporting the technology, media, and telecommunications industries. He holds an M.S. degree in Electrical and Communication Engineering and a B.S. degree in Electrical Engineering, both from California State University at Long Beach.

SKILLS & QUALIFICATIONS

Industry & Innovation: More than 30 years of experience in the media, cable, telecommunications, and broadband industries, serving in a variety of executive positions with multiple large enterprises. Comprehensive understanding of the business practices and technology used by CSG’s largest customers.

Experience: Served in multiple senior executive roles, with an emphasis in Strategy, Operations, and Technology. Significant experience serving as a director of another public company, Synacor, Inc. (since 2011) and as an advisory board member to several large, global companies.

 

Age 58

Director Since March 2016

Chair of

Nominating and Corporate Governance Committee

 

 

20


 

 

 

DR. RAJAN NAIK

Dr Naik currently serves as Chief Strategy and Innovation Officer for Motorola Solutions, Inc., where he is responsible for the corporate strategy organization, chief technology office, M&A, venture capital portfolio, and competitive and market intelligence. Motorola Solutions is a global leader in land mobile radio mission-critical communications, video security and analytics, and command center software for enterprise and public safety customers. Prior to joining Motorola Solutions, Dr. Naik held the role of Senior Vice President, Chief Strategy Officer at Advanced Micro Devices (AMD), a provider of high-performance computing, graphics and visualization technologies. From 2000 to 2012, Dr. Naik was a Partner at McKinsey & Company in the technology/media/telecom practice. Dr. Naik formerly served as a director on the board for Sonim Technologies from February 2018 to February 2019. He holds a BSc. degree in Engineering from Cornell University and a Ph.D. degree in Engineering from the Massachusetts Institute of Technology.

SKILLS & QUALIFICATIONS

Industry & Innovation:  Broad experience in technology strategy and innovation across the value chain from components to enterprise hardware and software.  Functional expertise in AI, industrial design, UI/UX and incubation.

Experience:  Deep experience driving growth and increasing stockholder value, having led corporate strategy, M&A, CTO, and corporate venture capital teams at Fortune 500 enterprises.

 

Age 49

Director Since August 2018

Member of

Nominating and Corporate Governance Committee

 

 

HAIYAN SONG

Ms. Song currently serves as Executive Vice President and General Manager at F5 Networks. Prior to that, Ms. Song served as Senior Vice President and General Manager of Security Markets for Splunk, Inc. from 2014 to 2020. Prior to that, she spent four years from 2010 to 2014 with Hewlett Packard Enterprise Co., in engineering and general manager roles within Hewlett Packard’s ArcSight Business Unit. Ms. Song joined Hewlett Packard following the company’s acquisition of ArcSight, Inc. in 2010. Ms. Song was Vice President of Engineering & Product with ArcSight from 2005 to 2010. Ms. Song holds both M.S. and B.S. degrees in Computer Science from Florida Atlantic University. She also studied at Tsinghua University in China and completed the Stanford University Graduate School of Business Executive Program in General Management in 2012.

SKILLS & QUALIFICATIONS

Industry & Innovation:  Nearly 30 years of experience in enterprise software, SaaS, and cybersecurity. Familiarity with serving customers globally with strong familiarity in Asian markets, among key industry verticals, and in both the private and public sectors. Strong track record of building disruptive and industry-leading products. Well regarded in technology circles, having been named one of the 50 Most Powerful Women in Tech by the National Diversity Council in 2016.

Experience: Served as member of senior leadership teams across a wide spectrum of companies from startup to large businesses in software and cybersecurity industries. Incubated and grew new businesses and secured market share leadership, including building the security business at Splunk, Inc. from inception and scaling annual revenue to more than $1 billion.

 

Age 55

Director Since January 2020

Member of

Compensation Committee and

Nominating and Corporate Governance Committee

 

 

 

 

 

21


 

BENEFICIAL OWNERSHIP OF COMMON STOCK

 

Principal Stockholders

 

 

 

The table below sets forth each stockholder known by us to own beneficially more than 5% of our outstanding common stock as of February 26, 2021.

Percentage ownership calculations for beneficial ownership are based on 32,620,962 shares outstanding at the close of business on February 26, 2021.

Name and Address of Beneficial Owner

 

Shares of

Common Stock

Beneficially Owned

 

Percentage of

Common Stock

Outstanding

 

BlackRock, Inc.

 

 

5,462,579

 

(1)

 

16.75%

 

55 East 52nd Street

 

 

 

 

 

 

 

 

 

New York, New York 10055

 

 

 

 

 

 

 

 

 

The Vanguard Group

 

 

3,856,840

 

(2)

 

11.82%

 

100 Vanguard Boulevard

 

 

 

 

 

 

 

 

 

Malvern, Pennsylvania 19355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Based solely on Schedule 13G/A filed with the SEC on January 25, 2021, by BlackRock, Inc.

(2)

 

Based solely on Schedule 13G/A filed with the SEC on February 10, 2021, by The Vanguard Group.

 

 

 

 

 

22


 

Directors and Executive Officers

 

 

The table below sets forth, to our knowledge, the beneficial ownership of common stock held by each director and each NEO of the Company included in the 2020 Summary Compensation Table, individually, and by all directors and executive officers of the Company as a group, in each case, as of February 26, 2021.

Beneficial ownership is determined in accordance with SEC rules, which generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and includes shares of common stock issuable upon vesting or exercise of equity awards within 60 days of February 26, 2021. The information is not necessarily indicative of beneficial ownership for any other purpose. Percentage ownership calculations for beneficial ownership are based on 32,620,962 shares outstanding at the close of business on February 26, 2021.

 

Name

 

Total Shares of Common Stock

Beneficially Owned (1)(2)

 

 

Percentage of Common

Stock Outstanding

 

David G. Barnes

 

 

22,124

 

 

*

 

Ronald H. Cooper

 

 

35,182

 

 

*

 

Marwan H. Fawaz

 

 

16,414

 

 

*

 

Bret C. Griess

 

 

261,336

 

 

*

 

Rolland B. Johns

 

 

61,715

 

 

*

 

Kenneth M. Kennedy

 

 

114,021

 

 

*

 

Dr. Rajan Naik

 

 

10,414

 

 

*

 

Janice I. Obuchowski (1)

 

 

50,075

 

 

*

 

Donald B. Reed

 

 

42,282

 

 

*

 

Brian A. Shepherd

 

 

194,729

 

 

*

 

Frank V. Sica

 

 

28,464

 

 

*

 

Haiyan Song

 

 

4,096

 

 

*

 

Silvio Tavares

 

 

4,096

 

 

*

 

James A. Unruh

 

 

48,512

 

 

*

 

Tse Li “Lily” Yang

 

 

-

 

 

*

 

All directors and executive officers as a group

 

 

893,460

 

 

2.74%

 

 

*

 

Less than 1% of the outstanding common stock.

(1)

 

Except as otherwise indicated, all of the shares reflected are shares of common stock and all persons listed have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. Ms. Obuchowski has shared voting and investment power with respect to 3,000 shares owned jointly with her husband.

(2)

 

Includes restricted shares of common stock administered under the Amended and Restated 2005 Stock Incentive Plan of the Company, which have not vested and are itemized in the table below. Each holder of restricted shares may vote such shares but may not sell, transfer, or encumber such shares until they vest in accordance with the applicable restricted stock award agreement.

 

 

 

Name

 

Number of Restricted Shares That

Have Not Vested as of February 26, 2021

 

 

 

David G. Barnes

 

 

4,096

 

 

 

Ronald H. Cooper

 

 

4,096

 

 

 

Marwan H. Fawaz

 

 

4,096

 

 

 

Bret C. Griess (1)

 

 

-

 

 

 

Rolland B. Johns

 

 

33,764

 

 

 

Kenneth M. Kennedy

 

 

85,904

 

 

 

Dr. Rajan Naik

 

 

4,096

 

 

 

Janice I. Obuchowski

 

 

4,096

 

 

 

Donald B. Reed

 

 

4,096

 

 

 

Brian A. Shepherd

 

 

132,986

 

 

 

Frank V. Sica

 

 

4,096

 

 

 

Haiyan Song

 

 

4,096

 

 

 

Silvio Tavares

 

 

4,096

 

 

 

James A. Unruh

 

 

4,096

 

 

 

Tse Li “Lily” Yang

 

 

-

 

 

 

Total

 

 

293,614

 

 

 

 

(1)

 

According to the terms of his separation and grant agreements, the vesting of Mr. Griess’ outstanding shares was accelerated on December 30, 2020 in recognition of his instrumental role in securing, maintaining, and expanding key long-term customer relationships during his tenure. For additional information, see Employment and Separation Agreements – Separation Agreement with Mr. Griess.

 

23


 

SHARE Ownership Guidelines

 

 

The Board has established robust share ownership guidelines for our executive officers and non-employee directors. Each executive officer is expected to attain the minimum ownership level within four years of their date of appointment and they may not sell any vested shares of stock in the corporation until the requirements are met. Non-employee directors do not have a specific timeframe to attain their share ownership requirements, and they may not sell any vested shares of our stock until the requirements are met. All non-employee directors and executive officers are in compliance subject to applicable grace periods and other transfer limitations.

Ownership levels are determined based on the common stock owned by each individual, excluding any unvested shares of restricted stock.

Below is a summary of the current required minimum share ownership levels:

Minimum Share Ownership Level

CEO

 

Value equal to three times annual base salary

Other executive officers

 

Value equal to annual base salary

Non-employee directors

 

Value equal to five times annual cash compensation

 

 

 

 

anti-Hedging and anti-pledging Policy

 

 

 

As part of our stock trading policy, all employees, including our executive officers and non-employee directors (and their designees) are prohibited from engaging in short sales of our securities and engaging in transactions that are designed to hedge, pledge or offset any decrease in the market value of our stock, including certain forms of hedging, pledging and monetization transactions, such as zero-cost collars, prepaid variable forward sale contracts, equity swaps and exchange funds.

delinquent Section 16(a) reports

 

 

 

Section 16(a) of the Exchange Act requires our executive officers (as defined in the applicable regulations), directors, and persons who beneficially own more than 10% of our common stock, to file certain reports of ownership and changes of ownership of our equity securities with the SEC. Officers, directors, and the stockholders who beneficially own more than 10% of such shares are required by SEC regulation to furnish to the Company copies of all Section 16(a) forms which they file.

Based solely on our review of the copies of such forms filed with the SEC and written representations from certain reporting persons, we believe that all filings required by our officers, directors and persons who beneficially own more than 10% of our common stock were timely filed for the year ended December 31, 2020, except for the following:

 

One Form 3 for Haiyan Song filed on March 6, 2020 in conjunction with her appointment to the Board of Directors on January 10, 2020; and

 

One Form 4 for each Bret C. Griess, Rolland B. Johns, Kenneth M. Kennedy, Brian A. Shepherd, and David N. Schaaf, filed on March 24, 2020, in each case, relating to the grant of stock awards on March 10, 2020.

 

 

24


 

EXECUTIVE COMPENSATION –

COMPENSATION DISCUSSION AND ANALYSIS

This section explains our 2020 executive compensation program as it relates to the following named executive officers (“NEOs”). Compensation information for the NEOs is presented in the tables following this discussion.

NEO

 

Position

Bret C. Griess (1)

 

Former President and Chief Executive Officer

Rolland B. Johns

 

Executive Vice President and Chief Financial Officer

Kenneth M. Kennedy (2)

 

Executive Vice President, Chief Operating Officer and President – Revenue Management and Digital Monetization; Former President – Technology and Product

Brian A. Shepherd (1)

 

President and Chief Executive Officer; Former Executive Vice President and Group President

 

 

(1)

 

Effective January 1, 2021, Mr. Shepherd was named President and Chief Executive Officer and was appointed to the Board. Mr. Griess stepped down as CEO and from the Board on December 30, 2020, and agreed to serve in a Transition Consultant role through March 31, 2021, at which time he retired from the Company.

(2)

 

Effective, January 1, 2021, Mr. Kennedy was named Executive Vice President, Chief Operating Officer (“COO”) and President - Revenue Management and Digital Monetization (“RMDM”).

Leadership Transition

In August 2020, Mr. Griess announced he would be stepping down from his role as President and CEO and as a director, effective December 30, 2020, following nearly twenty-five years of service with the company, including the last five years in his role as CEO. Additionally, Mr. Griess was instrumental in securing, maintaining and significantly expanding key long-term relationships with several of our largest customers, providing CSG and its stockholders with significant revenue growth and financial certainty. During his tenure, the Company firmly established its leadership in revenue management and cloud payment solutions industries. To ensure business continuity and a smooth handoff, he agreed to serve in a Transition Consultant role through March 31, 2021. Under his leadership, CSG significantly expanded business through organic and inorganic activity, including expanding our service offerings into new verticals, as well as increased revenue and earnings as demonstrated below:

In millions, except EPS (“Earnings Per Share”)

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

16- to 20-year Compound Annual Growth Rate

 

Revenue

 

$

761

 

 

$

790

 

 

$

875

 

 

$

997

 

 

$

991

 

 

 

7%

 

Non-GAAP adjusted revenue (1)

 

$

761

 

 

$

790

 

 

$

859

 

 

$

928

 

 

$

923

 

 

 

5%

 

Cash flow from operations (2)

 

$

126

 

 

$

138

 

 

$

158

 

 

$

173

 

 

$

164

 

 

 

7%

 

Non-GAAP EPS

 

$

2.79

 

 

$

2.51

 

 

$

3.06

 

 

$

3.53

 

 

$

3.12

 

 

 

3%

 

 

 

(1)

 

Non-GAAP (“Generally Accepted Accounting Principles”) adjusted revenues is defined as GAAP revenues less transaction fees.

(2)

 

Cash flow from operations is net cash flow provided by operating activity excluding changes in operating assets and liabilities, net of acquired amounts.

Effective January 1, 2021, Mr. Shepherd was named to succeed Mr. Griess as President and CEO and was appointed to the Board. Prior to his appointment, he served the Company for five years as EVP and Group President. His promotion to President and CEO is a result of succession planning done by the Board and the confidence they have in him and the management team to further accelerate long-term shareholder value. Mr. Shepherd has established a clear growth strategy, including strategic market and vertical expansions as well as complementary acquisitions to increase the Company’s portfolio.

Effective January 1, 2021, Mr. Kennedy was promoted to EVP, COO and President of Revenue Management and Digital Monetization (“RMDM”). Serving previously as EVP and President – Technology and Product, as well as Chief Technology Officer and Senior Vice President of Software Development, Mr. Kennedy has dedicated the last 15 years of his career to leading the Company’s product management, engineering, and platform operations across CSG’s solutions portfolio. In addition to accelerating the growth and development of our cloud-based platforms and solutions, he will continue growing our ecosystem, implementation and delivery capabilities, and systems-integrator partnerships.

In recognition of the promotion of Mr. Shepherd and Mr. Kennedy to their new roles, the Compensation Committee (the “Committee”) awarded one-time equity grants to each executive which consisted of a mix of performance- and time-based awards, along with base salary increases effective January 1, 2021. For details, see Long-Term Incentive Agreement –2020 One-Time LTI Awards.

 

25

 


 

Executive Summary

Company Overview and Business Strategy

We are one of the world’s leading providers of revenue management, customer experience, and payment solutions that enable a growing list of companies around the world to monetize relationships with their customers in an era of rapid change and digital transformation. We leverage more than 35 years of experience to deliver innovative customer engagement solutions that help our customers solve their toughest challenges. Our 4,800-plus diverse, worldwide workforce draws from real-world knowledge and extensive expertise to design and implement business solutions that make our customers’ hardest decisions simpler so that they can focus on delivering differentiated and real-time experiences to their customers.

Our proven solutions are built on a combination of on-premise, public and private cloud platforms, either customized or pre-integrated, as well as managed services models that adapt to fit our customers’ unique business needs and enable the transformative change required to create personalized experiences that drive loyalty and retention.

Our Mission is to channel the power of all to make ordinary customer and employee experiences extraordinary. We believe that by successfully executing on this goal we can grow our revenues and earnings, and thereby create long-term value for our customers, employees, and stockholders. Our strategic focus to accomplish this goal is as follows:

 

Accelerate Profitable Growth and Industry Vertical Revenue Diversification;

 

Lead with Technology Innovation;

 

Deliver an Exceptional Customer Experience; and

 

Attract and Retain the Best Talent.

Our Overall 2020 Performance

Despite the COVID-19 pandemic, we had a very strong finish to 2020, which proves the health and resilience of our business. We reported profitable operating results with strong cash flows and a solid balance sheet as we continued to execute upon our strategic initiatives. Key highlights of our 2020 performance include the following:

 

Generated $991 million in revenues, despite the headwinds resulting from the pricing adjustments associated with the five-year extension with Comcast (our largest customer) that were effective at the beginning of 2020, foreign currency movements, and the COVID-19 pandemic;

 

Delivered cash flows from operations to $173 million, driven by our solid revenues and profitable, recurring business model as well as working capital management;

 

Maintained our strength in the North American cable and satellite business, by continuing to deepen our relationships with current customers by deploying new solutions that help differentiate the customer experience, and increasing our market share with additional customer wins;

 

Positioned ourselves as the top challenger brand in the wireless and telecommunications revenue management market with several new large customer wins; and

 

Grew our sales pipeline to an all-time high, as our global sales team continues to compete and win in the markets, resulting in continued high visibility into our revenue over the next twelve months.

 

Additionally, we believe our holistic approach to capital allocation, which balances internal investments with shareholder remuneration, will maximize long-term stockholder value. During the year, we:

 

Drove innovation and technology leadership with $123 million of research and development investments in our revenue management, customer engagement, and payment solutions, enabling a growing list of companies around the world to provide a more personalized customer experience while introducing new digital products and services; and

 

Returned $57 million to stockholders through a combination of $31 million in quarterly dividend payments and $26 million in repurchase of common stock under a stock repurchase program. Our 2020 dividend increased 6% from the prior year.

 

26

 


 

2020 Executive Compensation Highlights

Each year, our executive compensation program is reviewed to ensure alignment with our business strategy and evolving market and governance practices for executive compensation. In addition, management further evaluated our 2020 financial results in light of the COVID-19 pandemic to assess if performance metrics or targets underlying our short- and long-term incentive programs should be modified. Ultimately, it was concluded no adjustments were warranted for them or other elements of the executive compensation program.

Our executive compensation program consists of a balance of multiple elements, including base salary, annual cash incentive programs, and long-term equity incentive awards that are earned over a number of years. The structure of our annual cash incentives for NEOs includes multiple performance measures that are objective and quantifiable, with a corresponding minimum and maximum payout range. A significant portion of our NEOs’ pay is tied to long-term equity awards based on the achievement of predetermined financial and operational performance measures that we believe align the long-term interests of our executives with those of our stockholders.

After considering compensation within our peer group and consulting with Exequity, the Committee independently assessed the value and competitiveness of each NEO’s compensation, including various pay components.

Based upon their assessment, the Board and the Committee made the following decisions regarding the framework for the 2020 executive compensation program:

 

Annual Base Salary. Modest market alignments were approved for each NEO which resulted in base salary increases of 3.6% for Mr. Griess, 6.0% for Mr. Johns, and 4.0% for both Mr. Kennedy and Mr. Shepherd. For more information, see 2020 Compensation – Annual Base Salaries.

 

Annual Incentive Program. Target bonus as a percentage of base salary was maintained for each NEO with 150% for Mr. Griess, 75% for Mr. Johns and 100% for both Mr. Kennedy and Mr. Shepherd. For more information, see 2020 Compensation – Annual Performance Bonuses.

 

Annual Long-Term Incentive (“LTI”) Program. The Annual LTI structure was maintained with 60% of each NEO’s award granted in the form of performance-based restricted stock and the remaining 40% granted in the form of time-based restricted stock that vests ratably over a four-year period.

The Committee continued to align LTI compensation for our NEOs with our pay-for-performance philosophy and strategic goals. Similar to prior year’s awards, the 2020 performance-based awards have an opportunity to vest at the end of a two-year performance period based upon the achievement of predetermined, objective, and quantifiable performance measures. For 2020, the Committee established the following performance measures: (1) Non-GAAP EPS; (2) Revenue; and (3) “Impact Minutes” as an operational measure. These performance measures were selected to incentivize and reward long-term strategic progress towards the success of the business and to continue to drive the creation of long-term stockholder value through profitability, growth, and operational excellence.

For more information on our executive compensation program, see 2020 Compensation – 2020 Long-Term Incentive Awards.

Pay-for-Performance Compensation Program

The portion of total target compensation that was based on the achievement of key financial and operational measures under our annual incentive and LTI programs was 60% for our former CEO and on average approximately 55% for our other NEOs.

Even with the COVID-19 pandemic taking centerstage in 2020, we had a strong financial performance, finishing at the high-end of our guidance ranges and delivering on two of our three 2019 performance-based LTI award’s objectives. As a result, our NEOs’ achieved payouts and performance-based stock vesting under our executive compensation program are as follows:

 

88.8% of target under the annual incentive program (“Annual Performance Bonus Program”) for 2020; and

 

132% of target shares vest under the 2019 LTI program.

For more information, see 2020 Compensation.

 

27

 


 

Say-on-Pay Results

Over 94.9% of the votes cast on our 2020 say-on-pay proposal were in favor of our executive compensation program and policies. When making compensation decisions for our NEOs, the Committee considers the voting results of our annual say-on-pay proposal along with other factors, such as our pay-for-performance philosophy and a competitive market analysis of peer companies to determine compensation practices. The Committee considered the results of the 2020 advisory vote in determining whether to make changes to the 2020 compensation for our NEOs as described in this proxy statement.

 

 

28

 


 

Governance and Compensation Practices

 

 

WHAT WE DO

 

 

WHAT WE DO NOT DO

 

Majority of executive officer pay is performance-based

 

No repricing or replacing of underwater options without stockholder approval

 

Meaningful share ownership guidelines

 

No income tax gross-ups in executive employment agreements

 

Clawback policy for executive officers

 

No excessive perquisites or other benefits

 

Independent compensation consultant, engaged by the Committee

 

No dividends or dividend equivalents paid on unvested time-based or performance-based shares (dividends or dividend equivalents accrue and are only paid upon vesting)

 

Include “double-trigger” change of control provisions

 

No “single-trigger” change of control vesting of equity awards

 

Limit post-employment and change of control benefits

 

No hedging or pledging of the Company’s securities is permitted

 

Hold annual say-on-pay vote

 

 

 

 

 

 

 

 

 

 

Key Compensation Governance Factors

We believe that the following governance and compensation practices reinforce our business strategy, culture, and values.

We Design Performance-Based Compensation to Reflect Our Business Strategy and Enhance Stockholder Value. We use certain predetermined financial and operational performance measures to determine compensation under our annual incentive and LTI programs. Each measure represents a key metric that reflects on the execution of our long-term business strategy to enhance stockholder value. For additional information about our business strategy, see Company Overview and Business Strategy.

We Emphasize the Long Term. A significant portion of our NEOs’ total compensation is in the form of long-term equity awards, 60% of which is performance-based restricted stock that fully vests only if we achieve specific predetermined financial or operational measures. For additional information, see 2020 Compensation – Long-Term Incentive Awards.

We Align the Financial Interests of Our Executives With the Interests of Our Stockholders Through Equity Awards and Share Ownership Guidelines. Each NEO must own at least the threshold level of our shares that is consistent with our share ownership guidelines. For additional information, see Share Ownership Guidelines.

We Have a Clawback Policy That Covers Our Executive Officers. The policy authorizes us to reduce or cancel, or require the recovery of, all or a portion of an executive officer’s annual bonus or LTI compensation award for intentional misconduct that leads to a material restatement of the financial statements of the Company. For additional information, see Employment and Separation Agreements.

The Committee Utilizes the Advice of an Independent Compensation Consultant. The Committee has engaged an independent compensation consultant that does not provide any services to management and that had no relationship with management prior to the engagement.

No Potential Income Tax Gross-Ups. A key feature of the executive officers’ employment agreements is the exclusion of potential income tax gross-ups for change of control benefits. For additional information regarding the agreements, see Employment and Separation Agreements.

We Provide Only Limited Perquisites and Other Benefits. Our NEOs are generally eligible for few perquisites or other benefits outside those available to our employees. For additional information, see Executive Compensation Tables - 2020 Summary Compensation Table.

No Dividends or Dividend Equivalents Paid on Unvested Stock Awards. We do not pay dividends or dividend equivalents on unvested stock awards. Dividends or dividend equivalents accrue, but are only paid when underlying shares vest.

We Have a Policy Prohibiting Hedging and Pledging Transactions Involving Our Stock. Our NEOs and other insiders are prohibited from selling our stock short or entering into transactions in puts or calls that raise similar concerns regarding speculation in our stock. For additional information, see Anti-Hedging and Anti-Pledging Policy.

 

 

29


 

Determining Executive Compensation

Each year during our February Board meeting, the Committee certifies the following for the previous fiscal year: (1) the level of performance attained for our predetermined performance measures; (2) the amount payable under the Annual Performance Bonus Program; and (3) the vesting levels for our performance-based LTI awards. The Committee also evaluates and recommends to the Board the base salary for each of our NEOs as well as the performance measures and target levels for the Annual Performance Bonus Program and performance-based LTI awards for the current year. For the performance-based LTI award, the at-target attainment levels are typically established based upon our financial budgets and projections which are adjusted for a pre-established growth as well as an improvement factor for our operational measure.

When making compensation decisions and recommendations, the Committee considers the following key factors:

 

Competitive peer group and market information and guidance provided by our independent compensation consultant;

 

Our financial and operational performance;

 

Progress on key strategic initiatives;

 

Individual performance reviews and compensation recommendations provided by the CEO regarding the other NEOs;

 

Committee and Board evaluations, both formal and informal, of the NEOs; and

 

A comparison of our actual results with the target measures for the annual performance bonus and performance-based LTI awards.

As required by the Committee’s charter, the CEO may not be present when either the Committee or the Board discuss or vote on CEO compensation.

The Committee undertakes considerable analysis when determining measures to be used in both its Annual Performance Bonus Program and performance-based LTI awards.

The Committee selects a combination of measures that, if achieved in the long-term, will most likely result in positive long-term stockholder return. Goals are established to effectively incent the NEOs to achieve long-term results while continuing to deliver and further enhance the operational excellence that our customers have come to expect and rely upon.

Our performance-based LTI awards employ a multiple-year time horizon, with the shares in the award eligible for vesting based upon achievement of the specified predetermined, objective and measurable performance levels. A minimum threshold of achievement is required before any shares for a measure may vest. At the threshold performance level, 50% of the target shares will vest. If targets are achieved, 100% of the target shares will vest. Up to 200% of the target shares may vest at the end of the performance period if targets are significantly exceeded.

The Committee believes executive compensation based on the achievement of performance-based measures that are tied to the short- and long-term strategy of our business incentivizes management to invest in the success of the business, while also linking executive compensation to increasing stockholder value.

Role of the Independent Compensation Consultant and Management

The Committee has sole authority and discretion to retain and terminate compensation consultants, independent legal counsel, and other advisers to help the Committee perform its responsibilities. It has the sole authority to approve the fees, scope, and other terms of engagement with its compensation consultant and other advisers, with full funding provided by the Company. The Committee is responsible for determining the independence of its compensation consultant and other advisers. Management is available at the Committee’s request to assist the consultant by providing historical pay data and perspective on our competitive environment for recruiting managerial talent.

 

 

30


 

The Committee engaged Exequity as its independent compensation consultant to advise on executive compensation matters for 2020. It has instructed Exequity to take a broad view of the competitive compensation landscape to assist the Committee in structuring a compensation program for our NEOs. We believe this broader perspective has enabled us to attract and retain a highly talented executive team. Exequity reviewed compensation data publicly available from peer companies, using position matches and data analyses to identify the most appropriate comparisons among executives of similar titles and responsibilities. For additional information regarding the companies in the peer group component and the pay of our NEOs compared to the peer group, see Role of Benchmarking in Determining Compensation and Peer Group.

Compensation Mix

 

The compensation program for each of our NEOs includes the following components, which together comprise “Total Direct Compensation”: (i) annual base salary, (ii) an annual performance bonus, and (iii) two types of annual LTI awards. The objective of each component and the form in which each is delivered if earned is outlined as follows:

 

Core Component

 

Purpose

 

Percentage of

Total Direct

Compensation

 

Form

Annual Base salary

 

Provide competitive base compensation that reflects the scope of responsibility, level of authority, and overall duties of the position

 

13-25%

 

Cash

Annual incentive program

 

Provide an annual bonus opportunity that is tied to predetermined Company performance goals and achievement of individual performance objectives ("Annual Performance Bonus Program") to ensure focus on annual financial and operating results

 

19-22%

 

Performance-

based cash

Annual

long-term incentive program

 

Provide performance-based equity awards tied to predetermined Company performance goals measured over a multi-year period to ensure focus on long-term value creation and the Companys strategic objectives

 

34-41%

 

Performance-

based equity

 

Provide time-based equity awards that vests ratably over a four-year period to serve as a retention tool

 

22-27%

 

Time-based

equity

 

 

 

 

 

 

 

 

 

 

 

 

Total Direct Compensation. The charts below illustrate the percentage of compensation our former CEO and other NEOs on average would generally receive, if paid at target level, for each core compensation component, based on 2020 target compensation:

 

COMPONENTS OF TOTAL DIRECT COMPENSATION AT TARGET

CEO

 

Other NEOs – Average

 

 

 

 

 

31


 

Role of Benchmarking in Determining Compensation and Peer Group

 

 

Role of Benchmarking in Determining Compensation

To assist the Committee in establishing 2020 compensation for the NEOs, Exequity provided a competitive assessment using peer group compensation information for the primary elements of our NEO compensation packages. Exequity analyzed and assessed peer group data for roles corresponding to and closely aligned to the roles of our NEOs. The peer group composition is described in the next section.

The Committee recognizes that peer group comparisons may not be perfectly aligned because the executive titles and responsibilities at peer group companies may not be directly comparable to those of our NEOs with similar or equivalent titles. The Committee generally considers Total Direct Compensation for a NEO to be competitive if it is near the median of the peer group data. For the definition of Total Direct Compensation, see Compensation Mix on prior page.

Our compensation philosophy is intended to ensure leadership continuity as part of our succession planning and to leverage variable incentive pay tied to our performance.

Peer Group Used for Benchmarking

The peer group used for compensation benchmarking is reviewed annually to ensure its composition and characteristics remain consistent with our objectives and is based on analysis and recommendations by our independent compensation consultant. As a result, the 2020 peer group used to determine compensation (“2020 Compensation Peer Group”), remained unchanged from the 2019 peer group. The group, as listed in the table below, includes companies in the software, data processing and outsourced services, information technology consulting, and other electronic industries, which were selected for their comparable size, product, service offerings, customers, and markets. Their annual revenues ranged in size from $354 million to $2.3 billion at the end of 2019.

 

2020 Compensation Peer Group

 

 

 

 

 

 

 

 

ACI Worldwide, Inc.

Fair Isaac Corp.

Aspen Technology, Inc.

j2 Global, Inc.

Black Knight, Inc.

Manhattan Associates, Inc.

Blackbaud, Inc.

ManTech International Corp.

Bottomline Technologies (de), Inc.

National Instruments Corporation

Cardtronics plc

NIC, Inc.

CoreLogic, Inc.

Perficient, Inc.

CTS Corporation

Progress Software Corporation

Ebix, Inc.

RealPage, Inc.

EPAM Systems, Inc.

Sykes Enterprises, Incorporated

EVERTEC, Inc.

Verint Systems Inc.

ExlService Holdings, Inc.

WEX Inc.

 

 

 

32


 

2020 Compensation

Annual Base Salaries

For 2020, the Committee recommended to the Board, and the Board approved, the following base salaries for our NEOs:

NEO

 

2020

Base Salary (1)

 

 

2019

Base Salary

 

 

% Increase in

Base Salary

from 2019

 

Bret C. Griess

 

$

725,000

 

 

$

700,000

 

 

3.6%

 

Rolland B. Johns

 

$

424,000

 

 

$

400,000

 

 

6.0%

 

Kenneth M. Kennedy

 

$

436,800

 

 

$

420,000

 

 

4.0%

 

Brian A. Shepherd

 

$

473,200

 

 

$

455,000

 

 

4.0%

 

 

 

 

 

(1)

 

Base salary amounts were effective as of January 1, 2020.

The Committee provides for competitive base salary compensation that reflects the scope of responsibility, level of authority, and overall duties of the position. Based on their review and assessment of the peer data and competitive market practices for the duties and responsibilities of each position, the Committee approved modest base salary increases for 2020 for each of the NEOs. In preparation for the CEO leadership transition from Mr. Griess to Mr. Shepherd, the Committee approved increasing Mr. Shepherd’s base salary to $700,000 effective January 1, 2021.

Annual Performance Bonuses

Annual performance bonuses are awarded under the terms of our Annual Performance Bonus Program and are determined based on the following formula:

Base Salary. The starting point for each NEO’s bonus calculation is the NEO’s base salary.

NEO Target Bonus Percentage. The Committee provides competitive bonus opportunities for the NEOs based on the achievement of annual performance goals. After considering the competitive compensation information provided by Exequity, the 2020 and 2019 target bonus percentages of base salary for each NEO were as follows:

NEO

 

2020 Target Bonus %

 

2019 Target Bonus %

 

Bret C. Griess

 

150%

 

150%

 

Rolland B. Johns

 

75%

 

75%

 

Kenneth M. Kennedy

 

100%

 

100%

 

Brian A. Shepherd

 

100%

 

100%

 

 

The Committee calibrated Mr. Shepherd’s compensation package for his new role of CEO by maintaining his target bonus of 100% for the 2021 Annual Performance Bonus Program.

Company Performance Percentage. The Company performance percentage is based on our performance against two predetermined financial performance measures: Non-GAAP adjusted revenues and Non-GAAP adjusted operating margin percentage. If we achieve the target levels of performance for both measures, the Company performance percentage achieved will be 100%. If we fail to achieve the minimum threshold performance for either measure, the Company performance percentage will be zero (0%). If we exceed target levels, the Company performance percentage can exceed 100% up to a maximum of 200%. The following table shows our financial results with respect to the 2020 targets:


 

33


 

 

 

 

 

2020 Results

 

2020 Target

(100% Payout)

 

2020 Minimum

Threshold

 

Non-GAAP adjusted revenues (in millions) (1)

 

$

930.7

 

 

$

935.3

 

 

$

915.8

 

 

Non-GAAP adjusted operating margin percentage (2)

 

 

16.8%

 

 

 

16.5%

 

 

 

16.0%

 

 

 

 

(1)

 

Non-GAAP adjusted revenues is defined as GAAP revenues less transaction fees at a budgeted constant currency rate.

(2)

 

Non-GAAP adjusted operating margin percentage is calculated by dividing Non-GAAP operating income (at a budgeted constant currency rate) by our Non-GAAP adjusted revenues. Non-GAAP operating income is defined as our GAAP operating income with the following items added back, as applicable: (a) stock-based compensation; (b) restructuring and reorganization charges; (c) executive transition costs and (d) acquisition-related expenses (e.g. amortization of acquired intangible assets, earn-out compensation and transaction-related costs).

 

The Company’s performance percentage achieved for 2020 for the results in the above table was calculated at 88.8% and was certified by the Committee in February 2021.

NEO Individual Performance Percentage. The final component of the Annual Performance Bonus Program is a determination by the Committee in its evaluation of each NEO’s individual performance achievement expressed as a percentage, not to exceed 100%. This evaluation is based on the achievement of certain common and unique objectives described below. These non-financial objectives are important to our success and are designed to enhance stockholder value over the long term.

 

Common Objectives. Common elements of NEO objectives include operational and functional responsibilities. Specifically, each NEO has multiple objectives associated with the stewardship of the NEO’s areas of responsibility. The specific objectives vary by NEO, but typically include achieving both near- and long-term business objectives and meeting budget expectations.

 

Unique Objectives. The following are examples of categories of individual objectives unique to one or more of the NEOs based on area of responsibility within the Company:

 

Deliver on Key Development Initiatives. As a technology company, we have a technology product road map requiring significant software development investments aimed at achieving specified feature and functional milestones, and overall, at modernizing our platforms and processes to enhance our market competitiveness.

 

Maintain and Expand Customer Relationships. A significant portion of our revenue is derived from a limited number of key customers, and a critical objective is to ensure that these relationships remain strong and, when applicable, that important contracts are renewed under terms satisfactory to both parties.

 

Contribute to Growth Initiatives. Implementation of our long-term strategic plan is a fundamental objective, including execution on our merger, acquisition, and partnership strategies, and when applicable, the successful integration of acquired assets.

 

Increase Cost Efficiency. Our NEOs are expected to identify and implement potential cost savings and process efficiencies in identified areas of the Company.

 

Staff Development. Succession planning and development of key staff is an important Company-wide objective, including transitioning identified tasks and functions from outgoing personnel to new personnel, where applicable.

The Committee met in February 2021 to consider the 2020 performance of each NEO as compared to the individual’s performance goals. Mr. Shepherd summarized the 2020 performance of the other NEOs and presented information to the Committee for consideration. After evaluating each NEO’s performance, the Committee assigned each NEO an individual performance percentage of 100% for 2020.

Final Bonus Calculation. The following table provides each NEO’s earned 2020 annual performance bonus calculation:

NEO

 

Base Salary

 

 

x

 

NEO

Target Bonus Percentage

 

 

x

 

Company

Performance Percentage

Achieved

 

 

x

 

NEO

Performance Percentage

Achieved

 

 

=

 

2020 Total

Bonus Earned

 

Bret C. Griess

 

$

725,000

 

 

 

 

150%

 

 

 

 

88.8%

 

 

 

 

100%

 

 

 

 

$

965,700

 

Rolland B. Johns

 

$

424,000

 

 

 

 

75%

 

 

 

 

88.8%

 

 

 

 

100%

 

 

 

 

$

282,384

 

Kenneth M. Kennedy

 

$

436,800

 

 

 

 

100%

 

 

 

 

88.8%