PRE 14A 1 d525817dpre14a.htm PRE 14A PRE 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

 

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

 

Check the appropriate box:

 

Preliminary Proxy Statement

 

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

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

 

CBRE Group, Inc.

(Name of Registrant as Specified in Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

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

 

 

1.

 

Title of each class of securities to which transaction applies:

 

 

 

2.

 

Aggregate number of securities to which transaction applies:

 

 

3.

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

4.

 

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Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

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

 

 

1.

 

Amount Previously Paid:

 

 

2.

 

Form, Schedule or Registration Statement No.:

 

 

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4.

 

Date Filed:

 

 

 

 


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LOGO

 

400 South Hope Street, 25th Floor

Los Angeles, California 90071

(213) 613-3333

April 5, 2018

Dear Fellow Stockholder:

On behalf of the Board of Directors and management of CBRE Group, Inc., I cordially invite you to attend our annual meeting of stockholders on Friday, May 18, 2018, at 200 Park Avenue, 21st Floor, New York, New York at 8:30 a.m. (Eastern Time). The notice of meeting and proxy statement that follow describe the business that we will consider at the meeting.

We hope that you will be able to attend the meeting. However, regardless of whether you are present in person, your vote is very important. We are pleased to again offer multiple options for voting your shares. You may vote by telephone, via the internet, by mail or in person, as described beginning on page 1 of the proxy statement.

Thank you for your continued support of CBRE Group, Inc.

Sincerely yours,

 

LOGO

Robert E. Sulentic

President and Chief Executive Officer


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LOGO

 

Notice of 2018 Annual Meeting

of Stockholders

 

May 18, 2018

8:30 a.m. (Eastern Time)

200 Park Avenue, 21st Floor, New York, New York

AGENDA:

 

1.

Elect the 10 Board-nominated directors named in the Proxy Statement;

 

2.

Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018;

 

3.

Conduct an advisory vote on named executive officer compensation for the fiscal year ended December 31, 2017;

 

4.

Approve an amendment to our certificate of incorporation to reduce (to 25%) the stock-ownership threshold required for our stockholders to request a special stockholder meeting;

 

5.

If properly presented, to consider a stockholder proposal regarding our stockholders’ ability to call special stockholder meetings; and

 

6.

Transact any other business properly introduced at the Annual Meeting.

Only stockholders of record as of March 20, 2018 will be entitled to attend and vote at the Annual Meeting and any adjournments or postponements thereof.

We hope that you can attend the Annual Meeting in person. Regardless of whether you will attend in person, please complete and return your proxy so that your shares can be voted at the Annual Meeting in accordance with your instructions. Any stockholder attending the Annual Meeting may vote in person even if that stockholder returned a proxy. You will need to bring a picture ID and proof of ownership of CBRE Group, Inc. stock as of the record date to enter the Annual Meeting. If your common stock is held in the name of your broker, bank or other nominee and you want to vote in person, then you will need to obtain a legal proxy from the institution that holds your common stock indicating that you were the beneficial owner of our common stock on March 20, 2018.

We are pleased to furnish proxy materials to our stockholders on the internet. We believe that this allows us to provide you with the information that you need while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting.

April 5, 2018

By Order of the Board of Directors

 

LOGO

Laurence H. Midler

Executive Vice President, General Counsel and Secretary

This Proxy Statement and accompanying proxy card are first being made available on or about April 5, 2018.

References in this Proxy Statement to “CBRE,” “the company,” “we,” “us” or “our” refer to CBRE Group, Inc. and include all of its consolidated subsidiaries, unless otherwise indicated or the context requires otherwise. References to “the Board” refer to our Board of Directors. A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, including financial statements, is being sent simultaneously with this Proxy Statement to each stockholder who requested paper copies of these materials and will also be available at www.proxyvote.com.


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Proxy Summary Information

To assist you in reviewing the proposals to be voted upon at our 2018 Annual Meeting, we have summarized important information contained in this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. This summary does not contain all of the information that you should consider, and you should carefully read the entire Proxy Statement and Annual Report on Form 10-K before voting.

Voting

Stockholders of record as of March 20, 2018 may cast their votes in any of the following ways:

 

LOGO    LOGO    LOGO    LOGO
Internet    Phone    Mail    In Person
Visit www.proxyvote.com. You will need the 16-digit number included in your proxy card, voter instruction form or notice.    Call 1-800-690-6903 or the number on your voter instruction form. You will need the 16-digit number included in your proxy card, voter instruction form or notice.    Send your completed and signed proxy card or voter instruction form to the address on your proxy card or voter instruction form.    If you plan to attend the meeting, you will need to bring a picture ID and proof of ownership of CBRE Group, Inc. stock as of the record date. If your common stock is held in the name of your broker, bank or other nominee and you want to vote in person, then you will need to obtain a legal proxy from the institution that holds your common stock indicating that you were the beneficial owner of our common stock on March 20, 2018.

Voting Matters and Board Recommendation

 

Proposal        Board Vote Recommendation

Elect Directors (page 8)

   ü FOR each  Director Nominee

Ratify the Appointment of Independent Registered Public Accounting Firm for 2018 (page 27)

   ü FOR

Advisory Vote to Approve Named Executive Officer Compensation for 2017 (page 30)

   ü FOR

Approve an Amendment to our Certificate of Incorporation to Reduce (to 25%) the Stock-Ownership Threshold Required for our Stockholders to Request a Special Stockholder Meeting (page 70)

   ü FOR

If Properly Presented, to Consider a Stockholder Proposal Regarding Special Stockholder Meetings (page 73)

 

 

   × AGAINST

Fiscal Year 2017 Business Highlights(1)

 

We are the world’s largest commercial real estate services and investment firm, based on 2017 global revenue of $14.2 billion, with leading global market positions in our leasing, property sales, occupier outsourcing and valuation businesses.

 

 

Our service offering is supported by more than 450 offices worldwide with over 80,000 employees, excluding independent affiliates. We serve clients in more than 100 countries.

 

Our services include:

 

   

commercial real estate services operating under the “CBRE” brand name;

 

   

real estate investment management services operating under the “CBRE Global Investors” brand name; and

 

   

development services operating under the “Trammell Crow Company” brand name.

 

 

  (1)

For more complete information regarding our fiscal year 2017 performance, please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. You can obtain a free copy of our Annual Report on Form 10-K at the SEC’s website (www.sec.gov) or by submitting a written request by (i) mail to CBRE Group, Inc., Attention: Investor Relations, 200 Park Avenue, New York, New York 10166, (ii) telephone at (212) 984-6515 or (iii) e-mail at investorrelations@cbre.com.



 

CBRE - 2018 Proxy Statement     1  


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PROXY SUMMARY INFORMATION

 

In fiscal year 2017, we delivered strong results:

 

 

Our revenue totaled $14.2 billion, up 9% from 2016.

 

 

Our fee revenue totaled $9.4 billion, up 8% from 2016.(2)(3)

 

 

On a GAAP basis, net income for 2017 increased 21% to $691.5 million and earnings per diluted share rose 20% to $2.03 per share.

 

 

Our adjusted net income was $924.5 million, up 19% from 2016.(3)

 

 

Our adjusted earnings per share (“adjusted EPS”) was $2.71, up 18% from 2016.(3)

 

 

Our adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) was $1.7 billion, up 10% from 2016.(3)

 

 

Our revenue mix has shifted in recent years toward more contractual revenue as occupiers and investors increasingly prefer to purchase integrated, account-based services from firms that meet the full spectrum of their needs nationally and globally.

 

We generated revenue from a highly-diversified base of clients. In 2017, our client roster included over 90 of the Fortune 100 companies.

 

 

We executed a highly targeted M&A strategy, closing 11 acquisitions in 2017 that enhanced our capabilities, including companies operating in investment management, project management, retail experience advisory services, occupier brokerage focused on major technology companies, as well as two real estate software as a service companies.

 

 

We added significantly to our talent base, with one of our best years for producer recruiting, and strengthened the leadership team that is responsible for driving our continued growth.

 

 

We have been voted the most recognized commercial real estate brand in a Lipsey Company survey for 17 years in a row (including 2018) and we have been rated a World’s Most Ethical Company by the Ethisphere Institute for five consecutive years (including 2018).

 

 

We ended 2017 in a very strong financial position with low leverage, high liquidity and considerable cash flow.

 

 

The following charts highlight our growth in adjusted EBITDA, adjusted net income and adjusted EPS for 2017 relative to 2016:

 

 

LOGO

 

 (2)

Fee revenue is gross revenue less both client reimbursed costs largely associated with employees that are dedicated to client facilities and subcontracted vendor work performed for clients.

 

 (3)

These are non-GAAP financial measures. For supplemental financial data and a corresponding reconciliation of (i) revenue computed in accordance with GAAP to fee revenue, (ii) net income computed in accordance with GAAP to adjusted EBITDA and (iii) net income computed in accordance with GAAP to adjusted net income and to adjusted EPS, in each case for the fiscal years ended December 31, 2017 and 2016, see Annex A to this Proxy Statement. We also refer to “adjusted EBITDA,” “adjusted net income” and “adjusted EPS” from time to time in our public reporting as “EBITDA, as adjusted,” “net income attributable to CBRE Group, Inc., as adjusted” and “diluted income per share attributable to CBRE Group, Inc. shareholders, as adjusted,” respectively. As described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, our Board and management use non-GAAP financial measures to evaluate our performance and manage our operations. However, non-GAAP financial measures should be viewed in addition to, and not as an alternative for, financial results prepared in accordance with GAAP. The term “GAAP,” as used in this Proxy Statement, means generally accepted accounting principles in the United States.



 

 

2   CBRE - 2018 Proxy Statement

ADJUSTED EBITDA $ in millions ADJUSTED NET INCOME $ in millions ADJUSTED EPS


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PROXY SUMMARY INFORMATION

 

Our Corporate Strategy

 

We operate in an industry that is characterized by enduring trends that support the long-term growth of our business. These include:

 

 

occupiers’ growing acceptance of the outsourcing of real estate services;

 

 

investors’ increasing allocation of capital to commercial real estate, and

 

 

the continuing consolidation of occupier and investor activity to the highest-quality, globally diversified service providers.

In addition, technological advancements hold significant opportunities for firms that invest prudently in digital capabilities.

We have a clear strategy to capitalize on the inherent opportunities within our sector. Our strategy is focused on delivering consistently superior client outcomes that other firms cannot replicate. This strategy is underpinned by six key elements:

 

An intense focus on client outcomes. We deeply study the results we produce for clients and then use the insights we gain to improve those results.

 

 

Having top talent—both client-facing professionals and business line/geographic leaders—in every key role.

 

 

Maintaining a premier operating platform—from research to marketing to human resources to, most especially, data/technology capabilities—that helps our professionals to serve clients.

 

 

Leveraging our scale as the world’s largest commercial real estate services provider and using our collaborative culture to connect our people and capabilities around the world.

 

 

Making strategic investments in targeted M&A activity, data and technology, and other initiatives that enhance our capabilities.

 

 

Operating efficiently. We prudently manage our expense base to enable re-investment in the business while maintaining strong margins.

 

 

Corporate Governance Highlights

 

Board Independence

Independent director nominees

  

9 out of 10 

Independent Chair of the Board

  

Ray Wirta* 

Director Elections

Frequency of Board elections

  

Annual 

Voting standard for uncontested elections

  

Majority Requirement 

Director term limits

  

12 Years(4) 

Limit on number of Board-nominated executive officers

  

Maximum 1 

Proxy access for director nominations

   Yes 

Evaluating and Improving Board Performance

    

Board evaluations

  

Annual 

Committee evaluations

   Annual 

Aligning Director and Executive Interests with Stockholder Interests

Director stock ownership requirements

  

Yes 

Executive officer stock ownership requirements

  

Yes 

Policy restricting trading, and prohibiting hedging and short-selling of, CBRE stock

  

Yes 

Compensation clawback policy for executive officers

  

Yes 

Ongoing stockholder outreach and engagement

  

Yes 

  *

Mr. Wirta is our current Board Chair. Our Board has appointed Mr. Boze to succeed Mr. Wirta as the Independent Chair of our Board, effective following the Annual Meeting, assuming Mr. Boze is re-elected at such meeting by our stockholders.

 

 

 (4)

The application of this term-limit restriction does not go into effect until December 17, 2020 for any of the company’s directors who were serving on the Board as of December 17, 2015. See “Corporate Governance—Term Limits” on page 17.



 

CBRE - 2018 Proxy Statement     3  


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PROXY SUMMARY INFORMATION

 

Summary of Board Nominees

The following table provides summary information about each of the director nominees who is being voted on by stockholders at the Annual Meeting.

 

  Name    Age     

Director

Since

    Principal Occupation    Committees   

Other Public 

Company Boards 

 

  Brandon B. Boze*†

     37        2012     Partner of Value Act Capital    CC, GC       

  Beth F. Cobert*

     59        2017     Chief Executive Officer of Skillful    CC, GC       

  Curtis F. Feeny*

     60        2006     Managing Director of Silicon Valley Data Capital    AC, GC, EC       

  Christopher T. Jenny*

     62        2016     Senior Advisor to Parthenon-EY    AC, GC       

  Gerardo I. Lopez*

     58        2015     Former President and Chief Executive Officer of Extended Stay America, Inc.    CC, GC       

  Paula R. Reynolds*

     61        2016     President and Chief Executive Officer of PreferWest, LLC    AC, CC       

  Robert E. Sulentic

     61        2012     President and Chief Executive Officer of CBRE    EC       

  Laura D. Tyson*

     70        2010     Distinguished Professor of the Graduate School, Haas School of Business, University of California, Berkeley    AC       

  Ray Wirta*†

     74        2001     Chief Executive Officer of The Koll Company and President of the Irvine Company    EC       

  Sanjiv Yajnik*

     61        2017     President of Capital One Financial Services    AC, CC       
  *

Independent Director

 

  †

Mr. Wirta is our current Board Chair. Our Board has appointed Mr. Boze to succeed Mr. Wirta as the Independent Chair of our Board, effective following the Annual Meeting, assuming Mr. Boze is re-elected at such meeting by our stockholders.

 

  Key:

 

  AC

Audit and Finance Committee

 

  CC

Compensation Committee

 

  EC

Executive Committee

 

  GC

Corporate Governance and Nominating Committee

 

Executive Compensation Highlights

 

Our Philosophy—Our executive compensation program is designed to reinforce our corporate strategy and to attract and retain accomplished and high-performing executives and to motivate those executives to consistently achieve short- and long-term goals consistent with and in furtherance of our corporate strategy. To do this, we focus a significant percentage of our executive officers’ compensation on both annual and long-term incentive awards intended to reflect growth in our business and in our share price in the short and long term, with a relatively modest portion of compensation paid in fixed base salary.

In 2017, we continued to place a significant percentage of our named executive officers’ total annual target direct compensation “at risk,” with incentive programs tied to

financial and strategic performance measures. In 2017, our named executive officers (taken collectively) had on average approximately (1) 85% of their total annual target direct compensation tied to variable, as opposed to fixed, compensation, (2) 56% of their total annual target direct compensation tied to financial and strategic metrics (our annual cash bonus awards and Adjusted EPS Equity Awards) and (3) 60% of their total annual target direct compensation tied to our stock price performance (our Adjusted EPS Equity Awards and Time Vesting Equity Awards). This program design is intended to motivate our executive officers to achieve positive short- and long-term results for our stockholders consistent with and in furtherance of our corporate strategy.

 


 

 

4   CBRE - 2018 Proxy Statement


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PROXY SUMMARY INFORMATION

 

The total target direct compensation mix for 2017 for (i) our Chief Executive Officer (CEO) and (ii) our CEO together with our other named executive officers (NEOs) is illustrated in the following charts(5):

 

LOGO

Say on Pay—We received strong support for our executive compensation from our stockholders at our 2017 annual meeting of stockholders, at which over 97% of the votes cast on the “say on pay” proposal were in favor of the 2016 compensation that we paid to our named executive officers. In addition, stockholders that we engaged with as part of our outreach program generally reported that executive compensation was viewed as well-aligned with performance.

2017 Financial Performance—We achieved strong overall financial and operational performance in 2017. Historically, our Board has set aggressive targets to achieve strategic growth and increase stockholder value, and our 2017 operating plan assumed continued solid growth over 2016. In 2017, we outperformed our internal growth target on a global basis and for our Global Workplace Solutions business. As we describe in greater detail under the heading “Compensation Discussion and Analysis” beginning on page 31, our overall performance directly impacted a portion of the compensation of all of our named executive officers, and the performance of our Global Workplace Solutions business directly impacted a portion of the compensation for William F. Concannon (our Global Group President and CEO—Global Workplace Solutions).

Annual Compensation—Set forth below is the 2017 compensation for our named executive officers. See the footnotes accompanying the Summary Compensation Table on page 55 for more information.

 

     Name and Principal Position    Year     

Salary

($)

    

Bonus

($)

    

Annual

Stock Awards

($)

    

Non-Equity

Incentive Plan

Compensation

($)

    

All Other

Compensation

($)

    

Total

($)

        
 

Robert E. Sulentic

President and Chief Executive Officer

     2017        990,000               5,129,964        2,485,824        4,500        8,610,288    
 

James R. Groch

Chief Financial Officer and Global

Director of Corporate Development

     2017        770,000        150,000        2,999,938        1,436,512        4,500        5,360,950    
 

Michael J. Lafitte

Global Group President

     2017        700,000        150,000        2,319,936        1,330,560        4,500        4,504,996    
 

Calvin W. Frese, Jr.

Global Group President

     2017        695,000               2,319,936        1,305,920        4,500        4,325,356    
   

William F. Concannon

Global Group President and Chief Executive Officer—Global Workplace Solutions

     2017        693,750        150,000        2,169,990        1,265,400        4,500        4,283,640          

 

One-Time Strategic Equity Award—In addition to the compensation described above, in 2017, in exchange for the execution of certain restrictive covenants described below, the Compensation Committee made a one-time Strategic Equity Award with a six-year cliff vesting performance period to a group of our most senior executives around the globe,

including each of our named executive officers (other than Mr. Sulentic who declined the award as described below). Our named executive officers (other than Mr. Sulentic) each received awards with a target grant date value of $5,500,000 (two-thirds of which is performance-based).

 

 

(5)

Excludes one-time Strategic Equity Awards granted to our named executive officers (other than Mr. Sulentic) in 2017. See “ —One-Time Strategic Equity Award” on page 5 above.



 

CBRE - 2018 Proxy Statement     5  

CEO TARGET COMPENSATION MIX CEO + NEOS TARGET COMPENSATION MIX


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PROXY SUMMARY INFORMATION

 

The Compensation Committee also offered Mr. Sulentic a significant Strategic Equity Award. Mr. Sulentic determined (and the Compensation Committee agreed) that it was in the best interest of the company that Mr. Sulentic decline such award in order to maintain his independence and avoid any conflict of interest or appearance of conflict of interest as he was actively involved in designing the program and advocating for such awards and the related restrictive covenants with both our Board and our senior executives around the globe.

As a condition to receiving the Strategic Equity Award, the group of global senior executives participating in the program, including Messrs. Groch, Lafitte, Frese and Concannon entered into a restrictive covenants agreement with the company which provides for certain post-termination non-competition, non-solicitation of clients and non-solicitation of employees covenants. Although Mr. Sulentic declined his Strategic Equity Award as stated above, he nonetheless entered into the same restrictive covenants agreement with the company as our other named executive officers. All of our senior executives who were offered such Strategic Equity Award accepted their awards and executed the required restrictive covenants agreement.

The Strategic Equity Award is intended to retain our senior executives for the six-year cliff vesting performance period of the award and to incentivize each executive to continue increasing their focus on driving client outcomes and positioning the company for long-term growth during that six-year period.

The Strategic Equity Award differs from our annual equity awards in several ways:

 

 

The Strategic Equity Award is earned over a six-year cliff vesting performance period, which is much longer than typical market practice for ongoing annual equity awards.

 

 

The payout on two-thirds of the Strategic Equity Award is performance-based and is driven by the extent to which the

   

company achieves rigorous cumulative Adjusted EPS and total shareholder return performance hurdles relative to the S&P 500 over a six-year performance period. For each measure, none of the performance-based awards will be earned unless our performance is above the 50th percentile. The remaining one-third of the Strategic Equity Award cliff vests based on continued service for a six-year vesting period.

For more detail on the design of the Strategic Equity Award, please refer to the discussion under “Compensation, Discussion and Analysis—Components of Our Program—Elements of our compensation program—One-Time Strategic Equity Award” beginning on page 47.

Executive Compensation—In reviewing executive compensation for 2017 as compared to prior years, it is important to keep the following in mind:

 

 

In 2016, the Committee changed our annual equity grant date from August to March, effective March 2017. To effectuate this change in annual grant timing, in August 2016, the Committee awarded our executives a “stub” grant, as a bridge between August 2016 and the date of the next annual grant in March 2017. The “stub” grant value was equal to 50% of each named executive officer’s target annual long-term incentive award value and consisted solely of a Time Vesting Equity Award. As such, our executives received 100% of their target annual equity award in August 2015, 50% of their target annual equity award in August 2016 and 100% of their target annual equity award in March 2017. As a consequence, aggregate executive compensation was lower in 2016 as compared to 2015 and 2017.

 

 

The combination of the lower stock award in 2016 due to the change in timing of the awards and the granting of the Strategic Equity Awards in 2017, are the principal drivers of the increase in executive compensation in 2017 as compared to 2016.

 


 

 

6   CBRE - 2018 Proxy Statement


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TABLE OF CONTENTS

 

PROPOSAL 1    Elect Directors

     8  
CORPORATE GOVERNANCE      15  

PROPOSAL 2    Ratify Appointment of Independent Registered Public Accounting Firm

     27  
AUDIT AND OTHER FEES      28  

PROPOSAL 3    Advisory Vote on Executive Compensation

     30  
COMPENSATION DISCUSSION AND ANALYSIS      31  
EXECUTIVE MANAGEMENT      52  
EXECUTIVE COMPENSATION      54  

PROPOSAL 4    Approve an Amendment to our Certificate of Incorporation to Reduce (to 25%) the Stock-Ownership Threshold Required for Stockholders to Request a Special Stockholder Meeting

     70  

PROPOSAL 5    Consider a Stockholder Proposal Regarding Stockholders’ Ability to Call Special Stockholder Meetings

     73  
STOCK OWNERSHIP      76  
RELATED-PARTY TRANSACTIONS      79  
GENERAL INFORMATION ABOUT THE ANNUAL MEETING      81  

ANNEX A     Reconciliation of Certain Non-GAAP Financial Measures

     A-1  

ANNEX B    Amended and Restated Certificate of Incorporation (as Proposed to be Amended by
Proposal 4)

     B-1  

ANNEX C     Amended and Restated By-Laws (as Proposed to be Amended if Proposal 4 is approved)

     C-1  

 

CBRE - 2018 Proxy Statement     7  


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PROPOSAL 1  ELECT DIRECTORS

Our Board has nominated 10 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees currently are directors and were selected to serve on our Board based on:

 

 

outstanding achievement in their professional careers;

 

 

broad experience;

 

 

personal and professional integrity;

 

 

their ability to make independent, analytical inquiries;

 

 

financial literacy;

 

 

mature judgment;

 

high-performance standards;

 

 

familiarity with our business and industry; and

 

 

an ability to work collegially.

We also believe that all of our director nominees have a reputation for honesty and adherence to high ethical standards. Each agreed to be named in this Proxy Statement and to serve if elected.

 

 

Director Nomination Criteria: Qualifications, Skills and Experience

 

Our by-laws provide that our Board may not nominate (i) more than one member of the company’s current management to serve on the Board at any one time or (ii) any non-management director for re-election to the Board if that director has completed 12 years of service as an independent member of the Board.1 Our Board believes that these restrictions contribute to Board stability, vitality and diversity and help ensure that our Board continuously benefits from a balanced mix of perspectives and experiences. Our focus on Board refreshment has resulted in the addition of five new directors since October 2015.

Our Board seeks directors who represent a mix of backgrounds and experiences that will enhance the quality of our Board’s deliberations and decisions. In nominating candidates, our Board considers a diversified membership in the broadest sense, including persons diverse in experience, gender and ethnicity. Our Board does not discriminate on the basis of race, color, national origin, gender, religion, disability or sexual preference. When evaluating candidates, our Board considers whether potential nominees possess integrity, accountability, informed judgment, financial literacy, mature confidence and high-performance standards.

Our Board is especially interested in adding candidates over time who are operating executives (particularly current chief executives or other operating executives of other large public companies) or who have a strong technology background and in both cases a passion for building a transformative business on a global basis. Other factors include having directors with international experience, including knowledge of emerging markets or management of business operations and resources

that are dispersed across a global platform. In addition, a majority of our Board must be independent, consistent with our Corporate Governance Guidelines and New York Stock Exchange (“NYSE”) listing standards. Further, at least one member of our Board should have the qualifications and skills necessary to be considered an “Audit Committee Financial Expert” under Section 407 of the Sarbanes-Oxley Act, as defined by the rules of the Securities and Exchange Commission (“SEC”).

The Corporate Governance and Nominating Committee of our Board of Directors, or the Governance Committee, is, among other things, responsible for identifying and evaluating potential candidates and recommending candidates to our Board for nomination, as well as performing assessments of the skills and experience needed to properly oversee our interests.

The Governance Committee regularly reviews the composition of our Board and determines whether the addition of directors with particular experience, skills or characteristics would make our Board more effective. When a need arises to fill a vacancy, or it is determined that a director possessing particular experiences, skills or characteristics would make our Board more effective, the Governance Committee conducts targeted efforts to identify and recruit individuals who have the identified qualifications. As a part of the search process, the Governance Committee may consult with other directors and members of our senior management and also may hire a search firm to assist in identifying and evaluating potential candidates.

 

 

1      Theapplication of this term-limit restriction does not go into effect until December 17, 2020 for any of the company’s directors who were serving on the Board as of December 17, 2015. See “Term Limits” on page 17.

 

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PROPOSAL 1

 

 

All potential candidates are interviewed by our CEO, our Board Chair, our Governance Committee Chair and, to the extent practicable, the other members of the Governance Committee, and may be interviewed by other directors and members of senior management as desired and as schedules permit. In addition, the General Counsel reviews a director questionnaire submitted by the candidate, and a background and reference check is conducted as appropriate. The Governance Committee then meets to consider and approve the final candidates, and either makes its recommendation to the Board to fill a vacancy and to add an additional Board

member, or recommends a slate of candidates to the Board for nomination for election to the Board. The selection process for candidates is intended to be flexible, and the Governance Committee, in the exercise of its discretion, may deviate from the selection process when particular circumstances so warrant.

The Governance Committee will also consider candidates recommended to our Board by our stockholders. See “Corporate Governance—Stockholder Recommendations and Nominations of Director Candidates—Stockholder Recommendations” on page 16 for more information.

 

 

Director Skills Matrix

 

 

We believe our director nominees bring a well-rounded variety of experiences, qualifications, attributes and skills, and represent a mix of deep knowledge of the company and fresh perspectives. The director skills matrix below represents some of the key skills that our Board has identified as particularly valuable to the effective oversight of our company and the execution of our corporate strategy. This skills matrix highlights the depth and breadth of the skills of

our director nominees. This director skills matrix is not intended to be an exhaustive list of each of our director nominees’ skills or contributions to the Board. Further information on each director nominee, including some of their specific experience, qualifications, attributes and skills is set forth in the biographies on pages 10 to 13 of this Proxy Statement.

 

 

LOGO

 

CBRE - 2018 Proxy Statement     9  

BUSINESS OPERATIONS DIVERSITY FINANCE GLOBAL BUSINESS LEADERSHIP M&A OTHER PUBLIC COMPANY BOARD SERVICE AND GOVERNANCE TECHNOLOGY


Table of Contents

PROPOSAL 1

 

2018 Director Nominees

 

Brandon B. Boze

 

Age: 37

Director Since: December 2012

Board Committees:    

Compensation

 

Governance

Our Board has appointed Mr. Boze to succeed Mr. Wirta as the Independent Chair of our Board, effective following the Annual Meeting, assuming Mr. Boze is re-elected at such meeting by our stockholders. Mr. Boze is a Partner at ValueAct Capital, a privately-owned investment firm. Prior to joining ValueAct Capital in August 2005, Mr. Boze was an investment banker at Lehman Brothers, focused on power utilities and technology mergers and acquisitions.

Qualifications, Attributes, Skills and Experience:

Mr. Boze brings to our Board experience in finance, strategy and mergers and acquisitions as well as deep knowledge of our business as a Partner at a significant stockholder. He previously served on the board of directors of Valeant Pharmaceuticals International. Mr. Boze holds a B.E. from Vanderbilt University and is a CFA charterholder.

Beth F. Cobert

 

Age: 59

Director Since: May 2017

Board Committees:    

Compensation (Chair)

 

Governance

Ms. Cobert has served as the Chief Executive Officer of Skillful, a non-profit organization focused on creating a skills-based labor market, since June 2017. She previously served as the Acting Director of the U.S. Office of Personnel Management from July 2015 to January 2017, and as the Deputy Director for Management of the U.S. Office of Management and Budget from October 2013 to July 2015. From 2001 to October 2013, Ms. Cobert served as a Senior Partner at McKinsey & Company, a global business strategy consulting firm. From 1990 to 2001, Ms. Cobert was a Partner at McKinsey & Company. She joined the firm in 1984 as an Associate and served in various leadership roles at McKinsey & Company.

Qualifications, Attributes, Skills and Experience:

Ms. Cobert brings to our Board nearly 30 years of experience as a consultant in business strategy, where she worked with corporate, non-profit and government entities on key strategic, operational and organizational issues across a range of sectors, including financial services, health care, legal services, real estate and telecommunications. Our Board also benefits from Ms. Cobert’s government service. Ms. Cobert previously served as a member of the board of directors and chair of the United Way of the Bay Area and as a member of the Stanford University Graduate School of Business Advisory Council. Ms. Cobert holds a B.A. from Princeton University and an M.B.A. from Stanford University.

Curtis F. Feeny

 

Age: 60

Director Since: December 2006

Board Committees:    

Audit and Finance (Chair)

 

Governance

 

Executive

Mr. Feeny has been a Managing Director of Silicon Valley Data Capital, a venture capital firm, since July 2017. He previously served as a Managing Director of Voyager Capital, a venture capital firm, from January 2000 to December 2017. From 1992 through 1999, Mr. Feeny served as Executive Vice President of Stanford Management Co., which manages the Stanford University endowment.

Qualifications, Attributes, Skills and Experience:

Mr. Feeny brings broad knowledge of the commercial real estate industry and our business from his service as an employee and later director of Trammell Crow Company as well as from his many years of service as Chair of our Audit and Finance Committee. He also has broad experience counseling companies through growth and experience in corporate finance matters. Mr. Feeny previously served on the board of directors of Staples, Inc. and Trammell Crow Company, which we acquired in 2006. Mr. Feeny holds a B.S. from Texas A&M University and an M.B.A. from Harvard Business School.

 

 

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PROPOSAL 1

 

Christopher T. Jenny

 

Age: 62

Director Since: January 2016

Board Committees:    

Audit and Finance

 

Governance (Chair)

Mr. Jenny has served as a Senior Advisor to Parthenon-EY since January 2016 and was a Senior Managing Director at Parthenon-EY from August 2014 through December 2015. He previously served as President and Senior Partner with The Parthenon Group LLC, a Boston-based private management consulting and management firm, from 1995 to 2014 prior to its merger with Ernst & Young in August 2014. Prior to joining The Parthenon Group LLC in 1995, Mr. Jenny was a Partner at Bain & Company, Inc., a global business strategy consulting firm.

Qualifications, Attributes, Skills and Experience:

Mr. Jenny brings to our Board more than twenty years of experience as a consultant in business strategy, and has worked on issues related to business-unit strategy, profit improvement and mergers and acquisitions. In addition, he has experience as a senior operating executive and has managed portfolio companies for two of the nation’s leading private-equity firms. He is a member of the board of directors of The Guardian Life Insurance Company of America, Mobile Virtual Player and PLT4M. He previously served on the board of directors of Mac-Gray Corporation. Mr. Jenny holds a B.A. from Dartmouth College and an M.B.A. from Harvard Business School.

Gerardo I. Lopez

 

Age: 58

Director Since: October 2015

Board Committees:    

Compensation

 

Governance

Mr. Lopez served as a Senior Advisor to Extended Stay America, Inc. and its paired-share REIT, ESH Hospitality, Inc. from January 2018 to March 2018 and was its President and Chief Executive Officer from August 2015 to December 2017. Mr. Lopez previously served as President and Chief Executive Officer of AMC Entertainment Holdings, Inc. and its subsidiary, AMC Entertainment Inc., from March 2009 through August 2015. Prior to that, he was Executive Vice President of Starbucks Coffee Company and President of its Global Consumer Products, Seattle’s Best Coffee and Foodservice divisions from September 2004 to March 2009, and President of the Handleman Entertainment Resources division of Handleman Company from November 2001 to September 2004. Mr. Lopez has also held a variety of executive management positions with International Home Foods, Frito Lay, Pepsi-Cola and the Procter & Gamble Company.

Qualifications, Attributes, Skills and Experience:

Mr. Lopez brings to our Board his skills, knowledge and business leadership as a senior executive at hospitality, entertainment and consumer products companies. He has over 30 years of experience in marketing, sales and operations and management in public and private companies and has public-company experience across diverse consumer-focused industries. He is a member on the board of directors of Brinker International, Inc., and previously served on the board of directors of Extended Stay America, Inc., AMC Entertainment Holdings, Inc., Digital Cinema Implementation Partners, National Cinemedia, LLC, Open Road Films, Safeco Insurance, TXU, Inc. and Recreational Equipment, Inc. Mr. Lopez holds a B.A. from George Washington University and an M.B.A. from Harvard Business School.

Paula R. Reynolds

 

Age: 61

Director Since: March 2016

Board Committees:    

Audit and Finance

 

Compensation

Ms. Reynolds has been the Chief Executive Officer and President of PreferWest, LLC, a business advisory group, since September 2009. She was Vice Chairman and Chief Restructuring Officer of American International Group from October 2008 to September 2009, where she oversaw its divestiture of assets and served as chief liaison to the Federal Reserve Bank of New York. From 2006 to 2008, she served as President and Chief Executive Officer of Safeco Corporation, a casualty insurance company, until its acquisition by Liberty Mutual Group. Ms. Reynolds was Chairman of AGL Resources from 2002 to 2005 and its President and Chief Executive Officer from 2000 to 2005. She was President and Chief Operating Officer of Atlanta Gas Light Company, a wholly-owned subsidiary of AGL Resources, from 1998 to 2000.

Qualifications, Attributes, Skills and Experience:

Ms. Reynolds brings to our Board experience from serving as an executive officer and director of a number of global public companies and a long career in a variety of operational and corporate roles in the energy sector. Ms. Reynolds currently serves on the board of directors of BP p.l.c., BAE Systems plc and TransCanada Corporation. She is also a member of the Board of Trustees of the Fred Hutchinson Cancer Research Center. She previously served on the board of directors of Anadarko Petroleum Corporation, Delta Air Lines, Inc., Safeco Corporation, Coca-Cola Enterprises, Inc. and Air Products and Chemicals Inc. She holds a B.A. from Wellesley College.

 

 

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PROPOSAL 1

 

Robert E. Sulentic

 

Age: 61

Director Since: December 2012

Board Committee:    

Executive

Mr. Sulentic has been our CEO since December 2012 and President since March 2010. He previously served as the President of our Development Services business from December 2006 to April 2011, as our Chief Financial Officer from March 2009 until March 2010 and as our Group President from July 2009 until March 2010. Mr. Sulentic was a member of our Board and Group President of Development Services, Asia Pacific and Europe, Middle East and Africa (EMEA) from December 2006 through March 2009. He was President and Chief Executive Officer of Trammell Crow Company from October 2000 through our acquisition of that company in December 2006, and prior to that served as its Executive Vice President and Chief Financial Officer from September 1998 to October 2000.

Qualifications, Attributes, Skills and Experience:

Mr. Sulentic brings to our Board a significant operating background in the commercial real estate industry through extensive experience, previously with the Trammell Crow Company before its acquisition by us, and later with the company in his capacities as Group President of several service lines, as our Chief Financial Officer, and currently as our President and CEO. He previously served as the Independent Board Chair and member of the board of directors of Staples, Inc., and previously served on the board of directors of Trammell Crow Company from December 1997 through December 2006, including as its Chairman from May 2002 through December 2006. Mr. Sulentic holds a B.A. from Iowa State University and an M.B.A. from Harvard Business School.

Laura D. Tyson

 

Age: 70

Director Since: March 2010

Board Committee:    

Audit and Finance

Dr. Tyson has been a Distinguished Professor of the Graduate School, Haas School of Business, University of California, Berkeley since July 2016. She was a Professor at the Haas School of Business, University of California, Berkeley from January 2007 to July 2016 and has also been the Director of the Institute for Business and Social Impact at the Haas School since July 2013. Dr. Tyson was previously Dean of the London Business School from January 2002 to December 2006 and Dean of the Haas School of Business from July 1998 to December 2001, and was Professor of Business Administration and Economics there from January 1997 to June 1998. She was a member of President Clinton’s cabinet from 1993 through 1996. During that time, she served as the Chair of the National Economic Council and as the National Economic Adviser to the President of the United States from February 1995 to December 1996, and she was the first woman to Chair the White House Council of Economic Advisers, in which capacity she served from January 1993 to February 1995.

Qualifications, Attributes, Skills and Experience:

Dr. Tyson brings experience from serving on the boards of directors of complex global organizations, and is a noted economist who brings experience in government and broad knowledge of macroeconomics and international economic issues to our Board. Dr. Tyson served as a member of President Obama’s Economic Recovery Advisory Board from 2009 through 2011, as a member of President Obama’s Council on Jobs and Competitiveness from 2011 through 2012, and as a member of the U.S. State Department Foreign Affairs Policy Board from 2011 through 2013. She is a member on the board of directors of AT&T Inc. She also serves as Chair of the Board of Trustees of the Blum Center for Developing Economies at the University of California, Berkeley and is a member of the board of directors of the non-profit Jacobs Foundation. She previously served on the board of directors of Eastman Kodak Company, Morgan Stanley and Silver Spring Networks, Inc. Dr. Tyson holds a B.A. from Smith College and a Ph.D. in Economics from the Massachusetts Institute of Technology.

 

 

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PROPOSAL 1

 

 

Ray Wirta

 

Age: 74

Director Since: September 2001

Independent Chair of our Board

Board Committee:    

Executive (Chair)

Mr. Wirta has served as the Independent Chair of our Board since May 2014 and will continue to serve in such capacity until the expiration of his current term at the Annual Meeting. Prior to that, Mr. Wirta served as the Vice Chair of our Board from November 2013 to May 2014. He has served as the President of the Irvine Company since June 2016 and as the Chief Executive Officer of The Koll Company since November 2009. He previously served as President of the Investment Properties Group at the Irvine Company from June 2010 through June 2016. Mr. Wirta served as our Chief Executive Officer from September 2001 to June 2005, and Chief Executive Officer of our predecessor company, CBRE Services, Inc., from May 1999 to September 2001. He also served as Chief Operating Officer of that predecessor company from May 1998 to May 1999. Mr. Wirta served as a director and Non-Executive Chairman of Realty Finance Corporation, where he was the Chairman from May 2005 through August 2009. He also served as Interim Chief Executive Officer and President of that company from April 2007 to September 2007.

Qualifications, Attributes, Skills and Experience:

Mr. Wirta brings to our Board many years of experience in the commercial real estate industry, including a depth of knowledge about the real estate investment management and development services business and operational experience in our business operations as our former chief executive officer. Mr. Wirta holds a B.A. from California State University, Long Beach and an M.B.A. from Golden Gate University.

Sanjiv Yajnik

 

Age: 61

Director Since: November 2017

Board Committees:    

Audit

 

Compensation

Mr. Yajnik has been the President of Capital One Financial Services, a division of Capital One, since June 2009. He is also President and Director of Capital One National Association, one of Capital One’s two national bank subsidiaries, and serves on Capital One’s Executive Committee. In addition, Mr. Yajnik oversees Capital One’s community relations throughout Texas, Oklahoma and Louisiana as President of the company’s South Central Region. Since joining Capital One in 1998, he has held a number of senior leadership positions in Europe, Canada and the United States. Prior to Capital One, he held leadership positions at PepsiCo and Circuit City and was a Chief Engineer for Mobil Oil Corporation’s shipping business. In November 2015, Mr. Yajnik was appointed by Texas Governor Greg Abbott to be Chairman of the Texas Economic Development Corporation. He is the Chairman of the Dallas Symphony Association, and leads the Board of Governors in overseeing the direction and governance for the Dallas Symphony Orchestra.

Qualifications, Attributes, Skills and Experience:

Mr. Yajnik brings to our board his broad business background and his experience in leading the transformation of a large, service-oriented global organization through technology enablement. Mr. Yajnik has spent the past two decades in financial services, with a wide range of experience in the U.S and international markets. He received an M.B.A. with honors from the University of Western Ontario, Canada, and completed the Executive Management Program at Stanford University. He is a medalist Chartered Engineer (I), and graduated with distinction from the Marine Engineering Research Institute, India.

 

 

 

Messrs. Freeman and Malek, who currently serve on our Board, have a combined 32 years of director service to us. They will not stand for re-election and will retire from our Board at the expiration of their current terms at the Annual Meeting. We are grateful for their many years of service to CBRE.

 

 

 

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PROPOSAL 1

 

The following summarizes the independence, diversity and tenure of our 2018 director nominees:

 

LOGO

Required Vote

This is an uncontested Board election. As such, in order to be elected, each nominee must receive the affirmative vote of a majority of the votes cast on his or her election (i.e., votes cast “FOR” a nominee must exceed votes cast as “AGAINST”). Votes to “ABSTAIN” with respect to a nominee and broker non-votes are not considered votes cast, and so will not affect the outcome of the nominee’s election.

Recommendation

Our Board recommends that stockholders vote “FOR” all of the nominees.

 

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INDEPENDENCE DIVERSITY TENURE

 


Table of Contents

CORPORATE GOVERNANCE

 

We are governed by a Board and committees of the Board that meet several times throughout the year, and we are committed to maintaining the highest standards of business conduct and corporate governance. Governance is a continuous focus for us, starting with our Board and extending to management and our employees. Our Board has also established Corporate Governance Guidelines that provide a framework for the effective governance of the company.

In January 2017, our Board adopted proxy access for director nominations, which allows eligible stockholders to nominate

directors and include those nominees in our proxy materials. As set forth in our by-laws, a group of up to 20 stockholders who beneficially own at least 3% of our outstanding common stock in the aggregate and who have held their shares for at least three years may submit nominees. The maximum number of director nominees included in our proxy materials pursuant to this process shall be the greater of (i) 20% of the total number of directors serving in office at the deadline for nominations (rounded down to the nearest whole number) and (ii) two.

 

 

GOVERNANCE HIGHLIGHTS

 

     Corporate Governance    Compensation    Stockholder Rights     
 

 10 director nominees, 9 of whom are independent

  

 Pay-for-performance compensation program, which includes performance-based equity grants

  

 Annual election of all directors

 
 

 Director Term Limits (12 years)2

  

 Annual “say on pay” votes, with most recent favorable “say on pay” vote of over 97%

  

 Majority voting requirement for directors in uncontested elections

 
 

 Independent Chair of the Board

  

 Stock ownership requirements for directors and executive officers

  

 Stockholder rights to call special meetings

 
 

 Regular executive sessions of independent directors

  

 Policy restricting trading, and prohibiting hedging and short-selling, of CBRE stock

  

 No poison pill takeover defense plans

 
 

 Risk oversight by the Board and its key committees

  

 Compensation clawback policy for executive officers

  

 Stockholders may act by written consent

 
 

 Maximum of one Board-nominated management director

     

 Proxy access for director nominations

 
 

 All incumbent directors attended at least 80% of Board and Board committee meetings

     

 Ongoing stockholder outreach and engagement

 
 

 Robust Standards of Business Conduct and governance policies

       
   

 No “over-boarding” by our directors on other public-company boards

 

             

Process for Selecting Director Candidates

 

The Governance Committee identifies and evaluates potential candidates and recommends candidates to our Board for nomination. For greater detail about the criteria for director

candidates and the nomination process, see “Proposal 1—Elect Directors—Director Nomination Criteria: Qualifications, Skills and Experience” on page 8.

 

  

 

2         The application of this term-limit restriction does not go into effect until December 17, 2020 for any of the company’s directors who were serving on the Board as of December 17, 2015. See “Term Limits” on page 17.

 

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CORPORATE GOVERNANCE

 

Stockholder Recommendations and Nominations of Director Candidates

 

Stockholder Recommendations

If you are a stockholder who would like to recommend a candidate for our Governance Committee to consider for possible inclusion in our 2019 proxy statement, you must send notice to Laurence H. Midler, Secretary, CBRE Group, Inc., 400 South Hope Street, 25th Floor, Los Angeles, California 90071, by registered, certified or express mail, and provide him with a brief biographical sketch of the recommended candidate, a document indicating the recommended candidate’s willingness to serve if elected, and evidence of your stock ownership. The Governance Committee or its chair will then consider the recommended director candidate in accordance with the criteria for director selection described under “Proposal 1—Elect Directors—

Director Nomination Criteria: Qualifications, Skills and Experience” on page 8.

Stockholder Nominations

Stockholders who wish to nominate directors directly at an annual meeting should follow the instructions under “Submission of Stockholder Proposals and Board Nominees” on page 25. As discussed under “—Stockholder Director Nominations for Inclusion in the 2019 Proxy Statement” on page 25, our by-laws allow stockholders to submit director nominations to be included in our proxy materials. A stockholder who wishes to nominate a candidate and have that candidate included in our proxy materials must follow the procedures described in Article I, Section 12 of our by-laws.

 

 

Director Independence

 

Pursuant to our Board’s Corporate Governance Guidelines and the listing standards of the NYSE, our Board must consist of a majority of independent directors. In addition, all members of the Audit and Finance Committee, Compensation Committee and Governance Committee must be independent directors as defined by our Corporate Governance Guidelines and NYSE listing standards. Members of the Compensation Committee must also meet applicable NYSE independence requirements for compensation committee members, and members of the Audit and Finance Committee must further satisfy a separate SEC independence requirement, which generally provides that they may not (i) accept directly or indirectly any consulting, advisory or other compensatory fee from us or any of our subsidiaries, other than their compensation as directors or members of the Audit and Finance Committee or any other committees of our Board or (ii) be an affiliated person of ours.

Our Board regularly conducts a review of possible conflicts of interest and related-party transactions through the use of questionnaires, director self-reporting and diligence conducted by management. This review includes consideration of any investments and agreements between directors and their related persons and the company, including those described under “Related-Party Transactions” in this Proxy Statement, and such person’s beneficial ownership of our securities. The Board has determined that 90% of our director nominees (all except for Mr. Sulentic) are independent in accordance with NYSE listing standards and our Board’s Categorical Independence Standards that it has adopted relating to our director independence. These Categorical Independence Standards are posted on the Corporate Governance section of the Investor Relations page on our website at www.cbre.com.

 

 

Independent Director Meetings

 

Our non-management directors meet in executive session without management present each time the full Board convenes for a regularly scheduled meeting. If our Board convenes for a special meeting, the non-management

directors will meet in executive session if circumstances warrant. The Chair of our Board is a non-management director that presides over executive sessions of our Board.

 

 

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CORPORATE GOVERNANCE

 

Majority Voting to Elect Directors

 

In uncontested elections, directors are elected by a “majority vote” requirement. Under this requirement, in order for a nominee to be elected in an uncontested election, the nominee must receive the affirmative vote of a majority of the votes cast in his or her election (i.e., votes cast “FOR” a nominee must exceed votes cast as “AGAINST”). Votes to “ABSTAIN” with respect to a nominee and broker non-votes

are not considered votes cast, and so will not affect the outcome of the nominee’s election.

The company maintains a plurality vote standard in contested director elections, where the number of nominees exceeds the number of directors to be elected.

 

 

Director Resignation Policy Upon Change of Employment

 

Our Board’s Corporate Governance Guidelines require that directors tender their resignation upon a change of their employment. The Governance Committee will then consider whether the change in employment has any bearing on the

director’s ability to serve on our Board, our Board’s goals regarding Board composition or any other factors considered appropriate and relevant. Our Board will then determine whether to accept or reject the tendered resignation.

 

 

Term Limits

 

The Board may not nominate any non-management director for re-election to the Board if that director has completed 12 years of service as an independent member of the Board on or prior to the date of election to which such nomination relates. The application of this term-limit restriction does not go into

effect until December 17, 2020 for any of the company’s directors who were serving on the Board as of December 17, 2015. The Board believes that this restriction will contribute to Board stability and vitality.

 

 

Board Structure and Leadership

 

Our Board currently consists of 12 directors, 10 of whom have been nominated for re-election. As previously noted, Messrs. Freeman and Malek currently serve on our Board, but will not stand for re-election and will retire from our Board following the expiration of their current terms at the Annual Meeting.

All of our directors are elected at each annual meeting of stockholders and hold office until the next election. Our Board has authority under our by-laws to fill vacancies and to increase or, upon the occurrence of a vacancy, decrease its size between annual meetings of stockholders.

The Board has determined that it is in the best interests of the company and its stockholders to set the size of the Board to 10 members effective as of the date of the Annual Meeting.

 

Our Board has appointed Mr. Boze to succeed Mr. Wirta as the Independent Chair of our Board, effective following the Annual Meeting, assuming Mr. Boze is re-elected at such meeting by our stockholders. Since 2001, we have separated the roles of CEO and Chair of the Board in recognition of the differences between the two positions. Our CEO is responsible for setting the strategic direction and overseeing the day-to-day leadership and performance of the company. The Chair of our Board, who is independent of management, provides oversight and guidance to our CEO. Although it has been our longstanding policy to have an independent Board Chair, we amended our by-laws in 2015 to require that the Board Chair be an independent director.

 

 

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CORPORATE GOVERNANCE

 

Board Risk Management

 

Oversight of Risk

 

   

The Board oversees risk management.

 

 

   

Board committees, which meet regularly and report back to the full Board, play significant roles in carrying out our Board’s risk oversight function.

 

 

   

Company management is charged with managing risk through rigorous risk mitigation activities and strong internal controls.

 

 

Our Board regularly reviews information regarding our most significant strategic, operational, financial and compliance risks. Our Board maintains direct oversight over our enterprise risk management process rather than delegating this function to a Board or management committee. We maintain an executive risk committee chaired by our Chief Risk Officer and consisting of several other key senior executives responsible for identifying, assessing and managing our most significant risks. This executive risk committee reports to the CEO, and a detailed presentation is given on identified significant risks in connection with an annual General Counsel Report to the Board. Certain risks that are determined to be best managed directly by the Board versus management or that are in areas specific to a particular Board committee expertise are monitored and overseen at the Board or committee level as appropriate.

 

 

The Compensation Committee is responsible for overseeing the management of risks relating to our compensation plans and arrangements. For additional information regarding the Compensation Committee’s assessment of our compensation-related risk, please see “Compensation Discussion and Analysis—How We Make Compensation Decisions—Compensation Risk Assessment” on page 40.

 

The Audit and Finance Committee oversees management of risks related to our financial reports and record-keeping and potential conflicts of interest, and also oversees our risk assessment and risk management more generally, including major business, financial, cybersecurity, legal and reputational risk exposures. In furtherance of this oversight responsibility, the Audit and Finance Committee typically receives quarterly reports from our Chief Risk Officer, our Chief Ethics and Compliance Officer, our Global Director of Assurance & Advisory, our Chief Digital & Technology Officer as well as updates from our General Counsel on any developments affecting our overall risk profile.

 

 

The Governance Committee manages risks associated with the independence of the Board and the composition of our Board and its committees.

Although each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee chair reports about such risks. These reports are presented at every regularly scheduled Board meeting.

 

 

Succession Planning

 

Our Board reviews management succession and development plans with the CEO on at least an annual basis. These plans include CEO succession in the event of an emergency or

retirement, as well as the succession plans for the CEO’s direct reports and other employees critical to our continued operations and success.

 

 

Board Meetings and Committees

 

Our Board held four meetings during fiscal year 2017 to review significant developments, engage in strategic planning and act on matters requiring Board approval. In 2017, each incumbent director attended at least 80% percent of our Board meetings and meetings of committees on which he or she served (taken in the aggregate) during the period that he or

she served thereon. Our Board also conducted several lengthy strategic planning sessions with our management during 2017.

Our Board currently has four standing committees that met or acted by written consent during fiscal year 2017: the Audit and Finance Committee, the Compensation Committee, the Governance Committee and the Executive Committee.

 

 

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CORPORATE GOVERNANCE

 

The following table describes the current members of each of the committees of our Board, and the number of meetings held during fiscal year 2017:

 

Director    Board    Audit and
Finance
   Compensation    Governance    Executive

Brandon B. Boze

   ü       ü    ü   

Beth F. Cobert

   ü       CHAIR    ü   

Curtis F. Feeny

   ü    CHAIR       ü    ü

Bradford M. Freeman(1)

   ü       ü    ü   

Christopher T. Jenny

   ü    ü       CHAIR   

Gerardo I. Lopez

   ü       ü    ü   

Frederic V. Malek(1)

   ü       ü      

Paula R. Reynolds

   ü    ü    ü      

Robert E. Sulentic

   ü             ü

Laura D. Tyson

   ü    ü         

Ray Wirta

   CHAIR             CHAIR

Sanjiv Yajnik

   ü    ü    ü      

Number of Meetings

   4    9    3    5    1
  (1)

Messrs. Freeman and Malek currently serve on our Board, but will not stand for re-election and will retire from our Board following the expiration of their current terms at the Annual Meeting.

 

Each committee (other than the Executive Committee) is composed entirely of directors whom our Board has determined to be independent under current NYSE standards. Each committee operates under a charter approved by our Board that sets out the purposes and responsibilities of the committee and that are published in the Corporate Governance section of the Investor Relations page on our website at www.cbre.com. In accordance with our Board’s Corporate Governance Guidelines, our Board and each of the Audit and Finance Committee, Compensation Committee and Governance Committee conducts an annual performance self-assessment with the purpose of increasing the effectiveness of our Board and its committees. The responsibilities of all of our Board committees are described below.

Audit and Finance Committee—The Audit and Finance Committee provides oversight of our accounting and financial reporting and disclosure processes; the adequacy of the systems of disclosure and internal control established by management; our compliance with legal and regulatory requirements; risk oversight and management generally; the audit of our financial statements; and the periodic review of our balance sheet management, borrowing and capital markets activities. Among other things, the Audit and Finance Committee: (i) retains, compensates, oversees and terminates the independent auditor and evaluates its independence and performance; (ii) approves all audit and any non-audit services performed by the independent auditor; (iii) reviews the results of the independent audit and internal audits as well as reports from our Chief Ethics and Compliance Officer, our Global Director of Assurance & Advisory and our Chief Digital & Technology Officer; (iv) reviews the independent auditor’s report describing our internal quality-control procedures and any material issues raised by the most recent

internal quality-control review or any inquiry by governmental authorities; (v) reviews financial statements and releases and guidance provided to analysts and rating agencies; and (vi) establishes procedures to handle complaints regarding accounting, internal controls or auditing matters.

All of the members of the Audit and Finance Committee are independent within the meaning of SEC regulations, the listing standards of the NYSE and our Board’s Corporate Governance Guidelines. Our Board has determined that each of Messrs. Feeny and Jenny, Ms. Reynolds and Dr. Tyson meets the qualifications of an “audit committee financial expert” in accordance with SEC rules and that they have the requisite accounting, related financial management and/or other relevant expertise, as described under “Proposal 1—Elect Directors” beginning on page 8.

Compensation Committee—The Compensation Committee oversees the development and administration of our executive compensation policies, plans and programs, including reviewing and approving compensation of our executive officers and any compensation contracts or arrangements with our executive officers. In addition, the Compensation Committee reviews the performance of our executive officers, including our CEO. Each of the members of the Compensation Committee qualifies as a “non-employee director” within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code, and each of them is also independent within the meaning of the listing standards and rules of the NYSE applicable to members of compensation committees. For additional information on the responsibilities and activities of the Compensation Committee, including the Compensation Committee’s processes for determining

 

 

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executive compensation, see the “Compensation Discussion and Analysis” section of this Proxy Statement beginning on page 31.

Governance Committee—The Governance Committee oversees our Board’s corporate governance procedures and practices, including the recommendations of individuals for service on our Board and recommendations to our Board regarding corporate governance matters and practices, including as to director compensation and directors’ and officers’ liability insurance. In addition, the Governance

Committee consults with our CEO regarding management succession planning. All of the members of the Governance Committee are independent within the meaning of the listing standards and rules of the NYSE.

Executive Committee—The Executive Committee implements policy decisions of our Board and is authorized to act on our Board’s behalf between meetings of our Board, including by approving certain transactions within dollar thresholds established by our Board.

 

 

Board Attendance at Annual Meeting of Stockholders

Although the Board understands that there may be situations that prevent a director from attending an annual meeting of stockholders, it is the Board’s policy that all directors should attend these meetings. All of our then-serving directors attended our 2017 annual meeting of stockholders on May 19, 2017.

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee are set forth in the table on page 19. None of Messrs. Boze, Freeman, Lopez, Malek, Yajnik or Ms. Cobert and Reynolds has ever been an officer or employee of the company or any of its subsidiaries. In addition, during 2017, none of our directors was employed as an executive officer of another entity where any of our executive officers served on that entity’s board of directors or compensation committee (or its equivalent).

Director Compensation

 

Our director compensation policy provides for the following annual compensation for each of our non-employee directors:

 

 

a $75,000 annual cash retainer;

 

 

a restricted stock unit grant for a number of shares equal to $150,000 divided by the fair market value of our common stock on the date of grant, which shares vest in full on the earlier of the one-year anniversary of grant or the next annual meeting of stockholders;

 

 

the Chair of the Audit and Finance Committee receives an additional annual cash retainer of $15,000;

 

 

the Chair of the Governance Committee and the Chair of the Compensation Committee each receive an additional annual cash retainer of $10,000; and

 

 

each non-employee director who serves on any of our Board committees receives an additional cash payment of $1,000 per committee meeting attended.

In all cases, our non-employee directors may elect to receive shares of our common stock in lieu of cash payments (in like

amounts). Non-employee directors who are appointed or elected off-cycle (i.e., outside an annual meeting) receive a pro rata portion of their cash retainer and restricted stock unit grant based on the length of their service until the next annual meeting.

Our non-employee directors are eligible to defer their compensation through our Deferred Compensation Plan, as described under “Executive Compensation—Summary of Plans, Programs and Agreements—Deferred Compensation Plan” on page 62. We also reimburse our non-employee directors for all reasonable out-of-pocket expenses incurred in the performance of their duties as directors. Employee directors do not receive any fees for attendance at meetings or for their service on our Board.

Our Board also has adopted stock ownership requirements that are applicable to non-employee directors. A description of these stock ownership requirements can be found under “Stock Ownership Requirements” on page 23.

 

 

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The following table provides information regarding compensation earned during the fiscal year ended December 31, 2017 by each non-employee director for his or her Board and committee service. Robert E. Sulentic, who is our President and CEO, is not compensated for his role as a director. Compensation information for Mr. Sulentic is described under “Compensation Discussion and Analysis” beginning on page 31 and under “Executive Compensation” beginning on page 54. For stock awards in the table below, the dollar amounts indicated reflect the aggregate grant date fair value for awards granted during the fiscal year ended December 31, 2017.

 

  Name   

Fees Earned or

Paid in Cash(1)

($)

    

Stock

Awards(2)(3)

($)

    

Change in Pension

Value and Nonqualified

Deferred Compensation

Earnings

($)

      

Total  

($)  

 

  Brandon B. Boze

     83,000        149,977                 232,977    

  Beth F. Cobert

     76,000        149,977                 225,977    

  Curtis F. Feeny

     104,000        149,977                 253,977    

  Bradford M. Freeman(4)

     81,000        149,977        3,692          234,669    

  Christopher T. Jenny

     98,000        149,977                 247,977    

  Gerardo I. Lopez(4)

     82,000        149,977        342          232,319    

  Frederic V. Malek(4)

     88,000        149,977        3,090          241,067    

  Paula R. Reynolds

     87,000        149,977                 236,977    

  Laura D. Tyson

     84,000        149,977                 233,977    

  Ray Wirta

     76,000        149,977                 225,977    

  Sanjiv Yajnik(5)

     38,115        76,219                 114,334    
  (1)

Includes fees associated with the annual Board service retainer, attendance at committee meetings and chairing a Board committee. Our non-employee directors may elect to receive shares of our common stock in lieu of cash payments (in like amounts). We reflect these “stock in lieu of cash” payments under the column titled “Fees Earned or Paid in Cash,” and not under the “Stock Awards” column.

 

  (2)

This represents the grant date fair value under Financial Accounting Standards Board, Accounting Standards Codification (“ASC”), Topic 718, Stock Compensation, of all restricted stock units granted to the directors during 2017. See also Note 2 “Significant Accounting Policies” and Note 13 “Employee Benefit Plans” to our consolidated financial statements as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for a discussion of the valuation of our stock awards.

 

  (3)

Each of Ms. Cobert, Reynolds and Dr. Tyson and Messrs. Boze, Feeny, Freeman, Jenny, Lopez, Malek and Wirta was awarded 4,453 restricted stock units pursuant to our director compensation policy, valued at the fair market value of our common stock of $33.68 per share on the award date of May 19, 2017.

 

  (4)

Pursuant to our Deferred Compensation Plan, our non-employee directors are eligible to defer their director fees as described under “Summary of Plans, Programs and Agreements—Deferred Compensation Plan” on page 62. During 2017, the total deferred account balances (which included amounts deferred during 2017 as well as amounts deferred from prior years) for Messrs. Freeman, Lopez and Malek accrued interest at an annualized rate of 3.81% for the period from January 1, 2017 through March 31, 2017, 3.96% for the period from April 1, 2017 through June 30, 2017, 3.80% for the period from July 1, 2017 through September 30, 2017 and 3.65% for the period from October 1, 2017 through December 31, 2017.

 

   

Mr. Freeman deferred a total of $81,000 of his 2017 cash compensation. Mr. Freeman’s total accrued interest for 2017 was $18,677.

 

   

Mr. Lopez deferred a total of $37,500 of his 2017 cash compensation. Mr. Lopez’s total accrued interest for 2017 was $1,795.

 

   

Mr. Malek deferred a total of $88,000 of his 2017 cash compensation. Mr. Malek’s total accrued interest for 2017 was $15,680.

 

      

In accordance with SEC rules regarding above-market interest on non-qualified deferred compensation, accrued interest for 2017 of $3,692, $342 and $3,090 for Messrs. Freeman, Lopez and Malek, respectively, is considered to be compensation and is shown in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column based on a comparison to 120% of the long-term quarterly applicable federal rate for the months when the interest rate was set.

 

  (5)

Mr. Yajnik was appointed to our Board on November 14, 2017 and as such received pro-rated director compensation for 2017. The pro-rated portion of his annual cash retainer under our director compensation policy was $38,115 and the pro-rated portion of his equity grant was 1,807 restricted stock units, valued at the fair market value of our common stock of $42.18 per share on the award date of November 14, 2017.

 

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The table below shows the aggregate number of stock awards (i.e., restricted stock units) and option awards outstanding for each non-employee director as of December 31, 2017:

 

  Name    Aggregate Number of
Stock Awards
Outstanding
     Aggregate Number of Shares  
Underlying Options  
Outstanding  
 

  Brandon B. Boze

     4,453        —    

  Beth F. Cobert

     4,453        —    

  Curtis F. Feeny

     4,453        —    

  Bradford M. Freeman

     4,453        1,886    

  Christopher T. Jenny

     4,453        —    

  Gerardo I. Lopez

     4,453        —    

  Frederic V. Malek

     4,453        —    

  Paula R. Reynolds

     4,453        —    

  Laura D. Tyson

     4,453        1,886    

  Ray Wirta

     4,453        1,886    

  Sanjiv Yajnik

     1,807        —    

Corporate Governance Guidelines and Code of Ethics

 

Our Board has adopted Standards of Business Conduct applicable to our directors, officers and employees as well as a Code of Ethics for Senior Financial Officers applicable to our CEO, Chief Financial Officer and Chief Accounting Officer. In addition, our Board has adopted Corporate Governance Guidelines, which set forth a framework within which our Board, assisted by its committees, directs our affairs.

Other key governance policies include:

 

 

Policy Regarding Transactions with Interested Parties and Corporate Opportunities. Our Board has adopted a related-party transactions and corporate opportunities policy that directs our Audit and Finance Committee to review and approve, among other things, potential conflicts of interest between us and our directors and executive officers. See “Related-Party Transactions—Review and Approval of Transactions with Interested Persons” on page 79.

 

 

Whistleblower Policy. We have a Whistleblower Policy that directs the Audit and Finance Committee to investigate complaints (received directly or through management) regarding:

 

   

deficiencies in or noncompliance with our internal accounting controls or accounting policies;

 

   

circumvention of our internal accounting controls;

 

   

fraud in the preparation or review of our financial statements or records;

   

misrepresentations regarding our financial statements or reports;

 

   

violations of legal or regulatory requirements; and

 

   

retaliation against whistleblowers.

 

 

Equity Award Policy. We have an Equity Award Policy that is designed to maintain the integrity of the equity award process and to ensure compliance with all applicable laws. The Equity Award Policy sets forth the procedures that must be followed in connection with employee awards and imposes stringent controls around any award made outside of the normal cycle. Our Equity Award Policy is described in greater detail under the heading “Compensation Discussion and Analysis—Other Relevant Policies and Practices—Equity Award Policy and procedures for equity grants” on page 50.

 

 

Compensation Clawback Policy. We have a policy that permits us, subject to the discretion and approval of our Board, to recover cash-based and performance-based-equity incentive compensation paid to any current or former “Section 16 officer” if there is a restatement of our financial results in certain circumstances. These circumstances are described in greater detail under “Compensation Discussion and Analysis—Other Relevant Policies and Practices—Compensation Clawback Policy” on page 50.

 

 

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Current copies of our Board’s Standards of Business Conduct, Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines, Policy Regarding Transactions with Interested Parties and Corporate Opportunities, Whistleblower Policy and Equity Award Policy are available on our website and in print upon written request to our Investor Relations Department at CBRE Group, Inc., 200 Park Avenue, New York, New York 10166, or by email at investorrelations@cbre.com. If the Board grants any waivers from the Board’s Standards of Business Conduct or the Code of Ethics for Senior Financial Officers to any of our directors or executive officers, or if we amend such policies, we will, if required, disclose these matters through the Investor Relations section of our website on a timely basis.

Stock Ownership Requirements

 

In order to align the interests of our Board members and executives with the interests of our stockholders, our Board has adopted stock ownership requirements for non-employee directors, and the Compensation Committee has adopted executive officer stock ownership requirements that are applicable to all of our Section 16 officers.

Non-Employee Directors. Each non-employee director has a target minimum common stock ownership requirement of five times the value of the annual stock grants made by us to the non-employee director pursuant to our then current director compensation plan. If at any time the target common stock ownership requirement is not satisfied, the director must retain the shares remaining after payment of taxes and exercise price upon exercise of stock options, the vesting of restricted stock or the settlement of vested restricted stock units, as applicable. Shares that count toward compliance with the requirements include: shares owned outright by the director (either directly or beneficially, e.g., through a family trust); and shares issued upon the settlement of vested restricted stock units. Shares that do not count toward achievement of the requirements include: (i) shares held by mutual or hedge funds in which the non-employee director is a general partner, limited partner or investor; (ii) unexercised outstanding stock options (whether or not vested); (iii) unvested/unearned restricted stock units or restricted

stock; and (iv) shares transferred to a non-employee director’s employer pursuant to such employer’s policies.

Executive Officers. Depending on their positions, our executive officers have a target minimum common stock ownership requirement of two to five times their annual base salary. The CEO’s target minimum ownership requirement is five times his annual base salary, and the target minimum ownership requirement for our other named executive officers for 2017 is three times their annual base salary. If at any time an executive officer’s equity holdings do not satisfy these target minimum ownership requirements, depending on his or her position, the executive must retain 100% (for our CEO) or 75% (for our other named executive officers) of the shares remaining after payment of taxes and exercise price upon the exercise of stock options or upon the vesting of restricted stock or the settlement of vested restricted stock units, as applicable. Shares that count toward compliance with the requirements include: shares owned outright (either directly or indirectly); shares issued upon the settlement of vested restricted stock units; and allocated shares in other company benefit plans. Unexercised outstanding stock options (whether or not vested) and unvested/unearned restricted stock and restricted stock units do not count toward compliance with the requirements.

 

 

Corporate Responsibility

 

We view it as a priority to operate in an environmentally and socially responsible manner, and it is our practice to act responsibly in relationships with our stockholders, customers, suppliers, employees, communities and other stakeholders. The seven pillars of our Corporate Responsibility program are:

 

 

Environmental Sustainability;

 

 

People and Culture;

 

 

Health and Safety;

 

 

Communities and Giving;

 

Procurement;

 

 

Ethics and Compliance; and

 

 

Governance.

We believe that we can make the greatest impact by:

 

 

mitigating the impact of the built environment on climate change;

 

 

using our talent, energy and resources to improve the quality of our communities and the lives of others; and

 

 

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helping our employees to reach their full potential while providing a safe and ethical workplace.

In 2017 and in early 2018, our corporate responsibility efforts were recognized with the following awards and accolades:

 

 

We were named to the Dow Jones Sustainability Index – North America for the fourth year in a row. Inclusion in this index is based on an assessment of a company’s financially material environmental, social and governance factors.

 

 

We remained a constituent of the FTSE4Good Index and have been a part of FTSE4Good since 2014. The FTSE4Good Index Series is designed to measure the performance of companies demonstrating Environmental, Social and Governance practices.

 

 

For the fifth consecutive year, we were named as one of the World’s Most Ethical Companies by Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices.

 

 

For the fifth consecutive year, we achieved a perfect score on the Human Rights Campaign’s 2018 Corporate Equality Index and were designated as a “Best Place to Work” for Lesbian, Gay, Bisexual, Transgender and Queer Equality.

 

 

We were listed at #27 in the 2018 Forbes Just 100: America’s Best Corporate Citizens ranking. The list assessed companies on seven aspects of business behavior: employee relations, quality of goods and services, client

   

service, environmental impact, community support, diversity and ethical conduct.

 

 

We received a 2017 EPA ENERGY STAR® Partner of the Year – Sustained Excellence Award, marking the 10th consecutive year of ENERGY STAR recognition.

 

 

For the 11th consecutive year, we were named to the “Companies That Care” Honor Roll by The Center for Companies That Care, which recognizes organizations that demonstrate ten characteristics of socially responsible employers through their daily business practices.

 

 

We were recognized as one of the 100 Most Sustainable Companies in the U.S. by Barron’s. The 1,000 largest U.S. publicly held companies were considered for this recognition based on various attributes of corporate citizenship.

 

 

We were listed at #45 (out of 250 companies) in the 2018 America’s Best Employers For Diversity list by Forbes, and are the only commercial real estate company to receive this honor.

 

 

We were named a 2017 Best Workplace for Diversity in the United States by FORTUNE and Great Place to Work®.

To learn more about our corporate responsibility and sustainability efforts, please view our Corporate Responsibility Report on www.cbre.com/responsibility.

 

 

Stockholder Engagement

 

Throughout each year, management and members of our Board engage with a significant portion of our stockholders through a number of forums, including quarterly earnings presentations, our annual meeting, our annual Investor Day, our annual Corporate Responsibility Report, investor conferences and web communications, as well as our SEC filings, our Annual Report and proxy statement.

We also have a formal corporate governance outreach program. This program covers a wide array of topics with a broad group of stockholders, and stockholder feedback is regularly provided to the Board and the company’s management. In 2017, topics of discussion included company strategy and performance, executive compensation, board

diversity and refreshment, corporate governance policies and corporate responsibility. In addition, in 2017, we sought stockholder input on two specific corporate governance issues: (i) the ability of stockholders to call a special meeting and (ii) board composition.

As a result of all of our stockholder engagement efforts, and after careful consideration of all relevant factors, we are submitting a proposal in this Proxy Statement asking our stockholders to reduce the ownership threshold for stockholders to call a special meeting from 30% to 25%. Stockholders that we spoke to generally expressed minimal concerns about our Board’s composition and indicated their continued support of individual directors.

 

 

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Communications with our Board

 

Stockholders and other interested parties may write to the Chair of the Board (who acts as the lead independent director), the entire Board or any of its members at CBRE Group, Inc., c/o Laurence H. Midler, Executive Vice President, General Counsel and Secretary, 400 South Hope Street, 25th Floor, Los Angeles, California 90071 or via email to larry.midler@cbre.com. The Board considers stockholder questions and comments to be important and endeavors to respond promptly and appropriately, even though the Board may not be able to respond to all stockholder inquiries directly.

The Board has developed a process to assist with managing inquiries and communications. The General Counsel will review any stockholder communications and will forward to the Chair of our Board, our Board or any of its members a summary and/or copies of any such correspondence that deals with the functions of our Board or committees thereof or that the General Counsel otherwise determines requires their attention. Certain circumstances may require that our Board depart from the procedures described above, such as the receipt of threatening letters or e-mails or voluminous inquiries with respect to the same subject matter.

 

 

Submission of Stockholder Proposals and Board Nominees

 

If you would like to include a proposal for stockholder consideration in our 2019 proxy statement or bring business before our annual meeting of stockholders in 2019, you must send notice to Laurence H. Midler, Secretary, CBRE Group, Inc., 400 South Hope Street, 25th Floor, Los Angeles, California 90071, by registered, certified, or express mail and provide the required information and follow the other procedural requirements as described below.

Stockholder Proposals for Inclusion in the 2019 Proxy Statement. Stockholders who wish to present a proposal in accordance with SEC Rule 14a-8 for inclusion in our proxy materials to be distributed in connection with our 2019 annual meeting of stockholders must submit their proposals in accordance with that rule so that they are received by the Secretary at the address set forth above no later than the close of business on December 6, 2018. If the date of our 2019 annual meeting is more than 30 days before or after May 18, 2019, then the deadline to timely receive such material shall be a reasonable time before we begin to print and send our proxy materials. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received. As the rules of the SEC make clear, simply submitting a timely proposal does not guarantee that it will be included in our proxy materials.

Stockholder Director Nominations for Inclusion in the 2019 Proxy Statement. Our by-laws permit any stockholder, or group of up to 20 stockholders, who has beneficially owned 3% or more of our outstanding common stock continuously for at least three years to submit director nominations to be included in our proxy materials. The maximum number of director nominees included in our proxy pursuant to this process (known as “proxy access”) shall be the greater of (i) 20% of the total number of directors serving in office at the deadline for nominations (rounded down to the nearest whole

number) and (ii) two. The notice required to nominate a director for the 2019 annual meeting through this proxy access process must be delivered to (or mailed to and received at) the address set forth above no later than February 17, 2019 and no earlier than January 18, 2019, unless our 2019 annual meeting of stockholders is to be held more than 30 days before, or more than 70 days after, May 18, 2019, in which case the stockholder’s notice must be delivered not earlier than the close of business on the 120th day prior to the 2019 annual meeting and not later than the close of business on the later of the 90th day prior to the 2019 annual meeting or the 10th day after public announcement of the date of the 2019 annual meeting is first made. The notice must set forth the information required by our by-laws with respect to each proxy access director nomination that eligible stockholder or stockholders intend to present at the 2019 annual meeting and must otherwise be in compliance with our by-laws.

Other Stockholder Proposals or Nominations for Presentation at the 2019 Annual Meeting. If a stockholder wishes to bring business to a meeting for consideration other than a matter brought pursuant to SEC Rule 14a-8, the stockholder must give our Secretary written notice of the stockholder’s intent to do so and provide the information required by the provision of our by-laws dealing with stockholder proposals. In addition, our by-laws allow stockholders to nominate one or more persons for election as directors outside of the proxy access process described above (although doing so relieves the company of the obligation to include a director nominee in the proxy materials prepared for the relevant stockholders meeting). The notice of such a proposal or director nomination must be delivered to (or mailed to and received at) the address set forth above no later than February 17, 2019 and no earlier than January 18, 2019, unless our 2019 annual meeting of stockholders is to be held more than 30 days before, or more than 70 days after,

 

 

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May 18, 2019, in which case the stockholder’s notice must be delivered not earlier than the close of business on the 120th day prior to the 2019 annual meeting and not later than the close of business on the later of the 90th day prior to the 2019 annual meeting or the 10th day after public announcement of the date of the 2019 annual meeting is first made. In the event that the number of directors to be elected at the annual meeting is increased and no public announcement naming all of the nominees or specifying the size of the increased Board has been made by February 7, 2019, then notice of a stockholder’s nomination to fill the new position or positions may be delivered to (or mailed to and received at) the address set forth above no later than the close of business on the 10th

day after public announcement of such increase is first made. The requirements for such stockholder’s notice are set forth in our by-laws, which are posted in the Corporate Governance section of the Investor Relations page on our website at www.cbre.com. We will submit all candidates nominated by a stockholder pursuant to the procedures and requirements outlined in this “—Other Stockholder Proposals or Nominations for Presentation at the 2019 Annual Meeting” section to the Governance Committee for its review, and this submission may include an analysis of the candidate from our management. Any stockholder making a nomination in accordance with the foregoing process will be notified of the Governance Committee’s decision.

 

 

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PROPOSAL 2  RATIFY APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit and Finance Committee of our Board appointed KPMG LLP as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2018. During 2017, KPMG LLP served as our independent accountant and reported on our consolidated financial statements for that year. KPMG LLP has been our independent auditor at all times since 2008.

The Audit and Finance Committee periodically considers whether to rotate our independent auditor in order to assure continuing auditor independence. The Board and the members of the Audit and Finance Committee believe that the continued retention of KPMG LLP as the company’s independent auditor in fiscal year 2018 is in the best interests of the company and its stockholders.

We expect that representatives of KPMG LLP will attend the Annual Meeting and will have the opportunity to make a

statement if they so desire and to respond to appropriate questions.

Although stockholder ratification is not required, the appointment of KPMG LLP is being submitted for ratification at the Annual Meeting with a view towards soliciting stockholders’ opinions, which the Audit and Finance Committee will take into consideration in future deliberations. If KPMG LLP’s selection is not ratified at the Annual Meeting, the Audit and Finance Committee will consider the engagement of other independent accountants. The Audit and Finance Committee may terminate KPMG LLP’s engagement as our independent accountant without the approval of our stockholders whenever the Audit and Finance Committee deems termination appropriate.

 

 

Required Vote

Approval of this Proposal 2 requires the affirmative vote (i.e., “FOR” votes) of a majority of the shares present or represented and entitled to vote thereon at our 2018 Annual Meeting. A vote to “ABSTAIN” will count as “present” for purposes of this proposal and so will have the same effect as a vote “AGAINST” this proposal. In the absence of instructions, your broker may vote your shares on this proposal. For more information, see “General Information about the Annual Meeting—Voting Instructions and Information—If you do not vote/effect of broker non-votes” on page 82.

Recommendation

Our Board recommends that stockholders vote “FOR” ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.

 

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AUDIT AND OTHER FEES

The following table shows the fees for audit and other services provided by KPMG LLP for the fiscal years ended December 31, 2017 and 2016 (in millions):

 

Fees    Fiscal 2017      Fiscal 2016    

  Audit Fees

   $ 10.7        9.6    

  Audit-Related Fees

     2.5        2.5    

  Tax Fees(1)

     1.1        4.7    

  All Other Fees

            —    
  

 

 

    

 

 

 

  Total Fees

 

   $

 

                14.3

 

 

 

    

 

                  16.8  

 

 

 

  

 

 

    

 

 

 
  (1)

The year over year reduction in tax fees of $3.6 million is due to in-sourcing of tax compliance and tax planning work and the use of other third-party consultants.

A description of the types of services provided in each category is as follows:

 

Audit Fees—Includes fees associated with the audit of our annual financial statements, review of our annual report on Form 10-K and quarterly reports on Form 10-Q, statutory audits, and consents and assistance with and review of registration statements filed with the SEC. In addition, audit fees include those fees related to KPMG LLP’s audit of the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.

Audit-Related Fees—Includes fees associated with the audit of our employee benefit plans, accounting consultations

related to GAAP and the application of GAAP to proposed transactions. In addition, audit-related fees include those fees related to KPMG LLP’s audit of the effectiveness of our internal controls over client accounting.

Tax Fees—Includes fees associated with tax compliance at international locations, domestic and international tax advice and planning and assistance with tax audits and appeals.

 

 

Audit and Finance Committee Pre-Approval Process

 

The Audit and Finance Committee is responsible for overseeing and approving our independent auditor’s fees, and pre-approves all audit and permissible non-audit services provided by our independent auditor. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Our independent auditors and management

are required to periodically report to the Audit and Finance Committee regarding the extent of services provided by the independent auditor in accordance with this pre-approval process and the fees for the services performed to date. In certain one-off cases, the Audit and Finance Committee Chair (on behalf of the Audit and Finance Committee) may also pre-approve particular services, with that pre-approval subject to subsequent Audit and Finance Committee ratification.

 

 

Audit and Finance Committee Report

 

The Audit and Finance Committee consists of five directors, each of whom is independent under NYSE rules and applicable securities laws. The Board has determined that each member of the Audit and Finance Committee is financially literate as required under NYSE rules. Our Board has also determined that each of Messrs. Feeny and Jenny, Ms. Reynolds and Dr. Tyson meets the qualifications of an

audit committee financial expert as described under “Corporate Governance—Board Meetings and Committees—Audit and Finance Committee” on page 19. The Audit and Finance Committee operates under a written charter adopted by the Board a copy of which is published in the Corporate Governance section of the Investor Relations page of our website at www.cbre.com.

 

 

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AUDIT AND OTHER FEES

 

The Audit and Finance Committee assists the Board in fulfilling its responsibilities to our stockholders with respect to our independent auditors, our corporate accounting and reporting practices, risk oversight and the quality and integrity of our financial statements and reports. The Audit and Finance Committee is directly responsible for overseeing the appointment, compensation, retention and oversight of the work of our independent auditor, and the Audit and Finance Committee and its chair oversee the selection of our independent auditor’s lead engagement partner. In addition, the Audit and Finance Committee reviews and considers all potential related-party and corporate-opportunity transactions involving us and our directors and executive officers, and periodically reviews our balance sheet management, borrowing and capital markets activities as well as our merger-and-acquisition and co-investment performance.

The Audit and Finance Committee discussed with our independent auditors the scope, extent and procedures for the fiscal 2017 audit. Following completion of the audit, the Audit and Finance Committee met with our independent auditors, with and without management present, to discuss the results of their examinations, the cooperation received by the auditors during the audit examination, their evaluation of our internal controls over financial reporting and the overall quality of our financial reporting.

Management is primarily responsible for our financial statements, reporting process and systems of internal controls. In ensuring that our management fulfilled that responsibility, the Audit and Finance Committee reviewed and discussed with management the audited financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Discussion topics included the quality and acceptability of the accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and an assessment of the work of the independent auditors.

The independent auditors are responsible for expressing an opinion on the conformity of the audited financial statements with GAAP. The Audit and Finance Committee reviewed and discussed with the independent auditors their judgments as to the quality and acceptability of our accounting principles and such other matters as are required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301 “Communications with Audit Committees” and the Sarbanes-Oxley Act of 2002. In addition, the Audit and Finance Committee received from the independent auditors

written disclosures and a letter regarding their independence as required by applicable rules of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit and Finance Committee, discussed with the independent auditors their independence from us and our management and considered the compatibility of non-audit services with the auditors’ independence.

Based on the reviews and discussions described above, the Audit and Finance Committee recommended to the Board (and the Board subsequently approved) the inclusion of the audited financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for filing with the SEC.

In addition, the Audit and Finance Committee has appointed KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. The Board concurred with the selection of KPMG LLP. The Board has recommended to our stockholders that they ratify and approve the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.

In accordance with law, the Audit and Finance Committee is responsible for establishing procedures for the receipt, retention and treatment of complaints that we receive regarding accounting, internal accounting controls or auditing matters, including the confidential, anonymous submission of complaints by our employees received through established procedures of concerns regarding questionable accounting or auditing matters. The Audit and Finance Committee approved the establishment of an ethics and compliance program in 2004 and receives periodic reports from our Chief Ethics and Compliance Officer regarding that program.

Audit and Finance Committee

Curtis F. Feeny, Chair

Christopher T. Jenny

Paula R. Reynolds

Laura D. Tyson

Sanjiv Yajnik

Notwithstanding any statement in any of our filings with the SEC that might be deemed to incorporate part or all of any filings with the SEC by reference, including this Proxy Statement, the foregoing Report of the Audit and Finance Committee is not incorporated into any such filings.

 

 

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PROPOSAL 3  ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

Our Board is committed to excellence in governance and recognizes the interest of our stockholders in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, we are asking you to approve, on an advisory basis, a resolution on the compensation of the named executive officers as reported in this Proxy Statement. This proposal, commonly known as a “say on pay” proposal, gives you the opportunity to endorse or not endorse our 2017 executive compensation program and policies for our named executive officers. The Board has adopted a policy providing for annual “say on pay” advisory votes. Accordingly, the next “say on pay” vote will occur at our annual meeting of stockholders in 2019.

In deciding how to vote on this proposal, our Board encourages you to review the “Compensation Discussion and Analysis” in this Proxy Statement beginning on page 31 for a detailed description of our executive compensation philosophy and programs.

This vote is not intended to address any specific item of compensation, but rather the overall compensation that was paid in 2017 to our named executive officers resulting from our compensation objectives, policies and practices as described in this Proxy Statement. Because your vote is advisory, it will not be binding upon the Board. However, the Board and the Compensation Committee value the opinions expressed by our stockholders and will review the voting results in connection with their ongoing evaluation of our executive compensation program.

We received strong support for our executive compensation from our stockholders at our 2017 annual meeting of stockholders, at which over 97% of the votes cast on the “say on pay” proposal were in favor of the 2016 compensation that we paid to our named executive officers. In addition, stockholders that we engaged with as part of our outreach

program generally reported that executive compensation was viewed as well-aligned with performance.

Our executive compensation program is designed to reinforce our corporate strategy and to attract and retain accomplished and high-performing executives and to motivate those executives to consistently achieve short- and long-term goals consistent with and in furtherance of our corporate strategy. To achieve this goal, we have designed an executive compensation program based on the following principles:

 

 

Paying for performance—A significant portion of each executive’s potential compensation is “at risk,” with incentive programs tied to financial and strategic performance measures. The financial measures may be at the global level, or based on a combination of global and/or business line performance, depending on the executive’s position.

 

 

Alignment with the interests of stockholders—Equity awards (including those tied to our financial performance) and promoting stock ownership align our executives’ financial interests with those of our stockholders.

 

 

Attracting and retaining top talent—The compensation of our executives must be competitive so that we may attract and retain talented and experienced executives.

 

 

Transparency and corporate governance—It is critical to us that we are transparent and reflect best practices in corporate governance when establishing our executive compensation.

The text of the resolution in respect of Proposal 3 is as follows:

RESOLVED, that the compensation paid to our named executive officers for 2017 set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement, as disclosed pursuant to Item 402 of Regulation S-K, is hereby approved on an advisory basis.

 

 

Required Vote

Approval of this Proposal 3 requires the affirmative vote (i.e., “FOR” votes) of a majority of the shares present or represented and entitled to vote thereon at our 2018 Annual Meeting. A vote to “ABSTAIN” will count as “present” for purposes of this proposal and so will have the same effect as a vote “AGAINST” this proposal. A broker non-vote will not count as “present,” and so will have no effect in determining the outcome with respect to this proposal.

Recommendation

Our Board recommends that stockholders vote “FOR” the advisory approval of the compensation of our named executive officers for the fiscal year ended December 31, 2017.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis, or CD&A, provides you with detailed information regarding the material elements of compensation paid to our executive officers, including the considerations and objectives underlying our compensation policies and practices. Although our executive compensation program is generally applicable to all of our executive officers, this CD&A focuses primarily on the program as applied to the following executives (whom we refer to as “named executive officers”):

 

   

Robert E. Sulentic

  

President and CEO

   
 

James R. Groch

  

Chief Financial Officer and Global Director of Corporate Development

 
 

Michael J. Lafitte

  

Global Group President

 
 

Calvin W. Frese, Jr.

  

Global Group President

 
   

William F. Concannon

  

Global Group President and Chief Executive Officer—Global Workplace Solutions

   

2017 Executive Summary

Business Highlights

 

In fiscal year 2017, we delivered strong results. Some highlights are as follows:

 

 

Our revenue totaled $14.2 billion, up 9% from 2016.

 

 

Our fee revenue totaled $9.4 billion, up 8% from 2016.3,4

 

 

On a GAAP basis, net income for 2017 increased 21% to $691.5 million and earnings per diluted share rose 20% to $2.03 per share.

 

 

Our adjusted net income was $924.5 million, up 19% from 2016. 4

 

 

Our adjusted EPS was $2.71, up 18% from 2016. 4

 

 

Our adjusted EBITDA was $1.7 billion, up 10% from 2016. 4

 

 

Our revenue mix has shifted in recent years toward more contractual revenue as occupiers and investors increasingly prefer to purchase integrated, account-based services from firms that meet the full spectrum of their needs nationally and globally.

 

 

We generated revenue from a highly-diversified base of clients. In 2017, our client roster included over 90 of the Fortune 100 companies.

 

 

We executed a highly targeted M&A strategy, closing 11 acquisitions in 2017 that enhanced our capabilities, including companies operating in investment management, project management, retail experience advisory services, occupier brokerage focused on major technology companies, as well as two real estate software as a service companies.

 

 

We added significantly to our talent base, with one of our best years for producer recruiting, and strengthened the leadership team that is responsible for driving our continued growth.

 

 

We have been voted the most recognized commercial real estate brand in a Lipsey Company survey for 17 years in a row (including 2018) and we have been rated a World’s Most Ethical Company by the Ethisphere Institute for five consecutive years (including 2018).

 

 

We ended 2017 in a very strong financial position with low leverage, high liquidity and considerable cash flow.

 

3         Fee revenue is gross revenue less both client reimbursed costs largely associated with employees that are dedicated to client facilities and subcontracted vendor work performed for clients.

4         For supplemental financial data and a corresponding reconciliation of (i) revenue computed in accordance with GAAP to fee revenue (ii) net income computed in accordance with GAAP to adjusted EBITDA and (iii) net income computed in accordance with GAAP to adjusted net income and to adjusted EPS, in each case for the fiscal years ended December 31, 2017 and 2016, please see Annex A to this Proxy Statement.

 

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The following charts highlight our growth in adjusted EBITDA, adjusted net income and adjusted EPS for 2017 relative to 2016:

 

 

 

LOGO

Executive Compensation Highlights

 

 

We achieved strong overall financial and operational performance in 2017 over 2016. Historically, our Board has set aggressive targets to achieve strategic growth and increase stockholder value consistent with stockholder expectations of growth in profits each year, and our 2017 operating plan assumed continued solid growth over 2016. In 2017, we outperformed our internal growth target on a global basis and for our Global Workplace Solutions business. As we describe in greater detail under the heading “Compensation Discussion and Analysis” beginning on page 31, our overall performance directly impacted a portion of the compensation of all of our named executive officers, and the performance of our Global Workplace Solutions business directly impacted a portion of the compensation for William F. Concannon (our Global Group President and CEO—Global Workplace Solutions).

Our executive compensation program is designed to reinforce our corporate strategy and to attract and retain accomplished and high-performing executives and to motivate those executives to consistently achieve short- and long-term goals consistent with and in furtherance of our corporate strategy. Our pay philosophy emphasizes pay-for-performance through significant variable compensation tied to accomplishments against financial metrics and strategic measures relative to targets and goals. Due to our solid overall financial and operational performance in 2017, and after giving effect to each executive’s strong performance on his respective strategic measures, the total direct cash compensation earned in respect of 2017 was above the target amounts established for our CEO and Messrs. Groch, Lafitte, Frese and Concannon.

Summarized on page 34 are the key components of our executive compensation program established and administered by the Board’s Compensation Committee (which we shall refer to in this CD&A as the “Committee”) with respect to our executive compensation program for the named executive officers for 2017.

As part of the review of target annual compensation, and after consultation with the Committee’s independent compensation consultant and consideration of market compensation data, in early 2017, the Committee approved increases to Messrs. Frese and Concannon’s annual base salary and increases in both the target annual performance award and annual long-term equity target for Messrs. Sulentic, Frese and Concannon. These increases reflect their superior performance as well as better alignment relative to their respective market peers and other CBRE global executives.

In reviewing executive compensation for 2017 as compared to prior years, it is important to keep the following in mind:

 

 

In 2016, the Committee changed our annual equity grant date from August to March, effective March 2017. To effectuate this change in annual grant timing, in August 2016, the Committee awarded our executives a “stub” grant, as a bridge between August 2016 and the date of the next annual grant in March 2017. The “stub” grant value was equal to 50% of each named executive officer’s target annual long-term incentive award value and consisted solely of a Time Vesting Equity Award. As such, our executives received 100% of their target annual equity award in August 2015, 50% of their target annual equity award in August 2016 and 100% of their target annual equity award in March 2017. As a consequence, aggregate executive compensation was lower in 2016 as compared to 2015 and 2017.

 

 

In 2017, in exchange for the execution of certain restrictive covenants described below, a group of our most senior executives around the globe, including each of our named executive officers (other than Mr. Sulentic who declined the award as described below), received a one-time Strategic Equity Award with a six-year cliff vesting performance period. The Committee also offered Mr. Sulentic a significant Strategic Equity Award. Mr. Sulentic determined (and the Committee agreed) that it was in the best interest of

 

 

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ADJUSTED EBITDA $ in millions ADJUSTED NET INCOME $ in millions ADJUSTED EPS


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the company that Mr. Sulentic decline such award in order to maintain his independence and avoid any conflict of interest or appearance of conflict of interest as he was actively involved in designing the program and advocating for such awards and the related restrictive covenants with both our Board and our senior executives around the globe. As a condition to receiving the Strategic Equity Award, the group of global senior executives participating in the program, including Messrs. Groch, Lafitte, Frese and Concannon entered into a restrictive covenants agreement with the company which provides for certain post-termination non-competition, non-solicitation of clients and non-solicitation of employees covenants. Although Mr. Sulentic declined his Strategic Equity Award as stated above, he nonetheless entered into the same restrictive

   

covenants agreement with the company as our other named executive officers. All of our senior executives who were offered such Strategic Equity Award accepted their awards and executed the required restrictive covenants agreement. The Strategic Equity Award is intended to retain our executives for the six-year cliff vesting performance period of the award and to incentivize each executive to continue increasing his focus on driving client outcomes and positioning the company for long-term growth during that six-year period.

 

 

The combination of the lower stock award in 2016 due to the change in timing of the awards and the granting of the Strategic Equity Awards in 2017, are the principal drivers of the increase in executive compensation in 2017 as compared to 2016.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM

 

    

Compensation

Component

  Description and Purpose   Committee Actions for 2017     
    Base Salary  

 Provides a minimum level of fixed compensation necessary to attract and retain senior executives.

 Set at a level that recognizes the skills, experience, leadership and individual contribution of each executive as well as the scope and complexity of the executive’s role, including due consideration given to appropriate comparator group benchmarking.

 

 In 2017, the Committee increased base salaries for the following executives relative to 2016:

Mr. Frese to $700,000 (an increase of $20,000).

Mr. Concannon to $700,000 (an increase of $25,000).

 The other named executive officers did not receive base salary increases for 2017 relative to 2016.

   
    Annual Performance Awards  

 Variable cash incentive opportunity tied to achievement of financial and individual strategic objectives.

 The financial performance measure used to determine a significant portion of each executive’s earned award is adjusted EBITDA as measured at the global level and, for Mr. Concannon, also as measured at the GWS business level.

 We believe that adjusted EBITDA is the best measure to evaluate our operating performance because it excludes certain items that management does not consider directly indicative of the company’s ongoing performance.

 Each executive had a target cash performance award opportunity, 80% of which (the “financial portion”) was impacted by the company’s financial performance and 20% of which (the “strategic measures portion”) was impacted by both the company’s financial performance and the executive’s personal performance against strategic performance objectives.

 An executive may also earn a supplemental and discretionary bonus award in cases of exceptional and exceedingly deserving circumstances.

 

 In 2017, the Committee increased the target annual performance award for the following executives relative to 2016:

Mr. Sulentic to $1,980,000 (an increase of $495,000).

Mr. Frese to $1,050,000 (an increase of $30,000).

Mr. Concannon to $1,000,000 (an increase of $25,000).

 2017 target annual performance award opportunities for the other named executive officers were unchanged from 2016.

 Global Adjusted EBITDA for 2017 was $1.7 billion, which was above the target level and resulted in a financial adjustment factor of 117.3%. Adjusted EBITDA for our Global Workplace Solutions business line was $517.3 million, which was also above target, and resulted in a financial adjustment factor of 117.0%. The financial adjustment factor for Messrs. Sulentic, Groch, Lafitte and Frese was based solely on Global Adjusted EBITDA, whereas Global Adjusted EBITDA comprised half of the financial adjustment factor for Mr. Concannon and Adjusted EBITDA for our Global Workplace Solutions business line determined the other half.

 Each named executive officer exceeded their strategic performance objectives, resulting in strategic adjustment factors ranging from 130% to 140%.

 In addition, the CEO recommended, and the Committee approved supplemental bonus awards for Messrs. Groch, Lafitte, and Concannon for their exemplary leadership and outstanding performance in growing the company during 2017.

 For more detail on each named executive officer’s target bonus opportunity and the performance factors considered in determining actual earned bonuses for 2017, please refer to the discussion beginning on page 41 in this CD&A.

   
    Annual Long-Term Incentives  

 Annual grants of restricted stock units intended to align the interests of our executives with those of stockholders over a multi-year period, and to support executive retention objectives.

 Generally, our executives will receive two-thirds of their target annual long-term incentive award value in the form of a Time Vesting Equity Award, and one-third of their target award value in the form of an Adjusted EPS Equity Award. (We describe these two types of awards in greater detail under the heading “Components of Our Program—Elements of our compensation program” beginning on page 47).

 

 In 2017, the Committee increased the annual long-term equity target for the following executives relative to 2016:

Mr. Sulentic to $5,630,000 (an increase of $1,505,000). After his 2017 target long-term equity incentive award had been established by our Board of Directors, Mr. Sulentic requested, and our Board agreed, to reduce his 2017 target long-term equity incentive award by $500,000. Therefore, Mr. Sulentic’s actual long-term equity incentive target for 2017 was $5,130,000 (an increase of $1,005,000).

Mr. Frese to $2,320,000 (an increase of $70,000).

Mr. Concannon to $2,170,000 (an increase of $120,000).

 2017 annual long-term equity targets for the other named executive officers were unchanged from 2016.

 In 2016, the Committee changed our annual equity grant date from August to March, effective March 2017. To effectuate this change in annual grant timing, in August 2016, the Committee awarded our executives a “stub” grant, as a bridge between August 2016 and the date of the next annual grant in March 2017. The “stub” grant value was equal to 50% of each named executive officer’s target annual

   

 

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Compensation

Component

  Description and Purpose   Committee Actions for 2017     
           

long-term incentive award value and consisted solely of a Time Vesting Equity Award. As such, our executives received 100% of their target annual equity award target annual equity award in August 2015, 50% of their target annual equity award in August 2016 and 100% target annual equity award in March 2017. As a consequence, aggregate executive compensation was lower in 2016 as compared to 2015 and 2017.

 The March 2017 annual equity awards granted to Messrs. Groch, Lafitte, Frese and Concannon were granted at the normal “target” grant value, 50% in the form of a Time Vesting Equity Award and 50% in the form of an Adjusted EPS Equity Award to maintain the two-thirds time-based, one-third performance-based mix for the combined August 2016 and March 2017 awards.

 As noted above, Mr. Sulentic was also awarded an annual equity award in March 2017 in the amount of $5,630,000, which Mr. Sulentic requested, and our Board agreed, to reduce by $500,000. Therefore, Mr. Sulentic’s actual long-term equity incentive target for 2017 was $5,130,000, an increase of $1,005,000 over the prior year. Two-thirds of the incremental increase to Mr. Sulentic’s annual equity award was granted in the form of an Adjusted EPS Equity Award and one-third was granted in the form of a Time Vesting Equity Award. With respect to the remaining $4,125,000 portion of his annual equity award, 50% was granted in the form of a Time Vesting Equity Award and the other 50% was granted in the form of an Adjusted EPS Equity Award.

 The Adjusted EPS Equity Awards granted in 2015 were earned at 169.2% of target, based on our cumulative Adjusted EPS of $5.01 for 2016 and 2017.

   
    One-Time Strategic Equity Award and Restrictive Covenants Agreement  

 One-time strategic equity award with a six-year vesting period intended to provide our executives with a significant and incremental financial incentive that aligns with the outcomes that we generate for our stockholders.

 

 In 2017, in exchange for the execution of certain restrictive covenants described below, the Committee made a one-time Strategic Equity Award with a six-year cliff vesting performance period to a group of our most senior executives around the globe, including each of our named executive officers (other than Mr. Sulentic who declined the award as described below). Our named executive officers (other than Mr. Sulentic) each received awards with a target grant date value of $5,500,000 (two-thirds of which is performance-based).

 The Committee also offered Mr. Sulentic a significant Strategic Equity Award. Mr. Sulentic determined (and the Committee agreed) that it was in the best interest of the company that Mr. Sulentic decline such award in order to maintain his independence and avoid any conflict of interest or appearance of conflict of interest as he was actively involved in designing the program and advocating for such awards and the related restrictive covenants with both our Board and our senior executives around the globe.

 As a condition to receiving the Strategic Equity Award, the group of global senior executives participating in the program, including Messrs. Groch, Lafitte, Frese and Concannon entered into a restrictive covenants agreement with the company which provides for certain post-termination non-competition, non-solicitation of clients and non-solicitation of employees covenants. Although Mr. Sulentic declined his Strategic Equity Award as stated above, he nonetheless entered into the same restrictive covenants agreement with the company as our other named executive officers. All of our senior executives who were offered such Strategic Equity Award accepted their awards and executed the required restrictive covenants agreement.

   

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

    

Compensation

Component

  Description and Purpose   Committee Actions for 2017     
           

 The Strategic Equity Award differs from our annual equity awards in several ways:

The Strategic Equity Award is earned over a six-year cliff vesting performance period, which is much longer than typical market practice for ongoing annual equity awards.

The payout on two-thirds of the Strategic Equity Award is performance-based and is driven by the extent to which the company achieves rigorous cumulative Adjusted EPS and total shareholder return performance hurdles relative to the S&P 500 over a six-year performance period. For each measure, none of the performance-based awards will be earned unless our performance is above the 50th percentile. The remaining one-third of the Strategic Equity Award cliff vests based on continued service for a six-year vesting period.

 For more detail on the design of the Strategic Equity Award, please refer to the discussion beginning on page 47 in this CD&A.

   

Corporate Governance Highlights

 

 

 

     Compensation and Corporate Governance Policies and Practices     
 

 Independence

  

We have a Compensation Committee that is 100% independent. The Committee engages its own compensation consultant and confirms each year that the consultant has no conflicts of interest and is independent.

 
 

 No Hedging

  

We have a policy prohibiting all directors and employees from engaging in any hedging transactions with CBRE securities held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps and collars) designed to hedge or offset any decrease in the market value of our securities.

 
 

 Compensation
Clawback Policy

  

We have a “compensation clawback policy” that permits the company, subject to the discretion and approval of our Board, to recover cash-based and performance-based-equity incentive compensation paid to any current or former “Section 16 officer” if there is a restatement of our financial results in certain circumstances. These circumstances are described in greater detail in this CD&A under the heading “Other Relevant Policies and Practices—Compensation Clawback Policy” on page 50.

 
 

 Stock Ownership Requirements

  

We have stock ownership requirements for directors and our executive officers that require retention of threshold amounts of the net shares acquired upon the exercise of stock options, the vesting of restricted stock or the settlement of vested restricted stock units until required ownership levels are met. The stock ownership requirements for our named executive officers are set forth in this CD&A under “Other Relevant Policies and Practices—Equity Ownership Policy” on page 49.

 
 

 Equity Award  Policy

  

We have an Equity Award Policy that is designed to maintain the integrity of the equity award process and to ensure compliance with all applicable laws. The Equity Award Policy sets forth the procedures that must be followed in connection with employee awards and imposes stringent controls around any award made outside of the normal cycle. Our Equity Award Policy is described in greater detail in this CD&A under the heading “Other Relevant Policies and Practices—Equity Award Policy and procedures for equity grants” on page 50.

 
 

 No “Single Trigger” Change of Control Payments

  

We do not have employment contracts, plans or other agreements that provide for “single trigger” change of control payments or benefits (including automatic accelerated vesting of equity awards upon a change of control only) to any of our named executive officers.

 
 

 No Special  Perquisites

  

Our named executive officers receive no special perquisites or other personal benefits, unless such benefits serve a reasonable business purpose, such as benefits specifically relating to healthcare and insurance.

 
   

 No Tax Gross-Ups

  

As a policy matter, we do not provide tax gross-ups to our named executive officers.

   

 

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Philosophy and Objectives of Our Executive Compensation Program

 

Compensation plays a vital role in supporting short- and long-term business objectives that ultimately drive business success. We believe that our compensation programs should reinforce our corporate strategy and focus our executives on creating sustainable long-term stockholder value. As a result, we reward our executives for annual and long-term business performance, based on global and/or business line financial performance as well as based on progress against individual strategic performance measures.

The Committee establishes and administers our executive compensation program. The primary objectives of the program are to attract and retain accomplished and high-performing executives and to motivate those executives to consistently achieve short- and long-term goals consistent with and in furtherance of our corporate strategy. These short- and long-term compensation incentives are designed to:

 

 

Link pay to performance—We place a significant portion of each executive officer’s potential compensation “at risk,” with incentive programs tied to financial and strategic performance measures. Depending on the executive’s position, the financial measures may be at the global level (i.e., based on our global consolidated results) or based on a combination of global and business line performance. Depending on the achievement of these financial and strategic measures, the resulting payout could be above, at or below target amounts. In addition, all of our long-term incentives have a performance component in that the ultimate value of those incentives depends upon our stock price over a multi-year period. We seek to further link our long-term incentives to our financial results and stockholder returns by awarding a combination of Adjusted EPS Equity Awards and Time Vesting Equity Awards. The one-time Strategic Equity Award is also strongly performance-based, with the payout on two-thirds of the award driven by the extent to which the company achieves rigorous cumulative Adjusted EPS and total shareholder return performance hurdles relative to the S&P 500 over a six-year performance period. Such performance awards will not vest unless the

   

company’s performance on the relevant metric exceeds 50th percentile performance. These awards are further described under the heading “Components of Our Program—Elements of our compensation program” beginning on page 40.

 

 

Align the interests of our executives with those of our stockholders—We seek to instill a sense of ownership in the company through equity-based awards and stock ownership requirements applicable to our directors and executives. Equity awards align an executive’s financial interests with those of our stockholders by creating incentives to preserve and increase stockholder value as well as achieve solid financial results for our stockholders over a multi-year period.

 

 

Attract and retain top leadership talent—To successfully execute our business strategy, we must attract and retain top talent in our industry. This requires us to provide our executives with compensation opportunities at a level commensurate with other organizations competing for their talents.

 

 

Be transparent and reflect best practices in corporate governance—In addition to implementing compensation programs that are easily understood and tracked, we have adopted specific policies and practices that are designed to further align executive compensation with long-term stockholder interests as described under “Corporate Governance Highlights” on page 36.

We believe that our stockholders recognize the positive attributes of our executive compensation program. As previously noted, we received strong support for our executive compensation from our stockholders at our 2017 annual meeting of stockholders, at which over 97% of the votes cast on the “say on pay” proposal were in favor of the 2016 compensation for our named executive officers. In addition, stockholders that we engaged with as part of our outreach program generally reported that executive compensation was viewed as well-aligned with performance.

 

 

How We Make Compensation Decisions

Our Compensation Committee

 

 

Each year, the Committee determines the appropriate target levels of each component of compensation for each executive officer based on factors the Committee deems relevant in its

business judgment. Key factors that the Committee may consider in any given year include:

 

 

Industry and market conditions;

 

 

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“Global” financial performance (i.e., based on our global consolidated results) and business line financial performance;

 

 

Global and business line performance relative to competitors;

 

 

Individual factors, including performance and expectations, responsibilities, experience, retention risk, succession planning, prior compensation and positioning among other senior executives;

 

 

Overall effectiveness of the compensation program in achieving, measuring and rewarding desired performance levels;

 

 

The results of our annual “say on pay” vote from the prior year’s annual meeting of stockholders;

 

 

Advice from the Committee’s independent compensation consultant;

 

Market compensation data among comparable companies; and

 

 

Current and evolving practices and trends among comparable companies.

These factors may vary from year to year based upon the Committee’s subjective business judgment reflecting its members’ collective experience. Upon setting target compensation levels, the Committee reviews our Board-approved annual operating plan and related strategy and objectives and uses this information to establish annual financial and strategic performance goals for each executive officer. Following year-end, performance relative to these goals is measured, and individual compensation levels are then determined.

 

 

Our Chief Executive Officer

 

 

Our CEO meets with the Committee and its independent compensation consultant to provide perspective about us and our industry that may be helpful in conducting an accurate survey of relevant market data from time to time. In addition, our CEO makes recommendations on non-CEO executive compensation, reviews the consultant’s report to the Committee and provides the Committee with commentary on portions of the report. At the invitation of the Committee, our CEO also attends meetings when the performance of other executive officers is discussed. During these meetings, our

CEO provides an assessment of those executives’ performance and recommends a payout percentage with respect to the strategic measures portion of the annual performance bonus for each of those executive officers. The Committee makes all ultimate compensation decisions with respect to our executive officers (including for our CEO), incorporating both the feedback from its independent compensation consultant and our CEO. Our CEO does not attend Committee discussions where the Committee evaluates his performance or sets his compensation.

 

 

The Committee’s Independent Compensation Consultant

 

 

The Committee has retained Frederic W. Cook & Co., Inc., or FW Cook, as its independent compensation consultant. FW Cook reports directly to the Committee, attends meetings and provides advice to the Committee Chair. FW Cook prepares analyses for the Committee based on its review of market data that it believes to be relevant, including compensation levels at, and the financial performance of, a comparator group of companies identified for the relevant period. FW Cook meets with the Committee and with management to solicit input on job scope, performance, retention issues and other factors that it views as relevant. FW Cook then prepares reports for the Committee with respect to management recommendations as to compensation opportunities of the applicable executive officers and the reasonableness of such recommendations. The Governance Committee also engages FW Cook from time to time to advise it on non-employee director compensation and FW Cook advises the Committee on compensation-related developments and best practices.

FW Cook has not provided the company any services other than the services that it provided to the Committee (and may from time to time provide to the Governance Committee with respect to non-employee director compensation). After considering, among other things, the other factors described elsewhere in this Proxy Statement with respect to FW Cook’s work for the Committee and (i) the absence of any business or personal relationship between FW Cook and any member of the Committee or any of our executive officers, (ii) a certification from FW Cook that it does not trade in our securities, (iii) FW Cook’s Independence Policy that is reviewed annually by its board of directors and (iv) FW Cook’s policy of proactively notifying the Committee chair of any potential or perceived conflicts of interest, the Committee has concluded that FW Cook is independent and that its work does not raise any conflict of interest.

 

 

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Comparative Market Data

 

 

We seek to offer total compensation competitive with the market in which we compete for executive talent. For some positions, this market is broader than the commercial real estate services and investment industry in which we operate. Accordingly, the Committee periodically reviews comparator company compensation data, general industry compensation survey data and recommendations from the Committee’s independent compensation consultant to understand whether our executive compensation is reasonable and competitive.

For certain executives, the Committee examines target compensation levels against business services sector comparators and a broad group of non-manufacturing companies, including those that the Committee considers to be our most comparable public company competitors. This group changes from time to time, and for 2017 executive-compensation-planning purposes it consisted of the following companies:

 

 

   

AECOM

 

    Jones Lang LaSalle Incorporated

   
 

Aon plc

 

    ManpowerGroup Inc.

 
 

Brookfield Asset Management Inc.

 

    Marsh & McLennan Companies, Inc.

 
 

Cognizant Technology Solutions Corporation

 

    Realogy Holdings Corp

 
 

Computer Sciences Corporation*

 

    Xerox Corporation

 
 

Fidelity National Financial, Inc.

 

    Waste Management, Inc.

 
 

Fluor Corporation

 

    Willis Group Holdings Public Limited Company

 
   

Jacobs Engineering Group Inc.

       

 

  *

On April 3, 2017, Computer Sciences Corporation merged with the Enterprise Services business of HP Enterprise to create DXC Technology. DXC Technology was added to the comparator group for 2018 planning purposes.

 

The group of companies listed above includes business services companies outside our industry, with stature, size and complexity that are generally similar to our own, in recognition of the fact that all of our direct competitors are smaller than us and/or are non-public organizations, and competition for certain senior management talent is not limited to our industry. We believe that the compensation paid by the comparator group, taken as a whole, serves as one appropriate reference for our executive compensation, and we do not target any particular compensation percentile within the comparator group when setting executive compensation.

The Committee considers market compensation data that it believes to be reliable and relevant when establishing executive compensation targets. As one factor in setting compensation targets for our CEO, the Committee examines data for comparable positions in the comparator group described above, which indicates, for example, that our CEO’s base salary and annual incentive targets should be above those of the next highest paid company executive. This is partly a function of competitive market data, which indicates that chief executive officers are paid significantly

higher than other executives, but it also reflects the Committee’s view that our CEO bears ultimate responsibility for our global results and our overall success, such that his compensation opportunity should be set higher. Because reliable comparative data for other positions that might be specific to our business, such as a head of corporate development or a regional or business-line chief executive officer, is not broadly available from the comparator group, the Committee reviews components of the comparator group for the most comparable level positions (e.g., 2nd or 3rd highest paid), as well as other data from outside the identified comparator group that it considers to be a reliable indicator of market compensation levels for those positions. As noted above under “—How We Make Compensation Decisions—Our Compensation Committee” on page 37, market compensation data is only one of many factors considered by the Committee when setting the compensation mix and levels for any particular executive. The actual factors considered by the Committee may vary from year to year based upon the Committee’s subjective business judgment reflecting its members’ collective experience.

 

 

Say on Pay Results

 

 

The Committee also considers the results of annual stockholder advisory votes on the compensation of our named executive officers in connection with the discharge of its responsibilities. We received strong support for our executive compensation from our stockholders at our 2017 annual meeting of stockholders, at which over 97% of the votes cast on the “say on pay” proposal were in favor of the 2016 compensation for our named executive officers. At the 2018

Annual Meeting, we will again hold an advisory vote to approve our named executive officer compensation for 2017. See “Proposal 3—Advisory Vote on Executive Compensation” on page 30. The Committee will continue to consider the results of these annual advisory votes in evaluating our executive compensation policies and programs.

 

 

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Stockholder Outreach

 

 

In 2017, we continued our stockholder outreach program and sought feedback from stockholders on a variety of topics, including company strategy and performance, executive compensation, board diversity and refreshment, corporate governance policies and corporate responsibility. With

respect to executive compensation, stockholders generally reported that executive compensation was viewed as well-aligned with performance. The Committee endeavors to incorporate feedback from our stockholders into our annual compensation decisions.

 

 

Compensation Risk Assessment

 

 

The Committee annually reviews the risks that may arise from our compensation programs, and in 2017, we undertook a comprehensive assessment of risk relating to those programs. Our management prepared a detailed inventory of all of our compensation programs, and FW Cook, on behalf of the Committee, worked with our management to analyze each

program’s design to determine whether the program creates or encourages excessive or inappropriate risk taking. Based on this review and analysis, we and the Committee have concluded that our compensation programs do not present any risk that is reasonably likely to have a material adverse effect on us.

 

 

Components of Our Program

Elements of our compensation program

 

 

The compensation program for our named executive officers consists primarily of three elements, which are described in more detail below:

 

 

Base salary;

 

 

Annual performance awards (paid in cash); and

 

 

Long-term equity-based incentives (granted with time-based and performance-based vesting conditions).

We endeavor to attract, motivate and retain exceptional individuals with demonstrated leadership and other capabilities required to implement innovative business initiatives, while concurrently encouraging those leaders to work towards ambitious long-term business objectives. We further seek to customize our pay practices based on

individual performance, leadership and potential, as well as global and business line results. We assess our executives in the context of a methodical performance management process. We believe that our pay practices support all of these efforts.

A significant percentage of our executive officers’ annual compensation package is variable, consisting of annual cash performance awards and long-term equity-based incentives. As shown in the charts below, for 2017, the targeted annual cash performance awards and long-term equity incentives comprised approximately (i) 88% of total target direct compensation for our CEO and (ii) on average 85% of total target direct compensation for our CEO together with our other named executive officers (taken collectively).5

 

 

LOGO

 

5      Excludes one-time Strategic Equity Awards granted to our named executive officers (other than Mr. Sulentic) in 2017. Please refer to the discussion under “One-Time Strategic Equity Award” beginning on page 47 for additional information regarding these awards.

 

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Base Salary

We provide competitive base salaries that allow us to attract and retain a high-performing leadership team at a reasonable level of fixed costs. Base pay levels generally reflect a variety of factors, such as the executive’s skill and experience, the seniority of the position, the difficulty of finding a replacement, affordability and the positioning of the base pay against market salary levels and against base salaries of other senior executives at the company. Base salaries are generally reviewed annually during the first quarter of the year but may

also be reviewed at other times if an executive officer’s responsibilities have materially changed or other special circumstances so warrant.

In 2017, we paid base salaries to our named executive officers as set forth in the table below. For additional information regarding the base salaries (and the reasons for any associated increases) of our named executive officers for 2017, see the heading entitled “2017 Executive Summary—Executive Compensation Highlights” on page 32.

 

 

 Name  

2017 Base

Salary

    Change from 2016

 Robert E. Sulentic

    President and Chief Executive Officer

  $ 990,000     No change.

 James R. Groch

    Chief Financial Officer and Global Director of Corporate Development

  $ 770,000     No change.

 Michael J. Lafitte

    Global Group President

  $ 700,000     No change.

 Calvin W. Frese, Jr.

    Global Group President

  $ 700,000     Increased in 2017 by $20,000.

 William F. Concannon

    Global Group President and Chief Executive Officer—Global Workplace Solutions

  $ 700,000     Increased in 2017 by $25,000.

 

Annual Performance Awards

In 2017, the Committee granted annual performance awards to our executive officers under our stockholder-approved Executive Incentive Plan, or EIP. The EIP is an incentive plan that permits executives to earn performance awards up to an individual cap based on a percentage of our adjusted EBITDA for the relevant performance period, which cap is 2.25% for our CEO and 1.50% for each of our other executive officers. Within the framework of the EIP, the Committee uses our Executive Bonus Plan, or EBP, to establish target and maximum awards and determine actual payouts thereunder for our executives. The EBP is designed to motivate and reward executives by aligning pay with annual performance, and the amount of an award thereunder is measured by the executive’s success against a combination of challenging financial and strategic performance measures established by the Committee. The maximum payout of annual performance awards to an executive under the EBP is generally less than

his or her respective cap under the EIP. Notwithstanding this maximum payout under the EBP, the Committee may (among other things) exercise its discretion in any year to award additional amounts to an executive up to his or her respective cap under the EIP or to pay an additional bonus outside of the EIP. In addition, we may determine in any year to pay an award under the EIP or EBP in cash, or in the form of company stock or other non-cash forms of compensation.

Annual EBP Target Award

In 2017, the Committee established annual performance award targets for our named executive officers under the EBP as set forth in the table below. For additional information regarding the annual performance award targets (and the reasons for any associated increases) of our named executive officers for 2017, see the heading entitled “2017 Executive Summary—Executive Compensation Highlights” on page 32.

 

 

 Name   

2017 EBP

Target Awards

    Change from 2016

 Robert E. Sulentic

    President and Chief Executive Officer

   $ 1,980,000     Increased in 2017 by $495,000.

 James R. Groch

    Chief Financial Officer and Global Director of Corporate Development

   $ 1,155,000     No change.

 Michael J. Lafitte

    Global Group President

   $ 1,050,000     No change.

 Calvin W. Frese, Jr.

    Global Group President

   $ 1,050,000     Increased in 2017 by $30,000.

 William F. Concannon

    Global Group President and Chief Executive Officer—Global Workplace Solutions

   $ 1,000,000     Increased in 2017 by $25,000.

 

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2017 Adjusted EBITDA Target under the EBP

The Committee uses adjusted EBITDA6 when establishing financial performance targets under the EBP so that we can effectively tie compensation to our operating results. We believe that adjusted EBITDA is the best measure to evaluate our operating performance because it excludes certain items that management does not consider directly indicative of the company’s ongoing performance. We believe sustained growth in profitability over time significantly correlates to value creation for our stockholders. As such, we seek to appropriately align our executives’ compensation to performance in the areas where they have the most direct impact. For our CEO and other corporate executives who manage our global business, their financial performance

targets are measured against adjusted EBITDA against plan at the global level. For our business line executives, their financial performance targets are measured against adjusted EBITDA against plan at both the global level and at the business line levels. We believe that this combined measurement encourages our executives to collaborate with and contribute to the success of their global colleagues. For 2017, the Committee decided that 80% of the 2017 EBP award for our named executive officers was to be weighted on financial performance measures (using adjusted EBITDA) and that the remaining 20% was to be weighted on both financial performance measures and individual strategic measures (as discussed below).

 

 

The 2017 adjusted EBITDA targets for our named executive officers, as compared to actual adjusted EBITDA in 2017, were as follows:

 

     

Target for

2017 adjusted

EBITDA

    

Actual

2017 adjusted

EBITDA

    Relevant Business Measure
Weighting
 

  Robert E. Sulentic

   President and Chief Executive Officer

  James R. Groch

   Chief Financial Officer and Global Director of Corporate

   Development

  Michael J. Lafitte

   Global Group President

  Calvin W. Frese, Jr.

   Global Group President

   $ 1,625.6 million      $ 1,709.5 million       Global (100%)  

  William F. Concannon

   Global Group President and Chief Executive Officer—Global
   Workplace Solutions

   $

$

492.2 million

  1,625.6 million

 

 

   $

$

517.3 million

  1,709.5 million

7 

 

   

Global Workplace Solutions (50%)

Global (50%)

 

 

 

Target financial performance under the EBP corresponds to our Board-approved internal financial and operating plan established at the beginning of each performance year, which we believe represents appropriate goal-setting by us. Following year-end, our actual financial performance is then compared to the targeted financial performance, and a resulting “adjustment factor” is applied to the executive’s entire target EBP award. For our executives to be eligible to receive any award under the EBP for 2017, our actual financial performance had to exceed 70% of the applicable target for adjusted EBITDA (as indicated in the table above). Performance at the target level for adjusted EBITDA would have resulted in a 100% adjustment factor (i.e., no multiplier or discount applied to the EBP target award), and performance at 130% or greater of the target level for adjusted EBITDA would have resulted in a 200% adjustment factor. The adjustment factor for performance between 70%

and 130% of the target level is linearly interpolated. For example, in 2017 our adjusted EBITDA at the global level was 105.2% of target (resulting in a 117.3% adjustment factor to the portion of a target EBP award subject to global performance); and adjusted EBITDA in our Global Workplace Solutions business was 105.1% of target (for Mr. Concannon, our Global Group President and CEO—Global Workplace Solutions, resulting in a 117.0% adjustment factor to the 50% portion of his target EBP award subject to our Global Workplace Solutions business performance). Once determined, the adjustment factor is applied to the entire target EBP award, and the portion of the resulting product subject to financial performance measures (as noted above, 80% of the 2017 EBP award for our named executive officers) becomes the “financial performance portion” of the total EBP award.

 

 

 

6       For additional information on adjusted EBITDA, please see footnote (3) under “Proxy Summary Information” on page 2.

7       For a reconciliation of net income computed in accordance with GAAP to EBITDA and adjusted EBITDA for our Global Workplace Solutions business for the fiscal year ended December 31, 2017, see Annex A to this Proxy Statement.

 

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2017 Strategic Measures under the EBP

Although company financial performance is critical to our success, the Committee also believes that a portion of the EBP award (as noted above, 20% of the 2017 EBP award for our named executive officers) should be affected by reference to performance against important strategic measures. Each of these strategic measures translates into a specific objective that is designed to reward performance that is consistent with and in furtherance of our corporate strategy. The payout of the strategic measure component of annual performance awards under the EBP is more qualitative in nature and subjective in measurement. These measures—which the Committee approves for each executive at the beginning of each performance year—enable the Committee to influence management’s performance against strategies beyond near-term financial measures to include certain strategic measures such as the quality of our earnings, the positioning of our business for the future and the mitigation of risk.

Following the end of the performance year, the Committee reviews each executive’s performance against the various strategic measures that were established at the beginning of the year, determines the relative weighting of each strategic measure, and considers any special factors that could have affected performance during the year. The Committee then determines a “preliminary strategic measures award multiplier” using the ratings framework below:

STRATEGIC MEASURES SCORECARD

 

     Rating    Performance Assessment   

 Preliminary Multiplier

 Against Portion of

 EBP Award Subject

 to Strategic Measures

    
 

1

   Far Below Expectations     0%  
 

2

   Partially Met Expectations     75%  
 

3

   Met Expectations     100%  
 

4

   Somewhat Exceeded Expectations     125%  
   

5

   Far Exceeded Expectations     150%    

After the “preliminary strategic measures award multiplier” is determined, the Committee then further reviews each executive’s performance relative to his or her executive colleagues and takes into account other objectives and measures that may have become important to us or the executive during the year that are not reflected in the formal strategic measures approved at the beginning of the performance year. Based on this review, the Committee may further increase or decrease the amount of the preliminary strategic measures award multiplier, subject to a multiplier cap of 150%. The multiplier percentage, as so further adjusted, becomes the “final strategic measures award multiplier,” which is then applied to the strategic measures portion of the EBP award (as adjusted by the financial performance “adjustment factor” described above). The resulting product becomes the “final strategic performance portion” of the total EBP award.

With respect to the CEO, the Committee determines his performance against strategic measures. With respect to other executive officers, the Committee reviews the determinations and recommendations of the CEO and then makes the final decision as to their performance and percentage payout assigned.

2017 EBP Award Payout Determination

The “financial performance portion” and the “final strategic performance portion” of the EBP award, each as described above, were then added together to arrive at a total 2017 EBP award, subject to an overall cap of 200% of the target EBP award under the terms of the EBP.

 

 

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The table below generally describes the financial and strategic measures applied to each of our named executive officers and their resulting payouts against targets under the EBP for 2017.

 

  Name    Financial Measures    Strategic Measures   2017 Target     2017 Payout    

  Robert E. Sulentic

    President and

    Chief Executive

    Officer

  

 Global adjusted  EBITDA—100%

  

Mr. Sulentic was expected to achieve specific objectives set for him in the following general areas in support of the company’s corporate strategy:

 Execute the initiatives identified in the company’s business strategy refresh

 Advancement of leadership structure

 Data strategy advancements

 Execution of Global Investors strategic plan

 Upgrade corporate strategy function

 Support the company’s diversity initiative

    $    1,980,000       $       2,485,824    
    

Actual Achievement Against Target: 105.2%

Adjustment Factor: 117.3%

   Strategic Performance Rating: 135%                

  James R. Groch

    Chief Financial

    Officer and

    Global Director

    of Corporate

    Development

  

 Global adjusted EBITDA—100%

  

Mr. Groch was expected to achieve specific objectives set for him in the following general areas in support of the company’s corporate strategy:

 Strategically invest the company’s capital

 Strengthen the company’s finance and corporate development capabilities

 Lead cost containment efforts

 Support the company’s diversity initiative

    $    1,155,000       $    1,436,512(1)    
    

Actual Achievement Against Target: 105.2%

Adjustment Factor: 117.3%

   Strategic Performance Rating: 130%                

  Michael J. Lafitte

    Global Group

    President

  

 Global adjusted EBITDA—100%

  

Mr. Lafitte was expected to achieve specific objectives set for him in the following general areas in support of the company’s corporate strategy:

 Advance the company’s project management business

 Devise and implement a new Capital Markets strategy

 Implement digital and technology initiatives in the company’s advisory and GWS business

 Advance the company’s client care program

 Support cost containment efforts

 Support the company’s diversity initiative

    $    1,050,000       $    1,330,560(1)    
    

Actual Achievement Against Target: 105.2%

Adjustment Factor: 117.3%

   Strategic Performance Rating: 140%                
  (1)

This amount does not include a supplemental and discretionary bonus award of $150,000 granted to each of Messrs. Groch and Lafitte under our EBP in recognition of their exemplary leadership and outstanding performance in growing the company during 2017. Including this supplemental bonus award, the total EBP award for Messrs. Groch and Lafitte for 2017 was $1,586,512 and $1,480,560, respectively. A further explanation of this supplemental bonus award is provided immediately below this table.

 

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  Name    Financial Measures      Strategic Measures   2017 Target     2017 Payout    

  Calvin W. Frese, Jr.

    Global Group

    President

  

 Global adjusted EBITDA—100%

    

Mr. Frese was expected to achieve specific objectives set for him in the following general areas in support of the company’s corporate strategy:

 Develop and execute a plan to scale the company’s private client capital markets business

 Senior executive development, succession planning and alignment of senior executive compensation in EMEA and Asia Pacific

 Advance collaboration between geographic/line of business leaders and corporate development in establishing M&A priorities

 Lead the company’s bureaucracy reduction initiative

 Support cost containment efforts

 Support the company’s diversity initiative

    $    1,050,000       $    1,305,920    
    

Actual Achievement Against Target: 105.2%

Adjustment Factor: 117.3%

     Strategic Performance Rating: 130%                

  William F. Concannon

    Global Group President and Chief Executive Officer—Global Workplace Solutions

  

 Global adjusted EBITDA—50%

 Global Workplace Solutions adjusted EBITDA—50%

    

Mr. Concannon was expected to achieve specific objectives set for him in the following general areas in support of the company’s corporate strategy:

 Advance the company’s project management business and facilities management business

 Develop and implement a plan for local facilities management expansion

 Support the company’s client care program

 Support the company’s diversity initiative

    $    1,000,000       $    1,265,400(2)    
    

Actual Achievement Against Target: 105.2% (Global); 105.1% (Global Workplace Solutions)

 

Global Adjustment Factor: 117.3%

Global Workplace Solutions Adjustment Factor: 117.0%

     Strategic Performance Rating: 140%                
  (2)

This amount does not include a supplemental and discretionary bonus award of $150,000 granted to Mr. Concannon under our EBP in recognition of his exemplary leadership and outstanding performance during 2017. Including this supplemental bonus award, the total EBP award for Mr. Concannon for 2017 was $1,415,400. A further explanation of this supplemental bonus award is provided immediately below this table.

 

Supplemental and Discretionary Awards Granted under our EBP

The EBP provides our CEO the opportunity to recommend to the Committee a supplemental and discretionary bonus award to other named executive officers in cases of exceptional and exceedingly deserving circumstances. The amount of any supplemental bonus award is determined in the CEO’s sole discretion, but subject to ratification by our Board or the Committee.

Messrs. Groch, Lafitte and Concannon each received a supplemental bonus award of $150,000 for 2017. These supplemental bonuses were awarded in recognition of their exemplary leadership and outstanding performance in growing the company during 2017. These accomplishments included:

 

 

the substantial reduction to the company’s effective tax rate;

 

the successful execution of recruitment and retention strategies which had an immediate and positive impact on the company’s performance;

 

 

the advancement of the company’s project management business through key infill acquisitions and an upgraded leadership team; and

 

 

the development of the CBRE 360 initiative, which was launched in early January 2018 and is a new global capability focused on delivering enhanced employee experiences in the workplace.

Long-Term Incentives

We use equity compensation as a long-term incentive to create alignment with stockholders, to reward achievement of multi-year financial objectives, and as a retention tool for top

 

 

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executives that have the most direct impact on corporate results. The link to performance in our long-term incentive grants is prospective in nature. For example, equity grants encourage executives not only to contribute to the creation of additional stockholder value but also to help maintain and preserve existing stockholder value—because the executives share in that value through their equity. Our equity grants are subject to multi-year vesting schedules, which help us to retain key talent.

With respect to our CEO, the Committee determines the amount of his equity award. With respect to other executive officers, our CEO recommends to the Committee each year the recipients of equity awards as well as the amount of each award. In evaluating these recommendations and making its final award determinations for all executive officers, the Committee considers:

 

the executive’s position within our organization;

 

 

ongoing performance and expected contributions by the executive to our future success; and

 

 

input from the Committee’s independent compensation consultant (FW Cook), taking into consideration relevant market data (when applicable), pay equity among the relevant employee group and other factors.

As part of the review of target annual compensation opportunities, the Committee approved increases in 2017 to the annual long-term equity targets for Messrs. Sulentic, Frese and Concannon. The increases reflect their superior performance as well as better alignment relative to their respective market peers and other CBRE global executives.

 

 

Annual Long-Term Incentive Program

The table below represents the dollar values (measured at grant date fair value) underlying the annual equity awards that were made to our named executive officers for 2017.

 

  Name   Adjusted EPS
Equity Award
(at  Target)(1)(2)(4)
    Time Vesting
Equity
Award(1)(3)(4)
   

Total 2017

Annual
Equity Awards(1)

    Change from
2016 Target

  Robert E. Sulentic

    President and Chief Executive Officer

  $     2,732,500     $     2,397,500     $     5,130,000 (5)    Increased in 2017

by $1,005,000.

  James R. Groch

    Chief Financial Officer and Global Director of Corporate Development

  $ 1,500,000     $ 1,500,000     $ 3,000,000 (4)    No change.(6)

  Michael J. Lafitte

    Global Group President

  $ 1,160,000     $ 1,160,000     $ 2,320,000 (4)    No change.(6)

  Calvin W. Frese, Jr.

    Global Group President

  $ 1,160,000     $ 1,160,000     $ 2,320,000 (4)    Increased in 2017

by $70,000.

  William F. Concannon(7)

    Global Group President and Chief Executive Officer—Global Workplace Solutions

 

  $ 1,085,000     $ 1,085,000     $ 2,170,000 (4)    Increased in 2017

by $120,000.

 (1)

These amounts reflect the Committee-approved award values, with the actual number of restricted stock units granted rounded down to the nearest whole share as set forth on the “Grants of Plan-Based Awards” table on page 56.

 

 (2)

The Adjusted EPS Equity Award was granted with a target number of restricted stock units, zero to 200% of which may be earned based on our achievement against adjusted EPS performance targets (over a minimum threshold) as measured on a cumulative basis for the 2017 and 2018 fiscal years, with full vesting of any earned amount on March 3, 2020. If actual adjusted EPS is less than the minimum threshold, then none of the units will be earned. The maximum number of units available under the award is 200% of the target number of units, and there is linear interpolation between the various adjusted EPS performance targets.

 

 (3)

The Time Vesting Equity Award will vest 25% per year on each of March 3, 2018, 2019, 2020 and 2021.

 

 (4)

With respect to Messrs. Groch, Lafitte, Frese and Concannon, 50% of each of their 2017 annual equity award was granted in the form of an Adjusted EPS Equity Award and the other 50% was granted in the form of a Time Vesting Equity Award.

 

 (5)

In 2017, the Board set Mr. Sulentic’s long-term equity award at $5,630,000. After his 2017 long-term equity incentive award had been established by our Board, Mr. Sulentic requested, and our Board agreed, to reduce his award by $500,000. Therefore, Mr. Sulentic’s actual long-term equity incentive award for 2017 was $5,130,000, an increase of $1,005,000 over the prior year. Two-thirds of the incremental increase to Mr. Sulentic’s long-term equity award was granted in the form of an Adjusted EPS Equity Award and one-third was granted in the form of a Time Vesting Equity Award. With respect to the remaining $4,125,000 portion of his 2017 annual equity award, 50% was granted in the form of an Adjusted EPS Equity Award and the other 50% was granted in the form of a Time Vesting Equity Award.

 

 (6)

In 2016, our named executive officers received a “stub grant” equal to 50% of their normal “target” grant value as a result of the change in annual grant timing.

 

 (7)

Mr. Concannon became retirement-eligible in November 2017. For additional information regarding the treatment of his outstanding equity awards upon retirement, please refer to the discussion under “—Severance Plan; Treatment of Death, Disability and Retirement Under 2014, 2015, 2016 and 2017 Equity Award Agreements; Treatment of Qualifying Termination and Retirement Under Strategic Equity Award Agreements” beginning on page 63.

 

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Change to Annual Grant Date

Historically, annual equity grants have been made in August each year. In 2016, the Committee decided to change our annual equity grant date from August to March, effective March 2017. The Committee determined that awarding equity grants in the first quarter of a fiscal year would allow the Committee to set performance-based goals for our Adjusted EPS Equity Awards using prior year actuals rather than forecast. As our Adjusted EPS Equity Awards are tied to fiscal year performance, this allows us to set future growth targets with greater confidence. Moving the grant date to March also allows the Committee to evaluate all components of total direct compensation (i.e., base salary, annual performance awards and long-term equity) at the same time. To effectuate this change in annual grant timing, in August 2016, the Committee awarded our executives a “stub” grant, as a bridge between August 2016 and the date of the next annual grant in March 2017. The “stub” grant value was equal to 50% of each named executive officer’s target annual long-term incentive award value and consisted solely of a Time Vesting Equity Award. As such, our executives received 100% of their target annual equity award in August 2015, 50% of their target annual equity award in August 2016 and 100% target annual equity award in March 2017. As a consequence, aggregate executive compensation was lower in 2016 as compared to 2015 and 2017.

2017 Annual Equity Awards

In March 2017, Messrs. Groch, Lafitte, Frese and Concannon received annual equity awards at the normal “target” grant value of $3,000,000, $2,320,000, $2,320,000 and $2,170,000, respectively, 50% in the form of a Time Vesting Equity Award and 50% in the form of an Adjusted EPS Equity Award to maintain the two-thirds time-based, one-third performance-based mix for the combined August 2016 and March 2017 awards as outlined below:

 

 

Time Vesting Equity Award—A time vesting award that vests 25% per year on each of March 3, 2018, 2019, 2020 and 2021.

 

 

Adjusted EPS Equity Award—A performance-vesting award that vests in full in March 2020, based on our achievement against various adjusted EPS performance targets (over a minimum threshold) as measured on a cumulative basis for the 2017 and 2018 fiscal years. The awards have a target unit amount, zero to 200% of which may be earned depending on our actual adjusted EPS over the performance period. If actual adjusted EPS is less than the minimum threshold, then none of the units will be earned. There is linear interpolation between the adjusted EPS performance threshold and target and also between the adjusted EPS performance target and maximum.

Mr. Sulentic also was awarded an annual equity award in March 2017 in the amount of $5,630,000. However, after his

annual equity award had been established by our Board, Mr. Sulentic requested, and our Board agreed, to reduce his award by $500,000. Therefore, Mr. Sulentic’s actual annual equity award for 2017 was $5,130,000, an increase of $1,005,000 over the prior year. Two-thirds of the incremental increase to Mr. Sulentic’s annual equity award was granted in the form of an Adjusted EPS Equity Award and one-third was granted in the form of a Time Vesting Equity Award. With respect to the remaining $4,125,000 portion of his annual equity award, 50% was granted in the form of a Time Vesting Equity Award and the other 50% was granted in the form of an Adjusted EPS Equity Award.

One-Time Strategic Equity Award

In 2017, in exchange for the execution of certain restrictive covenants described below, a group of our most senior executives around the globe, including each of our named executive officers (other than Mr. Sulentic who declined the award as described below), received a one-time Strategic Equity Award with a six-year cliff vesting performance period. The Committee also offered Mr. Sulentic a significant Strategic Equity Award. Mr. Sulentic determined (and the Committee agreed) that it was in the best interest of the company that Mr. Sulentic decline such award in order to maintain his independence and avoid any conflict of interest or appearance of conflict of interest as he was actively involved in designing the program and advocating for such awards and the related restrictive covenants with both our Board and our senior executives around the globe.

The one-time Strategic Equity Award is strongly performance-based, with vesting of two-thirds of the award to each executive driven by the extent to which the company achieves rigorous cumulative Adjusted EPS and total shareholder return performance hurdles relative to the S&P 500 over a six-year performance period. The Strategic Equity Award was structured to:

 

 

encourage focus on longer term business outcomes (performance and vesting periods are six years); and

 

 

provide our executives with a significant and incremental financial incentive that aligns with the outcomes that we generate for our stockholders.

The Strategic Equity Award is split into three types of restricted stock unit (“RSU”) awards:

 

 

Time Vesting Strategic Equity Award (one-third of target grant value)—cliff vests six years from the date of grant on December 1, 2023.

 

 

Relative TSR (“rTSR”) Strategic Equity Award (one-third of target grant value)—granted with a target number of restricted stock units, zero to 175% of which may be earned based on the cumulative total shareholder return (“TSR”) of the company compared to the cumulative TSR of each of the other companies comprising the S&P 500 on December 1,

 

 

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2017 (the “S&P 500 Comparison Group”) over a six-year measurement period commencing on December 1, 2017 and ending on December 1, 2023.

 

 

Relative EPS (“rEPS”) Strategic Equity Award (one-third of target grant value)—granted with a target number of restricted stock units, zero to 175% of which may be earned

   

based on the cumulative adjusted EPS growth of the company compared to the cumulative EPS growth, as reported under GAAP, of each of the other companies in the S&P 500 Comparison Group over a six-year measurement period commencing on January 1, 2018 and ending on December 31, 2023.

 

 

The performance and payout schedule for the rTSR and rEPS Strategic Equity Awards is intended to be extremely challenging, as evidenced by the fact that such performance awards will not vest unless the company’s performance on the relevant metric exceeds 50th percentile performance. The payout schedule for the rTSR and rEPS Strategic Equity Awards is as follows:

 

CBRE’s rTSR Performance
(Percentile Rank)
 

% of Target rTSR

Share Units that Vest

  CBRE’s rEPS Performance
(Percentile Rank)
 

% of Target rEPS

Share Units that Vest

<= 50th Percentile

  0%   <= 50th Percentile   0%

>= 75th Percentile

  175%   >= 75th Percentile   175%

 

If the company’s performance percentile ranking is less than or equal to the 50th percentile, then none of the relevant performance awards will be earned. If the company’s performance percentile ranking is greater or equal to the 75th percentile, then 175% of the relevant performance awards will be earned. There is linear interpolation if the company’s performance percentile ranking falls between the 50th percentile and 75th percentile. The rTSR Strategic Equity Awards and rEPS Strategic Equity Awards will vest on the date on which the Committee certifies the performance percentile ranking achieved (which certification will occur as soon as practicable following the end of the performance period, but in no event more than 60 days with respect to the rTSR Strategic Equity Awards and 90 days with respect to the rEPS Strategic Equity Awards.

Restrictive Covenants Agreement

As a condition to receiving the Strategic Equity Award, the group of global senior executives participating in the program, including Messrs. Groch, Lafitte, Frese and Concannon entered into a restrictive covenants agreement with the company which provides for certain post-termination non-competition, non-solicitation of clients and non-solicitation of employees covenants. Although Mr. Sulentic declined his Strategic Equity Award as stated above, he nonetheless entered into the same restrictive

covenants agreement with the company as our other named executive officers. All of our senior executives who were offered such Strategic Equity Award accepted their awards and executed the required restrictive covenants agreement.

Certified Achievement for Adjusted EPS Equity Awards Granted in 2015

On August 13, 2015, we granted (including to our named executive officers for 2017) Adjusted EPS Equity Awards eligible to be earned based on our achievement against certain adjusted EPS performance targets (over a minimum threshold) as measured on a cumulative basis for the 2016 and 2017 fiscal years, with full vesting of any earned amount on August 14, 2018. These 2015 Adjusted EPS Equity Awards were granted with a target number of restricted stock units, zero to 200% of which could be earned based on the extent to which the company achieves cumulative adjusted EPS targets over the performance period. On February 16, 2018, the Committee certified the company’s cumulative adjusted EPS performance for the performance period at $5.01, versus a cumulative adjusted EPS “target” for those grants of $4.83. As such, the recipients of these awards will vest on August 14, 2018 into 169.2% of the target number of restricted stock units, subject to forfeiture in certain circumstances as set forth in their award agreement.

 

 

Additional Elements of Our Compensation Program

 

 

Deferred Compensation Plan—The purpose of our Deferred Compensation Plan, or DCP, is to provide certain employees whose incomes exceed a certain threshold (including our executive officers) and non-employee directors a tax-efficient manner in which to defer compensation to future years, thus increasing the value of our overall compensation program in support of our recruitment and retention objectives. Certain of our non-employee directors (but none of our named executive

   

officers) participated in the DCP in 2017. The DCP is described in more detail under “Executive Compensation—Summary of Plans, Programs and Agreements—Deferred Compensation Plan” on page 62.

 

 

No “Single Trigger” Change of Control Payments—We do not have agreements or plans that provide for “single trigger” change of control payments or benefits (including automatic accelerated vesting of equity awards upon a change of control only) to any of our named executive officers.

 

 

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Severance Plan; Treatment of Annual Equity Awards on Termination due to Death, Disability and Retirement; Treatment of Strategic Equity Awards on Qualifying Termination or Retirement—We have a Change in Control and Severance Plan for Senior Management, which we refer to in this Proxy Statement as the Severance Plan, in which all of our named executive officers for 2017 participate. The Committee believes that the Severance Plan is reflective of current compensation practices and trends and will help ensure retention and continuity of our executives. Our Committee further believes that the Severance Plan is essential to recruiting, retaining and developing high-quality executive talent in the competitive market because it provides protection to the executive if the company does not retain him or her in certain circumstances. Participants under the Severance Plan are eligible to receive (i) severance benefits upon a qualifying termination of employment, including enhanced benefits for a qualifying termination that occurs within a window period surrounding a change in control of the company, and (ii) continued vesting in respect of equity awards held by them if they remain employed with us on the date of a change in control of the company (or accelerated vesting if such equity awards are not assumed by the successor company). In addition, the award agreements pursuant to which we granted our 2014, 2015, 2016 and 2017 equity awards provide for continued or accelerated vesting of the unvested portion of those awards in the event of termination of employment due to death, disability or retirement. Furthermore, the award agreements pursuant to which we granted the one-time Strategic Equity Awards

   

provide for continued or accelerated vesting of a pro-rata amount of the unvested portion of those awards in the event of termination of employment due to death or disability, by the company without cause or the grantee for good reason, or due to retirement. We describe these severance benefits and continued or accelerated vesting terms in greater detail under the heading “Executive Compensation—Summary of Plans, Programs and Agreements—Severance Plan, Treatment of Death, Disability and Retirement Under 2014, 2015, 2016 and 2017 Equity Award Agreements, Treatment of Qualifying Termination and Retirement Under Strategic Equity Award Agreements” on page 63.

 

 

Indirect Elements of Compensation—Our named executive officers are eligible to participate in the same health, welfare and insurance benefit plans in which our employees are generally able to participate. In addition, we offer our named executive officers out of country medical coverage and reimbursement for an annual physical. Some or all of our executive officers may also participate in broad-based plans and policies (such as our 401(k) plan), and our named executive officers for 2017 also participate in our Severance Plan as described briefly above and in more detail under “Executive Compensation—Summary of Plans, Programs and Agreements” beginning on page 60. We believe that these other elements of compensation are important to attract, motivate and retain the top executive talent for which we compete.

 

 

No Tax Gross-Ups—As a policy matter, we do not provide tax gross-ups to our named executive officers.

 

 

Other Relevant Policies and Practices

Equity Ownership Policy

 

 

Our objective to link compensation to our long-term success is reinforced by an equity ownership policy applicable to our executives. To further align our executives’ interests with our stockholders over the long term, this policy restricts selling of company stock by each executive officer until the executive acquires and maintains significant levels of company stock.

 

For our named executive officers, the minimum ownership requirements are indicated in the table below. Our executives are permitted to satisfy their ownership requirements over time through existing and new equity awards. As of December 31, 2017, all of our named executive officers have satisfied their minimum ownership requirements.

 

 

STOCK OWNERSHIP REQUIREMENT

 

  Name    Minimum Requirement  

  Robert E. Sulentic

    President and Chief Executive Officer

     5x Base Salary  

  James R. Groch

    Chief Financial Officer and Global Director of Corporate Development

     3x Base Salary  

  Michael J. Lafitte

    Global Group President

     3x Base Salary  

  Calvin W. Frese, Jr.

    Global Group President

     3x Base Salary  

  William F. Concanon

    Global Group President and Chief Executive Officer—Global Workplace Solutions

     3x Base Salary  

 

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A further description of this policy and the applicable thresholds can be found under “Corporate Governance—Stock Ownership Requirements” on page 23.

Policies restricting stock trading and prohibiting hedging and short-selling

 

 

We have a pre-clearance policy and process for trades in company securities that all directors, executive officers and other designated insiders must follow. Under this policy, our directors, executive officers and other designated insiders are prohibited from trading in company securities outside of our quarterly trading windows, and trades inside the windows are subject to pre-clearance through our General Counsel, in each

case except under pre-approved SEC Rule 10b5-1 trading plans. In addition, as part of this policy, we prohibit any short-selling and hedging transactions involving our securities. This is intended to, among other things, prohibit our directors, executive officers and designated insiders from insulating themselves from the effects of poor stock price performance.

 

 

Compensation Clawback Policy

 

 

We have a compensation clawback policy. This policy permits us, subject to the discretion and approval of the Board, to recover cash-based and performance-based-equity incentive compensation (e.g., our Adjusted EPS Equity Awards) paid to any current or former “Section 16 officer” (as so designated by the Board and our Audit and Finance Committee under Rule 16a-1(f) of the Exchange Act) in the event of a restatement of our financial results in certain circumstances described below. This policy applies to cash-based incentive compensation paid after February 21, 2014 and to performance-based-equity incentive compensation awarded on or after August 14, 2014.

Specifically, the policy provides that (i) if we are required to restate our financial statements due to material non-compliance by us with any financial reporting

requirement under securities laws (other than due to changes in accounting policy, generally accepted accounting principles or applicable law), (ii) fraud or willful misconduct contributed to the restatement and (iii) any executive officer received a recoverable incentive-based compensation award in excess of the amount that he or she would have received had the restated financial statements been in effect for the period in which the incentive-based compensation amount was awarded, then we are entitled to recover the overpayment. The policy permits clawback from any executive who received an award overpayment, irrespective of whether the executive contributed to the fraud or willful misconduct. Awards are subject to clawback under the policy for up to three years after the award (or any portion thereof) vests (for awards subject to vesting conditions) or is granted (for all other recoverable incentive-based compensation).

 

 

Equity Award Policy and procedures for equity grants

 

 

We have an Equity Award Policy that is designed to maintain the integrity of the equity award process. This policy has the following characteristics:

 

 

Requires Board approval for delegation by the Committee to any other committee or individual of its authority under our equity incentive plans;

 

 

Provides that the effective date of a grant is the date the Committee approves the award, unless a later date is required (for instance in connection with a grant to a new hire who starts work on a date after the Committee has approved the award);

 

Provides that the exercise price of stock options and value of restricted stock and restricted stock unit awards is the closing price of our common stock on the NYSE on the grant date; and

 

 

Permits our CEO to make special recruitment and retention awards in the periods between Committee meetings, but never to executive officers or an award consisting of stock options, and there are limitations on the terms and amounts of those grants as well as a requirement to provide reports of such grants to the Committee.

The policy is published in the Corporate Governance section of the Investor Relations page on our website at www.cbre.com.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Tax Deductibility and Accounting Implications

 

 

As a general matter, the Committee always takes into account the various tax and accounting implications of compensation. When determining amounts of equity grants to executives and employees, the Committee also examines the accounting cost associated with the grants.

Certain of the company’s incentive compensation programs are intended to allow the company to make awards to executive officers that are deductible under Section 162(m) of the Internal Revenue Code, which provision otherwise sets limits on the tax deductibility of compensation paid to a company’s most highly compensated executive officers. Commencing with the company’s 2018 fiscal year, the performance-based compensation exception to the deductibility limitations under Section 162(m) will no longer apply (other than with respect to certain “grandfathered”

performance-based awards granted prior to November 2, 2017) and the deduction limitation under Section 162(m) will generally apply to compensation paid to any of our then current or former named executive officers. The Committee may continue to seek ways to limit the impact of Section 162(m) of the Internal Revenue Code. However, the Committee believes that the tax deduction limitation should not compromise the company’s ability to establish and implement compensation and incentive programs that support the compensation objectives discussed above under “—Components of Our Program—Elements of our compensation program.” Accordingly, achieving these objectives and maintaining required flexibility in this regard is expected to result in compensation that is not deductible for federal income tax purposes.

 

 

Compensation Committee Report

 

The Compensation Committee reviewed and discussed with management of the company the foregoing Compensation Discussion and Analysis. Based on such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Compensation Committee

Beth F. Cobert, Chair

Brandon B. Boze

Bradford M. Freeman

Gerardo I. Lopez

Frederic V. Malek

Paula R. Reynolds

Sanjiv Yajnik

Notwithstanding any statement in any of our filings with the SEC that might incorporate part or all of any filings with the SEC by reference, including this Proxy Statement, the foregoing Compensation Committee Report is not incorporated into any such filings.

 

 

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EXECUTIVE MANAGEMENT

We have provided below summary biographies of our named executive officers who are described above in the CD&A, as well as our other executive officers as of March 20, 2018 (other than Mr. Sulentic). Information on Mr. Sulentic can be found on page 12 under “Elect Directors—2018 Director Nominees.”

 

William F. Concannon

 

Age: 62

Global Group President and Chief Executive Officer—Global Workplace Solutions

Mr. Concannon has been our Global Group President since January 2018 and Chief Executive Officer—Global Workplace Solutions since July 2012. He previously served as President of this business line from August 2009 until July 2012, and as Vice Chairman of this business line from 2006 until August 2009. Mr. Concannon served as Vice Chairman, from June 2003, and as director, from 1991, of Trammell Crow Company, a diversified commercial real estate firm, until its acquisition by CBRE in December 2006. From February 2001 to June 2003, Mr. Concannon was the president of the global services group of Trammell Crow Company. Mr. Concannon has also served as the president and chief executive officer of Trammell Crow Corporate Services, a real estate company, and from 2002 to 2006, he served on the board of directors of FPD Savills, a real estate company based in the United Kingdom. Mr. Concannon is a member of the board of directors of CRA International, Inc. He holds a B.S. from Providence College.

T. Ritson Ferguson

 

Age: 58

Chief Executive Officer—CBRE Global Investors

Mr. Ferguson has been the Chief Executive Officer of CBRE Global Investors (our real estate investment management business) since March 2016, Global Chief Investment Officer of CBRE Global Investors since August 2015 and Chief Executive Officer of CBRE Clarion Securities (our real estate securities business) since July 2011. Prior to that, he served as Chief Executive Officer and Co-Chief Investment Officer of ING Clarion Real Estate Securities, LLC from 1992 until our acquisition of that company in July 2011. Earlier in his career, Mr. Ferguson worked at K.S. Sweet Associates, Bain & Company and Trammell Crow Company, and served as a captain in the U.S. Air Force. He currently serves on the board of trustees of CBRE Clarion Global Real Estate Income Fund, which is a CBRE Clarion Securities-managed investment fund. Mr. Ferguson holds a B.S. from Duke University and an M.B.A. from the Wharton School of the University of Pennsylvania, and is a CFA charterholder.

Calvin W. Frese, Jr.

 

Age: 61

Global Group President

Mr. Frese has been our Global Group President since June 2016. He previously served as our Chief Executive Officer—Americas from July 2012 to June 2016, Group President—Global Services from December 2010 to July 2012 and President—Global Services from March 2010 to December 2010. He also served as our Global Chief Operating Officer from January 2009 to March 2010 and as President of our Americas region from January 2005 until August 2009. Prior to that, Mr. Frese served as our Chief Operating Officer of the Americas beginning in 2001, and prior to that as our Executive Managing Director of the Central Region from 1998 to 2001. From 1989 to 1998, Mr. Frese was General Partner and Chief Operating Officer of Whittier Partners, a New England-based full-service real estate company and a member of the CBRE affiliate network. He holds a B.A. from Trinity College and an M.S. in Accounting from the New York University, Leonard N. Stern School of Business.

Arlin E. Gaffner

 

Age: 61

Senior Vice President and Chief Accounting Officer

Mr. Gaffner has been our Senior Vice President and Chief Accounting Officer since November 2017 and Chief Financial Officer—Americas since March 2014. He previously served as our Chief Accounting Officer from March 2010 to March 2014. He served as Chief Financial Officer of Trammell Crow Company, which operates our Development Services business, from our acquisition of that company in December 2006 through December 2011. Mr. Gaffner was the Chief Accounting Officer of Trammell Crow Company from January 2002 until December 2006. Mr. Gaffner is a certified public accountant and holds a B.S. from Oral Roberts University.

 

 

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EXECUTIVE MANAGEMENT

 

James R. Groch

 

Age: 56

Chief Financial Officer and Global Director of Corporate Development

Mr. Groch has been our Chief Financial Officer and Global Director of Corporate Development since March 2014. He previously served as our Global Chief Investment Officer and Executive Vice President, Strategy and Corporate Finance from January 2009 to March 2014. From 2006 to 2009, he served as the Chief Investment Officer, President of Funds and Investment Management and Director of Corporate Finance of our subsidiary Trammell Crow Company; he served in the Chief Investment Officer role at Trammell Crow Company from 1998 and in roles of President of Funds and Investment Management and Director of Corporate Finance from 2000 until our acquisition of Trammell Crow Company in December 2006. From 1997 to 1998, Mr. Groch served as Trammell Crow Company’s President of Development and Investments for the Eastern U.S., and was a Managing Director of Trammell Crow Northeast from 1991 until 1997. In 1988, Mr. Groch became a partner in Trammell Crow Company after joining the company three years earlier. Mr. Groch holds a B.A. from Dickinson College and an M.B.A. from the Darden School of Business at the University of Virginia.

J. Christopher Kirk

 

Age: 52

Chief Administrative Officer

Mr. Kirk has been our Chief Administrative Officer since July 2012. He was our Global Director of Human Resources from June 2010 to July 2012. Mr. Kirk previously served as the Chief Operating Officer from 2007 to July 2011 and General Counsel from 2001 to 2011 of Trammell Crow Company. Prior to joining Trammell Crow Company, Mr. Kirk was a partner at the Dallas office of Vinson & Elkins LLP, where he was a corporate finance, securities and M&A lawyer. Mr. Kirk holds a B.B.A. and an M.B.A. from the University of Texas and a J.D. from the University of Texas School of Law.

Michael J. Lafitte

 

Age: 57

Global Group President

Mr. Lafitte has been our Global Group President since June 2016. He previously served as our Chief Operating Officer from February 2013 to June 2016, Global President of our Services business from July 2012 to February 2013 and prior to that was the President of our Americas region from August 2009 to July 2012. Prior to that, he served as President of our Institutional & Corporate Services business beginning in December 2006. He served as President, Global Services of Trammell Crow Company from June 2003 until our acquisition of that company in December 2006, and prior to that served as Trammell Crow Company’s Chief Operating Officer, Global Services beginning in September 2002. Mr. Lafitte holds a B.B.A. from the University of Texas and an M.B.A. from Southern Methodist University.

Laurence H. Midler

 

Age: 53

Executive Vice President, General Counsel and Secretary

Mr. Midler has been our Executive Vice President and General Counsel since April 2004. He also serves as our Secretary. Mr. Midler previously served as our Chief Compliance Officer from April 2004 to January 2014. Mr. Midler served as Executive Vice President, General Counsel and Secretary to Micro Warehouse, Inc., from July 2001 until April 2004. Mr. Midler began his legal career as an associate at Latham & Watkins, a global law firm, in 1990. He holds a B.A. from the University of Virginia and a J.D. from The New York University School of Law.

 

 

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EXECUTIVE COMPENSATION

 

In reviewing executive compensation for 2017 as compared with prior years, it is important to keep the following in mind:

 

 

In 2016, the Committee changed our annual equity grant date from August to March, effective March 2017. To effectuate this change in annual grant timing, in August 2016, the Committee awarded our executives a “stub” grant, as a bridge between August 2016 and the date of the next annual grant in March 2017. The “stub” grant value was equal to 50% of each named executive officer’s target annual long-term incentive award value and consisted solely of a Time Vesting Equity Award. As such, our executives received 100% of their target annual equity award in August 2015, 50% of their target annual equity award in August 2016 and 100% of their target annual equity award in March 2017. As a consequence, aggregate executive compensation was lower in 2016 as compared to 2015 and 2017.

 

 

In 2017, in exchange for the execution of certain restrictive covenants described below, a group of our most senior executives around the globe, including each of our named executive officers (other than Mr. Sulentic who declined the award as described below), received a one-time Strategic Equity Award with a six-year cliff vesting performance period. The Compensation Committee also offered Mr. Sulentic a significant Strategic Equity Award. Mr. Sulentic determined (and the Compensation Committee agreed) that it was in the best interest of the company that Mr. Sulentic decline such award in order to maintain his

   

independence and avoid any conflict of interest or appearance of conflict of interest as he was actively involved in designing the program and advocating for such awards and the related restrictive covenants with both our Board and our senior executives around the globe. As a condition to receiving the Strategic Equity Award, the group of global senior executives participating in the program, including Messrs. Groch, Lafitte, Frese and Concannon entered into a restrictive covenants agreement with the company which provides for certain post-termination non-competition, non-solicitation of clients and non-solicitation of employees covenants. Although Mr. Sulentic declined his Strategic Equity Award as stated above, he nonetheless entered into the same restrictive covenants agreement with the company as our other named executive officers. All of our senior executives who were offered such Strategic Equity Award accepted their awards and executed the required restrictive covenants agreement. The Strategic Equity Award is intended to retain our executives for the six-year cliff vesting performance period of the award and to incentivize each executive to continue increasing his focus on driving client outcomes and positioning the company for long-term growth during that six-year period.

 

 

The combination of the lower stock award in 2016 due to the change in timing of the awards and the granting of the Strategic Equity Awards in 2017, are the principal drivers of the increase in executive compensation in 2017 as compared to 2016.

 

 

Summary Compensation Table

The following table sets forth compensation information in respect of the fiscal years ended December 31, 2017, 2016 and 2015 for our CEO, Chief Financial Officer and the three other most highly compensated executive officers for 2017.

 

  Name and Principal

  Position

  Year    

Salary

($)

   

Bonus(1)

($)

   

Annual

Stock

Award

(2)(3)(4)

($)

   

One-Time
Strategic
Equity
Award(2)(5)

($)

   

Total
Stock

Awards(6)

($)

   

Non-Equity

Incentive Plan

Compensation(7)

($)

   

All

Other

Compensation(8)

($)

   

Total

($)

 

  Robert E. Sulentic

    2017       990,000             5,129,964 (9)(10)            5,129,964 (8)(9)      2,485,824       4,500       8,610,288  

  President and

  Chief Executive Officer

    2016       990,000       500,000       2,062,494             2,062,494       1,403,800       4,500       4,960,794  
    2015       967,500       607,130       4,124,980             4,124,980       1,992,870       3,750       7,696,230  
                                                     

  James R. Groch

    2017       770,000       150,000       2,999,938       5,637,461       8,637,399       1,436,512       4,500       10,998,411  

  Chief Financial Officer

  and Global Director of

  Corporate Development

    2016       770,000       300,000       1,499,982             1,499,982       1,081,700       4,500       3,656,182  
    2015       752,500       500,000       2,999,930             2,999,930       1,550,000       3,750       5,806,180  
                                                                       

  Michael J. Lafitte

    2017       700,000       150,000       2,319,936       5,637,461       7,957,397       1,330,560       4,500       10,142,457  

  Global Group President

    2016       700,000       350,000       1,159,972             1,159,972       992,600       4,500       3,207,072  
    2015       675,000       400,000       2,319,980             2,319,980       1,409,100       3,750       4,807,830  

  Calvin W. Frese, Jr.

    2017       695,000             2,319,936       5,637,461       7,957,397       1,305,920       4,500       9,962,817  

  Global Group President

    2016       680,000       300,000       1,124,994             1,124,994       957,700       4,500       3,067,194  
    2015       660,000       400,000       2,249,948             2,249,948       1,282,800       3,750       4,596,498  

  William F.  Concannon(11)

  Global Group President

  and CEO—Global

  Workplace Solutions

    2017       693,750       150,000       2,169,990       5,637,461       7,807,451       1,265,400       4,500       9,921,101  
    2016       675,000       300,000       1,024,989             1,024,989       848,900       4,500       2,853,389  
    2015       650,000       300,000       2,049,924             2,049,924       1,180,900       3,750       4,184,574  
                                                                       

 

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EXECUTIVE COMPENSATION

 

 

(1)

For 2017, Messrs. Groch, Lafitte and Concannon each received a $150,000 supplemental and discretionary bonus award granted under our EBP, in recognition of their exemplary leadership and outstanding performance in growing the company during 2017.

 

(2)

See Note 2 (“Significant Accounting Policies”) and Note 13 (“Employee Benefit Plans”) to our consolidated financial statements as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for a discussion of the valuation of our stock awards.

 

(3)

Our 2017 annual equity awards were made under and governed by the 2012 Equity Incentive Plan, as described under “Summary of Plans, Programs and Agreements” on page 60, and include (i) Time Vesting Equity Awards that were granted to each of Messrs. Sulentic, Groch, Lafitte, Frese and Concannon in the amount of 65,811, 41,174, 31,841, 31,841 and 29,783 restricted stock units, respectively, which are scheduled to vest 25% per year over four years (on each of March 3, 2018, 2019, 2020 and 2021) and (ii) Adjusted EPS Equity Awards that were granted to each of Messrs. Sulentic, Groch, Lafitte, Frese and Concannon with a target unit amount equal to 75,006, 41,174, 31,841, 31,841 and 29,783 restricted stock units, respectively, which are eligible to be earned based on the extent to which the company achieves adjusted EPS targets (over a minimum threshold) measured on a cumulative basis for the 2017 and 2018 fiscal years, with full vesting of any earned amount on March 3, 2020. For our Adjusted EPS Equity Awards, in this table we have assumed that achievement at 100% of target is the probable outcome of the related performance conditions, which was our assumption on the grant date. With respect to the Adjusted EPS Equity Awards granted for 2017, the aggregate grant date fair value for these awards, assuming the achievement of the highest level of performance (which is 200% of the target unit amount), is $5,464,937 for Mr. Sulentic, $2,999,938 for Mr. Groch, $2,319,935 for Mr. Lafitte, $2,319,935 for Mr. Frese and $2,169,989 for Mr. Concannon.

 

(4)

In August 2016, we changed our annual equity grant date from August to March, effective March 2017. As a result, in August 2016, our executives received a “stub” grant, consisting solely of a Time Vesting Equity Award equal to 50% of their target annual long-term incentive award value (as set forth in the table above). In March 2017, we continued our normal practice of granting a combination of Time Vesting Equity Awards and Adjusted EPS Equity Awards. The March 2017 grant for Messrs. Groch, Lafitte, Frese and Concannon was awarded at the normal “target” grant value, with 50% in the form of a Time Vesting Equity Award and 50% in the form of an Adjusted EPS Equity Award to maintain the two-thirds time-based, one-third performance-based mix for the combined August 2016 and March 2017 awards.

 

(5)

Our one-time Strategic Equity Awards were made and governed by the 2017 Equity Incentive Plan, as described under “Summary of Plans, Programs and Agreements” on page 60, and include (i) Time Vesting Strategic Equity Awards in the amount of 42,448 restricted stock units that were granted to each of Messrs. Groch, Lafitte, Frese and Concannon, which are scheduled to vest on December 1, 2023, (ii) Relative TSR (“rTSR”) Strategic Equity Awards with a target unit amount equal to 42,448 restricted stock units that were granted to each of Messrs. Groch, Lafitte, Frese and Concannon, which are eligible to be earned based on measuring the cumulative total stockholder return (“TSR”) of the company against the cumulative TSR of each of the other companies comprising the S&P 500 on December 1, 2017 (the “Comparison Group”) with a minimum threshold over a six-year measurement period, with full vesting of any earned amount no later than 60 days after December 1, 2023 and (iii) Relative EPS (“rEPS”) Strategic Equity Awards with a target unit amount equal to 42,448 restricted stock units that were granted to each of Messrs. Groch, Lafitte, Frese and Concannon, which are eligible to be earned based on measuring the cumulative Adjusted EPS growth of the company against the cumulative EPS growth, as reported under GAAP (“GAAP EPS”), of each of the other members of the Comparison Group with a minimum threshold over a six-year measurement period, with full vesting of any earned amount no later than 90 days after December 31, 2023. For our rTSR Strategic Equity Awards in this table, we have assumed based on a Monte Carlo simulation that achievement at 107.5% of target is the probable outcome of the related performance conditions, which was our assumption on the grant date. For our rEPS Strategic Equity Awards, in this table we have assumed that achievement at 100% of target is the probable outcome of the related performance conditions, which was our assumption on the grant date. With respect to the (i) rTSR Strategic Equity Awards granted in 2017, the aggregate grant date fair value for these awards, assuming the achievement of the highest level of performance (which is 175% of the target unit amount), is $3,208,326 for each of Messrs. Groch, Lafitte, Frese and Concannon and (ii) rEPS Strategic Equity Awards granted in 2017, the aggregate grant date fair value for these awards, assuming the achievement of the highest level of performance (which is 175% of the target unit amount), is $3,208,326 for each of Messrs. Groch, Lafitte, Frese and Concannon.

 

(6)

The amounts in this column represents the sum of each named executive officer’s annual equity award and, if applicable, one-time Strategic Equity Award, in each case as reported in the two columns to the immediate left of this column.

 

(7)

Amounts in this column relate to compensation pursuant to our annual performance award plans referred to in this Proxy Statement as the EIP and EBP, which are described below under “Summary of Plans, Programs and Agreements” on page 60. Amounts reflected in this table generally are based on the achievement of financial and strategic performance objectives that are established at the beginning of each fiscal year and that are further described under the heading “Compensation Discussion and Analysis—Components of Our Program—Elements of our compensation program” beginning on page 40 and “Grants of Plan-Based Awards” on page 56.

 

(8)

The amounts in this column for each of Messrs. Sulentic, Groch, Lafitte, Frese and Concannon reflect our matching contributions to their 401(k) accounts pursuant to our employee 401(k) match policy based on their respective contributions to such accounts.

 

(9)

In 2017, the Board set Mr. Sulentic’s long-term equity award at $5,630,000. After his 2017 annual equity award had been established by our Board, Mr. Sulentic requested, and our Board agreed, to reduce his award by $500,000. Therefore, Mr. Sulentic’s actual annual equity award for 2017 was $5,130,000, an increase of $1,005,000 over the prior year. Two-thirds of the incremental increase to Mr. Sulentic’s annual equity award was granted in the form of an Adjusted EPS Equity Award and one-third was granted in the form of a Time Vesting Equity Award. With respect to the remaining $4,125,000 portion of his annual equity award, 50% was granted in the form of an Adjusted EPS Equity Award and the other 50% was granted in the form of a Time Vesting Equity Award.

 

(10)

Mr. Sulentic declined the Compensation Committee’s offer of a one-time Strategic Equity Award.

 

(11)

Mr. Concannon became retirement-eligible in November 2017. For additional information regarding the treatment of his outstanding equity awards upon retirement, please refer to the discussion under “—Severance Plan; Treatment of Death, Disability and Retirement Under 2014, 2015, 2016 and 2017 Equity Award Agreements; Treatment of Qualifying Termination and Retirement Under Strategic Equity Award Agreements” beginning on page 63.

Employment Agreements

None of our named executive officers for 2017 are parties to an employment agreement.

 

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EXECUTIVE COMPENSATION

 

Grants of Plan-Based Awards

The following table sets forth information concerning stock and cash awards in respect of the fiscal year ended December 31, 2017 to the persons named in the table under the heading “Summary Compensation Table,” which awards were granted pursuant to our 2012 Equity Incentive Plan, 2017 Equity Incentive Plan, Executive Incentive Plan or Executive Bonus Plan described below under “Summary of Plans, Programs and Agreements” on page 60.

 

  Name    Grant Date    

Estimated Future Payouts Under

Non-Equity Incentive Plan

Awards(1)

         

Estimated Future Payouts Under

Equity Incentive Plan

Awards

   

All Other

Stock Awards:

Number of

Shares of

Stock or Units

(#)

   

Grant Date

Fair Value

of Stock

and Option

Awards(2)(3)

($)

 
    

Threshold

($)

   

Target

($)

   

Maximum

($)

         

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

     

  Robert E. Sulentic

                   1,980,000       3,960,000                                        
     03/03/17 (4)                                            65,811       2,397,495 (9) 
     03/03/17 (5)                          37,503       75,006       150,012             2,732,469 (9) 

  James R. Groch

                   1,155,000       2,310,000                                        
     03/03/17 (4)                                            41,174       1,499,969  
     03/03/17 (5)                          20,587       41,174       82,348             1,499,969  
     12/01/17 (6)                                            42,448       1,833,329  
     12/01/17 (7)                                45,631       74,284             1,970,803  
     12/01/17 (8)                                42,448       74,284             1,833,329  

  Michael J. Lafitte

                   1,050,000       2,100,000                                        
     03/03/17 (4)                                            31,841       1,159,968  
     03/03/17 (5)                          15,920       31,841       63,682             1,159,968  
     12/01/17 (6)                                            42,448       1,833,329  
     12/01/17 (7)                                45,631       74,284             1,970,803  
     12/01/17 (8)                                42,448       74,284             1,833,329  

  Calvin W. Frese, Jr.

                   1,050,000       2,100,000                                        
     03/03/17 (4)                                            31,841       1,159,968  
     03/03/17 (5)                          15,920       31,841       63,682             1,159,968  
     12/01/17 (6)                                            42,448       1,833,329  
     12/01/17 (7)                                45,631       74,284             1,970,803  
     12/01/17 (8)                                42,448       74,284             1,833,329  

  William F. Concannon(10)

                   1,000,000       2,000,000                                        
     03/03/17 (4)                                            29,783       1,084,995  
     03/03/17 (5)                          14,891       29,783       59,566             1,084,995  
     12/01/17 (6)                                            42,448       1,833,329  
     12/01/17 (7)                                45,631       74,284             1,970,803  
     12/01/17 (8)                                      42,448       74,284             1,833,329  
(1)

For our executives to be eligible to receive a non-equity incentive plan (“EBP”) award based on our financial performance in 2017, as measured by adjusted EBITDA, our performance had to exceed 70% of the applicable adjusted EBITDA goal. The maximum award permitted under the EBP was 200% of the executive’s target. Upon achievement just over the 70% threshold (e.g., 70.0000001%), the amount of the EBP award payable would be negligible, and as such no amount is shown in the “Threshold” column. For a full description of our EBP awards, see “Compensation Discussion and Analysis—Components of Our Program—Elements of our compensation program” beginning on page 40.

 

(2)

The amounts shown represent the grant date fair value of the awards computed in accordance with ASC 718. For our Adjusted EPS Equity Awards and rEPS Strategic Equity Awards granted in 2017, in this table we have assumed that achievement at 100% of target is the probable outcome of the related performance conditions, which was our assumption on the grant date. For our rTSR Strategic Equity Awards granted in 2017, in this table we have assumed based on a Monte Carlo simulation that achievement at 107.5% of target is the probable outcome of the related performance conditions, which was our assumption on the grant date. See Note 2 “Significant Accounting Policies” and Note 13 “Employee Benefit Plans” to our consolidated financial statements as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for a discussion of the valuation of our stock awards. Our 2017 stock awards are further described under the heading “Compensation Discussion and Analysis—Components of Our Program—Elements of our compensation program” beginning on page 40.

 

(3)

The closing price of our common stock on March 3, 2017 was $36.43 per share and on December 1, 2017 was $43.19 per share.

 

(4)

Represents Time Vesting Equity Awards of restricted stock units that were granted to each of Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, which are scheduled to vest 25% per year over four years (on each of March 3, 2018, 2019, 2020 and 2021).

 

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(5)

Represents Adjusted EPS Equity Awards of restricted stock units that were granted to each of Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, which are eligible to be earned based on our achievement against certain adjusted EPS targets (over a minimum threshold) as measured on a cumulative basis for the 2017 and 2018 fiscal years, with full vesting of any earned amount on March 3, 2020. Amounts shown in the “Threshold” column represent the number of shares (50% of the target unit amount) that would be issued upon achievement of the adjusted EPS performance measure at the minimum adjusted EPS threshold level. Amounts shown in the “Target” column represent the number of shares (100% of the target unit amount) that would be issued upon achievement of the target adjusted EPS performance measure. Amounts shown in the “Maximum” column represent the number of shares (200% of the target unit amount) that would be issued upon achievement of the adjusted EPS performance measure at the highest level. There is linear interpolation between the various adjusted EPS performance targets.

 

(6)

Represents Time Vesting Strategic Equity Awards of restricted stock units that were granted to each of Messrs. Groch, Lafitte, Frese and Concannon, which are scheduled to vest on December 1, 2023.

 

(7)

Represents rTSR Strategic Equity Awards of restricted stock units that were granted to each of Messrs. Groch, Lafitte, Frese and Concannon, which are eligible to be earned based on measuring the cumulative TSR of the company against the cumulative TSR of each of the other companies in the Comparison Group with a minimum threshold over a six-year measurement period, with full vesting of any earned amount no later than 60 days after December 1, 2023. Upon achievement just over the 50% threshold (e.g., 50.0000001%), the amount of the rTSR Strategic Equity Award payable would be negligible, and as such no amount is shown in the “Threshold” column. Amount shown in the “Target” columns represent the number of shares (107.5% of the target unit amount) that would be issued upon achievement of the target TSR performance measure. Amounts shown in the “Maximum” column represent the number of shares (175% of the target unit amount) that would be issued upon achievement of the target TSR performance measure at the highest level. There is linear interpolation between the Minimum and Maximum TSR performance targets for this award.

 

(8)

Represents rEPS Strategic Equity Awards of restricted stock units that were granted to each of Messrs. Groch, Lafitte, Frese and Concannon, which are eligible to be earned based on measuring the cumulative EPS growth, as reported under GAAP EPS, of each of the other members of the Comparison Group with a minimum threshold over a six-year measurement period, with full vesting of any earned amount no later than 90 days after December 31, 2023. Upon achievement just over the 50% threshold (e.g., 50.0000001%), the amount of the rEPS Strategic Equity Award payable would be negligible, and as such no amount is shown in the “Threshold” column. Amount shown in the “Target” columns represent the number of shares (100% of the target unit amount) that would be issued upon achievement of the target TSR performance measure. Amounts shown in the “Maximum” column represent the number of shares (175% of the target unit amount) that would be issued upon achievement of the target TSR performance measure at the highest level. There is linear interpolation between the Minimum and Maximum EPS performance targets for this award.

 

(9)

In 2017, the Board set Mr. Sulentic’s annual equity award at $5,630,000. After his annual award had been established by our Board, Mr. Sulentic requested, and our Board agreed, to reduce his award by $500,000. Therefore, Mr. Sulentic’s actual annual equity award for 2017 was $5,130,000, an increase of $1,005,000 over the prior year. Two-thirds of the incremental increase to Mr. Sulentic’s annual equity award was granted in the form of an Adjusted EPS Equity Award and one-third was granted in the form of a Time Vesting Equity Award. With respect to the remaining $4,125,000 portion of his annual equity award, 50% was granted in the form of an Adjusted EPS Equity Award and the other 50% was granted in the form of a Time Vesting Equity Award.

 

(10)

Mr. Concannon became retirement-eligible in November 2017. For additional information regarding the treatment of his outstanding equity awards upon retirement, please refer to the discussion under “—Severance Plan; Treatment of Death, Disability and Retirement Under 2014, 2015, 2016 and 2017 Equity Award Agreements; Treatment of Qualifying Termination and Retirement Under Strategic Equity Award Agreements” beginning on page 63.

 

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EXECUTIVE COMPENSATION

 

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning unexercised stock options and other equity awards that remain unvested as of December 31, 2017 that are held by the persons named in the table under the heading “Summary Compensation Table.”

 

  Name   Option Awards           Stock Awards  
 

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

   

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

   

Option

Exercise

Price

($)

   

Option
Expiration

Date

          

Number of

Shares or

Units of Stock

That Have Not

Vested(1)(2)

(3)(4)(5)

(#)

   

Market Value

of Shares

or Units of

Stock That

Have Not

Vested(6)

($)

   

Equity Incentive
Plan Awards:
Number of

Unearned

Shares, Units or
Other Rights
That

Have Not

Vested(7)(8)(9)(10)

(#)

   

Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned

Shares, Units or
Other Rights

That

Have Not

Vested(6)

($)

 

  Robert E. Sulentic

                                    173,970       7,534,641       136,197       5,898,692  

  James R. Groch

                                    162,136       7,022,110       170,571       7,387,430  

  Michael J. Lafitte

                                    135,718       5,877,947       151,152       6,546,393  

  Calvin W. Frese, Jr.

                                    133,902       5,799,296       150,113       6,501,394  

  William F.  Concannon(11)

                                    124,563       5,394,824       145,087       6,283,718  
  (1)

With respect to the total number of unvested stock units listed in this column, 20,207, 14,549, 11,963, 11,639 and 8,622 unvested stock units granted on August 14, 2014 (as Time Vesting Equity Awards) to Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, respectively, are scheduled to vest in full on August 14, 2018.

 

  (2)

With respect to the total number of unvested stock units listed in this column, 36,165, 26,302, 20,340, 19,726 and 17,973 unvested stock units granted on August 13, 2015 (as Time Vesting Equity Awards) to Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, respectively, will vest in equal increments on each of August 14, 2018 and 2019.

 

  (3)

With respect to the total number of unvested stock units listed in this column, 51,787, 37,663, 29,126, 28,248 and 25,737 unvested stock units granted on August 11, 2016 (as Time Vesting Equity Awards) to Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, respectively, will vest in equal increments on each of August 11, 2018, 2019 and 2020.

 

  (4)

With respect to the total number of unvested stock units listed in this column, 65,811, 41,174, 31,841, 31,841 and 29,783 unvested stock units granted on March 3, 2017 (as Time Vesting Equity Awards) to Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, respectively, will vest in equal increments on each of March 3, 2018, 2019, 2020 and 2021. For a full description of these awards, see “Compensation Discussion and Analysis—Components of Our Program—Elements of our compensation program” beginning on page 40.

 

  (5)

With respect to the total number of unvested stock units listed in this column, 42,448 unvested stock units granted on December 1, 2017 (as Time Vesting Strategic Equity Awards) to Messrs. Groch, Lafitte, Frese and Concannon, respectively, will vest on December 1, 2023. For a full description of these awards, see “Compensation Discussion and Analysis—Components of Our Program—Elements of our compensation program” beginning on page 40.

 

  (6)

Amounts reflected in this column were calculated by multiplying the number of unvested stock units by $43.31, which was the per-share closing price of our common stock on December 29, 2017. For the Adjusted EPS Equity Awards, rTSR Strategic Equity Awards and rEPS Strategic Equity Awards, these figures assume that those awards are later issued at their target number of shares, except for the Adjusted EPS Equity Awards granted in 2015. As described below in footnote (7) to this table, the 2015 Adjusted EPS Equity Awards will be issued at a greater number of shares than their target (169.2% of target), and we have reflected the greater number of shares in this table.

 

  (7)

With respect to the performance-based non-vested stock units listed in this column, 36,165, 26,301, 20,340, 19,726 and 17,972 stock units granted on August 13, 2015 (as 2015 Adjusted EPS Equity Awards) to each of Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, respectively, were eligible to be earned based on our achievement against certain adjusted EPS performance targets (over a minimum threshold) as measured on a cumulative basis for the 2016 and 2017 fiscal years, with full vesting of any earned amount on August 14, 2018. The 2015 Adjusted EPS Equity Awards were granted with a target number of restricted stock units, zero to 200% of which could be earned based on our achievement against the various adjusted EPS targets over the performance period. On February 16, 2018, the Compensation Committee certified the company’s cumulative adjusted EPS performance for the performance period at $5.01, versus a cumulative adjusted EPS “target” in those grants of $4.83. As such, Messrs. Sulentic, Groch, Lafitte, Frese and Concannon will vest on August 14, 2018 into 61,191, 44,501, 34,415, 33,376 and 30,408 shares (169.2% of their target number of restricted stock units), respectively, subject to forfeiture in certain circumstances as set forth in their award agreement. We have reflected this greater number of shares in this table.

 

  (8)

With respect to the performance-based non-vested stock units listed in this column, 75,006, 41,174, 31,841, 31,841 and 29,783 stock units granted on March 3, 2017 (as Adjusted EPS Equity Awards) to each of Messrs. Sulentic, Groch, Lafitte, Frese and Concannon, respectively, are eligible to be earned based on our achievement against certain adjusted EPS performance targets (over a minimum threshold) as measured on a cumulative basis for the 2017 and 2018 fiscal years, with full vesting of any earned amount on March 3, 2020. The Adjusted EPS Equity Award was granted with a target number of restricted stock units, zero to 200% of which may be earned based on our achievement against the various adjusted EPS targets over the performance period.

 

  (9)

With respect to the performance-based non-vested stock units listed in this column, 42,448 stock units granted on December 1, 2017 (as rTSR Strategic Equity Awards) to each of Messrs. Groch, Lafitte, Frese and Concannon are eligible to be earned based on our achievement against certain total shareholder return targets (over a minimum threshold) over a six-year measurement period, with full vesting of any earned amount no later than 60 days after December 1, 2023. The rTSR Strategic Equity Awards were granted with a target number of restricted stock units, zero to 175% of which may be earned based on our achievement against certain total shareholder return targets over the performance period.

 

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  (10)

With respect to the performance-based non-vested stock units listed in this column, 42,448 stock units granted on December 1, 2017 (as rEPS Strategic Equity Awards) to each of Messrs. Groch, Lafitte, Frese and Concannon are eligible to be earned based on our achievement against adjusted EPS targets (over a minimum threshold) over a six-year measurement period, with full vesting of any earned amount no later than 90 days after December 31, 2023. The rEPS Strategic Equity Awards were granted with a target number of restricted stock units, zero to 175% of which may be earned based on our achievement against certain adjusted EPS targets over the performance period.

 

  (11)

Mr. Concannon became retirement-eligible in November 2017. For additional information regarding the treatment of his outstanding equity awards upon retirement, please refer to the discussion under “—Severance Plan; Treatment of Death, Disability and Retirement Under 2014, 2015, 2016 and 2017 Equity Award Agreements; Treatment of Qualifying Termination and Retirement Under Strategic Equity Award Agreements” beginning on page 63.

Option Exercises and Stock Vested

The following table sets forth information concerning stock option exercises and vesting of stock awards during the fiscal year ended December 31, 2017 for the persons named in the table under “Summary Compensation Table.” The dollar amounts in the table below are based on the market value of our common stock on the respective dates of vesting multiplied by the number of shares that vested on such date.

 

  Name    Option Awards            Stock Awards  
  

Number of

Shares Acquired

on Exercise

(#)

    

Value Realized

on Exercise

($)

           

Number of

Shares Acquired

on Vesting

(#)

    

Value Realized

on Vesting

($)

 

  Robert E. Sulentic

                     161,761        5,825,128  

  James R. Groch

                     114,641        4,128,321  

  Michael J. Lafitte

                     95,881        3,452,820  

  Calvin W. Frese, Jr.

                     93,228        3,357,288  

  William F. Concannon

                           71,175        2,562,827  

CEO Pay Ratio

 

We believe our executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance stockholder value. In 2017, the ratio of CEO pay $8,621,191 to median employee pay $57,303 was 150:1. As is permitted under the SEC rules, we identified the median employee by examining the annual base salary for all individuals, excluding our CEO, who were employed by us at the end of 2017. We included all active and on-leave employees, whether employed on a full-time, part-time or seasonal basis. We did not make any adjustments or estimates with respect to annual base salary compensation, and we did not annualize compensation for any full-time employees that were not employed by us for all of 2017. Under the di minimis exclusion, we excluded a total of 4.5% of our employee population from the following countries: Argentina, Austria, Bulgaria, Chile, Colombia, Costa Rica, Czech Republic, Greece, Hungary, Korea, Mexico, Morocco, New Zealand, Oman, Panama, Peru,

Portugal, Romania, Saudi Arabia, Slovakia, South Africa, Taiwan, Turkey, Uruguay and Venezuela. We employed statistical sampling to identify a group of employees within 5% of the median based on annual base salary, then selected the median employee from this group. We then calculated 2017 CEO pay, which includes Mr. Sulentic’s base salary, bonus, equity awards, employer-paid insurance premiums and 401(k) match. We used the same methodology in calculating 2017 pay for the median employee. We believe that our methodology results in a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other employees. However, given the different methodologies that public companies will use to determine an estimate of their CEO pay ratio, the estimated CEO pay ratio reported above should not be used as a basis for comparison between us and other companies.

 

 

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Summary of Plans, Programs and Agreements

2017 Equity Incentive Plan

 

 

Our 2017 Equity Incentive Plan, or the 2017 Plan, which was approved by our stockholders on May 19, 2017, authorizes the grant of stock-based awards to our employees, directors and independent contractors and is administered by our independent Compensation Committee. The 2017 Plan will terminate on March 3, 2027 unless earlier terminated. A total of 10,000,000 shares of our Class A common stock have been reserved for issuance under the 2017 Plan. No person is eligible to be granted equity awards in the aggregate covering more than 3,300,000 shares during any fiscal year or cash awards in excess of $5,000,000 for any fiscal year. The number of shares issued or reserved pursuant to the 2017 Plan, or pursuant to outstanding awards, is subject to adjustment on account of a stock split of our outstanding shares, stock dividend, dividend payable in a form other than shares in an amount that has a material effect on the price of

the shares, consolidation, combination or reclassification of the shares, recapitalization, spin-off or other similar occurrence. Stock options and stock appreciation rights granted under the 2017 Plan are subject to a maximum term of ten years from the date of grant. All awards granted under the 2017 Plan are generally subject to a minimum three-year vesting schedule.

As of December 31, 2017, 5,573,842 shares remained available for future grants under the 2017 Plan (assuming the maximum number of shares that may be issued under our Adjusted EPS Equity Awards, rTSR Strategic Equity Awards and the rEPS Strategic Equity Awards currently outstanding as of such date will later be issued).

Recent Share Price. On March 20, 2018, the closing price of our common stock on the NYSE was $47.88 per share.

 

 

 

2012 Equity Incentive Plan

 

 

Our 2012 Equity Incentive Plan, or the 2012 Plan, which authorized the grant of stock-based awards to our employees, directors and independent contractors was terminated in May 2017 in connection with the adoption of our 2017 Plan, which is described above. Given that our 2012 Plan terminated in May 2017, no new awards may be granted thereunder. However, as of December 31, 2017, assuming the

maximum number of shares under our performance-based awards will later be issued, 5,829,189 outstanding restricted stock unit (RSU) awards granted under the 2012 Plan to acquire shares of our Class A common stock remain outstanding according to their terms, and we will continue to issue shares to the extent required under the terms of such outstanding awards.

 

 

Second Amended and Restated 2004 Stock Incentive Plan

 

 

Our 2004 Plan, which authorized the grant of stock-based awards to our employees, directors and consultants, was terminated in May 2012 in connection with the adoption of our 2012 Plan, which is described above. Given that our 2004 Plan terminated in May 2012, no new awards may be granted thereunder. However, as of December 31, 2017, stock options

(to acquire 5,658 of our shares) granted under the 2004 Plan prior to its termination remained outstanding according to their terms, and we will continue to issue shares under the 2004 Plan in respect of such outstanding awards to the extent required under their terms.

 

 

Executive Incentive Plan (“EIP”)

 

 

The purpose of the EIP is to advance our interests and the interests of our stockholders and to assist us in attracting and retaining executive officers by providing incentives and financial rewards to our executive officers that may be deductible as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code. We assume, given the current absence of official guidance to the contrary, that awards granted under the EIP prior to November 2, 2017 and that are paid or will vest after

December 31, 2017 will be treated as “grandfathered” such that the performance-based compensation exception to the deductibility limitations under Section 162(m) will continue to apply. There can be no assurance that such awards will in fact be grandfathered when official guidance is published. The principal features of the EIP are summarized below.

Administration; Amendment and Termination. Our Compensation Committee administers the EIP and has broad authority to interpret, amend or rescind its provisions as the

 

 

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Compensation Committee deems necessary and appropriate. Our Board reserves the right to amend or terminate the EIP at any time, subject to stockholder approval to the extent required by applicable law.

Eligibility. Our executive officers who are designated by our Board as “Section 16 officers” are eligible to participate in the EIP. Currently, there are nine executive officers designated as Section 16 officers.

Maximum Awards. Under the EIP, each participant is eligible to receive a maximum performance award (which may be cash or stock awards) equal to a percentage of our adjusted EBITDA for the applicable performance period. The percentage is equal to 2.25% for our CEO and 1.50% for each of our other participating executive officers. The actual performance award granted to an EIP participant is determined by our Compensation Committee, which retains the discretionary authority to reduce or eliminate (but not increase beyond the maximum award amount that may be granted to a participant under the EIP) an EIP performance award based on its consideration of, among other things, global or business line performance against budgeted financial goals, achievement of non-financial and strategic goals, economic and relative performance considerations and assessments of individual performance, including consideration of our EBP, which is described below under “Executive Bonus Plan.” The Compensation Committee may evaluate a participant’s performance against the foregoing considerations and thereby reduce the maximum award otherwise permissible for that participant under the EIP formula. Our Compensation Committee may also exercise its discretion in any year to award additional amounts based on performance outside the EBP, up to the maximum amounts permitted under the EIP.

The time period during which the achievement of the performance goals is to be measured shall be no longer than five years and no less than six months. Within the earlier of 90 days after the beginning of each fiscal year or the expiration of 25% of a performance period, our

Compensation Committee will designate one or more performance periods, determine the participants for such performance periods and affirm the applicability of the formula for determining each participant’s EIP award.

Each award under the EIP may be paid in cash, stock, restricted stock, stock options or other stock-based awards or stock-denominated units. An award shall be paid only after written certification by our Compensation Committee as to the attainment of the performance goals and the amount of the award.

Termination of Employment. Under the EIP, a participant who terminates employment with us due to retirement, disability or death during a performance period is eligible (but not guaranteed) to receive an award. An EIP participant who terminates employment with us due to retirement, disability or death following the end of a performance period but before awards relating to such performance period are paid is eligible (but not guaranteed) to receive the full award for such performance period. If an EIP participant terminates employment with us for any other reason (whether voluntary or involuntary) either during a performance period, or after a performance period but before awards relating to such performance period are paid, then under our EIP no award (or portion thereof) is payable or earned, unless the Compensation Committee otherwise determines. However, notwithstanding these EIP forfeiture provisions, our Severance Plan may provide for a severance payment in respect of an executive’s annual cash bonus award upon a qualifying termination of employment under certain terms and conditions as set forth herein. In addition, certain equity awards granted under the EIP provide for continued or accelerated vesting upon death, disability or retirement. We describe these severance and death, disability and retirement benefits in greater detail under the heading “Summary of Plans, Programs and Agreements—Severance Plan; Treatment of Death, Disability and Retirement Under 2014, 2015, 2016 and 2017 Equity Award Agreements; Treatment of Qualifying Termination and Retirement Under 2017 Strategic Equity Award Agreements” on page 63.

 

 

Executive Bonus Plan (“EBP”)

 

 

The EBP is designed to motivate and reward executives by aligning our annual performance awards with actual performance, and the amount of an EBP award is measured by the executive’s success against a combination of challenging financial and strategic performance measures established by the Compensation Committee. The principal features of the EBP are summarized below.

Eligibility. Our executives who are designated by our Board as “Section 16 officers” are eligible to participate in the EBP. Currently, there are nine executives designated as Section 16 officers.

Performance. Awards under the EBP are based on the achievement of certain financial and strategic performance goals and a targeted level or levels of performance with respect to those goals. Financial performance goals under the EBP are based on adjusted EBITDA performance, and target adjusted EBITDA goals are based on our internal financial and operating plan approved by our Board. The strategic performance measures are determined on an individual participant-by-participant basis and are based on the achievement of specific objectives in each participant’s area

 

 

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of responsibility. Strategic performance measures for the CEO and other EBP participants are approved by our Compensation Committee.

Award Determination. The Compensation Committee establishes a target award amount for each participant in the EBP early in the performance period, and the Compensation Committee determines the actual amount awarded after the conclusion of the fiscal year. The Compensation Committee may also determine to issue to our CEO a supplemental and

discretionary award under our EBP in exceptional and exceedingly deserving circumstances, and our CEO (subject to ratification by the Board or the Compensation Committee) may determine to issue to our other executive officers a

supplemental and discretionary bonus under the EBP in such circumstances. Our Compensation Committee and Board may exercise their discretion in any year to award additional amounts based on performance outside the EBP and up to the maximum amounts permitted under the EIP.

For a description of how the annual performance award payouts under the EBP were determined for 2017 as well as other features of the EBP, see “Compensation Discussion and Analysis—Components of Our Program—Elements of our compensation program” beginning on page 40 in our CD&A in this Proxy Statement. The process for calculating the strategic performance portion of the EBP award is also described in greater detail in that section.

 

 

Deferred Compensation Plan (“DCP”)

 

 

The DCP provides an opportunity for certain employees whose income exceed a certain threshold (including our executive officers) and non-employee directors to elect to defer a portion of their compensation to future years. The DCP is administered by our CEO or a committee of three or more individuals (the “DCP Committee”) selected by our CEO. The DCP Committee in its discretion will select which persons can participate in the DCP and the calendar year(s) in which they can participate. Participants in the DCP make an irrevocable election whether to defer a portion of their compensation with respect to a particular calendar year and whether to receive distributions of their deferred amounts (plus accrued interest) from a certain calendar year in: (i) a lump sum five years after the calendar year in which the election was made, unless the participant’s separation from service occurs prior to distribution; (ii) a lump sum seven years after the calendar year in which the election was made, unless the participant’s separation from service occurs prior to distribution; (iii) a lump sum six months after the participant’s separation from service; or (iv) equal annual installments over five years, with the first installment being

paid on July 15 of the calendar year following the year in which the participant’s separation from service occurs.

Deferred account balances accrue interest, and that interest is credited quarterly. The rate of interest is determined by the DCP Committee from time to time. In 2017, deferred account balances accrued interest at an annualized rate of 3.81% for the period from January 1, 2017 through March 31, 2017, 3.96% for the period from April 1, 2017 through June 30, 2017, 3.8% for the period from July 1, 2017 through September 30, 2017 and 3.65% for the period from October 1, 2017 through December 31, 2017, which represents a rate equal to the average quarterly Moody’s Seasoned AAA corporate bond yield for the prior quarter.

The DCP is an unfunded plan and is intended to comply both with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and with the Employee Retirement Income Security Act of 1974, as amended.

None of our named executive officers participated in, or had any account balance under, the DCP in 2017.

 

 

401(k) Plan

 

 

We maintain a tax-qualified 401(k) retirement plan. Most of our non-union U.S. employees, other than certain qualified real estate agents having the status of independent contractors under Internal Revenue Code Section 3508, are eligible to participate in this plan. The 401(k) plan provides for participant contributions as well as a company match. A participant is allowed to contribute to the 401(k) plan from 1% to 75% of his or her compensation, subject to limits imposed by applicable law. Participants are entitled to invest up to 25% of their 401(k) account balance in shares of our common stock, except that participants may not have more than 25% of their plan assets allocated to our common stock as measured at any year-end. As of December 31, 2017,

approximately 1.2 million shares of our common stock were held through investments in our 401(k) plan.

In 2017, we matched 50% of our employee’s contributions up to the first 6% of the employee’s annual compensation (up to $150,000 of compensation). For all 401(k) plan participants hired after January 1, 2007, our matching contributions in 2017 vested 20% for each year of service with the company in which they worked at least 1,000 hours, until they are 100% vested after five years of service. All 401(k) plan participants hired before January 1, 2007 have full and immediate vesting in our matching contributions.

 

 

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Severance Plan; Treatment of Death, Disability and Retirement Under 2014, 2015, 2016 and 2017 Equity Award Agreements; Treatment of Qualifying Termination and Retirement Under Strategic Equity Award Agreements

 

 

We have a Severance Plan for our executive officers in which all of our named executive officers participate, and as described below, provide for certain death, disability and retirement benefits for them in certain circumstances.

Severance Plan

We have a Severance Plan in which all of our executive officers participate, other than those executive officers from time to time who may be party to an employment agreement with the company that provides for severance pay. All of our named executive officers for 2017 participate in the Severance Plan. Participants in the Severance Plan (which we refer to as “Covered Employees” within this “Severance Plan” section) will not be eligible to participate in any other severance plan sponsored by us. Our CEO is designated as a “Tier I” participant, and all of our other current executive officers (including all of our named executive officers for 2017) are presently designated as “Tier II” participants under the Severance Plan. Covered Employees are eligible to receive under the Severance Plan (i) severance benefits upon a “Qualifying Termination” (which we describe below), including enhanced benefits for a Qualifying Termination that occurs within a window period surrounding a “Change in Control” (as defined in the Severance Plan) of the company, and (ii) accelerated and continued vesting in respect of equity awards held by them if they remain employed with us on the date of a change in control of the company, all subject to effective release of claims against the company, compliance with restrictive conditions, and certain other conditions.

We describe these severance benefits in detail immediately below.

Severance Benefits under Severance Plan

The Severance Plan provides the Covered Employee with the following severance payments and benefits upon a termination of employment either (1) by us other than for “Cause” and other than for “Poor Performance” or (2) by the Covered Employee for “Good Reason” (each such capitalized term as defined in the Severance Plan) (a “Qualifying Termination”):

 

 

a lump-sum cash payment equal to (a) 2.0 for the Tier I participant or 1.5 for Tier II participants, multiplied by (b) the sum of (1) the Covered Employee’s annual base salary plus (2) his or her target annual cash bonus award;

 

 

payment of a pro-rated portion of the Covered Employee’s annual cash bonus award for the year of termination (with the bonus calculated based on actual performance for our executive officers);

 

 

payment of any unpaid annual bonus in respect of a prior

   

fiscal year (or performance period already completed) that ended on or before the date of termination (without any requirement to remain employed through the payment date to earn such bonus);

 

 

continued health-care coverage for up to 18 months post-termination, with the Covered Employee paying active employee premium rates;

 

 

outplacement assistance for up to 12 months post-termination; and

 

 

vesting of equity awards as follows (unless the underlying equity award agreement provides for more favorable vesting, in which case such agreement shall control and except in the case of the Strategic Equity Awards, which are not subject to the Severance Plan):

 

   

If the Qualifying Termination occurs at any time outside of the Change in Control Protection Period (as defined below), accelerated vesting of a pro-rated portion of all outstanding unvested time-vesting equity awards or, if the award is subject to performance-based vesting conditions, continued eligibility to vest based on the actual achievement of the performance goals following the completion of the applicable performance period with respect to a pro-rated portion of all outstanding unvested performance-vesting equity awards, in each case, based on the number of days employed from the grant date through the date of termination plus an additional number of days corresponding to the Covered Employee’s severance multiple (24 months for the Tier I participant or 18 months for Tier II participants), subject to the following deferred equity delivery requirements:

 

   

50% of the accelerated portion of time-vesting restricted stock units or time-vesting restricted stock will be delivered on the date of termination and the remaining 50% will be delivered at the end of the applicable period during which the Covered Employee is subject to the restrictive conditions under the Severance Plan as described below (which is 24 months following the termination date for the Tier I participant and 18 months following the termination date for the Tier II participants) (such period is referred to herein as the “restricted period”), subject to the Covered Employee’s compliance with such restrictive conditions during the restricted period;

 

   

50% of the accelerated portion of shares underlying time-vesting options will be forfeited if the Covered Employee does not comply with the restrictive conditions under the Severance Plan during the applicable restricted period;

 

 

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With respect to the portion of performance-vesting restricted stock units or restricted stock that were subject to continued eligibility to vest and are actually earned based on the level of achievement of the applicable performance goals, 50% will be delivered at the end of the applicable performance period and the remaining 50% will be delivered at the later of the end of the performance period or the end of the restricted period, subject to the Covered Employee’s compliance with the restrictive conditions during the restricted period;

 

   

With respect to the portion of shares underlying performance-vesting options that were subject to continued eligibility to vest and are actually earned based on the level of achievement of the applicable performance goals, 50% will be forfeited if the Covered Employee does not comply with the restrictive conditions under the Severance Plan during the applicable restricted period; and

 

   

Notwithstanding the foregoing, if a Covered Employee exercises any time-vesting options or performance-vesting options during the restricted period applicable to such Covered Employee, then the shares acquired upon such exercise will be held by us and may not be sold or transferred by such Covered Employee before the end of such restricted period, and, if such Covered Employee does not comply with the restrictive conditions, each such share will be automatically repurchased by us at a price equal to the lower of the fair market value of such share and the exercise price per share of such option.

 

 

If the Qualifying Termination occurs upon, within 120 days prior to or within two years following, a Change in Control (the “Change in Control Protection Period”), immediate and fully accelerated vesting of all outstanding unvested equity awards (or their as-assumed, -converted or -replaced awards as described below under “Severance Plan Treatment of Equity Awards Held by Non-Terminated Participants upon a Change in Control”) (and, if the award is subject to performance-based vesting conditions, the Compensation Committee will determine the number of shares subject to the award based on the projected achievement of the performance goals after taking into account actual achievement through the date of such Change in Control), with none of the equity underlying the to-be-vested awards subject to deferred delivery.

The Covered Employee’s receipt of severance payments and benefits under the Severance Plan is conditioned upon his or her execution of an effective release of claims against the company and compliance with restrictive conditions set forth in the Severance Plan, including a condition prohibiting the solicitation of the company’s customers and employees that remains in effect for a specified period following termination. This restricted period is 24 months for the Tier I participant and 18 months for the Tier II participants, as such period may

be reduced or eliminated (x) by the Compensation Committee or (y) if and to the extent required to comply with the laws of the jurisdiction in which the Covered Employee was primarily providing services to the company immediately prior to such termination.

Severance Plan Treatment of Equity Awards Held by Non-Terminated Participants upon a Change in Control

The Severance Plan provides that if the Covered Employee remains employed on the date on which a Change in Control occurs, then:

 

 

with respect to any outstanding time-vesting equity awards held by the Covered Employee (other than the Time Vesting Strategic Equity Awards, which are not subject to the Severance Plan):

 

   

if the company’s successor does not assume, convert or replace such awards with publicly-traded equity securities (or their equivalent) having an equivalent value (and vesting schedule), the awards, to the extent unvested, will immediately vest in full; or

 

   

if the company’s successor so assumes, converts or replaces such awards, the awards will remain subject to vesting in accordance with their terms (including the provisions described above regarding the treatment of such award upon a Qualifying Termination); and

 

 

with respect to any outstanding performance-vesting equity awards held by the Covered Employee (other than the rTSR Strategic Equity Awards and the rEPS Strategic Equity Awards, neither of which are subject to the Severance Plan), the Compensation Committee will determine the projected achievement of the performance goals upon such Change in Control after taking into account actual achievement through the date of such Change in Control, and such projected performance will be used to determine the number of options or shares subject to such award that will remain eligible to vest as provided below (such options or shares, the “Vesting Eligible Shares”) (any shares that do not remain eligible to vest based on the Compensation Committee’s determination of projected performance being automatically forfeited on the date of such Change in Control); and

 

   

if the company’s successor does not assume, convert or replace the performance-based equity award of Vesting Eligible Shares, then each outstanding Vesting Eligible Share subject to such award will immediately vest in full; or

 

   

if the company’s successor so assumes, converts or replaces the performance-based equity award of Vesting Eligible Shares, then each outstanding award will convert into a time-vesting equity award that will vest in full on the date that the award would otherwise have fully vested in accordance with its terms (subject to the provisions described above regarding the treatment of such award upon a Qualifying Termination).

 

 

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Hypothetical December 29, 2017 Termination under our Severance Plan

In the hypothetical event that any of our named executive officers for 2017 incurred a Qualifying Termination on December 29, 2017, they would have received the following severance benefits under the Severance Plan in the case of each of our named executive officers:

 

Name         

Cash

Severance

($)

    Pro-Rata
Bonus(1)
($)
    

Accelerated
Vesting of
RSUs(2)

($)

    

Health and
Welfare
Benefits(3)

($)

    

Total*

($)

 

  Robert E. Sulentic

   No Change in Control      5,940,000 (4)      2,485,824        11,951,654        20,929        20,398,407  
   During Change in Control Protection Period      5,940,000 (4)      2,485,824        13,433,333        20,929        21,880,086  

  James R. Groch

   No Change in Control      2,887,500 (5)      1,586,512        7,076,508        25,255        11,575,775  
   During Change in Control Protection Period      2,887,500 (5)      1,586,512        8,894,272        25,255        13,393,539  

  Michael J. Lafitte

   No Change in Control      2,625,000 (5)      1,480,560        5,503,315        26,466        9,635,341  
   During Change in Control Protection Period      2,625,000 (5)      1,480,560        6,909,071        26,466        11,041,097  

  Calvin W. Frese, Jr.

   No Change in Control      2,625,000 (5)      1,305,920        5,395,387        20,929        9,347,236  
   During Change in Control Protection Period      2,625,000 (5)      1,305,920        6,785,421        20,929