DEF 14A 1 def14a.htm DEF 14A gkos_Current_Folio_Proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
 

 

Filed by the Registrant

Filed by a Party other than the Registrant

 

Check the appropriate box:

 

 

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Under §240.14a-12

 

 

 

 

 

 

GLAUKOS CORPORATION

(Name of Registrant as Specified In Its Charter)

 

 

 

 

Not applicable

 

 

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

 

 

 

 

 

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Thursday, May 30, 2019
9:00 a.m. Pacific Time

 

 

 

How to Participate:

   

Our annual meeting will be a completely virtual meeting of stockholders.  To participate, vote or submit questions during the annual meeting via live webcast, please visit:  www.virtualshareholdermeeting.com/GKOS2019.  You will not be able to attend the annual meeting in person.

Items of Business:

 

(1)   Elect the two directors named in the accompanying Proxy Statement to serve until the Company’s 2022 annual meeting of stockholders and until their respective successors are duly elected and qualified;

(2)   Approve, on an advisory basis, the compensation of the Company’s named executive officers;

(3)   Ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019;  and

(4)   Transact such other business as may properly come before the meeting or any postponements or adjournments thereof.

Who May Vote:

 

Stockholders of record at the close of business on April 4, 2019.

 

Your vote is important to us. Whether or not you expect to attend the annual meeting via live webcast, please submit a proxy as soon as possible to instruct how your shares are to be voted at the annual meeting. If you participate in and vote your shares at the annual meeting, your proxy will not be used.

 

 

 

 

By Order of the Board of Directors,

 

 

 

Picture 48

 

Robert L. Davis

 

Senior Vice President, General Counsel & Secretary

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

Important Notice Regarding Internet Availability of Proxy Materials

1

 

 

Meeting Information

2

 

 

Proposal 1 — Election of Directors

3

 

 

Corporate Governance

8

 

 

Executive Officers of the Company

18

 

 

Proposal 2 — Advisory Approval of Named Executive Officer Compensation

19

 

 

Executive Compensation

20

Compensation Discussion and Analysis

20

Compensation Committee Report

39

Summary Compensation Table for Fiscal Years 2018, 2017 and 2016

40

Executive Employment Offer Letters

40

2018 Grants of Plan-Based Awards

41

Outstanding Equity Awards at 2018 Fiscal Year-End

42

Option Exercises and Stock Vested in Fiscal 2018

42

Nonqualified Deferred Compensation Plans

43

Potential Payments Upon Termination or Change in Control

44

Employee Benefit and Stock Plans

45

 

 

Compensation Committee Interlocks and Insider Participation

50

 

 

CEO Pay Ratio

50

 

 

Director Compensation

51

 

 

Equity Compensation Plan Information

54

 

 

Security Ownership of Certain Beneficial Owners and Management

55

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

58

 

 

Report of the Audit Committee

59

 

 

Proposal 3 — Ratification of Independent Registered Public Accounting Firm

60

 

 

Transactions with Related Persons

62

 

 

Proposals of Stockholders and Director Nominations for 2020 Annual Meeting

64

 

 

Other Matters

65

 

 

Annual Report to Stockholders

65

 

 

Questions and Answers About the Proxy Materials and Annual Meeting

66

 

 

 

 

 


 

 

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229 Avenida Fabricante
San Clemente, California 92672

 

PROXY STATEMENT

 

Annual Meeting of Stockholders

To Be Held May 30, 2019

 

Our Board of Directors is soliciting your proxy for the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, May 30, 2019, at 9:00 a.m. Pacific Time, and at any and all postponements or adjournments of the Annual Meeting, for the purposes set forth in the Notice of Annual Meeting of Stockholders accompanying this Proxy Statement.  This Proxy Statement and our 2018 Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”) are first being made available to stockholders on or about April 17, 2019.

 

We will be hosting the Annual Meeting via live webcast on the Internet.  Any stockholder can listen to and participate in the Annual Meeting live via the Internet at www.virtualshareholdermeeting.com/GKOS2019Stockholders may vote and ask questions while connected to the Annual Meeting on the Internet.

 

You will not be able to attend the Annual Meeting in person.

 

Unless the context otherwise requires, references in this Proxy Statement to “Company,” “we,” “our,” “us,” and similar terms refer to Glaukos Corporation, a Delaware corporation.

 

 

IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS

This Proxy Statement and our 2018 Annual Report on Form 10-K are available on the Internet at www.proxyvote.com.  These materials are also available on our corporate website at http://investors.glaukos.com. The other information on our corporate website does not constitute part of this Proxy Statement.

 

 

 

 

 

 

 

 

GLAUKOS CORPORATION   

  2019 PROXY STATEMENT

  1

 


 

MEETING INFORMATION

 

Annual Meeting of Stockholders

 

 

 

 

Picture 3

Picture 14

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TIME AND DATE

PLACE

RECORD DATE

9:00 a.m. Pacific Time

on Thursday, May 30, 2019

The Annual Meeting will be hosted
via live webcast on the Internet at
www.virtualshareholdermeeting.com/GKOS2019.

April 4, 2019

 

Voting

Stockholders as of the record date are entitled to vote.

 

 

Picture 16

Vote by Internet at 
www.virtualshareholdermeeting.com/GKOS2019    

 

Vote during the meeting via the Internet at www.virtualshareholdermeeting.com/GKOS2019.

 

Voting Matters

 

 

 

 

 

 

PROPOSALS

 

BOARD
RECOMMENDATION

1

 

Election of Directors

 

FOR ALL
director nominees

 

 

 

 

 

2

 

Approve, on an advisory basis, the compensation of the Company’s named executive officers.

 

FOR

 

 

 

 

 

3

 

Ratification of Independent Registered Public Accounting Firm

 

FOR

 

 

 

 

 

 

 

2  

2019 PROXY STATEMENT

  GLAUKOS CORPORATION

 


 

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

 

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL” OF THE DIRECTOR NOMINEES. UNLESS OTHERWISE INSTRUCTED, THE PROXY HOLDERS WILL VOTE THE PROXIES RECEIVED BY THEM “FOR ALL” THE DIRECTOR NOMINEES.

 

Our Board of Directors (“Board” or “Board of Directors”) is currently comprised of seven directors. Under our Certificate of Incorporation, our Board of Directors is divided into three classes, each serving a staggered three-year term and with one class being elected at each year’s annual meeting of stockholders as follows:

 

·

the Class I directors are Mark J. Foley and David F. Hoffmeister, and their terms will expire at the Annual Meeting;

 

·

the Class II directors are William J. Link, Ph.D. and Aimee S. Weisner, and their terms expire at the 2020 annual meeting of stockholders; and

 

·

the Class III directors are Thomas W. Burns, Gilbert H. Kliman, M.D. and Marc A. Stapley, and their terms will expire at the 2021 annual meeting of stockholders.

 

Jonathan T. Silverstein served as a Class II director during our 2018 fiscal year until he resigned from the Board of Directors on March 14, 2018.  At the time of his resignation, the Board of Directors reduced the number of directors on the Board of Directors to seven. Upon the recommendation of the Compensation, Nominating and Governance Committee (the “Compensation Committee”), the Board of Directors has nominated each of Mark J. Foley and David F. Hoffmeister for election to our Board of Directors as Class I directors to serve until the 2022 annual meeting of stockholders and until their respective successors are duly elected and qualified. Proxies may only be voted for the two Class I directors nominated for election at the Annual Meeting.

 

Each of the director nominees has consented to being named in this Proxy Statement and to serving as a director, if elected. We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, the proxy holders will vote the proxies received by them for another person nominated as a substitute by the Board of Directors, or the Board of Directors may reduce the number of directors on the Board.

 

Biographical Descriptions

 

Set forth below is biographical information about each of our directors and director nominees. The information below is provided as of April 4, 2019. The primary experience, qualifications, attributes and skills of each of our director nominees that led to the conclusion of the Compensation Committee and the Board of Directors that such nominee should serve as a member of the Board of Directors are also described below.

 

 

 

 

 

GLAUKOS CORPORATION  

  2019 PROXY STATEMENT

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Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

Nominees for Election as Class I Directors at the Annual Meeting

 

MARK J. FOLEY

Picture 1 

 

Class I

Age: 53

Director Since:

2014

 

POSITION AND BUSINESS EXPERIENCE

 

Mr. Foley was the chairman, president and chief executive officer of ZELTIQ Aesthetics, Inc., a medical technology company, prior to its acquisition by Allergan plc in April 2017. Prior to becoming ZELTIQ’s chief executive officer in 2012, Mr. Foley served on its board of directors and held the position of executive chairman from July 2009 to May 2010. Mr. Foley also served as executive chairman at Onpharma Inc. from August 2009 until its acquisition by Valeant Pharmaceuticals International, Inc. in March 2014. Mr. Foley has served as a managing director at RWI Ventures, Inc. since 2004, where he focuses on healthcare investments. Prior to this, Mr. Foley held a variety of operating roles in large, public companies and venture-backed startups including United States Surgical Corporation, Guidant Corporation, Devices for Vascular Intervention, Inc. (acquired by Eli Lilly and Company), Perclose, Inc. (acquired by Abbott Laboratories) and Ventrica, Inc. (acquired by Medtronic, Inc.) where he was the founder and chief executive officer. Mr. Foley has over 25 years of medical device operating, investment and chief executive officer experience. Mr. Foley currently serves as the chairman of the audit committee for Revance Therapeutics, Inc. (Nasdaq: RVNC). Mr. Foley holds a B.A. from the University of Notre Dame.

 

KEY ATTRIBUTES

 

We believe Mr. Foley’s previous medical device experience as a senior executive and his service on the boards of several medical device companies qualify him to serve on our Board of Directors.

 

DAVID F. HOFFMEISTER

Picture 5 

 

Class I

Age: 64

Director Since:

2014

 

POSITION AND BUSINESS EXPERIENCE

 

Mr. Hoffmeister served as the senior vice president and chief financial officer of Life Technologies Corporation, a global life sciences company, prior to its acquisition by Thermo Fisher Scientific Inc. in February 2014. From October 2004 to November 2008, he served as chief financial officer of Invitrogen Corporation, which merged with Applied Biosystems Inc. in November 2008 to form Life Technologies Corporation. Before joining Invitrogen, Mr. Hoffmeister spent 20 years with McKinsey & Company as a senior partner serving clients in the healthcare, private equity and chemical industries on issues of strategy and organization. From 1998 to 2003, Mr. Hoffmeister was the leader of McKinsey’s North American chemical practice. Mr. Hoffmeister currently serves on the boards of directors of Celanese Corporation (NYSE: CE), ICU Medical, Inc. (Nasdaq: ICUI) and Kaiser Permanente. Mr. Hoffmeister holds a B.S. from the University of Minnesota and an M.B.A. from the University of Chicago.

 

KEY ATTRIBUTES

 

We believe Mr. Hoffmeister’s strong finance background, experience as a chief financial officer of a global biotechnology company, and public company board experience qualify him to serve on our Board of Directors.

 

 

 

 

 

 

2019 PROXY STATEMENT

  GLAUKOS CORPORATION

 


 

Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

All Other Continuing Directors

 

AIMEE S. WEISNER

Picture 6 

 

Class II

Age: 50

Director Since:

2014

 

POSITION AND BUSINESS EXPERIENCE

 

Ms. Weisner has been corporate vice president, general counsel of Edwards Lifesciences Corporation since January 2011. From 2009 to 2010, she was engaged in private practice and served as legal advisor to public pharmaceutical and medical device companies located in Southern California. Prior to this, from 2002 to 2009, Ms. Weisner served in a number of positions at Advanced Medical Optics, Inc. (acquired by Abbott Laboratories), including executive vice president, administration and secretary. From 1998 to 2002, Ms. Weisner served in a number of positions at Allergan, Inc., including vice president, assistant general counsel and assistant secretary. Ms. Weisner holds a B.A. from California State University, Fullerton, a J.D. from Loyola Law School, Los Angeles, and began her legal career as an associate at the law firm of O’Melveny & Myers LLP.

 

KEY ATTRIBUTES

 

We believe Ms. Weisner’s extensive in-house legal and compliance experience with different medical device companies, including an in-depth understanding of regulatory and reimbursement issues, intellectual property, corporate governance, risk management, corporate transactions, human resources, and internal audit, qualify her to serve on our Board of Directors.

 

WILLIAM J. LINK

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Class II

Age: 73

Director Since:

2001

 

POSITION AND BUSINESS EXPERIENCE

 

Dr. Link has served as chairman of our Board of Directors since June 2001. Dr. Link has also been a member of the board of directors of DOSE Medical Corporation since October 2009. Dr. Link has a proven record of building and operating large, successful medical product companies. He has extensive knowledge of medical devices and drug delivery, particularly in ophthalmology, and his operating experience spans 25 years in general management in the healthcare industry. Dr. Link is a managing director and co-founder of Versant Ventures Management LLC, a venture capital firm investing in early stage healthcare companies. Prior to co-founding Versant Ventures in 1999, Dr. Link was a general partner at Brentwood Venture Capital. From 1986 to 1997, Dr. Link was founder, chairman, and chief executive officer of Chiron Vision Corporation (acquired by Bausch & Lomb, Inc.). He also founded and served as President of American Medical Optics, Inc. (acquired by Allergan, Inc.). Dr. Link served as a director of Advanced Medical Optics, Inc. (acquired by Abbott Laboratories) from 2002 to 2009 and a director of Inogen, Inc. from 2003 to February 2014. Before entering the healthcare industry, Dr. Link was an assistant professor in the Department of Surgery at the Indiana University School of Medicine. He has been a member of the board of directors of Edwards Lifesciences Corporation (NYSE: EW) since May 2009 and Second Sight Medical Products, Inc. (Nasdaq: EYES) since 2004. Dr. Link holds a B.S., an M.S., and a Ph.D. in mechanical engineering from Purdue University.

 

KEY ATTRIBUTES

 

We believe Dr. Link’s experience in identifying new business opportunities and successfully commercializing products in the medical device industry, as well as his prior experience on the boards of U.S. public companies, qualify him to serve on our Board of Directors.

 

 

 

 

 

GLAUKOS CORPORATION  

  2019 PROXY STATEMENT

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Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

THOMAS W. BURNS

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Class III

Age: 58

Director Since:
2002

 

POSITION AND BUSINESS EXPERIENCE

 

Mr. Burns has served as our President, Chief Executive Officer and as a member of our Board of Directors since March 2002. Mr. Burns has also been a member of the board of directors of DOSE Medical Corporation, serving as its chairman of the board, since October 2009 and served as its chief executive officer and president from March 2010 until June 2015. Mr. Burns has a proven record of building successful medical device and pharmaceutical businesses and creating successful new markets in ophthalmology. Mr. Burns has more than 25 years of direct ophthalmic management experience, including over 20 years of general management experience across a broad range of ophthalmic medical devices, ophthalmic pharmaceuticals, drug delivery technologies, surgical products and over-the-counter products. Prior to joining our Company, Mr. Burns led Eyetech Pharmaceuticals, Inc. (acquired by OSI Pharmaceuticals, Inc.) as its president and chief operating officer, and as a director. From 1990 to 1997, Mr. Burns served as senior vice president and general manager of Chiron Vision Corporation (acquired by Bausch & Lomb, Inc.), and then as vice president, global strategy and general manager, refractive surgery, of Bausch & Lomb from 1998 to 2000. Mr. Burns has also served as an entrepreneur in residence at Versant Ventures Management, LLC. Mr. Burns received a B.A. from Yale University. Mr. Burns currently serves as a director and as the chair of the compensation committee on the board of Avedro, Inc. (Nasdaq: AVDR).

 

KEY ATTRIBUTES

 

We believe Mr. Burns’ extensive understanding of our business, operations and strategy, as well as significant industry experience and corporate management skills and experience, qualify him to serve on our Board of Directors.

 

GILBERT H. KLIMAN

Picture 10 

 

Class III

Age: 60

Director Since:

2007

 

POSITION AND BUSINESS EXPERIENCE

 

Dr. Kliman has been a partner at InterWest Partners, a venture capital firm and one of our principal stockholders, since 1996 and has been a managing director there since 1999. Dr. Kliman served on the board of directors of two public companies: Epocrates, Inc. (acquired by athenahealth, Inc.) between September 1999 and April 2011, and IntraLase Corp. (acquired by Advanced Medical Optics, Inc.) between October 2000 and April 2007. From 1995 to 1996, Dr. Kliman was an investment manager at Norwest Venture Partners, a venture capital firm. From 1989 to 1992, Dr. Kliman served as an associate at TA Associates, a private equity investment firm. Dr. Kliman holds a B.A. from Harvard University, an M.D. from the University of Pennsylvania and an M.B.A. from the Stanford Graduate School of Business. Dr. Kliman currently serves as a director of a number of private life science and healthcare IT companies, and serves as a director on the board and compensation committee of Avedro, Inc. (Nasdaq: AVDR), and as a director on the board and the audit committee of Restoration Robotics, Inc. (Nasdaq: HAIR).

 

KEY ATTRIBUTES

 

We believe Dr. Kliman’s prior experience as a practicing ophthalmologist, as well as his significant experience in financial markets and prior experience on the board of two U.S. public companies and various private healthcare companies, qualify him to serve on our Board of Directors.

 

 

 

 

 

 

2019 PROXY STATEMENT

  GLAUKOS CORPORATION

 


 

Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

MARC A. STAPLEY

Picture 30 

 

Class III

Age: 49

Director Since:

2014

 

POSITION AND BUSINESS EXPERIENCE

 

Mr. Stapley has served as a member of our Board of Directors since 2014. He was the executive vice president, strategy and corporate development at Illumina, Inc., where he was responsible for corporate strategy, corporate and business development and global infrastructure, from 2017 to January 2019. Previously, Mr. Stapley served as Illumina’s chief administrative officer, senior vice president and chief financial officer. He was also a member of Illumina’s executive management team, responsible for directing all aspects of the company’s strategy, planning and operations. Before joining Illumina in 2012, from 2009 to 2012, Mr. Stapley was senior vice president, finance at Pfizer Inc. and was responsible for global financial processes and systems, leading integration efforts in both the Wyeth Ltd. and King Pharmaceutical, Inc. acquisitions and providing oversight to the company’s largest technology investment program. Prior to Pfizer, he served in a variety of senior finance roles at Alcatel-Lucent, including Americas chief financial officer. He also worked as finance director and controller for several groups at Cadence Design Systems, Inc. He began his career as an Auditor at Coopers & Lybrand. Mr. Stapley is currently a member of the board of directors for Helix. He also serves on the board of Premier Foods, Inc., a private restaurant chain. He holds a B.Sc. (Honors) from The University of Reading (England) and is a member of the Institute of Chartered Accountants in England and Wales.

 

KEY ATTRIBUTES

 

We believe Mr. Stapley’s extensive experience in senior finance positions with public companies qualifies him to serve on our Board of Directors.

 

 

Each of our directors’ specific skills and experiences are included in the table below and described more fully in their individual biographies. However, even though a particular skill may not be indicated below, our directors often have some level of experience in each of the areas listed.

 

 

 

 

 

 

 

 

 

Business or Professional
Experience/Skills/Attributes

Thomas W.
Burns

William J.
Link

Mark J.
Foley

David F. Hoffmeister  

Gilbert H. Kliman, M.D. 

Marc A. Stapley  

Aimee S. Weisner    

Executive Leadership

Governance and Compliance

Other Public Co. Board Service

 

 

Accounting and Auditing

 

 

Capital Management

 

Mergers and Acquisitions

Regulatory & Risk Management

 

 

Commercialization and International

 

Legal and Human Resources

 

 

 

Medtech

Ophthalmology

 

 

 

 

 

 

 

 

 

GLAUKOS CORPORATION  

  2019 PROXY STATEMENT

 7

 


 

CORPORATE GOVERNANCE

 

Corporate Governance Guidelines

 

Our Board of Directors, on the recommendation of the Compensation Committee, has adopted Corporate Governance Guidelines to assist the Board in the discharge of its duties and to set forth the Board of Directors’ current views with respect to selected corporate governance matters considered significant to our stockholders. Our Corporate Governance Guidelines direct our Board’s actions with respect to, among other things, our Board composition and director qualifications, responsibilities of directors, director compensation, director orientation and continuing education, succession planning and the Board’s annual performance evaluation. A current copy of our Corporate Governance Guidelines is available under “Corporate Governance” on our website at http://investors.glaukos.com.

 

Stockholder Engagement and Responsiveness

 

67%

Stockholder Engagement

 

Since our IPO in 2015, we have conducted regular outreach to our stockholders to build relationships, explain our corporate governance structure and executive compensation policies, and receive valuable feedback on matters that are important to them.

 

At our 2018 Annual Meeting of Stockholders (“2018 Annual Meeting”), our stockholders approved, by a non-binding, advisory vote, the compensation of our Named Executive Officers. This ballot item, known as a “say-on-pay” proposal, passed by a 69.9% majority of the votes cast. Following the 2018 Annual Meeting, we engaged with our stockholders regarding our executive compensation policies and corporate governance structure. During this outreach, members of our management team spoke with stockholders collectively owning over 67% of our outstanding stock (excluding officers and directors). These included 14 of our top 20 stockholders. The Chairman of our Compensation Committee joined and participated in discussions with stockholders collectively owning nearly 50% of our outstanding stock.

 

The stockholders with whom we spoke expressed broad support for our governance practices and understood the importance of having certain governance protections, such as a classified Board, for a company that is still in a new product development phase and has its greatest opportunity for creating stockholder value in its future. Our stockholders also conveyed broad general support for the Company’s executive compensation program, including the size and structure of equity grants, recognizing that time-based stock option grants have a performance-based component in that they only have value if the Company’s stock price increases after the grant date.  While our stockholders who did not support our say-on-pay vote did not confirm for us why they withheld support, some of them did provide feedback on our executive compensation program which was communicated to the entire Board of Directors and formed the basis for substantive discussions at the Board of Directors and Committee level.

 

Specifically, one major stockholder expressed a desire that long-term equity compensation for our Named Executive Officers contain at least a portion of performance-based equity, to enhance the alignment of executives’ and stockholders’ interests. Several stockholders also noted their preference for certain ‘best practice’ compensation policies, such as stockholder ownership guidelines and clawback rights, to ensure executive accountability and enhanced alignment of executives’ and stockholders’ interests.  Additionally, in the shareholder outreach campaign we conducted in late 2017 and prior to our 2018 Annual Meeting, we received feedback from a shareholder requesting a tie between executive bonus compensation and both financial performance and stock price performance.  This stockholder also requested that we modify the executive bonus structure to place greater weight on achieving the net sales financial objective to emphasize the paramount importance, at this stage of the Company’s development, of continued growth of the Company through increased sales and revenue.

 

 

 

 

 

 

2019 PROXY STATEMENT

  GLAUKOS CORPORATION

 


 

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CORPORATE GOVERNANCE

Several stockholders also expressed interest in seeing enhanced disclosure regarding corporate social responsibility, specifically focusing on human rights and workplace diversity.

 

Based on stockholder feedback received in our 2018 and 2017 engagement campaigns, as well as our 2018 say-on-pay vote results, the Compensation Committee and Board responded by taking the following actions:

 

SAY ON PAY RESPONSIVENESS

 

Stockholder Feedback

Responsive Action Taken

Impact of Action

A portion of Company’s long-term equity compensation should be performance-based for executive officers

     Performance-Based Equity grants introduced as a component of our 2019 long-term incentive compensation for our executive officers, decreasing the proportion of time-based equity received

Incentivizes executive achievement of important Company strategic and operational goals that create value for stockholders

Company should adopt best practice of requiring executive officers to hold a designated amount of Company stock

    Stock Ownership Policy adopted (effective 2019) for executive officers (and directors) that requires each to own Company common stock with a value equal to a multiple of his or her annual base salary (or retainer fee)

Creates alignment of executives’ (and directors’) interests with those of long-term stockholders

Company should adopt best practice of requiring recoupment of incentive compensation earned based on erroneous financial data

    Clawback Policy adopted (effective 2018) that requires executive officers to reimburse any incentive compensation payments received based upon the achievement of financial results that were subsequently restated due to noncompliance

Increases executive accountability and mitigates risk inherent in incentive compensation structure

Company should create a tie between bonus opportunity payouts and stock price performance

    Equity Election Option adopted for our senior leadership team beginning in 2018, allowing our officers to elect to receive their annual bonus in the form of restricted stock units rather than cash. CEO linked 100% of his bonus to stock performance for 2018 and 2019 by electing to receive restricted stock units rather than cash

Further aligns executives’ interests with those of long-term stockholders

Company should place greater weight on achievement of net sales targets to emphasize continued growth of the Company through sales and revenue, and tie bonus payments to financial performance

    Financial Performance Adjustment Factor added to short-term incentive compensation beginning in 2018, which places greater weight on achieving net sales financial objective by decreasing or increasing bonus payout based upon under- or overachievement of key net sales corporate objective

Focuses executives on paramount importance of continued growth of the Company by increasing revenue, creating enhanced value for stockholders

Company should disclose its corporate social responsibility and commitment to human rights and workplace diversity

    Human and Workplace Rights Policy and Supplier Code of Conduct adopted in 2019, documenting our efforts to uphold the rights of all people and create a safe and fair workplace free from discrimination and harassment, and our expectations that our direct suppliers conduct operations in a similar ethical and humane manner

Documents our commitment to respecting human rights, creating equal opportunity for all workers, maintaining a diverse workplace and sourcing components from ethical, humane and responsible suppliers

 

When 2019 executive compensation was determined in March 2019, the Compensation Committee responded to the feedback received from stockholders in its shareholder engagement campaign and introduced performance-based restricted stock units (“PBRSUs”) to our senior leadership team, including our Named Executive Officers, as a component of long-term incentive compensation, thus reducing the number of time-based options issued. These PBRSUs will only vest upon the achievement of a pre-determined

 

 

 

 

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operational metric, described below, that will help drive the Company’s long-term value by expanding the Company’s customer base and, therefore, its potential sales.

 

Based upon feedback received from stockholders regarding compensation best practices, the Compensation Committee also adopted an incentive compensation recapture policy, also known as a “clawback” policy and described in greater detail under “Compensation Discussion and Analysis—Clawback Policy” below, that allows the Compensation Committee to require reimbursement from an executive officer of the Company of any cash or equity incentive compensation that was paid based upon the achievement of financial results that are restated due to noncompliance.

 

In response to input from stockholders regarding compensation best practices, the Compensation Committee also adopted a stock ownership policy, described under “Compensation Discussion and Analysis—Stock Ownership Policy Applicable to Executive Officers” below, pursuant to which our Chief Executive Officer is required to own shares of the Company’s common stock with a value of at least six times his annual base salary, and our other executive officers, including the other Named Executive Officers, are required to own shares of our common stock with a value of at least three times their individual annual base salary.  Under this policy, our non-employee directors are also required to own Company common stock with a value of at least six times their annual retainer. As of April 4, 2019, all of our Named Executive Officers and directors were in compliance with this policy.

 

An equity election option was adopted in 2018 in response to stockholder feedback received during 2017 requesting a tie between executive bonus compensation and stock price performance. Pursuant to this election option, the Compensation Committee provided senior leaders, including our Named Executive Officers, with the option to elect to receive all or a portion of their annual bonus opportunity in the form of RSUs rather than cash, allowing them to further align their interests with those of our stockholders.  For his 2018 and 2019 bonuses, our Chief Executive Officer, Mr. Burns, elected to receive 100% of his bonus in the form of RSUs, directly linking his bonus payout to the performance of our stock.

 

Based upon the feedback received from a stockholder requesting a tie between financial performance and bonus compensation to emphasize the paramount importance of continual Company growth through increased net sales, the Compensation Committee adopted a financial performance adjustment factor for 2018 short-term incentive compensation (which will continue for 2019 as well) that places greater weight on achieving the net sales financial objective by decreasing or increasing bonus payout based upon under- or overachievement of our key net sales corporate objective. This adjustment factor is intended to focus executives on the continued growth of the Company by increasing revenue, creating enhanced value for stockholders by growing the Company’s top line.

 

Based on stockholder input emphasizing the importance of corporate social responsibility through human rights and workplace diversity, in 2019 we adopted a Human and Workplace Rights Policy (the “Human Rights Policy”) and a Supplier Code of Conduct (the “Supplier Code”). Pursuant to the Human Rights Policy, we strive to uphold the rights of all people and create a safe and fair workplace free from discrimination and harassment and achieve a diverse workforce that provides equal opportunity regardless of race, gender, national origin or sexual orientation.  The Supplier Code requires our direct suppliers to treat their employees and operate their businesses in a responsible, ethical and humane manner.

 

The Company and the Compensation Committee listen to the input we receive from our stockholders, with the intention of responding to that input in an appropriate and thoughtful manner that takes into account the Company’s stage in its development cycle and its needs from a leadership and operational perspective. We believe we have responded fully and appropriately to the feedback received from stockholders through these outreach campaigns. We intend to continue the dialogue with our stockholders on these and other matters to ensure the Board of Directors is apprised of their views and governance and compensation best practices more broadly.  In addition, our Board of Directors will regularly review the Company’s current corporate governance structure to ensure it continues to align the interest of the Company with its stockholders, and consider appropriate governance changes as the Company matures, including potentially de-classifying the Board.

 

 

 

 

 

 

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Director Independence

 

Under the rules of the New York Stock Exchange (the “NYSE”) and our Corporate Governance Guidelines, independent directors must comprise a majority of our Board of Directors. Under the NYSE rules, a director will only qualify as an “independent director” if our Board of Directors affirmatively determines that the director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us).

 

Our Board of Directors reviewed its composition and the independence of our directors and considered whether any director has a material relationship with us that could interfere with his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board of Directors has determined that each of Messrs. Foley, Hoffmeister and Stapley, Drs. Kliman and Link, and Ms. Weisner is “independent” as that term is defined under the rules of the NYSE. Mr. Burns is not an independent director as a result of his position as our President and Chief Executive Officer. Our Board of Directors also previously determined that Mr. Silverstein, who ceased serving as a member of the Board of Directors effective March 14, 2018, was “independent” as that term is defined under the rules of the NYSE during the period of his service on our Board of Directors following our initial public offering.

 

In making these determinations, our Board of Directors considered the relationships that each non‑employee director has with us and all other facts and circumstances our Board of Directors deemed relevant in determining independence, including, without limitation, the affiliation Dr. Link, Dr. Kliman and Mr. Silverstein have or had with entities that previously owned more than 5% of our common stock.

 

Board Leadership Structure

 

We have no policy requiring either that the positions of the Chairman of the Board and our Chief Executive Officer be separate or that they be occupied by the same individual. Our Board of Directors believes that it is important to retain flexibility to allocate the responsibilities of the offices of the Chairman of the Board and Chief Executive Officer in a way that is in our best interests and the best interests of our stockholders at a given point in time. We currently separate the roles of Chief Executive Officer and Chairman of the Board, and Dr. Link, an independent director, currently serves as Chairman of the Board.

 

The Board recognizes that the roles of Chief Executive Officer and Chairman of the Board are distinct. While the Chief Executive Officer is responsible for setting our strategic direction and for our day-to-day leadership and performance, the Chairman of the Board provides guidance to the Chief Executive Officer and sets the agenda for, and presides over, meetings of the Board of Directors. The Board believes that participation of the Chief Executive Officer as a director, while keeping the roles of Chief Executive Officer and Chairman of the Board separate, provides the proper balance between independence and management participation at this time.

 

The Board’s Role in Risk Oversight 

 

Our Board of Directors, as a whole and through its committees, serves an active role in overseeing the management of risks related to our business. Our officers are responsible for day-to-day risk management activities. The full Board monitors risks through regular reports from each of the committee chairs, and is apprised of particular risk management issues in connection with its general oversight and approval of corporate matters. The Board and its committees oversee risks associated with their respective areas of responsibility, as summarized below. Each committee meets with key management personnel and representatives of outside advisers as required.

 

Our Board of Directors has delegated oversight for specific areas of risk exposure to committees of the Board of Directors as follows:

 

·

The Audit Committee serves an active role in overseeing the management of risks related to general operational matters, including without limitation, manufacturing, reimbursement, international

 

 

 

 

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expansion and cybersecurity. The Audit Committee receives quarterly assessments of risk in these areas and meets regularly with the functional leaders within the Company who manage such risks. The Audit Committee assesses management’s plans to monitor, control and minimize any risk exposure. The Audit Committee is also responsible for primary risk oversight related to our financial reporting, accounting and internal controls, oversees risks related to our compliance with legal and regulatory requirements, and meets regularly with our internal auditors and our independent registered public accounting firm.

 

·

The Compensation Committee oversees, among other things, the assessment and management of risks related to our compensation plans, policies and overall philosophy and equity-based incentive plans. The Compensation Committee also oversees the assessment and management of risks related to our governance structure, including our Board leadership structure and management succession.

 

The Compensation Committee identifies and considers risks related to our executive compensation, including during its review and approval of our executive compensation program. Our compensation programs are designed to reward our named executive officers and other employees for the achievement of the Company’s corporate strategies, business objectives and the creation of long-term value for stockholders, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. The Compensation Committee has concluded that the current executive compensation program does not encourage inappropriate or excessive risk-taking. In making its determination, the Compensation Committee noted that each executive officer’s direct compensation under our executive compensation program consists primarily of a fixed base salary, an annual incentive bonus opportunity and long-term equity incentive awards. Annual incentive bonuses are balanced with long-term equity incentives, which are subject to multi-year vesting schedules or only vest upon the achievement of strategic performance objectives.

 

Our Board believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks and therefore the Board’s leadership structure, as described under “Board Leadership Structure” above, was not affected by risk oversight considerations.

 

Committees of the Board of Directors

 

The Board has two standing committees: the Audit Committee and the Compensation, Nominating and Corporate Governance Committee. The written charters of these committees are available under “Corporate Governance” on our website at http://investors.glaukos.com.

 

 

 

 

Director

Audit

Compensation,
Nominating &
Governance

Thomas W. Burns

 

 

William J. Link, Ph.D.   Picture 41

 

Picture 35

Mark J. Foley    Picture 54

 

Picture 58
Chair

David F. Hoffmeister    Picture 43  Picture 46

Picture 39

 

Gilbert H. Kliman, M.D.   Picture 53

 

Picture 57

Marc A. Stapley   Picture 44  Picture 45

Picture 40
Chair

 

Aimee S. Weisner   Picture 51

Picture 56

 

 

Picture 50 Independent Director          Picture 47  Financial Expert          Picture 55 Committee Member

 

 

 

 

 

 

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Audit Committee

 

Our Board of Directors determined that Messrs. Stapley and Hoffmeister and Ms. Weisner, who comprise our Audit Committee, satisfy the independence standards for such committee established by applicable SEC rules and the listing standards of the NYSE. Additionally, our Board of Directors has determined that each of Messrs. Stapley and Hoffmeister is an “audit committee financial expert” as defined by applicable SEC rules.

 

ur

 

 

 

 

 

Committee Members

Primary Responsibilities

Number of
Meetings
in 2018

Marc A. Stapley (Chair)

David F. Hoffmeister

Aimee S. Weisner

   Appointing, evaluating, retaining, approving the compensation of, and assessing the independence of our independent registered public accounting firm.

   Overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from that firm.

   Reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures.

   Overseeing our internal control over financial reporting, disclosure controls and procedures and code of conduct.

   Monitoring our internal audit function and overseeing the internal auditor.

   Reviewing and approving or ratifying any related person transactions.

   Preparing the Audit Committee report required by SEC rules.

8

 

 

 

 

 

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Compensation, Nominating and Governance Committee

 

Our Board of Directors determined that Mr. Foley and Drs. Kliman and Link, who comprise our Compensation Committee, satisfy the independence standards for such committee established by applicable SEC rules and the listing standards of the NYSE. In making its independence determination for each member of the Compensation Committee, our Board of Directors considered whether the director has a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member.

 

 

 

 

 

 

 

Committee Members

Primary Responsibilities

Number of
Meetings
in 2018

Mark J. Foley (Chair)

William J. Link, Ph.D.

Gilbert H. Kliman, M.D.

   Determining our Chief Executive Officer’s compensation.

   Reviewing and approving, or making recommendations to our Board of Directors with respect to, the compensation of our other executive officers.

   Overseeing and administering our cash and equity incentive plans.

   Reviewing and making recommendations to our Board of Directors with respect to director compensation.

   Reviewing and discussing annually with management our “Compensation Discussion and Analysis” disclosure.

   Preparing the compensation committee report.

   Identifying individuals qualified to become members of our Board of Directors.

   Recommending to our Board of Directors the persons to be nominated for election as directors at each annual meeting of stockholders.

   Evaluating the composition of each of our Board’s committees and making recommendations to the Board of Directors for changes or rotation of committee members.

   Overseeing an annual evaluation and peer review of our Board of Directors.

4

 

The Compensation Committee may form subcommittees and delegate to its subcommittees such power and authority as it deems appropriate from time to time under the circumstances. The Compensation Committee has no current intention to delegate any of its responsibilities to a subcommittee. The Compensation Committee may confer with the Board in determining the compensation for the Chief Executive Officer. In determining compensation for executive officers other than the Chief Executive Officer, the Compensation Committee considers, among other things, the recommendations of the Chief Executive Officer.

 

Pursuant to its charter, the Compensation Committee is authorized to retain or obtain the advice of compensation consultants, legal counsel or other advisors to assist in the evaluation of director and executive officer compensation or in carrying out its other responsibilities.  In fiscal 2018, the Compensation Committee retained Marsh & McLennan as its compensation consultant to evaluate the existing executive and non-employee director compensation programs and perform the services that are described in the Compensation Discussion and Analysis section below. The Company incurred $47,000 in fees for the compensation consulting services provided during fiscal 2018. In addition to providing compensation consulting services, during fiscal 2018, the Company engaged a separate division of Marsh & McLennan to provide the Company with general insurance brokerage services. The Company did not pay Marsh & McLennan any fees related to these insurance brokerage services, but Marsh & McLennan earned commissions from insurers as a result of providing such services in the approximate amount of $368,525. In connection with the compensation consultant services provided by Marsh & McLennan, the Compensation Committee has assessed the

 

 

 

 

 

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independence of Marsh & McLennan and does not believe Marsh & McLennan’s work has raised any conflict of interest.

 

Meetings and Attendance

 

During fiscal 2018, our Board of Directors held four meetings, the Audit Committee held eight meetings and the Compensation Committee held four meetings.  Each of our directors attended at least 75% of the aggregate meetings of the Board and the committees of the Board on which he or she served during fiscal 2018. In addition, independent directors of our Board of Directors meet in regularly scheduled sessions without management.

 

It is the Board of Directors’ policy to invite and encourage directors to participate in our annual meeting of stockholders. At our virtual annual meeting of stockholders held during fiscal 2018, all of our then-current directors participated.

 

Succession Planning

 

The Board of Directors recognizes that advance planning for contingencies such as the departure, death or disability of the chief executive officer or other top executives is critical so that, in the event of an untimely vacancy, the Company has in place a succession plan to facilitate the transition to both interim and longer-term leadership. The designation of the chief executive officer, as in the case of other officers, is a decision for the Board of Directors. The Compensation Committee reviews succession planning for the chief executive officer and other senior leaders on an annual basis.

 

Consideration of Director Candidates

 

Our Board of Directors and the Compensation Committee will consider director candidates recommended for election to the Board of Directors by stockholders in the same manner and using the same criteria as that used for any other director candidate. The Compensation Committee has not established any specific minimum qualifications that must be met by a director candidate. In evaluating a director candidate, the Compensation Committee will consider whether the composition of the Board reflects the appropriate balance of independence, sound judgment, business specialization, understanding of our business environment, willingness to devote adequate time to Board duties, technical skills, diversity and other background, experience and qualities as determined by the Compensation Committee. While our Board of Directors has no formal policy for the consideration of diversity in identifying director nominees, the Compensation Committee seeks to elect directors that will collectively represent a diversity of backgrounds and experience and will endeavor to include women and individuals from minority groups in the qualified candidate pool from which any new director candidates will be drawn.

 

 

 

 

Age

    

Tenure

Picture 20

 

Picture 36

Average Board Age: 58 years

 

Average Board Tenure: 9.5 years

 

 

 

 

 

 

 

 

 

 Company Experience

 

86%
Independent

 

 

14%

Women and Minority

 

 

100%

Other Public Company Experience

 

 

 

 

 

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Stockholders who wish to recommend a director candidate for consideration by the Compensation Committee and the Board should submit their recommendation in writing to the Board no later than January 1 prior to the next annual meeting of stockholders together with the following information: (1) the name and address of the stockholder as they appear on the Company’s books or other proof of share ownership; (2) the class and number of shares of common stock of the Company beneficially owned by the stockholder as of the date the stockholder submits the recommendation; (3) a description of all arrangements or understandings between the stockholder and the director candidate and any other person(s) pursuant to which the recommendation is being made; (4) the name, age, business address and residence address of the director candidate and a description of the director candidate’s business experience for at least the previous five years; (5) the principal occupation or employment of the director candidate; (6) the class and number of shares of common stock of the Company beneficially owned by the director candidate; (7) the consent of the director candidate to serve as a member of our Board of Directors if elected; and (8) any other information required to be disclosed with respect to such director candidate in solicitations for proxies for the election of directors pursuant to applicable rules of the SEC. The Compensation Committee may request additional information concerning such director candidate as it deems reasonably required to determine the eligibility and qualification of the director candidate to serve as a member of the Board of Directors.

 

Stockholders who wish to nominate a person for election as a director in connection with an annual meeting of stockholders (as opposed to making a recommendation to the Compensation Committee as described above) must deliver written notice to our Secretary in the manner described in our Bylaws, and as described further under “Proposals of Stockholders and Director Nominations for 2020 Annual Meeting” below.

 

Communications with the Board of Directors

 

The Board of Directors has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may communicate directly with members of the Board of Directors, the independent directors or the Chairman of the Board of Directors by submitting a communication in an envelope marked “Confidential” addressed to the “Board of Directors,” “Independent Members of the Board of Directors,” or “Chairperson,” as applicable, at: Glaukos Corporation, 229 Avenida Fabricante, San Clemente, California 92672.

 

Code of Conduct and Ethics

 

We have adopted a written code of business conduct and ethics that applies to our directors, executive officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. A current copy of the code is posted under “Corporate Governance” on our website at http://investors.glaukos.com. To the extent required by rules adopted by the SEC and NYSE, we intend to promptly disclose future amendments to certain provisions of the code, or waivers of such provisions granted to executive officers and directors, on our website at www.glaukos.com.

 

Corporate Citizenship

 

As we have grown to more than 400 employees and over 500,000 iStents implanted globally, so too has our commitment to creating a positive social impact in a responsible and ethical manner. Expanding opportunities for all workers, improving our local and global communities and respecting the rights of all humans are pillars of our corporate culture that create a more fulfilled workforce that benefits all stakeholders.

 

In 2019, in response to stockholder feedback received during our 2018 stockholder engagement campaign emphasizing the importance of advancing human rights and workplace diversity, we adopted the Human Rights Policy that documents our efforts to uphold the rights of all people and create a safe and fair workplace free from discrimination and harassment. We strive to create a diverse workforce that provides equal opportunity regardless of race, gender, religion, national origin or sexual orientation.  We regularly monitor our hiring and promotional practices to ensure that all candidates and employees are treated with fairness and equity.  Approximately 40% of our U.S.-based employees identify themselves as minorities, and approximately 40% identify themselves as female. Additionally, 40% of our senior leadership team is

 

 

 

 

 

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comprised of women. In fiscal 2018, approximately 40% of our promotions went to female employees, and approximately 50% went to minorities. A current copy of the Human Rights Policy is posted under “Corporate Governance” on our website at http://investors.glaukos.com.

 

Also in response to 2018 stockholder feedback regarding corporate social responsibility, in 2019 we adopted the Supplier Code.  This Supplier Code applies to our direct suppliers who provide us with components for the products we manufacture and sell. The Supplier Code details our expectations that these direct suppliers will treat their employees and conduct their business in a responsible, ethical and humane manner.  A copy of the Supplier Code is posted under “Corporate Governance” on our website at http://investors.glaukos.com.

 

We also try to improve the communities in which we work and serve, both locally and globally.  Since its founding, Glaukos has donated more than 4,800 iStents to benefit underserved glaucoma patients in 38 countries around the globe.  We have partnered with over 75 humanitarian organizations around the world to supply Glaukos products and other financial support for philanthropic purposes. In 2019, we established the Glaukos Charitable Foundation, to aid our charitable efforts and reinforce our corporate culture of giving. Glaukos also provides paid time off to employees who volunteer outside business hours, and employees are entitled to donate their personal paid time off to assist their fellow employees that require additional time off due to hardship or family crisis.  We are proud of the efforts we and our employees have made to improve the societies and populations that we serve.

 

 

 

 

 

 

 

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EXECUTIVE OFFICERS OF THE COMPANY

 

The table below sets forth certain information regarding our executive officers as of April 4, 2019:

 

Name

Age

Position

Thomas W. Burns

58

President, Chief Executive Officer & Director

Chris M. Calcaterra

58

Chief Operating Officer

Joseph E. Gilliam

43

Chief Financial Officer and Senior Vice President, Corporate Development

 

See “Proposal One — Election of Directors” for information concerning the business experience of Mr. Burns. Information concerning the business experience of our other executive officers is set forth below.

 

 

 

Chris M. Calcaterra
Picture 11

Mr. Calcaterra served as our chief commercial officer from April 2008 until becoming our chief operating officer in February 2017.  He has more than 30 years of experience in the ophthalmic medical technology industry. Prior to joining our Company, Mr. Calcaterra was senior vice president at Advanced Medical Optics, Inc. (acquired by Abbott Laboratories), and was responsible for its cataract business. Prior to that position, Mr. Calcaterra held increasingly responsible vice president positions in a variety of sales and marketing roles at Advanced Medical Optics, Inc., as well as its predecessor surgical division business at Allergan, Inc. Mr. Calcaterra has a B.S. from Miami University and an M.B.A. from Xavier University, and he was previously a board member of WaveTec Vision Systems, Inc. (acquired by Novartis).

Joseph E. Gilliam
Picture 13

Mr. Gilliam has served as our chief financial officer and senior vice president, corporate development since May 2017. He has nearly 20 years of experience across capital markets, strategic advisory, finance and banking services with an emphasis on the life sciences industry, including the medical technology, diagnostics and biotechnology sectors. From 2013 to May 2017, he was a Managing Director in the Healthcare Investment Banking group at J.P. Morgan, where he led the Glaukos initial public offering for the firm. From 2001 to 2013, Mr. Gilliam held positions of increasing responsibility at J.P. Morgan, with experience spanning mergers and acquisitions, primary and secondary public equity offerings, bank lending, bond offerings and other transactions. His prior experience includes positions at The Beacon Group (which was combined with J.P. Morgan and Chase Manhattan in 2001) and PricewaterhouseCoopers. Mr. Gilliam has a B.S. in accounting from the Kelly School of Business at Indiana University.

 

There are no family relationships between or among any of our executive officers or directors.

 

 

 

 

 

 

 

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PROPOSAL 2 — ADVISORY APPROVAL OF NAMED
EXECUTIVE OFFICER COMPENSATION

 

 

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.  UNLESS OTHERWISE INSTRUCTED, THE PROXY HOLDERS WILL VOTE THE PROXIES RECEIVED BY THEM “FOR” OUR NAMED EXECUTIVE OFFICER COMPENSATION.

 

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which was amended pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), we are asking our stockholders to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers (as defined below under the heading “Compensation Discussion and Analysis”) as disclosed in this Proxy Statement.

 

As described in detail under the heading “Compensation Discussion and Analysis,” our executive compensation program is designed to:

 

·

Attract, retain and reward highly skilled individuals by providing competitive incentives to executives of the Company who contribute significantly to company success;

 

·

Align our executives’ interests with those of our stockholders by linking compensation to corporate performance and corresponding creation of stockholder value.

 

·

Align executives with our business objectives and performance expectations;

 

·

Reward executives for the creation of value for our stockholders;

 

·

Create an appropriate balance of incentives for achievement of both near-term and long-term strategic objectives; and

 

We urge stockholders to read the “Executive Compensation” section beginning on page 20 of this Proxy Statement which describes in more detail our executive compensation and the key elements of our executive compensation program.  The Compensation Committee and the Board of Directors believe that our executive compensation program is appropriately designed to achieve the Company’s business objectives and create long-term value for our stockholders.

 

Accordingly, we ask our stockholders to approve the following resolution at the Annual Meeting:

 

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers as set forth under “Executive Compensation,” including the Compensation Discussion and Analysis, Summary Compensation Table and the related compensation tables and narrative disclosure in this Proxy Statement for the 2019 Annual Meeting of Stockholders.”

 

The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee. However, the Compensation Committee, which is responsible for designing and administering our executive compensation program, values the opinions expressed by our stockholders in their vote on this proposal, and will consider the outcome of the vote when making future compensation decisions for Named Executive Officers.

 

We intend to provide our stockholders with an opportunity to approve the compensation of the Company’s named executive officers each year at the annual meeting of stockholders.

 

 

 

 

 

 

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis describes the objectives of our executive compensation program and provides disclosure about the elements of compensation earned by and awarded to each of the executive officers identified in the “Summary Compensation Table,” whom we refer to in this section as our “Named Executive Officers.” It also describes the philosophy of and process followed by our Compensation Committee in making compensation decisions and setting compensation policy for our Named Executive Officers.

 

2018 Named Executive Officers

 

Our Named Executive Officers for fiscal year 2018 were:

 

 

 

Thomas W. Burns

President and Chief Executive Officer

Chris M. Calcaterra

Chief Operating Officer

Joseph E. Gilliam

Chief Financial Officer and Senior Vice President, Corporate Development

 

The Named Executive Officers were our only executive officers during 2018.

 

Stockholder Engagement and Responsiveness

 

Since our IPO in 2015, we have conducted regular outreach to our stockholders to build relationships, explain our corporate governance structure and executive compensation policies, and receive valuable feedback on matters that are important to them.

 

At our 2018 Annual Meeting, our stockholders approved, by a non-binding, advisory vote, the compensation of our Named Executive Officers. This ballot item, known as a “say-on-pay” proposal, passed by a 69.9% majority of the votes cast. Following the 2018 Annual Meeting, we engaged with our stockholders regarding our executive compensation policies and corporate governance structure. During this outreach, members of our management team spoke with stockholders collectively owning over 67% of our outstanding stock (excluding officers and directors). These included 14 of our top 20 stockholders. The Chairman of our Compensation Committee joined and participated in discussions with stockholders collectively owning nearly 50% of our outstanding stock.

 

The stockholders with whom we spoke expressed broad support for our governance practices and understood the importance of having certain governance protections, such as a classified Board, for a company that is still in a new product development phase and has its greatest opportunity for creating stockholder value in its future. Our stockholders also conveyed broad general support for the Company’s executive compensation program, including the size and structure of equity grants, recognizing that time-based stock option grants have a performance-based component in that they only have value if the Company’s stock price increases after the grant date.  While our stockholders who did not support our say-on-pay vote did not confirm for us why they withheld support, some of them did provide feedback on our executive compensation program which was communicated to the entire Board of Directors and formed the basis for substantive discussions at the Board of Directors and Committee level.

 

Specifically, one major stockholder expressed a desire that long-term equity compensation for our Named Executive Officers contain at least a portion of performance-based equity, to enhance the alignment of executives’ and stockholders’ interests. Several stockholders also noted their preference for certain ‘best practice’ compensation policies, such as stockholder ownership guidelines and clawback rights, to ensure executive accountability and enhanced alignment of executives’ and stockholders’ interests.  Additionally, in the shareholder outreach campaign we conducted in late 2017 and prior to our 2018 Annual Meeting, we received feedback from a shareholder requesting a tie between executive bonus compensation and both financial performance and stock price performance.  This stockholder also requested that we modify the

 

 

 

 

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executive bonus structure to place greater weight on achieving the net sales financial objective to emphasize the paramount importance, at this stage of the Company’s development, of continued growth of the Company through increased sales and revenue.

 

Several stockholders also expressed interest in seeing enhanced disclosure regarding corporate social responsibility, specifically focusing on human rights and workplace diversity.

 

Based on stockholder feedback received in our 2018 and 2017 engagement campaigns, as well as our 2018 say-on-pay vote results, the Compensation Committee and Board responded by taking the following actions:

 

SAY ON PAY RESPONSIVENESS

 

Stockholder Feedback

Responsive Action Taken

Impact of Action

A portion of Company’s long-term equity compensation should be performance-based for executive officers

     Performance-Based Equity grants introduced as a component of our 2019 long-term incentive compensation for our executive officers, decreasing the proportion of time-based equity received

Incentivizes executive achievement of important Company strategic and operational goals that create value for stockholders

Company should adopt best practice of requiring executive officers to hold a designated amount of Company stock

     Stock Ownership Policy adopted (effective 2019) for executive officers (and directors) that requires each to own Company common stock with a value equal to a multiple of his or her annual base salary (or retainer fee)

Creates alignment of executives’ (and directors’) interests with those of long-term stockholders

Company should adopt best practice of requiring recoupment of incentive compensation earned based on erroneous financial data

     Clawback Policy adopted (effective 2018) that requires executive officers to reimburse any incentive compensation payments received based upon the achievement of financial results that were subsequently restated due to noncompliance

Increases executive accountability and mitigates risk inherent in incentive compensation structure

Company should create a tie between bonus opportunity payouts and stock price performance

     Equity Election Option adopted for our senior leadership team beginning in 2018, allowing our officers to elect to receive their annual bonus in the form of restricted stock units rather than cash. CEO linked 100% of his bonus to stock performance for 2018 and 2019 by electing to receive restricted stock units rather than cash

Further aligns executives’ interests with those of long-term stockholders

Company should place greater weight on achievement of net sales targets to emphasize continued growth of the Company through sales and revenue, and tie bonus payments to financial performance

     Financial Performance Adjustment Factor added to short-term incentive compensation beginning in 2018, which places greater weight on achieving net sales financial objective by decreasing or increasing bonus payout based upon under- or overachievement of key net sales corporate objective

Focuses executives on paramount importance of continued growth of the Company by increasing revenue, creating enhanced value for stockholders

Company should disclose its corporate social responsibility and commitment to human rights and workplace diversity

     Human and Workplace Rights Policy and Supplier Code of Conduct adopted in 2019, documenting our efforts to uphold the rights of all people and create a safe and fair workplace free from discrimination and harassment, and our expectations that our direct suppliers conduct operations in a similar ethical and humane manner

Documents our commitment to respecting human rights, creating equal opportunity for all workers, maintaining a diverse workplace and sourcing components from ethical, humane and responsible suppliers

 

When 2019 executive compensation was determined in March 2019, the Compensation Committee responded to the feedback received from stockholders in its shareholder engagement campaign and

 

 

 

 

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introduced PBRSUs to our senior leadership team, including our Named Executive Officers, as a component of long-term incentive compensation, thus reducing the number of time-based options issued. These PBRSUs will only vest upon the achievement of a pre-determined operational metric, described below, that will help drive the Company’s long-term value by expanding the Company’s customer base and, therefore, its potential sales.

 

Based upon feedback received from stockholders regarding compensation best practices, the Compensation Committee also adopted an incentive compensation recapture policy, also known as a “clawback” policy and described in greater detail under “Compensation Discussion and Analysis—Clawback Policy” below, that allows the Compensation Committee to require reimbursement from an executive officer of the Company of any cash or equity incentive compensation that was paid based upon the achievement of financial results that are restated due to noncompliance.

 

In response to input from stockholders regarding compensation best practices, the Compensation Committee also adopted a stock ownership policy, described under “Compensation Discussion and Analysis—Stock Ownership Policy Applicable to Executive Officers” below, pursuant to which our Chief Executive Officer is required to own shares of the Company’s common stock with a value of at least six times his annual base salary, and our other executive officers, including the other Named Executive Officers, are required to own shares of our common stock with a value of at least three times their individual annual base salary.  Under this policy, our non-employee directors are also required to own Company common stock with a value of at least six times their annual retainer. As of April 4, 2019, all of our Named Executive Officers and directors were in compliance with this policy.

 

An equity election option was adopted in 2018 in response to stockholder feedback received during 2017 requesting a tie between executive bonus compensation and stock price performance. Pursuant to this election option, the Compensation Committee provided senior leaders, including our Named Executive Officers, with the option to elect to receive all or a portion of their annual bonus opportunity in the form of RSUs rather than cash, allowing them to further align their interests with those of our stockholders.  For his 2018 and 2019 bonuses, our Chief Executive Officer, Mr. Burns, elected to receive 100% of his bonus in the form of RSUs, directly linking his bonus payout to the performance of our stock.

 

Based upon the feedback received from a stockholder requesting a tie between financial performance and bonus compensation to emphasize the paramount importance of continual Company growth through increased net sales, the Compensation Committee adopted a financial performance adjustment factor for 2018 short-term incentive compensation (which will continue for 2019 as well) that places greater weight on achieving the net sales financial objective by decreasing or increasing bonus payout based upon under- or overachievement of our key net sales corporate objective. This adjustment factor is intended to focus executives on the continued growth of the Company by increasing revenue, creating enhanced value for stockholders by growing the Company’s top line.

 

Based on stockholder input emphasizing the importance of corporate social responsibility through human rights and workplace diversity, in 2019 we adopted the Human Rights Policy and the Supplier Code. Pursuant to the Human Rights Policy, we strive to uphold the rights of all people and create a safe and fair workplace free from discrimination and harassment and achieve a diverse workforce that provides equal opportunity regardless of race, gender, national origin or sexual orientation.  The Supplier Code requires our direct suppliers to treat their employees and operate their businesses in a responsible, ethical and humane manner.

 

The Company and the Compensation Committee listen to the input we receive from our stockholders, with the intention of responding to that input in an appropriate and thoughtful manner that takes into account the Company’s stage in its development cycle and its needs from a leadership and operational perspective. We believe we have responded fully and appropriately to the feedback received from stockholders through these outreach campaigns. We intend to continue the dialogue with our stockholders on these and other matters to ensure the Board of Directors is apprised of their views and governance and compensation best practices more broadly.  In addition, our Board of Directors will regularly review the Company’s current corporate governance structure to ensure it continues to align the interest of the Company with its stockholders, and consider appropriate governance changes as the Company matures, including potentially de-classifying the Board.

 

 

 

 

 

 

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Business Strategy and Fiscal 2018 Accomplishments

 

2018 was a year of significant accomplishments and continued progress on key growth initiatives for Glaukos. In 2018, we obtained U.S. Food and Drug Administration (“FDA”) approval and commenced a U.S. commercial launch of iStent inject®, our two-stent system designed to lower intraocular pressure.  In 2018, we increased global net sales 14%, despite the U.S. market entry in late 2017 of our first competitor in the micro-invasive glaucoma surgery (“MIGS”) space.  We also made considerable progress on the development of our pipeline of breakthrough products, focusing on our long-term strategic objective of addressing the full range of glaucoma disease states and progression. Additionally, the Company’s stock price rose nearly 120% from the last business day of 2017 to the last business day of 2018. In sum, we are pleased to report the following 2018 achievements:

 

 

 

 

Obtained FDA Approval of and Launched the iStent inject®

  

Began Patient Enrollment of Key Pivotal Studies

  Received iStent inject approval in June 2018, approximately six months after premarket approval submission

  Executed iStent inject commercial launch in the U.S. in September 2018

  Strong real-world clinical performance reported

 

  Initiated Phase III clinical trials for the iDose®  Travoprost

  Secured early FDA 510(k) Investigational Device Exemption for iStent infinite®  and commenced related study

 

 

 

Drive Increased Penetration in International Markets

 

Expanded Pharmaceutical Capabilities And Continued Investment in Pipeline

  Achieved 61% year-over-year international revenue growth

  Secured new regulatory approvals and reimbursement in key international markets

 

  Implemented significant expansion of our pharmaceutical team and pipeline programs

  Initiated pharmaceutical development agreement to explore Rho-kinase (ROCK) inhibitors for our iDose delivery system

 

Stock Price Appreciation in 2018: 119%

 

Our continued execution against the Company’s long-term strategic plan has further established MIGS as the global standard of care and advanced our comprehensive product pipeline.

 

Executive Compensation Program and Objectives

 

Our executive compensation program for 2018 was intended to:

 

·

Attract, retain and reward highly skilled individuals by providing competitive incentives to executives of the Company who contribute significantly to company success;

·

Align our executives’ interests with those of our stockholders by linking compensation to corporate performance and corresponding creation of stockholder value.

·

Align executives with our business objectives and performance expectations;

·

Reward executives for the creation of value for our stockholders;

 

 

 

 

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·

Create an appropriate balance of incentives for achievement of both near-term and long-term strategic objectives; and

 

Our 2018 executive compensation program was comprised of three key elements, each of which was designed to further the program objectives listed above: (1) base salary; (2) annual bonus that is earned based upon achievement of specified corporate and/or individual goals; and (3) long-term incentive compensation in the form of equity awards that are subject to vesting requirements.  We also provide 401(k) retirement benefits, an executive deferred compensation plan and severance benefits to our Named Executive Officers.

 

Element

Description

Primary Design Element

 

 

 

Base Salary

     Annual fixed cash compensation

     Enables us to attract and retain top talent. Provide compensation for functional expertise and day-to-day responsibilities

Annual Incentive

(Performance Bonus)

     Chief Executive Officer payout evaluated based 100% on achievement of corporate objectives

     Other Named Executive Officer payout evaluated based 50% on corporate objectives and 50% on individual objectives 

     Corporate goals are comprised of financial results, completion of clinical studies and clinical enrollment goals

     In response to stockholder feedback, financial performance adjustment factor added to financial objective, placing greater weight on achievement of net sales objective by decreasing or increasing bonus payout based on achievement of key net sales corporate objective

     Payout is capped at a maximum of 200% of base salary for Chief Executive Officer and 120% of base salary for other Named Executive Officers

     Emphasize financial results by making them a key factor in determination of bonus, with a new financial performance adjustment factor that ensures all Named Executive Officer bonuses are tied to achievement of objective top-line sales growth target

     Align our executives with Company’s business objectives and performance expectations

     Align executive pay with the achievement of short-term goals; designed to help the Company achieve long-term strategic objectives and create long-term value for the stockholders

     In response to stockholder feedback, introduced option for executives to elect to receive bonus opportunity in restricted stock units to also link bonus payment to stock price performance. CEO linked 100% of his bonus to stock performance for 2018 and 2019 by electing to receive restricted stock units rather than cash

Long Term Incentive

     2018 long term incentive value allocated in the form of Non-Qualified Stock Options

     Options vest over 4 years

     In response to stockholder feedback, adjusted the mix of our Named Executive Officers’ annual equity awards for 2019 by decreasing the proportion of time-based awards and introducing new performance-based restricted stock units for 2019

     Link the interests and risks of executives with those of our stockholders

     Promote executive focus on long-term company performance

     Options will only have value if management can drive long-term value creation through stock price appreciation; new PBRSUs will only vest and have value if objective operational goal is achieved

 

 

 

 

 

 

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As shown in the following graphic, the largest component of our compensation program is long-term incentive.  When combined with annual incentive, the vast majority of executive compensation is “at risk,” or, in other words, dependent on the accomplishment of the Company’s business and financial objectives or the performance of the Company’s stock (or both, in the case of annual bonus awards granted in equity).  In the case of Mr. Burns, 87% of his target compensation is “at risk.”  For our other Named Executive Officers, 78% of their target compensation is “at risk.”

 

 

 

Picture 4

Picture 15

 

Our Compensation Committee believes that our success depends, in large part, on the commitment, leadership, and general operational performance of our executive management team, including our Named Executive Officers. Based upon this belief, our executive compensation program is designed to both attract, motivate and retain top talent, and to reward high performance, all while focusing on the interests of our company as a whole and our stockholders. The Compensation Committee believes that when individuals meet or exceed their goals within their functional areas and contribute to positive financial and operational results for the entire company, stockholders are benefitted and those individuals should be compensated for their efforts and achievements.

 

Role of the Compensation Committee

 

Pursuant to its charter, the Compensation Committee has the authority to determine the amount of compensation given to each of the Named Executive Officers, as well as the overall executive compensation program. The Compensation Committee annually evaluates the performance of each of the Named Executive Officers and determines compensation levels based on its performance evaluation. The Compensation Committee also, among other things, reviews and approves our executive compensation plans and policies, and is responsible for administering our equity incentive plans, including approving award grants under the plans. Executive compensation and senior management equity award grants are also approved by our Board of Directors as a whole. In performing its duties, the Compensation Committee is authorized to consider the recommendations of our Chief Executive Officer when determining the compensation of the other members of management, including the Named Executive Officers.  The Compensation Committee is also authorized to approve any severance benefits, deferred compensation and change-in-control benefits or any perquisites offered to our Named Executive Officers.

 

Each element of our executive compensation program was approved by the Compensation Committee. All Compensation Committee members are deemed independent under applicable NYSE rules. None of our Named Executive Officers is a member of our Compensation Committee or otherwise had any role in determining the compensation of our other Named Executive Officers, other than the Chief Executive Officer’s recommendations to the Compensation Committee as to the compensation of the other Named Executive Officers.

 

Role of the Compensation Consultant

 

Pursuant to its charter, the Compensation Committee is authorized to retain or obtain the advice of compensation consultants, outside counsel, experts or other advisors to advise the Compensation Committee with respect to amounts or forms of executive compensation or in carrying out its other responsibilities. The

 

 

 

 

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Compensation Committee has retained Marsh & McLennan Agency as its independent compensation consultant. The Compensation Committee is directly responsible for the appointment and compensation of Marsh & McLennan, as well as the oversight of its work. In addition to providing compensation consulting services, during fiscal 2018, the Company engaged a separate division of Marsh & McLennan to provide the Company with general insurance brokerage services. The Company did not pay Marsh & McLennan any fees related to these insurance brokerage services, but Marsh & McLennan earned commissions from insurers as a result of providing such services in the amount of approximately $368,525. In connection with the compensation consultant services provided by Marsh & McLennan, the Compensation Committee has assessed the independence of Marsh & McLennan pursuant to the SEC and NYSE rules and has concluded that no conflict of interest exists.

 

In late 2017 and during 2018, Marsh & McLennan performed a comprehensive review of our executive compensation program for purposes of determining 2018 executive compensation. Marsh & McLennan’s services included providing advice with respect to the composition of our peer group described below, performing a compensation survey utilizing the peer group for each of the Named Executive Officers, providing recommendations on appropriate base salary, target annual bonus and long-term incentive levels, and providing recommendations on our annual incentive plan design based upon the Compensation Committee’s overall executive compensation philosophy. As part of this review, Marsh & McLennan analyzed the base salaries, target bonus opportunities, target cash compensation opportunities, target equity award opportunities and targeted total direct compensation of each of our Named Executive Officers. Marsh & McLennan also recommended changes to our peer group for purposes of determining 2018 executive compensation, as discussed in more detail below. The Compensation Committee reviewed the reports prepared by Marsh & McLennan at the end of 2017 and in 2018, and used these reports, as applicable, when determining the amount and structure of each Named Executive Officer’s 2018 base salary, annual bonus opportunity and any equity award grants.

 

Peer Companies

 

Below is a listing of the peer group companies chosen by the Compensation Committee for 2018 comparative compensation purposes. The Compensation Committee’s objective in selecting this peer group was to include a group of comparably-sized public companies in the life sciences sector, with an emphasis on high-growth medical technology companies and biotechnology companies with commercialized products. Utilizing equity research analyses and public disclosures, we targeted peer companies in this field that had fewer than 1,000 employees, reported revenues of less than $500 million, and held a market capitalization of less than $5 billion. In addition, we drew these 2018 peers from companies based all across the nation, as opposed to limiting our group to companies solely based in California, where our headquarters are based. Moreover, as our business continues to grow and expand, the Compensation Committee will continue to evaluate the pool of peers most applicable in order to ensure it accurately reflects both the absolute and competitive position of the Company. The Compensation Committee believed these selection criteria were appropriate given the Company’s increase in size and sales from the previous year and that its talent pool was increasingly being drawn from markets outside of California.

 

In determining the Company’s 2018 peer group, the Compensation Committee removed several companies from the 2017 peer group, including two that had been acquired and one that fell outside the Company’s stated target ranges for the criteria described above, and added additional companies that now fell within the target ranges. Our peer group used to determine 2018 executive compensation includes the following 20 companies:

 

 

 

 

 

 

 

Peer Group

Accuray

 

Cardiovascular Systems

 

Intersect ENT

Natus Medical

Aerie

 

DexCom

 

iRhythm Technologies

Nevro

Anika Therapeutics

 

Endologix

 

Luminex

Nxstage Medical

AtriCure

 

ICU Medical

 

Merit Medical

Penumbra

Atrion

 

Insulet

 

MiMedx 

Wright Medical

 

 

 

 

 

 

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The Compensation Committee believes that the peer companies are a reasonable reference point for compensation decisions with respect to the Named Executive Officers based on each company’s similarity to Glaukos, taking into account their respective businesses, revenues, market capitalization and the talent pool from which they compete. The Compensation Committee believes it is important to understand and reference what similarly-situated life sciences companies are paying their executives, and use this information as one of the data points it considers when making compensation decisions for the Named Executive Officers using its business judgment. Other factors considered when determining compensation levels include our objective of attracting and retaining highly qualified executives, and our goal of rewarding top performers to motivate and encourage high achievement. Finally, the Compensation Committee notes that due to the rather narrow slice of the ophthalmology field within which the Company operates, the targeted talent pool from which to attract skilled leadership is narrow.  As such, it will continue to revisit and revise its peer group in future years to ensure the Company remains competitive in its continuing recruitment and retention efforts.

 

Material Elements of Compensation

 

Base Salaries

 

Philosophy

 

We provide an annual base salary to each of our Named Executive Officers to compensate them for performing their day-to-day services during the year. Salaries are reviewed annually by the Compensation Committee and may be adjusted for the following year based on a variety of quantitative and qualitative factors. Our philosophy is to initially target base salary at the midpoint of our peer group for the comparable executive position, although as described above and below, this is one of many data points the Compensation Committee considers when using its business judgment to establish base salary levels. We believe this allows us to compete for top talent and offer an overall compensation package that effectively balances the components of fixed and at-risk pay. In so doing, we seek to offer our executives a competitive fixed amount of base compensation, while still providing a mechanism that we expect will encourage them to strive to meet the performance metrics necessary to achieve, or overachieve, the significantly heavier-weighted, at-risk compensation components.

 

However, to be competitive in recruitment and retention, the Compensation Committee is thoughtful in constructing compensation packages to maximize the ability of the Company to meet its human capital needs.  While the Compensation Committee uses the peer group reference point as discussed, it does not rigidly adhere to a peer-based benchmarking strategy. Instead, the Compensation Committee determines the appropriate base salary for each Named Executive Officer only after considering each executive’s job responsibilities, experience, performance, and the compensation philosophy discussed above, as well as the recommendations of our Chief Executive Officer (except with respect to his own salary). No Named Executive Officer is entitled to any automatic base salary increases.

 

The chart below shows the change in each Named Executive Officer’s base salary from fiscal 2017 to fiscal 2018.

 

 

 

 

 

 

Named Executive Officer

2017 Base Salary
($)

2018 Base Salary
($)

Increase
($)

Increase (%)

Thomas W. Burns

600,000
625,000
25,000
4.2

Chris M. Calcaterra

385,000
396,550
11,550
3.0

Joseph E. Gilliam

360,000
374,400
14,400
4.0

 

 

 

 

 

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For fiscal year 2017, Mr. Burns’ base salary was $600,000. In setting his 2018 base salary, the Compensation Committee considered the Company’s financial and operational performance during 2017, noting that the Company had met or overachieved its expenses, research and development and clinical trial enrollment objectives.  After consideration of this performance, the Compensation Committee also noted that, based upon a market analysis performed by the compensation consultant, Mr. Burns’ 2017 base salary was slightly below the midpoint of other chief executive officers in our peer group.  Taking all of this information into account, the Compensation Committee determined to increase Mr. Burns’ base salary by approximately 4.2%, to $625,000. The Compensation Committee deemed this amount to be appropriate given our base salary philosophy as well as Mr. Burns’ solid performance in leading the organization in 2017.

 

Mr. Calcaterra’s base salary was $385,000 for 2017, during which year he was appointed as the Company’s Chief Operating Officer.  In determining Mr. Calcaterra’s 2018 base salary, the Compensation Committee considered his performance in the role of Chief Operating Officer in 2017 as well as the Company’s net sales performance for the 2017 year. After consideration of this information and the peer group compensation data for comparable positions, the Compensation Committee increased Mr. Calcaterra’s base salary for 2018 to $396,550, which matches the Company’s standard 3% merit increase.  This increase placed Mr. Calcaterra’s base salary at the midpoint for chief operating officers within our identified peer group, which is consistent with the Compensation Committee’s philosophy for determining base salaries.

 

The Compensation Committee determined Mr. Gilliam’s 2017 base salary of $360,000 at the time of his hiring in 2017, based upon his nearly 20 years of experience in capital markets and other banking services, much of which was specifically focused on the medical technology and biotechnology fields and our Company in particular.  This base salary level was also determined to be in line with our executive compensation philosophy of staying near the midpoint of our peers in base salary. For fiscal 2018, the Compensation Committee evaluated Mr. Gilliam’s performance as Chief Financial Officer, noting that the Company had overachieved (by underspending) its operating expense target by just over 101%. Taking this information into account, as well as compensation data from our peer companies’ chief financial officers, the Compensation Committee determined to raise Mr. Gilliam’s base salary for 2018 to $374,400, an increase of approximately 4%, an amount deemed appropriate by the Compensation Committee given the peer company compensation data and Mr. Gilliam’s overall performance during fiscal 2017.

 

Annual Bonuses

 

Philosophy

 

We provide our senior leadership team, including our Named Executive Officers, with a performance-based annual bonus opportunity. The purpose of this annual bonus is to provide competitive incentives for those employees who contribute significantly to the Company’s success, and to align our executives’ short-term compensation opportunity with the Company’s business objectives and performance expectations. We believe the annual bonus opportunity helps further our compensation objective of aligning executive pay with achievement of the Company’s short-term goals, which are designed to help the Company achieve its long-term strategic goals and create long-term value for our stockholders.  Our philosophy is to target our annual bonus opportunity at approximately the midpoint of our peer group for the comparable executive position, although as described above, this is just one of many data points the Compensation Committee considers when using its business judgment to establish target annual bonus levels. We believe this allows us to compete for top talent and encourages our executives to perform at a high level by providing a near-term reward for that performance.

 

Award Design

 

Annual bonuses were earned by our executives for 2018 in accordance with a 2018 executive bonus plan.  Pursuant to the 2018 bonus plan, our Named Executive Officers were eligible to earn an annual bonus, at a targeted percentage of their respective base salaries, based upon the achievement of various corporate and/or individual performance goals.

 

 

 

 

 

 

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Executive

% Corporate Objectives

% Individual Objectives

Chief Executive Officer

100%
0%

Other Named Executive Officers

50%
50%

 

Mr. Burns’ 2018 annual bonus was evaluated based upon the Company’s achievement of its corporate objectives, reflecting his ultimate responsibility, as the Chief Executive Officer, for all of our operational and financial results and his key role in setting and achieving our strategic plan.  Each of Messrs. Calcaterra’s and Gilliam’s 2018 bonus was evaluated 50% based upon the Company’s achievement of its corporate goals and 50% on the performance against various pre-determined individual goals that had been approved by the Compensation Committee (based upon the recommendation of our Chief Executive Officer) and tied to our overall strategy and corporate objectives. This structure is intended to incentivize these executives to deliver top results in the areas over which they have control, and recognize the connection between their individual goals and the overall performance of the Company. Although the Compensation Committee makes the determination whether the Company has met its corporate objectives and whether an executive has achieved any applicable individual goals, it also may take into consideration other factors in determining the bonus payout amount for each senior leader.

 

Additionally, based upon stockholder feedback received in 2017 during our stockholder engagement campaign in which a shareholder expressed a preference for our bonus plan to include a link to stock price performance during the bonus year, the Compensation Committee structured our 2018 bonus plan to give our executives the ability to elect to receive equity in lieu of their cash bonus payment, which would tie their bonus value to stock performance as well.  To accomplish this, they approved a mechanism by which certain of our senior leaders, including all of our Named Executive Officers, would be entitled to elect to receive all or a portion of their 2018 annual bonus in the form of RSUs rather than cash. The Compensation Committee believes that this option is responsive to stockholder feedback and creates an opportunity for our executives to further align their interests with those of our stockholders and put more of their total compensation at risk.  To provide additional incentive for executives to elect equity, there is a 15% premium component to the conversion from the dollar value of the bonus to the number of RSUs granted, which aligns with the 15% discount received by employees who purchase shares of our common stock under the Glaukos Employee Stock Purchase Plan. If an executive elected to receive an equity award, the executive was granted a one-year performance stock unit award with respect to the targeted number of shares having a grant date value equal to the amount of the executive’s cash-denominated target bonus (or applicable portion thereof) based upon the closing market price ($30.83) on March 29, 2018 (the last business day prior to the date of grant on April 1, 2018).  This can be illustrated as follows:

 

Cash Target Bonus Amount / $30.83 Closing Market Price X 1.15% = Target # of Restricted Stock Units

 

The number of RSUs that ultimately vested in 2019 with respect to the 2018 bonus for our executives who elected to receive RSUs was determined in the same manner as the cash bonuses that became payable under our 2018 bonus plan described above (i.e., the number of RSUs that vests is performance-contingent so that the percentage of the target number of RSUs that vest will be the same as the payout percentage for target cash bonuses).

 

Simply put, our executives who elected to participate in this program earned more than their cash bonus would have been since the price of our common stock increased between the grant date ($30.78 on April 2, 2018, the first business day after the date of grant) and the vesting date ($76.78 on April 1, 2019), but would have earned less if the price of our common stock had fallen more than 15%.  We believe this equity election further strengthens the link between our executive compensation program and the value delivered to our stockholders, creates greater alignment between the interests of our executives and those of our stockholders, and exemplifies our pay for performance philosophy.  Our Chief Executive Officer, Mr. Burns, elected to receive 100% of his 2018 bonus in RSUs rather than cash, and our Chief Operating Officer, Mr. Calcaterra, elected to receive 25% of his 2018 bonus in RSUs rather than cash.

 

·

Corporate Objectives

 

The Company’s corporate objectives for 2018 were established by the Compensation Committee and the Board in late 2017, in consultation with our management team. Each objective was weighted to signify its

 

 

 

 

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importance to our short-term and long-term success and strategy. These goals were designed to be challenging but achievable and to align with the Company’s strategic plan.

 

o

Financial Objectives

 

The financial objectives, which together comprised 70% of the corporate objectives, reflect the importance of continued, but controlled, growth of the Company and the Company’s goal of remaining the leader in the MIGS space and delivering value to stockholders.

 

 

 

 

 

 

Metric

Weight

Goal

Actual

% of Goal

Net Sales

50%

$168 MM

$181.3 MM

108%

Operating Expenses (<)

20%

$167.8 MM

$169.2 MM

99.2%

 

Consistent with the Company’s goal of achieving continued growth, the Compensation Committee set a net sales target of $168 million as one of the Company’s financial objectives. This target reflected a goal of increasing net sales by approximately 5.5% over 2017 net sales of $159.3 million, which was deemed appropriate by the Compensation Committee recognizing the anticipated effect of increased competition from one of the largest ophthalmic companies in the world that entered the MIGS space in late 2017, as well as uncertainty over the approval timing for the Company’s new product, the iStent inject, which was submitted for approval to the FDA in January 2018, and our ability to commence a commercial launch of that product in the U.S. in 2018. The Compensation Committee wanted to incentivize the Named Executive Officers to achieve top-line sales growth, and therefore used a net sales target as a financial objective.

 

In response to shareholder feedback received in connection with our 2017 engagement campaign, in which a shareholder emphasized the paramount importance of achieving net sales objectives to continue the Company’s top-line growth and tie bonus payouts to financial performance, in 2018 the Compensation Committee introduced a financial performance adjustment factor to place greater weight on achieving this net sales objective. This adjustment factor can override the accomplishment of the strategic objectives described below by decreasing or increasing the Named Executive Officer’s bonus payout based upon the achievement of the net sales metric.  The financial performance adjustment factor was included for 2018 to ensure that, regardless of the achievement of the other financial or strategic objectives, each senior leader’s bonus payout is ultimately dependent on the achievement of an objective financial target for the Company that directly impacts the Company’s continued growth. The application of the financial performance adjustment factor effectively acts as an overall performance modifier for each executive’s bonus that would otherwise be payable, as the bonus payout for each Named Executive Officer may be decreased to 0% or increased up to 200%, according to the following scale of actual net sales achieved as compared to the fiscal year’s target.

 

% of Net Sales Target Achieved

Financial Performance Adjustment Factor

110% +

200%

108%

180%

105%

150%

103%

130%

100%

100%

98%

90%

95%

75%

93%

65%

90%

50%

< 90%

0

Linear interpolation applies to the achievement of a % of the net sales target in‑between the specified percentages

 

As discussed above, prior to the application of the financial performance adjustment factor, each Named Executive Officer’s bonus payout was evaluated based on the achievement of corporate and/or individual performance goals.

 

The Company achieved net sales of $181.3 million in fiscal 2018, or greater than 108% of the target, as determined by the Compensation Committee.  Our strong 2018 net sales performance resulted in the

 

 

 

 

 

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EXECUTIVE COMPENSATION

achievement of this financial objective and in a performance adjustment factor based on the level of overachievement of 180%.

 

The other financial corporate objective was to incur operating expenses of less than $167.8 million in 2018; this goal was weighted 20%. This target reflected an approximately 25% increase in operating expenses from fiscal year 2017, which the Compensation Committee determined was consistent with the Company’s planned substantial investments in clinical studies supporting our potentially market-expanding pipeline products, including the studies for the iDose delivery platform and the iStent infinite, and increased penetration in international markets. The Company’s actual operating expenses in 2018 were approximately $169.2 million. While the actual 2018 operating expenses were 0.8% higher than the target, this increase was related solely to the direct costs associated with the outperformance in net sales, such as an increase in sales commissions. Because these additional operating expenses would not have been incurred but for the overachievement in sales, the Compensation Committee determined that this financial objective had been satisfied.

 

o

Strategic Objectives

 

The remaining 30% of the corporate objectives was comprised of two specific business goals, each weighted 15%. These objectives reflect the significance of continual progress developing our pipeline products. We believe development of our pipeline products is key to our growth strategy and the creation of lasting value for our stockholders.

 

The first business objective was completion of certain design elements of the iDose Travoprost to achieve various performance metrics by the end of 2018. Testing of the iDose Travoprost evidencing the desired performance occurred in the fourth quarter of 2018. The second business objective was reaching a pre-determined level of patient enrollment in both the the iDose Travoprost Phase III clinical trial and the iStent infinite investigational device exemption study. The iDose and iStent infinite clinical trial enrollment goal was met in November 2018. Both of the business objectives were achieved prior to the deadlines established by the Compensation Committee, which resulted in the Named Executive Officers exceeding expectations on these objectives.

 

Based upon these financial and strategic results, the Compensation Committee determined that the Company achieved 100% of its corporate performance objectives, and that 100% of the portion of each executive’s bonus tied to the corporate objectives (which for our Chief Executive Officer, Mr. Burns, is 100% of his bonus) should be payable, subject to the application of the financial performance adjustment factor.

 

o

Calcaterra Individual Objectives

 

Mr. Calcaterra’s individual objectives consisted of specific goals in the areas of commercial growth, such as a successful launch of our iStent inject product, growing our international markets and addressing competitive factors, and commercial operations, including optimizing governmental reimbursement of our products globally and completing certain aspects of design and expansion at our manufacturing facilities.  Mr. Calcaterra also had individual objectives with respect to patient enrollment in clinical trials related to our pipeline products and certain business continuity efforts.

 

o

Gilliam Individual Objectives

 

Mr. Gilliam’s individual objectives consisted of specific goals in the areas of finance, accounting, information technology, investor relations and business development.  This included updating and automating certain business systems and payment processes, enhancing international performance reporting and planning and analysis tools, implementing new tax strategies, performing cybersecurity assessments and implementing enhancements, and developing and implementing a disaster recovery plan.  Mr. Gilliam also had individual objectives with respect to achieving our first Sarbanes-Oxley compliance audit of our 2017 financial statements with no material weaknesses or significant deficiencies, and completing evaluation and selection of a next-generation enterprise resource planning system.

 

 

 

 

 

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Following the end of 2018, the Compensation Committee determined that Mr. Calcaterra and Mr. Gilliam each achieved 100% of his individual objectives, and that 100% of the portion of each executive’s bonus tied to the individual objectives should be payable subject to the application of the financial performance adjustment factor.

 

Annual Bonus Targets

 

The chart below indicates the target, threshold and maximum bonus opportunity for each of our Named Executive Officers for fiscal 2018.

 

Named Executive Officer

2018 Target
Bonus (% of
Base Salary)

  2018 Target
Bonus ($)

Threshold
Bonus (%
  of Base Salary)

 

Threshold
Bonus
($)

Maximum
Bonus (%
  of Base Salary)

Maximum
Bonus
($)

Thomas W. Burns

100%
625,000
50%

 

$

312,500
200%
1,250,000

Chris M. Calcaterra

60%
237,930
30%

 

 

118,965
120%
475,860

Joseph E. Gilliam

60%
224,640
30%

 

 

112,320
120%
449,280

 

·

Chief Executive Officer: Thomas W. Burns

 

Mr. Burns’ target bonus opportunity for fiscal 2017 was set at 95% of his annual base salary. Based upon a market survey conducted by our independent compensation consultant, the Compensation Committee confirmed that this percentage was slightly below the midpoint of the target bonus percentages of other chief executive officers in our peer group.  Therefore, the target bonus percentage for purposes of Mr. Burns’ 2018 compensation was increased, resulting in a 2018 target bonus of $625,000 (100% of his 2018 base salary of $625,000).  Mr. Burns elected to receive 100% of his 2018 bonus in the form of RSUs.  On April 1, 2018, he was granted 23,313 target RSUs, calculated based upon the closing stock price on March 29, 2018 as follows:

 

$625,000 Target Bonus / $30.83 Closing Stock Price X 1.15% Premium = 23,313 RSUs

 

·

Named Executive Officer: Chris M. Calcaterra

 

Mr. Calcaterra’s target bonus opportunity for 2017 was set at 50% of his annual base salary.  Based upon a market survey conducted by our independent compensation consultant, the Compensation Committee confirmed that this target percentage was slightly below the midpoint of target bonus percentages of other chief operating officers in our peer group. Therefore, the target bonus percentage for purposes of his 2018 compensation was increased to 60%, resulting in a target 2018 bonus of $237,930 (60% of his base salary of $396,550).  Mr. Calcaterra had previously elected to defer 10% of his 2018 bonus pursuant to the Company’s nonqualified deferred compensation plan.  Of the 90% remaining portion of his 2018 target bonus ($214,137), Mr. Calcaterra elected to receive 25% (or $53,534) in the form of RSUs.  On April 1, 2018, he was granted target 1,997 RSUs, calculated based upon the closing stock price on March 29, 2018 as follows:

 

$237,930 Target Bonus X 90% Non-Deferred Portion X 25% Election / $30.83 Closing Stock Price

X 1.15% Premium = 1,997 RSUs

 

·

Named Executive Officer: Joseph E. Gilliam

 

Mr. Gilliam’s target bonus opportunity for 2017 was set at 50% of his annual base salary as part of his initial compensation package upon hiring, consistent with the target bonus percentage of the Company’s other (non-CEO) executive officer. Based upon a market survey conducted by our independent compensation consultant, the Compensation Committee determined that this target percentage placed him just below the midpoint of the target bonus percentages of other chief financial officers in our peer group. Therefore, his percentage bonus target was increased for purposes of his 2018 compensation, resulting in a target 2018 bonus of $224,640 (60% of his base salary of $374,400).

 

 

 

 

 

 

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Bonus Payouts

 

As described above, annual bonus awards are initially evaluated based upon satisfaction of a combination of corporate and/or individual objectives, and then the actual bonus payout is decreased to 0% or increased up to 200% based upon the application of the financial performance adjustment factor for under- or overachievement of the net sales corporate objective. Based on our strong net sales performance in 2018, the financial performance adjustment factor was 180%, which resulted in each Named Executive Officer receiving a total bonus percentage award equal to 180% of his target bonus award.

 

·

Chief Executive Officer: Thomas W. Burns

 

As Mr. Burns had previously elected to receive 100% of his 2018 bonus in the form of RSUs, he received a grant of 23,313 target RSUs on April 1, 2018. Based on achieving a 180% annual bonus payout percentage, Mr. Burns vested in a total number of 41,963 RSUs on April 1, 2019, or 18,650 more than the target number of RSUs granted. The value of the RSUs that vested and were delivered to Mr. Burns increased due to the increase in the price of our common stock from the date of grant to the vesting date.

 

The Compensation Committee believes that this amount properly rewards Mr. Burns for the successes of the Company in 2018, particularly taking into account the approval and successful commercial launch of the Company’s new iStent inject product, strong sales growth during the year, and the competitive position of the Company’s products.

 

Mr. Burns’
Target RSU #

 

15%
Premium

 

Initial
RSU Grant (#)

 

Financial
Performance
Adjuster (%)

 

Final
RSU Payout (#)

20,273

×

15%

=

23,313

×

180%

=

41,963

 

·

Named Executive Officer: Chris M. Calcaterra

 

Mr. Calcaterra had previously elected to defer receipt of 10% of his 2018 bonus pursuant to our executive nonqualified deferred compensation plan, and further elected to receive 25% of the remaining portion (or 22.5% of his total 2018 bonus) in the form of RSUs, which would then be multiplied by the 15% premium.  Based upon these elections, Mr. Calcaterra was granted 1,997 target RSUs on April 1, 2018. Based on achieving a 180% annual bonus payout percentage, Mr. Calcaterra vested in a total number of 3,595 RSUs on April 1, 2019, or 1,598 more than the target number of RSUs granted. The remaining portion of his 2018 bonus (which, based upon his target percentage, was $184,419) would be paid in cash, which resulted in a cash payment of $331,912 (including the deferred portion of $42,827). The value of the RSUs that vested and were delivered to Mr. Calcaterra increased due to the increase in the price of our common stock from the date of grant to the vesting date.

 

Alcaterra’s

 

 

 

 

 

 

 

 

Mr. Calcaterra’s
Base Salary

 

Initial
Bonus Award (%)

 

Financial
Performance
Adjuster (%)

 

22.5%
Attributable to
RSU Election

 

Final
Cash Bonus
Award ($)

$396,550

×

60%

×

180%

$
96,362

=

$
331,912

 

alcaterra

 

 

 

 

 

 

 

 

Mr. Calcaterra’s
Target RSU #

 

15%
Premium

 

Initial
RSU Grant (#)

 

Financial
Performance
Adjuster (%)

 

Final
RSU Payout (#)

1,736

×

15%

=

1,997

×

180%

=

3,595

 

 

 

 

 

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·

Named Executive Officer: Joseph E. Gilliam

 

Mr. Gilliam elected to receive his bonus payout in cash.  This resulted in a total cash bonus payout of $404,352.  As with our other Named Executive Officers, the Compensation Committee believed the amount of Mr. Gilliam’s bonus payment was appropriate based upon our achieved results in 2018.

 

 

 

 

 

 

 

 

 

 

Mr. Gilliam’s
Base Salary

 

Initial
Bonus Award

 

Financial
Performance
Adjuster

 

Final
Bonus Award

$374,400

×

60%

×

180%

=

$
404,352

 

2019 Bonus Plan

 

In March 2019, the Compensation Committee approved the 2019 executive bonus plan issued under our 2015 Omnibus Incentive Compensation Plan.  Based upon stockholder feedback, this 2019 plan mirrors the 2018 bonus plan in its structure and metrics, including incorporation of an equity election as introduced in 2018 and described below.  In order to emphasize the paramount importance of achieving our net sales objectives, the bonus plan again includes a financial performance adjustment factor which may decrease down to zero, based upon underachievement of targets by more than 10%, or increase, up to a 2X cap upon overachievement of targets by 110% or more, our Named Executive Officers’ bonus awards based upon the financial performance of the Company compared to our pre-set financial objective related to net sales.  Therefore, regardless of how the Company and its executives perform with respect to operational performance initiatives and individual objectives, 100% of each executive’s bonus payment is dependent upon our achievement of the objective, pre-set net sales target. With regard to performance targets, the Compensation Committee determined to focus on key operational initiatives for the corporate performance component, which include clinical trial enrollment goals for our pipeline products and pipeline product design initiatives by the end of 2019.  The Committee deemed such a construct is appropriate to motivate management to not only deliver on stated operational objectives, but to do so in an efficient fashion.

 

Equity Election Option

 

In direct response to stockholder input received in our 2017 stockholder engagement campaign, the Compensation Committee, first in 2018 and again in 2019, gave certain senior leaders, including all of our Named Executive Officers, the option to elect to receive all or a portion of their annual bonus in the form of RSUs rather than cash.

 

The Compensation Committee believes that giving such an option to executives creates an opportunity to further align their interests with those of our stockholders.  To provide additional incentive for executives to elect equity, there is a 15% premium component to the conversion from the dollar value of the bonus to the number of RSUs granted.  Finally, the number of RSUs that subsequently vest in 2020 will be determined in the same manner as the cash bonuses that become payable under our 2019 bonus plan described above (i.e., the number of RSUs that vests is performance-contingent so that the percentage of the target number of RSUs that vest will be the same as the payout percentage for target cash bonuses).

 

Simply put, our executives who elect to participate in this program will earn more than their cash bonus would have been if the price of our common stock increases between the grant date and the vesting date, and will earn less if the price of our common stock falls more than 15%.  We believe this equity election further strengthens the link between our executive compensation program and the value delivered to our stockholders, creates greater alignment between the interests of our executives and those of our stockholders, and exemplifies our pay for performance philosophy.  Our Chief Executive Officer, Mr. Burns, elected to receive 100% of his 2019 bonus in RSUs rather than cash, and our Chief Operating Officer, Mr. Calcaterra, elected to receive 15% of his 2019 bonus in the form of RSUs.

 

 

 

 

 

 

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Long-Term Incentive Compensation

 

Philosophy and Award Practice

 

Our Compensation Committee believes it is essential to provide long-term equity-based compensation to our executive officers in order to inextricably link both the interests and risks of our executive officers with those of our stockholders. We believe compensating our leadership team in equity also further reinforces our commitment to ensuring a strong linkage between company performance and pay.  The Compensation Committee believes that equity awards with a multi-year vesting schedule create an incentive for the executives to create and preserve long-term stockholder value, as the value of the equity will only increase if our share price increases following the grant date.

 

In 2018, we granted long-term equity-based compensation to our Named Executive Officers in the form of stock options, which only have value if the price of our common stock appreciates after the date of grant.  When determining the size of these equity awards, the Compensation Committee considered several factors, including the Company’s strong financial and operational performance in the prior year.  The Compensation Committee noted that the Company had achieved net sales growth of nearly 40%, established 13 additional direct international markets and submitted the U.S. PMA application for the iStent inject to the FDA, all in 2017.  The Compensation Committee also noted the breakthrough procedures and products the Company is creating and therefore the small pool from which the Company can draw qualified talent. With this in mind, the Compensation Committee acknowledges that, while the midpoint of the peer group may be sufficient for short-term compensation elements, reference points above the midpoint of the Company’s peer group are more appropriate for long-term equity-based compensation in order to recruit top talent. The Compensation Committee also considers this level of grant to be appropriate to provide strong retention value and more closely link our Named Executive Officers’ compensation to our stockholders’ interests. The Compensation Committee believes that the greater potential compensation through equity grants provides enhanced motivation for our executives to achieve the Company’s strategic goals over time and to stay committed to the long-term growth of the Company.

 

The equity grants of options to our Named Executive Officers in 2018 vest over four years, with 25% of the options vesting on the first anniversary of the grant date, and the remainder vesting in equal monthly installments over the following three years.  The exercise price for the options is the closing price for our stock on the date of grant.

 

2018 Named Executive Officer Long-Term Equity Grants

 

In March 2018, the Board of Directors (based upon the recommendation of the Compensation Committee) determined the appropriate size of grant to award Messrs. Burns, Calcaterra and Gilliam, consistent with the vesting terms described above. In so doing, and consistent with its philosophy, the Compensation Committee, with the approval of the Board of Directors, concluded that equity grant values above the midpoint of the peer group would be appropriate in light of the Company growing net sales by almost 40% year-over-year in fiscal 2017.  The Company’s successful performance in 2017 was a greater factor in determining the size of these option awards than the Compensation Committee’s comparative pay positioning philosophy. The closing price of $30.92 on the date of grant was set as the exercise price, and was used to determine the valuation of the grants.

 

In determining Mr. Burns’ option grant, the Compensation Committee set a target grant date value of approximately $4.0 million, which equated to options to purchase 280,000 shares at the Company’s then-current trading levels.  The Compensation Committee set this target grant to reward Mr. Burns for the Company’s exemplary 2017 financial and operational performance. Then taking the Company’s slight shortfall in reaching its rigorous revenue target for 2017, the Compensation Committee decreased that number of stock options to 266,000, which equated, based upon our stock price as of the date of grant, to a grant date value of approximately $3.8 million.

 

In determining Mr. Calcaterra’s 2018 option grant, the Compensation Committee targeted an equity grant date value of $1.2 million, which equated to options to purchase about 84,000 shares at the Company’s then-current trading levels.  Again, taking into account the Company’s and Mr. Calcaterra’s performance in 2017

 

 

 

 

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and looking to reward that performance but also recognizing the 99.5% achievement of the Company’s revenue goal, the Compensation Committee decreased the size of his 2018 option grant to 80,500 shares, with a value, at the time of grant, of approximately $1.160 million.

 

In determining Mr. Gilliam’s 2018 option grant, the Compensation Committee targeted an equity grant date value of $1.2 million, which equated to options to purchase about 84,000 shares at the Company’s then-current trading levels.  Again, taking into account the Company’s and Mr. Gilliam’s performance in 2017 and looking to reward that performance but also recognizing the 99.5% achievement of the Company’s revenue goal, the Compensation Committee decreased the size of his 2018 option grant to 80,500 shares, with a value, at the time of grant, of approximately $1.160 million. The Compensation Committee granted the same number of options to both Mr. Calcaterra and Mr. Gilliam in order to maintain internal pay equity for the long-term equity incentive granted to these executives.

 

2019 Named Executive Officer Long-Term Equity Grants

 

In structuring the 2019 long-term equity grants for our executive officers, including our Named Executive Officers, the Compensation Committee considered many factors, including stockholder feedback received during our 2018 engagement campaign and the results of the say-on-pay vote at our 2018 Annual Meeting. While we believe our historic practice of granting stock options is performance-based in nature because the options will only have value if our stock price increases, the Compensation Committee also took into account the preference expressed by a stockholder during our 2018 stockholder outreach campaign that we make a portion of our long-term equity compensation subject to performance-based vesting. Performance-based equity consists of grants of equity that require the achievement of certain pre-determined operational or financial targets in order to vest, as contrasted with time-based equity grants that only require the passage of time before they vest. Additionally, like all equity grants, the value of performance-based equity increases if the price of the Company’s common stock increases.  The Compensation Committee believes that the use of performance-based equity advances multiple goals that benefit both the Company and stockholders. Performance-based equity grants incentivize the achievement of the Company’s long- and short-term strategic goals, they motivate executives to work hard to increase the value of the Company, as evidenced by increased stock price, and they encourage executives to remain employed with the Company.

 

In direct response to stockholder feedback, in March 2019 the Compensation Committee determined to reduce the amount of time-based equity issued and introduce PBRSUs into our long-term incentive program for our senior leadership team, including our Named Executive Officers. The 2019 equity grants were set at target values, based in part upon each executive’s and the Company’s 2018 performance and in part upon peer company compensation data.  These target values were then divided into three equal tranches: one-third time-based stock options, one-third time-based RSUs, and one-third PBRSUs.  The Compensation Committee determined that issuing one-third of the total long-term equity compensation in the form of PBRSUs was responsive to the shareholder feedback that a portion of our long-term equity compensation be performance-based.  The time-based stock options have a strike price equal to the market price of the Company’s common stock on the date of grant and will vest over four years, with 25% vesting on the first anniversary of the grant date and the remainder vesting in equal monthly installments over the next three years.  The time-based RSU’s will vest 25% each year, on the anniversary of the grant date, for four years.  The PBRSUs will only vest upon the Compensation Committee’s confirmation of the satisfaction of a pre-determined operational goal relating to completion of the rigorous certification training and conversion of surgeons to our iStent inject product, which was approved by the FDA and commercially launched in 2018. This essential training is designed to ensure that surgeons are properly and fully prepared to utilize our iStent inject product to achieve the highest probability of positive surgical outcomes.  The Compensation Committee determined that the achievement of this goal is the leading, quantifiable driver to the adoption of the Company’s new iStent inject product, which the Compensation Committee believes provides for a more elegant, facile and straightforward procedure that potentially leads to increased intraocular pressure reduction with two patent bypass openings, resulting in improved patient outcomes.  Therefore, the Compensation Committee believes the iStent inject will not only increase utilization by surgeons currently using our first-generation iStent product, but also attract new surgeons who have never used a Glaukos products, leading to market expansion opportunities and the associated sales growth. The goal must be reached within three years of the grant date or the PBRSU grant will lapse and be forfeited for no consideration.

 

 

 

 

 

 

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The Compensation Committee takes stockholder feedback very seriously, and believes that this shift from all time-based long-term equity to performance-based long-term equity evidences its commitment to respond to stockholder feedback in a responsible manner that benefits both stockholders and the Company.

 

Severance Benefits

 

We have entered into executive severance and change in control agreements with each of our senior team leaders, including our three executive officers, Messrs. Burns, Calcaterra and Gilliam. The level of each executive’s severance benefits has been determined to be appropriate by the Compensation Committee, which believes that severance benefits, particularly in the context of the uncertainty surrounding any potential change in control transaction, play a valuable role in attracting and retaining quality executive officers. We believe these potential benefits helped us to assemble a qualified senior leadership team. The payments and benefits provided under our severance and change in control arrangements are designed to provide our Named Executive Officers with treatment that is competitive with market practices.

 

As described in more detail below under the heading “Potential Payments Upon Termination or Change in Control,” each of the Named Executive Officers would be entitled to severance benefits in the event of an involuntary termination of employment by us without “cause” or a resignation for “good reason” (each as defined in the executive severance and change in control agreements). We do not believe that the Named Executive Officers should be entitled to receive their cash severance benefits merely because a change in control transaction occurs, and a change in control does not, in and of itself, entitle any Named Executive Officer to receive severance benefits (i.e., these severance benefits are “double-trigger” benefits). The amount of each Named Executive Officer’s severance benefits is increased in connection with a qualifying termination in connection with or following a change in control in order to encourage our Named Executive Officers to remain employed with us, and focus on the creation of value for stockholders, during an important time when their prospects for continued employment following a change in control transaction may be uncertain.

 

No Named Executive Officer is entitled to receive a “gross-up” or similar payment for any excise taxes that may become payable in connection with a change in control pursuant to Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), and, depending on what results in the best after-tax benefit for the executive, benefits may be “cut back” instead in such circumstances.

 

Perquisites and Other Benefits

 

We generally do not provide perquisites or other benefits to our Named Executive Officers other than those available to employees generally. We have established a 401(k) tax-deferred savings plan, which permits participants, including our Named Executive Officers, to make contributions by salary deduction pursuant to Section 401(k) of the Code. We are responsible for administrative costs of the 401(k) plan. We make matching contributions to the 401(k) plan up to specified limits. All of our Named Executive Officers participated in the 401(k) plan in 2018. We provide all employees, including our Named Executive Officers, with life insurance equal to twice their annual salary to a maximum of $500,000 and long-term disability insurance.

 

Named Executive Officers are eligible to participate in the Company’s health, dental, disability and other insurance plans on the same terms and at the same cost as such plans are available to all of the Company’s full-time employees, and are also eligible for an executive physical. Additionally, substantially all full-time employees of the Company, including the Named Executive Officers other than Mr. Burns, are eligible to participate in the Company’s 2015 Employee Stock Purchase Plan (the “ESPP”) upon enrolling in the ESPP during one of the established enrollment periods, subject to certain limitations as set forth in the ESPP. Under the ESPP, no Company employee is permitted to purchase shares of common stock having a market value of more than $25,000 per calendar year, as calculated under the ESPP taking into account any discounts to purchase price.

 

 

 

 

 

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Stock Ownership Policy Applicable to Executive Officers

 

In structuring the 2019 executive compensation program, the Compensation Committee considered many factors, including stockholder feedback and the results of the say-on-pay vote at our 2018 Annual Meeting. The Compensation Committee considered these data points and determined that requiring our executives to own shares of our common stock was an appropriate policy to adopt at this time. In 2018, the Compensation Committee adopted a Stock Ownership Policy that requires our Chief Executive Officer to own shares of our common stock having a value equal to at least six times his annual base salary, and each of our other Named Executive Officers to own shares of our common stock having a value of at least three times the executive’s annual base salary.  Shares subject to stock options and unvested PBRSUs are not considered owned by the executive for purposes of this Policy. This Policy went into effect on January 1, 2019, and each Named Executive Officer is required to meet the minimum stock ownership requirement by the later of January 1, 2024, or five years after such person’s appointment as an executive officer for future hires. The initial minimum stock ownership level of each executive officer was determined on January 1, 2019, based upon the average daily closing price of the Company’s common stock as reported by the New York Stock Exchange for the 12-months ended December 31, 2018.  The minimum stock ownership level will be re-determined every third anniversary of the last calculation, as well as upon a change in annual base salary.  As of January 1, 2019, each of our Named Executive Officers was in compliance with the applicable minimum stock ownership levels.

 

Clawback Policy

 

In 2018, in response to stockholder feedback and the results of the say-on-pay vote at our 2018 Annual Meeting, the Compensation Committee decided to create greater accountability for our executive officers by adopting a policy regarding the recoupment of certain incentive compensation payments.  Pursuant to this policy, our Board of Directors or the Compensation Committee shall, if it deems appropriate under certain circumstances, require reimbursement or cancellation of all or a portion of any short- or long-term cash or equity incentive payments or awards to our executive officers.  This reimbursement requirement would apply when the amount of any such payment or award was determined based upon the achievement of financial results that were subsequently the subject of an accounting restatement due to noncompliance with any financial reporting requirements under federal securities laws, and such restatement was the result of misconduct, if a lesser, or no, payment or award would have been earned based upon the restated financials and the payment or award was received in the three years preceding the date of the restatement.

 

Executive Deferred Compensation Program

 

We have adopted and maintain the Glaukos Corporation Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan permits our management or highly compensated employees, including all of our Named Executive Officers, to elect to defer base salary and annual incentive compensation pursuant to the terms of the Deferred Compensation Plan. Further details on this Deferred Compensation Plan are provided below under the heading, “Nonqualified Deferred Compensation Plans.” As noted below, each of Messrs. Burns and Calcaterra participate in the Deferred Compensation Plan.

 

Policy with Respect to Section 162(m)

 

Section 162(m) of the Code generally prohibits a publicly-held company from deducting compensation paid to a current or former Named Executive Officer that exceeds $1.0 million during the tax year. Certain awards granted before November 2, 2017 may qualify for an exception to the $1.0 million deductibility limit.

 

As one of the factors in its consideration of compensation matters, the Compensation Committee notes this deductibility limitation. However, the Compensation Committee has the flexibility to take any compensation-related actions that it determines are in the best interests of the Company and our stockholders, including awarding compensation that may not be deductible for tax purposes. There can be no assurance that any compensation will in fact be deductible.

 

 

 

 

 

 

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Compensation Committee Report

 

The Compensation Committee of the Board has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement.  Based upon this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis section be included in this Proxy Statement.

 

Compensation, Nominating and Governance Committee of the Board

 

Mark J. Foley (chair)

William J. Link, Ph.D.

Gilbert H. Kliman, M.D.

 

 

 

 

 

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Summary Compensation Table for Fiscal Years 2018, 2017 and 2016

 

The following table provides information regarding the compensation of our Named Executive Officers during 2018, 2017 and 2016, which consist of our principal executive officer and our two other executive officers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and principal position

   

Year

   

Salary
($)

   

Bonus
($)

   

Stock
awards(1) ($)

   

Option
awards(1)
($)

   

Non‑equity
incentive plan
compensation
($)

   

All other
compensation(2) ($)

   

Total
($)

Thomas W. Burns(3)

 

2018

 

$

625,000

 

$

 

$

717,574

 

$

3,846,456

 

$

 

$

9,687

 

$

5,198,717

President and Chief

 

2017

 

$

600,000

 

$

 

$

 

$

3,886,112

 

$

530,000

 

$

8,100

 

$

5,024,212

Executive Officer

 

2016

 

$

562,380

 

$

 

$

 

$

2,313,038

 

$

534,261

 

$

 

$

3,409,679

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chris M. Calcaterra(3)

 

2018

 

$

396,550

 

$

 

$

61,468

 

$

1,164,059

 

$

331,912

 

$

10,250

 

$

1,964,239

Chief Operating Officer

 

2017

 

$

385,000

 

$

 

$

 

$

1,727,161

 

$

179,217

 

$

8,100

 

$

2,299,478

 

 

2016

 

$

346,112

 

$

 

$

 

$

841,105

 

$

173,056

 

$

 

$

1,360,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joseph E. Gilliam(4)

 

2018

 

$

374,400

 

$

 

$

 

$

1,164,059

 

$

404,352

 

$

10,250

 

$

1,953,061

Chief Financial Officer and SVP, Corporate Development

 

2017

 

$

234,692

 

$

 

 

$

4,169,000

 

$

5,871,634

 

$

177,840

 

$

2,990

 

$

10,456,156

 

(1)

The amounts shown represent the grant date fair values of stock and option awards granted in the year indicated as computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 718. For a discussion of valuation assumptions used to determine the grant date fair values of equity awards made to executive officers in 2018, see Note 7, Stock-based Compensation, to our Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.  2018 Bonus RSUs: The amounts reported in this column for 2018 consist of the grant date fair value of restricted stock units (the “Bonus RSUs”) granted to Messrs. Burns and Calcaterra under our 2018 executive bonus plan pursuant to an election by each such Named Executive Officer to receive all (with respect to Mr. Burns) or a portion (25% of the non-deferred portion with respect to Mr. Calcaterra) of his annual bonus in the form of an equity award rather than in the form of a cash payment. The grant date fair value of the Bonus RSUs was computed in accordance with FASB ASC Topic 718, and excludes the effects of estimated forfeitures. The Bonus RSUs are valued based on the probable outcome of the applicable performance conditions as determined on the grant date, which results in a grant date fair value for the Bonus RSUs of $717,574 for Mr. Burns and $61,468 for Mr. Calcaterra. If we had achieved the highest level of performance under the Bonus RSUs, the grant date fair value for the Bonus RSUs would have increased to $1,435,148 for Mr. Burns and $122,935 for Mr. Calcaterra. For a more detailed description of these grants of Bonus RSUs, please see “Material Elements of Compensation—Annual Bonuses” in the Compensation Discussion and Analysis section above.

(2)

Consists of Company matching contributions to the executive’s 401(k) plan contribution and the Company’s payment for an annual executive physical.

(3)

Base salary and non-equity incentive plan amounts for Mr. Burns and Mr. Calcaterra include the amounts that were deferred under our Deferred Compensation Plan described below.

(4)

Mr. Gilliam joined the Company effective May 5, 2017.

 

Executive Employment Offer Letters

 

On July 10, 2014, we entered into employment offer letters with Messrs. Burns and Calcaterra, and on February 3, 2017, we entered into an offer letter with Mr. Gilliam. The offer letters provide Messrs. Burns and Calcaterra with a minimum annual base salary of $525,000 and $320,000, respectively, and a minimum target bonus opportunity of 70% and 40% of base salary, respectively. Mr. Gilliam’s offer letter provides him a minimum annual base salary of $360,000 and a minimum target bonus opportunity of 50% of base salary.  As described above in the Compensation Discussion and Analysis, each executive’s annual bonus is based upon the achievement of specific corporate or individual performance objectives determined by our Board. Base salary and bonus opportunity percentages are reviewed by our Board at least annually for adjustments.

 

Messrs. Burns, Calcaterra and Gilliam are also entitled to receive all employee benefits that we customarily make available to employees in comparable positions, including participation in our equity plans. Additionally, Messrs. Burns, Calcaterra and Gilliam continue to be subject to the patent, copyright and non‑disclosure restrictive covenants agreement each executed prior to the offer letters.

 

 

 

 

 

 

40 

2019 PROXY STATEMENT

  GLAUKOS CORPORATION

 


 

Table of Contents

EXECUTIVE COMPENSATION

2018 Grants of Plan-Based Awards

The following table summarizes information about the non-equity incentive awards and equity-based awards granted to our Named Executive Officers in 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

2018

 

Exercise

 

 

 

 

 

 

Estimated Future Payouts Under

 

Estimated Future Payouts Under

 

Stock Awards:

 

Option Awards:

 

or Base

 

Grant Date

 

 

 

 

Non-Equity Incentive Plan

 

Equity Incentive Plan

 

Number of

 

Number of

 

Price of

 

Fair Value

 

 

 

 

Award ($)(1)

 

Awards (#)(1)

 

Shares

 

Securities

 

Option

 

of Stock and

 

 

Grant

 

Threshold

 

Target

 

Maximum

 

Threshold

 

Target

 

Maximum

 

of Stock or

 

Underlying

 

Awards

 

Option

Name

  

Date

  

($)

  

($)

  

($)

  

 

  

 

  

 

  

Units (#)

  

Options (#)

  

($/Sh)

  

Awards ($)(2)

Thomas W. Burns

 

4/1/2018

 

 

 

 

 

 

 

 

11,657

 

 

23,313

  

 

46,626

 

 

 

 

 

 

717,574

 

 

3/14/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

266,000

 

$

30.92

 

$

3,846,456

Chris M. Calcaterra

 

4/1/2018

 

 

 

 

 

 

 

 

999

 

 

1,997

 

 

3,994

 

 

 

 

 

 

61,468

 

 

3/14/2018

 

$

92,210

 

$

184,419

 

$

368,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3/14/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,500

 

$

30.92

 

$

1,164,059

Joseph E. Gilliam

 

3/14/2018

 

$

112,320

 

$

224,640

 

$

449,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3/14/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,500

 

$

30.92

 

$

1,164,059

(1)

Incentive plan awards consist of annual bonuses payable under our 2018 executive bonus plan, and awards of Bonus RSUs granted to Messrs. Burns and Calcaterra pursuant to an election by each such Named Executive Officer to receive all (with respect to Mr. Burns) or a portion (25% of the non-deferred portion with respect to Mr. Calcaterra) of his annual bonus in the form of an equity award rather than in the form of a cash payment. Please see “Material Elements of Compensation—Annual Bonuses” in the Compensation Discussion and Analysis section above.

(2)

The amounts shown represent the grant date fair values of stock and option awards granted in the year indicated as computed in accordance with FASB ASC Topic 718 and, in the case of the Bonus RSUs, based upon the probable outcome of the applicable performance conditions. For a discussion of valuation assumptions used to determine the grant date fair values of equity awards made to executive officers in 2018, see Note 7, Stock-based Compensation, to our Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.

 

 

 

 

 

GLAUKOS CORPORATION  

  2019 PROXY STATEMENT

 41

 


 

Table of Contents

EXECUTIVE COMPENSATION

Outstanding Equity Awards at 2018 Fiscal Year‑End

 

The following table presents information concerning equity awards held by our named executive officers as of December 31, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option awards

 

 

 

 

 

 

 

Stock awards

 

 

 

Grant

 

Number of
securities underlying
unexercised options (#)

 

Option
exercise

 

Option
expiration

 

Number of
shares or
units of
stock that
have not

 

Market
value of
shares or
units
 of
stock that
have not

 

Equity
incentive
plan
awards:
Number of
unearned
shares,
units or
other
rights that
have not
vested

 

Equity
incentive
plan
awards:
Market or
payout
value of
unearned
shares,
units or
other
rights that
have not
vested

 

Name

  

date

  

Exercisable

  

Unexercisable

  

price ($)

  

date

  

vested (#)

  

vested ($)(1)

  

(#)(2)

  

($)(1)

 

Thomas W. Burns

 

1/27/2011

 

317,680 

 

 

$

3.975 

 

1/27/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

4/28/2011

 

69,047 

 

 

$

3.975 

 

4/28/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

7/13/2012

 

3,583 

 

 

$

3.70 

 

7/13/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

1/29/2013

 

256,000 

 

 

$

4.225 

 

1/29/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

4/25/2013

 

10,880 

 

 

$

4.225 

 

4/25/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

7/10/2014

 

540,000 

 

 

$

7.275 

 

7/10/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

3/10/2016

 

189,063 

 

85,937

(3)  

$

16.49 

 

3/10/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

3/15/2017

 

78,750