DEF 14A 1 def14a.htm DEF 14A cboe_Current_Folio_Proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

Cboe Global Markets, Inc.

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

No fee required.

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

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

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

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

Fee paid previously with preliminary materials.

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

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 

 

 

 

 


 

Picture 1

2019

Notice of Annual Meeting of Stockholders

and Proxy Statement

 

 

 

 

 


 

Picture 23

April 4, 2019

Dear Cboe Stockholder:

We cordially invite you to attend the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Cboe Global Markets, Inc. to be held on Thursday, May 16, 2019, at 9:00 a.m., local time, on the fourth floor of our principal executive offices located at 400 South LaSalle Street, Chicago, Illinois, 60605.

At the Annual Meeting, you will be asked to do the following:

Picture 94    elect 13 directors to the Board of Directors to hold office until the next Annual Meeting of Stockholders or until their respective successors have been elected and qualified; 

Picture 95    approve, in a non-binding resolution, the compensation paid to our executive officers;

Picture 96    ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the 2019 fiscal year; and 

Picture 97    transact any other business that may properly come before the meeting and any adjournments and postponements of the meeting.

Enclosed with this letter are a formal notice of the Annual Meeting, a proxy statement and a form of proxy.

Please carefully review the form of proxy that you receive to confirm that it reflects all of your shares of our stock. If you hold stock in different accounts, you may need to complete multiple proxy cards to vote all of your shares.

If you plan to attend the Annual Meeting in person, please note that you will be required to provide acceptable documentation to gain access to the meeting.  See the information under the heading “What do I need to do to attend the Annual Meeting?” in the attached proxy statement.  If you cannot attend the Annual Meeting in person, a live webcast of the Annual Meeting will be provided on the Investor Relations section of our website at http://ir.Cboe.com, however, please submit your vote in advance.  See the information under the heading “Will the Annual Meeting be webcast?” in the attached proxy statement.

Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted. Please submit your proxy by Internet or telephone, or complete, sign, date and return the enclosed proxy using the enclosed postage-paid envelope. The enclosed proxy, when returned properly executed, will be voted in the manner directed in the proxy.

We hope that you will participate in the Annual Meeting, either in person or by proxy.

 

Sincerely,

 

Picture 77

 

Edward T. Tilly

 

Chairman, President and Chief Executive Officer

 

 

 


 

Cboe Global Markets, Inc.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Cboe Global Markets, Inc. will be held on Thursday, May 16, 2019, at 9:00 a.m., local time, on the fourth floor of our principal executive offices located at 400 South LaSalle Street, Chicago, Illinois, 60605, for the following purposes:

1.

To consider and act upon a proposal to elect 13 directors named in the proxy statement to the Board of Directors to hold office until the next Annual Meeting of Stockholders or until their respective successors have been elected and qualified;

2.

To consider and act upon a non-binding resolution to approve the compensation paid to our executive officers;

3.

To consider and act upon the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the 2019 fiscal year; and

4.

The transaction of any other business that may properly come before the meeting and any adjournments or postponements of the meeting.

You are entitled to vote at the Annual Meeting and any adjournments or postponements of the meeting if you were a stockholder of record at the close of business on March 19, 2019. We also cordially invite you to attend the meeting.

Your vote is important. Whether or not you plan to attend the meeting, please vote as soon as possible.  For additional details, please see the information under the heading “How do I vote?” in the attached proxy statement.

Internet

 

 

Telephone

 

 

Mail

 

 

In Person

Picture 3

 

 

Picture 6

 

 

Picture 7

 

 

Picture 8

Go to

www.investorvote.com/Cboe

 

 

Call toll free

1-800-652-VOTE (8683)

 

 

Complete, sign, date and return the enclosed proxy using the enclosed postage-paid envelope

 

 

Attend the meeting in person

 

 

 

 

By Order of the Board of Directors,

 

Picture 78

 

Patrick Sexton

 

Corporate Secretary

April 4, 2019

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 16, 2019:

The notice of the Annual Meeting and proxy statement are available on the Investor Relations section
of our website at http://ir.Cboe.com/annual-proxy
.

 


 

 

TABLE OF CONTENTS

 

 

Proxy Statement Summary 

1

Corporate Governance 

4

Proposal 1—Election of Directors 

4

Board Structure 

13

Committees of the Board 

15

Stockholder Engagement 

20

Communications with Directors 

21

Corporate Social Responsibility 

21

Director Compensation 

22

Executive Compensation 

25

Proposal 2—Advisory Vote to Approve Executive Compensation 

25

Compensation Discussion and Analysis 

26

Compensation Committee Report 

47

Risk Assessment 

48

Summary Compensation 

49

Severance, Change in Control and Employment-Related Agreements 

57

Pay Ratio 

64

Equity Compensation Plan Information 

65

Audit Matters 

66

Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm 

66

Report of the Audit Committee 

67

Other Items 

68

Beneficial Ownership of Management and Directors 

68

Relationships and Related Party Transactions 

70

Incorporation by Reference 

70

Stockholder Proposals 

70

Voting Instructions 

71

Appendix A—Reconciliation of Non-GAAP Financial Measures to GAAP Measures 

77

 

 

 

 

 

 

 

 

 

We are furnishing this Proxy Statement to you in connection with a solicitation of proxies by the Board of Directors of Cboe Global Markets, Inc., a Delaware corporation, for use at the Cboe Global Markets, Inc. 2019 Annual Meeting of Stockholders on Thursday, May 16, 2019 at 9:00 a.m., local time, and at any adjournments or postponements thereof. The approximate date on which this Proxy Statement and the accompanying form of proxy are first being sent to stockholders is April 4, 2019.

 

Except as otherwise indicated, the terms “the Company,” “Cboe Global Markets,” “we,” “us” and “our” refer to Cboe Global Markets, Inc.  When we use the term “Cboe Options,” we are referring to Cboe Exchange, Inc., a wholly owned subsidiary and predecessor entity of Cboe Global Markets.  On February 28, 2017 (the “Effective Date”), we closed our acquisition of Bats Global Markets, Inc. (“Bats”).

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 


 

 

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement for the Cboe Global Markets, Inc. 2019 Annual Meeting of Stockholders (the “Annual Meeting”). It does not contain all of the information that you should consider in voting your shares of our common stock. Before voting, you should carefully read this entire Proxy Statement, as well as our 2018 Annual Report to Stockholders included in this mailing, which includes a copy of our Annual Report on Form 10‑K for the year ended December 31, 2018.  

Annual Meeting Information

 

 

 

 

 

 

Meeting Date:

 

May 16, 2019

Meeting Time:

 

9:00 a.m. (local time)

Meeting Place:

 

400 South LaSalle Street; Fourth Floor

 

 

Chicago, Illinois 60605

Record Date:

 

March 19, 2019

Stockholder Actions and Board of Directors Voting Recommendations

 

 

 

 

 

Proposal 

     

Board Voting
Recommendation

     

Page
Reference

1 - Elect 13 directors to the Board of Directors

 

FOR

 

4

2 - Approve, in a non-binding resolution, the compensation paid to our executive officers

 

FOR

 

25

3 - Ratify the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the 2019 fiscal year

 

FOR

 

66

Performance Highlights

Picture 98    Achieved record 2018 full year financial results 

Picture 99    Set new annual ADV highs for trading in Options, Index Options, SPX Options, VIX Futures and FX

Picture 100    Revenues less cost of revenues (“net revenues”) of $1,217 million for 2018, up 22% from $996 million for 2017, and up 14% from net revenues on a combined company basis of $1,068 million for 20171

Picture 101    Diluted earnings per share (“EPS”) of $3.76 for 2018, up 2% from $3.69 for 2017, and adjusted diluted EPS of $5.02 for 2018, up 41% from adjusted diluted EPS on a combined company basis of $3.57 for 20171

Picture 102    Adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of $840 million for 2018, up 18% from adjusted EBITDA on a combined company basis of $709 million for 20171

Picture 103    Exited 2018 with run rate expense synergies of $57 million


1

Net revenues on a combined company basis, adjusted diluted EPS, adjusted diluted EPS on a combined company basis, adjusted EBITDA and adjusted EBITDA on a combined company basis are non-GAAP measures used by the Company and reconciliations to GAAP measures are provided in Appendix A.

 

 

Cboe Global Markets 2019 Proxy Statement

1

 


 

Return to Stockholders

Cboe Global Markets and its Board of Directors are committed to a corporate mission and strategy designed to create long-term stockholder value. The ongoing commitment of our team and the Board of Directors to this strategy produced the following notable returns to stockholders.

Picture 81

 

 

101% Five Year Total Stockholder Return Outperformed the S&P 500 Index’s Return of 50%

(Including reinvestment of all dividends)

 

Director Nominee Highlights

The nominees for our Board of Directors (the “Board”) exhibit an effective mix of skills, experience, diversity and fresh perspectives. You can find additional information under “Corporate Governance—Proposal 1- Election of Directors”.

                     Picture 13

Picture 20

Picture 16

Picture 26

 

2

Cboe Global Markets 2019 Proxy Statement

 

 


 

Corporate Governance Highlights

 

We are committed to good corporate governance, which promotes the long-term interests of stockholders by providing for effective oversight and management of the Company.  The following are highlights of our corporate governance framework. For additional information, see “Corporate Governance”:

 

Picture 18    12 of the 13 Director Nominees are Independent;

Picture 4    Regular Executive Sessions of Board and Committees;

Picture 22    Directors are Elected Annually;

Picture 9    Lead Independent Director; 

Picture 25    Majority Voting Standard in Election of Directors;

Picture 28    Risk Oversight by Board and Committees, including a Risk Committee;

Picture 24    Majority Voting Standard for Bylaw and Charter Amendments;

Picture 29    Anti-Hedging, Anti-Pledging and Clawback Policies; and 

Picture 27    Independent Audit, Compensation and Nominating and Governance Committees;

Picture 14    Commitment to environmental, social and governance considerations.

Stockholder Engagement Highlights

 

Cboe Global Markets and our Board are also committed to fostering long-term and institution-wide relationships with stockholders and maintaining their trust and goodwill. Through a variety of engagement activities, our discussions with stockholders cover a variety of topics, including our performance, strategy, corporate governance and executive compensation.  For additional information, see “Corporate Governance—Stockholder Engagement”.     

 

Executive Compensation Highlights

 

The design of our executive compensation program, including compensation practices and independent oversight, is intended to align management’s interests with those of our stockholders.  The following are highlights of our 2018 executive compensation program, which is described in further detail in this Proxy Statement under “Executive Compensation”:

 

Picture 104    Annual cash incentive was based on corporate performance (weighted 75%) and individual performance (weighted 25%);

Picture 105    Long-term incentive was comprised of 50% time-based restricted stock units and 50% performance-based restricted stock units;

Picture 106    Performance-based compensation with limits on all incentive award payouts;

Picture 107    No excessive perquisites;

Picture 108    Clawback provisions for cash incentives and equity awards; and

Picture 109    Mandatory stock ownership and holding guidelines.

Additional Information

 

Please see the information under “Other Items” or important information about this Proxy Statement, voting, the Annual Meeting, Cboe Global Markets documents available to stockholders, communications and the deadlines to submit stockholder proposals for the 2020 Annual Meeting of Stockholders.  Additional questions may be directed to Investor Relations at investorrelations@Cboe.com or (312) 786‑5600.

 

 

 

 

Cboe Global Markets 2019 Proxy Statement

3

 


 

 

CORPORATE GOVERNANCE

PROPOSAL 1 - ELECTION OF DIRECTORS

Board Composition

Our Third Amended and Restated Certificate of Incorporation provides that our Board will consist of not less than 11 and not more than 23 directors. Our Board currently has 13 directors. Each director is elected annually to serve until the next Annual Meeting of Stockholders or until his or her successor is elected or appointed and qualified, except in the event of earlier death, resignation or removal. There is no limit on the number of terms a director may serve on our Board.

General

At the Annual Meeting, our stockholders will be asked to elect the 13 director nominees set forth below, each to serve until the 2020 Annual Meeting of Stockholders. All of the director nominees have been recommended for election by our Nominating and Governance Committee and approved and nominated for election by our Board.  In addition, with respect to Mr. Tilly, his employment agreement provides that the Company will nominate him as a director for stockholder approval at each annual meeting during his employment with us. All of the director nominees were elected as directors by stockholders at the 2018 Annual Meeting of Stockholders.

All of the nominees have indicated their willingness to serve if elected. If any nominee is unable or unwilling to serve as a director at the time of the Annual Meeting, then shares represented by properly executed proxies will be voted at the discretion of the persons named in those proxies for such other person as the Board may designate. We do not presently expect that any of the nominees will be unavailable. Your proxy for the Annual Meeting cannot be voted for more than 13 nominees.

Qualifications and Experience

The Board believes that the skills, qualifications and experiences of the director nominees make them all highly qualified to serve on our Board, both individually and as providing complementary skills on our Board. 6 of our director nominees, 4 of whom are women and 2 of whom are racially diverse, bring an effective mix of diverse perspectives. In addition, our Board’s composition represents a balanced approach to director tenure and age, 8 of the 13 nominees have tenures less than 10 years and the ages range from 50 to 73, allowing the Board to benefit from the experience of longer-serving directors combined with fresh perspectives from newer directors. The following table shows the

 

4

Cboe Global Markets 2019 Proxy Statement

 

 


 

specific qualifications and experiences the Board and the Nominating and Governance Committee considered for each nominee. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director Qualifications and Experiences

Tilly

Sunshine

English

Farrow

Fitzpatrick

Froetscher

Goodman

Palmore

Parisi

Ratterman

Richter

Sommers

Stone

Company’s Mission

 

 

 

 

 

 

 

 

 

 

 

 

 

Understand and adhere to the Company's mission

Independence

 

 

 

 

 

 

 

 

 

 

 

 

 

Satisfy the independence requirements of BZX

 

Strategy

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience developing and executing strategy

Management

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience managing at a senior level

Financial Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience with our markets and the trading of derivatives and equities

 

 

 

 

 

 

Government Relations

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience working in or with the government and regulators

 

 

 

 

Corporate Governance

 

 

 

 

 

 

 

 

 

 

 

 

 

Knowledge of corporate governance matters, including through service on other public company boards

 

 

 

Risk Management

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience overseeing risk management

 

 

 

Technology

 

 

 

 

 

 

 

 

 

 

 

 

 

Experience in technology or cybersecurity

 

 

 

 

 

 

 

 

 

Fresh Perspective

 

 

 

 

 

 

 

 

 

 

 

 

 

Board tenure is less than ten years

 

 

 

 

 

Nominees

Set forth below is biographical information for each of the directors nominated to serve on our Board for a one-year term until the 2020 Annual Meeting of Stockholders, as well as the reasons why the Board believes each candidate is well suited to serve as a director. The terms indicated for service include the service on the board of Cboe Options prior to our demutualization and our initial public offering in 2010. 

In addition, as indicated below, certain director nominees also serve on certain boards of directors and committees of Cboe Futures Exchange, LLC (“CFE”), Cboe SEF, LLC (“SEF”) and our securities exchanges, which include Cboe Options, Cboe C2 Exchange, Inc. (“C2”), Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc. and Cboe EDGX Exchange, Inc. (collectively, the “securities exchanges”).

 

 

Cboe Global Markets 2019 Proxy Statement

5

 


 

 

 

Edward T. Tilly 

Chairman, President and CEO

Age: 55

Committees:

Picture 110   Executive (Chair)

Background 

Mr. Tilly is our Chairman, President and Chief Executive Officer (“CEO”). Mr. Tilly has served as Cboe Global Markets’ President since January 2019, Chairman since February 2017 and as CEO and a director since May 2013. Prior to that, he served as our President and Chief Operating Officer from November 2011 to May 2013 and as Executive Vice Chairman from August 2006 until November 2011. He was a member of Cboe Options from 1989 until 2006, and served on its Board from 1998 through 2000, from 2003 through July 2006, and from 2013 to the present, including as Member Vice Chairman from 2004 through July 2006 and as Chairman from February 2017 to the present. Mr. Tilly currently serves on the boards of directors of our securities exchanges, CFE, SEF,  Vice Chairman of the World Federation of Exchanges, Northwestern Memorial HealthCare and Working in the Schools.  He is also a member of the Commercial Club of Chicago and the Economic Club of Chicago. He holds a B.A. degree in Economics from Northwestern University.

Qualifications 

Mr. Tilly has a deep understanding of the Company and the operations of our exchanges from trading on Cboe Options, representing the interests of market participants and serving in our management. He also brings significant knowledge of the global securities, futures and foreign currency exchange industries. We believe that Mr. Tilly’s experience overseeing our risk management, working with the government and regulators, successfully developing and executing our strategic initiatives, as well as being Chairman, President and CEO of Cboe Global Markets, makes him well suited to serve on our Board.

 

6

Cboe Global Markets 2019 Proxy Statement

 

 


 

Eugene S. Sunshine

Lead Director

Independent

Age: 69

Committees:

Picture 111   Executive

Background

Mr. Sunshine currently serves as our Lead Director and has served on the Board of Cboe Global Markets since our initial public offering in 2010 and of Cboe Options from 2003 to 2017.  Mr. Sunshine retired from his position as Senior Vice President for Business and Finance at Northwestern University in August 2014, a position he had held since 1997. Prior to joining Northwestern, he was Senior Vice President for administration at The John Hopkins University. At both The John Hopkins University and Northwestern University, Mr. Sunshine was CFO. Prior to joining The John Hopkins University, Mr. Sunshine held numerous positions in New York State government, including state treasurer. He is currently a member of the boards of directors of Arch Capital Group Ltd., a publicly traded company, and Kaufman Hall and Associates. He is a former member of the board of directors of Bloomberg L.P., KeyPath Education and National Mentor Holdings. He holds a B.A. degree from Northwestern University and a Masters of Public Administration degree from the Maxwell School of Citizenship and Public Affairs at Syracuse University.

Qualifications 

Mr. Sunshine has extensive financial skills from his education and professional experiences. He also has knowledge of the corporate governance issues facing boards from his experience serving on them. He has extensive connections in the Chicago area business community. We believe that these skills make him well suited to serve on our Board and as our Lead Director.

Frank E. English, Jr.

Independent

Age: 73

Committees:

Picture 112   Compensation

Picture 113   Finance and Strategy

Picture 114   Nominating and Governance

Background

Mr. English has served on our Board since 2012. He served as Senior Advisor at W.W. Grainger, Inc. from 2011 to 2017. From 1976 through January 2011, Mr. English served in a number of positions at Morgan Stanley, including Vice Chairman, Investment Banking, where he advised numerous domestic and international clients on the use of their capital, corporate strategy and relations with stockholders. He currently serves on the boards of directors of publicly traded companies Arthur J. Gallagher & Co. and Tower International, Inc. Mr. English holds a B.B.A. degree from the University of Notre Dame.

Qualifications 

Mr. English brings his experience advising and serving on boards of directors. His knowledge regarding capital deployment, stockholder relations and strategic planning bring an important skill set to the Board. We believe that Mr. English is well suited to serve on our Board based on his experience.

 

 

Cboe Global Markets 2019 Proxy Statement

7

 


 

William M. Farrow III

Independent

Age: 64

Committees:

Picture 115   Audit

Picture 116   Executive

Picture 117   Risk (Chair)

Background

Mr. Farrow has served on our Board since 2016. Mr. Farrow is the retired President and CEO of Urban Partnership Bank, a position he held from 2010 through 2017. Prior to that, he was the Managing Partner and CEO of FC Partners Group, LLC from 2007 to 2009, the Executive Vice President and Chief Information Officer of The Chicago Board of Trade from 2001 to 2007 and held various senior positions at Bank One Corporation. Mr. Farrow currently serves on the boards of directors of publicly traded companies Echo Global Logistics, Inc. and WEC Energy Group, Inc. and on the boards of directors of CoBank, Inc. and the NorthShore University Health Systems. Mr. Farrow previously served on the boards of directors of the Federal Reserve Bank of Chicago and Urban Partnership Bank. Mr. Farrow holds a B.A. degree from Augustana College and a Masters of Management from Northwestern University’s Kellogg School of Management.

Qualifications 

Mr. Farrow brings his experience as the retired President and CEO of a mission based community development financial institution to our Board. He has a strong understanding of information technology systems, including cybersecurity, and the financial services and banking industry. We believe that these experiences give Mr. Farrow an important skill set that makes him well suited to serve on our Board.

Edward J. Fitzpatrick

Independent

Age: 52

Committees:

Picture 118   Compensation (Chair)

Picture 119   Executive

Picture 120   Risk

Background

Mr. Fitzpatrick has served on our Board since 2013. Mr. Fitzpatrick is currently Chief Financial Officer of Genpact Limited, a position he has held since July 2014. Prior to that, Mr. Fitzpatrick worked at Motorola Solutions, Inc. and its predecessors from 1998 through 2014 in various financial positions, including as its CFO from 2009 to 2013. Before joining Motorola, Mr. Fitzpatrick was an auditor at PricewaterhouseCoopers, LLP from 1988 to 1998. Mr. Fitzpatrick holds a B.S. degree in Accounting from Pennsylvania State University and an M.B.A. degree from The Wharton School at the University of Pennsylvania and earned his CPA certification in 1990.

Qualifications 

Mr. Fitzpatrick brings his experience as the CFO of a publicly traded company to our Board. He has extensive experience with finance, public company responsibilities and strategic transactions. We believe that these experiences give Mr. Fitzpatrick an important skill set that makes him well suited to serve on our Board.

 

8

Cboe Global Markets 2019 Proxy Statement

 

 


 

Janet P. Froetscher

Independent

Age: 59

Committees:

Picture 121   Compensation

Picture 122   Nominating and Governance

Picture 123   Risk

 

Background

Ms. Froetscher is President of The J.B. and M.K. Pritzker Family Foundation, a position she has held since April 2016, and has served on the Board of Cboe Global Markets since our initial public offering in 2010 and of Cboe Options from 2005 to 2017. Previously, she served as President and CEO of Special Olympics International from October 2013 until October 2015, President and CEO of the National Safety Council from 2008 until October 2013, President and CEO of the United Way of Metropolitan Chicago and in a variety of roles at the Aspen Institute, most recently as Chief Operating Officer. From 1992 to 2000, Ms. Froetscher was the executive director of the Finance Research and Advisory Committee of the Commercial Club of Chicago. She also currently serves on the board of trustees of National Louis University. Ms. Froetscher holds a B.A. degree from the University of Virginia and a Masters of Management from Northwestern University’s Kellogg School of Management. Ms. Froetscher is also a Henry Crown Fellow of the Aspen Institute.

Qualifications 

Ms. Froetscher brings her experiences as the President of a family foundation and former CEO of public service entities to our Board. We believe that these experiences give her leadership, operational and community engagement skills that make her well suited to serve on our Board.

Jill R. Goodman

Independent

Age: 52

Committees:

Picture 124   Executive

Picture 125   Finance and Strategy (Chair)

Picture 126   Nominating and Governance

 

Background

Ms. Goodman has served on our Board since 2012. Ms. Goodman is currently Managing Director of Foros, a strategic financial and mergers and acquisitions advisory firm, a position she has held since November 2013. Previously, she served as a Managing Director and Head, Special Committee and Fiduciary Practice—U.S. at Rothschild from 2010 to October 2013. From 1998 to 2010, Ms. Goodman was with Lazard in the Mergers & Acquisitions and Strategic Advisory Group, most recently as Managing Director. Ms. Goodman advises companies and special committees with regard to mergers and acquisitions. Ms. Goodman graduated magna cum laude from Rice University with a B.A. degree. She received her J.D. degree, with honors, from the University of Chicago Law School.

Qualifications 

Ms. Goodman brings extensive experience in the boardroom to the Company. Her experiences, both as an investment banker and her corporate and securities legal background, bring a unique insight with which to consider our opportunities. We believe that these experiences give her knowledge and skills that make her well suited to serve on our Board.

 

 

Cboe Global Markets 2019 Proxy Statement

9

 


 

Roderick A. Palmore

Independent

Age: 67

Committees:

Picture 127   Executive

Picture 128   Finance and Strategy

Picture 129   Nominating and Governance (Chair) 

Background

Mr. Palmore is Senior Counsel at Dentons where he advises public and private corporations and their leadership suites on risk management and governance issues across practices and industry sectors. Mr. Palmore retired from his position as Executive Vice President, General Counsel and Chief Compliance and Risk Management Officer of General Mills, Inc. in February 2015 and has served on the Board of Cboe Global Markets since our initial public offering in 2010 and of Cboe Options from 2000 to 2017. Prior to joining General Mills in February 2008, he served as Executive Vice President and General Counsel of Sara Lee Corporation. Before joining Sara Lee, Mr. Palmore served in the U.S. Attorney’s Office in Chicago and in private practice. Mr. Palmore is currently a member of the board of directors of publicly traded company  The Goodyear Tire & Rubber Company and has previously served as a member of the boards of directors of Express Scripts Holding Company, formerly a publicly traded company, Nuveen Investments, Inc. and the United Way of Metropolitan Chicago. Mr. Palmore holds a B.A. degree in Economics from Yale University and a J.D. degree from the University of Chicago Law School.

Qualifications 

Through his experience as general counsel of public companies, in private practice and as an Assistant U.S. Attorney, Mr. Palmore has extensive experience in corporate governance and the legal issues facing the Company. In addition, his experience provides him with strong risk management skills. We believe that his experience makes him well suited to serve on our Board.

James E. Parisi

Independent

Age: 54

Committees:

Picture 130   Audit

Picture 131   Compensation

 

Background

Mr. Parisi has served on our Board since 2018. Mr. Parisi most recently served as the Chief Financial Officer of CME Group Inc. from November 2004 to August 2014, prior to which he held positions of increasing responsibility and leadership within CME Group Inc. from 1988, including as Managing Director & Treasurer and Director, Planning & Finance. Mr. Parisi is currently a member of the boards of directors of CFE, SEF, Vice-Chairman of the Special Olympics Illinois Foundation Board and Pursuant Health Inc. and has previously served as a member of the board of directors of Cotiviti Holdings, Inc., formerly a publicly traded company. Mr. Parisi holds a B.S. degree in Finance from the University of Illinois and an M.B.A. degree from the University of Chicago.  

Qualifications 

As the retired CFO of a publicly traded company offering a diverse derivatives marketplace and as a member of the boards of directors of CFE and SEF, Mr. Parisi has extensive knowledge of our industry. His service on other company boards also gives Mr. Parisi experience with corporate governance and leadership skills. We believe that his experience makes him well suited to serve on our Board.

 

10

Cboe Global Markets 2019 Proxy Statement

 

 


 

Joseph P. Ratterman

Independent

Age: 52

Committees:

Picture 132   Finance and Strategy

Background

Mr. Ratterman has served on our Board since 2017 in connection with the closing of the acquisition of Bats. Mr. Ratterman was one of Bats’ founders in 2005, and served as Chairman of Bats from 2015 until our acquisition of Bats. Mr. Ratterman also served as its Chairman from June 2007 until July 2012, as President from June 2007 until November 2014 and as CEO from June 2007 until March 2015. Mr. Ratterman is a member of the SEC’s Equity Market Structure Advisory Committee and a member of the board of directors of Axoni. Mr. Ratterman holds a B.S. degree in Mathematics and Computer Science from Central Missouri State University.

Qualifications 

Mr. Ratterman, as the former Chairman and CEO of Bats, brings significant knowledge of Bats, a large component of the Company, and the securities and futures industry. In addition to serving at Bats, he has extensive experience in a similar capacity with another industry participant. We believe that his experience in our industry makes him well suited to serve on our Board. His experience allows him to provide our Board a unique perspective on our business, competition and regulatory concerns.

Michael L. Richter

Independent

Age: 71

Committees:

Picture 133   Audit

Picture 134   Risk

 

Background

Mr. Richter has served on our Board since 2017 in connection with the closing of the acquisition of Bats.  Since 2013, Mr. Richter has been an Advisor to Estee Group, an India based proprietary trading broker dealer and asset manager.  He is also currently an  Advisor for Omega Point, a provider of quantitative analytic software to asset managers, a position he has held since 2015. In 2000, he co-founded Lime Brokerage LLC, a broker dealer and financial technology firm focused on providing customized solutions that offer exceptional reliability and scalability with leading low-latency access across multiple U.S. markets, and he served as its chief financial officer from 2000 to 2013. Mr. Richter is qualified as a Certified Public Accountant and holds a B.S. degree in Engineering from Rensselaer Polytechnic Institute and a master’s degree from MIT Sloan School of Management.

Qualifications 

Mr. Richter brings extensive experience in international banking and brokerage firms to the Company. He also has extensive experience with finance responsibilities and strategic transactions at brokerage firms, which brings a unique insight to our Board. We believe that these experiences give him knowledge and skills that make him well suited to serve on our Board.

 

 

Cboe Global Markets 2019 Proxy Statement

11

 


 

Jill E. Sommers

Independent

Age: 50

Committees:

Picture 135   Finance and Strategy

Background

Ms. Sommers has served on our Board since 2018. Ms. Sommers is currently a senior advisor to Patomak Global Partners, a financial services consultancy group, a position she has held since 2014. Previously, Ms. Sommers served as a commissioner of the Commodities Futures Trading Commission (“CFTC”) from 2007 to 2013 and as a member of the boards of directors of the securities exchanges of Bats from 2013 through the time of our acquisition of Bats in 2017. Ms. Sommers is currently a member of the boards of directors of our securities exchanges, CFE, SEF and the Ethics and Compliance Initiative and a member of the advisory board of directors of Green Key Technologies. Ms. Sommers holds a B.A. degree in Political Science from the University of Kansas.

Qualifications 

Ms. Sommers has a strong understanding of our business and the regulation of the financial and derivatives industries from her experience with the CFTC and as a member of the boards of directors of our securities exchanges, CFE and SEF. These skills, as well as her experience on other boards, make her well suited to serve on our Board.

Carole E. Stone

Independent

Age: 71

Committees:

Picture 136   Audit (Chair)

Picture 137   Executive

Picture 138   Nominating and Governance

Picture 139   Risk

 

Background

Ms. Stone currently serves on the board of directors of the Nuveen Funds and has served on the Board of Cboe Global Markets since our initial public offering in 2010 and of Cboe Options from 2006 to 2017. She served on the Nuveen Diversified Commodity Fund from February 2010 through March 2012 and served as director of the New York State Division of the Budget from 2000 to 2004. She has previously served as the chair of the New York Racing Association Oversight Board, as commissioner on the New York State Commission on Public Authority Reform, as chair of the Public Authorities Control Board and on the board of directors of several New York State public authorities. Ms. Stone holds a B.A. degree in Business Administration from Skidmore College. 

Qualifications 

Ms. Stone has a strong understanding of government and regulation from her experience with numerous public entities, as well as accounting and budgeting skills. She also has experience with governance matters and financial services from her service on the Nuveen boards. We believe that these skills make her well suited to serve on our Board.

 

Each director nominee must receive the affirmative vote of a majority of the votes cast with respect to his or her election in order to be elected. Each nominee has tendered his or her resignation, contingent on failing to receive a majority of the votes cast in this election and acceptance by the Board. In the event any director fails to receive a majority of votes cast, the Nominating and Governance Committee will consider and make a recommendation to the Board as to whether to accept the resignation. Abstentions and broker non-votes will not be counted as votes cast and therefore will not affect the vote. 

The Board recommends that the stockholders vote FOR each of the director nominees.

 

12

Cboe Global Markets 2019 Proxy Statement

 

 


 

Board Structure

Independence

Our Bylaws require that, at all times, no less than two-thirds of our directors will be independent. The Nominating and Governance Committee has affirmatively determined that all of our current directors, except Mr. Tilly, are independent under Cboe BZX Exchange’s (“BZX”) and Nasdaq Global Select Market’s (“Nasdaq”) listing standards for independence. In addition, James R. Boris, Christopher T. Mitchell and Samuel K. Skinner, who did not stand for reelection as directors in 2018, were determined to be independent through May 17, 2018.  

All of the directors on each of the Audit, Compensation and Nominating and Governance Committees are independent. Each of these Committees reports to the Board as they deem appropriate, and as the Board may request.

Lead Director

The Board has an independent Lead Director, Mr. Sunshine. Our Corporate Governance Guidelines require that an independent director serve as our Lead Director. The Lead Director is elected by the Board, upon the recommendation of the Nominating and Governance Committee.  The Charter of the Lead Director, Appendix A to our Corporate Governance Guidelines, provides that the Lead Director’s responsibilities include, among other items:

Picture 140    Chair all meetings of the non-employee and independent directors of the Board, including the executive sessions;

Picture 141    Approve agendas for Board meetings and consult with the Chairman on other matters pertinent to us and the Board;

Picture 142    Serve as a liaison between the Chairman and the independent Directors;

Picture 143    Approve meeting schedules to assure that there is sufficient time for discussion of all agenda items;

Picture 144    Advise and consult with the Chairman and CEO on the general scope and type of information to be provided in advance of Board meetings;

Picture 145    In collaboration with the Chairman and CEO, consult with the appropriate members of senior management about what information pertaining to our finances, operations, strategic alternatives and compliance is to be sent to the Board; and

Picture 146    To perform other duties as the Board may determine.

Chairman and CEO Roles

Since 2017, in connection with the closing of the acquisition of Bats, we combined the roles of Chairman and CEO, with Mr. Tilly serving as the Chairman and CEO.  Mr. Tilly was also appointed President effective January 14, 2019.  The Board carefully considers its Board leadership structure and the benefits of continuity in leadership roles and continues to believe that the combined roles of Chairman and CEO at this time enhances the Company’s strategic alignment and supports Cboe Global Markets’ ability to deliver stockholder value.

The Board periodically reviews the leadership structure and may make changes in the future based upon what the Board believes to be in the best interests of the Company and stockholders at the time. At certain points in our history, the Chairman and CEO roles have been held by the same person, and at other times, the roles have been held by different individuals. Under our Bylaws, the Chairman may, but need not be, our CEO, and the Board believes it is important to retain its flexibility to allocate the responsibilities of the offices of the Chairman and CEO in any way that is in the best

 

 

Cboe Global Markets 2019 Proxy Statement

13

 


 

interests of the Company and stockholders at a given point in time based upon then-prevailing circumstances. The Board believes that the decision as to who should serve in those roles, and whether the offices should be combined or separate, should be assessed periodically by the Board, and that the Board should not be constrained by a rigid policy mandate when making these determinations.

In addition, our Board has implemented the following elements in order to ensure independent oversight for us and for our Board:

Picture 147    requiring the Board to consist of at least two-thirds independent directors who meet regularly without management and solely with non-employee and independent directors,

Picture 148    establishing independent Audit, Compensation and Nominating and Governance Committees, and

Picture 149    appointing an independent Lead Director.

Board Oversight of Risk

The Board is responsible for overseeing our risk management processes. The Board is responsible for overseeing our general risk management strategy, the risk mitigation strategies employed by management and the significant risks facing us, including competition, reputation and technology risks. The Board stays apprised of particular risk management matters in accordance with its general oversight responsibilities. The Board has delegated to the Committees (as defined below) oversight over the following specific areas and all Committees report to the full Board on a routine basis and when a matter rises to the level of a material or enterprise level risk.    For more information about Committee responsibilities, see “Committees of the Board” below.  

 

 

Committee

Primary Areas of Risk Oversight

Audit

Picture 80   Adequacy and effectiveness of internal controls and procedures

Picture 150   Financial reporting and taxation 

Compensation

Picture 151   Compensation policies and procedures

Finance and Strategy

Picture 152   Credit and capital structure

Picture 153   Strategic challenges with business partners

Nominating and Governance

Picture 154   Corporate governance practices

Risk

Picture 155   Enterprise risk management

Picture 156   Operational risks relating to internal processes, people or systems, including information technology

Picture 157   Compliance, environmental, legal and regulatory risks

 

In addition to our Board, our management is responsible for daily risk management.  More specifically, we utilize a three lines of defense approach to enterprise risk management.  The first line of defense is our business, which is responsible for the performance, supervision and monitoring of our policies and control procedures.  The second line of defense is our compliance and risk management departments that provide an independent oversight by assessing risk, advising management, monitoring and reporting on any identified deficiencies or gaps.  This second line of defense includes representatives of each of our departments who attend periodic enterprise risk management meetings at which an established matrix of identified risks is reviewed to evaluate the level of potential risks facing us and to identify any new risks. This group, along with our Chief Risk Officer, provides information and recommendations to the Risk Committee as necessary.  The third line of defense is our internal audit department, which provides an additional assurance that significant processes and related controls are designed and operating effectively.   We believe this

 

14

Cboe Global Markets 2019 Proxy Statement

 

 


 

division of risk management responsibilities is an effective approach for addressing the enterprise risks that we face.

Board Oversight of Information Security

The Board recognizes that our business depends on the integrity, performance, security and reliability of our technology systems and devotes time and attention to the oversight of cybersecurity and information security risk.    In particular, the Board and Risk Committee each receives updates and reports on information security from management, including from the Company’s Chief Risk Officer and Chief Information Security Officer. More specifically, the Risk Committee receives presentations throughout the year on cybersecurity, information technology, data privacy and information related to third-party assessments of the Company’s information security program.  The Risk Committee also receives quarterly reports regarding the overall status of the Company’s information security program and shall review and approve any changes to the related charter.  

Board and Committee Meeting Attendance

There were 7 meetings of the Board during 2018. Each director attended at least 75% of the aggregate number of meetings of the Board and meetings of Committees of which the director was a member during 2018.

Independent Directors Meetings

Periodically, the independent directors meet separately in executive session without management. The Lead Director presides over these meetings. The independent directors met in executive session 6 times during 2018.

Annual Meeting Attendance

We encourage members of the Board to attend our annual meeting of stockholders. All of our current directors attended the 2018 Annual Meeting of Stockholders. Meetings of the Board and its Committees are being held in conjunction with the Annual Meeting. We expect all current directors will attend the Annual Meeting.

Committees of the Board

Overview

Our Board has the following six standing committees (each, a “Committee” and collectively, the “Committees”):

Picture 158    the Audit Committee,

Picture 159    the Compensation Committee,

Picture 160    the Executive Committee,

Picture 161    the Finance and Strategy Committee,

Picture 162    the Nominating and Governance Committee; and

Picture 163    the Risk Committee.

Other than the members of the Executive Committee required to be on such Committee pursuant to our Bylaws, each of the members of the Committees was recommended by the Nominating and Governance Committee for approval by the Board for service on that Committee. Each of the

 

 

Cboe Global Markets 2019 Proxy Statement

15

 


 

Committees has a charter, which is available on the Corporate Governance page of our Investor Relations section of our website at: http://ir.Cboe.com. 

The following table is a listing of the composition of our standing Committees during 2018 and as of March 19, 2019, including the number of meetings of each Committee during 2018.

 

 

 

 

    

 

    

 

Finance and

 

Nominating and

 

 

Director

 

Audit

 

Compensation

 

Executive

 

Strategy

 

Governance

 

Risk

Number of meetings

 

8

 

6

 

 

5

 

5

 

5

Edward T. Tilly(1)

 

 

 

 

 

 

 

Committee Chair

 

 

 

 

 

 

 

 

 

 

Eugene S. Sunshine(1)

 

 

 

 

Committee Member

(2)

 

Committee Member

 

 

 

 

 

Committee Chair

(2,3)

 

 

 

James R. Boris(4)

 

 

 

 

 

 

 

Committee Member

(2)

 

 

 

 

 

 

 

 

 

Frank E. English, Jr.

 

 

 

 

Committee Member

 

 

 

 

 

Committee Member

 

 

Committee Member

(5)

 

 

 

William M. Farrow, III

 

Committee Member

 

 

 

 

 

Committee Member

(5)

 

 

 

 

 

 

 

Committee Chair

(6)

Edward J. Fitzpatrick

 

Committee Chair

(2,7)

 

Committee Chair

(8)

 

Committee Member

 

 

Committee Member

(2)

 

 

 

 

Committee Member

(5)

Janet P. Froetscher

 

 

 

 

Committee Member

 

 

 

 

 

 

 

 

Committee Member

(5)

 

Committee Member

 

Jill R. Goodman

 

 

 

 

 

 

 

Committee Member

(5)

 

Committee Chair

(9)

 

Committee Member

 

 

 

 

Christopher T. Mitchell(4)

 

 

 

 

 

 

 

 

 

 

Committee Member

(2)

 

 

 

 

 

 

Roderick A. Palmore

 

 

 

 

 

 

 

Committee Member

 

 

Committee Member

(5)

 

Committee Chair

(3)

 

Committee Chair

(2,6)

James E. Parisi

 

Committee Member

(5)

 

Committee Member

(5)

 

 

 

 

 

 

 

 

 

 

 

 

Joseph P. Ratterman

 

 

 

 

 

 

 

 

 

 

Committee Member

 

 

 

 

 

 

 

Michael L. Richter

 

Committee Member

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committee Member

 

Samuel K. Skinner(4)

 

 

 

 

Committee Chair

(2,8)

 

Committee Member

(2)

 

 

 

 

Committee Member

(2)

 

 

 

Jill E. Sommers

 

 

 

 

 

 

 

 

 

 

Committee Member

(5)

 

 

 

 

 

 

Carole E. Stone

 

Committee Chair

(7)

 

 

 

 

Committee Member

 

 

Committee Chair

(2,9)

 

Committee Member

 

 

Committee Member

(5)


Committee Chair= Chair Committee Member= Member

(1)

The Chairman and Lead Director are both members of the Executive Committee and invited guests to the meetings of each of the other standing Committees.

(2)

Stepped down as a member of the Committee on May 17, 2018.

(3)

Effective May 17, 2018, Mr. Palmore became Chair of the Nominating and Governance Committee and Mr. Sunshine stepped down as Chair and a member of the Nominating and Governance Committee.

(4)

Messrs. Boris, Mitchell and Skinner stepped down as members of the Board and Committees in connection with the 2018 Annual Meeting of Stockholders on May 17, 2018.

(5)

Joined the Committee on May 17, 2018.

(6)

Effective May 17, 2018, Mr. Farrow became Chair of the Risk Committee and Mr. Palmore stepped down as Chair and a member of the Risk Committee.

(7)

Effective May 17, 2018, Ms. Stone became Chair of the Audit Committee and Mr. Fitzpatrick stepped down as Chair and a member of the Audit Committee.

(8)

Effective May 17, 2018, Mr. Fitzpatrick became Chair of the Compensation Committee and Mr. Skinner stepped down as Chair and a member of the Compensation Committee.

(9)

Effective May 17, 2018, Ms. Goodman became Chair of the Finance and Strategy Committee and Ms. Stone stepped down as Chair and a member of the Finance and Strategy Committee.

 

16

Cboe Global Markets 2019 Proxy Statement

 

 


 

Audit Committee

The Audit Committee consists of 4 directors, all of whom are independent under BZX and Nasdaq listing rules, as well as under Rule 10A‑3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee consists exclusively of directors who are financially literate. In addition, Mr. Parisi has been designated as our audit committee financial expert and meets  the SEC definition of that position.

The Audit Committee’s responsibilities include:

Picture 164    engaging our independent auditor and overseeing its compensation, work and performance,

Picture 165    reviewing and discussing the annual and quarterly financial statements and related press releases with management and the independent auditor, and

Picture 166    reviewing transactions with related persons for potential conflict of interest situations.

The Audit Committee also meets with our independent auditor in executive session without management present and our independent auditor may communicate directly, as needed, with members of the Audit Committee and the Board at large.

Compensation Committee

The Compensation Committee consists of 4 directors, all of whom are independent under BZX and Nasdaq listing rules. The Compensation Committee has primary responsibility to approve or make recommendations to the Board for:

Picture 167    all elements and amounts of compensation for the executive officers, including any performance goals,

Picture 168    reviewing succession plans relating to the CEO and our other executive officers,

Picture 169    the adoption, amendment and termination of cash and equity-based incentive compensation plans,

Picture 170    approving any employment agreements, severance agreements or change in control agreements with executive officers, and

Picture 171    the level and form of non-employee director compensation and benefits.

Nominating and Governance Committee

Overview

The Nominating and Governance Committee consists of 5 directors, all of whom are independent under BZX and Nasdaq listing rules. The Nominating and Governance Committee’s responsibilities include making recommendations to the Board on:

Picture 172    persons for election as director,

Picture 173    a director to serve as Chairman of the Board and an independent director to serve as Lead Director,

Picture 174    any stockholder proposals and nominations for director,

Picture 175    the appropriate structure, operations and composition of the Board and its Committees,

Picture 176    the Board and Committee annual self-evaluation process, and

Picture 177    the contents of the Corporate Governance Guidelines, Code of Business Conduct and Ethics and other corporate governance policies and programs.

 

 

Cboe Global Markets 2019 Proxy Statement

17

 


 

Criteria for Directors

We believe that each of the individuals serving on our Board has the necessary skills, qualifications and experiences to address the challenges and opportunities we face. The Nominating and Governance Committee is responsible for considering and recommending to the Board nominees for election as director, including considering each incumbent director’s continued service on the Board. The Committee annually reviews the skills and characteristics required of directors in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. In evaluating director candidates, the Committee takes into consideration many factors, including the individual’s educational and professional background, whether the individual has any special experience in a relevant area, personal accomplishments and cultural experiences. In addition, the Committee may consider such other factors it deems appropriate when conducting its assessment of director candidates.

 

18

Cboe Global Markets 2019 Proxy Statement

 

 


 

Annual Board and Committee Self-Evaluations

The Board believes that a robust annual evaluation process is a critical part of its governance practices.  The Nominating and Governance Committee is responsible for establishing and overseeing the Board’s and Committees’ annual self-evaluations to determine whether the Board and the Committees are functioning effectively and to identify potential areas of improvement. The annual self-evaluation process includes the following:

Stage in Process

Board of Directors

Committees

Determine Discussion Topics

Picture 178    Nominating and Governance Committee determines specific topics and subject areas to discuss with each director, such as roles, responsibilities, structure, skills, experience, background, composition and effectiveness

Picture 179    Nominating and Governance Committee determines and distributes to each Committee a list of specific topics and subject areas to facilitate discussion about each Committee’s roles and responsibilities, structure, charter, policies, composition and effectiveness

Discussions

Picture 180    Chair of Nominating and Governance Committee and Lead Director interview each director in one-on-ones to discuss Board’s performance

Picture 181    Chair of each Committee facilitates discussion of Committee’s performance in executive session and in one-on-ones

Feedback

Picture 183    Chair of Nominating and Governance Committee and Lead Director report results of discussions and recommendations to Nominating and Governance Committee for its consideration 

Picture 182    Chair of each Committee reports results of Committee self-evaluation and recommendations to Nominating and Governance Committee for its consideration

Reviews

Picture 184    Nominating and Governance Committee reviews results from Board and Committee self-evaluations and provides summary of assessments and recommendations to full Board

Picture 185    Board discusses results and, if necessary, provides additional recommendations 

Feedback Incorporated

Picture 186    Changes and enhancements, if any, are implemented to governance policies and practices 

 

In addition to the annual evaluation process, the Board and Committees meet in regular executive sessions, which provides the directors with opportunities to reflect and provide feedback on an ongoing basis to determine whether the Board and the Committees are functioning effectively and to identify potential areas of improvement. 

 

 

Cboe Global Markets 2019 Proxy Statement

19

 


 

Diversity

While we do not currently have a formal diversity policy, our Corporate Governance Guidelines provide that the Nominating and Governance Committee will seek to recommend to the Board candidates for director with a diverse range of experiences, qualifications and skills in order to provide varied insights and competent guidance regarding our operations, with a goal of having a Board that reflects diverse backgrounds, experience and viewpoints. We believe that we benefit from having directors with a diversity of skills, characteristics, backgrounds and cultural experiences.

Stockholder Nominations

The Nominating and Governance Committee will consider stockholder recommendations for candidates for our Board and will consider those candidates using the same criteria applied to candidates suggested by management. Stockholders may recommend candidates for our Board by contacting the Corporate Secretary of Cboe Global Markets, Inc. at 400 South LaSalle Street, Chicago, Illinois 60605.

In addition, stockholders may formally nominate candidates for our Board to be considered at an annual meeting of stockholders through the process described below under the heading “Stockholder Proposals.”

Executive Committee

The Executive Committee has the authority to exercise the powers and authority of the Board when the convening of the Board is not practicable, except as limited by its charter, the Company’s Bylaws and applicable law.

Finance and Strategy Committee

The Finance and Strategy Committee’s responsibilities include approving or making recommendations to the Board regarding the budget, capital allocation, strategic plans, and acquisition or investment opportunities.

Risk Committee

The Risk Committee is generally responsible for, among other things, overseeing the risk assessment and risk management of the Company, including risk related to cybersecurity, information technology and the Company’s compliance with laws, regulations, and its policies.     

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee is a current or former officer or employee of ours. In addition, there are no compensation committee interlocks with other entities with respect to any member of the Compensation Committee. 

Stockholder Engagement

Cboe Global Markets and its Board are committed to fostering long-term and institution-wide relationships with stockholders and maintaining their trust and goodwill. As a result, each year we interact with stockholders through a variety of engagement activities. These engagements routinely cover strategy and performance, corporate governance, executive compensation and other current and emerging issues to ensure that our Board and management understand and address the issues that are important to our stockholders.

Our key stockholder engagement activities in 2018 included attending investor and industry conferences, conducting investor road shows in major U.S. cities and hosting meetings at our

 

20

Cboe Global Markets 2019 Proxy Statement

 

 


 

corporate headquarters.  Some of these conferences also featured webcasts and replays of the presentations so that our stockholders could listen remotely.  In 2018, we engaged with holders of approximately 40 percent of our common stock outstanding.     

In 2018 and early 2019, we also conducted an outreach specifically focused on corporate governance,  executive compensation and proxy season trends and issues, targeting our top ten stockholders that represent nearly 45 percent of institutional holdings.  Through these discussions we gained valuable feedback, and this feedback was shared with the Board and its relevant Committees.  We  also took steps to address any areas of improvement, including by incorporating some of the disclosure suggestions into this Proxy Statement.    

In addition, our quarterly earnings calls are open to the general public and feature a live webcast. The Annual Meeting, to be held in Chicago, also includes a live webcast, so all of our stockholders may listen to the meeting remotely if they are unable to attend the meeting in person.

Communications with Directors

As provided in our Corporate Governance Guidelines, stockholders and other interested parties may communicate directly with our independent directors or the entire Board. Our policy and procedures regarding these communications are located in the Investor Relations section of our website at http://ir.Cboe.com. 

CORPORATE SOCIAL RESPONSIBILITY

The Board of Directors recognizes that operating in a socially responsible manner helps promote the long-term interests of our stockholders, organization, associates, industry and community.  Our guiding principles help us deliver on our corporate mission and strategy, including good citizenship.   

Picture 271

Being a good citizen means that we hold ourselves accountable for the integrity of the markets and to the communities we serve, seek to help resolve conflicts and build consensus, inform those impacted before taking action, lead by example and serve as part of the solution.  More specifically, being good citizens to the communities we serve means that we are committed to being environmentally conscious.  Additionally, being good citizens also means that we strive to support our associates and better serve our industry and community through our human capital development, volunteerism and policies.

 

 

Cboe Global Markets 2019 Proxy Statement

21

 


 

 

director compensation

Compensation Philosophy and Summary

The cash and stock retainers, committee meeting attendance fees, committee chair retainers and additional Lead Director fee paid to our non-employee directors are designed to be part of a competitive total compensation package when compared to market practices.  The director fees are generally designed to be paid at competitive levels that are near the median of director fees of our peer groups, which are discussed in further detail below in the “Executive Compensation — Compensation Discussion and Analysis”  section.  Typically, early in each year, the Compensation Committee considers a review of competitive market data analysis for Board compensation from Meridian Compensation Partners, LLC, our independent compensation consultant,  and recommends  changes, if any, to the Board for approval.    The compensation of our non-employee directors is based upon a compensation year beginning and ending in May at the time of our Annual Meeting of Stockholders.

2018 Elements of Director Compensation Program

The following table reflects the compensation, including any enhancements, for the Board term ending with the 2018 Annual Meeting of Stockholders and for the Board term ending with the Annual Meeting in 2019:  

Annual Fees

May 2017 —
May 2018

    

May 2018 —
May 2019

Cash retainer

$

90,000

 

$

90,000

Stock retainer, value based on closing price on date of grant

$

100,000

 

$

120,000

Committee chair cash retainer

 

 

 

 

 

Audit

$

25,000

 

$

25,000

Compensation

$

15,000

 

$

15,000

Finance and Strategy

$

15,000

 

$

15,000

Nominating and Governance

$

15,000

 

$

15,000

Risk

$

20,000

 

$

20,000

Lead Director cash retainer, in addition to above cash and stock retainers

$

150,000

 

$

50,000

Meeting Fees

 

 

 

 

 

Committee meeting attendance fee per meeting attended

$

1,500

 

$

1,500

Lead Director meeting attendance fee per Committee meeting attended for the Company and for each subsidiary board of directors or committee meeting attended

$

 

$

1,500

 

In early 2018, the Board increased the stock retainer to more closely align with the Broader Financial and Technology Industry peer group compensation median.  The Board also adjusted the stock retainer, and not the cash retainer, to better align with our peer groups’  pay mix and to continue to align our directors’ interests  with our stockholders.  In addition, following the creation of the Risk Committee in late 2017, the Board approved the Risk Committee chair cash retainer in early 2018.        

 

 

22

Cboe Global Markets 2019 Proxy Statement

 

 


 

2018 Director Compensation

The compensation of our non-employee directors for the year ended December 31, 2018 for their service is shown in the following table.

 

    

Fees Earned or

    

Stock

 

 

Name

 

Paid in Cash

 

Awards(1)

Total

Eugene S. Sunshine (2)

 

$

180,000

 

$

120,085

$

300,085

James R. Boris (3)

 

$

120,000

 

$

 —

$

120,000

Edward J. Fitzpatrick

 

$

131,000

 

$

120,085

$

251,085

Frank E. English, Jr.

 

$

111,000

 

$

120,085

$

231,085

William M. Farrow, III

 

$

115,000

 

$

120,085

$

235,085

Janet P. Froetscher

 

$

106,500

 

$

120,085

$

226,585

Jill R. Goodman

 

$

114,000

 

$

120,085

$

234,085

Christopher T. Mitchell(3)

 

$

46,500

 

$

 —

$

46,500

Roderick A. Palmore

 

$

121,000

 

$

120,085

$

241,085

James E. Parisi (4)

 

$

98,875

 

$

120,085

$

218,960

Joseph P. Ratterman

 

$

97,500

 

$

120,085

$

217,585

Michael L. Richter

 

$

105,000

 

$

120,085

$

225,085

Samuel K. Skinner (3)

 

$

55,500

 

$

 —

$

55,500

Jill E. Sommers (5)

 

$

93,625

 

$

120,085

$

213,710

Carole E. Stone

 

$

134,000

 

$

120,085

$

254,085

(1)

The non-employee directors then-serving on the Board received an equity grant of restricted stock on May 17, 2018. The equity grant vests on the earlier of the one year anniversary of the grant date or the completion of the year of director service. Each of these directors holds 1,108 shares of unvested restricted stock as of December 31, 2018. 

(2)

The amount shown in the Fees Earned or Paid in Cash column for Mr. Sunshine also includes fees of $6,000 for attending subsidiary Board of Directors or Committee meetings. 

(3)

Messrs. Boris, Mitchell and Skinner left the Board and Committees in connection with the 2018 Annual Meeting of Stockholders on May 17, 2018.  The amounts shown in the Fees Earned or Paid in Cash columns reflect the remaining cash retainers and Committee meeting fees while on the Board.

(4)

The amount shown in the Fees Earned or Paid in Cash column for Mr. Parisi also includes fees of $41,875 for his service as a member of the Boards of Directors of CFE and SEF. 

(5)

The amount shown in the Fees Earned or Paid in Cash column for Ms. Sommers also includes fees of $42,625 for her service as a member of the Boards of Directors of our securities exchanges, CFE and SEF.

Director Stock Ownership and Holding Guidelines

The Compensation Committee has adopted stock ownership and holding guidelines, which provide that each non-employee director should own stock equal to three times the cash annual retainer for directors within three years of joining the Board. For purposes of this ownership and holding requirement, (a) shares owned outright or in trust and (b) restricted stock, including shares that have been granted but are unvested, are included. In addition, each non-employee director is required to hold all of their shares until the guidelines are met, except for sales of shares to pay taxes with respect to the vesting or exercising of equity grants. Other than Mr. Parisi and Ms. Sommers, who were first elected to our Board in 2018, each of the non-employee incumbent directors has met the ownership requirement as of December 31, 2018.

 

 

Cboe Global Markets 2019 Proxy Statement

23

 


 

Director Hedging and Pledging Policies

Under our Insider Trading Policy, our directors are prohibited from entering into transactions involving options to purchase or sell our common stock or other derivatives related to our common stock. Our Insider Trading Policy also prohibits directors from entering into any pledges or margin loans on shares of our common stock. None of the directors have existing pledges or margin loans on shares of our common stock.

 

24

Cboe Global Markets 2019 Proxy Statement

 

 


 

 

executive Compensation

PROPOSAL 2 - ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

In accordance with Section 14A of the Exchange Act, the Board is providing our stockholders with an advisory vote to approve executive compensation. This advisory vote, commonly known as a “say-on-pay” vote, is a non-binding vote to approve the compensation paid to our named executive officers as disclosed in this proxy statement in accordance with SEC rules. The Board has adopted a policy of providing for annual “say-on-pay” votes in accordance with the results of our last stockholder advisory vote.

As discussed in the “Compensation Discussion and Analysis” section, our executive compensation program is designed to meet the following objectives:

Picture 187    attract and retain talented and dedicated executives,

Picture 188    motivate our executives to achieve corporate goals that create value for our stockholders, and

Picture 189    align the compensation of our executive officers with stockholder returns.

The Compensation Committee has implemented the following best practices applicable to our executive officers in order to achieve these objectives:

Picture 190    a high proportion of performance-based compensation with limits on all incentive award payouts,

Picture 191    stock ownership and holding guidelines,

Picture 192    double trigger change in control provisions for severance benefits in employment agreements and Executive Severance Plan,

Picture 193    prohibition on hedging,

Picture 194    prohibition of pledging,

Picture 195    elimination of tax gross-up payments in the event of a change in control, and

Picture 196    clawbacks of incentive compensation.

We believe that the compensation paid to the named executive officers is appropriate to align their interests with those of our stockholders to generate stockholder returns. Accordingly, the Board recommends that our stockholders vote in favor of the say-on-pay vote as set forth in the following non-binding resolution:

RESOLVED, that our stockholders approve, on an advisory basis, the compensation paid to our named executive officers, as disclosed in this Proxy Statement, including under the heading “Compensation Discussion and Analysis,” the accompanying compensation tables and the corresponding narrative discussion.

As this is an advisory vote, the outcome of the vote is not binding on us with respect to executive compensation decisions, including those relating to our named executive officers. Our Compensation Committee and Board value the opinions of our stockholders. The Compensation Committee and Board will consider the results of the say-on-pay vote and evaluate whether any actions should be taken in the future.

 

 

Cboe Global Markets 2019 Proxy Statement

25

 


 

Non-binding approval of our executive compensation program requires that a majority of the shares cast on this matter be cast in favor of the proposal. Abstentions and broker non-votes will not be counted as votes cast and therefore will not affect the vote.

The Board recommends that the stockholders vote FOR approval, in a non-binding resolution, of the compensation paid to our executive officers.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis section is intended to provide our stockholders with an understanding of our compensation practices and philosophy, material elements of our executive compensation program and the decisions made in 2018 with respect to the total compensation awarded to, earned by or paid to each of the following 2018 “named executive officers”  or “NEOs”:

Name

Title*

Edward T. Tilly

Chairman and Chief Executive Officer (1)

Christopher R. Concannon

President and Chief Operating Officer (2)

Brian N. Schell

Executive Vice President, Chief Financial Officer and Treasurer

Christopher A. Isaacson

Executive Vice President, Chief Information Officer (3)

Mark S. Hemsley

Executive Vice President, President Europe

Joanne Moffic-Silver

Former Executive Vice President, General Counsel and Corporate Secretary (4)


*Titles are as of December 31, 2018.

(1)

Mr. Tilly was also appointed our President effective January 14, 2019.  

(2)

Mr. Concannon’s last day with the Company was January 14, 2019.

(3)

Mr. Isaacson was appointed Executive Vice President and Chief Operating Officer effective January 14, 2019. 

(4)

Ms. Moffic-Silver’s last day with the Company was February 28, 2018.

 

 

26

Cboe Global Markets 2019 Proxy Statement

 

 


 

This Compensation Discussion and Analysis section is organized as follows:

Executive Summary

27

Compensation Governance Practices 

28

2018 Compensation Program Overview 

28

2018 Business Highlights 

29

Executive Compensation Program Practices 

30

Compensation Philosophy and Summary 

30

Company’s Response to Stockholder Vote on Say on Pay 

32

Compensation Refinements 

32

2018 Target Annual Pay Opportunities 

33

Role of the Compensation Committee 

34

Independent Compensation Consultant 

34

Tally Sheets 

34

Peer Groups and Comparative Data 

34

2018 Elements of Executive Compensation Program 

36

Base Salary 

36

Annual Incentive 

37

Overview 

37

Corporate Performance 

39

Individual Performance 

41

Actual Performance 

42

Technology Platform Migration Cash Incentive Plan 

42

Long-Term Incentive Plan 

42

Overview 

42

2018 Grants 

43

2016 PSU Grants Vested 

45

Other Executive Compensation Program Considerations 

46

Stock Ownership and Holding Guidelines 

46

Hedging Policy 

46

Pledging Policy 

46

Clawbacks 

46

Employee Benefit Plans, Severance, Change in Control and Employment-Related Agreements 

47

Tax and Accounting Considerations 

47

Executive Summary

The design of our executive compensation program, including compensation practices and independent oversight, is intended to align management’s interests with those of our stockholders and pay for our performance. Compensation awarded in 2018 reflects another year of record results and our continued successful integration with Bats. 

 

 

Cboe Global Markets 2019 Proxy Statement

27

 


 

Compensation Governance Practices

What we do

    

What we don’t do

Picture 257    Mitigate compensation risk

Picture 258    Enforce robust mandatory stock ownership and holding guidelines

Picture 259    Utilize independent compensation consultant

Picture 260    Maintain a Compensation Committee that is composed solely of independent directors

Picture 261    Active engagement with stockholders

Picture 264    Maintain double trigger change in control provisions in equity award agreements (beginning with the 2019 equity award agreements) and for severance benefits in employment agreements, offer letter agreements and the Executive Severance Plan

Picture 262    Provide clawback provisions for cash incentive and equity incentive awards for executives

Picture 263    Impose maximum caps and limits on short- and long-term incentive award payouts

 

No hedging or pledging of Company stock

No tax gross-ups upon a change in control or otherwise

No excessive use of employment contracts

No payouts for below threshold level performance

No excessive perquisites

No guaranteed annual incentive payments

 

2018 Compensation Program Overview

The following is a brief summary of our 2018 executive compensation program.

 

Picture 197    Market-competitive base salary.

Picture 198    High proportion of named executive officers’ total compensation was composed of performance-based compensation. 

Picture 199    Annual cash incentive for 2018 was based on corporate performance (weighted 75%) measured against pre-established adjusted EBITDA, net revenue and synergies goals and individual performance (weighted 25%) measured against pre-established individual strategic goals.

Picture 200    Long-term incentive for 2018  was comprised of 50% time-based restricted stock units (“RSUs”) and 50% performance-based restricted stock units (“PSUs”), with performance contingent on achievement of relative total shareholder return and earnings per share goals

Picture 201    Market competitive retirement, medical, life and disability arrangements that are generally available to all employees.

 

28

Cboe Global Markets 2019 Proxy Statement

 

 


 

2018 Business Highlights 

The following is a brief summary of our 2018 business highlights as they relate to the key performance metrics used in our performance-based compensation program as well as other business highlights.

Picture 83    Financial Results

o

Achieved record 2018 full year financial results.

o

Net revenues of $1,217 million for 2018, up 22% from $996 million for 2017, and up 14% from net revenues on a combined company basis of $1,068 million for 2017.1

o

Diluted EPS of $3.76 for 2018, up 2% from $3.69 for 2017, and adjusted diluted EPS of $5.02 for 2018, up 41% from adjusted diluted EPS on a combined company basis of $3.57 for 2017.1

o

Adjusted EBITDA of $840 million for 2018, up 18% from adjusted EBITDA on a combined company basis of $709 million for 2017.1

Picture 84    Bats Acquisition Integration

o

Exited 2018 with run rate expense synergies of $57 million, primarily seen in compensation and benefits and professional fees and outside services. We also continued to make solid progress executing on our integration plans.  

o

Increased our run-rate expense synergy target to $85 million, up by $20 million.

o

On February 25, 2018 and May 14, 2018, we successfully completed the migrations of CFE and C2, respectively, to the Bats technology platform.

Picture 85    Business Segment Results

o

Set new annual average daily volume (“ADV”) highs for trading in options, index options, SPX options, VIX futures and FX.

o

ADV growth for 2018 across each business segment.

o

Created two new Cboe corporate bond index futures.

o

Cboe Europe prospered in post MiFID II environment with growth in our Periodic Auctions book, a MiFID II- compliant lit order book, and increased volume in our Large-In-Scale block trading platform.

o

Grew our global FX market share to approximately 15% for the year, up from approximately 13% in 2017.2 


1

Net revenues on a combined company basis, adjusted diluted EPS and adjusted diluted EPS on a combined company basis, adjusted EBITDA and adjusted EBITDA on a combined company basis are non-GAAP measures used by the Company and reconciliations to GAAP measures are provided in Appendix A.

2

Market Share represents Cboe FX volume divided by the total volume of publicly reporting spot FX venues (Cboe FX, EBS, Refinitiv, and FastMatch).

 

 

 

Cboe Global Markets 2019 Proxy Statement

29

 


 

We believe that the performance of the Company demonstrates that management is keenly focused on driving the Company for sustainable long-term growth, while obtaining short-term results. Our business continued to generate strong cash flows from operations and we paid down debt, repurchased our stock and deployed capital to enhance stockholder returns while retaining the flexibility to pursue new opportunities. To that end, in 2018: 

Picture 202    in keeping with our goal of consistent and sustainable dividend growth, we increased our quarterly dividend by 15% to $0.31 per share and paid cash dividends of $130 million in 2018;  

Picture 203    we paid down  $25 million of outstanding debt; and

Picture 204    we repurchased 1.3 million of our outstanding shares of common stock under a share repurchase program for a total of $141 million.   

As a result of these business highlights and capital allocation decisions, as of December 31, 2018, we achieved a total stockholder return, including reinvested dividends, of approximately 56% over the past three years and approximately 101% over the past five years.    Despite record results in 2018, as of December 31, 2018, we achieved a total stockholder return, including reinvested dividends, of approximately -21% for 2018.  

Executive Compensation Program Practices

Compensation Philosophy and Summary

Our executive compensation program is designed to attract and retain talented and dedicated executives who are instrumental in our achievement of key strategic business objectives. To meet these objectives, the Compensation Committee designed and implemented a program that pays a substantial portion of executive compensation based on corporate and individual performance. 

The Compensation Committee believes that our executive compensation program plays a vital role in contributing to the achievement of key strategic business objectives that ultimately drive long-term business success. Accordingly, we designed our executive compensation program to focus our executives on achieving critical corporate financial and strategic goals, while taking steps to position the business for sustained growth in financial performance over time.

 

30

Cboe Global Markets 2019 Proxy Statement

 

 


 

Our executive compensation program generally consists of the following elements, in addition to retirement and health benefits:

Picture 2

The following table lists the various components included in total compensation for our executive officers and each element’s purpose. Later sections provide additional details regarding each component.

Total Compensation Component

    

Purpose

Base salary

 

Provides a fixed amount of compensation based on the market value of the position

Annual incentive (bonus)

 

Provides variable cash compensation payout opportunities designed to reward each executive for the achievement of certain annual corporate and individual performance metrics measured against pre-established performance goals

Long-term equity awards

 

Provide variable compensation in the form of equity, aligning the interests of our executives with stockholders and motivating our executives to focus on our long-term growth and increased stockholder value

Benefits (retirement, medical, life and disability)

 

Provide competitive health, welfare and retirement benefits

 

The following charts show the approximate 2018 total target compensation mix for the Chief Executive Officer and the other named executive officers as a group (excluding Ms. Moffic-Silver).  For the Chief Executive Officer and the other named executive officers, the majority of 2018 total target compensation is “at-risk” (i.e., linked to achievement of performance goals and/or the value is tied to our common stock price) and, further, the majority of “at-risk” pay is in the form of equity

 

 

Cboe Global Markets 2019 Proxy Statement

31

 


 

awards.  Total target compensation is the sum of an executive officer’s 2018 base salary, target annual incentive opportunity and target value for long-term equity awards (i.e., RSUs and PSUs). 

Picture 268

    

Picture 269

Company’s Response to Stockholder Vote on Say‑on‑Pay

At the 2018 Annual Meeting of Stockholders, our “say-on-pay” proposal received the support of over 94% of the votes cast for approval of our 2017 executive compensation program as disclosed in our 2018 Proxy Statement, and every year since going public in 2010, we have received over 85% stockholder support of our executive compensation programs. The Compensation Committee has reviewed the results of the stockholder vote on our 2017 executive compensation program and considered such results supportive of our executive compensation program and the Compensation Committee’s measured approach to modifying our compensation practices to enhance their alignment with stockholder interests. In addition, the Compensation Committee has determined that the vote result did not warrant any large-scale changes to our executive compensation program; however, the Compensation Committee continues to take steps, as described below, to ensure our compensation practices remain aligned with best practices and stockholder interests.

Compensation Refinements

The Board and Compensation Committee determine actual annual incentive bonus payouts based on achieved results measured against pre-established corporate and individual performance goals.  As a result of our executives’ continued focus on the integration of Bats and a larger focus on growing our revenues and earnings, the Compensation Committee changed  the annual incentive award’s corporate performance metrics in 2018 to better align the interests of our executives with our business strategy and with stockholders. For 2018, the metrics and weightings were updated as follows:

2017 Metrics

 

2018 Metrics

Picture 205   Individual Performance (weighted 30%)

 

Picture 207   Individual Performance (weighted 25%)

Picture 206   Corporate Performance (weighted 70%)

 

Picture 208   Corporate Performance (weighted 75%)

oAchievement of Synergies

 

oAchievement of Synergies

oAchievement of Net Revenue

 

oAchievement of Net Revenue

 

 

oAchievement of Adjusted EBITDA

 

 

oAchievement of Business Unit Performance

 

Historically, the Compensation Committee approved granting PSUs that were one-half subject to relative total stockholder return goals and one-half subject to earnings per share goals. As a result of

 

32

Cboe Global Markets 2019 Proxy Statement

 

 


 

the Bats acquisition, the Compensation Committee determined not to grant PSUs subject to earnings per share goals in 2017, due to the difficulty in setting a meaningful long-term earnings per share goal immediately following the acquisition. Therefore, in 2017 the Compensation Committee approved granting all PSUs subject solely to the achievement of relative total stockholder return.    

However, due to the continued successful integration of Bats and a better ability to set a meaningful long-term earnings per share goal, in 2018 the Compensation Committee approved granting PSUs (i) one-half subject to the achievement of relative total stockholder return measured against pre-determined performance goals over a three-year performance period and (ii) one-half subject to the achievement of earnings per share measured against pre-determined performance goals over a three-year performance period.  

Following the 2018 compensation decisions, the Compensation Committee reviewed our two peer groups, the Securities Exchange Peer Group and the Broader Financial and Technology Industry Peer Group,  and approved combining them into a single 25 company peer group that adds new companies and removes certain companies from each of those existing two peer groups.  The Committee made this determination because,  following the acquisition of Bats and our recent growth, the Company’s revenue, gross profit, market capitalization and number of employees grew to be more in-line with our larger securities exchange peers.  

Further, in connection with the grants of equity awards in 2019, the award agreements provide that in the event of a Change in Control (as defined in the Second Amended and Restated Long-Term Incentive Plan (the “Plan”)), each award will be "double trigger" unless a successor entity cannot or will not provide a "replacement award" (as defined in the Plan). If a successor entity cannot or will not provide a replacement award, the award will accelerate and be deemed fully vested and exercisable and all vesting conditions on restricted stock units will lapse, with all performance conditions deemed satisfied at the greater of target or the level of performance actually achieved as of the Change in Control (with similar performance assumed to be achieved through the remainder of the performance period). If the successor entity, including the Company if it is the surviving entity, assumes, continues or replaces an outstanding award (each such assumed, continued or replacement award, a replacement award), then such replacement award shall remain outstanding and be governed by its respective terms. Upon termination of the Participant's employment for any reason other than cause or by Participant with good reason upon or within two years after a Change in Control, such replacement award will accelerate and become fully vested and/or exercisable, with all performance conditions deemed satisfied at the greater of target or the level of performance actually achieved as of the employment termination date (with similar performance assumed to be achieved through the remainder of the performance period).

2018 Target Annual Pay Opportunities

The following chart shows the 2018 total target compensation for each named executive officer.

 

 

 

 

 

 

 

 

Target Long-Term

 

 

 

 

 

 

 

 

Target Annual

 

Equity Awards

 

 

 

Named Executive Officer(1)

    

Base Salary

    

Incentive Bonus

    

RSUs (2)

    

PSUs (2)

    

Total

Edward T. Tilly

 

$

1,265

 

$

2,087

 

$

1,650

 

$

1,650

 

$

6,652

Christopher R. Concannon

 

$

1,100

 

$

1,650

 

$

1,100

 

$

1,100

 

$

4,950

Brian N. Schell

 

$

521

 

$

729

 

$

359

 

$

359

 

$

1,968

Christopher A. Isaacson

 

$

540

 

$

810

 

$

325

 

$

325

 

$

2,000

Mark S. Hemsley (3)

 

$

619

 

$

681

 

$

 300

 

$

 300

 

$

1,900

Joanne Moffic-Silver

 

$

433

 

$

606

 

$

288

 

$

288

 

$

1,615

(1)

All amounts are in thousands.

(2)

Represents the grant date value.

 

 

Cboe Global Markets 2019 Proxy Statement

33

 


 

(3)

Mr. Hemsley receives his cash compensation in British pounds. The amounts reported were converted to U.S. dollars using a rate of £1.00 to $1.28, which was the exchange rate as of December 31, 2018.

This supplemental table is not required, but rather it is provided to demonstrate the link between performance and our named executive officers’ total direct compensation for 2018. Please refer to the Summary Compensation Table below for complete disclosure of the total compensation of our named executive officers reported in accordance with the SEC disclosure requirements.

Role of the Compensation Committee

The Compensation Committee, composed of all independent directors, is responsible for reviewing the various components of the total compensation program for all executive officers. The Compensation Committee met 6 times in 2018.  The Compensation Committee either approves or makes recommendations to the Board regarding compensation related decisions. To provide the Compensation Committee with advice and assistance related to the design of our executive compensation program, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant. As described below in further detail, Meridian consultants regularly attend meetings of the Compensation Committee. In addition, Messrs. Tilly, Concannon and Schell generally attended in 2018 portions of the meetings of the Compensation Committee to provide information and assistance, other than when the Compensation Committee discussed the respective executive’s compensation. 

Independent Compensation Consultant

Meridian, our independent compensation consultant, reviews our executive compensation program and advises the Compensation Committee on best practices and plan design to help improve the Company’s program’s effectiveness. In addition, the consultant provides advice to the Compensation Committee on the Company’s compensation peer groups and on the competitive positioning of the various components of the executive compensation program. The independent compensation consultant also meets with the Compensation Committee in executive session without management present and may communicate directly, as needed, with members of the Compensation Committee and the Board at large. Based on a review of its engagement of the independent compensation consultant and consideration of factors set forth in SEC, Nasdaq and BZX rules, the Compensation Committee determined that Meridian’s work did not raise any conflicts of interest and that it is independent from management. 

Tally Sheets

When reviewing compensation for the named executive officers, the Compensation Committee considers tally sheets that detail the various elements of compensation for each executive. These tally sheets, developed with the assistance of Meridian, are used to evaluate the appropriateness of the total compensation package, to compare each executive’s total compensation opportunity with his or her actual payout and to ensure that the compensation appropriately reflects the executive compensation program’s focus on pay for performance and alignment with stockholder interests.   

Peer Groups and Comparative Data

For the 2018 compensation decisions, the Compensation Committee used two peer groups from which to derive competitive market compensation data: (i) the Securities Exchange Peer Group and (ii) the Broader Financial and Technology Industry Peer Group. The Securities Exchange Peer Group was composed of seven companies, each with a heavy focus on our industry. The Broader Financial and Technology Industry Peer Group was composed of 20 companies, and included financial services firms and technology-focused companies with corporate profiles similar to ours, with revenues ranging between one-third and three-times the Company’s projected annual revenue. The 

 

34

Cboe Global Markets 2019 Proxy Statement

 

 


 

Compensation Committee utilized this two peer group model to derive meaningful compensation data due to our unique business model and to ensure that each named executive officer’s target total compensation is competitive. The Compensation Committee used this market data as points of reference, rather than as the sole determining factor in setting compensation for our executive officers.

Securities Exchange Peer Group

ASX Limited

Intercontinental Exchange, Inc.

CME Group Inc.

Nasdaq, Inc.

Deutsche Borse AG

TMX Group Limited

London Stock Exchange Group plc

 

 

Broader Financial and Technology Industry Peer Group

Akamai Technologies, Inc.

MarketAxess Holdings Inc.

BGC Partners, Inc.

MSCI Inc.

The Dun & Bradstreet Corporation

Piper Jaffray Companies

E*TRADE Financial Corporation

SEI Investments Company

Euronet Worldwide, Inc.

SS&C Technologies Holdings, Inc.

FactSet Research Systems Inc.

TransUnion

Fair Isaac Corporation

Tyler Technologies, Inc.

GAIN Capital Holdings, Inc.

The Ultimate Software Group, Inc.

Jack Henry & Associates, Inc.

Verint Systems Inc.

Manhattan Associates, Inc.

WEX Inc.

 

Following the 2018 compensation decisions, the Compensation Committee  reviewed the two peer groups. The Committee reviewed the data provided by Meridian and compared our corporate performance to our peer groups in the areas of revenues, gross profit, market capitalization and number of employees. The Committee also considered business descriptions, complexity of business, company locations and other qualitative factors.  Following the acquisition of Bats and our recent growth, the Company’s revenue, gross profit, market capitalization and number of employees grew, and now fall closer to the median revenue, gross profit, market capitalization and number of employees of the industry-specific Securities Exchange Peer Group.   As a result, the Committee approved combining the two groups into a single peer group that adds new companies and removes certain companies of the existing Securities Exchange Peer Group and the Broader Financial and Technology Industry Peer Group.   With respect to the updated single peer group, the Company’s annual revenue falls slightly below the median of the peer group, gross profit falls below the median of the peer group, market capitalization falls at the median of the peer group and number of

 

 

Cboe Global Markets 2019 Proxy Statement

35

 


 

employees falls below the median of the peer group.  The following is the updated 25 company single peer group:   

Updated Single Peer Group

Akamai Technologies, Inc.

London Stock Exchange Group plc

Broadridge Financial Solutions, Inc.

LPL Financial Holdings Inc.

Citrix Systems, Inc.

MarketAxess Holdings Inc.

CME Group Inc.

MSCI Inc.

Deutsche Borse AG

Nasdaq, Inc.

The Dun & Bradstreet Corporation

SEI Investments Company

Equifax Inc.

SS&C Technologies Holdings, Inc.

E*TRADE Financial Corporation

Stifel Financial Corp.

Euronet Worldwide, Inc.

Synopsys, Inc.

FactSet Research Systems Inc.

TransUnion

Fortinet, Inc.

Verisk Analytics, Inc.

Intercontinental Exchange, Inc.

Virtu Financial, Inc.

Jack Henry & Associates, Inc.

 

 

The following companies were added and removed from the existing Securities Exchange Peer Group and the Broader Financial and Technology Industry Peer Group:  

Added

 

Removed

Broadridge Financial Solutions, Inc.

 

ASX Limited

Citrix Systems, Inc.

 

BGC Partners, Inc.

Equifax Inc.

 

Fair Isaac Corporation

Fortinet, Inc.

 

GAIN Capital Holdings, Inc.

LPL Financial Holdings Inc.

 

Manhattan Associates, Inc.

Stifel Financial Corp.

 

Piper Jaffray Companies

Synopsys, Inc.

 

TMX Group Limited

Verisk Analytics, Inc.

 

Tyler Technologies, Inc.

Virtu Financial, Inc.

 

The Ultimate Software Group, Inc.

 

 

Verint Systems Inc.

 

 

WEX Inc.

2018 Elements of Executive Compensation Program

Base Salary

The base salary for our named executive officers is designed to be part of a competitive total compensation package when compared to both of our peer groups. Base salary provides our named executive officers with a measure of certainty within their total compensation package and provides a baseline for their target payout opportunity under the annual incentive plan. In setting base salary, in addition to considering peer group data, the Compensation Committee also considered for each named executive officer the following factors: 

Picture 87    position,

Picture 91    individual performance,

Picture 88    experience,

Picture 92    potential to influence our future success, and

Picture 89    industry specific knowledge,

Picture 93    total compensation.

Picture 90    level of responsibility,

 

 

 

36

Cboe Global Markets 2019 Proxy Statement

 

 


 

For 2018, the Compensation Committee approved or made recommendations to the Board regarding the base salaries for each of the named executive officers, with input in part from Mr. Tilly regarding the individual performances of Messrs. Concannon, Schell, Isaacson and Hemsley and Ms. Moffic-Silver.  Below are the base salary amounts at December 31, 2018 and 2017, and February 28, 2018 and December 31, 2017, with respect to Ms. Moffic-Silver, for the named executive officers and the aggregate percent change. 

 

 

2017 Base

 

2018 Base

 

Percent

Named Executive Officer

 

Salary (1)

 

Salary (1)

 

Change

Edward T. Tilly

 

$

1,150

 

$

1,265

 

10

%

Christopher R. Concannon

 

$

1,000

 

$

1,100

 

10

%

Brian N. Schell

 

$

500

 

$

521

 

4

%

Christopher A. Isaacson

 

$

500

 

$

540

 

8

%

Mark S. Hemsley (2)

 

$

659

 

$

619

 

-6

%

Joanne Moffic-Silver

 

$

433

 

$

433

 

0

%


(1)

In thousands

(2)

Mr. Hemsley receives his cash compensation in British pounds and his base salary did not change.  Any changes were due to foreign currency fluctuations.  The 2018 amounts reported were converted to U.S. dollars using a rate of £1.00 to $1.28, which was the exchange rate as of December 31, 2018. The 2017 amounts reported were converted to U.S. dollars using a rate of £1.00 to $1.35, which was the exchange rate as of December 31, 2017.

The base salaries for Messrs. Tilly and Concannon increased due to the continued successful integration with Bats, our strong corporate performance in 2017, their assumptions of additional responsibilities in leading a larger company, and to more closely align their compensation with comparative market data provided by Meridian. Mr. Schell’s base salary increase of 3% was approved in February 2018 and then an increase of approximately 1.5% was approved in July 2018 due to his assumption of additional responsibilities and duties, successful migration of our financial processing systems and to more closely align compensation with comparative market data provided by Meridian.  The base salary for Mr. Isaacson increased due to his department’s continued successful integration with Bats, his additional responsibilities in leading a larger department and to more closely align compensation with comparative market data provided by Meridian.     

Annual Incentive

Overview.  The annual incentive, or bonus, component of the total compensation package paid to our named executive officers is intended to reward performance relative to annual goals that were approved by the Board or Compensation Committee at the beginning of the year. In the first quarter following the performance year, the Compensation Committee reviews corporate and individual performance for the year and approves or makes recommendations to the Board for annual incentives to be paid to the named executive officers.

The Compensation Committee established a target annual incentive opportunity for each of the named executive officers by considering market data derived from our two peer groups, in addition to the following factors:

 

 

Picture 209    experience,

Picture 212    potential to influence our future success, and

Picture 210    industry specific knowledge,

Picture 213    pay history.

Picture 211    level of responsibility,

 

 

 

 

Cboe Global Markets 2019 Proxy Statement

37

 


 

The table below shows each named executive officer’s 2017 and 2018 target annual incentive opportunity, shown as a percentage of salary, and the change in percentage points.  

 

    

2017 Target Annual

 

2018 Target Annual

 

 

 

 

 

 

 

Incentive

 

Incentive

 

 

 

 

 

 

 

Opportunity as

 

Opportunity as

 

 

 

Change in

 

 

 

Percentage of

 

Percentage of

 

 

 

Percentage

 

Named Executive Officer

 

Base Salary

 

Base Salary

 

 

 

Points

 

Edward T. Tilly

 

165

%

 

165

%

 

0

pts

Christopher R. Concannon

 

150

%

 

150

%

 

0

pts

Brian N. Schell

 

140

%

 

140

%

 

0

pts

Christopher A. Isaacson

 

140

%

 

150

%

 

10

pts

Mark S. Hemsley

 

95

%

 

110

%

 

15

pts

Joanne Moffic-Silver

 

140

%

 

140

%

 

0

pts

 

Mr. Isaacson’s target annual incentive opportunity increased due to his role in the continued successful integration with Bats, his additional responsibilities in leading a larger department and to more closely align Mr. Isaacson’s target annual incentive opportunity with comparative market practice. Mr. Hemsley’s target annual incentive opportunity increased due to his leadership in managing the strong European business segment performance, his additional responsibilities in managing the impact of Brexit, navigating MIFID II and to more closely align Mr. Hemsley’s target annual incentive opportunity with comparative market practice.

The Compensation Committee determines actual annual incentive bonus payouts based on achieved results measured against pre-established performance goals. The use of pre-established performance metrics and related goals creates an annual incentive plan that rewards our executive officers for superior performance, reduces payouts when performance does not meet target and eliminates payouts if performance does not meet threshold. In addition, the performance metrics and related goals create a structured, formulaic annual incentive plan—the executive officers know throughout the year what needs to be accomplished and what specific bonus dollar amounts can be earned at different performance levels.  The following is a graphical depiction of determining annual incentive bonus payouts.  

Picture 270

As more fully described below, for the 2018 annual incentive plan the Compensation Committee approved two performance metrics: (i) corporate performance metrics (weighted 75%) and (ii) individual performance metrics (weighted 25%). The Compensation Committee established goals at threshold, target and maximum performance levels with respect to the corporate performance metrics. However, given the nature of the individual performance metrics, the Compensation Committee did not set a range of performance levels. Rather, the Compensation Committee determined each named executive officer’s payout (expressed as a percentage of target annual incentive award opportunity) based on the assessment of the executive officer’s actual performance measured against individual performance goals.   

 

38

Cboe Global Markets 2019 Proxy Statement

 

 


 

The Company will pay no annual incentive bonus if actual performance is below threshold. The following chart shows the bonus payout opportunity for each named executive officer at these performance levels.

 

 

 

 

 

Target Annual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incentive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opportunity as

 

Annual Bonus Payout

 

 

Base

 

Percentage of

 

Opportunity (1)

Named Executive Officer

  

Salary (1)

    

Base Salary

    

Threshold

    

Target

    

Maximum

Edward T. Tilly

 

$