DEF 14A 1 sni-def14a_20160510.htm DEF 14A sni-def14a_20160510.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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Exchange Act of 1934

 

 

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Soliciting Material Pursuant to Rule 14a-12

SCRIPPS NETWORKS INTERACTIVE, INC.

(Name of Registrant as Specified in Its Charter)

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

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TABLE OF CONTENTS

 

PROXY STATEMENT

 

1

ADMISSION AND VOTING PROCEDURES

 

1

PROXY SUMMARY

 

3

PROPOSAL 1 ELECTION OF DIRECTORS

 

7

REPORT ON THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS

 

8

REPORT ON THE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

12

REPORT ON THE BOARD OF DIRECTORS AND ITS COMMITTEES

 

15

CORPORATE GOVERNANCE

 

17

COMPENSATION DISCUSSION AND ANALYSIS

 

19

EXECUTIVE COMPENSATION TABLES

 

33

DIRECTOR COMPENSATION

 

51

REPORT OF THE COMPENSATION COMMITTEE

 

54

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

54

RELATED PARTY TRANSACTIONS

 

55

PROPOSAL 2 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

 

56

REPORT OF THE AUDIT COMMITTEE

 

57

SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE

 

58

SHAREHOLDER PROPOSALS FOR 2017 ANNUAL MEETING

 

58

OTHER MATTERS

 

59

 

 

 

 


 

SCRIPPS NETWORKS INTERACTIVE, INC.

9721 Sherrill Blvd.

Knoxville, TN 37932

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 10, 2016

TO THE SHAREHOLDERS OF SCRIPPS NETWORKS INTERACTIVE, INC.

The Annual Meeting of the Shareholders of Scripps Networks Interactive, Inc. (the “Company”) will be held at 7264 East Lamar Alexander Parkway, Townsend, Tennessee 37882, on Tuesday, May 10, 2016, at 4:00 p.m., local time, for the following purposes:

 

1.

to elect 12 directors;

 

2.

to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016; and

 

3.

to transact such other business as may properly come before the meeting.

The Board of Directors has set the close of business on March 17, 2016 as the record date for the determination of shareholders who are entitled to notice of and to vote at the meeting and any adjournment thereof.

We are furnishing our proxy materials to you under Securities and Exchange Commission rules that allow companies to deliver proxy materials to their shareholders on the Internet. On or about March 31, 2016, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) and provided access to our proxy materials on the Internet. The proxy materials include the 2015 Annual Report to Shareholders and the Proxy Statement.

We encourage you to attend the Annual Meeting. However, it is important that your shares be represented whether or not you are personally able to attend. Even if you plan to attend the Annual Meeting, please vote as instructed in the Notice, via the Internet or the telephone as promptly as possible to ensure that your vote is recorded. Alternatively, you may follow the procedures outlined in the Notice to request a paper proxy card to submit your vote by mail. If you attend the meeting and your shares are registered in your name, you may withdraw your proxy at that time and vote your shares in person.

Your proxy is being solicited by the Board of Directors.

 

By order of the Board of Directors,

 

Eleni Vatsis Stratigeas

Senior Vice President,

Business and Legal Affairs and Corporate Secretary

March 31, 2016

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 10, 2016.

The Proxy Statement and Annual Report to Shareholders are available without charge at http://www.proxyvote.com

 

 

 


 

SCRIPPS NETWORKS INTERACTIVE, INC.

9721 Sherrill Blvd.

Knoxville, TN 37932

PROXY STATEMENT

2016 ANNUAL MEETING

May 10, 2016

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Scripps Networks Interactive, Inc., an Ohio corporation (the “Company”), for use at the Company’s Annual Meeting of Shareholders (the “Annual Meeting”), which will be held on Tuesday, May 10, 2016, at 7264 East Lamar Alexander Parkway, Townsend, Tennessee 37882, at 4 p.m., local time.

The close of business on March 17, 2016, has been set as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting.

ADMISSION PROCEDURES

As we are committed to providing a safe, secure environment for our shareholders, employees, and guests, we kindly ask that you observe the following procedures if you plan to attend the Annual Meeting:

 

·

Before the meeting: Please register on or before May 8, 2016, by contacting Eleni Stratigeas, our Senior Vice President, Business and Legal Affairs and Corporate Secretary, at (865) 560-3326 or estratigeas@scrippsnetworks.com. If you plan to attend the meeting and need special assistance because of a disability, please contact the corporate secretary’s office.

 

·

When you arrive: Company representatives will be available to direct you to the meeting room where you can check in at the registration table beginning at 3:30 p.m. local time.

 

·

What to bring: If your shares are registered in the name of a bank, broker, or other holder of record, please bring both a photo ID and documentation of your stock ownership as of March 17, 2016 (such as a brokerage statement). If your shares are registered in your name, either solely or jointly with one or more co-owners, you will just need a photo ID.

INTERNET AVAILABILITY OF PROXY MATERIALS

We are furnishing proxy materials to our shareholders primarily via the Internet under rules adopted by the U.S. Securities and Exchange Commission, instead of mailing printed copies of those materials to each shareholder. On March 31, 2016, we mailed to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including our Proxy Statement and our Annual Report to Shareholders. The Notice of Internet Availability of Proxy Materials also instructs you on how to access your proxy card or to vote via the Internet or by telephone.

This process is designed to expedite the shareholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. Shareholders who would prefer to continue to receive printed proxy materials should follow the instructions included in the Notice of Internet Availability of Proxy Materials.

VOTING PROCEDURES

On March 17, 2016, the Company had outstanding 95,024,669 Class A Common Shares, $.01 par value per share (“Class A Common Shares”), and 33,850,481 Common Voting Shares, $.01 par value per share (“Common Voting Shares”). Holders of Class A Common Shares are entitled to elect the greater of three or one-third (or the nearest smaller whole number if such fraction is not a whole number) of the directors of the Company but are not entitled to vote on any other matters except as required by Ohio law. Holders of Common Voting Shares are entitled to elect all remaining directors and to vote on all other matters requiring a vote of shareholders. Each Class A Common Share and Common Voting Share is entitled to one vote upon matters on which such class of shares is entitled to vote. Holders of Class A Common Shares and Common Voting Shares do not have cumulative voting.

 


 

A quorum of shareholders is necessary to hold a valid meeting. The presence, in person or by proxy, of the holders of a majority of the outstanding Class A Common Shares is necessary for the election of the four directors to be elected by the holders of the Class A Common Shares and the presence, in person or by proxy, of the holders of a majority of the outstanding Common Voting Shares is necessary for any other action to be taken at the meeting.

With respect to the election of directors, when a quorum of holders of Class A Common Shares and Common Voting Shares, respectively, is present at an annual meeting in which directors are elected, directors shall be elected by a plurality of the votes cast. Under this standard, the eight (8) director nominees to be elected by the holders of Common Voting Shares and four (4) director nominees to be elected by the holders of Class A Common Shares who receive the greatest number of votes will become directors of the Company.

With respect to any other matter to be voted upon, when a quorum of holders of Class A Common Shares and Common Voting Shares, respectively, is present at an annual meeting, the vote of the holders of a majority of the Class A Common Shares and Common Shares, respectively, issued and outstanding and entitled to vote thereat, present in person or by proxy, shall decide any question brought before such meeting.  Note, however, that for purposes of this Proxy Statement, holders of Class A Common Shares are only entitled to vote for the election of four (4) director nominees.

With respect to the election of directors, a shareholder may vote “for” or “against” a director nominee or may “withhold” such shareholder’s vote for a director nominee.  Withheld votes will be treated as present at the meeting for purposes of establishing a quorum for the meeting and for purposes of the vote on a particular matter. A withheld vote will have no effect on the matter.

With respect to any other matter to be voted upon, a shareholder may vote “for” or “against” such matter or may “abstain” from voting for such matter. Abstentions will be treated as present at the meeting for purposes of establishing a quorum for the meeting and for purposes of the vote on the particular matter. Abstentions will have the same effect as a vote against the matter.

Broker non-votes also will be treated as present at the meeting for purposes of establishing a quorum for the meeting, but will not be treated as shares present for purposes of the vote on the particular matter. A broker non-vote will have no effect on the matter. A broker non-vote occurs when a broker or other nominee does not vote shares on a “non-routine” matter, such as the election of directors, because the broker or nominee does not have discretionary voting power for the particular matter and has not received voting instructions from the beneficial owner of the shares.

The presence of any shareholder at the meeting will not operate to revoke his or her proxy. A proxy may be revoked at any time, if it has not been exercised, by giving written notice to the Company or in open meeting. If a shareholder signs and submits such shareholder’s proxy without voting instructions with respect to the proposals contained herein, the proxy will be voted “for” such proposals.

If you are a shareholder of record (i.e., if your shares are registered directly in your name in the records of our transfer agent, Wells Fargo), you can vote using one of the methods described below. If you are a beneficial owner (i.e., you indirectly hold your shares through a nominee such as a bank or broker), you can vote using the methods provided by your nominee.

 

VOTE BY INTERNET

www.proxyvote.com

Have your 16-Digit Control Number (printed in the box marked by the arrow on the notice or proxy card) and follow the instructions.

VOTE BY PHONE

1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions.

TO REQUEST A PAPER OR E-MAIL COPY

If you want to receive a paper or email copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request:

1) BY INTERNET: www.proxyvote.com

2) BY TELEPHONE: 1-800-579-1639

3) BY EMAIL*: sendmaterial@proxyvote.com

*  If requesting materials by email, please send a blank email with your 16-Digit Control Number in the subject line (your Control Number can be found in the box marked by the arrow on the notice or proxy card). Requests, instructions and other inquiries sent to this email address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April 26, 2016 to facilitate timely delivery.

 

 

2


 

 

PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should consider in voting your shares. You should read the entire proxy statement, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, carefully before voting.

Voting Matters and Board Recommendations

 

 

Proposal

 

Board Voting

Recommendation

 

Page

Reference

 

 

 

 

 

 

I.

Election of 12 directors

 

For each nominee

 

7

 

 

 

 

 

 

II.

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016

 

For

 

56

Select Performance and Business Highlights

 

·

Set all-time Company records in 2015 and showed strong increases from the prior year in key financial metrics:

 

o

Operating Revenue $3.0 billion – up 13.2%

 

o

Segment Profit1 $1.2 billion – up 11.0%

 

o

Diluted Earnings per Share $4.66 – up 21.7%

 

·

HGTV completed 2015 with the highest yearly cable rating in the network’s history – #8 among primetime viewers age 25 to 54

 

·

Food Network ranked #11 among ad-supported cable networks

 

·

Continued growth in international expansion as evidenced by the completed acquisition of TVN, a leading Polish media company, and the launch of networks in Latin America, Asia and Australia

 

 

1

See reconciliation of Segment Profit to GAAP measure on page F-7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

3


 

Corporate Governance Highlights

We believe that good corporate governance is integral to our business, and the Board monitors developments in governance best practices to assure that it continues meeting its commitment to representation of shareholder interests. Below is a summary of certain corporate governance practices and facts:

 

●       Annual election of directors

●       Strong risk management program

 

 

●       Regular executive sessions of the Board and board committees

●       11 of our 12 director nominees are independent

 

 

●       Annual independent board and committee evaluations

●       Comprehensive Code of Ethics and Corporate Governance Principles

 

 

●       Global ethics and corporate compliance program

●       Board participation in executive succession planning

 

 

●       Incentive plan alignment between pay and performance

●       Clawback policy providing for return of incentive compensation

 

 

●       Commitment to seeking diversity on the Board

●       Board oversight of Company strategy

Shareholder Engagement

We value our shareholders’ perspective on our business and each year regularly engage with shareholders through a variety of engagement activities to stay informed on the evolving perspectives of the investor community. We engage with shareholders on various matters, including industry trends, Company performance, corporate governance, and executive compensation. In 2015, our key shareholder engagement activities included investor road shows in nine U.S. and international cities, six investor conferences in the U.S. and U.K., and our 2015 annual meeting of shareholders.

4


 

Director Nominees

The following table provides summary information regarding each nominee to the Board. Information about each director’s experience, qualifications and skills can be found beginning on page 10.

 

 

 

 

 

 

 

Committee Memberships2

 

NAME

AGE

DIRECTOR

SINCE

DIRECTOR

CATEGORY3

PRINCIPAL

OCCUPATION

INDE-

PENDENT

AC

EC

CC

NGC

OTHER

PUBLIC CO.

BOARDS

Jarl Mohn

Industry

64

2008

A

President and CEO, NPR

 

 

Chair

 

None

Nicholas B. Paumgarten

Non-Industry

70

2008

A

Founder, Corsair Capital LLC

 

 

1 (United Community Banks, Inc.)

Jeffrey Sagansky

Industry

64

2008

A

Chairman and CEO, Double Eagle Acquisition Corp.

 

 

Chair

3 (Double Eagle Acquisition Corp., Global Eagle Entertainment, Inc., Starz)

Ronald W. Tysoe

Non-Industry

62

2008

A

Former Senior Advisor, Perella Weinberg Partners LP; Former Vice Chairman, Federated Department Stores, Inc. (now Macy’s Inc.)

Chair

 

 

4 (Canadian Imperial Bank of Commerce, Cintas Corporation, J. C. Penney Company, Inc., Taubman Centers, Inc.)

Gina L. Bianchini

Industry

43

2012

CV

Founder and CEO, Mighty Software, Inc.

 

 

None

Michael R. Costa

Non-Industry

58

2009

CV

Former Head of Mergers and Acquisitions and Vice Chairman of Investment Banking, Cowen and Company

 

 

None

David A. Galloway

Industry

72

2008

CV

Former President and CEO, Torstar Corporation

 

 

 

1 (Toromont Industries Ltd.)

Kenneth W. Lowe

Industry

65

2008

CV

Chairman, President, and CEO, Scripps Networks Interactive, Inc.

 

 

Chair

 

 

None

Donald E. Meihaus

Industry

61

2015

CV

Former President, Miramar Services, Inc.

 

 

None

 

2

Audit Committee (“AC”); Executive Committee (“EC”); Compensation Committee (“CC”); Nominating and Governance Committee (“NGC”). The Company also maintains a Pricing Committee, a Digital Advisory Committee, and a Special Committee, as described in further detail on page 18.

3

Class A Common Shares (“A”); Common Voting Shares (“CV”).

5


 

 

 

 

 

 

 

Committee Memberships2

 

NAME

AGE

DIRECTOR

SINCE

DIRECTOR

CATEGORY3

PRINCIPAL

OCCUPATION

INDE-

PENDENT

AC

EC

CC

NGC

OTHER

PUBLIC CO.

BOARDS

Richelle P. Parham

Industry

48

2012

CV

Former Chief Marketing Officer, eBay

Marketplaces, North America

 

 

 

1 (Laboratory Corporation of America Holdings)

Mary McCabe Peirce

Industry

67

2008

CV

Former Trustee, The Edward W. Scripps Trust

 

 

1 (The E. W. Scripps Company)

Wesley W. Scripps

Industry

33

2014

CV

Founder and Owner, Forlio Designs LLC

 

 

 

None

 

 

 

 

Number of Meetings in 2015

 

7

0

5

4

 

 

Executive Compensation Highlights

The Company seeks to align the interests of our named executive officers (“NEOs”) with the interests of the Company’s shareholders. Certain important features of our executive compensation program include:

 

·

The program is  designed to reward financial results and effective strategic leadership to build sustainable value for shareholders by correlating the timing and amount of actual pay with performance goals over various time horizons without excessive risk taking.

 

·

Pay is based on performance. Approximately 80% of our Chief Executive Officer’s and approximately 71% of the other NEOs’ fiscal 2015 target total direct compensation was based on “variable” (or “at risk”) pay elements.

 

o

100% of each NEO’s annual incentive award and 30% of each NEO’s long-term incentive award is subject to achievement of short-term and long-term financial and business objectives, with the remainder of the long-term incentive award comprised of stock options and restricted stock units (“RSUs”), designed to reward the NEOs for increasing the Company’s stock price and enhancing long-term value.

 

o

Strong 2015 performance resulted in slightly-above-target payouts under the NEO’s 2015 annual incentive awards, while a lagging total shareholder return relative to the S&P 500 resulted in our NEO’s forfeiting the performance-based restricted share units (“PBRSUs”) award portion of their 2014 long-term incentive awards (with a performance period ended December 31, 2015).

 

·

Base pay increases in 2015 were modest, excluding promotional increases.

 

·

The Company maintains stock ownership guidelines that apply to all executive officers and directors.

 

·

The Company has strong governance policies related to executive compensation, and we employ appropriate compensation risk mitigating features.

 

 

6


 

PROPOSAL 1

Election of Directors

A board of 12 directors is to be elected, four by the holders of Class A Common Shares voting separately as a class and eight by the holders of Common Voting Shares voting separately as a class.  In the election, the nominees receiving the greatest number of votes will be elected. Withheld votes and broker non-votes will have no effect on this proposal.

Each proxy for Class A Common Shares executed and returned by a holder of such shares will be voted for the election of the four directors hereinafter shown as nominees for such class of shares, unless otherwise indicated on such proxy. Each proxy for Common Voting Shares executed and returned by a holder of such shares will be voted for the election of the eight directors hereinafter shown as nominees for such class of shares, unless otherwise indicated on such proxy. Although the Board does not contemplate that any of the nominees hereinafter named will be unavailable for election, in the event that any such nominee is unable to serve, the proxies will be voted for the remaining nominees and for such other person(s), if any, as the Board may propose.

Mr. Galloway is currently 72 years old. As set forth in the Company’s Corporate Governance Principles, it is the general policy of the Company that the retirement age for directors is 72 years of age. However, the Board, upon the recommendation of the Nominating and Governance Committee, has waived this retirement policy for Mr. Galloway until the 2017 annual meeting of shareholders due to Mr. Galloway’s extensive knowledge and experience, his deep understanding of the media industry and his valuable service on the Compensation Committee, and has concluded that the Company would benefit from his continued service as a member of the Board.

The Board of Directors unanimously recommends a vote “FOR” the election of the nominated directors.

 

 

7


 

REPORT ON THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS

The following table sets forth certain information as to each of the nominees for election to the Board of Directors. Each of the nominees for director is currently serving as a director of the Company and has been previously elected by our shareholders.

 

Name

 

Age

 

Director

Since

 

Principal Occupation or Occupation/Business

Experience for Past Five Years

 

 

 

 

 

 

 

Nominees for Election by Holders of Class A Common Shares

 

 

 

 

 

 

 

Jarl Mohn(1)

 

64

 

2008

 

President and CEO of NPR since July 2014; Trustee of the Mohn Family Trust since September 1991, Interim CEO at MobiTV, Inc. (a converged media platform) from May 2007 to October 2007; President and Chief Executive Officer of Liberty Digital, Inc. (a media company) from January 1999 to March 2002; President and CEO of E! Entertainment Television (a network with programming dedicated to the world of entertainment) from January 1990 to December 1998.

Mr. Mohn brings more than forty years’ experience in the media industry through his prior positions as Chief Executive Officer of several major media companies. Additionally, he has 25 years’ experience in the cable TV industry. He is known for his vast and extensive industry knowledge, innovative thinking and expertise as well as a thorough understanding of the challenges and opportunities faced by the Company. Additionally, he served as a director of The E. W. Scripps Company (a publicly traded media company with interests in television stations, newspapers and local news and information Web sites), which provided him with institutional knowledge of the Company.

 

 

 

 

 

 

 

Nicholas B. Paumgarten(2)

 

70

 

2008

 

Founder, Corsair Capital LLC (an investment firm) since March 2006; Managing Director of J.P. Morgan Chase and Chairman of J.P. Morgan Corsair II Capital Partners L.P. (an investment banking firm and an investment fund) from February 1992 to March 2006.

Mr. Paumgarten has extensive financial industry experience and brings both financial services and corporate governance perspective to the Company as the current Chairman of Corsair Capital, a former Managing Director of J.P. Morgan Chase, and the former Chairman of J.P. Morgan Corsair II Capital Partners L.P. His prior service as a director of The E. W. Scripps Company provided him with institutional knowledge and expertise in the media industry.

8


 

Name

 

Age

 

Director

Since

 

Principal Occupation or Occupation/Business

Experience for Past Five Years

 

 

 

 

 

 

 

Jeffrey Sagansky(3)

 

64

 

2008

 

Chairman and CEO of Double Eagle Acquisition Corp. since July 2015. President of Silver Eagle Acquisition Corp. from July 2013 to March 2015. President of Global Eagle Acquisition Corp. from 2011 to February 2013. Chairman of RHI Entertainment LLC (a producer and distributor of long-form television content) from February 2009 to December 2010.

Mr. Sagansky brings more than 35 years of experience managing television operations and investing in television distribution and production companies, which enables him to provide critical insights into the media industry and how best to position the Company for success. He also holds an MBA from Harvard Business School. From his long-term experience in the media industry, he brings expertise and industry knowledge to the Board. Also, as a former director of The E. W. Scripps Company, he brings historical knowledge of the Company and its strengths, challenges and opportunities.

 

 

 

 

 

 

 

Ronald W. Tysoe(4)

 

62

 

2008

 

Senior Advisor of Perella Weinberg Partners LP (a global, independent advisory and asset management firm) from October 2006 to September 2007; Vice Chairman of Federated Department Stores, Inc. (now Macy’s Inc.), a retail organization operating stores and Internet websites, from April 1990 to October 2006.

Mr. Tysoe brings significant experience in accounting and finance, including serving on a number of audit committees of public companies and as a former Chief Financial Officer of a large public company. Mr. Tysoe is an audit committee financial expert as defined in the SEC rules adopted under the Sarbanes-Oxley Act. Additionally, he served as a director of The E. W. Scripps Company, which provided him with institutional knowledge and insight into the challenges and opportunities of the Company.

 

 

 

 

 

 

 

Nominees for Election by Holders of Common Voting Shares

 

 

 

 

 

 

 

Gina L. Bianchini

 

43

 

2012

 

Founder and CEO of Mighty Software, Inc. (provider of social software solutions) since September 2010. CEO of Ning, Inc. (platform for creating social websites) from 2004 to March 2010. Co-Founder and President of Harmonic Communications (an advertising tracking, measurement, and optimization software company) from March 2000 to July 2003.

Ms. Bianchini’s expertise, vision and creativity in the rapidly evolving world of social networking make her uniquely qualified to serve the Company. Her valuable insight and guidance will benefit the Company as it develops new interactive businesses and explores opportunities to create and deliver our brand of lifestyle content on innovative digital platforms.

9


 

Name

 

Age

 

Director

Since

 

Principal Occupation or Occupation/Business

Experience for Past Five Years

 

 

 

 

 

 

 

Michael R. Costa

 

58

 

2009

 

Head of Mergers and Acquisitions and Vice Chairman of Investment Banking, Cowen and Company (a diversified financial services firm) from 2010 to 2011. Former Managing Director, Global Markets and Investment Banking/Mergers and Acquisitions of Merrill Lynch & Co. (provider of wealth management, securities trading and sales, corporate finance and investment banking services) from 1989 through 2008.

Mr. Costa brings more than twenty-five years of finance/investment banking experience to the Board. His prior work experience includes serving as a financial advisor to numerous corporations/boards in the media and communications industries in connection with mergers, acquisitions and corporate restructurings.

 

 

 

 

 

 

 

David A. Galloway(5)

 

72

 

2008

 

President and Chief Executive Officer of Torstar Corporation (a media company listed on the Toronto Stock Exchange) from 1988 until his retirement in May 2002.

Mr. Galloway brings over twenty years of media industry experience to the Company. His previous role as Chief Executive Officer provides him with knowledge, experience and insight into various budget issues as well as oversight, governance and management of large organizations. He holds an MBA from Harvard Business School and has extensive business experience and leadership skills. Additionally, he served on the board of directors of the E. W. Scripps Company, which provided him with institutional knowledge and insight into the challenges and opportunities of the Company.

 

 

 

 

 

 

 

Kenneth W. Lowe

 

65

 

2008

 

Chairman, President and Chief Executive Officer of the Company since July 2008. President and Chief Executive Officer of The E. W. Scripps Company from October 2000 to June 2008. President and Chief Operating Officer from January 2000 to September 2000 of The E. W. Scripps Company.

From his service as the current Chairman, President and Chief Executive Officer of the Company and his prior service as President and Chief Executive Officer and Chief Operating Officer of The E. W. Scripps Company, Mr. Lowe brings deep institutional knowledge and perspective regarding the Company’s strengths, challenges and opportunities. He possesses extensive public company and media industry experience.

 

 

 

 

 

 

 

Donald E. Meihaus

 

61

 

2015

 

Secretary and Treasurer of The Edward W. Scripps Trust from 1990 until his retirement in 2013. President of Miramar Services, Inc. (the Scripps family office) from 2002 to 2012.

Mr. Meihaus brings institutional knowledge to the Company from his service as the former President of the Scripps family office and as Secretary and Treasurer of The Edward W. Scripps Trust.

10


 

Name

 

Age

 

Director

Since

 

Principal Occupation or Occupation/Business

Experience for Past Five Years

 

 

 

 

 

 

 

Richelle P. Parham(6)

 

48

 

2012

 

Chief Marketing Officer of eBay Marketplaces, North America (Ecommerce company) from 2010 to February 2015. Head of Global Marketing Innovation and Head of Global Marketing Services for Visa, Inc. (credit card company) from 2008 to 2010. Senior Vice President and General Manager of Digitas (an integrated advertising agency) from 1994 to 2007.

Ms. Parham has more than 20 years of global marketing experience. Her experience developing strategies that deliver strong return on marketing investments becomes increasingly important as we create lifestyle content services for consumers on emerging interactive media platforms.

 

 

 

 

 

 

 

Mary McCabe Peirce(7)(8)

 

67

 

2008

 

Mrs. Peirce brings institutional knowledge to the Company through her service as a trustee of The Edward W. Scripps Trust and as a director of The E. W. Scripps Company. As a result of this experience, she has a thorough understanding of the Company’s history and vision.

 

 

 

 

 

 

 

Wesley W. Scripps(8)

 

33

 

2014

 

Founder and owner of Forlio Designs LLC (a web design firm) since 2008.

Mr. Scripps’ experience in owning and operating a web design firm provides real-time, valuable insight and guidance to the Company as it develops new interactive businesses and promotes its brands on various platforms.

 

(1)

Mr. Mohn was previously a director of CNET Networks, Inc. (a then-publicly traded interactive media company) and XM Satellite Radio Holdings, Inc. (a then-publicly traded satellite radio provider).

(2)

Mr. Paumgarten is a director of United Community Banks, Inc. (a publicly traded bank holding company).

(3)

Mr. Sagansky is Chairman and CEO of Double Eagle Acquisition Corp. (a publicly traded company formed for the purpose of effecting business combinations), a director of Global Eagle Entertainment, Inc. (a publicly traded airline supplier of entertainment and connectivity to the worldwide airline business) and a director of Starz (a publicly traded pay cable operator). He was previously a director of RHI Entertainment, Inc. (a then-publicly traded broadcast media producer) and American Media, Inc. (a publicly traded magazine company).

(4)

Mr. Tysoe is a director of Canadian Imperial Bank of Commerce, Cintas Corporation (a publicly traded company providing specialized services, including uniform programs and other products, to businesses), J. C. Penney Company, Inc. (a publicly traded apparel and home furnishing retailer), and Taubman Centers, Inc. (a publicly traded real estate company that owns and operates regional shopping centers). He was previously a director of NRDC Acquisition Corporation, Ohio Casualty Corporation (a then-publicly traded casualty insurance company) and Pzena Investment Management, Inc. (a publicly traded investment management company).

(5)

Mr. Galloway is a director of Toromont Industries (a Caterpillar machinery dealer). He was previously chair of Bank of Montreal and a director of Shell Canada, Cognos Inc. and Abitibi Consolidated. He was chair of Hospital for Sick Children in Toronto from 2002-2005 and on the board for thirteen years.

(6)

Ms. Parham is a director of Laboratory Corporation of America Holdings (a publicly traded independent clinical laboratory company).

(7)

Mrs. Peirce is a director of The E. W. Scripps Company.

(8)

Mr. Scripps is a first cousin once removed of Mrs. Peirce.

 

 

11


 

REPORT ON THE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information with respect to persons known to management to be the beneficial owners, as of January 31, 2016, unless indicated otherwise in the footnotes below, of more than 5 percent of the Company’s outstanding Class A Common Shares or Common Voting Shares. Unless otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares shown therein as being beneficially owned by them.

 

 

 

Total Shares to be

Beneficially Owned

 

 

Percentage of Total(1)

 

Name and Address of Beneficial Owner

 

Class A

Common

Shares

 

 

Common

Voting

Shares

 

 

Class A

Common

Shares

 

 

Common

Voting

Shares

 

GREATER THAN FIVE PERCENT SHAREHOLDERS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signatories to Scripps Family Agreement(2)

 

 

 

 

 

31,066,422

 

 

 

 

 

 

91.8

%

c/o Tracy Tunney Ward Miramar Services, Inc. 250

   Grandview Ave., Suite 400 Fort Mitchell, KY 41017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeastern Asset Management, Inc.(3)

 

 

13,064,835

 

 

 

 

 

 

13.8

%

 

 

 

6410 Poplar Ave., Suite 900 Memphis, TN 38119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock, Inc.(4)

 

 

7,358,656

 

 

 

 

 

 

7.8

%

 

 

 

55 East 52nd Street New York, NY 10022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Vanguard Group(5)

 

 

6,891,877

 

 

 

 

 

 

7.3

%

 

 

 

100 Vanguard Blvd. Malvern, Pennsylvania 19355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Percentage of class is based on 94,863,550 Class A Common Shares and 33,850,481 Common Voting Shares outstanding as of January 31, 2016. Subject to the Scripps Family Agreement, each Common Voting Share is convertible at no cost and at any time into one Class A Common Share. The Percentage of Total Class A Common Shares does not give effect to the conversion of any Common Voting Shares into Class A Common Shares.

(2)

Certain descendants of Robert P. Scripps, descendants of John P. Scripps, certain trusts of which descendants of John P. Scripps or Robert P. Scripps are trustees or beneficiaries and an estate of a descendent of Robert P. Scripps are signatories to the Amended and Restated Scripps Family Agreement, dated May 19, 2015 (the “Scripps Family Agreement”), which governs the transfer and voting of all Common Voting Shares held by such signatories. The information in the table and this footnote is based on Amendment No. 9 to a Schedule 13D filed with the SEC on December 31, 2015 by the signatories to the Scripps Family Agreement. The signatories to the Scripps Family Agreement report shared voting power with each other with respect to the Common Voting Shares shown in the table because such shares will be voted as instructed by a vote conducted in accordance with the procedures set forth in the Scripps Family Agreement. The shares shown in the table do not include the following Common Voting Shares (the “Minors’ Shares”) that are held on behalf of persons who were minors at the time such shares were distributed from The Edward W. Scripps Trust (each, a “Minor”), and are not parties or subject to the Scripps Family Agreement: (a) 1,604,000 Common Voting Shares held by two signatories to the Scripps Family Agreement as co-guardians for a Minor and (b) 801,999 Common Voting Shares held by trusts for the benefit of Minors with respect to which another signatory to the Scripps Family Agreement serves as trust advisor.

The signatories to the Scripps Family Agreement also report that they individually beneficially own, in the aggregate, an additional 12,671,552 Class A Common Shares (13.4% of the outstanding Class A Common Shares), including an additional 37,405 Class A Common Shares, 4,376 Class A Common Shares, 45,973 Class A Common Shares, 17,136 Class A Common Shares and 17,136 Class A Common Shares, respectively, that Mary McCabe Peirce and Wesley W. Scripps (each of whom is a director of the Company), Nackey Scagliotti, Edward W. Scripps, Jr. and Paul K. Scripps have the right to acquire within 60 days pursuant to outstanding stock options. None of the Class A Common Shares are subject to the Scripps Family Agreement.

If the Scripps Family Agreement is not considered, none of the signatories to the Scripps Family Agreement currently beneficially owns more than 5% of the Company’s outstanding Class A Common Shares or Common Voting Shares, other than: (i) Virginia S. Vasquez and Rebecca Scripps Brickner, who beneficially own 2,405,650 and 2,405,850 Common Voting Shares, respectively (7.1% of the outstanding Common Voting Shares), including shares held by the Estate of Robert P. Scripps, Jr., of which they are co-executors, (ii) Mary McCabe Peirce, who beneficially owns 2,404,000 Common Voting Shares (7.1% of the outstanding Common Voting Shares), including 1,604,000 Minor’s Shares as to which she and Elizabeth A. Logan may be deemed to share beneficial ownership as co-guardians (which are not subject to the Scripps Family Agreement), (iii) Eaton M. Scripps, who beneficially owns 2,283,289 Common Voting Shares (6.7% of the outstanding Common Voting Shares), (iv) Charles Kyne McCabe, who beneficially owns 2,269,000 Common Voting Shares (6.7% of the outstanding Common Voting Shares), and (v) Edward W. Scripps, Jr., who beneficially owns 1,713,211 Common Voting Shares (5.1% of outstanding Common Voting Shares).

The signatories to the Scripps Family Agreement filing the Amendment No. 9 to Schedule 13D were Adam R. Scripps, Anne La Dow, Anne M. La Dow Trust under Agreement dated 10/27/2011, Anthony S. Granado, Austin S. Heidt, Barbara Victoria Scripps Evans, Careen Cardin, Charles E. Scripps, Jr., Charles Kyne McCabe, Charles L. Barmonde, Cody Dubuc, Corina S.

12


 

Granado, Crystal Vasquez Lozano, Cynthia J. Scripps, Douglas A. Evans, Douglas A. Evans 1983 Trust, Eaton M. Scripps, Edward W. Scripps, Jr., Eli W. Scripps, Elizabeth A. Logan, Elizabeth Scripps, Ellen B. Granado, Ellen M. Scripps Kaheny, Ellen M. Scripps Kaheny Revocable Trust dtd April 17, 2014, Estate of Robert P. Scripps, Jr., Eva Scripps Attal, Gerald J. Scripps, Geraldine Scripps Granado, J. Sebastian Scripps, James Bryce Vasquez, Jenny Sue Scripps Mitchell, Jessica L. Scripps, Jimmy R. Scripps, John P. Scripps, John P. Scripps Trust Exempt Trust under agreement dated 2/10/77, John P. Scripps Trust under agreement dated 2/10/77 FBO Barbara Scripps Evans, John P. Scripps Trust FBO Douglas A. Evans under agreement dated 12/28/84, John P. Scripps Trust FBO Ellen McRae Scripps under agreement dated 12/28/84, John P. Scripps Trust FBO Paul K. Scripps under agreement dated 2/10/77, John P. Scripps Trust under agreement dated 2/10/77 FBO Peter M. Scripps, John Patrick Scripps, John Peter Scripps 2013 Revocable Trust, Jonathan L. Scripps, Julia Scripps Heidt, Kendall S. Barmonde, Keon Korey Vasquez, La Dow Family Trust under agreement dated 6/29/2004, Manuel E. Granado, Margaret Scripps Klenzing, Marilyn S. Wade, Mary Ann S. Sanchez, Mary Peirce, Maxwell Christopher Logan, Megan Scripps Tagliaferri, R. Michael Scagliotti, Molly E. McCabe, Monica Holcomb, Nackey E. Scagliotti, Nathaniel W. Heidt, Paul K. Scripps, Peggy Scripps Evans, Peter M. Scripps, Peter R. La Dow, Raymundo H. Granado, Jr., Rebecca Scripps Brickner, Robert S. Heidt III, Samantha J. Brickner, Savannah Brickner, The Marital Trust of the La Dow Family Trust (subtrust of La Dow Family Trust), The Paul K. Scripps Family Revocable Trust, The Peter M. Scripps Trust under agreement dated 11/13/2002, Thomas S. Evans, Thomas S. Evans Irrevocable Trust under agreement dated 11/13/12, Victoria S. Evans Trust under agreement dated 5/19/2004, Virginia S. Vasquez, Wendy E. Scripps, William A. Scripps, William H. Scripps, Kathy Scripps, Scripps Family 1992 Revocable Trust, dated 06-09-92, Sam D.F. Scripps, Samuel Joseph Logan, Welland H. Scripps, Wesley W. Scripps and William A. Scripps Jr.

(3)

This information is based on a Schedule 13G filed with the SEC by Southeastern Asset Management, Inc. on February 12, 2016. According to the filing, Southeastern Asset Management, Inc. holds sole voting power with respect to 4,559,472 Class A Common Shares, shared voting power with respect to 7,986,400 Class A Common Shares, sole dispositive power with respect to 5,078,435 Class A Common Shares and shared dispositive power with respect to 7,986,400 Class A Common Shares.

(4)

This information is based on a Schedule 13G filed with the SEC by BlackRock, Inc. on January 27, 2016. According to the filing, BlackRock, Inc. holds sole voting power with respect to 6,477,039 Class A Common Shares and sole dispositive power with respect to 7,358,656 Class A Common Shares.

(5)

This information is based on a Schedule 13G filed with the SEC by The Vanguard Group on February 10, 2016. According to the filing, The Vanguard Group holds sole voting power with respect to 173,642 Class A Common Shares, sole dispositive power with respect to 6,713,032 Class A Common Shares, shared voting power with respect to 7,100 Class A Common Shares, and shared dispositive power with respect to 178,845 Class A Common Shares.

The Scripps Family Agreement

General.     The Edward W. Scripps Trust (the “Trust”), the former controlling shareholder of the Company, ended on October 18, 2012 upon the death of Robert P. Scripps, a grandson of the founder. He was the last of Edward W. Scripps’ grandchildren upon whom the duration of the Trust was based. In March and September of 2013, the Trust distributed the Class A Common Shares and Common Voting Shares held by the Trust to the beneficiaries of the Trust and to trust and guardian arrangements on behalf of the Minors.

Certain beneficiaries of the Trust and their descendants and certain members of the John P. Scripps family and trusts for their benefit are signatories to the Scripps Family Agreement, which governs the transfer and voting of Common Voting Shares.

The Minors’ Shares are not subject to the Scripps Family Agreement, and the Minors may or may not become parties in the future.

Voting Provisions of the Scripps Family Agreement.    Section 9 of the Scripps Family Agreement provides that the Company will call a meeting of the signatories to the Scripps Family Agreement (the “Signatories”) prior to each annual or special meeting of the shareholders of the Company. At each of these meetings, the Company will discuss with the Signatories each matter, including election of directors, that the Company will submit to the holders of Common Voting Shares at the annual meeting or special meeting with respect to which the meeting under the Scripps Family Agreement has been called. Each Signatory is entitled, either in person or by proxy, to cast one vote for each Common Voting Share owned of record or beneficially by the Signatory on each matter brought for a vote at the meeting. Each Signatory is bound by the decision reached by majority vote with respect to each such matter, and at the related annual or special meeting of the shareholders of the Company each Signatory is required to vote the Signatory’s Common Voting Shares in accordance with the decisions reached at the meeting of the Signatories.

The Signatories have informed the Company that at a March 10, 2016 meeting of the Signatories held pursuant to the Scripps Family Agreement, the Signatories approved election of the eight director nominees to be voted on by the holders of Common Voting Shares and approved Proposal 2. Accordingly, based on such approval, the Signatories have informed the Company that they will vote the Common Voting Shares held of record by them in favor of such nominees and for Proposal 2 at the annual meeting of shareholders.

13


 

Transfer Restrictions of the Scripps Family Agreement.    Signatories cannot dispose of any Common Voting Shares (except as otherwise summarized below) without first giving other Signatories and the Company the opportunity to purchase the shares. Signatories cannot convert Common Voting Shares into Class A Common Shares except for a limited period of time after giving other Signatories and the Company the opportunity to purchase such shares and in certain other limited circumstances.

Signatories are permitted to transfer Common Voting Shares to (a) their lineal descendants, and (b) certain charitable organizations, trusts and entities that are controlled by, or for which the power to vote and dispose of the Common Voting Shares is directed by, descendants of Robert P. Scripps or John P. Scripps.  Descendants to whom the shares are sold or transferred outright, and trustees and other persons with voting and dispositive power with respect to charitable organizations, trusts and entities into which such shares are transferred, must become parties to the Scripps Family Agreement or the shares will be deemed to be offered for sale pursuant to the Scripps Family Agreement. Signatories also are permitted to transfer Common Voting Shares by testamentary transfer to their spouses provided the shares are converted to Class A Common Shares and to pledge the shares as collateral security provided that the pledgee agrees to be bound by the terms of the Scripps Family Agreement. If title to any such shares subject to any trust is transferred to anyone other than a descendant of Robert P. Scripps or John P. Scripps, or if a person who is a descendant of Robert P. Scripps or John P. Scripps acquires outright any such shares held in trust but is not or does not become a party to the Scripps Family Agreement, such shares will be deemed to be offered for sale pursuant to the Scripps Family Agreement. Any valid transfer of Common Voting Shares made by Signatories without compliance with the Scripps Family Agreement will result in automatic conversion of such shares to Class A Common Shares.

Duration of the Scripps Family Agreement.    The provisions restricting transfer of Common Voting Shares under the Scripps Family Agreement will continue until 21 years after the death of the last survivor of the descendants of Robert P. Scripps and John P. Scripps alive when the Trust terminated. The provisions of the Scripps Family Agreement governing the voting of Common Voting Shares will be effective for a 10-year period after termination of the Trust and may be renewed for additional 10-year periods.

Beneficial Ownership by Executive Officers and Directors

The following table sets forth certain information with respect to the beneficial ownership of Class A Common Shares and Common Voting Shares by the Company’s executive officers and directors as of January 31, 2016.*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of

Total(1)

 

Name of Beneficial Owner:

 

Class A

Common

Shares(1)

 

 

Exercisable

Options(2)

 

 

Vested

Restricted

Stock

Units(3)

 

 

Total Class A

Common Shares(4)

 

 

Common

Voting

Shares(1)

 

 

Class A

Common

Shares

 

 

Common

Voting

Shares

 

Gina L. Bianchini

 

 

3,637

 

 

 

18,471

 

 

 

1,077

 

 

 

23,185

 

 

 

0

 

 

*

 

 

*

 

Michael R. Costa

 

 

6,962

 

 

 

22,765

 

 

 

1,077

 

 

 

30,804

 

 

 

0

 

 

*

 

 

*

 

David A. Galloway

 

 

4,137

 

 

 

42,567

 

 

 

1,077

 

 

 

47,781

 

 

 

0

 

 

*

 

 

*

 

Cynthia L. Gibson

 

 

21,822

 

 

 

59,459

 

 

 

6,116

 

 

 

87,397

 

 

 

0

 

 

*

 

 

*

 

Mark S. Hale

 

 

28,820

 

 

 

96,370

 

 

 

5,776

 

 

 

130,966

 

 

 

0

 

 

*

 

 

*

 

Lori A. Hickok

 

 

14,378

 

 

 

78,745

 

 

 

15,365

 

 

 

108,488

 

 

 

0

 

 

*

 

 

*

 

Burton F. Jablin

 

 

26,746

 

 

 

100,077

 

 

 

45,597

 

 

 

172,420

 

 

 

0

 

 

*

 

 

*

 

Kenneth W. Lowe

 

 

307,925

 

 

 

538,184

 

 

 

99,792

 

 

 

945,901

 

 

 

0

 

 

 

1.0

%

 

*

 

Donald E. Meihaus

 

 

0

 

 

 

5,162

 

 

 

1,077

 

 

 

6,239

 

 

 

0

 

 

*

 

 

*

 

Jarl Mohn(5)

 

 

22,299

 

 

 

42,567

 

 

 

1,077

 

 

 

65,943

 

 

 

0

 

 

*

 

 

*

 

Joseph G. NeCastro

 

 

14,706

 

 

 

201,627

 

 

 

66,973

 

 

 

283,306

 

 

 

0

 

 

*

 

 

*

 

Richelle P. Parham

 

 

3,637

 

 

 

18,471

 

 

 

1,077

 

 

 

23,185

 

 

 

0

 

 

*

 

 

*

 

Nicholas B. Paumgarten(6)

 

 

21,668

 

 

 

60,126

 

 

 

1,077

 

 

 

82,871

 

 

 

0

 

 

*

 

 

*

 

Mary M. Peirce(7)

 

 

79,997

 

 

 

37,405

 

 

 

1,077

 

 

 

118,479

 

 

 

32,670,422

 

 

*

 

 

 

96.5

%

Nello-John Pesci, Jr.

 

 

3,435

 

 

 

17,519

 

 

 

6,531

 

 

 

27,485

 

 

 

0

 

 

*

 

 

*

 

Jeffrey Sagansky

 

 

11,580

 

 

 

18,471

 

 

 

1,077

 

 

 

31,128

 

 

 

0

 

 

*

 

 

*

 

Wesley W. Scripps(7)

 

 

1,199

 

 

 

4,376

 

 

 

1,077

 

 

 

6,652

 

 

 

31,066,422

 

 

*

 

 

 

91.8

%

Ronald W. Tysoe

 

 

3,637

 

 

 

27,996

 

 

 

1,077

 

 

 

32,710

 

 

 

0

 

 

*

 

 

*

 

All directors & executive

 

 

576,585

 

 

 

1,390,358

 

 

 

257,997

 

 

 

2,224,940

 

 

 

32,670,422

 

 

 

2.3

%

 

 

96.5

%

officers as a group (18 persons)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Shares owned represent less than 1% of the outstanding shares of such class of stock.

(1)

The shares listed for each of the officers and directors represent his or her direct or indirect beneficial ownership of Class A Common Shares and Common Voting Shares. None of the shares listed for any officer or director is pledged as security for any

14


 

obligation, such as pursuant to a loan arrangement or agreement or pursuant to any margin account agreement. Percentage of class is based on 94,863,550 Class A Common Shares and 33,850,481 Common Voting Shares outstanding as of January 31, 2016. Subject to the Scripps Family Agreement, each Common Voting Share is convertible at no cost and at any time into one Class A Common Share. The Percentage of Total Class A Common Shares does not give effect to the conversion of any Common Voting Shares into Class A Common Shares. 

(2)

The shares listed for each of the executive officers and directors include Class A Common Shares underlying exercisable options at January 31, 2016 and options that will be exercisable within 60 days after January 31, 2016 and options that will vest upon retirement.

(3)

The shares listed for each of the executive officers and directors include Class A Common Shares underlying RSUs at January 31, 2016 and restricted stock units that will be vested within 60 days of January 31, 2016 and RSUs that will vest upon retirement.

(4)

The shares listed do not include any phantom share units held by a director in a phantom share account under the 2008 Deferred Compensation Plan for Directors. The following directors have been credited with the following number of phantom share units in such accounts as of December 31, 2015: Mr. Galloway — 23,342.65; Mr. Paumgarten — 17,107.20 and Mr. Tysoe — 27,837.11. The directors do not have voting or investment power with respect to any of these phantom share units.

(5)

The shares for Mr. Mohn include 100 shares held in an S corporation that is 100 percent controlled by The Mohn Family Trust.

(6)

The shares listed for Mr. Paumgarten include 1,700 shares owned by his wife. Mr. Paumgarten disclaims beneficial ownership of such shares.

(7)

The shares listed for Mrs. Peirce include 1,638,108 Class A Shares and 1,604,000 Common Voting Shares held as co-guardian on behalf of a Minor. Mrs. Peirce and Mr. Scripps are signatories to the Scripps Family Agreement. See “The Scripps Family Agreement” and footnote (2) to the preceding table.

 

 

REPORT ON THE BOARD OF DIRECTORS AND ITS COMMITTEES

2015 Board Meetings

During 2015, the Board held four regularly scheduled meetings and four special meetings. All directors attended at least 75 percent of the meetings of the Board and of the committees on which they served during the year ended December 31, 2015.

Executive Sessions of Directors

Executive sessions of non-management directors are held periodically. A lead director selected by the Board or another non-management director selected by the Board at the time of the meeting presides at each of these meetings. Nicholas B. Paumgarten currently is serving as the lead director.

Committee Charters

The charters of the audit, compensation and nominating and governance committees are available for review on the Company’s website at www.scrippsnetworksinteractive.com by first clicking on “Investors,” then “Corporate Governance,” then “Governance Highlights,” and then on each committee’s name. Copies are available in print to any shareholder who requests a copy by contacting the corporate secretary at 9721 Sherrill Blvd., Knoxville, Tennessee 37932.

Committees of the Board of Directors

Executive Committee.    Kenneth W. Lowe, Chair, Nicholas B. Paumgarten and Mary M. Peirce are the members of the Executive Committee. The Board may delegate authority to the Executive Committee to exercise certain powers of the Board in the management of the business and affairs of the Company between Board meetings. The Executive Committee did not meet in 2015.

Audit Committee.    Ronald W. Tysoe, Chair, Michael R. Costa, Donald E. Meihaus, Richelle P. Parham and Jeffrey Sagansky are the members of the Audit Committee. The purpose of the Audit Committee is to assist the Board in fulfilling its oversight responsibility relating to: (1) the integrity of the Company’s financial statements and financial reporting process and the Company’s systems of internal accounting and financial controls; (2) the performance of the internal audit services function; (3) the annual independent audit of the Company’s financial statements, the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence, performance and fees; (4) the compliance by the Company with legal and regulatory requirements, including the Company’s disclosure controls and procedures; (5) the evaluation of enterprise risk issues; and (6) the fulfillment of all other responsibilities as outlined in its charter. The internal and independent auditors have unrestricted access to the Audit Committee. The Audit Committee meets privately with each of the independent auditors, the internal auditors and management. During 2015, the Audit Committee held seven meetings. Each member of the Audit Committee is financially literate,

15


 

under applicable Securities and Exchange Commission (“SEC”) and NASDAQ Global Select Market (“NASDAQ”) standards. In addition, Mr. Tysoe and Mr. Costa each is an audit committee financial expert, as defined under SEC regulations. No member of the Audit Committee may receive any compensation, consulting, advisory or other fee from the Company, other than the Board compensation described elsewhere in this proxy statement, as determined in accordance with applicable SEC and NASDAQ rules.

The Company does not limit the number of other audit committees on which the members serve; however, in each case, the Board evaluates and determines whether commitments to serve on other audit committees impairs such member’s effective service to the Company. Messrs. Tysoe and Sagansky currently serve on the audit committees of two public companies, in addition to service on the Audit Committee of the Company. The Company’s Board reviewed these service commitments and determined that such simultaneous service does not impair their ability to effectively serve on the Company’s Audit Committee.

Compensation Committee.    Jarl Mohn, Chair, Gina L. Bianchini, Michael R. Costa, David A. Galloway, and Ronald W. Tysoe are the members of the Compensation Committee.

The Compensation Committee is appointed by the Board to discharge the Board’s responsibilities relating to compensation of the Company’s officers. The Compensation Committee reviews and approves the Company’s goals and objectives relevant to compensation of senior management and evaluates the performance of senior management in light of those goals and objectives. With respect to the senior managers, the Compensation Committee establishes base compensation levels, the terms of incentive compensation plans and equity-based plans and post-service arrangements. The Compensation Committee approves all awards under the Company’s Long-Term Incentive Plan and approves awards under the Company’s Executive Annual Incentive Plan. The Compensation Committee reviews all of the components of the chief executive officer’s compensation, including goals and objectives, and makes recommendations to the Board.

With respect to any funded employee benefit plans, the Compensation Committee appoints and monitors named fiduciaries. On an annual basis, the Compensation Committee reviews the operation of the Company’s compensation program to evaluate its coordination and execution and reviews any management perquisites. The Compensation Committee reviews succession planning relating to positions held by senior officers and makes recommendations with respect thereto to the Board. The Compensation Committee has the authority to engage outside consultants to assist in determining appropriate compensation levels for the chief executive officer, other senior managers and directors. The Compensation Committee is also responsible for producing an annual report for inclusion in the Company’s proxy statement and for reviewing and approving the Compensation Discussion & Analysis and related compensation disclosure. During 2015, the Compensation Committee held five meetings.

Nominating and Governance Committee.    Jeffrey Sagansky, Chair, Gina L. Bianchini, Donald E. Meihaus, Nicholas B. Paumgarten, Mary McCabe Peirce and Wesley W. Scripps are the members of the Nominating and Governance Committee. The purpose is to: (1) to assist the Board by identifying individuals qualified to become board members and to recommend director nominees to the Board and to the signatories to the Scripps Family Agreement; (2) to recommend to the Board the Corporate Governance Principles applicable to the Company; (3) to lead the Board in its annual review of the Board’s performance; (4) to recommend to the Board nominees for each committee of the Board; and (5) to review and make recommendations with respect to director compensation to the Board. During 2015, the Nominating and Governance Committee held four meetings.

Pricing Committee.    Ronald W. Tysoe, Jarl Mohn and Michael R. Costa are the members of a special Pricing Committee appointed by the Board to review material distribution agreements. The Pricing Committee did not meet in 2015.

Digital Advisory Committee.    Gina L. Bianchini, Chair, Jarl Mohn, Richelle P. Parham and Wesley W. Scripps are the members of the ad hoc Digital Advisory Committee appointed by the Board in November 2012 to further the Company’s on-going commitment to create viable, profitable and growing interactive content strategies and businesses. The Digital Advisory Committee met twice in 2015.

Special Committee.    A special committee of the Board, consisting of Jarl Mohn, Nicholas B. Paumgarten, Jeffrey Sagansky and Ronald W. Tysoe (each of the directors elected by the holders of the Class A Common Shares), was appointed by the Board in December 2014 to review and approve the purchase by the Company pursuant to the Company’s ongoing share repurchase program of Class A Common Shares offered for sale by certain signatories to the Scripps Family Agreement. The special committee did not meet in 2015.

 

 

16


 

CORPORATE GOVERNANCE

The Board is committed to good corporate governance, good business practices and transparency in financial reporting. The Nominating and Governance Committee annually reviews the Company’s Corporate Governance Principles, a copy of which is available on the Company’s website by clicking on “Investors,” then “Corporate Governance,” and “Governance Highlights.” Copies are available in print to any shareholder who requests a copy by contacting the corporate secretary at 9721 Sherrill Blvd., Knoxville, Tennessee 37932.

Code of Ethics

The Company demonstrates its commitment to operate at the highest ethical standards by enforcing the principles in its Code of Ethics which is applicable to all employees. The Company’s Chief Ethics and Compliance Officer is responsible for implementation and oversight of the ethics program. Additionally, the Company has in place a Code of Business Conduct and Ethics for the Chief Executive Officer and the Senior Financial Officers. It is the responsibility of the Audit Committee and the Chief Financial Officer to make sure that this policy is operative and has effective reporting and enforcement mechanisms. The Code of Business Conduct and Ethics for the Chief Executive Officer and Senior Financial Officers is available for review on the Company’s website and to any shareholder who requests a printed copy. Amendments to the policies and waivers of provisions applicable to executive officers or directors may only be made by the Board or an authorized committee of the Board. Any such amendment or waiver will be promptly disclosed on the Company’s website within four business days.

The Company believes it has an obligation to provide employees with the guidance and support needed to ensure that the best, most ethical choices are made at work. To support this commitment, the Company established a means for employees to submit confidential and anonymous reports of suspected or actual violations of the Company’s Code of Ethics relating, among other things, to: accounting and auditing matters; antitrust activity; confidentiality and misappropriation; conflicts of interest, discrimination or harassment; diverting of product or business activity; embezzlement; falsification of contracts, reports or records; gifts or entertainment; improper supplier or contractor activity; securities violations; sexual harassment; substance abuse; theft; or unsafe working conditions. To submit a report, an employee may call a toll-free number that is answered by a trained professional of EthicsPoint, an independent firm. This number (888-258-3507) is operational 24 hours a day, seven days a week. Employees may also raise questions online through the Internet (www.ethicspoint.com).

Charitable Contributions

The Company has not made any charitable contributions, where the amount has exceeded $1 million or 2 percent of such charity’s consolidated gross revenues, to any charitable organization of which a director is an executive officer.

Board Leadership Structure

Kenneth W. Lowe serves as both the Chairman of the Company’s Board and as its President and Chief Executive Officer. The Board has also appointed an independent lead director, Nicholas B. Paumgarten, who presides at all meetings of the Board at which the chairman is not present, including executive sessions of the independent directors. The lead director also serves as a liaison between the Chairman, President and Chief Executive Officer and the independent directors, which includes sharing with the Chairman, President and Chief Executive Officer such observations, comments or concerns as he and the other independent directors deem appropriate, reviews with the Chairman, President and Chief Executive Officer matters to be presented to the Board and has the authority to call meetings of the independent directors. The Company’s enterprise risk issues are reviewed by the Audit Committee, which reports on such issues to the Board based on periodic reports from management. The Chairman, President and Chief Executive Officer’s performance is reviewed annually by the Compensation Committee, which reports such determinations to the Board. The Company deems this leadership structure appropriate as it promotes efficiency in communications between the Chairman, President and Chief Executive Officer and the Board while monitoring effective independent board oversight over the President and Chief Executive Officer. The Company also believes that its leadership structure supports the risk oversight function of the Board described in more detail below.

Board Role in Risk Oversight

Risk oversight is primarily the responsibility of Company management, while the Board has ultimate responsibility for overseeing management’s risk management processes. The Board uses various means to fulfill this responsibility. Certain risks that fall under the purview of a particular committee are monitored by that committee, which then reports to the full Board as appropriate. Each of the committees of the Board addresses risks that fall within the committee’s areas of responsibility. For example, the Audit Committee reviews management’s enterprise risk management report, management’s audit plan and reports, legal and regulatory reports, treasury and insurance operations, the Company’s information technology risks and mitigation strategies, the tax function, and

17


 

the Company's business code of conduct and compliance program. These management reports address significant risks such as operational, strategic, legal, regulatory, financial, technological, and reputational risks. The Compensation Committee addresses risks arising out of the Company’s executive compensation programs.

Certain risks that might relate to various market and economic assumptions that might be key risk indicators to the Company’s growth and strategic plans are addressed in connection with the Board’s annual review of the Company’s strategic plan and planning process. The Board also has the opportunity to address such risks at each Board meeting in connection with its regular review of significant business and financial developments as presented by management. The Board also reviews risks arising out of specific significant transactions when these transactions are presented to the Board for review or approval.

Communications with the Board

Shareholders and other interested parties wishing to communicate with the independent directors as a group or with any individual director (including the lead director) may do so by addressing a letter to the independent directors or to the individual director and sending it to them in care of the corporate secretary at 9721 Sherrill Blvd., Knoxville, Tennessee 37932. For those who wish to send such communications via e-mail, they can do so to estratigeas@scrippsnetworks.com. A majority of the independent directors have instructed the corporate secretary to review all communications so received, and to forward directly to the independent directors or the individual director all such communications, except for communications unrelated to the function of the Board. Any communications not forwarded will be retained for one year, and any independent director may request the corporate secretary to forward to the independent director any such communication. The corporate secretary will not share direct communications to the independent directors or an individual director with any other member of management unless instructed to do so by the lead director or the independent director to whom the communication was addressed.

Director Attendance at Annual Meetings of Shareholders

The Company does not have a policy with regard to attendance by the directors at the Annual Meeting of Shareholders. Directors are strongly encouraged to attend the Annual Meeting of Shareholders. At last year’s Annual Meeting of Shareholders, all directors were present.

Director Education

New directors attend a training session that introduces them to the Company’s operations and to the members of management. Thereafter, directors are informed on a regular basis of various director educational programs offered by governance and director organizations. The Company pays for the continuing education of its directors. The director orientation policy is reviewed by the Nominating and Governance Committee annually.

Director Independence — Audit Committee

The Board of the Company has determined that none of the current members of the Audit Committee has any relationship with the Company that could interfere with his or her exercise of independence from management and the Company. Each of the members satisfies the definitions of independence set forth in the rules promulgated under the applicable rules of the SEC, the Sarbanes-Oxley Act and in the listing standards of NASDAQ.

Director Independence — Controlled Company Status

NASDAQ requires listed companies to have a majority of independent directors on their board of directors and to ensure that their audit committee, compensation committee and nominating and governance committee are composed solely of independent directors as well. A company that qualifies as a “controlled company” does not have to comply with these requirements, other than the audit committee independence requirement, so long as the company discloses to shareholders that the company qualifies as a “controlled company” and is relying on this exemption in not having a majority of independent directors on the Board or solely independent directors on either of the compensation or nominating and governance committees. A “controlled company” is a listed company of which more than 50 percent of the voting power for the election of directors is held by an individual, a group, or another company. Signatories to the Scripps Family Agreement hold a majority of the Company’s outstanding Common Voting Shares and as such the Company qualifies as a “controlled company” and may rely on the NASDAQ exemption. The Company is not relying at present on that exemption.

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Director Independence

The Company has determined that all of the directors, other than Kenneth W. Lowe, have no material relationship with the Company and are independent under the criteria set forth in applicable rules of the SEC, the listing standards of NASDAQ and the Company’s Corporate Governance Principles. Additionally, all of the members of the Audit Committee, Nominating and Governance Committee and the Compensation Committee are independent under such standards.

Nominations for Directors

The Nominating and Governance Committee will review any candidate recommended by a shareholder of the Company in light of the Nominating and Governance Committee’s criteria for selection of new directors. If a shareholder wishes to recommend a candidate, he or she should send the recommendation, with a description of the candidate’s qualifications, to: Chair, Nominating and Governance Committee, c/o Ms. Eleni Vatsis Stratigeas, Scripps Networks Interactive, Inc., 9721 Sherrill Blvd., Knoxville, TN 37932.

In the past, the Nominating and Governance Committee has hired an independent consultant to assist with the identification and evaluation of director nominees and may do so in the future.

Nomination for Directors — Qualification Standards

When selecting new director nominees, the Nominating and Governance Committee considers requirements of applicable law and listing standards, as well as the director qualification standards highlighted in the Company’s Corporate Governance Principles. The Nominating and Governance Committee seeks diversity on the Board in terms of skills and experience and other factors. The Nominating and Governance Committee is responsible for reviewing with the Board the experience, qualifications, attributes and skills of nominees as well as the diversity and composition of the Board as a whole. A person considered for nomination to the Board must be a person of high integrity. Other factors considered are independence, age, skills, and experience in the context of the needs of the Board. The Nominating and Governance Committee makes recommendations to the Board regarding the selection of director nominees. The Nominating and Governance Committee is required to review annually the effectiveness of the Company’s Corporate Governance Principles, including the provisions regarding director qualifications (including diversity) that are part of the Corporate Governance Principles.

 

 

Compensation Discussion & Analysis

In this section, we describe our compensation philosophy objectives and programs for our Chairman, President  & Chief Executive Officer (“CEO”) and our other NEOs. The CD&A provides:

 

·

A summary of our business results and the alignment between executive pay and long-term Company performance;

 

·

How our Board’s Compensation Committee determines compensation design and pay levels for specific 2015 decisions, including our compensation governance approach; and

 

·

A detailed description of the elements of the Company’s executive compensation program.

Executive Summary

Our executive compensation program is designed to reward financial results and effective strategic leadership to build sustainable value for shareholders, by correlating the timing and amount of actual pay with performance goals over various time horizons without excessive risk-taking.

As part of our historic compensation governance protocol, we annually review the appropriate group of peer companies upon which we benchmark all elements of compensation program design and company-wide pay levels. During 2015, we achieved significant international growth both organically and through our acquisition of TVN. Our compensation decisions and program designs for our NEOs, as discussed in this section, are intended to focus on the long-term growth of the organization.

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Our NEOs for Fiscal 2015 were:

 

Name

Current Title

Previous Title

Kenneth W. Lowe

Chairman, President & Chief Executive Officer

-

Lori Hickok

Executive Vice President, Chief Financial Officer

(February 19, 2015)

Executive Vice President, Finance

Burton F. Jablin

Chief Operating Officer, Scripps Networks Interactive

(August 20, 2015)

President, Scripps Networks

Joseph G. NeCastro

Chief Development Officer (February 19, 2015)

Chief Financial & Administrative Officer

Cynthia L. Gibson

Executive Vice President, Chief Legal Officer

-

Mark S. Hale

Executive Vice President, Global Operations & Chief Technology Officer

-

 

Fiscal 2015 Business Review

Scripps Networks Interactive is one of the leading global developers of lifestyle-oriented content for linear and interactive video platforms, including television and the internet, with respected, high-profile brands. Our businesses operate internationally and engage audiences to efficiently serve advertisers by delivering entertaining and highly-useful content that focuses on specifically-defined topics of interest.

We seek to engage audiences worldwide that are highly-desirable to advertisers with entertaining and informative lifestyle content that is produced for television, the internet and alternative media platforms. We intend to expand and enhance our lifestyle brands through creating popular new programming and content, distributing on various platforms, such as mobile phones, tablets and video-on-demand, licensing of content and branded consumer products and increasing our international footprint.

The growth of our international business organically, as well as through acquisition and joint ventures, has been, and continues to be, a strategic priority for the Company. During 2015, we completed the acquisition of TVN, a Polish media company, which operates a portfolio of 13 free-to-air and pay-TV lifestyle and entertainment networks. As a result of this acquisition, we now have two reportable segments: U.S. Networks and International Networks.

U.S. Networks includes our six domestic television networks: HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country.  Additionally, U.S. Networks includes websites associated with the aforementioned television brands and other internet and mobile businesses serving home, food, travel and other lifestyle-related categories.

International Networks includes the lifestyle-oriented networks, including TVN. Our lifestyle-oriented channels are available in the United Kingdom, other European markets, the Middle East and Africa, Asia Pacific and Latin America. We currently broadcast 39 international feeds, reaching approximately 265 million subscribers under the HGTV, DIY, Food Network, AFC, Cooking Channel, Fine Living and Travel Channel brands, as well as the TVN network portfolio.

Our businesses earn revenues from advertising sales, affiliate fees and ancillary sales, including licensing of our content to third parties and our brands for consumer products. Programming expenses, employee costs and marketing and advertising expenses are our primary operating costs.

Consolidated operating revenues, including the results of TVN for six months of the year, were $3,018.3 million in 2015 compared with $2,665.5 million in 2014, an increase of $352.8 million, or 13.2%. Consolidated advertising revenues were $2.063 billion in 2015, up 13.6% over 2014 driven by higher demand and pricing, while consolidated affiliate fee revenues were $875.0 million in 2015, up 9.5% over 2014.

Consolidated segment profit was $1,245.7 million in 2015 compared with $1,121.8 million in 2014, an increase of $123.9 million, or 11.0%.

Segment profit excludes interest, income taxes, depreciation and amortization, divested operating units, investment results and certain other items included in net income determined in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company’s Chief Operating Decision Maker evaluates the operating performance of businesses and make decisions about the allocation of resources to our businesses using a non-GAAP measure we call segment profit. Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. A reconciliation of segment profit to operating income determined in accordance with GAAP is provided for on page F-7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

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Consolidated net income attributable to the Company was $606.8 million, or $4.66 per diluted share, in 2015 compared with $545.3 million, or $3.83 per diluted share, in 2014.

Key Fiscal 2015 Executive Compensation Decisions

Important decisions and payouts related to 2015 are recapped below, and discussed in greater detail in the remainder of the CD&A.

 

 

 

Base Salary

Five NEOs, with the exception of Ms. Hickok, received base salary increases effective January 1, 2015 ranging from 3.3% to 5.0% based on individual contributions to overall corporate results and salary level relative to market. Ms. Hickok received a 25% base salary increase which included her merit increase and in recognition of her promotion to EVP, Chief Financial Officer. Mr. Jablin received a base salary increase of 12.9% effective August 1, 2015 in conjunction with his promotion to Chief Operating Officer and additional scope of responsibilities.

 

 

Annual Incentives

Our financial goals, segment profit and revenue, were achieved at 101.97% and 100.31% of target respectively, resulting in a payout of 106.9% of target. These achievements represent 3.3% growth in segment profit over 2014 and 4.8% growth in revenues over 2014.

 

 

Long-term Incentives

All NEOs received a 2014 PBRSU grant, for which the Company’s Total Shareholder Return (“TSR”) was at the 15th percentile as compared to companies in the S&P 500 for the two-year period ending December 31, 2015, resulting in performance below threshold level and therefore no payout.

 

 

Employment Arrangements

We entered into new or amended employment contracts with certain NEOs to reflect their new roles and responsibilities.

 

Business Results’ Impact on Compensation

We establish target compensation at the beginning of the performance period. An executive’s actual pay will be above or below the target level based on individual, organizational and stock performance. A substantial portion of each NEO’s compensation is in the form of equity and correlated with stock price performance so as the stock price rises or falls, so does the NEO’s actual compensation.

We employ a variety of quantitative criteria to assess the performance of our executives. Our objectives include achieving certain segment profit and revenue targets and exceeding the median total shareholder return of our peers. The charts below illustrate the relationship between performance and our CEO’s compensation.

 

 

Earned stock options, time-based RSUs and PBRSUs represent value of awards granted in 2012, 2013 and 2014 that vested in 2015 and PBRSU awards granted in 2014 and earned in 2015. All equity awards are valued based on the Company’s share price on December 31, 2015.

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Compensation Process Overview

Below we highlight certain executive compensation practices that we consider instrumental in driving Company performance while mitigating risk, as well as practices that we avoid because we do not believe they would serve the interests of our shareholders.

 

 

Our Compensation Core Values

 

 

Market Competitive

Benchmark pay based on size-adjusted median of companies we compete with for business and for talent

Review Peer Group

Annually review peer group for appropriateness, and adjust when necessary to ensure a relevant comparison for executive compensation decisions

Focus on Performance

Maintain a pay mix that is heavily performance-based

Diversified Metrics over Varying Time Horizons

Use different performance metrics in annual incentive plan and long-term incentive plan, to avoid heavy reliance on one definition of success

Program Transparency

Fully disclose the financial performance drivers in numeric terms, used in our incentive programs

Performance Reviews & Risk Consideration

Compensation Committee annually reviews performance goals for annual and long-term incentive awards to confirm using diversified and rigorous, yet attainable targets, and avoiding excessive risk taking

Restrictive Covenants

NEOs are subject to restrictive covenants upon separation, including non-compete, non-solicitation and non-disclosure obligations

Independent Committee Consultant

Retain an independent compensation consultant engaged by, and reporting directly to, the Compensation Committee

Review Committee Charter

Review charter annually to maintain strong oversight and governance protocols

Clawback Policy

Maintain a clawback policy to permit repayment or forfeitures of compensation based on restated financial results

No Hedging

Do not permit hedging transactions or short sales by executives or directors

No Excise Tax Gross-Ups for New Employees

Eliminated excise tax gross-up provisions to new executives

Substantial Stock Ownership Guidelines

Maintain stock ownership guidelines for executives

Double Trigger Vesting

Require double trigger vesting for cash severance payments for termination following a change in control

No Backdating

Do not backdate stock options or reprice without shareholder approval

 

Role of the Compensation Committee

The Compensation Committee is responsible for reviewing and approving the Company’s executive compensation policies, plan designs and the compensation of our senior officers, including our NEOs. The Compensation Committee considers various factors in making compensation determinations, including the officer’s responsibilities and performance, the effectiveness of our programs in supporting the Company’s short and long-term strategic objectives, and overall financial performance. Additionally, the Compensation Committee coordinates the full Board’s annual review of the CEO’s performance and considers the Board’s assessment in its compensation decisions related to the CEO.

To this end, the Compensation Committee conducts an annual review of executive officer pay levels, reviews market data provided by the independent consultant, approves changes to program designs, including post-termination arrangements, based on an assessment of competitive market practice and emerging trends. Additionally, the Compensation Committee recommends succession plans to the Board and evaluates the risks associated with the Company’s executive compensation programs.

Role of the Compensation Consultant

In 2015 the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) to provide executive compensation consulting services. Meridian’s services to the Compensation Committee and the Nominating and Governance Committee have included updates on best practices and market trends in executive and director compensation, recommendations regarding executive and director compensation, and an independent review of compensation proposals by the Company’s senior management. Meridian attended meetings at the Compensation Committee’s request and was available to provide guidance as questions and issues arose. Meridian provides no other services to the Company other than independent compensation advisory services. The Compensation Committee determined that Meridian is independent after consideration of the SEC independence factors.

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Role of Executive Officers in Compensation Decisions

At the request of the Compensation Committee, the CEO presents individual pay recommendations for each of the NEOs, other than himself. In forming his recommendations, he is advised by information provided by human resource management (i.e., Executive Vice President, Chief Human Resource Officer and Senior Vice President, Human Resources) and the independent compensation consultant, assessments of individual contributions, achievement of performance objectives and other qualitative factors. The Compensation Committee considers these recommendations in approving the pay levels of each NEO. The CEO does not make recommendations concerning his own compensation.

The CEO and members of human resource management regularly attend Compensation Committee meetings. Human resources management typically presents recommendations for changes to program designs and individual pay levels for executive officers, taking into consideration individual performance of each incumbent, appropriate benchmarking information and issues that may arise from an accounting, legal or tax perspective.

Compensation Program Overview

The Company’s executive compensation program is designed to meet the following three objectives that align with and support our strategic business goals:

 

·

Attract and retain executives who lead the Company’s efforts to build long-term value for shareholders

 

·

Reward achievement of annual operating performance goals and sustained increases in shareholder value

 

·

Emphasize the variable performance-based components of the compensation program more heavily than the fixed components

The key elements of the Company’s executive compensation program are base salary, annual incentives, long-term incentives consisting of stock options, time-based RSUs and PBRSUs units, and retirement benefits. The compensation program also includes certain perquisites, but these perquisites are not a significant element of compensation. Each element of compensation is designed to fulfill the objectives discussed above.

 

Program

Form

Fixed or

Variable

Objectives

Base Salary

Cash

Fixed

●    Serves as attraction and retention incentive

    Rewards individual performance

Annual Incentive

Cash

Variable

●    Rewards annual operating results

●    Emphasizes variable performance-based compensation

Long-term Incentive, which includes:

 

 

●    Emphasizes variable performance-based compensation

●    Serves as attraction and retention incentive

●    Aligns interests with shareholders

Stock Options

Equity

Variable

●    Rewards for increasing stock price and enhancing long-term value

RSUs

Equity

Fixed

●    Rewards for maintaining and increasing stock price and enhancing long-term value

PBRSUs

Equity

Variable

●    Rewards based on Company performance

●    Rewards for maintaining and increasing stock price and enhancing long-term value

Retirement Benefits

Cash

Fixed

●    Serves as attraction and retention incentive

 

Pay Mix

The Compensation Committee has not established a specific formula for the allocation of “fixed” and “variable” compensation components and instead retains the discretion to modify the allocation from year to year. A significant portion of the compensation program for the NEOs is “variable” or “at risk.” This means that it is contingent upon achieving specific results that are essential to the Company’s long-term success and growth in shareholder value. As described above, the variable components of the 2015 compensation program include annual incentives, stock options, and PBRSUs.

A majority of Mr. Lowe’s total direct compensation is variable. The Compensation Committee believes this approach directly aligns the CEO with shareholder interests.

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As illustrated for the 2015 annual program elements, approximately 71% of the total direct compensation opportunity (i.e., “TDC”, or the sum of base salary, annual incentives, variable equity at target and fixed equity) for the Company’s NEOs employed on the last day of 2015 (other than the CEO) was weighted — assuming payout at target levels — toward variable and equity components. The TDC opportunity for the CEO was approximately 80% weighted toward variable and equity components.

 

To assist in reviewing the levels of compensation in 2015 Meridian collected and analyzed comprehensive market data, including base salary, target short- and long-term incentive opportunities for each of the NEOs from the following published and proprietary sources:

Primary Data Source: Proxy data from a peer group of 10 publicly-traded companies in the media industry, including:

 

AMC Networks Inc.

Lions Gate Entertainment Corp./CN/

Time Warner Inc.

CBS Corp.

Sirius XM Holdings Inc.

Twenty-First Century Fox Inc.

Discovery Communications, Inc.

Starz

Viacom, Inc.

Liberty Global, PLC

 

 

 

The companies in this peer group represent those companies with which we compete for business and talent. All pay opportunities were compared with the size-adjusted median of the market using regression analysis based on revenue to reflect pay of similarly-situated executives in comparable positions.

Secondary Data Sources: To obtain a broader understanding of market pay levels and practices, the Compensation Committee also reviewed survey data from the following sources:

 

·

Cable and Telecommunications Human Resources Association (“CTHRA”) Cable Programmers, Broadcast Networks Compensation Survey; and

 

·

Towers Watson Executive Compensation Database: General Industry and Media Surveys.

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Market data provides an important reference point by indicating what an executive could expect to earn at a similar peer company and what the Company might expect to pay if it should have to recruit from the outside. However, market data is one of the many factors that the Compensation Committee considers to assess the reasonableness of pay opportunities provided to the Company’s executive officers. The Compensation Committee also considers other relevant factors in setting an executive officer’s pay opportunity, such as the incumbent’s experience, tenure in position, talent supply and demand, cost constraints of the Company and internal equity considerations.

Tally Sheets

In determining executive compensation, the Compensation Committee also reviews tally sheets for each NEO designed to provide:

 

·

History of targeted pay for the last five years;

 

·

Value of outstanding equity awards at various stock price levels;

 

·

Present value of accrued benefits under each retirement plan and current level of perquisites provided;

 

·

Cumulative stock exercises and stock vesting over time; and

 

·

Update on stock ownership levels.

Analysis of Each Compensation Element

Following is a brief summary of each element of the 2015 compensation program for the NEOs.

Base Salary

After discussing the individual performance, experience, scope of responsibilities, and Mr. Lowe’s recommendations for the other NEOs, the Compensation Committee established the base salaries for each NEO. In general, the increases are intended to align base salary levels with the market and to reflect the individual performance and scope of responsibilities of each NEO. For Mr. Jablin and Ms. Hickok, these include increases due to their promotions.

 

NEO

 

2015 Base Salary

Percentage Increase

 

Mr. Lowe

 

 

3.3

%

Ms. Hickok

 

 

25.0

%

Mr. Jablin

 

 

16.7

%

Mr. NeCastro

 

 

3.3

%

Ms. Gibson

 

 

5.0

%

Mr. Hale

 

 

3.3

%

 

Please refer to the Salary column of the Summary Compensation Table for the 2015 base salaries of the NEOs.

Annual Incentive

The annual incentive payout for the NEOs is based on the extent to which certain pre-established performance goals are achieved during the year. The annual incentive program is consistent with the Company’s pay for performance philosophy and is also “at risk” because the Company must achieve certain performance goals established by the Compensation Committee for the NEOs to receive an annual incentive payout.

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Target Incentive Opportunities

The NEOs had the opportunity to earn targeted incentive cash payments that were expressed as a percentage of each executive’s annual base salary. The target incentive opportunities were established by the Compensation Committee, according to each executive’s position and level of responsibility. The Compensation Committee took into consideration the overall performance of each NEO, market data as well as Mr. Lowe’s recommendations. The following table shows the target annual incentive opportunity as of December 31, 2015 (expressed as a percentage of base salary) for each NEO.

 

NEO

 

2015 Target Incentive  as

a Percent of Base Salary

 

Mr. Lowe

 

 

130

%

Ms. Hickok

 

 

65

%

Mr. Jablin

 

 

100

%

Mr. NeCastro

 

 

80

%

Ms. Gibson

 

 

65

%

Mr. Hale

 

 

65

%

 

Performance Goals and Actual Results for 2015

The target incentive opportunities are earned based on the extent to which certain performance goals are achieved. The Compensation Committee established two performance goals for the 2015 annual performance period: segment profit and revenue. These performance goals were used because:

 

Segment Profit

Segment profit is the measure by which the Company evaluates the operating performance of each business segment and the measure of performance most frequently used by investors to determine the value of the enterprise. The segment profit goal was based on the consolidated performance of the Company.  Segment profit is a supplemental non-GAAP financial measure that is defined in our notes to the financial statements.  Segment profit for 2015 was adjusted to exclude (i) the effects of currency fluctuations above or below budgeted levels, (ii) financial results of TVN (and the related transaction and integration costs), (iii) expenses related to the reorganization of Travel Channel  and our national television networks, and (iv) restructuring and severance costs.

 

 

Revenue

Revenue growth is primarily achieved through growth in advertising sales and affiliate fee revenues from our television networks. Continued growth in revenues allows us to invest and grow our existing brands and allows us the flexibility to take advantage of promising opportunities in the global media marketplace. The revenue goal was based on the Company’s operating revenue as set forth in our financial statements, and then adjusted to exclude the effects of currency fluctuations above or below budgeted levels and the financial results of TVN.

 

The above combination of a growth measure (revenue) and a profitability measure (segment profit) creates a balance between growing the Company and managing expenses.

The following table provides the weights of each metric, the range of performance and payout, and the actual achievement level for each performance goal along with the payout percentage for 2015. All amounts are shown in millions.

 

 

 

Weights

(% of Total)

 

 

Threshold

 

 

Target

 

 

Maximum

 

 

Actual

 

Segment Profit(1)

 

 

65

%

 

$

943.8

 

 

$

1,179.8

 

 

$

1,414.8

 

 

$

1,202.9

 

Revenue

 

 

35

%

 

$

2,227.9

 

 

$

2,784.9

 

 

$

3,341.8

 

 

$

2,793.5

 

Payout Percent of Target

 

 

 

 

 

 

0.6

%

 

 

100

%

 

 

200

%

 

 

 

 

 

(1)

Actual segment profit results include adjustments for one-time items that differ from the reported segment profit on page F-6 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

For more information on the 2015 annual incentive opportunity for the NEOs, please refer to the “Grants of Plan-Based Awards” Table. The “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” column of that table provides the estimated payouts for the NEOs at threshold, target and maximum performance levels for 2015. Please refer to the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for the actual amounts earned by each NEO.

26


 

Long-Term Incentives

The Company’s long-term incentive awards are consistent with the Company’s pay for performance philosophy and are intended to create a direct correlation between the level of compensation paid to the NEOs and the Company’s financial performance and stock price. This approach:

 

·

Assists in increasing stock ownership of the NEOs so that their interests are more closely aligned with the long-term interest of the Company’s shareholders;

 

·

Rewards performance that delivers creation of sustainable shareholder value; and

 

·

Provides a long-term retention incentive for key employees based on the vesting period.

Long-Term Incentive Opportunities

Under the Company’s Long-Term Incentive Plan, the NEOs were granted equity awards as recommended by the CEO and approved by the Compensation Committee. The Compensation Committee approved the 2015 target value of the equity award as a percent of base salary for each NEO based on each NEO’s position and level of responsibility.

Decisions regarding long-term incentive grants were made based on role and competitive market data to reward value creation and meet retention objectives. The Compensation Committee also determined that, to maintain internal equity among the NEOs, the long-term incentive award should increase to reflect increased levels of an NEO’s responsibility and authority in the Company. Therefore, in addition to the other factors cited, the targets reflect the Compensation Committee’s strategy to ensure proper internal alignment among the NEOs. This table  shows the 2015 long-term incentive opportunities (expressed as a percentage of base salary) for each NEO, which remain the same except for Mr. Jablin’s which is higher in connection with his promotion.

 

NEO

 

2015 Long-Term

Incentive as a

Percent of Base Salary

 

Mr. Lowe

 

 

275

%

Ms. Hickok

 

 

125

%

Mr. Jablin

 

 

225

%

Mr. NeCastro

 

 

200

%

Ms. Gibson

 

 

125

%

Mr. Hale

 

 

125

%

 

During 2015 we used three long-term incentive vehicles targeting the mix in the table below.

 

Form of Equity

 

Percent of Target

Long-Term

Incentive Award

 

Stock Options

 

 

40

%

Restricted Share Units (RSUs)

 

 

30

%

Performance-Based Restricted Share Units (PBRSUs)

 

 

30

%

 

This combination of vehicles balances the need for retention with the focus on share price appreciation, both on an absolute and a relative basis.

Off-Cycle Grants

From time to time, in response to promotional opportunities, retention concerns, or renewal of employment agreements, the Company may provide select key executives with an off-cycle grant. These awards typically vest over multiple years either through passage of time or the requirement of various levels of performance achievement. On March 15, 2015, Ms. Hickok received a RSU grant of $1,000,000 in recognition of her promotion to Executive Vice President, Chief Financial Officer, which vests equally over three years.

Stock Options

Stock options only have a value when the Company’s stock price is greater than the options’ exercise price. This incentivizes NEOs to increase share price which benefits our shareholders. Therefore, stock options help to align the interests of NEOs with those

27


 

of shareholders. In addition, stock options serve as an important retention device as they vest over three years and, if not vested, are forfeited if the employee voluntarily terminates before retirement.

Stock option grants have an exercise price equal to the fair market value of the underlying shares on the date of grant and have an eight-year term. These grants provide for accelerated vesting on a pro-rata basis for termination without cause or for good reason.

Time-Based Restricted Share Units

Each RSU corresponds in value to a single share of Company Class A Common Stock. Therefore, as share price increases, RSUs become more valuable. This creates an incentive for our NEOs to increase share price which benefits our shareholders. Time-based RSUs also provide NEOs the opportunity to increase their stock ownership levels. This serves to help align the interests of the NEOs with those of our shareholders. In addition, RSUs serve as an effective retention incentive as they vest over three years and unvested RSUs are forfeited if the employee voluntarily terminates before retirement. These grants provide for accelerated vesting on pro-rata basis for termination without cause or for good reason.

Performance-Based Restricted Share Units (2015 Grants)

PBRSU awards provide NEOs with an opportunity to increase their own stock ownership levels and at the same time serve as retention incentives. The number of shares ultimately earned is dependent upon the level of the Company’s achievement of performance targets.

The two-year performance period began on January 1, 2015 and ends on December 31, 2016. Shares are earned if the targeted adjusted cash flow is achieved by more than the threshold as further illustrated in the table below.

The earned units, if any, vest 50% on each of February 28, 2017 and 2018. These grants provide for accelerated vesting in full for termination without cause or for good reason.

 

Performance Payout

 

≤ 80%

 

=

 

 

0

%

85%

 

=

 

 

30

%

90%

 

=

 

 

60

%

95%

 

=

 

 

90

%

100%

 

=

 

 

100

%

105%

 

=

 

 

125

%

110%

 

=

 

 

150

%

115%

 

=

 

 

175

%

≥ 120%

 

=

 

 

200

%

 

Performance-Based Restricted Share Units (2014 Grants)

Prior to 2015, the PBRSUs were calculated by comparing the Company’s TSR over two years to the TSR of the S&P 500 and a minimum performance of the 30th percentile was required.

For the 2014 PBRSU grant, the Company’s TSR was at the 15th percentile as compared to companies in the S&P 500 for the two-year period ending December 31, 2015, resulting in performance below the threshold and therefore there was no payout.

Additional Information

For more information on the equity awards granted to NEOs in 2015, please refer to the “Grants of Plan-Based Awards” table. For information about the total number of stock options, RSUs and PBRSUs outstanding as of the end of 2015 with respect to each NEO, please refer to the “Outstanding Equity Awards at Fiscal Year-End” table.

Retirement Plans

The Company provides savings and retirement benefits through the Scripps Networks Interactive Pension Plan and the Scripps Networks Interactive 401K Savings Plan.

28


 

The pension plan is closed to new participants and the credited service levels used for benefit calculation purposes are frozen; however, consideration of salary growth to calculate benefit levels continues for a ten-year transition period that ends December 31, 2019. Plan participants will continue to accrue service for vesting and early retirement eligibility.

The 401K Savings Plan includes a Company match of 50% of the employee’s contribution up to 6% of eligible compensation, and a Company contribution of up to 8% based on a combination of age and service. This Company contribution, which went into effect on January 1, 2010, was intended to mirror some of the financial benefits available under the defined benefit plan that was frozen.

To attract and retain key executive talent, the Company has determined that it is important to provide the management team, including the NEOs, with retirement benefits that are in addition to those generally provided to its employees. These restorative plans listed below allow the NEOs to receive the same benefit as other plan participants:

 

·

The Company supplements the pension plan for pension-eligible executives whose salary and contributions exceed the IRS limitations through the Company’s Supplemental Executive Retirement Plan (“SERP”). Consistent with the transitional freeze of the defined benefit plan, the SERP was also transitionally frozen, effective January 1, 2010.

 

·

The NEOs may also defer specified portions of their compensation under the Executive Deferred Compensation Plan, and receive matching contributions, in each case in excess of what they are able to defer under the 401K Savings Plan due to IRS limitations.

 

·

Due to legal restrictions for plan design, the transitional freeze of the defined benefit pension plan and accompanying transitional freeze of the Company’s SERP had a disproportionately negative impact on employees of the Company, including some of the NEOs. In order to address this disproportionately negative impact, the Company added a Supplemental Contribution Plan (“SCP”), effective January 1, 2010 to allow for Company contributions based on a combination of age and service above the IRS contribution limits. The changes to the Company’s plans also had a disproportionately negative impact on employees as their relative ages and length of service increased. To address this negative impact, the Company contribution to the Executive Deferred Compensation Plan was increased for a group of employees based on age and length of service, including the four NEOs who participate in the pension plan. During 2011, the SCP was merged into the Executive Deferred Compensation Plan for ease of administration.

The Company believes that the SERP and the Executive Deferred Compensation Plan are important retention and recruitment tools, as many of the companies with which the Company competes for executive talent provide similar benefits to their senior executives.

Perquisites

The Company provides executives with benefits comparable to those they would receive at other companies within our industry and are necessary for us to remain competitive in the marketplace. Our Compensation Committee considers these arrangements to be fair and reasonable in light of the relatively low cost to the Company.

In 2015, the NEOs received a financial planning benefit pursuant to the terms of their employment agreements, plus an additional payment to cover the taxes associated with the compensation value of this benefit. They also received membership in luncheon and business clubs. In addition, Mr. Lowe receives a monthly travel stipend for his trips to New York.

The NEOs are also eligible for an executive physical. Typically, the majority of the cost associated with this benefit is covered under the healthcare plans offered to the Company’s employees; however, if certain tests or procedures are not covered, the Company will pay for the difference.

For more information about the perquisites provided in 2015 to each NEO, please refer to the “All Other Compensation” column of the Summary Compensation Table.

Other Plans and Agreements

Employment Agreements

The Company maintains employment agreements with each of the NEOs. These employment agreements enhance retention incentives for the NEOs and also protect the Company’s interests by imposing confidentiality, non-competition, non-solicitation and other restrictive covenants on the executives.

29


 

The Company entered into a new employment agreement with Mr. Hale in 2014 effective January 1, 2015. The term of Mr. Hale’s agreement extends through December 31, 2015 with an option to extend for up to two one-year periods. Mr. Hale’s contract provided for an increase to base salary to $560,000, target annual incentive opportunity of 50% and a cash bonus of $250,000 within 30 days of the execution of the agreement and a second cash bonus payable on January 1, 2016. Mr. Hale will also receive additional cash bonus payments of $250,000 upon the mutual renewal of his employment agreement on January 1, 2017 and January 1, 2018, respectively. The cash bonus structure was put in place as a retention vehicle in order to insure Mr. Hale’s continued leadership at the Company and in order to allow sufficient opportunity for succession planning.

The Company entered into a new employment agreement with Ms. Hickok effective January 1, 2015 including her promotion to Executive Vice President, Chief Financial Officer effective February 19, 2015. Ms. Hickok’s contract provided for an increase to base salary to $675,000 annually, target annual incentive opportunity of 65% of her annual salary, a promotion grant of RSUs valued at $1,000,000 and vesting equally over three years and a pension enhancement.

The Company amended Burton Jablin’s contract effective August 19, 2015 to reflect his promotion to Chief Operating Officer, Scripps Networks Interactive. The amendment provided for a base salary increase, effective August 1, 2015, and a target annual incentive opportunity increase to $1,050,000 annually and 100% of Mr. Jablin’s annual salary, respectively.

Effective February 19, 2015, the Company and Mr. NeCastro entered into an amendment to his employment agreement to reflect his new position with the Company of Chief Development Officer. The amendment increased Mr. NeCastro’s base salary to $904,000 annually.  The amendment also modified the multiple of his annual salary and annual incentive he is entitled to receive upon termination of his employment in certain events, with 2.5 times his annual salary and annual incentive payable in the event his employment terminates by reason of his death or disability, but with a reducing multiple (starting at 2.5 times and reduced proportionately based on the time elapsed to the date of termination over the period from January 1, 2015 through the December 31, 2016 termination date of his employment agreement) in the event his employment is terminated without cause or he terminates his employment for good reason.

Each NEO would be entitled to severance benefits under his/her employment agreement in the event of an involuntary termination of employment without “cause” or a termination by the executive for “good reason,” death or disability. Each NEO, other than Messrs. NeCastro and Jablin, would also be entitled to certain severance benefit upon a termination of employment following the expiration of the term. The severance benefits for each of the NEOs are generally determined based upon a multiple of base pay and annual incentive.

In exchange for the severance benefits, the NEOs agree not to disclose Company confidential information and agree not to compete against the Company or solicit its employees or customers for a period of time after termination. These provisions protect the Company’s interests and help to ensure its long-term success.

Executive Severance Plan

Effective January 1, 2011, the Company adopted the Executive Severance Plan, which was most recently amended and restated in 2014 (“ESP”), that provides severance benefits to certain executives upon involuntary termination, death and disability. The ESP also provides benefits for termination for “good reason” for executives with employment agreements. The severance benefits are generally based upon a multiple of base salary and annual incentive, depending upon the level of responsibility of the executive. The ESP was adopted to codify existing practices, to ensure consistency in benefits payable upon termination and to provide for protection of the Company through the inclusion of confidentiality, non-compete and non-interference obligations in exchange for the receipt of benefits.

Change in Control Plan

All NEOs are provided change in control protection under the Company’s Executive Change in Control Plan. Under this plan, a NEO would be entitled to certain severance benefits if a change in control were to occur and the Company terminated the executive’s employment without “cause” or the executive terminated his/her employment with the Company for “good reason” within a two-year period following the change in control. In addition to the benefits available under the Executive Change in Control Plan under these circumstances, Mr. Lowe is entitled to certain additional benefits under his employment agreement. The severance levels in the Change in Control Plan were adopted by the Compensation Committee in 2008.

This plan was frozen to new participants beginning in 2012. A new plan, 2012 Executive Change in Control Plan, was added for new hires beginning in 2012 that is the same as the 2008 plan with the exception that it does not include a gross-up provision.

30


 

The Company believes that the occurrence, or potential occurrence, of a change in control transaction will create uncertainty regarding the continued employment of NEOs. The change in control protections allow NEOs to focus on the Company’s business and objectively evaluate the benefits to shareholders of proposed transactions without being distracted by potential job loss. It also enhances retention following a change in control, as the severance benefits are payable only if the executive incurs a qualifying termination within a certain period following a change in control, rather than merely as a result of the change in control. In addition, the Change in Control Plan conditions the severance benefits upon certain confidentiality, non-compete and non-solicitation obligations which further protects the continuity of the Company’s business following a change in control.

All equity awards held by employees would immediately vest upon a change in control, under the Long-Term Incentive Plan. Unlike the cash severance described above, the vesting is not contingent upon a qualifying termination within a certain period following a change in control. This single trigger is appropriate because the equity of the Company will change and the Company believes NEOs, along with all participants, should have the same opportunity to realize value as common shareholders.

Additional Information

Please refer to the “Potential Payments Upon Termination or Change in Control” section of this proxy statement for information regarding potential payments and benefits, if any, that each NEO is entitled to receive under his/her employment agreement and applicable plans in connection with his/her termination of employment as well as in connection with a change in control.

Other Governance Items

Equity Grant Practices

The Compensation Committee approves annual equity awards at its February meeting, which are subsequently issued on March 1st based on the closing price of the Company’s Class A Common Shares on such date (or the last trading day prior to such date). This meeting date is set typically two years in advance. The Compensation Committee does not grant equity compensation awards in anticipation of the release of material nonpublic information. Similarly, the Company does not time the release of material nonpublic information based on equity award grant dates.

Stock Ownership Guidelines

Effective November 2011, the Company adopted stock ownership guidelines for all NEOs in addition to executive officers to encourage ownership in the Company for the executives who have a direct impact on the decisions that contribute to the long-term success of the Company.

The guidelines give the executive five years to attain the prescribed ownership levels which are established as a target multiple of base pay. The target multiples for the NEOs are on the table to the right.

 

 

 

Multiple of

 

2015

NEO

 

Salary

 

Ownership

Mr. Lowe

 

5.0x

 

15.5x

Ms. Hickok

 

2.0x

 

2.5x

Mr. Jablin

 

3.0x

 

4.7x

Mr. NeCastro

 

3.0x

 

5.1x

Ms. Gibson

 

2.0x

 

2.5x

Mr. Hale

 

2.0x

 

3.3x

 

Shares owned outright as well as RSUs are included in the totals. As of December 31, 2015, all of the NEOs have met the target stock ownership levels.

Mandatory Retirement Policy

Effective January 1, 2011, the Company adopted a mandatory retirement policy pursuant to which all bona fide executives as defined under the Age Discrimination in Employment Act, will be required to retire at the age of 65, unless otherwise determined by the Compensation Committee. Each of the NEOs qualifies as a bona fide executive and will be subject to the policy. An amendment to Mr. Lowe’s employment agreement in 2014, which was approved by the Board, extended his employment until December 31, 2016, which is approximately eight months after he turns 65.

31


 

Anti-hedging and Prohibition on Pledging Policy

Our policy on insider trading prohibits directors, officers and certain key employees from engaging in short sales, purchases of puts and calls and other speculative or hedging transactions with respect to Company stock, regardless of whether they hold material, non-public information. In addition, directors, officers and certain key employees are prohibited from holding Company stock in a margin account or pledging Company stock to secure a loan unless a prior approval is obtained.

Income Deduction Limitations

Section 162(m) of the Internal Revenue Code generally sets a limit of $1 million on the amount of non-performance-based compensation that the Company may deduct for federal income tax purposes in any given year with respect to the compensation of each of the NEOs other than the Chief Financial Officer. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. The Compensation Committee intends to preserve the tax deductibility of compensation paid to our executive officers to the extent consistent with our overall program objectives and philosophy, but recognizes that doing so may not always be feasible. In light of the need to maintain flexibility in administering our executive compensation program, the Compensation Committee retains discretion to recommend to the Board executive compensation that may not be deductible.

Compensation Risk Assessment

Members of management from the Company’s human resources, finance and legal groups assessed whether the Company’s compensation policies and practices encourage excessive or inappropriate risk taking by our employees, including employees other than our NEOs and reported the results to the Compensation Committee.

Specifically, the review included a detailed analysis of the following risk factors related to compensation: pay mix, performance goals, performance metrics/target, market comparisons and checks and balances. The review also analyzed whether there was any link between the Company’s key business risks and its compensation programs.

Based upon the review, and in consultation with Meridian, the Compensation Committee determined that its compensation policies and practices did not create risks that are “reasonably likely to have a material adverse effect” on the Company.

 

 

32


 

EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The following table presents information concerning compensation paid to the NEOs in 2013, 2014, and 2015. The narrative following the table describes current employment agreements and employment terms with each of our NEOs.

Summary Compensation Table — 2013 to 2015

 

Name and Principal Position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock Awards

($)(4)

 

 

Option

Awards

($)(5)

 

 

Non-Equity

Incentive Plan

Compensation

($)(6)

 

 

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)(7)

 

 

All Other

Compensation

($)(8)

 

 

Total

($)

 

Kenneth W. Lowe

 

2015

 

 

1,467,000

 

 

 

 

 

 

 

2,420,604

 

 

 

1,573,534

 

 

 

2,039,548

 

 

 

1,315,473

 

 

 

499,158

 

 

 

9,315,317

 

Chairman, President &

 

2014

 

 

1,420,000

 

 

 

 

 

 

 

6,398,643

 

 

 

1,566,013

 

 

 

1,785,174

 

 

 

212,433

 

 

 

455,752

 

 

 

11,838,015

 

Chief Executive Officer

 

2013

 

 

1,287,500

 

 

 

 

 

 

 

2,301,604

 

 

 

1,462,782

 

 

 

1,748,466

 

 

 

0

 

 

 

436,486

 

 

 

7,236,838

 

Lori Hickok(1)

 

2015

 

 

675,000

 

 

 

 

 

 

 

1,506,226

 

 

 

329,101

 

 

 

469,221

 

 

 

96,339

 

 

 

154,590

 

 

 

3,230,477

 

Executive Vice President,

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chief Financial Officer

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Burton F. Jablin(2)

 

2015

 

 

1,050,000

 

 

 

 

 

 

 

1,116,022

 

 

 

725,479

 

 

 

1,122,923

 

 

 

197,847

 

 

 

287,837

 

 

 

4,500,108

 

Chief Operating Officer

 

2014

 

 

900,000

 

 

 

 

 

 

 

1,105,662

 

 

 

721,848

 

 

 

696,276

 

 

 

522,776

 

 

 

219,613

 

 

 

4,166,175

 

 

 

2013

 

 

830,027