DEF 14A 1 def14a.htm DEF 14A env_Current_Folio_Proxy 2017

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.           )

 

 

 

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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

 

 

 

 

 

Envestnet, Inc.

(Name of Registrant as Specified In Its Charter)

 

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

 

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Picture 1

May 1, 2017

Chicago, Illinois

 

Dear Stockholder:

 

It is with great pleasure that we invite you to our 2017 Annual Meeting of Stockholders. The meeting will be held on July 13, 2017 at 35 East Wacker Drive, Suite 260, Chicago, Illinois at 10:00 a.m. Central Time.

 

Our formal agenda for this year’s meeting is to vote on the election of directors; to vote, on an advisory basis, on 2016 executive compensation; to vote, on an advisory basis, on the frequency of submitting the advisory vote on executive compensation to stockholders; to ratify the selection of independent auditors for 2017; and to approve our 2010 Long-Term Incentive Plan as amended through the Fourth Amendment. In addition, we will report to you the highlights of 2016 and discuss the outlook for our business in 2017.

 

Whether or not you plan to attend the meeting, your vote on these matters is important to us. Stockholders of record can vote their shares via the Internet, by using a toll‑free telephone number or by requesting and completing a proxy card and mailing it in the return envelope provided. If you hold shares through your broker or other intermediary, that person or institution will provide you with instructions on how to vote your shares.

 

If you are a beneficial holder of our shares, we urge you to give voting instructions to your broker so that your vote can be counted. This is especially important since the New York Stock Exchange does not allow brokers to cast votes with respect to the election of directors or the advisory vote on executive compensation unless they have received instructions from the beneficial owner of shares.

 

We look forward to seeing you at the meeting.

 

 

 

 

Sincerely,

 

Picture 2

 

Judson Bergman

 

Chairman and Chief Executive Officer

 

 

 


 

Picture 3

NOTICE OF ANNUAL MEETING

 

May 1, 2017

Chicago, Illinois

 

TO THE STOCKHOLDERS OF ENVESTNET, INC.:

 

The 2017 Annual Meeting of Stockholders of Envestnet, Inc. will be held on July 13, 2017, at 10:00 a.m. Central Time at 35 East Wacker Drive, Suite 260, Chicago, Illinois, for the following purposes:

 

1.

To elect three Class II directors to hold office until the 2020 Annual Meeting or until their successors are duly elected and qualified;

 

2.

To vote, on an advisory basis, on 2016 executive compensation;

 

3.

To vote, on an advisory basis, on whether executive compensation should be submitted to stockholders for an advisory vote every one, two or three years;

 

4.

To ratify the appointment of KPMG LLP as Envestnet’s independent auditors for the fiscal year ending December 31, 2017;

 

5.

To approve Envestnet’s 2010 Long-Term Incentive Plan, as amended through the Fourth Amendment; and

 

6.

To transact such other business, if any, as lawfully may be brought before the meeting.

 

Only stockholders of record, as shown by the transfer books of Envestnet, at the close of business on April 3, 2017, are entitled to notice of, and to vote at, the Annual Meeting.

 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE VOTE AS PROMPTLY AS POSSIBLE VIA THE INTERNET OR BY TELEPHONE IN ACCORDANCE WITH THE INSTRUCTIONS IN YOUR PROXY MATERIALS. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT.

 

 

 

 

By Order of the Board of Directors,

 

Picture 4

 

Shelly O’Brien

 

Corporate Secretary

 

 

 


 

TABLE OF CONTENTS 

 

 

 

 

 

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING 

1

Why has this proxy statement been made available 

1

What proposals will be voted on at the Annual Meeting 

1

Are proxy materials available on the Internet 

1

Who is entitled to vote 

2

How many votes do I have 

2

What is the difference between holding shares as a stockholder of record and as a beneficial owner 

2

How do I vote by proxy if I am a stockholder of record 

2

How do I give voting instructions if I am a beneficial owner 

3

May I vote by telephone or via the Internet 

3

May I revoke my proxy or my voting instructions 

3

How do I vote in person at the Annual Meeting 

4

What votes need to be present to hold the Annual Meeting 

4

What vote is required to approve each proposal 

4

How are votes counted 

4

What is the effect of broker non-votes and abstentions 

5

Are there any voting agreements with respect to our common stock 

5

What are the costs of soliciting these proxies and who will pay them 

5

Where can I find the voting results 

5

Will Envestnet’s independent auditors attend the Annual Meeting 

5

Do directors attend the Annual Meeting 

5

Can a stockholder, employee or other interested party communicate directly with our Board If so, how 

5

Whom should I call if I have any questions 

6

CORPORATE GOVERNANCE 

6

Overview 

6

The Board of Directors 

7

Director Independence 

7

The Committees of the Board 

8

How are directors compensated 

9

Director Compensation 

10

What is our Board leadership structure 

11

How does the Board oversee risk 

11

How do directors evaluate their performance 

12

How are directors nominated 

12

Compensation Committee interlock and insider participation 

14

What is our Related Party transactions approval policy and what procedures do we use to implement it 

14

What Related Party transactions do we have 

15

Indemnification of Directors and Executive Officers 

15

Did our insiders comply with Section 16(a) beneficial ownership reporting in 2016 

16

PROPOSAL NO. 1:  ELECTION OF DIRECTORS

16

General 

16

Nominees for election for term expiring in 2020 (Class II) 

17

Directors whose terms of office will continue after this meeting 

19

Directors whose terms expire in 2018 (Class I) 

19

Directors whose terms expire in 2019 (Class III) 

20

INFORMATION ABOUT OUR COMMON SHARE OWNERSHIP 

21

How much stock is owned by directors and executive officers 

21

Which stockholders own more than 5% of our common stock 

22

 

 


 

 

 

 

EXECUTIVE COMPENSATION 

23

Compensation Discussion and Analysis 

23

Philosophy and Objectives 

23

Role of Compensation Committee and Management 

24

Competitive Market Review 

24

Our 2016 Executive Compensation Program 

24

Supplemental Benefits 

28

Recoupment of earned awards 

28

Regulatory limitations 

28

2016 Summary Compensation 

29

2016 Grants of Plan-Based Awards 

30

Narrative to 2016 Summary Compensation and 2016 Grants of Plan-Based Awards 

30

2016 Outstanding Equity Awards at Fiscal Year-End 

31

2016 Option Exercises and Stock Vested 

32

Nonqualified Deferred Compensation 

32

Potential Payments Upon Termination of Change of Control 

33

Compensation Committee Report 

37

AUDIT COMMITTEE REPORT 

38

PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION 

39

PROPOSAL NO. 3 ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS 

40

PROPOSAL NO. 4 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS 

41

Independent Auditor Fee Information 

41

Pre-Approval Policy of Audit and Non-Audit Services 

41

PROPOSAL NO. 5 APPROVAL OF THE 2010 LONG TERM INCENTIVE PLAN AS AMENDED THROUGH THE FOURTH AMENDMENT 

42

Purpose 

42

Summary of the Fourth Amendment 

42

Background 

42

Shares Outstanding and Available 

43

Burn Rate 

44

Plan Description 

44

United States Income Tax Considerations 

49

Authorized Securities under Equity Compensation Plans 

52

STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING 

53

How do I submit a proposal for inclusion in next year’s proxy material 

53

How do I submit a proposal or make a nomination at an annual meeting 

53

OTHER MATTERS 

53

EXHIBIT A  ENVESTNET, INC. 2010 LONG-TERM INCENTIVE PLAN (as amended through the Fourth Amendment) 

A-1

 

 

 

 

 

 

 


 

ENVESTNET, INC.

35 East Wacker Drive

Suite 2400

Chicago, Illinois 60601

May 1, 2017

 


 

PROXY STATEMENT

 


 

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

Why has this proxy statement been made available?

 

Our board of directors is soliciting proxies for use at our Annual Meeting of Stockholders to be held on July 13, 2017, and any adjournments or postponements of the meeting. The meeting will be held at 10:00 a.m. Central Time at 35 East Wacker Drive, Suite 260, Chicago, Illinois. This proxy statement and the accompanying form of proxy are being mailed to stockholders on or about May 8, 2017.

 

This proxy statement summarizes the information you need to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares.

 

What proposals will be voted on at the Annual Meeting?

 

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

 

·

The election of three Class II directors.

 

·

An advisory vote on 2016 executive compensation.

 

·

An advisory vote on the frequency of the submission of the advisory vote on executive compensation to stockholders.

 

·

The ratification of the selection of KPMG LLP, an independent registered public accounting firm, as our independent auditors for the fiscal year ending December 31, 2017.

 

·

The approval of the Envestnet, Inc. 2010 Long-Term Incentive Plan (the “2010 Long-Term Incentive Plan”), as amended through the Fourth Amendment.

 

Envestnet’s Board recommends that you vote your shares “FOR” each of the nominees to the Board, “FOR” the advisory vote on executive compensation, “FOR” submitting executive compensation to stockholders every year, “FOR” the ratification of the selection of KPMG LLP as our independent auditors for 2017 and “FOR” the approval of the 2010 Long-Term Incentive Plan, as amended through the Fourth Amendment.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting

To Be Held on July 13, 2017

 

Are proxy materials available on the Internet?

 

Yes. Our proxy statement for the 2017 Annual Meeting, form of proxy card and 2016 Annual Report are available at www.envestnet.com.

 

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Who is entitled to vote?

 

April 3, 2017 is the record date for the Annual Meeting. If you owned our common stock at the close of business on April 3, 2017, you are entitled to vote. On that date, we had 43,638,636 shares of our common stock outstanding and entitled to vote at the Annual Meeting. Our common stock is our only outstanding class of stock. The closing price of our common stock on April 3, 2017 on the New York Stock Exchange was $32.50.

 

How many votes do I have?

 

You have one vote for each share of our common stock that you owned at the close of business on April 3, 2017.

 

The proxy card indicates the number of shares of common stock you are entitled to vote.

 

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

Many of our stockholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.

 

Stockholder of Record

 

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, the stockholder of record and these proxy materials are being sent to you directly. As the stockholder of record, you have the right to grant your voting proxy directly or to vote in person at the Annual Meeting. You may also vote by telephone or via the Internet as described below under the heading “Information About the Annual Meeting and Voting—May I vote by telephone or via the Internet?” or you may vote your proxy card by mail.

 

Beneficial Owner

 

If your shares are held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and our proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker or nominee on how to vote your shares and are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may only vote these shares in person at the Annual Meeting if you follow the instructions described below under the heading “Information About the Annual Meeting and Voting—How do I vote in person at the Annual Meeting?” and your broker or nominee has provided a voting instruction card for you to use in directing your broker or nominee as to how to vote your shares. If you would like to vote by telephone or on the Internet, you should read the information described below under the heading “Information About the Annual Meeting and Voting—May I vote by telephone or via the Internet?”

 

How do I vote by proxy if I am a stockholder of record?

 

If you are a stockholder of record, you must properly submit your proxy card (by telephone, via the Internet or by mail) so that it is received by us in time to vote. Your “proxy” (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card (including electronic signatures in the case of Internet or telephonic voting) but do not make specific choices, your proxy will vote your shares as recommended by the Board:

 

·

“FOR” the election of each Class II director;

 

·

“FOR” the approval of the advisory vote on executive compensation;

 

·

FOR” the submission of executive compensation to an advisory vote by stockholders every year;

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·

“FOR” the ratification of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2017; and

 

·

“FOR” the approval of the Envestnet, Inc. 2010 Long-Term Incentive Plan, as amended through the Fourth Amendment.

 

If any other matter is presented, your proxy will be voted in accordance with the best judgment of the individuals named on the proxy card. As of the date of printing this proxy statement, we knew of no matters that needed to be acted on at the Annual Meeting, other than those discussed in this proxy statement.

 

How do I give voting instructions if I am a beneficial owner?

 

If you are a beneficial owner of shares, the broker will ask you how you want your shares to be voted. If you give the broker instructions, the broker will vote your shares as you direct. If your broker does not receive instructions from you about how your shares are to be voted, one of two things can happen, depending on the type of proposal. Pursuant to rules of the New York Stock Exchange, which we refer to as the NYSE, brokers have discretionary power to vote your shares with respect to “routine” matters, but they do not have discretionary power to vote your shares on “non‑routine” matters. Brokers holding shares beneficially owned by their clients do not have the ability to cast votes with respect to the election of directors unless they have received instructions from the beneficial owner of the shares. It is therefore important that you provide instructions to your broker if your shares are beneficially held by a broker so that your vote with respect to directors and on the advisory vote on executive compensation, and any other matters treated as non‑routine by the NYSE, is counted.

 

May I vote by telephone or via the Internet?

 

Yes. If you are a stockholder of record, you have a choice of voting over the Internet, voting by telephone using a toll‑free telephone number or voting by requesting and completing a proxy card and mailing it in the return envelope provided. We encourage you to vote by telephone or over the Internet because your vote is then tabulated faster than if you mailed it. Please note that there are separate telephone and Internet arrangements depending on whether you are a stockholder of record (that is, if you hold your stock in your own name), or whether you are a beneficial owner and hold your shares in “street name” (that is, if your stock is held in the name of your broker or bank).

 

If you are a stockholder of record, you may vote by telephone, or electronically via the Internet, or by following the instructions provided on the proxy card.

 

If you are a beneficial owner and hold your shares in “street name,” you will need to contact your bank or broker to determine whether you will be able to vote by telephone or electronically through the Internet.

 

The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their voting instructions and to confirm that stockholders’ instructions have been recorded properly. If you vote via the Internet, you may incur costs, such as usage charges from Internet access providers and telephone companies. You will be responsible for those costs.

 

Whether or not you plan to attend the Annual Meeting, we urge you to vote. Voting by telephone or over the Internet or returning your proxy card by mail will not affect your right to attend the Annual Meeting and vote.

 

May I revoke my proxy or my voting instructions?

 

Yes. If you change your mind after you vote, if you are a stockholder of record, you may revoke your proxy by following any of the procedures described below. To revoke your proxy:

 

·

Send in another signed proxy with a later date or resubmit your vote by telephone or the Internet;

 

3


 

·

Send a letter revoking your proxy to Envestnet’s Corporate Secretary at 35 East Wacker Drive, Suite 2400, Chicago, Illinois, 60601; or

 

·

Attend the Annual Meeting and vote in person.

 

If you are a beneficial owner and hold your shares in “street name,” you will need to contact your bank or broker to determine how to revoke your voting instructions.

 

If you wish to revoke your proxy or voting instructions, you must do so in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken.

 

How do I vote in person at the Annual Meeting?

 

You may vote shares held directly in your name as the stockholder of record in person at the Annual Meeting. If you choose to vote your shares in person at the Annual Meeting, please bring proof of identification. Shares held in “street name” may be voted in person by you only if you obtain a signed proxy from the stockholder of record giving you the right to vote the shares. If your shares are held in the name of your broker, bank or other nominee, you must bring to the Annual Meeting an account statement or letter from the broker, bank or other nominee indicating that you are the owner of the shares and a signed proxy from the stockholder of record giving you the right to vote the shares. The account statement or letter must show that you were the beneficial owner of the shares on April 3, 2017.

 

Even if you plan to attend the Annual Meeting, Envestnet recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to attend the Annual Meeting.

 

What votes need to be present to hold the Annual Meeting?

 

To have a quorum for our Annual Meeting, the holders of a majority of our shares of common stock outstanding as of April 3, 2017 must be present in person or represented by proxy at the Annual Meeting.

 

What vote is required to approve each proposal?

 

Directors are elected by a plurality vote, which means that the three nominees for Class II directors receiving the most affirmative votes will be elected. However, if the majority of the votes cast for a director are withheld, then notwithstanding the valid election of such director, our by‑laws provide that such director will voluntarily tender his resignation for consideration by our Board of Directors (“Board”). Our Board will determine whether to accept the resignation of such director. All other matters submitted for stockholder approval require the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote.

 

How are votes counted?

 

In the election of Envestnet directors, your vote may be cast “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. Your vote may be cast “FOR” or “AGAINST” or you may “ABSTAIN” with respect to the proposals relating to the advisory vote on executive compensation, the ratification of Envestnet’s independent auditors and the approval of our 2010 Long-Term Incentive Plan, as amended through the Fourth Amendment. With respect to the advisory vote on the frequency of the submission of the advisory vote on executive compensation to stockholders, you may vote “FOR” every year, every two years or every three years, or you may “ABSTAIN” from voting. If you sign (including electronic signatures in the case of Internet or telephonic voting) your proxy card with no further instructions, your shares will be voted in accordance with the recommendations of the Board. If you sign (including electronic signatures in the case of Internet or telephonic voting) your broker voting instruction card with no further instructions, your shares will be voted in the broker’s discretion with respect to routine matters but will not be voted with respect to non‑routine matters. As described in “How do I give voting instructions if I am a beneficial holder?” the election of directors and the advisory vote on executive compensation are considered non‑routine matters. We will appoint one or more inspectors of election to count votes cast in person or by proxy.

 

4


 

What is the effect of broker non‑votes and abstentions?

 

A broker “non‑vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

 

Common stock owned by stockholders electing to abstain from voting with respect to any proposal will be counted towards the presence of a quorum. Common stock that is beneficially owned and is voted by the beneficiary through a broker will be counted towards the presence of a quorum, even if there are broker non‑votes with respect to some proposals, as long as the broker votes on at least one proposal. Broker “non‑votes” will not be considered present and voting with respect to elections of directors or other matters to be voted upon at the Annual Meeting. Therefore, broker “non‑votes” will have no direct effect on the outcome of any of the proposals. Abstentions will be considered present and voting and will have the impact of a vote against a proposal.

 

Are there any voting agreements with respect to our common stock?

 

No.

 

What are the costs of soliciting these proxies and who will pay them?

 

Envestnet will pay all the costs of soliciting these proxies. Our directors and employees may also solicit proxies by telephone, by fax or other electronic means of communication, or in person. We will reimburse banks, brokers, nominees and other fiduciaries for the expenses they incur in forwarding the proxy materials to you.

 

Where can I find the voting results?

 

We will publish the voting results in a Form 8‑K that we will file with the U.S. Securities and Exchange Commission (“SEC”), within four business days after the Annual Meeting. You can find the Form 8‑K on our website at www.envestnet.com.

 

Will Envestnet’s independent auditors attend the Annual Meeting?

 

Representatives of KPMG LLP will attend the Annual Meeting and will have the opportunity to make a statement if they wish and will be available to respond to appropriate questions from stockholders.

 

Do directors attend the Annual Meeting?

 

Directors are encouraged to attend all meetings of stockholders called by Envestnet. All seven of our independent directors, who were members of our Board at the time, attended the 2016 Annual Meeting.

 

Can a stockholder, employee or other interested party communicate directly with our Board? If so, how?

 

Our Board provides a process for stockholders, employees or other interested parties to send communications to our Board. Stockholders, employees or other interested parties wanting to contact the Board, the independent directors, the Chairman of the Board, the chairman of any Board committee or any other director, as to accounting or auditing matters or any other matters may send an email to corpsecy@envestnet.com. Alternatively, stockholders, employees or other interested parties may send written communications to the Board c/o Corporate Secretary, 35 East Wacker Drive, Suite 2400, Chicago, Illinois, 60601, although mail is not as prompt as e‑mail. Communication with the Board may be anonymous. The Secretary will forward all communications to the Board, to the Chairman of the Audit Committee or the Chairman of the Nominating and Governance Committee, who will then determine when it is appropriate to distribute such communications to other members of the Board or to management.

 

5


 

Whom should I call if I have any questions?

 

If you have any questions about the Annual Meeting or voting, please contact Shelly O’Brien, our Corporate Secretary, at (312) 827‑2800 or at corpsecy@envestnet.com. If you have any questions about your ownership of Envestnet common stock, please contact Investor Relations at (312) 827‑3940 or by email at investor.relations@envestnet.com.

 

CORPORATE GOVERNANCE

 

Overview

 

 

 

In General

Our Board has maintained corporate governance policies since we became a public company following our 2010 initial public offering, which we refer to as our IPO. We have reviewed internally and with the Board the provisions of the Sarbanes‑Oxley Act of 2002, the rules of the SEC and the NYSE’s listing standards regarding corporate governance policies and processes and are in compliance with the rules and listing standards. We have adopted Corporate Governance Guidelines covering issues such as executive sessions of the Board, director qualification standards, including independence, director responsibilities and Board self‑evaluations. We have also adopted a Code of Business Conduct and Ethics for our employees and directors and charters for each of our Audit, Compensation, Nominating and Governance,  and Compliance and Information Security Committees. The full text of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and each committee charter, are available on our website located at www.envestnet.com and you can view and print these documents by accessing our website, then clicking on “Investor Relations,” followed by “Corporate Governance.” In addition, you may request copies of the Corporate Governance Guidelines, the Code of Business Conduct and Ethics and the committee charters by contacting our Corporate Secretary via:

 

Telephone    (312) 827‑2800
Facsimile     (312) 827‑2801
E‑mail          
corpsecy@envestnet.com

Independent Director Meetings

Our independent directors meet at regularly scheduled executive sessions without the participation of management and our non‑employee directors also meet periodically at executive sessions without the participation of management. Ross Chapin, our lead independent director, is the presiding director for executive sessions of independent directors and non‑employee directors.

Other Corporate Governance Highlights

With the exception of two directors, our Board consists of all non‑employee, independent directors.

 

Only non‑employee, independent directors may serve on our Audit, Compensation,  Nominating and Governance, and Compliance and Information Security Committees.

 

Our Audit Committee hires, determines the compensation of and decides the scope of services performed by our independent auditors. It also has the authority to retain outside advisors.

 

6


 

 

No member of our Audit Committee simultaneously serves on the audit committees of more than two public companies.

 

Our Compensation Committee has the authority to retain independent consultants to assist it. Our Compensation Committee evaluates the performance of the Chief Executive Officer, to whom we refer as our CEO, based on corporate goals and objectives and, with the other independent directors, sets his compensation based on this evaluation.

 

The Board and each committee of the Board performed the annual self‑evaluation required by the Corporate Governance Guidelines or the applicable committee charter.

 

We have adopted a Code of Business Conduct and Ethics applicable to all directors, officers and employees that sets forth basic principles to guide their day‑to‑day activities. The Code of Business Conduct and Ethics addresses, among other things, conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of company assets, compliance with laws and regulations, including insider trading laws, and reporting illegal or unethical behavior.

 

In addition to Envestnet’s regular Board meetings that last approximately two days each, our Board has an annual business review meeting to assess specific areas of our operations and to learn about general trends affecting the wealth management industry. We also provide our directors with the opportunity to attend continuing education programs.

 

The Board of Directors

 

Our Board oversees our business and monitors the performance of management. The directors keep themselves up‑to‑date on the Company by discussing matters with the CEO, other key executives and our principal external advisors, such as outside legal counsel, outside auditors, investment bankers and other consultants, by reading the reports and other materials that we send them regularly and by participating in Board and committee meetings.

 

The Board usually meets six times per year in regularly scheduled meetings, but will meet more often if necessary. From time to time, the Board has telephonic information sessions on various topics. The Board met nine times, including these telephonic conferences, during 2016. All of our directors attended at least 75% of the aggregate number of meetings of the Board and committees of the Board of which they were a member held while they were in office during the year ended December 31, 2016.

 

Director Independence

 

In March 2017, our Board determined that the following directors are independent under the listing standards of the NYSE: Luis Aguilar, Ross Chapin, Gayle Crowell, James Fox, James Johnson, Charles Roame, and Gregory Smith. These independent directors constitute substantially more than a majority of Envestnet’s Board. In making its determination of independence, the Board applied the categorical standards for director independence set forth in the NYSE’s rules and therefore determined that no other material relationships existed between us and these directors. The Board also considered the other directorships held by the independent directors and determined that none of these directorships constituted a material relationship with us.

 

7


 

The Committees of the Board

 

During 2016, we had an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. Beginning in April 2017, we also have a Compliance and Information Security Committee.

 

 

 

The Audit Committee

The Audit Committee provides oversight of the integrity of our financial statements and financial reporting process, the system of internal controls, the audit process, the performance of our internal audit program and the performance, qualification and independence of the independent auditors.

 

 

 

The Audit Committee is composed entirely of directors who are independent of us and our management, as defined by the NYSE listing standards.

 

 

 

The members of the Audit Committee are currently Mr. Smith (Chairman), Mr. Chapin, Mr. Fox and Mr. Johnson.

 

 

 

The Board has determined that each member of the Audit Committee satisfies the financial literacy requirements of the NYSE and that Messrs. Chapin, Johnson, Fox and Smith are each audit committee financial experts, as that term is defined under SEC Rules. For additional information about the qualifications of the Audit Committee members, see their respective biographies set forth in “Proposal No. 1: Election of Directors.”

 

 

 

The Audit Committee held six meetings during 2016.

 

 

The Compensation Committee

The Compensation Committee has responsibility for evaluating the performance of the CEO and senior management and determining executive compensation in conjunction with the independent directors. The Compensation Committee also works with the Nominating and Governance Committee and the CEO on succession planning.

 

 

 

The Compensation Committee is composed entirely of directors who are independent of us and our management, as defined by the NYSE listing standards.

 

 

 

The members of the Compensation Committee are currently Mr. Fox (Chairman), Mr. Chapin and Ms. Crowell.

 

 

 

The Compensation Committee held seven meetings during 2016.

 

 

The Nominating and Governance Committee

The responsibilities of the Nominating and Governance Committee include identifying individuals qualified to become Board members, recommending director nominees to the Board and developing and recommending corporate governance guidelines. The Nominating and Governance Committee also has responsibility to review and make recommendations to the full Board regarding director compensation. In addition to general corporate governance matters, the Nominating and Governance Committee assists the Board and the Board committees in their self‑evaluations.

 

 

 

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The Nominating and Governance Committee is composed entirely of directors who are independent of us and our management, as defined by the NYSE listing standards.

 

 

 

The members of the Nominating and Governance Committee are Mr. Roame (Chairman), Mr. Aguilar, Mr. Fox, Mr. Johnson and Mr. Smith.

 

 

 

The Nominating and Governance Committee held five meetings during 2016.

 

 

The Compliance and Information Security Committee

Beginning with its first meeting in April 2017, the Compliance and Information Security Committee provides oversight of our regulatory compliance programs and information technology security framework and reviews, assesses and makes recommendations to our Board regarding such regulatory compliance programs and information technology security framework.

 

 

 

The Compliance and Information Security Committee is composed entirely of directors who are independent of us and our management, as defined by the NYSE listing standards.

 

 

 

The members of the Compliance and Information Security Committee are Ms. Crowell (Chairman), Mr. Aguilar, Mr. Roame and Mr. Smith.

 

How are directors compensated?

 

Each non-employee director receives an annual retainer of $100,000, a meeting attendance stipend of $5,000 for each board meeting attended in person, including all coinciding committee meetings and an additional meeting attendance stipend of $1,000 for each telephonic meeting, including all coinciding committee meetings. The chairperson of our Audit Committee receives an additional annual retainer of $25,000. The chairpersons of our other committees receive an additional annual retainer of $15,000. The lead independent director receives an additional annual retainer of $25,000. All non-chairperson committee members receive an additional annual retainer of $10,000 for each committee on which they serve. Directors receive twenty-five percent (25%) of such amounts in cash, twenty-five percent (25%) in options to acquire shares of our common stock, and fifty percent (50%) in restricted stock units. In order to align the interests of the non-employee members of the Board with the long-term interests of the Corporation’s stockholders, all non-employee directors are expected to have an ownership level equivalent to $300,000 within 4 years of October 28, 2015.

 

Cash amounts paid to directors are paid quarterly with respect to the pro rata portion of fees earned during that quarter. Equity amounts paid to directors are granted once a year no later than March 31 for the amounts earned during the previous year. With respect to equity awards granted in 2016:

 

·

Option grants vest monthly over a four year period, except that the options that would otherwise vest over the first 12 months do not vest until the first anniversary of the grant; and

 

·

Restricted stock units vest quarterly over a three-year period, except that restricted stock units that would otherwise vest over the first 12 months do not vest until the first anniversary of the grant.

 

In addition, all directors who joined the Board after July 29, 2010 received an initial equity grant of $100,000 of restricted stock units.

 

Each of the directors who joined the Board between July 29, 2010 and February 28, 2015 received a grant of 4,876 restricted stock units on February 29, 2016 which vests over a two-year period. Forty percent (40%) of the total amount

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vested on February 29, 2016. Thirty percent (30%) of the total amount vested on February 28, 2017 and the remaining thirty percent (30%) vests on February 28, 2018. Each of the directors who joined the Board on March 25, 2016, received a grant of 3,204 restricted stock units on April 26, 2016 which vests over a three-year period. Twenty-five percent (25%) of the total amount vested on April 26, 2016 and an additional twenty-five percent (25%) vested on April 26, 2017. The remaining unvested restricted stock units will vest in equal installments on each of the subsequent two anniversaries of the grant date. All equity grants to our non‑employee directors are made pursuant to our 2010 Long‑Term Incentive Plan. See “—Compensation Discussion and Analysis—2010 Long‑Term Incentive Plan.”

 

We also reimburse all of our directors for their reasonable expenses incurred in attending meetings of our Board or committees.

 

Director Compensation

 

The following table sets forth our 2016 director compensation:

 

 

 

 

 

 

 

 

 

 

 

 

    

Fees Earned

    

Option

    

Stock

 

    

 

 

 

or Paid in Cash

 

Awards

 

Awards

 

 

Total

Name (1)

 

($)

 

($)(*)

 

($)(*)

 

 

($)

Luis Aguilar

 

25,276

 

 —

 

100,000

(2)

 

125,276

Cynthia Egan (3)

 

10,002

 

7,451

 

163,441

(4)

 

180,894

Ross Chapin

 

42,750

 

7,886

 

64,310

 

 

114,946

Gayle Crowell

 

25,276

 

 —

 

100,000

(2)

 

125,276

James Fox

 

41,600

 

6,799

 

157,577

(4)

 

205,976

James Johnson

 

37,167

 

7,461

 

74,334

 

 

118,962

Charles Roame

 

35,000

 

6,578

 

161,694

(4)

 

203,272

Gregory Smith

 

40,972

 

6,799

 

157,577

(4)

 

205,348

Yves Sisteron (5)

 

11,722

 

5,943

 

161,972

 

 

179,637


*Option and restricted stock unit awards were granted on February 29, 2016 with a fair market value of $20.51 in connection with 2015 service. The amounts reported represent the aggregate grant date fair value during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. 

 

(1)

Mr. Aguilar and Ms. Crowell were appointed to the Board in March 2016. Mr. Fox and Mr. Smith were appointed to the Board in February 2015. They received their first equity award in 2016.

 

(2)

Represents restricted stock units that were granted on April 26, 2016, with a fair market value of $31.21 per share in connection with the initial equity grant of $100,000 in connection with joining the Company’s Board.

 

(3)

Ms. Egan resigned from the Board on March 29, 2016.

 

(4)

Also includes restricted stock units that were granted on February 29, 2016, with a fair market value of $20.51 per share in connection with the initial equity grant of $100,000 in connection with joining the Company’s Board between the period of July 29, 2010 and February 28, 2015.

 

(5)

Mr. Sisteron did not stand for re-election and thus his last day as a Board member was May 11, 2016.

 

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Outstanding Unvested Awards

 

As of December 31, 2016, the following unvested awards were outstanding for each director.

 

 

 

 

 

 

Luis Aguilar

 

0

 

options

 

 

2,403

 

restricted stock units

Ross Chapin

 

8,815

 

options

 

 

769

 

restricted stock units

Gayle Crowell

 

0

 

options

 

 

2,403

 

restricted stock units

James Fox

 

5,210

 

options

 

 

3,589

 

restricted stock units

James Johnson

 

9,662

 

options

 

 

728

 

restricted stock units

Gregory Smith

 

5,210

 

options

 

 

3,589

 

restricted stock units

Charles Roame

    

8,662

 

options

 

 

3,567

 

restricted stock units

 

What is our Board leadership structure?

 

The Nominating and Governance Committee of our Board evaluates the Board’s leadership structure on a regular basis.

 

While the Board does not have a policy with respect to combining or separating the Chairman and Chief Executive Officer positions, under the current Board leadership structure, the positions of Chairman and Chief Executive Officer are combined into one role. Mr. Bergman has served as our Chairman and Chief Executive Officer since 1999. Effective as of November 19, 2015, Anil Arora was appointed Vice Chairman. The independent directors of the Board have designated one lead director. The lead director’s responsibilities include, among other things, presiding over all executive sessions of the non‑employee directors, where non‑employee directors meet outside the presence of the management directors, presiding at all other meetings of the Board at which the Chairman is not present, serves as a liaison between the Chairman and the independent directors, discusses with the Chairman all information sent to the Board and discusses with the Chairman the meeting agendas of the Board. The other responsibilities of the lead director are determined by the Board from time to time. Ross Chapin has been designated the lead director.

 

In considering its leadership structure, the Board takes a number of factors into account. Based on its most recent review of the leadership structure, the Board believes that the current structure is appropriate for our Company because it allows for effective evaluation and execution of our strategies and operations management. In addition, a number of Board and Committee processes and procedures, including regular executive sessions of non‑employee directors and annual performance evaluations, provide substantial independent oversight of our Chairman and Chief Executive Officer’s performance.

 

How does the Board oversee risk?

 

Envestnet’s policies and procedures relating to risk assessment and risk management are overseen by our Board. The Board takes an enterprise‑wide approach to risk management that is designed to support our business plans at a reasonable level of risk. A fundamental part of risk assessment and risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for our Company. The Board annually approves our business plan, giving consideration to risk management. The involvement of the Board in setting our business strategy is a key part of its assessment of management’s risk tolerance and also a determination of what constitutes an appropriate level of risk for our Company.

 

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The Audit Committee of the Board reviews our policies and practices with respect to risk assessment and risk management, and discusses with management our major financial risk exposures and the steps that have been taken to monitor and control such exposures.

 

The Compensation Committee reviews compensation risk. The Compensation Committee assesses our executive compensation programs to ascertain any potential material risks that may be created by the compensation program.

 

In conducting this assessment, the Compensation Committee focused on our incentive compensation programs in order to identify any general areas of risk or potential for unintended consequences that exist in the design of our compensation programs and to evaluate our incentive plans relative to our enterprise risks to identify potential areas of concern, if any.

 

The Compensation Committee considered the findings of this assessment of compensation policies and practices and determined that our compensation programs are designed and administered with the appropriate balance of risk and reward in relation to our overall business strategy. Envestnet’s policies and practices are not structured to encourage executives to take unnecessary or excessive risks, and therefore do not create risks reasonably likely to have a material adverse effect on our Company.

 

The Compliance and Information Security Committee reviews potential risk related to regulatory compliance requirements and reviews and assesses our regulatory compliance programs. The Compliance and Information Security Committee also reviews potential risk related to our information technology systems, including cybersecurity risk, and reviews and assesses our information technology security framework.

 

How do directors evaluate their performance?

 

The Board and each committee of the Board conduct annual self‑evaluations to assess the business skills, experience and background represented on the Board and to determine whether the Board and its committees are functioning effectively. During the year, the Nominating and Governance Committee receives input on the Board’s performance from directors and discusses the input with the full Board and oversees the full Board’s review of its performance. Each committee also discusses the input with respect to the committee and the review of its performance. The self‑assessments focus on whether the Board is operating effectively and on areas in which the Board or management believes that the Board or any of its committees could improve.

 

How are directors nominated?

 

In accordance with its charter, the Nominating and Governance Committee identifies potential nominees for directors from various sources. The Nominating and Governance Committee reviews the qualifications of these persons to determine whether they might be a good candidate for membership on the Board. The Nominating and Governance Committee includes a review of the person’s judgment, experience, independence, understanding of our business or other related industries and such other factors as the Nominating and Governance Committee determines are relevant in light of the needs of the Board and our Company. The Nominating and Governance Committee will select qualified candidates and review its recommendations with the Board, which will decide whether to nominate the person for election to the Board at an annual meeting. Between annual meetings, the Board, upon the recommendation of the Nominating and Governance Committee, can approve additions to the Board.

 

Envestnet does not have a formal Board diversity policy. However, the Board considers diversity in professional experience and professional training in recommending nominees. The Nominating and Governance Committee works with the Board on an annual basis to determine the appropriate characteristics, skills and experience for the Board as a whole and its individual members. In evaluating the suitability of individual Board members, the Board and the Nominating and Governance Committee take into account factors such as the individual’s general understanding of marketing, finance and other disciplines relevant to the success of a publicly traded company; understanding of our business; education and professional background, including current employment and other Board memberships; reputation for integrity; and any other factors they consider to be relevant. The Board evaluates each

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individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of the business and represent stockholder interest through the exercise of sound judgment, using its diversity of experience. In determining whether to recommend a director for re‑election, the Nominating and Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board. The Nominating and Governance Committee annually reviews its own performance. In connection with such self‑evaluation, the Nominating and Governance Committee assesses whether it effectively nominates candidates for director in accordance with the above described standards specified by the corporate governance guidelines. See each nominee’s and director’s biography appearing later in this proxy statement for a description of the specific experiences that each such individual brings to our Board.

 

The Nominating and Governance Committee will consider a stockholder’s recommendation for directors, but the Nominating and Governance Committee has no obligation to recommend such candidates for nomination by the Board. Assuming that appropriate biographical and background material is provided for candidates recommended by stockholders, the Nominating and Governance Committee will evaluate those candidates by following substantially the same process and applying substantially the same criteria as for candidates recommended by other sources. If a stockholder has a suggestion for candidates for election, the stockholder should mail it to: Corporate Secretary, Envestnet, Inc., 35 East Wacker Drive, Suite 2400, Chicago, Illinois, 60601. No person recommended by a stockholder will become a nominee for director and be included in a proxy statement unless the Nominating and Governance Committee recommends, and the Board approves, such person.

 

If a stockholder desires to nominate a person for election as director at a stockholders’ meeting, that stockholder must comply with Section 5.2 of our By‑laws, which requires notice not more than 120 days nor less than 90 days in advance of the anniversary of the date of the proxy statement provided in connection with the previous year’s annual meeting of stockholders. This time period has passed with respect to the 2017 Annual Meeting. With respect to the 2018 Annual Meeting, Envestnet must receive such written notice between January 1, 2018 and January 31, 2018. Such notice must describe the nomination in sufficient detail to be summarized on the agenda for the meeting and must set forth:

 

·

As to each person whom the stockholder proposes to nominate for election or re‑election as a director:

 

·

The name, age, business address and residence address of the person;

 

·

The principal occupation or employment of the person;

 

·

The class, series and number of shares of Envestnet common stock that are owned beneficially by the person;

 

·

Any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to the Exchange Act; and

 

·

The nominee’s written consent to serve, if elected.

 

·

As to the stockholder giving the notice:

 

·

The name and record address of the stockholder;

 

·

The number of shares of Envestnet common stock that are owned beneficially by the stockholder; and

 

·

A description of all arrangements or understandings between such stockholder and each person the stockholder proposes for election or reelection as a director pursuant to which such proposed nomination is being made.

 

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Compensation Committee interlock and insider participation

 

The Compensation Committee of Envestnet’s Board has responsibility for determining the compensation of our executive officers. None of the members of the Compensation Committee is a current or former officer or employee of our Company. None of our executive officers serves on the compensation committee of any company that employs any member of the Compensation Committee.

 

What is our Related Party transactions approval policy and what procedures do we use to implement it?

 

Our Board has adopted a written Related Party transactions policy. This policy applies to any transaction, arrangement or relationship, which we refer to as a Related Party Transaction, in which we (including any of our subsidiaries) were, are, or will be a participant, the amount involved exceeds $120,000 annually and in which any director, officer, 5% or greater stockholder or certain other related parties or entities, each of which we refer to as a Related Party, has a direct or indirect material interest. We refer to these transactions as Related Party Transactions. Under the policy, the Audit Committee considers all of the relevant facts and circumstances in determining whether to approve a Related Party Transaction, including:

 

·

The benefits to us of the proposed Related Party Transaction;

 

·

The impact on a director’s independence in the event the Related Party is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer;

 

·

The creation of an actual or apparent conflict of interest;

 

·

The availability of other sources for comparable products or services;

 

·

The terms of the proposed Related Party Transaction;

 

·

The Related Party’s interest in the transaction; and

 

·

The terms available to unrelated third parties or to employees generally.

 

The Audit Committee will approve only those Related Party Transactions that are in, or are not inconsistent with, the best interests of our Company and our stockholders, as the Audit Committee determines in good faith.

 

The following types of transactions do not require approval or ratification under this policy:

 

·

Transactions involving the purchase or sale of products or services in the ordinary course of business, not exceeding $120,000;

 

·

Transactions in which the Related Party’s interest derives solely from his or her service as a director of another corporation or organization that is a party to the transaction;

 

·

Transactions in which the Related Party’s interest derives solely from his or her ownership of less than 10% of the equity interest in another person (other than a general partnership interest) which is a party to the transaction;

 

·

Transactions in which the Related Party’s interest derives solely from his or her service as a director, trustee or officer (or similar position) of a not‑for‑profit organization or charity that receives donations from us;

 

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·

Compensation arrangements of any executive officer (other than an individual who is an immediate family member of a Related Party) that have been approved by the Compensation Committee of our Board and that are reported in our annual meeting proxy statement or would be reported if the executed officer were a named executive officer; and

 

·

Director compensation arrangements that have been approved by our Board and that are reported in our annual meeting proxy statement.

 

What Related Party transactions do we have?

 

Registration Rights

 

On March 22, 2004, we entered into a registration rights agreement with certain holders of our common stock, or the registration rights agreement, pursuant to which these holders of our common stock are entitled to demand registration rights, Form S‑3 registration rights and piggyback registration rights with respect to the registration of their shares of our common stock under the Securities Act of 1933, as amended, or the Securities Act. We refer to shares of our common stock that are subject to the registration rights agreement as “registrable securities.”

 

In connection with our IPO, The EnvestNet Group, Inc., Envestnet’s 41% shareholder prior to the IPO (the “Envestnet Shareholder”), merged with and into Envestnet, with Envestnet being the surviving entity. Upon consummation of the merger of the Envestnet Shareholder with and into Envestnet, certain stockholders of the Envestnet Shareholder are entitled to become a party to the registration rights agreement and to receive each of the registration rights described below.

 

Demand Registration Rights. The holders of registrable securities have rights, at their request, to have their shares registered for resale under the Securities Act. Holders of at least 50% of registrable securities may demand the registration of their shares on up to two occasions within any 12‑month period if the gross proceeds from the registration of their shares would exceed $15,000,000.

 

Registration on Form S‑3. In addition to the demand registration rights discussed above, holders of at least 20% of the registrable securities may require that we register their shares of our common stock for public resale on Form S‑3 or similar short‑form registration statement if the gross proceeds from the registration of their shares of our common stock would exceed $5,000,000 and our Company is eligible to use Form S‑3.

 

Piggyback Registration Rights. The holders of approximately 2.5 million shares of registrable securities have rights to have their shares of our common stock registered for resale under the Securities Act if we register any of our securities, either for our own account or for the account of other stockholders, subject to the right of the underwriters involved in any such transaction to limit the number of shares of our common stock included in an underwritten offering.

 

The following Related Parties are currently party to the registration rights agreement: Judson Bergman (our Chairman and Chief Executive Officer and one of our directors), William Crager (our President), Scott Grinis (our Chief Technology Officer), Brandon Thomas (our Chief Investment Officer), and James Johnson, a current director. Holders of our registrable securities are entitled to the registration rights described above. Collectively, these Related Parties hold approximately 1.3 million shares covered by the registration rights agreement as of April 3, 2017.

 

Indemnification of Directors and Executive Officers

 

We have entered into agreements to indemnify our directors and certain of our officers in addition to the right to indemnification provided to such persons in our certificate of incorporation and by‑laws. These agreements will, among other things, require us to indemnify these individuals to the fullest extent permitted under Delaware law, including for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our right, on account of services by any such person as a director or officer of our Company or as a director or officer of any of our subsidiaries, or as a director or officer of any other

15


 

company or enterprise if any such person serves in such capacity at our request. We also intend to enter into indemnification agreements with our future directors and executive officers.

 

Did our insiders comply with Section 16(a) beneficial ownership reporting in 2016?

 

Our executive officers and directors are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Except as disclosed in the next sentence, we believe that all of our executive officers and directors complied with all filing requirements imposed by Section 16(a) of the Exchange Act on a timely basis during fiscal year 2016. One Form 4 was filed late for Mr. D’Arrigo with respect to the transfer of stock from a joint account to his own name. Two Form 4s for each of Messrs. Grinis, Mayer and Thomas and Ms. O’Brien were filed late, one in 2016 and one in 2017, with respect to the vesting of restricted stock units.

 

PROPOSAL NO. 1: ELECTION OF DIRECTORS

 

General

 

Our by‑laws divide our Board into three classes with the terms of office of each class ending in successive years. Our by‑laws provide for a minimum of 5 and a maximum of 11 directors and empower our Board to fix the exact number of directors and appoint persons to fill any vacancies on the Board until the next Annual Meeting.

 

Following the recommendation of the Nominating and Governance Committee, our Board has nominated Luis Aguilar, Ross Chapin and James Fox as directors of Envestnet to each serve a three‑year term to expire at the Annual Meeting in 2020 or, in each case, until their respective successors shall have been elected and shall have qualified. Each nominee is currently serving as a director of Envestnet. Our Nominating and Governance Committee has been working with our directors and management over the last few years to identify qualified individuals to serve on our Board. Ms. Crowell and Messrs. Aguilar, Fox, Roame and Smith were identified through this process. Mr. Johnson has informed us of his desire to retire from the Board, which may occur prior to the expiration of his term.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THESE NOMINEES AS DIRECTORS OF ENVESTNET.

 

It is the intention of the persons named as proxies, subject to any direction to the contrary, to vote in favor of the candidates nominated by the Board. We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board, or the Board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out his or her term, or the Board increases the number of directors, the Board may fill the vacancy until the Annual Meeting.

 

We have set forth below information with respect to the nominees for election as directors and the other directors whose terms of office as directors will continue after the Annual Meeting. There are no arrangements or understandings between any director and any other person pursuant to which any director was or is selected as a director or nominee.

 

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Nominees for election for term expiring in 2020 (Class II)

Luis Aguilar

Mr. Aguilar, age 63, was appointed to the Company’s Board effective March 29, 2016. Mr. Aguilar is Principal in Falcon Cyber Investments, an investment fund exclusively focused on cyber security investment and was a Commissioner at the U.S. Securities and Exchange Commission from July 2008 through December 2015. Prior to his appointment as an SEC Commissioner, Mr. Aguilar was a partner with the international law firm of McKenna Long & Aldridge, LLP (subsequently merged with Dentons US LLP), specializing in corporate and securities law. Mr. Aguilar's previous experience includes serving as the general counsel, head of compliance, executive vice president, and corporate secretary of Invesco, Inc. with responsibility for all legal and compliance matters regarding Invesco Institutional. While at Invesco, in the 1990’s, he was also managing director for Latin America, and president of one of Invesco’s broker-dealers. His career also includes tenure as a partner at several prominent national law firms: Alston & Bird LLP; Kilpatrick Townsend & Stockton LLP; and Powell Goldstein Frazer & Murphy LLP (subsequently merged with Bryan Cave LLP). He began his legal career as an attorney at the U.S. Securities and Exchange Commission.

Mr. Aguilar represented the Commission as its liaison to both the North American Securities Administrators Association and to the Council of Securities Regulators of the Americas. He also served as the sponsor of the SEC's first Investor Advisory Committee.

Mr. Aguilar serves as a director of Donnelley Financial Solutions, Inc. and MiMedx Group, Inc.

Mr. Aguilar is a graduate of the University of Georgia School of Law, and also received a master of laws degree in taxation from Emory University. He had earlier earned a bachelor's degree from Georgia Southern University.

 

Mr. Aguilar’s experience as an SEC Commissioner and his extensive experience in corporate, securities and compliance matters, especially as they apply to investment advisers, investment companies and broker-dealers, contribute to his qualifications to serve on our Board.

Ross Chapin

Mr. Chapin, age 64, has served as a director of our Company since 2001. Mr. Chapin is a Managing Director of Parametric Portfolio Associates LLC, a provider of structured portfolio management, which he joined as a senior executive in October 2005. Prior to Parametric, Mr. Chapin co‑founded Orca Bay Partners, a private equity firm in 1998. Mr. Chapin received an MBA from Columbia University in finance and accounting, and an undergraduate degree from Denison University.

 

Mr. Chapin has broad knowledge of the financial services industry and financial products acquired through his experience at Parametric. In addition, the Board benefits from Mr. Chapin’s experience with a broad range of companies and industries acquired as a result of the review and analysis of investments by Orca Bay Partners and his education in finance and accounting.

17


 

James Fox

Mr. Fox, age 65, has served as a director of our Company since 2015. Mr. Fox most recently retired as Non Executive Chairman of FundQuest, Inc., upon its acquisition by the Company, effective December 2011 after serving in that role since September 2010 and prior to that, as President and Chief Executive Officer starting in October 2005. Mr. Fox has over 30 years of senior executive experience with The BISYS Group, Inc. and First Data Corporation starting in 1989 and currently serves on two additional boards in different industries. He is a Director and Chairman of the Audit Committee for kgb, Inc. and a Director of Ultimus Fund Solutions, LLC. Mr. Fox has previously served as a board member of several public and private companies.

 

He participated in the Advanced Management Program at the Wharton School of the University of Pennsylvania. He earned his MBA in Finance from Suffolk University and his BA in Economics from the State University of New York.

 

Mr. Fox’s qualifications to serve on our Board include his extensive experience in the business and financial services industry, financial reporting and his knowledge gained from service on the boards of various other companies.

 

18


 

Directors whose terms of office will continue after this meeting

Directors whose terms expire in 2018 (Class I)

 

 

 

James Johnson

Mr. Johnson, age 79, has served as a director of our Company since 2000. Mr. Johnson is a General Partner and Founder of Apex Venture Partners, LLC or Apex, a private equity firm, which he founded in 1988. Prior to founding Apex, Mr. Johnson was one of three founding partners of Knightsbridge Partners, Inc., a private investment firm. Prior to Knightsbridge, Mr. Johnson served in senior management roles with Beatrice Foods Co., including corporate Chief Financial Officer and Senior Vice President of its $6 billion U.S. Foods subsidiary. Mr. Johnson received an MBA from Northwestern University and a BS from Loyola University.

 

Mr. Johnson has experience with a broad range of companies and industries acquired as a result of the review and analysis of investments by Apex and Knightsbridge Partners. The Board also benefits from Mr. Johnson’s experience in senior financial and management roles at Beatrice Foods and his education in business administration.

Charles Roame

 

Mr. Roame, age 51, has served as a director of our Company since 2011.  Mr. Roame is a private investor and advisor to dozens of worldwide CEOs in the financial services and fintech markets.  Mr. Roame also serves as a board member at Edelman Financial Services, LLC (and the related affiliates of Hellman & Friedman, which owns the majority of Edelman Financial Services), and as a trustee for the SA Funds (where he serves on the Audit and Nominating & Governance committees).  Mr. Roame has also served as the Managing Partner of Tiburon Strategic Advisors, LLC, a provider of research, strategy consulting, and other related services primarily to financial services firms, and the Tiburon Partners Fund, since 1998.  Tiburon has published over 1,900 industry research papers, served hundreds of financial services companies, and hosts the semi-annual Tiburon CEO Summits.  Mr. Roame received his MBA from the University of Michigan and a BA from Michigan State University.

 

Mr. Roame’s qualifications to serve on our Board are primarily based on his industry experience.

Gregory Smith

Mr. Smith, age 53, has served as a director of our Company since 2015. Mr. Smith currently is an Executive‑in‑Residence and Lecturer at the University of Wisconsin‑Milwaukee’s Lubar School of Business, as well as Managing Partner of Barnett Management Advisors, LLC. Prior to joining the University of Wisconsin‑Milwaukee, Mr. Smith served as Senior Vice President and Chief Financial Officer of the Marshall & Ilsley Corporation and M&I Bank from 2006 until the company’s sale to BMO Harris Bank in 2011. Prior to joining Marshall & Ilsley, Mr. Smith held progressively senior roles during a 16 year Wall Street investment banking career, including six years as a Managing Director. He is currently a Director of the Church Mutual Insurance Company and its subsidiary CM Vantage Specialty Insurance Company. He is also a board member of the University School of Milwaukee and the Milwaukee Symphony Orchestra. He served as a Trustee of the Milwaukee County Pension Fund in 2014 and 2015. Mr. Smith is an honors graduate of both Princeton University, where he received a BA and The University of Chicago where he received an MBA. More recently, he has been recognized as a Board Leadership Fellow by the National Association of Corporate Directors.

 

Mr. Smith’s extensive experience in accounting, liquidity, budgeting and forecasting, treasury, capital management, tax and mergers and acquisitions and his knowledge gained from service on the boards of various other companies contribute to his qualifications to serve on our Board.

 

 

19


 

Directors whose terms expire in 2019 (Class III)

 

 

 

Judson Bergman

Mr. Bergman, age 60, is the founder of our Company and has served as our Chairman, Chief Executive Officer and a director since 1999. Since founding the Company, he has focused on guiding the company’s strategy and overseeing its organizational and business development. Prior to founding our Company, Mr. Bergman was the Managing Director for Mutual Funds at Nuveen Investments, where he was responsible for the profitable growth of the firm’s mutual fund business and also served on the firm’s Investment Management Committee. He also directed Nuveen’s product and corporate development activity where he helped build the firm’s closed-end fund business, led the development and growth of Nuveen’s separately managed accounts business and helped guide the firm’s expansion into asset classes beyond municipal investments. Mr. Bergman received his MBA in finance and accounting from Columbia University and received a BA from Wheaton College.

 

Mr. Bergman has extensive familiarity with the financial services industry acquired through his years with the Company and his experience at Nuveen as well as his education in finance and accounting.

Anil Arora

Mr. Arora, age 56, has served as a  director and Vice Chairman of our Company, and Chief Executive of Envestnet | Yodlee since November 2015. Prior to then, he was President and Chief Executive Officer and a director of Yodlee, Inc. since February 2000. Mr. Arora served as the Chairman of the board of directors of Yodlee, Inc. from March 2014 through November 2015. Prior to joining Yodlee, from June 1998 to February 2000, Mr. Arora served in various positions with Gateway, Inc., a computer hardware manufacturer which was acquired by Acer Inc. in October 2007, most recently as senior vice president, Gateway Internet and prior to that as chief marketing officer with global responsibility for Gateway. From April 1995 to May 1998, Mr. Arora served in various positions for The Pillsbury Company, a subsidiary of General Mills, Inc. a manufacturer and marketer of branded consumer foods, including as vice president, strategy and marketing for North America and vice president, general manager for Progresso. From June 1984 to April 1995, Mr. Arora served in various brand management and corporate strategy and operations roles for Kraft Foods Group, Inc., a manufacturer and marketer of leading branded consumer foods. Mr. Arora holds an MBA from the University of Michigan and a BS in business administration from Rockford College. 

 

Mr. Arora’s qualifications to serve on our Board include his experience in the technology industry and the operational insight and expertise he accumulated as President and Chief executive officer of Yodlee, Inc.

Gayle Crowell

Ms. Crowell, age 66, was appointed to the Company’s Board effective March 29, 2016. Prior to that she served as lead independent director of Yodlee, Inc. from March 2014 and as a member of the Yodlee, Inc. board of directors from July 2002 until November 19, 2015, when Yodlee, Inc. was acquired by the Company. Ms. Crowell has served as an operational business consultant for Warburg Pincus LLC, a private equity firm, since June 2001. From January 2000 to June 2001, Ms. Crowell served as president of Epiphany, Inc., a developer of customer relationship management software which was acquired by SSA Global Technologies, Inc. in September 2005. Ms. Crowell currently serves on the board of directors of MercuryGate International, Inc., a cloud-based transportation management system technology provider, as well as Dude Solutions Inc., a provider of facilities maintenance software. Ms. Crowell received a BS in education from the University of Nevada at Reno.

 

Ms. Crowell’s qualifications to serve on our Board include her experience as a senior executive and director of a public company and her experience in the technology industries.

 

 

20


 

INFORMATION ABOUT OUR COMMON SHARE OWNERSHIP

 

How much stock is owned by directors and executive officers? 

 

The following table sets forth information, as of April 3, 2017, regarding the beneficial ownership of our common stock by our current directors and executive officers whose compensation is reported in the compensation tables that appear later in this proxy statement, to whom we refer as our named executive officers, and by our directors and executive officers as a group. Unless otherwise indicated, the named individual has sole voting and investment power over the common stock under the column “Shares Held.” Directors, executive officers and employees are prohibited from engaging in any short sales involving our securities.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

Unvested

  

 

  

 

 

 

 

 

 

Options

 

RSUs

 

 

 

 

 

 

 

 

 

Exercisable

 

Vesting

 

Total

 

Beneficial

 

 

 

 

 

within

 

within

 

Beneficial

 

Ownership

 

Name

  

Shares Held

 

60 Days (1)

 

60 Days (2)

 

Ownership

 

Percentages

 

Jud Bergman (3)

 

666,259

 

488,313

 

42,410

 

1,196,982

 

2.71

%

Bill Crager (4)

 

145,970

 

266,231

 

17,153

 

429,354

 

*

 

Scott Grinis

 

215,467

 

110,742

 

3,185

 

329,394

 

*

 

Pete D’Arrigo

 

5,343

 

312,996

 

10,353

 

328,692

 

*

 

Anil Arora (5)

 

73,892

 

6,666

 

 —

 

80,558

 

*

 

Ross Chapin

 

37,694

 

22,238

 

64

 

59,996

 

*

 

Charles Roame (6)

 

12,374

 

16,693

 

53

 

29,120

 

*

 

James Johnson

 

2,016

 

25,711

 

60

 

27,787

 

*

 

Gayle Crowell (7)

 

10,498

 

 —

 

801

 

11,299

 

*

 

Gregory Smith

 

5,634

 

1,626

 

55

 

7,315

 

*

 

James Fox

 

3,634

 

1,626

 

55

 

5,315

 

*

 

Luis Aguilar

 

801

 

 —

 

801

 

1,602

 

*

 

All Directors and Executive Officers as a Group

 

1,179,582

 

1,252,842

 

74,990

 

2,507,414

 

5.58

%


*Denotes beneficial ownership of less than one percent.

 

(1)

Includes options vested and exercisable within 60 days of April 3, 2017.

 

(2)

Includes restricted stock units vesting within 60 days of April 3, 2017, which includes 41,666 performance shares, 16,666 performance shares, and 10,000 performance shares for Mr. Bergman, Mr. Crager and Mr. D’Arrigo respectively.

 

(3)

Includes 132,500 shares held as security in a margin account.

 

(4)

Includes 100 shares indirectly held by Mr. Crager’s wife.

 

(5)

Includes 272 shares held by a trust for the benefit of each of Mr. Arora’s children of which Mr. Arora is a trustee.

 

(6)

Includes 8,952 shares held by a trust in which Mr. Roame is the trustee and 3,146 shares indirectly held by Tiburon Strategic Advisors, LLC, of which Mr. Roame is Managing Partner.

 

(7)

All 10,498 shares are held by a trust in which Ms. Crowell is a trustee and beneficial owner.

 

21


 

Which stockholders own more than 5% of our common stock? 

 

The following table shows all persons we know to be direct or indirect owners of more than 5% of our common stock as of the close of business on April 3, 2017, unless otherwise indicated. Our information is based on reports filed with the SEC by each of the firms listed in the table below. You may obtain these reports from the SEC.

 

 

 

 

 

 

 

 

    

Number of

    

 

 

 

 

Shares

 

 

 

 

 

Beneficially

 

Percent of

 

Name and Address of Beneficial Owner

    

Owned

    

Class

  

Wellington Management Group LLP (fka Wellington Management Company, LLP) (1)

 

4,235,752

 

9.71

%

 280 Congress Street

 

 

 

 

 

 Boston, MA 02210

 

 

 

 

 

Wells Fargo & Company (2)

 

3,885,235

 

8.90

%

 420 Montgomery Street

 

 

 

 

 

 San Francisco, CA 94104

 

 

 

 

 

Janus Capital Management LLC (3)

 

3,465,055

 

7.94

%

 151 Detroit Street

 

 

 

 

 

 Denver, CO 80206

 

 

 

 

 

The Vanguard Group (4)

 

3,115,552

 

7.14

%

 100 Vanguard Blvd.

 

 

 

 

 

 Malvern, PA 19355

 

 

 

 

 

BlackRock Inc. (5)

 

2,527,196

 

5.79

%

 55 East 52nd Street

 

 

 

 

 

 New York, NY 10022

 

 

 

 

 


(1)

Based on Amendment #8 to Schedule 13G filed by Wellington Management Group, LLP (fka Wellington Management Company, LLP) on February 9, 2017 reporting the amount of securities beneficially owned as of December 31, 2016, Wellington reports shared voting power with respect to 3,664,810 shares and shared dispositive power with respect to 4,235,752 shares.

 

(2)

Based on Amendment #3 to Schedule 13G filed by Wells Fargo & Company and certain of its subsidiaries ("Wells Fargo") on January 10, 2017, reporting the amount of securities beneficially owned as of December 31, 2016, Wells Fargo reports sole voting power with respect to 50,047 shares, shared voting power with respect to 432,337 shares, sole dispositive power with respect to 50,047 shares and shared dispositive power with respect to 432,337 shares.

 

(3)

Based on Amendment #1 to Schedule 13G filed by Janus Capital Management LLC on February 13, 2017 reporting the amount of securities beneficially owned as of December 31, 2016, Janus Capital Management reported sole voting and dispositive power with respect to 3,465,055 shares.

 

(4)

Based on Amendment #2 to Schedule 13G filed by The Vanguard Group on February 9, 2017 reporting the amount of securities beneficially owned as of December 31, 2016, Vanguard reports sole voting power with respect to 82,280 shares, shared voting power with respect to 5,047 shares, sole dispositive power with respect to 3,030,152 shares and shared dispositive power with respect to 85,400 shares.

 

(5)

Based on Schedule 13G filed by BlackRock, Inc. on January 30, 2017 reporting the amount of securities beneficially owned as of December 31, 2016, BlackRock reported sole voting power with respect to 2,444,951 shares and sole dispositive power with respect to 2,444,951 shares.

 

22


 

EXECUTIVE COMPENSATION 

 

Compensation Discussion and Analysis

 

We operate in a highly competitive environment and our executive compensation program is designed to attract and retain talented executives who can execute our strategy. The discussion below describes the material elements of the 2016 compensation program for our named executive officers and the manner in which compensation decisions were made.

 

Philosophy and Objectives

 

Our executive compensation philosophy, as established by our Compensation Committee, is designed to:

 

·

Attract and retain skilled executive officers;

 

·

Support our business strategy and objectives; and

 

·

Align the interests of our executive officers with those of our stockholders through a pay‑for‑performance philosophy.

 

We have established a set of guiding principles that have provided the foundation for all compensation programs for executive officers and all other employees. These guiding principles are as follows:

 

·

Pay for performance in such a way as to drive our business strategy and objectives and create shareholder value, consistent with an acceptable risk profile and through legal and ethical means;

 

·

The amount of overall total compensation should be attractive to executive officers, affordable for the company, proportional to the executive officer’s contribution, and fair to shareholders and employees, while providing payouts that are clearly aligned with actual performance;

 

·

Compensation should be transparent, understandable and effectively communicated to shareholders and employees; and

 

·

Avoid controversial pay practices.

 

We are committed to providing a comprehensive total rewards program to attract, retain, and reward highly qualified, diverse and productive employees. The total rewards program emphasizes alignment of employee efforts to support our corporate strategies. The components of the program include compensation, benefits, learning and development opportunities and recognition of employee performance. We strive to remain externally competitive in relevant labor markets while maintaining internal equity. The program also promotes fiscally responsible pay decisions, encourages efficient use of our resources and ensures compliance with applicable legal and contractual requirements.

 

To our employees, our compensation philosophy means fair pay based on their role in the company, a subjective determination of the market value of their job and their performance in that position. In addition, there is opportunity for additional rewards when we meet or exceed business objectives. Performance rewards provide employees with the opportunity to earn additional compensation beyond their base salary.

 

Compensation for our executive officers consists of three primary elements: A base salary which is paid in semi‑monthly cash installments, an annual incentive‑based cash payment, which is typically paid in February of the subsequent year or in quarterly installments and an annual grant of restricted stock units and stock options. For details regarding why we pay each element and how the amounts are determined, see “—Our 2016 Executive Compensation Program—Base Salary,” “—Our 2016 Executive Compensation Program—Annual Incentive‑Based Cash Compensation,” and “—Our 2016 Executive Compensation Program—Equity Awards.” Although these sections discuss our practices employed in 2016, generally we plan to continue these practices in future years.

23


 

We do not have a specific policy that governs the allocation of compensation between cash and non‑cash compensation or between long‑term or current compensation. The allocations are driven primarily through a desire to pay what we view as competitive compensation, as determined solely by us based on our review of broad‑based third party surveys and other generally available information, which we have historically used to obtain a general understanding of market compensation practices.

 

Role of Compensation Committee and Management

 

The Compensation Committee consists of three independent non‑employee members of our Board. The Compensation Committee reviews and, as it deems appropriate, recommends to the Board policies, practices and procedures relating to the compensation of officers and other managerial employees and the establishment and administration of employee benefit plans.

 

The Compensation Committee determines, and recommends to the Board for approval, the Chief Executive Officer’s compensation without the participation of the Chief Executive Officer. The Compensation Committee is also responsible for reviewing the performance of the Chief Executive Officer. Our Chief Executive Officer is the only executive officer that has a role in determining the compensation of our named executive officers other than himself. The Chief Executive Officer will provide the Compensation Committee with recommendations, which the Committee has the discretion to approve or disapprove, for (a) changes to base salary, (b) distribution of annual incentive‑based cash compensation and (c) restricted stock and stock option grants.

 

Competitive Market Review 

 

In 2015, the Compensation Committee retained an independent third party compensation specialist, Compensation Advisory Partners (“CAP”), to assist in identifying and facilitating certain changes to our compensation and employee retention programs, including the amounts of compensation paid to our senior management, including the named executive officers, and advice regarding employment agreements. As a result of this analysis, in 2016 employment agreements were implemented for key executive officers and additional market adjustments were made as needed and approved by the Compensation Committee.

 

Our 2016 Executive Compensation Program

 

Our 2016 executive compensation program had three primary components: base salary, annual incentive‑based cash compensation and equity awards.

 

Base Salary. Base salaries are intended to provide our executives with a degree of financial certainty and stability that does not depend on company performance. In determining the base salaries for our Chief Executive Officer and the other named executive officers, the Compensation Committee, at the beginning of each year, reviews the overall scope of each executive officer’s responsibilities while taking into account the base salaries paid by companies with which we compete for talent. For 2016, base salary adjustments were based on a subjective determination of competitive market rates, individual performance, changes in job duties and responsibilities and our overall financial performance. We did not follow a specific formula or set of criteria in determining base salary adjustments in 2016.

 

Market data, such as the base salary of comparable jobs at comparable companies, were reviewed to provide guidance as to what constitutes competitive base salaries. In addition, individual performance of the executive’s duties and responsibilities is also considered. If the executive has performed his or her duties above expectations, then an increase in the base salary may be justified. Similarly, if the executive is given different duties or responsibilities or if they have changed jobs within the company, then their base salary may be increased or decreased accordingly.

 

In all cases where base salaries may be changed, the overall compensation budget must be sufficient for such changes. In certain extreme cases, our financial results and performance may lead to reductions in base salaries as a cost cutting measure.

 

24


 

Annual Incentive‑Based Cash Compensation. We maintain an annual incentive‑based cash compensation program comprising two elements: the Annual Incentive Program, which is intended to reward executives and eligible employees based on our revenue growth and profitability; and Incentive Compensation, which is intended to reward executives and employees for gross sales from expanding existing client relationships and developing new client relationships.

 

Beginning in 2015, the Compensation Committee established a two part process for paying annual incentive-based cash compensation to its executive officers. For the first step, in order for the payment of the incentive-based cash compensation to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code, the Compensation Committee established a performance goal based on performance metrics pursuant to the 2010 Long-Term Incentive Plan. If the performance goal is not met, no annual incentive-based cash compensation will be paid to executive officers for such year. If the performance goal is met, for the second step, a cash bonus pool is established pursuant to which payments can be made to the executive officers as described below for the Annual Incentive Program and Incentive Compensation subject to the applicable limits contained in the 2010 Long-Term Incentive Plan.

 

Annual Incentive Program. Under the Annual Incentive Program, a predetermined percentage of the revenues and profits from the preceding year are distributed to employees, including our executive officers. At the beginning of each year, the Compensation Committee approves the calculation methodology, or formula, which will be used at the end of the year to determine the amount of the annual incentive distribution. The formula includes the distribution amount as a percentage of revenues and EBITDA, as adjusted for certain items as defined by the Compensation Committee, as well as a stretch incentive target and a minimum threshold. The distribution percentage, as determined by the Compensation Committee, is generally derived by (a) investigating the annual compensation practices of comparable financial services firms and (b) considering the resulting aggregate incentive for management and employees to meet or exceed the firm’s financial expectations.

 

In calculating the amount to be paid under the Annual Incentive Program, the Compensation Committee utilizes revenues and adjusted EBITDA, which is prior to the payment of any amount paid pursuant to the Annual Incentive Program and certain extraordinary non‑cash or non‑recurring general and administrative expenses. The Compensation Committee may exercise its discretion to adjust for revenues and expenses attributable to acquisitions, as well as extraordinary or non‑recurring gains or losses. The amounts paid for 2016 under the Annual Incentive Program were based on our financial performance during the 12‑month period ending December 31, 2016. The Compensation Committee established a minimum threshold amount of revenue and adjusted EBITDA, defined as described above, of $459.5 million and $69.2 million, respectively. Performance above either or both of the minimum threshold amounts would result in an aggregate annual incentive pool amount of 0.25% of total revenue for revenue equal to or in excess of the threshold amount plus 0.25% of total revenue for each incremental $5.8 million of revenue between $459.5 million and $494.4 million plus 1.65% of the excess revenue above $494.4 million plus 3.30% of the incremental revenue above $552.5 million plus 5.12% of incremental revenue above $581.6 million plus 3.30% of incremental revenue above $639.8 million and 4.25% of threshold adjusted EBITDA if the threshold amount has been achieved plus 13.4% of the excess adjusted EBITDA above the threshold amount plus 23.4% of incremental adjusted EBITDA above $115.3 million. The Compensation Committee has final authority to exercise its discretion in setting compensation amounts or awards for the company as a whole and for individuals and is not bound by the formula or by recommendations of Mr. Bergman nor of any consultant. For the amount to be earned in 2016, the Compensation Committee agreed with management’s recommendation and approved the amount to be paid under the Annual Incentive Program of approximately $19.5 million.

 

At the end of each year, an allocation of the Annual Incentive Program to each eligible employee, including executive officers, is made. The CEO recommends to the Compensation Committee the distribution amounts for each executive officer, including himself, based on a subjective analysis of his or her performance. For the named executive officers, the CEO subjectively assesses their performance broadly with consideration given to four general categories: integrity, intelligence/business knowledge, qualitative considerations and effectiveness. No quantitative criteria are used. The CEO’s analysis is based on his sole and absolute discretion when assessing performance. Similarly, the amounts he recommends for individual Annual Incentive Program recommendations are based on his sole and absolute discretion. The CEO presents his recommendations to the Compensation Committee for their consideration along with his

25


 

individual Annual Incentive Program distribution recommendations. The Compensation Committee reviews and makes the final approval for annual incentive distributions for the named executive officers, including the CEO. For the year ending December 31, 2016, the Compensation Committee chose to accept the individual annual bonus distribution recommendations which it received from the CEO. Distributions of the Annual Incentive Program earned for a fiscal year are paid in the subsequent fiscal year, generally within the first two months.

 

Incentive Compensation. We maintain a compensation program with amounts paid to eligible employees as incentive compensation based on a target percentage of gross sales, though the total amount of incentive compensation is not an exact percentage of gross sales. The target percentage is revised annually. For the purposes of determining the total amount available for incentive compensation, we estimate our new fee revenue based on gross sales. We do this by calculating the average fee paid on all of our products, taking into account differing fee rates on the various products we sell and various fee schedules related to different client programs. The average will also vary by region due to the mix of clients and products within each region. In 2016, we targeted 12.0% of such estimated fee revenue to be used for total incentive compensation, with discretion to award total incentive compensation of up to an additional 1.5% of estimated fee revenue. Incentive Compensation amounts are calculated quarterly and paid out in 20.0% installments over the subsequent five quarters. Incentive Compensation payments are not guaranteed. The recipient must still be employed at the time of payment. Incentive Compensation payments are allocated among sales and service personnel and sales management, and the allocation of the incentive compensation payments is approved at the discretion of Mr. Bergman and Mr. Crager. In exercising their discretion, these officers annually establish a framework of percentages of the total available amount that is to be paid to different categories of employees, but there is no predetermined formula. The amount of the Incentive Compensation payments may also be adjusted based on our overall performance. In 2016, approximately $13.6 million in incentive compensation was earned by eligible employees, of which Mr. Crager received $182,000. Mr. Crager is the only executive officer who receives Incentive Compensation. The amount of Mr. Crager’s Incentive Compensation was based on our total gross sales and the CEO’s subjective assessment of his leadership and overall results of the sales organization.

 

Equity Awards. We grant stock options and restricted stock units to our current and newly hired executive officers to enable them to share in our success and to reinforce a corporate culture that aligns employee interests with the interests of our stockholders. All equity grants to our executive officers to date have been awarded under the Envestnet Asset Management Group, Inc. 2004 Stock Incentive Plan, the Envestnet, Inc. 2015 Acquisition Equity Award Plan, or the 2010 Long‑Term Incentive Plan (the “Equity Plans”). It has been our practice to annually grant equity awards to employees, including executives, in recognition of performance and as an incentive for retention, as well as to align their interests with the interests of our stockholders. The size of these grants is based on a number of factors, including our subjective analysis of competitive practices, individual performance as determined in the discretion of the Compensation Committee, changes in the scope of the individual’s position, internal equity and retention potential. Ultimately, all amounts were determined in the sole and absolute discretion of the Compensation Committee based on its conclusions as to what was appropriate and necessary after consideration of these factors. The Compensation Committee uses a formula similar to the revenue component of the Annual Incentive Program described above. The grants made in 2016 were based on our financial performance during the 12‑month period ending December 31, 2015. The Compensation Committee established a minimum threshold amount of revenue, defined as described above, of $342.8 million. Performance above the minimum threshold amounts would result in an aggregate annual stock option pool amount of 0.22% of shares outstanding for revenue equal to or in excess of the threshold amount plus 0.22% of total shares outstanding for each $4.3 million of incremental revenue between $342.8 million and $364.2 million plus 0.019% of shares outstanding for revenue above $364.2 million plus 0.038% of shares outstanding for each $4.3 million of incremental revenue above $407.1 million plus 0.061% of shares outstanding for each $4.3 million of incremental revenue above $428.5 million plus 0.038% of shares outstanding for each $4.3 million of incremental revenue above $471.4 million. The value of the options is estimated using the Black Scholes methodology described below in footnote 2 of the 2016 Grants of Plan‑Based Awards table. The value of restricted stock units results in a dollar‑for‑dollar offset to the value of the annual stock option pool amount. Historically, vesting for equity award grants occurs annually on the anniversary of the grant date with one‑third vesting on each of the first three anniversaries. In 2015, stock options were granted that vest over three years, with one third (1/3) of the award vesting on the first anniversary of the grant date and one-twelfth (1/12) of the option award vesting on each three-month anniversary for the following two years, and restricted stock units were granted with one-twelfth (1/12) of the restricted stock unit award vesting on each three-month anniversary for the following three years. In 2016, stock options and restricted stock units were granted that vest over three years, with one third (1/3) of the award vesting on the first anniversary of the grant date and one twelfth (1/12) of the option award vesting on each three-month anniversary

26


 

for the following two years. In keeping with the annual practice of issuing equity grants in the first quarter of the company’s fiscal year, the Compensation Committee authorized equity grants equal to 1.10% of our outstanding number of shares as of December 31, 2015. Consistent with our executive compensation philosophy and to better align the interests of our employees with those of our stockholders through pay‑for‑performance, the number of shares of each award was made 50% in restricted stock units and 50% in stock options.

 

Additionally, in 2016, in connection with entering into new employment agreements, and pursuant to the 2010 Long-Term Incentive Plan, Mr. Bergman, Mr. Crager and Mr. D’Arrigo each received a one-time performance-based restricted stock unit award in 2016 (the “PSU Awards”), Mr. Bergman received a one-time stock option grant, and Mr. Grinis received a one-time restricted stock unit award (the “RSU Award”). Subject to the terms of the PSU Award and the plan, the executive will earn a percentage of his PSU Award based on the Company’s Adjusted EBITDA for the relevant performance period. To the extent the Adjusted EBITDA during the performance period is less than sixty percent (60%) of the applicable goal, then no PSUs shall be earned. To the extent that the performance measure is satisfied following the end of each of the performance periods, a number equal to the total number of PSUs multiplied by an applicable performance percentage shall be earned and become “Banked Units.” To the extent any units are settled, they will no longer be considered Banked Units. Subject to the executive’s continued employment, the executive shall become vested ratably in his outstanding Banked Units on each of the first three anniversaries of the grant date determined as follows: one-third (1/3) of the Banked Units following the first performance period shall become vested on the first anniversary of the grant date; one-half (1/2) of the outstanding Banked Units following the second performance period shall become vested on the second anniversary of the grant date; and all of the remaining Banked Units following the third and final performance period shall become vested on the third anniversary of the grant date (such percentage of vesting referred to as the vested percentage). The stock option grant to Mr. Bergman will vest as follows: one-third (1/3) of the stock options shall become vested on the first anniversary of the grant date and one twelfth (1/12) of the stock options shall become vested on each quarterly anniversary of the grant date thereafter. The RSU Award to Mr. Grinis will vest as follows: one-third (1/3) of the RSU Award shall become vested on the first anniversary of the grant date and one twelfth (1/12) of the RSU Award shall become vested on each quarterly anniversary of the grant date thereafter

 

Our CEO, with the help of his management team, recommended to the Compensation Committee individuals who should receive equity awards, the components of the award and the size of each individual award. The individual component and distribution amounts that were recommended were based on the CEO’s subjective review of each individual’s performance within his or her role in our Company since the previous year’s grant, as well as a subjective determination of the competitive practices necessary to retain key employees. This recommendation was submitted to the Compensation Committee for its consideration and approval. As noted above, the Compensation Committee has final authority to exercise its discretion in setting compensation amounts or awards, and the components of those amounts or awards and is not bound by the use of any formula or recommendations of the CEO nor of any consultant. In its discretion, the Compensation Committee approved the recommendations as submitted. The equity grants to our named executive officers on February 29, 2016 were as follows:

 

 

 

 

 

 

 

 

 

 

    

Number of Shares

    

 

    

 

 

 

 

Underlying 2016

 

Number of Shares

 

Total Number of Shares

 

 

 

Restricted Stock

    

Underlying 2016

    

Underlying February 2016

 

Name

 

Awards

 

Options

 

Equity Award Grants

 

Judson Bergman

 

8,932

 

8,932

 

17,864

 

Anil Arora

 

 —

 

 —

 

 —

 

William Crager

 

5,852

 

5,852

 

11,704

 

Peter D’Arrigo

 

4,235

 

4,235

 

8,470

 

Scott Grinis

 

3,234

 

3,234

 

6,468

 

 

27


 

Additionally, as noted above, Mr. Bergman, Mr. Crager and Mr. D’Arrigo received the following PSU Awards on May 12, 2016, and Mr. Grinis received the following RSU Award on August 2, 2016 in consideration for entering into employment agreements with the Company. Mr. Bergman also received the following one-time Option Grant on May 12, 2016.

 

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

Number of Shares

 

 

 

Total Number 

 

 

Underlying 2016

 

Underlying 2016

 

Number of Shares

 

of Shares

 

 

One-Time

 

One-Time

 

Underlying 2016

 

Underlying 2016 

 

 

Performance Stock

 

Restricted Stock

 

One-Time

 

One-Time

Name

    

Unit Awards

    

Unit Awards

    

Option Grants

    

Equity Award Grants

Judson Bergman

 

125,000

 

 —

 

25,000

 

150,000

Anil Arora

 

 —

 

 —

 

 —

 

 —

William Crager

 

50,000

 

 —

 

 

50,000

Peter D’Arrigo

 

30,000

 

 —

 

 

30,000

Scott Grinis

 

 —

 

35,000

 

 

35,000

 

Supplemental Benefits

 

We provide the following benefits to our executives on the same basis as provided to all of our employees:

 

·

Health, dental and vision insurance;

 

·

Life insurance;

 

·

Medical and dependent care flexible spending account;

 

·

Short‑ and long‑term disability, accidental death and dismemberment;

 

·

A 401(k) plan, with company match; and

 

·

A college scholarship plan for employees’ children.

 

We believe these benefits are consistent with companies with which we compete for talent.

 

Recoupment of earned awards

 

We do not currently have a formal policy requiring a fixed course of action with respect to compensation adjustments following later restatements of financial results. Under those circumstances, the Board or the Compensation Committee would evaluate whether compensation adjustments were appropriate, or required under applicable law, based on the facts and circumstances relating to any such restatement.

 

Regulatory limitations

 

Section 162(m) of the Internal Revenue Code generally limits the deductibility for federal income tax purposes of compensation in excess of $1 million to the chief executive officer or any of the next three most highly paid executive officers of a publicly held corporation (other than the Chief Financial Officer). We expect that on an ongoing basis we will generally consider whether a form of compensation will be deductible under Section 162(m) in determining executive compensation, though other factors will also be considered. However, we may authorize compensation payments that do not comply with the exemptions under Section 162(m) when we believe that such payments are appropriate to attract and retain executive talent.

 

28


 

In light of the strong shareholder support on our say‑on‑pay proposal in 2016, we made no significant changes to the executive compensation program based on concerns or issues raised by our shareholders. We continue to desire feedback from our shareholders on our executive compensation program and will consider the views of our shareholders as we evaluate our compensation program in 2017.

 

2016 Summary Compensation

 

The following table contains compensation information for our Chief Executive Officer, our Chief Financial Officer, and the three other most highly compensated executive officers. We refer to these individuals as our “named executive officers” or NEOs in other parts of this proxy statement. The information included in this table reflects compensation paid to our NEOs for services rendered to us.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Awards (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

All Other

 

 

 

Name and

 

 

 

Salary

 

Bonus

 

Units

 

Awards

 

Compensation

 

Total

Principal Position

    

Year

    

($)

    

($)(1)

    

($)

    

($)

    

($)(3)

    

($)

Judson Bergman

 

2016

 

 

600,000

 

 

440,000

 

 

4,061,945

 

 

409,415

 

 

25,160

 

 

5,536,520

Chief Executive Officer

 

2015

 

 

444,000

 

 

340,000

 

 

625,008

 

 

366,637

 

 

16,160

 

 

1,791,805

 

 

2014

 

 

450,000

 

 

400,000

 

 

527,184

 

 

341,342

 

 

16,060

 

 

1,734,586

Anil Arora

 

2016

 

 

425,000

 

 

381,543

 

 

 —

 

 

 —

 

 

14,300

 

 

820,843

CEO Envestnet | Yodlee

 

2015

 

 

425,000

 

 

375,000

 

 

3,246,000

 

 

265,167

 

 

 —

 

 

4,311,167

William Crager

 

2016

 

 

375,000

 

 

240,000

 

 

1,671,525

 

 

51,050

 

 

196,516

 

 

2,534,090

President

 

2015

 

 

344,000

 

 

 —

 

 

409,488

 

 

240,210

 

 

327,549

 

 

1,321,247

 

 

2014

 

 

344,500

 

 

100,000

 

 

372,376

 

 

237,090

 

 

150,000

 

 

1,203,966

Peter D’Arrigo

 

2016

 

 

325,000

 

 

295,000

 

 

1,017,760

 

 

36,944

 

 

14,960

 

 

1,689,664

Chief Financial Officer

 

2015

 

 

313,788

 

 

242,000

 

 

296,340

 

 

173,836

 

 

5,960

 

 

1,031,925

 

 

2014

 

 

305,000

 

 

275,000

 

 

276,144

 

 

178,238

 

 

5,860

 

 

1,040,242

Scott Grinis

 

2016

 

 

300,000

 

 

220,000

 

 

1,398,079

 

 

28,212

 

 

10,450

 

 

1,956,741

Chief Technology Officer

 

2015

 

 

239,000

 

 

180,000

 

 

215,520

 

 

126,426

 

 

5,300

 

 

766,246

 

 

2014

 

 

239,500

 

 

200,000

 

 

167,360

 

 

104,252

 

 

5,200

 

 

716,312


(1)

Bonuses earned for a fiscal year are paid in the subsequent fiscal year, generally within the first two months (e.g. the bonuses earned for 2016 were paid in February 2017). The amounts disclosed in the Bonus column relate to amounts paid under our Annual Incentive Program.

 

(2)

Amounts disclosed in the Equity Awards column relate to grants of restricted stock units and stock options in the identified year, including, with respect to 2016, as described previously, the receipt of one-time grants of equity awards in consideration for executive officers entering into employment agreements with the Company, including the following awards: 125,000 PSU Awards and 25,000 stock options for Mr. Bergman, 50,000 PSU Awards for Mr. Crager, 30,000 PSU Awards for Mr. D’Arrigo, and 35,000 RSU Awards for Mr. Grinis. With respect to each equity grant, the amounts disclosed reflect the full grant date fair value in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. Our assumptions with regard to determining the 2016 stock option values are set forth in note 2 to the 2016 Grants of Plan Based Awards table.

 

(3)

For Mr. Bergman, the amounts disclosed reflect a parking and car allowance of $10,860 and matching contributions to his 401(k) account of $5,300 in 2016, $5,300 in 2015 and $5,200 in 2014. For Mr. Crager, the amounts disclosed reflect $182,216 earned as incentive compensation in 2016, $322,249 earned as incentive compensation in 2015, and $144,800 earned as incentive compensation in 2014, and matching contributions to his 401(k) account of $5,300 in 2016, $5,300 in 2015, and $5,200 in 2014. For Mr. D’Arrigo, the amounts disclosed reflect a parking allowance of $660, matching contributions to his 401(k) account of $5,300 in 2016, $5,300 in 2015, and $5,200 in 2014. For Messrs. Grinis and Arora the amounts disclosed reflect matching contributions to their 401(k) accounts. Beginning in 2016 amounts disclosed include a $9,000 annual expense stipend program which can be spent by each NEO on health related activities such as gym memberships.

29


 

2016 Grants of Plan‑Based Awards 

 

The following table contains information concerning grants of plan‑based awards made in 2016 to our NEOs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

All

 

All

    

 

 

    

 

 

 

 

 

 

 

 

 

 

Other

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

Exercise

 

Grant

 

 

 

 

Estimated Future

 

Awards:

 

Awards:

 

or Base

 

Date Fair

 

 

 

 

Payouts under Equity

 

Number of

 

Number of

 

Price of

 

Value of

 

 

 

 

Incentive Plan

 

Shares of

 

Securities

 

Option

 

Stock and

 

 

Grant

 

Awards (2)

 

Stock or

 

Underlying

 

Awards

 

Option

Name

    

Date (1)

    

Threshold

    

Maximum

    

Units (#)

    

Options (#)

    

($/Share)

    

Awards (3)

Judson Bergman

 

2/29/2016

 

 —

 

 —

 

8,932

 

8,932

 

$

20.51

 

$

261,113

 

 

5/12/2016

 

75,000

 

125,000

 

 —

 

25,000

 

 

31.03

 

 

4,210,247

Anil Arora

 

 —

 

 —

 

 —

 

 —

 

 —

 

 

 —

 

 

 —

William Crager

 

2/29/2016

 

 —

 

 —

 

5,852

 

5,852

 

 

20.51

 

 

171,074

 

 

5/12/2016

 

30,000

 

50,000

 

 —

 

 —

 

 

 —

 

 

1,551,500

Peter D’Arrigo

 

2/29/2016

 

 —

 

 —

 

4,235

 

4,235

 

 

20.51

 

 

123,804

 

 

5/12/2016

 

18,000

 

30,000

 

 —

 

 —

 

 

 —

 

 

930,900

Scott Grinis

 

2/29/2016

 

 —

 

 —

 

3,234

 

3,234

 

 

20.51

 

 

94,541

 

 

8/2/2016

 

 —

 

 —

 

35,000

 

 —

 

 

 —

 

 

1,331,750


(1)

All restricted stock units and stock option grants were approved by the Compensation Committee and the Board on their respective grant dates.

 

(2)

The PSU Awards granted to Mr. Bergman, Mr. Crager and Mr. D’Arrigo were subject to a performance goal based on Adjusted EBITDA during 2016. Such performance goal was met as certified by the Compensation Committee in 2017, the applicable performance percentage was determined to be equal to one-hundred percent (100%), and a number equal to the total number of PSUs listed in the maximum column became “Banked Units” as of such certification. The Banked Units remain subject to service-based vesting conditions and will vest as follows: one-third (1/3) of the Banked Units following the first performance period shall become vested on the first anniversary of the grant date; one-half (1/2) of the outstanding Banked Units following the second performance period shall become vested on the second anniversary of the grant date; and all of the remaining Banked Units following the third and final performance period shall become vested on the third anniversary of the grant date (such percentage of vesting referred to as the vested percentage).

 

(3)

The fair value of stock options granted was determined using the Black Scholes model as of the grant date. The model for the February 29, 2016 grant assumes: (i) the stock option would be exercised 6 years after grant date, (ii) expected stock price volatility of 42.13%, (iii) a risk free yield equal to 1.57% and (iv) our dividend yield (0%) would remain constant from grant date to exercise date. The model for the May 12, 2016 grant assumes: (i) the stock option would be exercised 6 years after grant date, (ii) expected stock price volatility of 42.42%, (iii) a risk free yield equal to 1.41% and (iv) our dividend yield (0%) would remain constant from grant date to exercise date.

 

Narrative to 2016 Summary Compensation and 2016 Grants of Plan‑Based Awards

 

See “—Compensation Discussion and Analysis” above for a complete description of compensation plans pursuant to which the amounts listed under the 2016 Summary Compensation table and 2016 Grants of Plan‑Based Awards table were paid or awarded, and the criteria on which such payments were based. The Compensation Discussion and Analysis also describes certain grants of stock options to our NEOs.

30


 

2016 Outstanding Equity Awards at Fiscal Year‑End 

 

The following table lists all outstanding equity awards held by our NEOs as of December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards (1)

 

Stock Awards (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity