DEF 14A 1 d507433ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

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

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  Preliminary Proxy Statement
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  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to Section 240.14a-12

Santander Consumer USA Holdings Inc.

(Name of Registrant as Specified In Its Charter)

 

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

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LOGO

 

Santander CONSUMER USA | 2018 PROXY STATEMENT for Annual Meeting of Stockholders


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LOGO  

1601 Elm St. Suite 800 Dallas, Texas 75201  |  214.634.1110    

 

 

April 30, 2018

Dear Stockholders of Santander Consumer USA Holdings Inc.,

The last 18 months have been transformative for us. We made significant regulatory progress, marked by closing identified issues, passing CCAR/horizontal capital review, and closing a 2014 Written Agreement with the Federal Reserve, which allowed us to make our first capital distribution to stockholders since 2014. We also strengthened our management team and stabilized credit performance.

While these have been important milestones for us, there is still work to do. Key priorities for us include improving the dealer experience and market penetration, improving profitability for all segments for our business, improving efficiency and controlling costs, diligent capital management, and operating under heightened bank standards.

We are optimistic about our future, as our fundamentals continue to strengthen, and we remain committed to better serving our customers and creating value for all our stakeholders.

The Notice of Annual Meeting and Proxy Statement on the following pages contain information about the official business of the Annual Meeting. Whether or not you expect to attend, please vote your shares now. Of course, if you attend the Annual Meeting in person you will have the opportunity to revoke your proxy and vote your shares in person. This Proxy Statement is also available at http://www.proxypush.com/SC.

You are invited to attend the Annual Meeting of Stockholders on Tuesday, June 12, 2018. The Annual Meeting will begin promptly at 2 P.M. Central Time, at 1601 Elm Street, Suite 800, Dallas, TX 75201. We thank you for your continuing interest in Santander Consumer USA, and we hope you will attend the Annual Meeting.

We are proud to lead this dynamic and maturing company, which has been a leader in automotive finance for nearly two decades.

 

Sincerely,         
LOGO  

LOGO

 

William Rainer

Chairman of the Board

     LOGO  

LOGO

 

Scott Powell

         President and CEO

 



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LOGO  

1601 Elm St. Suite 800 Dallas, Texas 75201  |  214.634.1110    

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD JUNE 12, 2018

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders will be held at 1601 Elm Street, Suite 800, Dallas, Texas 75201, at 2 P.M. local time on June 12, 2018 for the following purposes:

 

1. To elect 10 directors named in the Proxy Statement to the Board of Directors;

 

2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year;

 

3. To approve, on a non-binding, advisory basis, named executive officer compensation; and

 

4. To vote on a stockholder proposal, if properly presented at the Annual Meeting, requesting that the Board of Directors prepare a report related to the monitoring and management of certain risks related to vehicle lending.

Stockholders will also transact any other business as may properly come before the Annual Meeting in accordance with the terms of our Third Amended and Restated Bylaws.

The Board of Directors has fixed the close of business on April 16, 2018 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting.

By Order of the Board of Directors,

 

LOGO

Christopher Pfirrman

Chief Legal Officer, General Counsel, and Corporate Secretary

April 30, 2018

 



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TABLE OF CONTENTS

 

     

 

TABLE OF CONTENTS

 

2018 Proxy Summary

    1  

Corporate Governance

    7  

Proposal 1: Election of Directors

    7  

Director Independence

    13  

Board Leadership Structure and Risk Oversight

    14  

Board Committees

    15  

Director Compensation

    18  

Nomination of Directors

    19  

Executive Officers

    20  

Audit

    22  

Proposal  2: Ratification of Appointment of Independent Registered Public Accounting Firm

    22  

Audit Fees and Related Matters

    23  

Report of the Audit Committee

    23  

Compensation

    25  

Proposal 3: Non-Binding, Advisory Approval of NEO Compensation (“Say-on-Pay”)

    25  

Compensation Discussion and Analysis

    26  

Executive Compensation Tables

    42  

Equity Compensation Plan Information

    50  

Pay Ratio Disclosure

    51  

Stockholder Proposal

    52  

Additional Governance Information

    55  

Related Party Transactions

    55  

Stock Ownership Information

    59  

Other Governance Information

    60  

Questions and Answers

    61  

Annex A – Reconciliation of Non-GAAP Financial Measures

    65  

 

 

      

 

SC 2018 Proxy Statement

  

 

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PROXY SUMMARY

 

     

 

2018 PROXY SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER. PLEASE READ THE ENTIRE PROXY STATEMENT CAREFULLY BEFORE VOTING.

Important Terms

 

»   “Banco Santander” and “SAN” – Banco Santander, S.A.

 

»   “Board” – the Board of Directors of SC

 

»   “BSI” – Banco Santander International, an affiliate of SC

 

»   “BSPR” – Banco Santander Puerto Rico, an affiliate of SC

 

»   “Bylaws” – the Third Amended and Restated Bylaws of SC

 

»   “CCAR” – the United States Federal Reserve Board’s Comprehensive Capital Analysis and Review

 

»   “CD&A” – the Compensation Discussion and Analysis section of this Proxy Statement

 

»   “Common Stock” – shares of SC common stock, par value $0.01 per share

 

»   “Company,” “us,” “we,” “our,” and “SC” – Santander Consumer USA Holdings Inc. and, where appropriate, Santander Consumer USA Holdings Inc. and its subsidiaries

 

»   “Exchange Act” – the Securities Exchange Act of 1934, as amended

 

»   “GAAP” – United States generally accepted accounting principles, the accounting standard adopted by the SEC

 

»   “Independent Directors” – our independent directors as defined by the NYSE Listed Company Rules (as determined by the Board), including Mr. Ferriss, Ms. Holiday, Mr. McCarthy, Mr. Muir, and Mr. Rainer

 

»   “NEOs” – our “named executive officers,” as determined under Rule 402 of Regulation S-K, and as designated in this Proxy Statement

 

»   “NYSE” – the New York Stock Exchange

 

»   “Omnibus Plan” – SC’s Omnibus Incentive Plan

 

»   “PwC” – PricewaterhouseCoopers LLP

 

»   “RSU” – restricted stock unit

 

»   “SBNA” – Santander Bank, N.A., a subsidiary of SHUSA and an affiliate of SC

 

»   “SEC” – the United States Securities and Exchange Commission

 

»   “Securities Act” – the Securities Act of 1933, as amended

 

»   “SHUSA” – Santander Holdings USA, Inc., SC’s majority stockholder and a subsidiary of Banco Santander

 

»   “SIS” – Santander Investment Securities, an affiliate of SC and formerly known as Santander Central Hispano Investment Services, Inc.

Your Vote

Your vote is very important. The Board is requesting you to allow your Common Stock to be represented at our 2018 annual meeting by proxies named on the proxy card.

This Proxy Statement is being sent to you in connection with this request and has been prepared for the Board by our management. This Proxy Statement is being sent to our stockholders on or about April 30, 2018.

 

 

      

 

SC 2018 Proxy Statement

  

 

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PROXY SUMMARY

 

 

 

How to Vote

You may vote your shares prior to the Annual Meeting via the Internet, by telephone, or by mail.

 

 

INTERNET

 

 

 

TELEPHONE

 

 

 

MAIL

 

 

LOGO

 

 

LOGO

 

 

LOGO

     
Go to www.proxypush.com/sc   Dial toll-free 855-782-8499   Mark, sign, and date your

You will need the control number

included in your Proxy Card/Voting

Instruction Form.

 

 

You will need the control number

included in your Proxy Card/Voting

Instruction Form.

 

Proxy Card/Voting Instruction

Form and return it in the

postage-paid envelope provided.

Summary of Voting Proposals and Voting Recommendations

 

 

PROPOSALS

 

 

 

      BOARD RECOMMENDATION      

 

 

PROPOSAL 1. Election of Directors (Page 7)

 

We are asking stockholders to vote on each director nominee to the Board named in this Proxy Statement. The Board and the Executive Committee believe that each director nominee has the qualifications, experience, and skills necessary to represent stockholders through service on the Board.

 

  FOR ALL

 

PROPOSAL 2. Ratification of Appointment of Independent Registered Public Accounting Firm (Page 22)

 

The Audit Committee has appointed PwC to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018. The Audit Committee and the Board believe that the continued retention of PwC to serve as our independent auditor is in the best interests of the Company and its stockholders. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s appointment of PwC.

 

  FOR

 

PROPOSAL 3. Non-Binding, Advisory Approval of Compensation to NEOs (“Say-on-Pay”) (Page 25)

 

We are asking our stockholders to indicate their support for our executive compensation programs as described in this Proxy Statement. This vote is referred to as a “Say-on-Pay” vote.

 

  FOR

 

PROPOSAL 4. Stockholder Proposal (if properly introduced at the Annual Meeting) (Page 52)

 

  AGAINST

 

 

      

 

2

  

 

SC 2018 Proxy Statement


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PROXY SUMMARY

 

     

 

Nominees for Election as Directors

The Board recommends a vote FOR the election of each of the following nominees for director:

 

 

NAME

 

 

 

  AGE   

 

 

 

  DIRECTOR SINCE     

 

 

 

  INDEPENDENT   

 

  

 

COMMITTEE MEMBERSHIP  

 

 

William Rainer

 

    72      2015      Board Chair, EC (Chair)

 

Stephen A. Ferriss

 

    72      2013      Board Vice Chair, CC, RC (Chair), AC, EC  

 

Mahesh Aditya

 

    55      2017        ---  

 

José Doncel

 

    57      2015        ---  

 

Victor Hill

 

    54      2015        RCOC, RC  

 

Edith E. Holiday

 

    66      2016      CC (Chair), RCOC  

 

Javier Maldonado

 

    55      2015        CC, EC, RCOC  

 

Robert J. McCarthy

 

    64      2015      RCOC (Chair), AC, CC  

 

William F. Muir

 

    63      2016      AC (Chair), RC, RCOC  

 

Scott Powell

 

    56      2016        EC  

 

»   AC: Audit Committee
»   CC: Compensation Committee
»   EC: Executive Committee
»   RC: Risk Committee
»   RCOC: Regulatory and Compliance Oversight Committee

 

 

      

 

SC 2018 Proxy Statement

  

 

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PROXY SUMMARY

 

 

 

2017 BUSINESS HIGHLIGHTS*

 

LOGO

LOGO     LOGO     LOGO     LOGO

»  Total auto originations of $20.1 billion

 

»  More than 800,000 units originated

 

»  Largest provider for Fiat Chrysler (“FCA”)

   

»  Total funding of $40.3 billion at the end of 4Q17

 

»  Banco Santander support totaling $7.8 billion

 

»  Issued and sold $9.2 billion in bonds across three distinct platforms

 

»  Inaugural lease securitization

   

»  Received non-objection to CCAR submission

 

»  Terminated 2014 Written Agreement with the Federal Reserve

   

»  Totaled $8.6 billion

 

»  Servicing fee income of $118 million

 

* Adjusted net income, adjusted ROA, and adjusted ROE are each non-GAAP financial measures. For an explanation and a reconciliation of adjusted net income, adjusted ROA, and adjusted ROE to net income, ROA, and ROE, respectively, the most directly comparable GAAP measures, please see Annex A.

 

NET INCOME OF $1.2 BILLION RETURN ON AVERAGE ASSETS OF 3.0% RETURN ON AVERAGE EQUITY OF % 21.0 ADJUSTED NET INCOME OF $627 MILLION ADJUSTED RETURN ON AVERAGE ASSETS OF 1.6% ADJUSTED RETURN ON AVERAGE EQUITY OF % 11.1 VEHICLE FUNDING AND CULTURE OF SERVICED FINANCE LIQUIDITY COMPLIANCE FOR OTHERS

 

 

      

 

4

  

 

SC 2018 Proxy Statement


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PROXY SUMMARY

 

     

 

Corporate Governance Highlights

 

 

Annual election of all directors

 

 

Annual joint evaluation of CEO by Board and SHUSA’s Board of Directors

 

 

Annual Board and Committee self-evaluations and annual individual director evaluations

 

 

Strong Board providing challenge to management opinions

 

 

Strong independent Chairman of the Board

 

 

Orientation program for new directors and continuing education for all directors

 

 

Robust stock ownership guidelines for independent directors

 

 

Strong risk oversight by full Board and Board Committees

 

 

Regular executive sessions of non-management directors

 

Executive Compensation Program—Overview

Our executive compensation program is designed to reinforce the link between the long-term interests of our executive officers and our stockholders. A significant portion of our executive officers’ incentive compensation is deferred and payable in SC shares, and therefore directly aligned with the Company’s performance, including total stockholder return.

 

 

ELEMENT

 

  

 

KEY CHARACTERISTICS

 

       

 

PURPOSE

 

    
Base Salary   

 

Fixed cash compensation component, reviewed at least annually, that reflects the executive’s position, responsibilities, qualifications, tenure, and contributions to the Company

 

       Offers security for executives and allows the Company to maintain a stable management team    

Annual Incentive

Award Program

  

Comprised of both short-term and long-term incentives; a significant portion of annual bonuses are deferred; half payable in cash and half payable in SC equity awards; includes a special regulatory incentive program intended to focus executives on regulatory and compliance transformation initiatives

 

      

Motivates and rewards executives for achievement of Company and individual performance goals, appropriately balances compensation risk, and aligns management and stockholder interests

 

   

Retirement Benefits;

Welfare Benefits;

Perquisites

   Indirect compensation consisting of a retirement plan, health and welfare plans, and minimal perquisites       

 

Provides executives with security during employment and into retirement and promotes employee health, which assists in the retention of our executives

 

   

 

 

      

 

SC 2018 Proxy Statement

  

 

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PROXY SUMMARY

 

 

 

Key Features of Our Executive Compensation Program

 

 

Ties annual incentive compensation to the achievement of meaningful Company and individual performance goals

 

 

Subjects a significant portion of annual incentive compensation to deferral

 

 

Pays a significant portion of annual incentive compensation in SC stock

 

 

Subjects Omnibus Plan awards to “double-trigger” change in control vesting

 

 

Subjects incentive compensation to a robust malus and clawback policy

 

 

Conditions a significant portion of compensation on the acceptance of confidentiality, non-solicit, and other restrictive covenants

 

 

Uses a prominent independent compensation consultant

 

 

Uses a representative and relevant peer group

 

 

Imposes annual limits on non-employee director compensation

 

 

Maintains independent non-employee director stock ownership guidelines

 

 

Conducts a robust annual compensation risk assessment

 

 

Does not reprice underwater stock options

 

 

Does not grant discounted stock options

 

 

Does not allow hedging or pledging of SC stock by executive officers or directors

 

 

 

      

 

6

  

 

SC 2018 Proxy Statement


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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

     

 

CORPORATE GOVERNANCE

Proposal 1: Election of Directors

 

 

WHAT YOU ARE VOTING ON:

 

At the Annual Meeting, 10 directors are to be elected to hold office until

the 2019 Annual Meeting and until their successors are elected and qualified, or

until the directors either resign or are removed from office.

 

Introduction

As of the date of the Annual Meeting, the Board will consist of 10 members. The current members are Mahesh Aditya, José Doncel, Stephen A. Ferriss, Victor Hill, Edith E. Holiday, Javier Maldonado, Robert J. McCarthy, William F. Muir, Scott Powell, and William Rainer. Mr. Aditya and Mr. Powell are also members of the board of directors of Santander Consumer USA Inc., an Illinois corporation and wholly-owned subsidiary of SC (“SC Illinois”). Brian Gunn resigned as a member of the Board and of the SC Illinois board of directors effective April 19, 2018.

SHUSA has the right to nominate seven members of the Board. Please see “Corporate GovernanceNomination of Directors” for more information. SHUSA has nominated Mr. Aditya, Mr. Doncel, Mr. Ferriss, Mr. Hill, Mr. Maldonado, Mr. Powell, and Mr. Rainer for election to the Board. The Board has nominated Ms. Holiday, Mr. McCarthy, and Mr. Muir for election to the Board. The Board has determined that Mr. Ferriss, Ms. Holiday, Mr. McCarthy, Mr. Muir, and Mr. Rainer are Independent Directors.

Each of the directors elected at the Annual Meeting will be elected for a one-year term, which expires at the next Annual Meeting, and will serve until the director’s successor has been elected and qualified, or until the director’s earlier resignation or removal.

Information Concerning the Nominees

Biographical information for each nominee for election to the Board appears below. The information is based entirely upon information provided by the respective nominees.

 

    

THE BOARD

RECOMMENDS A VOTE FOR

EACH OF THE NOMINEES.

    

 

 

      

 

SC 2018 Proxy Statement

  

 

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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

 

   

MAHESH

ADITYA

  

DIRECTOR SINCE: 2017     AGE: 55

 

LOGO     

  

 

EXPERIENCE

 

Mr. Aditya has served as the Chief Operating Officer of SHUSA since May 2017 and as Chief Risk Officer of SBNA since April 2018. Prior to joining SHUSA, he served as the Chief Risk Officer and was a member of the Operating Committee of Visa Inc. from June 2014 to February 2017. Prior to that role, from April 2011 until June 2014, Mr. Aditya was employed by JPMorgan Chase, first as the Chief Risk Officer of Retail Banking and then later the Chief Risk Officer of Mortgage Banking. Previously, he was employed as the Head of Risk for Mortgage and Business Banking at Capital One Bank from 2009 to 2011. He currently serves on the board of directors of BSPR and has previously served as a member of the board of Early Warning Systems (EWS). Mr. Aditya holds a degree in Electrical Engineering from Bangalore University and a master’s degree in business administration from the Faculty of Management Studies, Delhi University. Mr. Aditya has extensive experience in risk management and finance, and we believe he is qualified to serve on the Board.

 


    

 

 

  
   

JOSÉ

DONCEL

  

DIRECTOR SINCE: 2015     AGE: 57

 

LOGO     

  

 

EXPERIENCE

 

Mr. Doncel has served as a senior executive of Banco Santander and its predecessor companies since 1993, most recently as Senior Executive Vice President and Director of the Accounting and Control Division since October 2014, as Senior Executive Vice President and Director of the Corporate Division of Internal Audit from June 2013 to October 2014, and as Senior Executive Vice President and Director General of the Retail Banking Management Control Area from April 2013 to June 2013. He was previously employed by Arthur Andersen Auditores, S.A., Division of Financial Institutions. Mr. Doncel is currently a member of the boards of directors of SHUSA and SBNA. He is also a member of the boards of directors of multiple Banco Santander subsidiaries. Mr. Doncel holds a degree in economic and business sciences from the Universidad Complutense de Madrid. Mr. Doncel has extensive experience in leadership, finance, and risk management, and we believe he is qualified to serve on the Board.

 

 

 

      

 

8

  

 

SC 2018 Proxy Statement


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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

     

 

   

STEPHEN A.

FERRISS

  

DIRECTOR SINCE: 2013     AGE: 72

 

LOGO     

 

Vice-Chairman of the Board

 

COMMITTEES

 

»  Audit

 

»  Compensation

 

»  Executive

 

»  Risk (Chair)

 

  

 

EXPERIENCE

 

Mr. Ferriss has served as a director of SHUSA since 2012. He also is the chairman of the boards of directors Santander BanCorp and BSPR and a director of BSI. Mr. Ferriss was also a director of SBNA from 2012 to 2015. Previously, he served as President and CEO of SIS (formerly known as Santander Central Hispano Investment Services, Inc.) from 1999 to 2002, and held various roles at Bankers Trust, including Managing Director and Partner of the Bankers Trust Global Investment Bank in London and New York. Prior to Bankers Trust, Mr. Ferriss spent 19 years at Bank of America. Mr. Ferriss graduated from Columbia College and received a master’s degree in Latin American International Economics from Columbia University School of International and Public Affairs. Mr. Ferriss has extensive experience in management and international finance, and we believe he is qualified to serve on the Board.

 

 

 

 


  
   

VICTOR

HILL

  

DIRECTOR SINCE: 2015     AGE: 54

 

LOGO     

 

COMMITTEES

 

»  Regulatory and

    Compliance Oversight

 

»  Risk

 

 

 

  

 

EXPERIENCE

 

Mr. Hill has worked within the UK motor finance industry for over 35 years, 18 of them at board level. He began his career within Lombard Motor Finance in 1982 and moved to First National Motor Finance in 1998, joining the board of directors in 2000. Mr. Hill was responsible for the launch of Santander Consumer Finance (UK) plc (“SCUK”), an affiliate of SC, in 2005, and continues to lead that business today as CEO. He led the acquisition of the UK motor finance portfolio from GE Money in 2009 and currently serves as chairman of two joint venture subsidiaries, Hyundai Capital UK and PSA Finance. Mr. Hill has held a number of directorships, registered at Companies House in London, but his current responsibilities include directorships of 5 companies in the Santander UK Group including SCUK, Hyundai Capital UK Ltd, PSA Finance UK Ltd, PSA Finance plc, and First National Motor plc. He qualified as a Chartered Director in 2007 and achieved Fellowship of the Institute of Directors, in London, during 2012. He also qualified as a Mediator for Civil and Commercial Disputes in 2008. Mr. Hill has extensive management experience within the auto finance industry, and we believe that he is qualified to serve on the Board.

 

 

 

      

 

SC 2018 Proxy Statement

  

 

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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

 

   

EDITH E.

HOLIDAY

  

DIRECTOR SINCE: 2016     AGE: 66

 

LOGO     

 

COMMITTEES

 

»  Compensation (Chair)

 

»  Regulatory and     Compliance Oversight

 

  

 

EXPERIENCE

 

Ms. Holiday is a member of the boards of directors of Hess Corporation (NYSE:HES), White Mountains Insurance Group Ltd. (NYSE:WTM), and Canadian National Railway (NYSE:CNI), and is a member of the boards of directors or trustees of various investment companies in the Franklin Templeton Group of Funds, serving as Lead Director of the Templeton Funds. She also served on the boards of directors of RTI International Metals, Inc. from 1999 to 2015, and of the H.J. Heinz Company from 1994 to 2013. Ms. Holiday was also the President, Secretary, and Treasurer of Comcast TW Holdings, Inc. from 2006 to 2007. From 1990 to 1993, Ms. Holiday was Assistant to the President of the United States and Secretary of the U.S. Cabinet. From 1989 to 1990, she served as General Counsel of the U.S. Treasury Department, and from 1988 to 1989 she served as Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison of the U.S. Treasury Department. Prior to that, Ms. Holiday held various other positions in government and in private practice. Ms. Holiday holds a bachelor of science and a law degree from the University of Florida and is a member of the state bars of Florida and Georgia and the District of Columbia Bar. Ms. Holiday has extensive experience in legal and regulatory matters and in public service, and we believe that she is qualified to serve on the Board.

 

    

 

  
   

JAVIER

MALDONADO

  

DIRECTOR SINCE: 2015     AGE: 55

 

LOGO     

 

COMMITTEES

 

»  Compensation

 

»  Executive

 

»  Regulatory and Compliance

    Oversight

 

 

  

 

EXPERIENCE

 

Mr. Maldonado has served as Senior Executive Vice President, Global Head of Cost Control of Banco Santander since October 2015. He has held numerous management positions at Banco Santander and its affiliates, including Senior Executive Vice President, Head of the New General Directorate for Coordination and Control of Regulatory Projects of Banco Santander; Executive Committee Director, Head of Internal Control and Corporate Development, for Santander (UK) plc from May 2012 to September 2014; Vice President in Charge of Closed Funds and Complaints for Banco Santander Brazil from October 2011 to April 2012; and General Manager for Banco Santander in the Middle East from January 2011 to September 2011. Previously, Mr. Maldonado was an attorney with Baker & McKenzie and Corporate and International Law Department Head at J.Y. Hernández-Canut Law Firm. Mr. Maldonado has served as a director of SHUSA since April 2015 and has served as vice-chairman of the board of directors of SHUSA since October 2015. He also currently serves as a director of SBNA, BSPR, Santander BanCorp and SIS. Mr. Maldonado also serves as a director of Alawwal Bank (formerly, Saudi Hollandi Bank). He holds law degrees from Northwestern University and UNED University. Mr. Maldonado has extensive knowledge and experience in international finance and legal and regulatory affairs, and we believe he is qualified to serve on the Board.

 

 

      

 

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SC 2018 Proxy Statement


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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

     

 

   

ROBERT J.

McCARTHY

  

DIRECTOR SINCE: 2015     AGE: 64

 

LOGO     

 

COMMITTEES

 

»  Audit

 

»  Compensation

 

»  Regulatory and Compliance

    Oversight (Chair)

 

 

  

 

EXPERIENCE

 

In 2014, Mr. McCarthy retired from Marriott International, Inc., where he served as Chief Operations Officer since 2012. Mr. McCarthy joined Marriott in 1975, where he served in various leadership positions, including Senior Vice President, Northeast Region from 1995 to 2000; Executive Vice President, Operations from 2000 to 2002; President, North America from 2003 to 2009; Group President from 2009 to 2011; and Chief Operations Officer from March 2012 until February 2014. Mr. McCarthy has served as Chairman of Hotel Development Partners since March 2014. He currently is a member of the Board of Trustees at Villanova University and a member of the board of directors of RLJ Lodging Trust (NYSE:RLJ). Previously, Mr. McCarthy served as a director of the ServiceSource Foundation, as a member of the board of directors of the Autism Learning Center, as a member of the Dean’s Advisory Board at Cornell University School of Hotel Administration, as a member of the Dean’s Advisory Board at Villanova University School of Business, and as a member of the board of managers at Avendra, LLC. He holds a bachelor’s degree in business administration from Villanova University and is a graduate of the Advanced Management Program at the Wharton School of Business at the University of Pennsylvania. Mr. McCarthy has extensive managerial and finance experience, and we believe he is qualified to serve on the Board.

 

    

 

  
   

WILLIAM F.

MUIR

  

DIRECTOR SINCE: 2016     AGE: 63

 

LOGO     

 

COMMITTEES

 

»  Audit (Chair)

 

»  Risk

 

»  RCOC

 

 

  

 

EXPERIENCE

 

In 2014, Mr. Muir retired from Ally Financial Inc. (formerly known as General Motors Acceptance Corporation (“GMAC”)), where he served as President and head of its Global Automotive Services business starting in 2004. In that role, he led Ally’s automotive finance, insurance, vehicle remarketing, and servicing operations. Prior to that time, he served as Executive Vice President and Chief Financial Officer of GMAC from 1998 to 2004. From 1996 to 1998, Mr. Muir served as Executive-in-Charge of Operations and then Executive Director of Planning at Delphi Automotive Systems, a former subsidiary of General Motors (“GM”). Prior to serving at Delphi Automotive Systems, he served in various executive capacities upon joining GMAC in 1992 and also served in a number of capacities with GM since joining GM in 1983. Mr. Muir also served as Chairman of the Ally Insurance Group from 1999 to 2014 and a member of the Ally Bank board of directors from 2004 to 2016. Mr. Muir received a bachelor’s degree in industrial engineering and operations research from Cornell University in 1977. He earned a master’s degree in business administration from Harvard University in 1983. Mr. Muir has extensive experience in management, finance, and the auto finance industry, and we believe that he is qualified to serve on the Board.

 

 

 

      

 

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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

 

   

SCOTT

POWELL

  

DIRECTOR SINCE: 2016     AGE: 56

 

LOGO     

 

COMMITTEE

 

»  Executive

  

 

EXPERIENCE

 

Mr. Powell has served as our CEO since August 2017, and has also served as the CEO and a director of SHUSA since March 2015. Mr. Powell joined the Board in September 2016 and has been a member of SBNA’s board of directors and Executive Committee since July 2015. He also served as CEO of SBNA from July 2015 until August 2017. From 2013 to 2014, before joining SHUSA, Mr. Powell was Executive Chairman of StoneRiver National Flood Services Inc. From 2002 to 2012, Mr. Powell held numerous management roles at JPMorgan Chase & Co. and its predecessor Bank One Corporation, including Head of Banking and Consumer Lending Operations, CEO of Consumer Banking and Retail Investments, Head of Consumer Lending, and Chief Risk Officer, Consumer. Mr. Powell also served at Citigroup and its predecessors from 1988 to 2002 in senior risk management positions. Mr. Powell is a member of the boards of directors of the Phipps Houses and the End Fund in New York City, as well as the Boys and Girls Clubs of Boston. Mr. Powell graduated from the University of Minnesota and received a master’s degree in business administration from the University of Maryland. Mr. Powell has extensive experience in management, finance, risk management, and consumer and auto lending, and we believe he is qualified to serve on the Board.

 

    

 

  
   

WILLIAM

RAINER

  

DIRECTOR SINCE: 2015     AGE: 72

 

LOGO     

 

Chairman of the Board

 

COMMITTEE

 

»  Executive (Chair)

  

 

EXPERIENCE

 

Mr. Rainer has extensive experience and has held numerous leadership roles in the financial services industry. From 2001 to 2004, Mr. Rainer served as the Chairman and CEO of OneChicago, LLC, a regulated futures exchange. He also served as the Chairman of the Commodity Futures Trading Commission from 1999 to 2001, as Chairman of the United States Enrichment Corporation from 1994 to 1998, and as Founder of Greenwich Capital Markets, Inc. from 1981 to 1988. Previously, Mr. Rainer held various leadership positions at Kidder, Peabody & Co., Inc. From July 2015 to March 2016, he served as a director of BSI, and from December 2015 to March 2016, he served as chairman of the board of SIS. Mr. Rainer served as director of IQ Funds, a family of closed-end mutual funds, from 2004 until 2010. From 1996 to 2000 and from 2004 to 2008, Mr. Rainer served as a trustee for Southern Methodist University. He has served as a member of the Dean’s Council of the Harvard Divinity School since 2004 and as its Chair from 2005 through June 2013. He is currently the Chairman of Shortridge Academy, Ltd. and New Braunfels Communications, Inc. Mr. Rainer received his bachelor’s degree in economics and master’s degree in business administration from Southern Methodist University. Mr. Rainer has extensive knowledge and experience in finance, regulatory affairs, and leadership of financial services firms, and we believe he is qualified to serve on the Board.

 

 

 

      

 

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CORPORATE GOVERNANCE - DIRECTOR INDEPENDENCE

 

     

 

Director Independence

Because we are a controlled company, we are exempt from the requirement in the NYSE Listed Company Rules that a majority of our directors must be independent. In addition, we are exempt from the requirements (i) that our Executive Committee (which under its charter has the responsibilities of a Nominating and Governance Committee) be composed solely of directors who meet the independence standards under the NYSE Listed Company Rules and (ii) that our Compensation Committee be composed solely of directors who meet additional, heightened independence standards under the NYSE Listed Company Rules and the rules of the SEC. The Company is subject to the requirement that all members of our Audit Committee satisfy independence requirements set forth under the NYSE Listed Company Rules and meet the additional criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under the Exchange Act.

Under the NYSE Listed Company Rules, to be considered independent, a director must not have a disqualifying relationship, as defined in the NYSE Listed Company Rules, and the Board must affirmatively determine that the director otherwise has no direct or indirect material relationship with the Company. In making independence determinations, the Board complies with all NYSE and SEC criteria and considers all relevant facts and circumstances. The Board has determined that Mr. Ferriss, Ms. Holiday, Mr. McCarthy, Mr. Muir, and Mr. Rainer are Independent Directors. The Board also determined that Wolfgang Schoellkopf and Mark Hurley, each of whom resigned from the Board during 2017, were independent as defined by the NYSE Listed Company Rules.

In assessing the independence of the Independent Directors, the Board considered, without limitation, the following transactions, relationships, and arrangements:

 

DIRECTOR   

 

ORGANIZATION  

 

RELATIONSHIP  

 

 

SC TRANSACTION/  

RELATIONSHIP  

 

Mr. Ferriss     

SHUSA  

 

Director  

 

 

Majority Stockholder  

 

 

SBNA  

 

Former Director  

 

 

Affiliate  

 

 

 

SIS  

 

Former CEO  

 

Affiliate  

 

Santander BanCorp  

 

Chairman of the Board  

 

 

Affiliate  

 

 

BSPR  

 

Chairman of the Board  

 

 

Affiliate  

 

 

BSI  

 

Director  

 

 

Affiliate  

 

Ms. Holiday     

SC  

 

Independent Advisor  

 

 

During 2016, SC paid Ms. Holiday  

$18,739 for advisory services to the  

Board prior to her appointment as  

a director  

 

Mr. Muir     

SC  

 

Independent Advisor  

 

 

During 2016, SC paid Mr. Muir $18,739  

for advisory services to the Board prior  

to his appointment as a director  

 

Mr. Rainer     

BSI  

 

Former Director  

 

 

Affiliate  

 

 

SIS  

 

Former Chairman  

 

 

Affiliate  

 

 

The Board has also determined that each member of the Audit Committee (Mr. Ferriss, Mr. McCarthy, and Mr. Muir) is an “audit committee financial expert” in accordance with the definition established by the SEC.

 

 

      

 

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CORPORATE GOVERNANCE - BOARD LEADERSHIP STRUCTURE AND RISK OVERSIGHT

 

 

 

Board Leadership Structure and Risk Oversight

The Board is responsible for the oversight of management on behalf of our stockholders. The Board and its committees meet periodically throughout the year to (i) review strategy, business and financial performance, risk and control matters, and compensation and management development; and (ii) provide guidance to and oversight of, and otherwise assess and advise, the CEO and other senior executives. The Board’s leadership structure, described below, is designed to ensure that authority and responsibility are effectively allocated between the Board and management.

The Board does not have any formal policy as to whether the same person should serve as both the CEO and Chairman of the Board, as the Board believes that it should have the flexibility to make the determination of the appropriate leadership for us at any given point in time. Currently, Mr. Rainer serves as the independent Chairman of the Board. We believe that having an independent Chairman can create an environment that leads to objective evaluation and oversight of management’s performance, increases management accountability, and improves the ability of the Board to monitor whether management’s actions are in the best interests of all stockholders. As a result, at this time, we believe that Mr. Rainer serving as our independent Chairman enhances the effectiveness of the Board as a whole. The Board will continue to review the Board’s leadership periodically and may modify this structure from time to time if it is in the best interests of our Company and our stockholders.

The Chairman of the Board leads the Board, sets the tone for its culture, and ensures its effectiveness in overseeing the Company and its management. The Chairman presides at all meetings of the Board, as well as executive sessions of Independent Directors, and, in consultation with the CEO, other directors, and management, establishes the agenda for each Board meeting. The Chairman also has the power to call special meetings of the Board. Mr. Ferriss serves as the Board’s Vice-Chairman, who acts as Chairman of the Board if Mr. Rainer is absent.

The Company has established a risk governance structure that assigns responsibility for risk management among front-line business personnel, an independent risk management function, and internal audit. According to this model, business owners maintain responsibility for identifying and mitigating the risks generated through their business activities. The Chief Risk Officer, who reports to the CEO and is independent of any business line, is responsible for developing and maintaining a risk framework that ensures risks are appropriately identified and mitigated, and for reporting on the overall level of risk in the Company. The Chief Risk Officer is also accountable to the Risk Committee and to SHUSA’s Chief Risk Officer. The Chief Risk Officer is charged with the implementation and execution of the enterprise risk management (“ERM”) program under the oversight of the Board and its committees.

Risk management is overseen by the Board through four standing committees: the Risk Committee, the Audit Committee, the Compensation Committee, and the Regulatory and Compliance Oversight Committee, each of which is chaired by an Independent Director. Committee chairs are responsible for calling meetings of their committees, presiding at meetings of their committees, approving agendas and materials for their committee meetings, serving as a liaison between committee members and the Board and between committee members and senior management (including the CEO and Chief Risk Officer), and working directly with the senior management responsible for committee matters. Each Board committee provides regular reports to the Board regarding matters reviewed by the Board committee.

In addition to receiving and discussing reports of risks under the purview of a particular committee, the Board monitors our risk culture and reviews specific and aggregate risks the Company faces. Further, at least annually, the Board approves, at the recommendation of the Risk Committee, a Risk Appetite Statement (a “RAS”), which defines the levels and types of risks the Company is willing to assume to achieve its business plans while controlling risk exposures within our risk capacity. In addition, the RAS establishes principles for risk-taking in the aggregate and for each risk type, and is supported by a comprehensive system of risk limits, escalation triggers, and control programs.

The Risk Committee is charged with responsibility for establishing governance over the ERM process and provides oversight of risk policies and risk management performance. The Risk Committee monitors our aggregate risk position and reviews reports from management on the comprehensive portfolio of risk categories and the potential impact these risks can have on our risk profile. A comprehensive risk report is submitted regularly by the Chief Risk Officer to the Risk Committee and to the Board, providing management’s view of our risk position. Further, the Risk Committee reviews and recommends for the Board’s approval the RAS and the ERM Policy along with various sub-policies governing, without limitation, enterprise risk, credit risk, information risk, market and liquidity risk, operational risk, model risk, and strategic risk. The Risk Committee also provides oversight of our impact on SHUSA’s compliance with its capital adequacy assessment process, including its CCAR submissions and resolution planning. In addition, the Risk Committee oversees the Company’s information and cyber risk management program. The Risk Committee also reviews and concurs in the appointment, replacement, performance, and compensation of the Chief Risk Officer.

The Audit Committee is charged with oversight relating to the integrity of our financial statements and financial reporting process, the integrity of our systems of internal accounting and financial controls, and internal and external auditing, including the qualifications and independence of our independent registered public accounting firm. Please see “Audit—Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm” for discussion of PwC, our proposed independent registered public accounting firm for 2018. The Audit Committee oversees the performance of our internal audit function; reviews and concurs in the appointment, replacement, performance, and compensation of our Chief Audit Executive; and approves our internal audit function’s

 

 

      

 

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CORPORATE GOVERNANCE - BOARD COMMITTEES

 

     

 

annual audit plan, charter, policies, and budget. The Audit Committee also receives regular updates on the audit plan’s status and results including significant reports issued by our internal audit function and the status of management’s corrective actions.

The Compensation Committee works to ensure that the compensation programs covering our executives, business units, and risk-taking employees appropriately balance risk with incentives such that business performance is achieved without taking imprudent or inefficient risks. At least annually, the Compensation Committee conducts an assessment of the compensation policies and practices for our employees, including our executive officers. The assessment includes whether such compensation policies and practices created risks that were reasonably likely to have a material adverse effect on the Company.

The Regulatory and Compliance Oversight Committee is charged with the oversight of risk relating to the effectiveness of our compliance management system. The Regulatory and Compliance Oversight Committee also oversees our progress in remediating risks identified in risk assessment findings, internal audit findings, and outstanding corrective actions identified by regulators in examination reports, enforcement actions, and other communications.

In addition to the Board and the Risk Committee, the CEO and Chief Risk Officer delegate risk responsibility to management committees. These committees include the Asset Liability Committee and the Enterprise Risk Management (“ERM”) Committee. The Chief Risk Officer participates on each of these committees.

Board Committees

The Board has five standing committees: the Audit Committee, the Compensation Committee, the Executive Committee, the Regulatory and Compliance Oversight Committee, and the Risk Committee. The charters for each committee may be found on SC’s website at http://investors.santanderconsumerusa.com.

 

NAME

AUDIT

COMPENSATION

EXECUTIVE

REGULATORY 

AND COMPLIANCE

OVERSIGHT

    RISK    

 

Mahesh Aditya

 

 

José Doncel

 

 

Stephen A. Ferriss

 

Chair

 

Victor Hill

 

 

Edith E. Holiday

 

Chair

 

Javier Maldonado

 

 

Robert J. McCarthy

 

Chair

 

William F. Muir

 

Chair

 

Scott Powell

 


 

William Rainer

 

Chair

 

 

      

 

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CORPORATE GOVERNANCE - BOARD COMMITTEES

 

 

 

The following summarizes the membership of each Board committee, as well as the primary roles and responsibilities of each committee and the number of times each committee met in 2017.

 

 

AUDIT COMMITTEE

 

    

NUMBER OF MEETINGS IN 2017: 12

 

MEMBERS

 

    

 

AMONG OTHER THINGS, OUR AUDIT COMMITTEE:

»  Mr. Muir (Chair)

 

»  Mr. Ferriss

 

»  Mr. McCarthy

     »   Reviews financial reporting policies, procedures, and internal controls.
    

 

»

 

 

Administers the appointment, compensation, and oversight of our independent registered public accounting firm.

    

 

»

 

 

Pre-approves audit, audit-related, and non-audit services to be performed by our independent registered public accounting firm.

    

 

»

 

 

Reviews and approves or ratifies all related-party transactions.

      

 

»

 

 

Oversees our internal audit function, including approval of the annual internal audit plan and the review of the performance of our Chief Audit Executive.

      

 

»

 

 

Oversees our compliance with legal and regulatory requirements as well as ethical standards adopted by the Company.

      

 

»

 

 

Reviews certain risk management policies and procedures; certain policies, processes, and procedures regarding compliance matters; and our Supplemental Statement of Ethics and Code of Ethics for the CEO and Senior Financial Officers.

 

 

The Board has determined that each of the Audit Committee members is “independent” as defined by Section 10A(m)(3) of the Exchange Act, Rule 10A-3 under the Exchange Act, and the NYSE Listed Company Rules. The Board has also determined that each of the members is “financially literate” as required by Section 303A.07 of the NYSE Listed Company Rules and is an “audit committee financial expert” as defined in the SEC’s rules.

 

      

 

 

COMPENSATION

COMMITTEE

 

    

NUMBER OF MEETINGS IN 2017: 11

 

MEMBERS

 

    

 

AMONG OTHER THINGS, OUR COMPENSATION COMMITTEE:

 

»  Ms. Holiday (Chair)

 

»  Mr. Ferriss

 

»  Mr. Maldonado

 

»  Mr. McCarthy

     »  

Reviews and approves the compensation of the CEO and each other executive officer.

 

     »  

Reviews and makes recommendations to the Board regarding the compensation of the Independent Directors.

 

     »  

Approves and evaluates all compensation plans, policies, and practices of the Company as they affect our CEO and other executive officers.

 

     »  

Sets performance measures and goals and verifies the attainment of performance goals under performance-based incentive compensation arrangements applicable to our executive officers.

 

       »  

Monitors and assesses whether the overall design and performance of our compensation plans, policies, and programs do not encourage employees, including our NEOs, to take excessive risk.

 

       »  

Oversees the management development, succession planning, and retention practices for our executive officers.

 

 

The Board has determined that Mr. Ferriss, Ms. Holiday, and Mr. McCarthy are “independent” as defined by the NYSE Listed Company Rules and qualify as “non-employee” directors within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (“Rule 16b-3”). Mr. Ferriss, Ms. Holiday, and Mr. McCarthy constitute a subcommittee of the Compensation Committee when considering issues governed by Rule 16b-3.

 

 

 

      

 

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EXECUTIVE COMMITTEE

 

    

NUMBER OF MEETINGS IN 2017: 1

 

MEMBERS

 

    

 

AMONG OTHER THINGS, OUR EXECUTIVE COMMITTEE:

 

»  Mr. Rainer (Chair)

 

»  Mr. Ferriss

 

»  Mr. Maldonado

 

»  Mr. Powell

     »   Acts on the Board’s behalf between Board meetings on all matters that may be lawfully delegated.
    

 

»

 

 

Considers and recommends candidates for election to the Board.

    

 

»

 

 

Leads the annual performance evaluations of the Board and Board committees.

    

 

»

 

 

Reviews and advises the Board on our corporate governance.

 

 

The Board has determined that Mr. Rainer and Mr. Ferriss are “independent” as defined by the NYSE Listed Company Rules.

 

      

 

 

REGULATORY AND COMPLIANCE OVERSIGHT COMMITTEE

 

    

NUMBER OF MEETINGS IN 2017: 7

 

MEMBERS

»  Mr. McCarthy (Chair)

 

    

 

AMONG OTHER THINGS, OUR REGULATORY AND COMPLIANCE OVERSIGHT COMMITTEE:

 

»  Mr. Hill

 

»  Ms. Holiday

 

»  Mr. Maldonado

 

»  Mr. Muir

     »  

Provides oversight of the Company’s significant banking and consumer regulatory compliance issues.

 

     »  

Oversees our compliance function including the Chief Compliance Officer.

 

     »  

Oversees our progress in responding to internal audit findings, risk assessment findings, and outstanding corrective actions identified by regulators in examination reports, enforcement actions, and other communications.

 

     »  

Reviews our regulatory correspondence and reports received from or submitted to regulators to ensure effective communication between the Company and its respective regulators.

 

 

The Board has determined that Mr. McCarthy, Ms. Holiday, and Mr. Muir are “independent” as defined by the NYSE Listed Company Rules.

 

      

 

RISK COMMITTEE

 

    

NUMBER OF MEETINGS IN 2017: 13

 

MEMBERS

 

    

 

AMONG OTHER THINGS, OUR RISK COMMITTEE:

 

»  Mr. Ferriss (Chair)

 

»  Mr. Hill

 

»  Mr. Muir

     »   Assesses and manages our enterprise risk, credit risk, market risk, operational risk, liquidity risk, and other risk matters.
    

 

»

 

 

Provides oversight of our risk governance structure in order to evaluate and control our risks, including the approval of our Risk Appetite Statement.

    

 

»

 

 

Oversees our risk management function including appointment and evaluation of the Chief Risk Officer and annual review of the Chief Risk Officer’s proposed priorities, budget and staffing plans.

    

 

»

 

 

Oversees and manages our activities related to capital planning and analysis.

 

 

The Board has determined that Mr. Ferriss and Mr. Muir are “independent” as defined by the NYSE Listed Company Rules.

 

 

 

 

      

 

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CORPORATE GOVERNANCE - DIRECTOR COMPENSATION

 

 

 

Director Compensation

Only Independent Directors are compensated for their service on the Board. The 2017 compensation program for Independent Directors was approved by our non-independent, disinterested directors, who do not receive any compensation for their Board service. The program provided the following compensation for Independent Directors:

 

»   An annual cash retainer of $100,000 (paid quarterly in arrears); plus

 

»   An annual grant of RSUs with a grant date fair market value equal to $50,000, vesting on the earlier of the 1st anniversary of the grant date or the 1st annual stockholder meeting following the grant date (with the grant date occurring at or around the start of the applicable term of service); plus

 

»   $70,000 in cash annually for serving as the chair of any committee of the Board (paid quarterly in arrears); plus

 

»   $20,000 in cash annually for serving as a non-chair member of any committee of the Board (paid quarterly in arrears); plus

 

»   $450,000 in cash annually if the director also serves as the Chairman of the Board (paid quarterly in arrears).

The Compensation Committee periodically reviews the form and amount of director compensation and recommends changes to the non-independent, disinterested Board members (who do not receive any director compensation from us), as appropriate. There were no changes to the Independent Director compensation program in 2017.

Independent Director Stock Ownership Guidelines

In order to align the economic interests of our Independent Directors with those of our stockholders, the Board has determined that our Independent Directors should hold a meaningful equity stake in SC. To that end, our Independent Non-Employee Director Stock Ownership Guidelines (adopted by the Board in 2016) require each of our Independent Directors to acquire and retain shares or share equivalents of our Common Stock with a target value not less than five times the annual equity retainer of $50,000.

There is no required time period within which an Independent Director must attain the applicable stock ownership target. However, until the stock ownership target is achieved, an Independent Director is required to retain 100% of all shares of our Common Stock received under SC’s Independent Director compensation program, other than shares received with a value equal to the amount of taxes due on income realized in connection with the vesting or exercise of awards.

As of the date hereof, all directors are in compliance with the Independent Non-Employee Director Stock Ownership Guidelines.

Director Compensation Table for 2017

The following table provides information regarding compensation for each Independent Director in 2017. Under our director compensation program, only Independent Directors are compensated for their service on the Board.

 

NAME

 

FEES EARNED OR

PAID IN CASH

($)

 

 

STOCK AWARDS(1)

($)

 

    TOTAL    

($)

 

Stephen A. Ferriss

 

 

211,549

 

 

50,000

 

 

261,549

 

 

Edith E. Holiday

 

 

143,451

 

 

50,000

 

 

193,451

 

 

Mark P. Hurley(2)

 

 

189,542

 

 

33,845

 

 

222,387

 

 

Robert J. McCarthy

 

 

210,000

 

 

50,000

 

 

260,000

 

 

William F. Muir

 

 

191,359

 

 

50,000

 

 

241,359

 

 

William Rainer

 

 

620,000

 

 

50,000

 

 

670,000

 

 

Wolfgang Schoellkopf(3)

 

 

49,231

 

 

0

 

 

49,231

 

 

(1)  To align our Independent Directors’ compensation with stockholder interests, each Independent Director is granted RSUs upon election or re-election. In 2017, all director RSUs were granted on June 12, 2017. Each award will vest upon the earlier of (i) the first anniversary of the grant date and (ii) the first annual stockholder meeting following the grant date. This column represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, based on the closing price of our Common Stock on the applicable grant date, but excluding the effect of potential forfeitures. Except for Mr. Ferriss, who holds 5,207 vested options, the stock awards reflected above comprise all outstanding equity awards held by our Independent Directors at the end of 2017.

 

 

      

 

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(2)  Mr. Hurley resigned from the Board effective November 27, 2017, so he received a pro rata portion of the equity retainer earned from June 12, 2017 until his resignation from the Board.

 

(3)  Mr. Schoellkopf resigned from the Board effective April 21, 2017, so he did not receive an equity retainer for 2017.

Nomination of Directors

The Shareholders Agreement, by and among SC, SHUSA, and certain other holders of our Common Stock, which we refer to as the “Shareholders Agreement,” provides SHUSA with special rights to nominate directors to the Board. Please see “Additional Governance Information—Related Party Transactions—Shareholders Agreement” for further information. Pursuant to the Shareholders Agreement, SHUSA is entitled to nominate seven members of the Board. The Shareholders Agreement provides further that SHUSA may remove any director nominated by SHUSA with or without cause. In addition, SHUSA has the right to designate a replacement to fill a vacancy on the Board created by the departure of a director that was nominated by SHUSA, and we are required to take all action within our power to cause such vacancy to be filled by such designated replacement (including by promptly appointing such designee to the Board).

With respect to directors not nominated by SHUSA, the Board is responsible for selecting nominees for election to the Board by our stockholders. Generally, the Board begins identifying nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria described below. Generally, the Board identifies candidates for director nominees in consultation with sitting members of the Board and with management, through the use of search firms or other advisors, through recommendations submitted by other directors or stockholders, and through such other methods as the Board deems appropriate. In identifying and evaluating a potential director nominee, the Board considers, among other things, the following factors:

 

»   Our needs with respect to the particular talents and experience of our directors;

 

»   The nominee’s knowledge, skills, and experience, including experience in finance, administration, or public service, in light of prevailing business conditions and the knowledge, skills, and experience already possessed by other members of the Board;

 

»   Whether the nominee is independent, as that term is defined under the NYSE Listed Company Rules;

 

»   The familiarity of the nominee with our industry;

 

»   The nominee’s experience in legal and regulatory affairs;

 

»   The nominee’s experience with accounting rules and practices; and

 

»   The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.

In its identification and evaluation process, the Board collects information about candidates through interviews, detailed questionnaires, and other means that the Board deems helpful in such process.

The Board’s goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.

The Board is also committed to diversified Board membership. The Board will not discriminate, including on the basis of race, national origin, gender, sexual orientation, religion, or disability, in selecting nominees. Diversity and inclusion are values embedded into our culture and are fundamental to our business. In keeping with those values, when assessing a candidate, the Board considers the different viewpoints and experiences that a candidate could bring to the Board and how those viewpoints and experiences could enhance the Board’s effectiveness in the execution of its responsibilities. The Board is also committed to seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. In addition, the Board assesses the diversity of the Board and committees as a part of its annual self-evaluation process.

Other than the foregoing, there are no stated minimum criteria for director nominees. The Board may also consider such other factors as it may deem in our best interests and the best interests of our stockholders. We also believe it may be appropriate for key members of our management to participate as members of the Board.

Subject to the rights of our majority stockholder, stockholders may nominate candidates for election to the Board. In order to nominate a candidate for election to the Board, stockholders must follow the procedures set forth in our Bylaws, including timely receipt by the Secretary of the Company of notice of the nomination and certain required disclosures with respect both to the nominating stockholder and the recommended director nominee. For a complete description of the requirements and procedures for stockholder nominations, please refer to our Bylaws.

Directors may be elected by a plurality of votes cast at any meeting called for the election of directors at which a quorum is present. The presence of a majority of the holders of our Common Stock, whether in person or by proxy, constitutes a quorum. The Board did not receive any recommendations from stockholders (other than SHUSA) requesting that the Board consider a candidate for inclusion among the nominees in this Proxy Statement. However, our policy is that we will consider any such recommendation as long as the stockholder making the recommendation provides to us the information concerning the recommended individual that is required under our Bylaws.

 

 

      

 

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EXECUTIVE OFFICERS

 

 

 

EXECUTIVE OFFICERS

The names, ages, and current positions of our executive officers as of the date of this Proxy Statement are listed in the table below. Each executive officer, including the CEO, is elected by the Board. Each executive officer holds office until his or her successor is elected and qualified, or until he or she is removed from, or resigns from, that office. There are no family relationships among the executive officers nor is there any agreement or understanding between any officer and any other person pursuant to whom the officer was elected.

 

 

NAME

 

       AGE             POSITION

 

Scott Powell

 

  

56

      

President and Chief Executive Officer

 

Juan Carlos Alvarez de Soto

 

 

  

47

      

Chief Financial Officer

 

Joshua Baer

 

 

  

43

      

Chief Risk Officer

 

Sandra Broderick

 

 

  

60

      

Executive Vice President, Head of Operations

 

Reza Leaali

 

 

  

59

      

Chief Technology Officer

 

Richard Morrin

 

 

  

48

      

President, Chrysler Capital and Auto Relationships

 

Christopher Pfirrman

 

 

  

58

      

Chief Legal Officer, General Counsel, and Corporate Secretary

 

Lisa VanRoekel

 

 

  

48

      

Chief Human Resources Officer

Scott Powell

President and Chief Executive Officer

Mr. Powell is discussed above under “Corporate Governance—Proposal 1: Election of Directors—Information Concerning the Nominees.”

Juan Carlos Alvarez de Soto

Chief Financial Officer

Mr. Alvarez de Soto joined us as our Chief Financial Officer in October 2017. Prior to joining us, Mr. Alvarez de Soto served as Corporate Treasurer for SHUSA from 2009 to 2017, overseeing SHUSA’s liquidity risk management, asset liability management, and treasury functions. Prior to joining SHUSA, from 2005 to 2008, he was Senior Vice President and Head of Treasury and Investments for Banco Santander’s International Private Banking at BSI and Banco Santander Suisse. In this role he managed a team of investment professionals, overseeing the assets of Banco Santander’s international high-net-worth clients. From 2000 to 2004, Mr. Alvarez de Soto held the position of Directeur Adjoint for Santander Central Hispano Suisse, Geneva and was Head of Treasury, Trading and Asset-Allocation. Mr. Alvarez de Soto holds a master’s degree in finance from George Washington University and a bachelor’s degree in management from Tulane University, and is a Chartered Financial Analyst.

Joshua Baer

Chief Risk Officer

Mr. Baer has served as our Chief Risk Officer since March 2018, joining us from SHUSA, where he served as Head of Operations and Risk Strategy since May 2017. Prior to SHUSA, Mr. Baer worked at Capital One for 13 years, most recently as the Head of Consumer Credit Risk Analytics since 2010. Mr. Baer holds a bachelor’s degree in finance from James Madison University and a master’s degree in business administration from the Haas School of Business at the University of California, Berkeley.

Sandra Broderick

Executive Vice President, Head of Operations

Ms. Broderick has served as our Executive Vice President, Head of Operations since October 2017. Ms. Broderick joins us from U.S. Bank, where she served as Executive Vice President, Operations Executive since March 2017. Prior to that, Ms. Broderick served as Managing Director, Operations Executive at JP Morgan Chase from March 2002 to March 2017, where she also served as Head of Operations for their Automotive Finance business beginning in 2012. Ms. Broderick was also a Senior Operations Director at GE Capital from December 1995 to September 1998 and a Senior Vice President of Operations Executive at Bank One from September 1998 to March 2002. Ms. Broderick attended State University of New York at Buffalo.

 

 

      

 

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EXECUTIVE OFFICERS

 

     

 

Reza Leaali

Chief Technology Officer

Mr. Leaali has served as our Chief Technology Officer since February 2018. He previously served as Chief Information Officer for Wells Fargo from 2002 to 2018 and for PurchasePro from 2001 to 2002. Prior to that, Mr. Leaali held the position of Chief Architect at Ingram Micro from 1995 to 2001. Mr. Leaali holds a bachelor’s degree in computer science from North London University.

Richard Morrin

President, Chrysler Capital and Auto Relationships

Mr. Morrin has served as our President, Chrysler Capital and Auto Relationships since October 2017. He previously served as our Chief Operating Officer since February 2016, having joined us as our Executive Vice President, New Business in August 2011. Prior to joining us, Mr. Morrin held a variety of management positions in 21 years of combined service at Ally Financial and General Motors Acceptance Corp. Most recently, he managed the commercial lending operations for Ally automotive dealers in the United States and Canada. Mr. Morrin holds a bachelor’s degree in economics from the University of Pennsylvania and a master’s degree in business administration from the University of Virginia.

Christopher Pfirrman

Chief Legal Officer, General Counsel, and Corporate Secretary

Mr. Pfirrman has served as our Chief Legal Officer, General Counsel, and Corporate Secretary since September 2015. He was previously employed by SHUSA, and most recently, served as Senior Executive Vice President and General Counsel of SHUSA and of SBNA from January 2012 to September 2015. He served as SBNA’s Senior Vice President and Deputy General Counsel from January 2000 to January 2012, and he was an attorney in the law firm of Edwards & Angell, LLP (now Locke Lord LLP) from 1996 to 2000. He received a bachelor’s degree from Fairfield University in Connecticut and a law degree from the College of William and Mary in Virginia. He is a member of the Massachusetts and Connecticut bars.

Lisa VanRoekel

Chief Human Resources Officer

Ms. VanRoekel has served as our Chief Human Resources Officer since March 2016, having previously served as our Head of Human Resources from 2006 to 2009. Previously, she served as the Interim Chief Human Resources Officer of SHUSA from December 2015 to February 2016; as the Chief Human Resources Officer of SBNA from December 2013 to February 2016; as the Deputy Managing Director, Human Resources of SBNA from July 2012 to December 2013; and as the HR Corporate Business Director of SBNA from March 2009 to July 2012. Ms. VanRoekel holds bachelor’s and master’s degrees in journalism from East Texas State University.

 

 

      

 

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AUDIT - PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

AUDIT

Proposal 2: Ratification of Appointment of Independent Registered

                     Public Accounting Firm

 

 

WHAT YOU ARE VOTING ON:

 

We are asking our stockholders to ratify the appointment of PwC as our independent

registered public accounting firm for 2018.

 

 

Our Audit Committee is responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting firm retained to perform the audit of our financial statements and our internal control over financial reporting. The Audit Committee has appointed the accounting firm of PwC to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.

Stockholder Ratification of Appointment of Independent Registered Public Accounting Firm

A proposal to ratify the appointment of PwC to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2018 will be presented at the 2018 Annual Meeting. PwC audited our consolidated financial statements for 2017. Representatives of PwC are expected to be present at the meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from stockholders.

Stockholder ratification of the selection of PwC as our independent registered public accounting firm is not mandated by our Bylaws or otherwise required. However, the Board is submitting the selection of PwC to our stockholders for ratification as a matter of good corporate governance. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee at its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and our stockholders’ best interests.

The affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on this matter at the 2018 Annual Meeting, whether in person or represented by proxy, will approve the proposal to ratify PwC as our independent registered accounting firm for the fiscal year ending December 31, 2018.

 

 
 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE

FOR THE RATIFICATION OF OUR APPOINTMENT OF PWC

AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FOR THE CURRENT FISCAL YEAR.

 

 

 

      

 

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AUDIT - REPORT OF THE AUDIT COMMITTEE

 

     

 

AUDIT FEES AND RELATED MATTERS

Audit and Non-Audit Fees

The following tables present fees for professional audit services rendered by PwC for the audits of our annual financial statements and the effectiveness of internal controls for the years ended December 31, 2017 and 2016, and fees for other services rendered by PwC during 2017 and 2016.

 

     

 

2017 ($)

 

        

 

2016 ($)

 

     

 

Audit Fees(1)

 

 

  

8,407,000

       

10,523,000

    

 

Audit-Related  Fees(2)

 

 

  

897,500

       

1,892,000

    

 

Tax Fees(3)

 

 

  

485,000

 

       

210,000

    

 

All Other Fees

 

 

               

 

(1)  Represents fees billed, or expected to be billed, for the audit of our financial statements included in our Annual Report on Form 10-K, review of financial statements included in our Quarterly Reports on Form 10-Q, and the audit of our internal control over financial reporting.

 

(2)  Represents fees billed, or expected to be billed, for assurance-related services. Such services during 2017 and 2016 principally included attestation reports required under services agreements, consent to use the auditor’s report in connection with various documents filed with the SEC, comfort letters issued to underwriters for securities offerings, and certain other agreed-upon procedures.

 

(3)  Represents fees billed, or expected to be billed, for tax compliance, tax advice, and tax planning.

Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditor

The Audit Committee has implemented procedures to ensure that all audit and permitted non-audit services provided to us are pre-approved by the Audit Committee. Specifically, the Audit Committee pre-approves the use of an independent accountant for specific audit and non-audit services, within approved monetary limits. If a proposed service has not been pre-approved, then it must be specifically pre-approved by the Audit Committee before it may be provided by our independent accountant. Any pre-approved services exceeding the pre-approved monetary limits require specific approval by the Audit Committee. The Audit Committee may delegate pre-approval authority to one or more of its members when expedition of services is necessary.

All of the audit-related, tax, and other services provided by PwC to us in 2017 were approved by the Audit Committee by means of specific pre-approvals or under procedures established by the Audit Committee. The Audit Committee has determined that all non-audit services provided by PwC in 2017 were compatible with maintaining its independence in the conduct of its auditing functions.

REPORT OF THE AUDIT COMMITTEE

This report reviews the actions taken by our Audit Committee with regard to the Company’s financial reporting process during 2017 and particularly with regard to the Company’s audited consolidated financial statements as of December 31, 2017 and 2016 and for the three years ended December 31, 2017.

The Audit Committee is comprised of three non-management Board members. The Board has determined that each member of our Audit Committee has no material relationship with the Company under the Board’s director independence standards and that each is independent under the NYSE’s listing standards and the SEC’s standards relating to the independence of audit committees. The Board has also determined that each member is financially literate and is an “audit committee financial expert” as defined by the SEC.

The Audit Committee operates under a written charter adopted by the Board that is published on the investor relations section of our website at http://investors.santanderconsumerusa.com. The Audit Committee annually reviews its written charter and practices, and has determined that its charter and practices are consistent with the listing standards of the NYSE and the provisions of the Sarbanes-Oxley Act of 2002.

The purpose of the Audit Committee is to assist Board oversight of (i) our independent registered public accounting firm’s qualifications and independence, (ii) the performance of the internal audit function and that of the independent registered public accounting firm, (iii) management’s responsibilities to ensure that there is in place an effective system of controls reasonably designed to safeguard the assets and income of the Company, (iv) the integrity of our financial statements, and (v) compliance with our ethical standards, policies, plans, and procedures, and with laws and regulations.

The Audit Committee discussed with PwC the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301 (Communications with Audit Committees), including PwC’s overall audit scope and audit approach as set forth in the terms of their engagement letter, PwC’s overall audit strategy for significant audit risks identified by them, and the nature and extent of the specialized skills necessary to perform the planned audit. In addition, the Audit Committee monitors

 

 

      

 

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AUDIT - REPORT OF THE AUDIT COMMITTEE

 

 

 

the audit, audit-related, and tax services provided by PwC. Details of the fees paid to PwC can be found in this Proxy Statement under “AuditAudit Fees and Related Matters.”

PwC provided the Audit Committee the written disclosures and the letter required by PCAOB’s Ethics and Independence Rule 3526 (Communications with Audit Committees Concerning Independence), and the Audit Committee discussed and confirmed with PwC their independence. The Audit Committee has considered whether PwC’s provision of any non-audit services to us is compatible with maintaining auditor independence. The Audit Committee has concluded that the provision of any non-audit services by PwC was compatible with PwC’s independence in the conduct of its auditing functions.

Management is responsible for our internal control over financial reporting, the financial reporting process, and our consolidated financial statements. The independent auditor is responsible for performing an independent audit of our consolidated financial statements and of the effectiveness of internal control over financial reporting in accordance with auditing standards promulgated by the PCAOB. Our Internal Audit Department, under the Chief Audit Executive, is responsible to the Audit Committee for preparing an annual audit plan and conducting internal audits intended to evaluate our internal control structure and compliance with applicable regulatory requirements. The members of the Audit Committee are not professionally engaged in the practice of accounting or auditing; as noted above, the Audit Committee’s responsibility is to monitor and oversee these processes.

The Audit Committee regularly meets and holds discussions with our management and internal auditors and with the independent auditor, including sessions with the internal auditors and with the independent auditor without members of management present. Management represented to the Audit Committee that our consolidated financial statements were prepared in accordance with GAAP. The Audit Committee reviewed and discussed our consolidated financial statements with management and PwC.

The Audit Committee also discussed with PwC the quality of our accounting principles, the reasonableness of critical accounting estimates and judgments, and the disclosures in our consolidated financial statements, including disclosures relating to significant accounting policies. Based on the Audit Committee’s discussions with our management, internal auditors, and PwC, as well as a review of the representations given to the Audit Committee and PwC’s reports, the Audit Committee recommended to the Board, and the Board approved, inclusion of the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on February 28, 2018.

Submitted by the Audit Committee of the Board:

William F. Muir, Chair

Stephen A. Ferriss

Robert J. McCarthy

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or Exchange Act, and shall not otherwise be deemed filed under these Acts.

 

 

      

 

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COMPENSATION - PROPOSAL 3: NON-BINDING, ADVISORY APPROVAL OF NEO COMPENSATION (“SAY-ON-PAY”)

 

     

 

COMPENSATION

Proposal 3: Non-Binding, Advisory Approval of NEO Compensation (“Say-on-Pay”)

 

 

WHAT YOU ARE VOTING ON:

 

At the Annual Meeting, stockholders are being asked to approve the

compensation of our NEOs as disclosed in this Proxy Statement.

 

 

As described in detail in the CD&A and the related compensation tables and narrative discussion beginning on page 26 of this Proxy Statement, our executive compensation programs are designed to reward our NEOs for the achievement of short-term and long-term strategic and operational goals, align NEO and stockholder interests, attract and retain quality leadership, and support a pay-for-performance philosophy, while at the same time avoiding the encouragement of unnecessary or excessive risk taking.

In accordance with Section 14A of the Exchange Act, the Board is asking our stockholders to indicate their support for our executive compensation programs as described in this Proxy Statement. This vote is referred to as a “Say-on-Pay” vote. This vote is not intended to address any specific term of compensation, but rather the overall compensation of our NEOs and the philosophy, policies, and practices described in this Proxy Statement. Accordingly, the Board is asking our stockholders to vote FOR the following resolution at the 2018 Annual Meeting:

“RESOLVED, that the stockholders of Santander Consumer USA Holdings Inc. (the “Company”) hereby approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules, including in the “Compensation Discussion and Analysis” and the compensation tables and related narrative discussion included in the Proxy Statement for the 2018 Annual Meeting of Stockholders.”

Although this vote regarding the compensation of our NEOs is not binding, the Board values the opinions of our stockholders and will consider the result of the vote when determining future executive compensation arrangements.

At the 2015 Annual Meeting, our stockholders approved a non-binding, advisory proposal to hold triennial Say-on-Pay votes. In consideration of the results of this advisory vote, the Board has adopted a policy providing for triennial Say-on-Pay votes. Unless the Board modifies this policy, our next Say-on-Pay vote following this vote will be held at our 2021 Annual Meeting.

The affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on this matter at the Annual Meeting, whether in person or represented by proxy, will approve, on an advisory basis, the compensation paid to the Company’s NEOs.

 

 
 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR

APPROVAL, ON AN ADVISORY BASIS, OF THE

COMPENSATION PAID TO THE COMPANY’S NEOs AS

DISCLOSED IN THIS PROXY STATEMENT.

 

 

 

      

 

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COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

Compensation Discussion and Analysis

Executive Summary

Introduction. This CD&A describes the material elements of compensation awarded to, earned by, or paid to each of our NEOs, and focuses on the information contained in the following tables and related footnotes primarily for the year 2017.

 

NAMED EXECUTIVE OFFICER    TITLE

 

Scott Powell

 

  

 

President and CEO

 

 

Juan Carlos Alvarez de Soto

 

  

 

Chief Financial Officer

 

 

Richard Morrin

 

  

 

President, Chrysler Capital and Auto Relationships

 

 

Christopher Pfirrman

 

  

 

Chief Legal Officer, General Counsel, and Corporate Secretary

 

 

Jason A. Kulas

 

  

 

Former President and CEO

 

 

Ismail Dawood

 

  

 

Former Chief Financial Officer

 

 

Dale Cochran*

 

  

 

Former Chief Risk Officer

 

 

* Mr. Cochran was serving as our Chief Risk Officer at the end of 2017 and was one of our three highest paid executive officers for 2017. However, he ceased serving as our Chief Risk Officer in February 2018. For more information, please see “Compensation—Executive Compensation Tables—Potential Payments upon Termination or Change in Control—Table Illustrating Potential Payments upon Termination or Change in Control.”

This CD&A explains the overall objectives of our executive compensation program, how each element of our executive compensation program is designed to satisfy these objectives, and the policies underlying our 2017 compensation program.

The Compensation Committee designs our executive compensation program to be consistent with best practices, support our businesses in achieving their key goals and imperatives, and drive stockholder value. The Compensation Committee believes that our compensation programs, which are intended to comply with all applicable laws and regulations and directives from our regulators, are governed by a set of sound principles and are designed to mitigate excessive risk-taking.

2017 Business Performance Highlights. With net income of $1.2 billion ($627 million adjusted net income) and $20.1 billion in total originations, our full year 2017 financial results demonstrate our continued profitability and strong returns. Additionally, we achieved a return on average assets (“ROA”) of 3% (1.6% adjusted ROA) and a return on average equity (“ROE”) of 21.0% (11.1% adjusted ROE), and issued $9.2 billion in securitizations.1

 

 

Net income for the full year 2017 was $1.2 billion, or $3.30 per diluted common share. Adjusted net income, which excludes the impact of significant items, including tax reform and other tax-related items, legal reserves, and a settlement with our former CEO Thomas G. Dundon, was $627 million, or $1.74 per diluted common share.

 

 

The Federal Reserve Bank of Boston terminated its 2014 Written Agreement with our majority owner, SHUSA, following its non-objection to SHUSA’s CCAR submission. SHUSA and SC now operate within a normal capital cycle and we completed our first cash dividend payments to stockholders since 2014.

 

 

SHUSA and Banco Santander reaffirmed their commitment to SC by increasing their total ownership in SC to approximately 68.1%, following Banco Santander’s acquisition from our former CEO Thomas G. Dundon of 9.6% of our outstanding shares, which it transferred to SHUSA.

 

 

We launched a flow program with Banco Santander allowing us to execute prime auto loan sales of $2.6 billion, and through Banco Santander increased FCA dealer receivables 14% year-over-year (“YoY”), to $2.0 billion.

 

 

We were a leading auto loan ABS issuer with $9.2 billion in ABS offered and sold, including our inaugural lease securitization, Santander Retail Auto Lease Trust, and our first public DRIVE securitization.

 

 

We achieved a retail installment contract (“RIC”) gross charge-off ratio of 17.9%, up 60 basis points YoY, stabilizing compared to a 230 basis point increase from 2015 to 2016 and RIC net charge-off ratio of 8.9%, up 60 basis points YoY, compared to a 140 basis point increase from 2015 to 2016.

 

 

We achieved ROA of 3.0% and adjusted ROA of 1.6%.

 

In line with the Compensation Committee’s goal of balancing risk/reward management with income and profitability, the above results were accomplished while also taking a measured approach to originations in a competitive market and improving the credit quality of our balance sheet.

 

 

1  Adjusted net income, adjusted ROA, and adjusted ROE are each non-GAAP financial measures. For an explanation and a reconciliation of adjusted net income, adjusted ROA, and adjusted ROE to net income, ROA, and ROE, respectively, the most directly comparable measures reported under GAAP, please see Annex A.

 

 

      

 

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COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

     

 

2017 Compensation Highlights. The Compensation Committee’s compensation decisions for 2017 reflect the direct relationship between the pay opportunities for our NEOs and performance for our stockholders. Based on our strong financial performance in an increasingly competitive market, consistent economic stability, robust customer relations, and steady regulatory compliance, the Compensation Committee approved funding of 95% of the target amount of the SC Executive Bonus Pool (the “Bonus Pool”).

The 95% funding of the Bonus Pool was further supported by the accomplishment of key goals related to our survey and program to measure and report customer satisfaction and completion of critical regulatory, compliance, and risk milestones.

As part of the continual assessment and evolution of our compensation programs for NEOs, the Compensation Committee oversaw the first performance year of a Special Regulatory Incentive Program (the “SRIP”) in 2017. Under the SRIP, specified NEOs are eligible to receive a multi-year targeted award based on their performance at SC and achievement of companywide objectives. For 2017, the SRIP was tailored to incentivize NEOs to achieve key regulatory milestones and each of our NEOs participated in the program. For more information, please see “Principal Components of Executive Compensation—SRIP” in this CD&A.

Allocation of Compensation Between SC and SHUSA for Mr. Powell. On August 27, 2017, the Board appointed Scott Powell to succeed Jason Kulas as our CEO. Mr. Powell also continued (and continues) to serve as the CEO of our parent, SHUSA. In connection with his appointment, our Compensation Committee and SHUSA’s compensation committee jointly determined the following approach to allocating Mr. Powell’s compensation between SC and SHUSA for 2017:

 

»   Cash Compensation. Mr. Powell has remained on SHUSA’s payroll and continued to participate in SHUSA’s benefit plans. However, a portion of Mr. Powell’s salary has been allocated to his service as our CEO during 2017, which appears in our financial statements as a compensation expense. As for the cash portion of his 2017 annual bonus (including the SRIP award for 2017, described below), we have paid and will continue to pay the allocated portion directly. Through August 27, 2017, 100% of Mr. Powell’s time was attributed to SHUSA. For the remainder of the year, Mr. Powell spent approximately 69% of his time on SC matters and 31% of his time on SHUSA matters. As a result, for 2017, in total approximately 23% of Mr. Powell’s cash compensation was attributed to his service as our CEO. These amounts for 2017 are shown in the salary and bonus columns (for the non-deferred cash portion of the bonus) in the Summary Compensation Table below. This same allocation applies to the deferred cash portion of Mr. Powell’s 2017 bonus, which amounts will be reported in the Summary Compensation Table for the year earned and paid.

 

»   Equity Compensation. As discussed below, 50% of Mr. Powell’s 2017 annual bonus (including the portion under the SRIP) is provided in the form of equity awards that are subject to certain vesting conditions. For 2017, to reflect Mr. Powell’s split in service between SHUSA and SC, but also to give Mr. Powell an additional initial stake in SC to further align his interests with the interests of our long-term stockholders, the Compensation Committee, together with the SHUSA compensation committee, jointly decided that the equity portion of Mr. Powell’s 2017 bonus would be provided half in awards of RSUs under our equity compensation plan and half in awards of Banco Santander ADRs under SHUSA’s compensation program. The grant date fair value of our RSU awards for 2017 service will be shown in the stock awards column in the Summary Compensation Table for 2018 (the year the RSUs were granted).

Given the allocation of compensation between us and SHUSA for Mr. Powell’s services, the assessment of Mr. Powell’s performance and decisions about the total amount of his 2017 bonus were made jointly by our Compensation Committee and SHUSA’s compensation committee. Please see SHUSA’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for information about Mr. Powell’s total compensation paid by SHUSA, including the amounts reported in this Proxy Statement for amounts attributable to his service as our CEO. Our Compensation Committee will review this allocation approach for 2018 compensation with SHUSA and, depending on the expected allocation of Mr. Powell’s duties for 2018, may change the approach next year.

Key Executive Compensation Principles. The fundamental principles that the Compensation Committee follows in designing and implementing compensation programs for our NEOs are to:

 

»   Attract, motivate, and retain highly skilled executives with the business experience and acumen necessary for achieving our long-term business objectives;

 

»   Link pay to performance and, to an appropriate extent, align the interests of management with those of our stockholders;

 

»   Appropriately balance risk and financial results; and

 

»   Support our core values, strategic mission, and vision.

The Compensation Committee aims to provide a total compensation package that is comparable to that of other financial institutions with whom we compete for business and for talent, taking into account publicly available information provided by our independent compensation consultant. Within this framework, the Compensation Committee considers each component of each NEO’s compensation package independently; that is, the Compensation Committee does not evaluate what percentage each component comprises of the total compensation package. In 2017, the Compensation Committee took into account SC’s performance and each NEO’s individual performance, level of responsibility, and track record within the organization in setting the NEO’s compensation.

 

 

      

 

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COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

2017 Compensation Actions

How we compensated our CEO serving at the end of 2017

 

 

SCOTT POWELL

 

  

AGE: 56     TITLE: President and CEO

 

As discussed in “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell,” Mr. Powell’s performance in 2017 was evaluated collectively by the Board and SHUSA’s Board of Directors. Our decision to pay a pro rata portion of Mr. Powell’s compensation for 2017 was reached after substantial discussion, review of peer group data presented by the Compensation Committee’s independent consultant, and a thorough review of Mr. Powell’s performance throughout the year. Mr. Powell received a base salary of $2,000,000 for his work as CEO of both SHUSA and SC, with $455,400 allocated for time spent as SC’s CEO. His annual bonus award of $2,395,000 for his work as CEO of both SHUSA and SC (114% of Mr. Powell’s target bonus of $2,104,000) was provided in a mix of current and deferred cash and RSU awards, with $871,421 allocated to us. Mr. Powell also received a SRIP bonus award of $500,000 for his work as CEO of both SHUSA and SC, provided in a mix of current and deferred cash and RSU awards, with half of the equity portion and approximately 23% of the cash portion allocated to us, for a total of approximately $181,925. As discussed above, the cash allocation was based on Mr. Powell’s time as our CEO in 2017, while the equity allocation was intended to give Mr. Powell an additional stake in SC to more fully align his interests with those of our stockholders.

 

How we compensated our other NEOs serving at the end of 2017

 

 

JUAN CARLOS ALVAREZ DE SOTO

 

  

AGE: 47     TITLE: Chief Financial Officer

 

Mr. Alvarez de Soto joined us in October 2017 from SHUSA, where he served as Treasurer. For his service to us in 2017, Mr. Alvarez de Soto received a salary of $250,000 as well as an annual bonus award of $205,000 (160% of Mr. Alvarez de Soto’s prorated target bonus), which was provided in a mix of current and deferred cash and RSU awards. Mr. Alvarez de Soto also received a prorated SRIP bonus award of $51,453, which was provided in a mix of current and deferred cash and RSU awards.

 

 

 

RICHARD MORRIN

 

  

AGE: 48     TITLE: President, Chrysler Capital and Auto Relationships

 

In setting Mr. Morrin’s compensation for 2017, the Compensation Committee recognized that Mr. Morrin made significant progress on the collection, tracking, and handling of customer complaints. The Compensation Committee also noted that JD Power dealer satisfaction results showed progress in some areas and continued room for improvement in others, and that Mr. Morrin put significant work into improving SC’s hiring, training, and development program for servicing sites as well as to improve competitiveness of program pricing and approach against key competitors. The Compensation Committee also determined that Mr. Morrin has managed our relationship with Chrysler well, fostered a strong working relationship with our regulators, and demonstrated a high level of awareness of and compliance with risk management activities, particularly by reinforcing staff within the first line in coordination with business operators. For 2017, the Compensation Committee increased Mr. Morrin’s base salary from $650,000 to $850,000 to align with market. Mr. Morrin was also compensated with an annual bonus award of $784,125 (90% of Mr. Morrin’s target bonus) and a SRIP bonus award of $250,000, in each case provided in a mix of current and deferred cash and RSU awards.

 

 

 

CHRISTOPHER PFIRRMAN

 

  

AGE: 57     TITLE: Chief Legal Officer, General Counsel, and Corporate Secretary

 

In deciding on compensation for 2017, the Compensation Committee specifically recognized that Mr. Pfirrman improved Board processes and completed an inclusive, external survey of customers. The Compensation Committee further considered that, under Mr. Pfirrman’s leadership, we have settled or minimized several legal disputes, as well as successfully navigated important funding and liquidity initiatives. The Compensation Committee noted that Mr. Pfirrman consistently demonstrated a high level of awareness of risk management activities and deliberation in his evaluations of legal risks to SC. For 2017, the Compensation Committee increased Mr. Pfirrman’s base salary from $649,418 to $659,018 in order to align with market. Mr. Pfirrman was also compensated with an annual bonus award of $520,000 (97.7% of Mr. Pfirrman’s target bonus) and a SRIP bonus award of $139,813, in each case provided in a mix of current and deferred cash and RSU awards.

 

 

 

      

 

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COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

     

 

 

 

 

DALE COCHRAN

 

  

AGE: 52     TITLE: Former Chief Risk Officer

 

Mr. Cochran joined us in May 2017. Per the terms of his offer letter, he received $461,058 in base salary in 2017 and a $970,000 sign-on bonus upon hire, 50% in cash and 50% in RSUs vesting in equal installments over three years. In 2018, as part of his separation agreement, Mr. Cochran also received an annual bonus award of $400,000 and SRIP award of $250,000 for performance year 2017, provided in a mix of current and deferred cash and RSU awards.

 

 

PROCESS FOR DETERMINING EXECUTIVE COMPENSATION

Compensation Committee

The Compensation Committee sets the compensation for our executive officers, including our NEOs, and has oversight of, among other things, adoption, modification, and termination of the terms of our executive incentive plan(s), and approval of amounts paid to our NEOs under those plans. The Compensation Committee operates under a written charter adopted by the Board that is published on the investor relations section of our website at http://investors.santanderconsumerusa.com. Pursuant to its charter, the Compensation Committee may delegate responsibilities to subcommittees consisting of one or more of its members, who must report on their activities to the Compensation Committee.

The Compensation Committee conducts an in-depth assessment of each NEO’s performance against his or her individual goals, as well as against SC’s performance, and then applies its judgment to make compensation decisions. The Compensation Committee utilizes a formula to approve a bonus pool for executive officers and certain other senior members of management (please see “Principal Components of Executive Compensation—Annual Bonuses—SC Bonus Pool” in this CD&A for further information), but does not otherwise rely on a formula or matrix to make individual compensation decisions. The Compensation Committee believes this process provides accountability for performance against SC and individual goals and enables the Compensation Committee to assess effectively the quality of the performance and leadership demonstrated by each NEO. Importantly, the Compensation Committee believes that the process also differentiates among each NEO’s performance and motivates each NEO’s short-term and long-term results as well as promotes innovation and business transformation within SC.

To advise the Compensation Committee in fulfilling its duties and responsibilities, the Compensation Committee retained Pay Governance LLC (“Pay Governance”) in July 2017 to act as its independent consultant and advise on executive compensation. Pay Governance reported directly to the Compensation Committee and performed no other work for SC in 2017. As part of its 2017 engagement of Pay Governance, the Compensation Committee analyzed Pay Governance’s independence from management and whether hiring Pay Governance would raise a conflict of interest. The Compensation Committee performed this analysis by taking into consideration the following factors set forth in Section 303A.05 of the NYSE Listed Company Manual:

 

»   Any other services provided to us by Pay Governance;

 

»   The amount of fees Pay Governance received from us as a percentage of Pay Governance’s total revenue;

 

»   Policies and procedures Pay Governance utilizes to prevent conflicts of interest;

 

»   Any business or personal relationship of the individual compensation advisor of Pay Governance with any member of the Compensation Committee or an executive officer of ours;

 

»   Any business or personal relationship of Pay Governance with an executive officer of ours;

 

»   Any SC stock owned by Pay Governance or the Compensation Committee’s individual advisor at Pay Governance; and

 

»   Any business or personal relationship of Pay Governance with an executive officer of ours.

The Compensation Committee determined, based on its analysis of the above factors, that Pay Governance is independent from management and that the work of Pay Governance and the individual compensation advisors employed by Pay Governance as compensation consultants to the Compensation Committee have not presented any conflict of interest.

Pay Governance assisted the Compensation Committee in 2017 by providing market and industry information regarding executive compensation. In providing such information, Pay Governance identified consumer finance and banking companies with which we compete directly for both business and talent. In identifying those companies, Pay Governance considered institutions in comparable industries and product markets, with comparable business models, and of comparable sizes. While the Compensation Committee considered all available information when determining NEO compensation for 2017, including the data provided by Pay Governance, it did not engage in any benchmarking of NEO compensation for 2017.

 

 

      

 

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Consideration of Say-on-Pay Vote

The Compensation Committee values input from our stockholders on our executive compensation program and our principles and objectives when determining executive compensation. One way the Compensation Committee receives that input is through the results of an advisory stockholder vote on executive compensation (the “Say-on-Pay vote”). We hold a Say-on-Pay vote every three years, most recently in 2015, based on the preference expressed by our stockholders at our 2015 Annual Meeting. In the 2015 Say-on-Pay vote, a significant majority of our stockholders approved, on an advisory basis, the compensation for our NEOs. The Compensation Committee did not take any specific actions with respect to 2017 compensation decisions for our NEOs as a result of the 2015 Say-on-Pay vote.

As in 2015, the Compensation Committee will assess the results of this year’s Say-on-Pay Vote with careful consideration of our stockholders’ preferences and will determine what, if any, changes should be made to our executive compensation programs currently in place. Even with a full ratification of the compensation decisions, the Compensation Committee will continue to review our NEOs’ performance against their individual goals and the goals of SC.

 

 

      

 

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PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION

Overview of Components

The Compensation Committee uses the following elements of compensation to attract and retain NEOs and maintain a stable team of effective leaders, to balance the compensation of our NEOs with the short-term and long-term objectives of SC, and to align the interests of our NEOs with the interests of all of our stockholders. For 2017, the compensation that we paid to our NEOs consisted primarily of base salary and short- and long-term incentive opportunities, as described more fully below. In addition, our NEOs were eligible for participation in company-wide health and welfare benefits plans, and provided with certain health and welfare benefits and perquisites not available to our employees generally, as described more fully below. The principal elements of compensation available to our NEOs in 2017 were as follows:

 

 

ELEMENT

 

 

 

DESCRIPTION AND PURPOSE

 

Base Salary  

 

»

 

 

 

Fixed cash compensation component that reflects the NEO’s position and responsibilities.

 

 

»

 

 

Offers stability for NEOs.

 

Annual Bonus

 

 

»

 

 

Annual bonus program designed to motivate and reward the achievement of SC and/or individual performance goals.

 

 

»

 

 

 

The annual bonus is comprised of both short-term and long-term incentives. A portion of the bonus is deferred in cash and RSUs as part of a balanced design intended to appropriately balance compensation risk. Payment of the deferred cash and RSUs is specifically conditioned upon the absence of several negative risk and/or legal events, including, but not limited to, any of the following: (i) material failures with respect to risk management by us and any of our affiliates; (ii) any material, negative restatement of our financial statements as a result of activities carried out on or after January 1, 2017; (iii) material breach of any of our internal rules or regulations; or (iv) a material, negative change in our capitalization or risk profile.

 

 

»

 

 

In 2018, the Compensation Committee awarded bonuses to our NEOs for their performance in 2017 based upon a bonus pool methodology adopted by the Compensation Committee. For bonuses awarded to Mr. Powell and Mr. Pfirrman, a portion of the deferred cash and RSUs are also subject to future Banco Santander and SC performance goals to further encourage long-term, sustainable performance. Part of Mr. Cochran’s separation agreement includes what would have been his annual bonus for 2017, a portion of which is subject to the same performance goals as Mr. Pfirrman’s bonus. Part of Mr. Kulas’s severance package also includes what would have been his annual bonus for 2017, a portion of which is subject to the same performance goals as Mr. Powell’s bonus. Mr. Dawood, who separated from us in 2017, was not awarded a bonus.

 

Long-Term Incentive Compensation  

 

»

 

 

No awards under the SAN Performance Award program were made in 2017, and none are expected moving forward. In November 2016, we made final grants of performance-based RSUs (PSUs) under the program to certain NEOs. The awards are scheduled to vest in March 2019 based on a scorecard of Banco Santander performance goals. Awards previously made under the SAN Performance Award program in 2015 became earned in 2017.

 

 

»

 

 

Aligns long-term NEO and stockholder interests and encourages retention.

 

 

SRIP Awards

 

 

 

 

»

 

 

 

The Compensation Committee designed the SRIP to incentivize and reward our NEOs for meeting key regulatory commitments, as part of our long-term business strategy. Under the SRIP, our NEOs are eligible to receive awards that track the same payment procedure and timing as annual bonus awards. For performance in 2017, we granted SRIP awards to all of the NEOs except for Mr. Dawood.

 

   

»

 

 

 

Aligns long-term NEO and stockholder interests, encourages retention, and incentivizes achievement of regulatory goals.

 

 

Retirement Benefits; Health and Welfare Benefits; Perquisites

 

 

 

 

»

 

 

 

Provide NEOs with stability during employment and into retirement and are competitive with overall market practices.

Employment Agreements  

 

»

 

 

 

Severance benefits provided to certain NEOs upon certain terminations of employment.

 

 

»

 

 

 

Facilitates retention of NEOs by providing income stability in the event of job loss.

 

 

 

 

      

 

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Base Salary

Base salary reflects each NEO’s level of responsibility, leadership, and tenure, as well as the Compensation Committee’s evaluation of each NEO’s contribution to the performance and profitability of SC. In establishing each NEO’s annual base salary, the Compensation Committee considered market salary data, our budget, achievement of performance objectives, and our CEO’s assessment of the other NEOs’ performance.

The following table provides detail regarding each NEO’s annual base salary rate for 2017:

 

 

NEO

 

 

ANNUAL BASE SALARY RATE

($)*

 

 

Scott Powell**

 

 

2,000,000

 

 

Juan Carlos Alvarez de Soto***

 

 

1,000,000

 

 

Richard Morrin

 

 

850,000

 

 

Christopher Pfirrman

 

 

659,018

 

 

Jason Kulas

 

 

1,809,600

 

 

Ismail Dawood

 

 

1,052,250

 

 

Dale Cochran***

 

 

685,000

 

 

* This table provides the annual base salary rate for each NEO as of their last date of employment with us in 2017. For Mr. Kulas and Mr. Dawood, those figures are as of the dates of separation from service. For the other NEOs, those figures are as of December 31, 2017. The base salary actually paid to each NEO in 2017 is reflected in the Summary Compensation Table below.

 

** Mr. Powell’s 2017 salary of $2,000,000 was set by SHUSA’s compensation committee, but only $455,400 was allocated to time spent on SC matters, as described above in “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell.

 

*** Mr. Alvarez de Soto joined us in October 2017 and was paid a pro rata share of his annual base salary—$250,000. Mr. Cochran joined us in May 2017 and was also paid a pro rata share of his base salary—$461,058.

The Compensation Committee approved increases in base salaries for certain NEOs during 2017. For more information regarding these base salary increases, please see “2017 Compensation Actions” in this CD&A.

Annual Bonuses

Introduction. For 2017, the annual compensation of our NEOs included bonuses payable in cash and RSUs under SC’s Senior Executive Annual Bonus Plan (the “Bonus Plan”).

The Bonus Plan is intended to provide an incentive for superior work and to motivate covered key executives toward even greater achievement and business results, to tie their goals and interests to the long-term interests of our stockholders, and to enable us to attract and retain highly-qualified executives. Under the Bonus Plan, our executive officers, including our NEOs and certain senior members of management, are eligible to receive bonus payments for a specified period (for example, our fiscal year), which may be performance-based or discretionary.

 

 

      

 

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Individual Bonus Targets. The Compensation Committee assigned to each NEO a target bonus award opportunity under the Bonus Plan for 2017 based on the NEO’s role and responsibilities, rate of base salary, and competitive practices at our compensation peer groups. The following table provides detail regarding each NEO’s target bonus under the Bonus Plan for performance in 2017:

 

NEO

 

 

TARGET BONUS*

($)

 

 

Scott Powell**

 

 

2,104,000

 

 

Juan Carlos Alvarez de Soto***

 

 

128,125

 

 

Richard Morrin

 

 

871,250

 

 

Christopher Pfirrman

 

 

532,180

 

 

Jason Kulas

 

 

2,070,000

 

 

Ismail Dawood

 

 

750,000

 

 

Dale Cochran

 

 

497,125

 

 

* Target bonuses for 2017 were increased by 2.5% in December 2017 for our NEOs serving at that time in response to CRD IV regulations, which no longer allowed us to pay dividend equivalents or interest on deferred amounts starting with the 2017 performance year.

 

** Mr. Powell’s full 2017 bonus target of $2,104,000 was set by SHUSA’s compensation committee, as described above in “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell.

 

*** Mr. Alvarez de Soto joined us after the start of the 2017 performance year and his pro rata target bonus is shown above.

SC Bonus Pool. The Compensation Committee approved the Bonus Pool as a methodology for setting the overall funding of Bonus Plan awards with respect to 2017 for our executive officers, including our NEOs, and certain senior members of management. The target amount of the Bonus Pool is the sum of the individual target bonus amounts. The Bonus Pool methodology incorporates a balanced, “scorecard” approach that considers our financial performance against budgeted financial goals, as well as performance related to customer satisfaction, regulatory compliance, employees, and culture. The Compensation Committee approved the following metrics for the Bonus Pool for 2017:

 

SC BONUS POOL METRIC

 

 

WEIGHTING OF SC
BONUS POOL METRIC

 

 

Customers & Employees

 

 

10%

 

 

Consumer Customer Satisfaction

 

 

2.50%

 

 

Chrysler Capital (CCAP) Dealer Loyalty

 

 

1.25%

 

 

Core Dealer Satisfaction

 

 

1.25%

 

 

Employee Engagement

 

 

5.00%

 

 

Regulatory & Risk

 

 

20%

 

 

Cost of Credit Ratio(1)

 

 

5.00%

 

 

Completed Action Plans for Regulatory Commitments and Written Agreements

 

 

15.00%

 

 

Capital

 

 

15%

 

 

Contribution to Group Capital(1)

 

 

15.00%

 

 

Profitability

 

 

55%

 

 

Net Profit(1)

 

 

27.50%

 

 

RoRWA(1)

 

 

27.50%

 

 

SHUSA Scorecard Modifier

 

 

Formulaic

 

 

Discretionary Adjustment

 

 

+/- 20%

 

 

 

      

 

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(1)  We generally assess our performance based on financial measures calculated under GAAP. However, due to our relationship with Banco Santander, for purposes of the 2017 Bonus Pool, financial measures were calculated under International Financial Reporting Standards (“IFRS”). Differences between IFRS and GAAP in the accounting treatment of certain transactions can result in differences between financial measures calculated under IFRS and those calculated under GAAP. We believe using financial measures calculated under IFRS rather than GAAP did not significantly impact the Compensation Committee’s ability to assess our NEOs’ performance for purposes of determining 2017 Bonus Pool awards.

”Cost of Credit Ratio” is defined as the ratio of the sum of total provision over the prior 12 months to the average 12-month customer loan balances (excluding all of the public balance sheet). “Contribution to Group Capital” is defined as net profit minus capital deductions and 11% of change in risk-weighted assets. “Net Profit” is defined as net profit after tax, prior to minority interests, and adjusted for significant one-time items, including tax reform and other tax-related items, hurricane-related provisions, certain legal reserves, a settlement with Thomas G. Dundon, and other non-recurring items. “RoRWA” (or “return on risk-weighted assets”) is defined as the ratio of net income to total risk-weighted assets. (Under certain banking regulators’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together with the measure for market risk, resulting in our total risk-weighted assets.)

For 2017, we performed below target on our Net Profit and RoRWA goals. For purposes of the Bonus Plan:

 

»   Our Net Profit for 2017 was $660 million, below our 2017 goal Net Profit of $819 million, and

 

»   Our RoRWA for 2017 was 1.82%, below our 2017 goal RoRWA of 2.15%.

We performed above target on both categories in the Regulatory & Risk metric. On the Customers & Employees metric, we performed only slightly below target on two categories, and below target on the other two categories. As for capital creation, while performance was slightly below target, our capabilities in 2017 continued to be strong and show signs of improving going into 2018.

The final calculated score of the Bonus Pool before the exercise of any discretionary adjustment was 89.64%. The Bonus Pool provides that this final calculated score be adjusted by the difference between our bonus plan score and the final score under SHUSA’s bonus plan, multiplied by 20%. After reviewing SHUSA’s bonus plan score, the Compensation Committee determined that an adjustment of 2.50% was appropriate.

While some of the metrics for the Bonus Pool were below target, net income was strong in an increasingly competitive market and our NEOs made significant strides in achieving their individual goals, instilling a culture of compliance and balancing risk/reward management with income and profitability. As noted above, the Compensation Committee may use its discretion to adjust the final Bonus Pool funding up or down by 20 percentage points in either direction. Accordingly, the Compensation Committee in its discretion determined that the Bonus Pool should be funded at 95% of target for 2017, summarized as follows:

 

SC BONUS POOL METRIC

 

RESULTS

 

 

TARGET
WEIGHTING

 

 

FINAL SC

BONUS
POOL

 

 

Customers & Employees

 

 

10%

 

 

9.50%

 

 

Consumer Customer Satisfaction

 

 

Slightly below target

 

 

2.50%

 

 

2.40%

 

 

CCAP Dealer Loyalty

 

 

Below target

 

 

1.25%

 

 

1.14%

 

 

Core Dealer Satisfaction

 

 

Below target

 

 

1.25%

 

 

1.11%

 

 

Employee Engagement

 

 

Slightly below target

 

 

5.00%

 

 

4.85%

 

 

Regulatory & Risk

 

 

20%

 

 

20.00%

 

 

Cost of Credit Ratio

 

 

Above target

 

 

5.00%

 

 

5.00%

 

 

Completed Action Plans for Regulatory Commitments and Written Agreements

 

 

Above target

 

 

15.00%

 

 

15.00%

 

 

Capital

 

 

15%

 

 

14.70%

 

 

Contribution to Group Capital

 

 

Slightly below target

 

 

15.00%

 

 

14.70%

 

 

Profitability

 

 

55%

 

 

45.44%

 

 

Net Profit

 

 

Below target

 

 

27.50%

 

 

22.16%

 

 

RoRWA

 

 

Below target

 

 

27.50%

 

 

23.28%

 

 

SHUSA Scorecard Modifier

 

 

Applied

 

 

+/- 20%

 

 

2.50%

 

 

Discretionary Adjustment

 

 

Exercised

 

 

+/- 20%

 

 

2.86%

 

 

                                                             TOTAL

 

 

95.00%

 

 

 

 

      

 

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Individual Performance Assessments and Award Determinations. As described above, our performance resulted in an approved funding of 95% of the Bonus Pool target. This Bonus Pool percentage is multiplied by the applicable target bonus amount of each executive officer, including each NEO, to establish an initial starting point for each executive subject to the Bonus Pool.

Each executive’s award under the Bonus Plan is subject to a discretionary adjustment, either positive or negative, based on the evaluation of the executive’s performance by the Compensation Committee. In no event, however, will the aggregate total of the actual bonus amounts exceed the aggregate total of the Bonus Pool. The Compensation Committee believes that this individual performance review and these discretionary adjustments serve stockholder interests by providing the Compensation Committee with a means to differentiate compensation outcomes among our NEOs based on the quality of the performance and leadership demonstrated by each NEO.

The Compensation Committee conducted a detailed evaluation and assessment of each NEO’s 2017 performance against pre-established performance measures that were tied to financial performance and strategic initiatives, including risk and compliance measures. Please see “2017 Compensation Actions” in this CD&A for the additional information on the individual performance goals and assessments.

For 2017, following the review of our performance and each NEO’s individual performance, the Compensation Committee approved awards under the Bonus Plan for each NEO as follows:

 

NEO*

 

  

 

2017 BONUS PLAN AWARD

($)

 

  

 

TARGET BONUS AWARDED

(%)

 

 

Scott Powell**

 

  

 

871,421

 

  

 

113.8

 

 

Juan Carlos Alvarez de Soto***

 

  

 

205,000

 

  

 

160.0

 

 

Richard Morrin

 

  

 

784,125

 

  

 

90.0

 

 

Christopher Pfirrman

 

  

 

520,000

 

  

 

97.7

 

 

* Neither Mr. Kulas nor Mr. Dawood is listed above because neither was employed as of December 31, 2017. Mr. Kulas was awarded 100% of his target bonus, $2,070,000, under his separation agreement, whereas Mr. Dawood was not awarded a bonus under his separation agreement. Mr. Cochran, who was employed as our Chief Risk Officer on December 31, 2017 but transitioned into a non-executive role in February 2018, was guaranteed a $400,000 annual bonus award for 2017 pursuant to an addendum to his offer letter made in December 2017, constituting 80.5% of his pro rata target annual bonus award of $497,125. Mr. Cochran’s bonus award will be paid as part of his separation package.

 

** Mr. Powell’s 2017 full bonus amount of $2,395,000 was in recognition of his service as CEO of both SHUSA and SC. As described above in “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell,” half of the equity portion of Mr. Powell’s 2017 bonus was provided in RSUs under our equity compensation plan, while approximately 23% of the cash portion of Mr. Powell’s 2017 bonus was allocated to his service as our CEO.

 

*** Mr. Alvarez de Soto joined us in October 2017 and his pro rata target bonus of $128,125 was used to calculate the percentage of his target bonus awarded.

For 2017, awards under the Bonus Plan were payable in cash and RSUs as discussed below. These amounts will appear in the Summary Compensation Table of our proxy statements over several years as follows:

 

»   The immediately payable cash amounts of the Bonus Plan awards are reflected for 2017 in the “Bonus” column of the 2017 Summary Compensation Table.

 

»   The deferred cash amounts of the Bonus Plan awards are subject to additional vesting requirements discussed below and will be reflected in the “All Other Compensation” column of the summary compensation tables for subsequent years to the extent vested and paid.

 

»   The RSU portion of the Bonus Plan awards was granted under the Omnibus Plan in March 2018 and will be reflected in the “Stock Awards” column of the summary compensation table for 2018.

Form of Awards: Mix of Current and Deferred Cash and RSUs. As we are a controlled company, owned indirectly by Banco Santander, certain of our executive officers, including our NEOs, and other identified staff are subject to Directive 2013/36/EU (“CRD IV”) promulgated by the European Parliament and Council of the European Union. Under Banco Santander’s Management Board Compensation Policy and Identified Staff Plan, certain identified staff, including all of our executive officers and all of our NEOs, are required to defer receipt of a portion of their variable compensation (including all bonuses paid under the Bonus Plan) in order to comply with CRD IV. Ultimately, these policies are intended to ensure that annual bonus awards encourage sustainable, long-term performance consistent with our risk appetite and risk management policies, and are aligned with long-term stockholder interests.

Accordingly, each NEO’s aggregate award under the Bonus Plan for 2017 (except for Mr. Powell, whose bonus award’s cash and equity mix is described above under “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell”) was payable 50% in cash (a portion of which was paid immediately and a portion of which was deferred) and 50% in the form of stock-settled RSUs (a portion of which was vested and settled immediately and a portion of which was subject to vesting). After the shares subject to the RSUs are settled, they will remain subject to transfer and sale restrictions for one year.

 

 

      

 

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The following table reflects the portions of each NEO’s bonus award for 2017 that were payable in the form of cash and RSUs:

 

NEO*

 

 

CASH PORTION OF 2017 BONUS AWARD

($)

 

 

RSU PORTION OF 2017 BONUS AWARD

($)

 

 

Scott Powell

 

 

272,671

 

 

598,750

 

 

Juan Carlos Alvarez de Soto

 

 

102,500

 

 

102,500

 

 

Richard Morrin

 

 

392,063

 

 

392,063

 

 

Christopher Pfirrman

 

 

260,000

 

 

260,000

 

 

* Neither Mr. Kulas nor Mr. Dawood is listed above because neither was employed as of December 31, 2017. Mr. Kulas’s award of $2,070,000, under his separation agreement, was awarded half in cash and half in RSUs. Mr. Cochran’s annual bonus award of $400,000, which was provided as part of his separation package, will also be awarded half in cash and half in RSUs. Mr. Dawood did not receive an award.

The portion of the total award deferred is based on Banco Santander policies as implemented by SC. Under those policies, each of Mr. Powell and Mr. Kulas had 50% of his Bonus Plan award deferred, and each of the other NEOs had 40% of his respective Bonus Plan awards deferred.

The deferred portion (whether cash or RSUs) becomes earned and vested annually over a vesting period of five years for Mr. Powell and Mr. Kulas, and three years for the other NEOs. Generally, an executive must remain continuously employed with us through each vesting date; however, under the terms of their separation agreements, Mr. Kulas’s and Mr. Cochran’s bonus plan awards will continue to vest without regard to their continued employment.

There are additional corporate performance goals in order for Mr. Powell and Mr. Kulas to earn the vesting installments in years three, four, and five, and for certain other NEOs (for 2017, Mr. Cochran and Mr. Pfirrman) to earn the vesting installment for year three. These performance goals further encourage sustainable, long-term performance. Mr. Alvarez de Soto’s and Mr. Morrin’s awards for 2017 are not subject to additional performance goals. The performance metrics are weighted 50% towards Banco Santander performance and 50% towards SC performance and follow a balanced, “scorecard” approach:

 

»   The SAN goals relate equally to (1) growth in SAN earnings per share (EPS) over 2016–2019; (2) SAN’s relative total shareholder return (“TSR”) over 2017–2019; and (3) attainment by SAN of certain capital ratio goals by December 31, 2019.

 

»   The SC goals relate equally to (1) SC attaining a specified level of EPS by December 31, 2019; (2) SC attaining certain capital ratio goals by December 31, 2019; (3) SC attaining a specified level of return on assets by December 31, 2019; and (4) SC attaining a specified level of expense ratio by December 31, 2019.

Performance below target goals for any component will result in below-target payouts, and performance below certain threshold goals will result in no payout for the component. No amount greater than the target award can be earned.

The payment of the deferred portion of the 2017 awards under the Bonus Plan is conditioned on avoidance of certain events or conduct, including: (1) our deficient financial performance; (2) material breach of any of our material internal rules or regulations; (3) material negative restatement of our financial statements (other than any restatement undertaken as a result of a change in accounting standards); (4) material negative change in our capitalization or risk profile prior to the applicable settlement date; and (5) certain other detrimental conduct. These conditions are intended to further reinforce a business culture that promotes conduct based on the highest ethical standards consistent with our risk management policies.

Our NEOs had the following amounts of their variable compensation for 2017 deferred under the design described above:

 

NEO*

 

 

TOTAL

($)

 

 

CASH DEFERRED

($)

 

 

RSUs DEFERRED

($)

 

 

Scott Powell

 

 

435,710

 

 

136,335

 

 

299,375

 

 

Juan Carlos Alvarez de Soto

 

 

82,000

 

 

41,000

 

 

41,000

 

 

Richard Morrin

 

 

313,650

 

 

156,825

 

 

156,825

 

 

Christopher Pfirrman

 

 

208,000

 

 

104,000

 

 

104,000

 

 

* Neither Mr. Kulas nor Mr. Dawood is listed above because neither was employed as of December 31, 2017. Half of Mr. Kulas’s award of $2,070,000, under his separation agreement, was deferred, half in cash and half in RSUs. Mr. Dawood did not receive an award. Both the cash and RSU portions of Mr. Cochran’s annual bonus award of $400,000, which was provided as part of his separation package, will be 40% deferred ($160,000).

Long-Term Incentive Compensation

Introduction. In addition to RSUs granted as a portion of the Bonus Plan award, which are a form of long-term equity incentive, the Compensation Committee may, in its discretion, grant additional long-term incentive awards under our Omnibus Plan. These awards

 

 

      

 

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may be in the form of restricted stock, RSUs, stock options, or other forms of award permitted under the Omnibus Plan. The Compensation Committee did not grant any such awards in 2017.

2016 SAN Performance Awards. Although no performance-based RSU (“PSU”) awards were made under the SAN Performance Award program in 2017, and none are expected to be made going forward, awards made in 2015 became earned in 2017 and awards made in 2016 continue to vest until 2019. The PSUs become earned based on the multi-year performance of Banco Santander. The awards made in 2015 became earned based on Banco Santander’s relative TSR performance over 2014–2017. PSUs granted in 2016 vest in March 2019 based on the achievement of a range of performance goals by Banco Santander:

 

 

GOAL

 

  

 

WEIGHT

 

 

SAN EPS growth, 2015–2017, relative to a competitor group

 

  

 

25%

 

 

SAN return on tangible equity in 2017

 

  

 

25%

 

 

SAN employee satisfaction (# of markets in which SAN group member is within top 3 banks to work for in 2017)

 

  

 

20%

 

 

SAN customer satisfaction (# of markets in which SAN group member is within top 3 banks in customer satisfaction index in 2017)

 

  

 

15%

 

 

Individual customer loyalty goals, as of 12/31/17

 

  

 

7.5%

 

 

Corporate customer loyalty goals, as of 12/31/17

 

  

 

7.5%

 

Settlement of the PSUs is contingent on the NEOs remaining employed through the March 2019 settlement date. As with Bonus Plan RSUs, the PSUs are also conditioned on avoidance of certain events or conduct by the executive, including: (1) our deficient financial performance; (2) material breach by the NEO of any of our material internal rules or regulations; (3) material negative restatement of our financial statements (other than any restatement undertaken as a result of a change in accounting standards); (4) material negative change in our capitalization or risk profile prior to the applicable settlement date; or (5) certain other detrimental conduct by our NEO. After the shares subject to the PSUs are settled, they will remain subject to transfer and sale restrictions for one year.

SRIP

Introduction. We, in conjunction with SHUSA, instituted a Special Regulatory Incentive Program (SRIP) in 2017 to provide a multi-year targeted award tied to participants’ status and standing at SC, as well as our general financial stability and our passing key regulatory milestones. The SRIP is tailored to maximize incentives for performance. Participants are eligible to receive awards that track the same payment procedure and timing as annual bonus awards. SRIP awards are essentially additional discretionary bonuses that our high-performing senior executives are eligible for, contingent upon accomplishing entity-wide performance goals.

Target Opportunities. Under the SRIP, we set total target opportunities for each NEO over the life of the multi-year program, a percentage of which would be at stake during separate performance cycles. We set $2,000,000 as Mr. Powell’s total target award; $1,000,000 as the total target award for Mr. Morrin, Mr. Cochran, Mr. Kulas, and Mr. Dawood; $823,250 as the total target award for Mr. Alvarez de Soto, and $559,250 as the total target award for Mr. Pfirrman.

Performance Cycles. While a multi-year award, the SRIP will be evaluated in cycles and awards will be evaluated and settled on an annual basis. Like our annual bonuses, SRIP awards will be made early in the year following each performance year. For the 2017 performance year, 25% of each NEO’s multi-year target award was at stake. The goals for the NEOs to earn 2017 SRIP awards included our passing the CCAR (an annual review or “stress test” of financial institutions) and securing approval of the capital plan’s external dividends and capital distributions.

Performance Assessments and Award Determinations. Because we achieved both of the SRIP goals for 2017, the Compensation Committee granted the NEOs 25% of their respective SRIP awards at stake for 2017 performance, as follows:

 

NEO*

 

    

 

2017 SRIP AWARD

($)

 

 

Scott Powell**

 

    

 

181,925

 

 

Juan Carlos Alvarez de Soto***

 

    

 

51,453

 

 

Richard Morrin

 

    

 

250,000

 

 

Christopher Pfirrman

 

    

 

139,813

 

 

* Other than Mr. Dawood (who separated from us before the end of the year), all NEOs received a SRIP grant. Mr. Kulas, who also separated from us in 2017, received a SRIP award of $250,000 as part of his separation agreement. Mr. Cochran, who is no longer an executive officer as of the date of this Proxy Statement and will separate from us effective May 4, 2018, was provided a SRIP award of $250,000 as part of his separation agreement.

 

 

      

 

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** Mr. Powell’s full 2017 SRIP award of $500,000 was in recognition of his service as CEO of both SHUSA and SC. As described above in “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell,” half of the equity portion of Mr. Powell’s 2017 SRIP award was provided in RSUs under our equity compensation plan (the other half was in SAN ADRs), while approximately 23% of the cash portion of Mr. Powell’s 2017 SRIP award was allocated to his service as our CEO.

 

*** Mr. Alvarez de Soto’s SRIP award was pro-rated based on his hire date in October 2017.

Form of Awards: Mix of Current and Deferred Cash and RSUs. As with our annual bonuses, in order to comply with CRD IV, each NEO’s aggregate award under the SRIP for 2017 was payable 50% in cash (a portion of which was paid immediately and a portion of which was deferred) and 50% in the form of stock-settled RSUs (a portion of which was settled immediately and a portion of which was subject to vesting). After the shares subject to the RSUs are settled, they will remain subject to transfer and sale restrictions for one year. The following table reflects the portions of each NEO’s SRIP award for 2017 that was payable in the form of cash and RSUs:

 

NEO*

 

 

CASH PORTION OF 2017 SRIP AWARD

($)

 

 

RSU PORTION OF 2017 SRIP AWARD

($)

 

 

Scott Powell

 

 

56,925

 

 

125,000

 

 

Juan Carlos Alvarez de Soto

 

 

25,727

 

 

25,727

 

 

Richard Morrin

 

 

125,000

 

 

125,000

 

 

Christopher Pfirrman

 

 

69,907

 

 

69,907

 

 

* Mr. Kulas and Mr. Cochran were each granted SRIP awards of $250,000, half in cash and half in RSUs, under their respective separation agreements.

The portion of the total SRIP award deferred is based on Banco Santander policies as implemented by SC. Under those policies, Mr. Powell and Mr. Kulas have 50% of their SRIP awards deferred, and the other NEOs have 40% of their SRIP awards deferred.

The deferred portion of the SRIP (whether cash or RSUs) becomes earned and vested annually over a vesting period of three years (for Mr. Alvarez de Soto, Mr. Morrin, Mr. Pfirrman, and Mr. Cochran) or five years (for Mr. Powell and Mr. Kulas). Generally, an executive must remain continuously employed with us through each vesting date; however, under the terms of their separation agreements, Mr. Kulas’s and Mr. Cochran’s SRIP awards will continue to vest as though they were still employed.

The additional corporate performance goals applicable to certain NEOs’ annual bonuses are also applicable to the deferred portions of those NEOs’ SRIP awards. In order for Mr. Powell and Mr. Kulas to earn the vesting installments in years three, four, and five, and for other NEOs (for 2017, Mr. Cochran and Mr. Pfirrman) to earn the vesting installment for year three, they must meet performance goals. These performance goals further encourage sustainable, long-term performance. Mr. Alvarez de Soto’s and Mr. Morrin’s awards for 2017 are not subject to performance goals.

As with payment of the deferred portion of Bonus Plan awards, payment of the deferred portion of SRIP awards is also conditioned on avoidance of certain events or conduct by the executive, including: (1) our deficient financial performance; (2) material breach of any of our material internal rules or regulations; (3) material negative restatement of our financial statements (other than any restatement undertaken as a result of a change in accounting standards); (4) material negative change in our capitalization or risk profile prior to the applicable settlement date; and (5) certain other detrimental conduct. After the shares subject to the SRIP RSUs are settled, they will remain subject to transfer and sale restrictions for one year.

Our NEOs had the following amounts of their SRIP awards for 2017 deferred under the design described above:

 

NEO*

 

  

 

TOTAL AMOUNT OF SRIP
DEFERRED

($)

 

  

SRIP CASH DEFERRED

($)

 

  

SRIP RSUs DEFERRED

($)

 

 

Scott Powell

 

  

 

90,962

 

  

 

28,462

 

  

 

62,500

 

 

Juan Carlos Alvarez de Soto

 

  

 

20,581

 

  

 

10,291

 

  

 

10,291

 

 

Richard Morrin

 

  

 

100,000

 

  

 

50,000

 

  

 

50,000

 

 

Christopher Pfirrman

 

  

 

55,925

 

  

 

27,963

 

  

 

27,963

 

 

* Mr. Kulas was granted a SRIP award of $250,000, half in cash and half in RSUs, under his separation agreement. Mr. Cochran was also granted a SRIP award of $250,000, half in cash and half in RSUs, under his separation agreement.

Other Compensation

In addition to the benefits that all of our employees are eligible to receive, our NEOs are eligible to receive certain other benefits and perquisites. For 2017, the additional benefits and perquisites included company-paid annual premiums for executive medical, dental, and disability benefits. These benefits and perquisites are generally consistent with those paid to our similarly situated executives.

 

 

      

 

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Retirement Benefits

Each of our NEOs is eligible to participate in our qualified defined contribution retirement plan (the “401(k) Plan”) under the same terms as our other eligible employees, including with respect to the SC matching contribution under the 401(k) Plan. We provide these benefits in order to foster the development of our NEOs’ long-term careers with SC. We do not provide defined benefit pension benefits, or nonqualified or excess retirement benefits to any of our NEOs.

Employment Agreements

We have entered into employment agreements with some of our NEOs, establishing key elements of compensation in addition to our generally applicable plans and programs, which include certain restrictive covenants, such as those prohibiting post-employment competition or solicitation. We believe that these agreements provide stability to SC and further the objectives of our compensation programs, including our objective of attracting and retaining the highest quality executives to manage and lead us. Please see “Compensation—Potential Payments upon Termination or Change in Control—Employment Agreements” in this Proxy Statement for additional information regarding our NEO employment agreements.

CLAWBACK POLICY

We maintain a robust Policy on Malus and Clawback Requirements (the “Clawback Policy”). The Clawback Policy contains a framework under which we will implement into our incentive compensation arrangements (1) provisions that can cause unvested compensation to be reduced or forfeited during the applicable vesting period (often referred to as “malus” provisions) and (2) provisions that can cause previously earned and paid compensation to be repaid (often referred to as “clawback” provisions). Malus and clawback provisions serve several purposes, such as ensuring that our incentive compensation awards are based on sustainable, appropriate, and compliant performance; that such performance is achieved consistently within applicable risk frameworks; and that our employees are discouraged from manipulating performance or financial metrics or engaging in other behaviors that could adversely impact us.

Employees covered by the Clawback Policy include, at a minimum: (1) employees or employee groups identified as “covered employees” under the Guidance on Sound Incentive Compensation Policies adopted by U.S. banking agencies, (2) employees determined to be “identified staff” under CRD IV, and (3) any other employees who receive incentive compensation awards that the Compensation Committee determines should be subject to malus or clawback requirements.

Incentive compensation covered by the Clawback Policy will include, at a minimum: (1) “incentive compensation arrangements” within the meaning of the Guidance on Sound Incentive Compensation Policies, (2) “variable remuneration” within the meaning of CRD IV, and (3) any other incentive compensation arrangements that the Compensation Committee determines should be covered by malus or clawback requirements.

The Clawback Policy requires our applicable incentive compensation agreements to reflect all design features of any malus and clawback requirements, including triggering events, covered employees, and time periods during which compensation may be subject to malus and clawback provisions. All of our malus and clawback requirements are intended to be enforceable to the maximum extent permitted by applicable law.

Under the Clawback Policy, malus provisions include, at a minimum, the following triggering events: (1) “detrimental conduct” (as described below), (2) breach of post-employment covenants, and (3) the malus triggering events required by Banco Santander’s remuneration policies as in effect from time to time, which currently include the following categories of events:

 

»   Significant risk management failures at or by us, or by a business unit or control or support function of ours;

 

»   Material restatement of our financial statements, except when appropriate due to a change in accounting standards;

 

»   Violation by the beneficiary of internal regulations, policies, or codes of conduct;

 

»   Significant changes in the financial capital or risk profile of Banco Santander;

 

»   Significant increases in requirements to our economic or regulatory capital base when not foreseen at the time of generation of exposures;

 

»   Regulatory sanctions or criminal convictions for acts that could be attributable to us or to the personnel responsible for the acts;

 

»   Any misconduct, whether individual or collective, in particular with respect to marketing of unsuitable products; and

 

»   Poor financial performance of Banco Santander.

The malus triggering events under the Clawback Policy are not limited to the foregoing and will be customized and adjusted as appropriate.

Under the Clawback Policy, clawback provisions include, at a minimum, the following triggering events: (1) “detrimental conduct” (as described below), (2) breach of post-employment covenants, and (3) breach of applicable anti-hedging policies. The clawback triggering events under the Clawback Policy are not limited to the foregoing and will be customized and adjusted as appropriate.

 

 

      

 

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“Detrimental conduct” under the Clawback Policy refers to categories of employee conduct specified in incentive compensation agreements that may trigger a right to apply malus or clawback provisions against the employee. The following lists categories of conduct that are considered detrimental conduct under the Clawback Policy:

 

»   An employee’s conduct that would permit us to terminate the employee for “cause”;

 

»   An employee’s commission of a criminal act that victimizes us or a customer, employee, or counterparty of ours or subjects us to public ridicule or embarrassment;

 

»   Improper or intentional conduct by an employee causing reputational harm to us or our customers;

 

»   An employee’s breach of a fiduciary duty owed to us or a customer or former customer of ours;

 

»   An employee’s intentional violation of, or grossly negligent disregard for, our policies, rules, or procedures, including in connection with the supervision or oversight of other employees; or

 

»   An employee taking or maintaining trading positions, or executing his or her duties or responsibilities in a manner that results in a need to restate financial results in a subsequent reporting period or that results in a significant financial loss to us.

The Clawback Policy is administered by our Chief Human Resources Officer, with the advice of our executive-level management human resources committee, subject to oversight and governance by our Compensation Committee.

TAX CONSIDERATIONS

Section 162(m) limits the deductibility of compensation in excess of $1 million paid to certain “covered employees” in any calendar year. Under the tax rules in effect before 2018, compensation that qualified as “performance-based” under Section 162(m) was deductible without regard to this $1 million limit. However, the Tax Cuts and Jobs Act, which was signed into law December 22, 2017, eliminated this performance-based compensation exception effective January 1, 2018, subject to a special rule that “grandfathers” certain awards and arrangements that were in effect on or before November 2, 2017. As a result, compensation that our Compensation Committee structured in 2017 and prior years with the intent of qualifying as performance-based compensation under Section 162(m) that is paid on or after January 1, 2018 may not be fully deductible, depending on the application of the special grandfather rules. Moreover, from and after January 1, 2018, compensation awarded in excess of $1 million to certain “covered employees” generally will not be deductible. While the Tax Cuts and Jobs Act may limit the deductibility of compensation paid to certain “covered employees,” our Compensation Committee will—consistent with its past practice—continue to retain flexibility to design compensation programs that are in the best long-term interests of the Company and our stockholders, with deductibility of compensation being one of a variety of considerations taken into account.

COMPENSATION RISK ASSESSMENT

At least annually, the Compensation Committee conducts an assessment of the compensation policies and practices for our employees, including our executive officers, and whether such policies and practices create risks that are reasonably likely to have a material adverse effect on us. Our management compensation team and an executive-level management human resources committee assist the Compensation Committee with such risk assessment and help ensure our compensation programs align with our goals and compensation philosophies and, along with other factors, operate to mitigate against the risk that such programs would encourage excessive risk-taking.

We believe our compensation programs strike the appropriate balance between short-term and long-term components. We consider the potential risks in our business when designing and administering our compensation programs, and we believe our balanced approach to performance measurement and compensation decisions works to mitigate the risk that individuals will be encouraged to undertake excessive or inappropriate risk. Our compensation program is also subject to internal controls, and we rely on principles of sound governance and good business judgment in administering our compensation programs.

Based on its assessment, the Compensation Committee has determined, in its reasonable business judgment, that our compensation policies and practices as generally applicable to our executive officers and employees do not create risks that are reasonably likely to have a material adverse effect on us and instead promote behaviors that support long-term sustainability and stockholder value creation.

 

 

      

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed this CD&A as required by Item 402(b) of Regulation S-K and discussed it with SC’s management. Based on such review and discussions with management, the Compensation Committee has recommended to the Board that this CD&A be included in this Proxy Statement.

Submitted by the Compensation Committee:

Edith E. Holiday, Chair

Stephen A. Ferriss

Javier Maldonado

Robert J. McCarthy

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2017, our Compensation Committee consisted of Stephen A. Ferriss, Edith E. Holiday, Javier Maldonado, and Robert McCarthy. No member of the Compensation Committee was during that time or in the past an executive officer or employee of the Company or any of its subsidiaries. In addition, none of our executive officers served on the compensation committee of any other entity for which any executive officers of such other entity served on either the Board or on our Compensation Committee, and no member of our Compensation Committee had any relationship requiring disclosure under Item 404 of Regulation S-K.

 

 

      

 

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EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The following table sets forth the compensation for 2017 for each individual who served as our Chief Executive Officer or Chief Financial Officer during 2017, and our three other most highly compensated executive officers who were serving as executive officers on December 31, 2017. These officers are referred to throughout this Proxy Statement as our “NEOs.” Compensation information for 2016 and 2015 is presented for individuals who were also our NEOs in those years.

 

NAME AND PRINCIPAL
POSITION
  YEAR    

SALARY

($)(1)

   

BONUS

($)(2)

   

STOCK
AWARDS

($)(3)

   

OPTION
AWARDS

($)(4)

   

 

ALL OTHER
COMPENSATION

($)(5)

 

    TOTAL ($)  

 

Scott Powell

President and Chief Executive Officer

 

    2017       455,400         164,798         —         —         —         620,198    

 

Juan Carlos Alvarez de Soto

Chief Financial Officer

 

    2017       250,000         76,936         —         —         11,136         338,072    

Richard Morrin

President, Chrysler Capital and Auto Relationships

 

 

 

 

2017

 

 

    770,911         310,238         357,499         —         69,932         1,508,580    
    2016       531,923         214,500         765,372         —         43,772         1,555,567    
   

 

2015

 

 

 

    391,631         535,818         127,520         —         27,895         1,082,864    

Christopher Pfirrman

Chief Legal Officer and General Counsel

 

 

 

 

2017

 

 

    659,018         197,944         259,995         —         227,837         1,344,794    
   

 

2016

 

 

 

    649,418         256,000         541,515         —         122,100         1,569,033    

Jason Kulas

Former President and Chief Executive Officer

    2017       1,183,200         —         983,486         —         672,120         2,838,806    
    2016       1,800,000         491,750         1,139,658         —         30,002         3,461,410    
   

 

2015

 

 

 

    1,392,581         446,304         540,479         764,000         25,541         3,168,905    

Ismail Dawood

Former Chief Financial Officer

 

 

 

 

2017

 

 

    789,188         —         700,736         —         2,662,556         4,152,480    
    2016       724,750         1,642,005         —         —         18,312         2,385,067    
   

 

2015

 

 

 

    32,500         —         1,330,018         —         —         1,362,518    

 

Dale Cochran

Former Chief Risk Officer

 

    2017       461,058         485,000         484,992         —         40,020         1,471,070    

 

(1)  The amounts in this column reflect base salary earned during the year or through the date of separation, as applicable.

 

(2)  The amounts in this column include the non-deferred cash portion of the annual bonus earned under the Bonus Plan, as well as the non-deferred cash portion of awards earned under the SRIP. Please see “Compensation Discussion and Analysis—Principal Components of Executive Compensation—Annual Bonuses” and “Compensation Discussion and Analysis—Principal Components of Executive Compensation—SRIP” for additional information. Mr. Kulas’s 2017 annual bonus award and SRIP award are not reflected here because he became entitled to them under his separation agreement (and they are not reflected in the All Other Compensation column because his right to them had not accrued by December 31, 2017). The immediately vesting cash portions of Mr. Cochran’s annual bonus and SRIP award are similarly excluded because the awards were granted as part of his separation agreement. However, Mr. Cochran’s amount in this column includes the $485,000 cash portion of his one-time sign-on bonus.

 

(3)  The amounts in this column represent the aggregate grant date fair value of the awards detailed under “2017 Grants of Plan-Based Awards” in this Proxy Statement, which consisted of the approximately $485,000 RSU portion of Mr. Cochran’s sign-on bonus and, for the other NEOs (except Mr. Powell and Mr. Alvarez de Soto), RSU awards granted in early 2017 as the equity portion of annual bonuses granted for performance in 2016. Neither Mr. Powell nor Mr. Alvarez de Soto received an equity grant from us in 2017.

SEC rules require the Summary Compensation Table to include in each year’s amount the aggregate grant date fair value of stock awards granted during the year. Typically, we grant RSU awards early in the year as part of the annual bonus award for prior year performance. As a result, the amounts for RSU awards generally appear in the Summary Compensation Table for the year after the performance year upon which they were based and, therefore, the Summary Compensation Table does not fully reflect the Compensation Committee’s view of its pay-for-performance executive compensation program for a particular performance year. For example, amounts for Mr. Morrin, Mr. Pfirrman, Mr. Kulas, and Mr. Dawood shown as 2017 compensation in the “Stock Awards” column reflect RSU awards granted in March 2017 for 2016 performance. Please see “Compensation Discussion and Analysis—Principal Components of Executive Compensation” for a discussion about how the Compensation Committee viewed its 2017 compensation decisions for our NEOs.

The grant date fair value of the stock awards included in the Summary Compensation Table represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, based on the closing price of our Common Stock on the applicable grant date, but excluding the effect of potential forfeitures. Additional details on accounting for equity-based compensation can be found in Note 1 (“Description of Business, Basis of Presentation, and Significant Accounting Policies and Practices—Stock Based Compensation”) and Note 16 (“Employee Benefit Plans”) of our consolidated financial statements filed with the SEC on Form 10-K for the fiscal year ended December 31, 2017.

 

(4)  The amounts in this column represent the grant date fair value of stock options computed in accordance with FASB ASC Topic 718, but excluding the effect of potential forfeitures. No stock options were granted to our NEOs in 2017. For details on the assumptions for computing the grant date fair value of stock options granted in prior years, please see Note 1 (“Description of Business, Basis of Presentation, and Significant Accounting Policies and Practices—Stock Based Compensation”) and Note 16 (“Employee Benefit Plans”) to our consolidated financial statements filed with the SEC on Form 10-K for the applicable fiscal year.

 

(5)  The amounts in this column for the most recent year are detailed below under “All Other Compensation Table.” The amounts in this column include long-term cash awards granted in prior years as the deferred cash portion of annual bonus awards under the Bonus Plan that became earned and vested in the applicable year, as well as payments granted to certain of our NEOs upon termination of their employment.

 

 

      

 

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All Other Compensation Table

 

NAME  

SC
CONTRIBUTION
TO 401(k) PLAN

($)

   

LIFE &
DISABILITY
BENEFITS

($)(a)

   

HOUSING
ALLOWANCE

($)

   

 

DEFERRED
ANNUAL
VARIABLE
COMPENSATION

($)(b )

 

   

OTHER

($)(c)

   

PAYMENTS
UPON
TERMINATION

($)

   

TOTAL

($)

 

 

Scott Powell

 

          —         —           —         —         —           —    

 

Juan Carlos

Alvarez de Soto

 

          —         11,136           —         —         —           11,136    

 

Richard Morrin

 

    13,754       7,260         —           48,918         —         —           69,932    

 

Christopher Pfirrman

 

    16,200       9,121         74,364           28,152         100,000         —           227,837    

 

Jason Kulas

 

    16,200       7,562         —           153,975         —         494,383(d)       672,120    

 

Ismail Dawood

 

    15,770       8,478         250,000(e)       —         —         2,388,308(f)       2,662,556    

 

Dale Cochran

 

          6,595         33,425           —         —         —           40,020    

 

(a)  Amount represents the annual premiums paid by SC for NEO executive life and disability benefits.

 

(b)  Reflects the amount of long-term cash awards granted in prior years as the deferred cash portion of annual bonus awards under the Bonus Plan that became earned and vested in 2017. Please see “Compensation Discussion and Analysis—Principal Components of Executive Compensation—Annual Bonuses” for additional information.

 

(c)  Represents the deferred cash portion of retention award granted to Mr. Pfirrman in 2016 that vested in part in 2017.

 

(d)  Represents the portion of 12 months’ worth of base salary paid to Mr. Kulas in 2017 in bi-weekly installments between his separation and December 31, 2017, as well as the accrued value of 12 months’ worth of continued medical, dental, and life insurance coverage at our expense due to his separation from SC.

 

(e)  Represents a lump sum cash payment in lieu of a housing allowance and relocation expenses under Mr. Dawood’s offer letter.

 

(f)  Represents a lump sum cash payment equal to 225% of Mr. Dawood’s annual salary, as well as the cost of 12 months’ worth of healthcare for Mr. Dawood and his dependents, paid pursuant to Mr. Dawood’s separation agreement.

 

 

      

 

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2017 Grants of Plan-Based Awards

The following table provides information regarding plan awards granted to our NEOs in 2017. Please see the “Outstanding Equity Awards at Fiscal Year-End” table below for additional information regarding the vesting parameters that are applicable to these awards.

 

NAME    GRANT
DATE
    

ALL OTHER STOCK AWARDS: NUMBER OF
SHARES OF STOCK OR UNITS

(#)(1)

    

GRANT DATE FAIR VALUE OF STOCK
AWARDS

($)(2)

 

 

Scott Powell

 

                    

 

Juan Carlos Alvarez de Soto

 

                    

 

Richard Morrin

 

     3/1/17        23,913        357,499  

 

Christopher Pfirrman

 

     3/1/17        17,391        259,995  

 

Jason Kulas

 

     3/1/17        65,785        983,486  

 

Ismail Dawood

 

    

 

3/1/17

 

 

 

     46,872        700,736  

 

Dale Cochran

 

     5/1/17        37,890        484,992  

 

(1)  All of the plan-based awards that we granted to our NEOs in 2017 were RSUs. For RSUs granted under the Bonus Plan to Mr. Morrin, Mr. Pfirrman, and Mr. Dawood on March 1, 2017, 60% vested and were settled immediately and the remainder will vest and be settled in three equal installments on the first three anniversaries of the grant date, with Mr. Pfirrman’s and Mr. Dawood’s vesting installments on March 1, 2020 contingent on achievement of certain performance goals. For RSUs granted under the Bonus Plan to Mr. Kulas on March 1, 2017, 50% vested and were settled immediately and the remainder will vest and be settled in five equal installments on the first five anniversaries of the grant date, with vesting installments on March 1, 2020, 2021, and 2022 contingent on achievement of certain performance goals. RSUs granted to Mr. Cochran on May 1, 2017 as part of a one-time sign-on bonus will vest in equal installments on the first three anniversaries of the grant date.

 

(2)  This column shows the aggregate grant date fair value of RSUs granted to our NEOs in 2017, which is calculated based on the closing price of our Common Stock on the NYSE on the grant date ($14.95 on March 1, 2017 and $12.80 on May 1, 2017). Generally, the aggregate grant date fair value is the amount that SC expects to expense in its financial statements over the award’s vesting schedule.

 

 

      

 

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Outstanding Equity Awards at Fiscal Year-End

The following table provides information regarding all outstanding equity awards held by our NEOs as of December 31, 2017. Vesting of option and stock awards reflected in the table is generally subject to continuous service with SC, except that awards may vest (or continue to vest) upon termination by us without “cause,” termination by the officer for “good reason,” or termination due to the officer’s “disability” or death (in each case as defined in the applicable award agreement). The termination vesting provisions generally are covered in the footnotes below. Vesting of awards may also be impacted by a change in control of SC, as more fully described in “Compensation—Potential Payments upon Termination or Change in Control—Equity Compensation Plans” in this Proxy Statement.

 

    

 

OPTION AWARDS

 

   

 

STOCK AWARDS

 

 
NAME  

NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS

(#)

EXERCISABLE

   

NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS

(#)

UNEXERCISABLE

    OPTION
EXERCISE
PRICE ($)
   

OPTION
EXPIRATION

DATE

   

NUMBER
OF
SHARES
OR
UNITS OF
STOCK

THAT
HAVE
NOT
VESTED

(#)

   

MARKET
VALUE
OF
SHARES
OR
UNITS  OF
STOCK
THAT
HAVE
NOT
VESTED

($)(a)

    EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER
OF
UNEARNED
SHARES,
UNITS, OR
OTHER
RIGHTS
THAT
HAVE NOT
VESTED (#)
   

EQUITY
INCENTIVE
PLAN
AWARDS:
MARKET
OR PAYOUT
VALUE OF
UNEARNED

SHARES,
UNITS, OR
OTHER
RIGHTS
THAT

HAVE NOT
VESTED

($)(a)

 

 

 

Scott Powell

 

                                               

 

Juan Carlos Alvarez de Soto

 

                                               

Richard Morrin

 

 

 

 

85,982

 

 

          9.21       12/31/21       755(b)       14,058              
    41,048             9.21       12/31/21       36,076(c)       671,735              
    18,112             12.10       12/31/21       5,679(d)       105,743              
                            9,566(e)       178,119              
     

 

 

 

 

                                  5,172(f)       96,303  

Christopher Pfirrman

                            5,191(d)       96,656              
                            6,957(e)       129,539              
                            7,215(g)       134,343              
   

 

 

 

 

                                  3,118(f)       58,057  

Jason Kulas

                            5,975(b)       111,255              
                            32,893(e)       612,468              
                            26,099(i)       485,963              
                            2,219(i)       41,318              
                                        20,536(f)       382,380  
   

 

 

 

 

                                  1,970(j)       36,681  

 

Ismail Dawood

 

                            18,749(e)       349,106              

 

Dale Cochran

 

                            37,890(h)       705,512              

Notes Relating to Stock Awards (all granted under the Omnibus Plan)

 

(a)  The market value of the stock awards or units is based on the closing price per share of our Common Stock on the NYSE on December 29, 2017 (the last trading day of 2017), which was $18.62.

 

(b)  Reflects RSUs granted (to Mr. Morrin on February 27, 2015 and to Mr. Kulas on April 10, 2015) in settlement of the deferred stock portion of the NEO’s 2014 annual bonus. Mr. Kulas’s outstanding RSUs vested on April 10, 2018. Mr. Morrin’s outstanding RSUs vested on February 27, 2018. All RSUs continue to vest under their original schedule in the event of termination by us without cause, termination by the NEO for good reason, or termination due to disability or death.

 

(c)  Reflects RSUs granted to Mr. Morrin on March 29, 2016 as a retention award. The RSUs vest in equal installments on March 29, 2018 and 2019. The RSUs also vest fully if we terminate Mr. Morrin’s employment without cause, if he terminates his employment for good reason, or if his employment terminates due to his disability or death.

 

(d)  Reflects RSUs granted on April 5, 2016 in settlement of the deferred stock portion of the NEO’s 2015 annual bonus. The RSUs vest in equal installments on April 5, 2018 and 2019. All RSUs continue to vest under their original schedule in the event of termination by us without cause, termination by the NEO for good reason, or termination due to disability or death.

 

(e)  Reflects RSUs granted on March 1, 2017 in settlement of the deferred stock portion of the NEO’s 2016 annual bonus. Mr. Kulas’s outstanding RSUs vest in equal installments on March 1, 2018, 2019, 2020, 2021, and 2022, with vesting installments on March 1, 2020, 2021, and 2022 contingent on achievement of certain performance goals. Mr. Morrin’s, Mr. Pfirrman’s, and Mr. Dawood’s outstanding RSUs vest in equal installments on March 1, 2018, 2019, and 2020, with Mr. Pfirrman’s and Mr. Dawood’s vesting installments on March 1, 2020 contingent on achievement of certain performance goals. All RSUs continue to vest under their original schedule in the event of termination by us without cause, termination by the NEO for good reason, or termination due to disability or death.

 

(f) 

Reflects PSUs granted on November 1, 2016 as part of the SAN Performance Award program for 2016. The PSUs vest in one installment on March 15, 2019 based on SAN’s achievement of a number of performance conditions related to earnings per share (25% of the PSUs), return on tangible equity (25% of the PSUs), employee satisfaction (20% of the PSUs), customer satisfaction (15% of the PSUs), individual customer loyalty goals (7.5% of the PSUs), and corporate customer loyalty goals (7.5% of the PSUs). All PSUs

 

 

      

 

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  continue to vest under their original schedule and subject to their original performance conditions in the event of termination by us without cause, termination by the NEO for good reason, or termination due to disability or death.

 

(g)  Reflects RSUs granted to Mr. Pfirrman on November 16, 2016 as a retention award. The remaining RSUs vest on November 16, 2018. The RSUs continue to vest under their original schedule if we terminate Mr. Pfirrman’s employment without cause or if his employment terminates due to his disability or death.

 

(h)  Reflects RSUs granted to Mr. Cochran on May 1, 2017 as part of a sign-on bonus. The RSUs vest in equal installments on May 1, 2018, 2019, and 2020 (their original schedule) under the terms of Mr. Cochran’s separation agreement.

 

(i)  Reflects RSUs granted on April 7, 2016 and April 28, 2016 in settlement of the deferred stock portion of Mr. Kulas’s 2015 annual bonus. The unvested RSUs granted on April 7, 2016, vest in equal installments on April 7, 2018 and 2019. The unvested RSUs granted on April 28, 2016 vest in equal installments on April 28, 2018 and 2019. All RSUs continue to vest under their original schedule under Mr. Kulas’s separation agreement.

 

(j) Reflects PSUs granted on June 17, 2015 as part of the SAN Performance Award program for 2015. The PSUs vest on June 17, 2018 based on SAN’s achieving a certain TSR position relative to its peer group for the applicable performance period. All PSUs continue to vest under their original schedule and subject to their original performance conditions in the event of termination by us without cause, termination by the officer for good reason, or termination due to disability or death.

2017 Option Exercises and Stock Vested

The following table provides information regarding the exercise of stock options by our NEOs and shares acquired by our NEOs upon the vesting of stock awards in 2017.

 

NAME

 

 

OPTION AWARDS

 

   

STOCK AWARDS

 

   

 

TOTAL VALUE
REALIZED ON
EXERCISE
AND VESTING

($)

 

 
 

NUMBER OF SHARES
ACQUIRED ON EXERCISE

(#)

 

   

VALUE REALIZED
ON EXERCISE

($)(1)

 

   

NUMBER OF SHARES
ACQUIRED ON VESTING

(#)

 

   

VALUE REALIZED
ON VESTING

($)(2)

 

   

 

Scott Powell

 

                             

 

Juan Carlos

Alvarez de Soto

 

                             

Richard Morrin

 

 

 

 

 

 

          754       11,287        
                14,347       214,488        
                18,038       237,921        
   

 

 

 

 

   

 

 

 

 

   

 

2,839

 

 

 

   

 

34,721

 

 

 

   

 

 

 

 

 

Totals ($)

 

                      498,417       498,417  

Christopher Pfirrman

 

 

 

 

 

 

          10,434       155,988        
                2,595       31,737        
   

 

 

 

 

   

 

 

 

 

   

 

7,215

 

 

 

   

 

116,522

 

 

 

   

 

 

 

 

 

Totals ($)

 

                      304,247       304,247  

 

Jason Kulas

 

 

 

 

7,417

 

 

    30,521       32,892       491,735        
    36,090       252,630       13,050       163,256        
    15,920       65,431       5,975       73,433        
    51,978       363,846       1,109       14,129        
    49,915 (3)      206,399       68,918       962,784        
    187,118 (3)      1,309,620                    
   

 

129,929

 

(3)  

 

   

 

909,230

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

 

Totals ($)

 

          3,137,677             1,705,337       4,843,014  

Ismail Dawood

 

 

 

 

 

 

          28,123       420,439        
   

 

 

 

 

   

 

 

 

 

   

 

56,911

 

 

 

   

 

874,722

 

 

 

   

 

 

 

 

 

Totals ($)

 

                      1,295,161       1,295,161  

 

Dale Cochran

 

                             

 

(1)  Amounts reflect the aggregate difference between the market price of our Common Stock at the exercise date and the exercise price of the options.
(2)  Amounts reflect the market value of our Common Stock on the day on which the stock awards vested.
(3)  Represents the total number of shares underlying the exercised options; however, such options were disposed of in a cashless exercise, resulting in zero net shares received by Mr. Kulas.

 

 

      

 

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Equity Compensation Plans

We originally adopted our current equity compensation plan, the Omnibus Plan, on December 28, 2013, and we restated the Omnibus Plan effective June 16, 2016, with the approval of our stockholders.

For Omnibus Plan awards granted before June 16, 2016, in the event of a change in control (as defined in the plan) of us, unless otherwise provided by the Compensation Committee: (1) all time-vesting options will become fully exercisable, (2) all time-vesting restricted stock awards and RSUs will become fully vested, and (3) all performance-vesting awards will become vested to the extent that the applicable performance targets are met through the date of the change in control.

For Omnibus Plan awards granted on or after June 16, 2016, in the event of a change in control (as defined in the restated plan) of SC, (1) awards granted to non-employee directors will fully vest, and (2) for awards granted to all other service providers, vesting will depend on whether the awards are assumed, converted, or replaced by the resulting entity:

 

»   For awards that are not assumed, converted, or replaced, (i) time-vesting awards will fully vest upon the change in control; and (ii) performance-vesting awards will vest based on the greater of achievement of all performance goals at the “target” level or the actual level of achievement of performance goals as of the change in control, and will be prorated based on the portion of the performance period that had been completed through the date of the change in control.

 

»   For awards that are assumed, converted, or replaced, no automatic vesting will occur upon the change in control. Instead, the awards, as adjusted in connection with the transaction, will continue to vest in accordance with their terms. In addition, time-vesting awards will fully vest if the award recipient has a termination of employment within two years after the change in control by the company other than for cause or by the recipient for good reason (each as defined in the applicable award agreement). For performance-vesting awards, the amount vesting upon involuntary termination within two years of a change in control will be based on the greater of (i) achievement of all performance goals at the “target” level or (ii) the actual level of achievement of performance goals as of the change in control.

All awards under the Omnibus Plan are also subject to any change in control and employment termination provisions contained in applicable award agreements and employment agreements. Please see the footnotes to the “Compensation—Executive Compensation Tables—Outstanding Equity Awards at Fiscal Year-End” table of this Proxy Statement for information regarding vesting of outstanding equity awards upon termination of employment.

Employment Agreements

We are party to an employment agreement with Mr. Morrin, and were previously party to employment agreements with Mr. Kulas and Mr. Dawood. These agreements provide (or provided) these individuals with, among other things, payments and benefits in the event of a termination of employment under the various circumstances described below. Mr. Alvarez de Soto, Mr. Pfirrman, and Mr. Cochran all received offer letters in connection with their employment, which provide basic terms such as base salary and bonus eligibility, at-will employment status terminable at will by either party, and restrictive covenants. Their agreements do not provide for severance benefits in the context of termination or a change in control, and so are not discussed in this section. Mr. Cochran’s actual separation benefits are discussed below.

A change in control does not affect the timing or amount of severance payments to any of our currently employed NEOs under their employment agreements.

Employment Agreement with Richard Morrin

We entered into an employment agreement with Mr. Morrin on August 24, 2011, which set forth the terms and conditions of his employment with us. The employment agreement had an initial term of three years, which has passed, and automatically extends annually for additional one-year terms, unless either party provides notice of non-renewal at least three months prior to the extension date.

Mr. Morrin will be entitled to the following under his employment agreement if terminated by us without cause (as defined in the agreement) (but excluding termination due to death or disability) or upon resignation because of a reduction in base salary or target bonus opportunity, in each case subject to the execution of a general release and waiver in favor of SC.

 

»   12 months of salary continuation;

 

»   Full annual performance bonus for the calendar year in which the termination of employment occurs;

 

»   Certain deferred bonus payments;

 

»   Accelerated vesting and settlement of equity-related awards; and

 

»   12 months of continued medical, dental, and life insurance coverage.

 

 

      

 

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Mr. Morrin will be entitled to the following under his employment agreement if his employment terminates due to disability (as defined in the agreement): (1) participation in our short-term salary continuation program for 13 weeks; (2) subsequent participation in our long- term and individual disability insurance program under its terms; and (3) prorated annual bonuses for the year of termination and, in certain cases, for subsequent years.

Mr. Morrin’s beneficiaries or estate will be entitled to the following under his employment agreement if his employment terminates due to death:

 

»   12 months of salary continuation;

 

»   Full annual performance bonus for the calendar year in which the termination of employment occurs;

 

»   Certain deferred bonus payments; and

 

»   12 months of continued medical and dental insurance coverage.

Mr. Morrin is subject to the following restrictive covenants under his employment agreement:

 

»   Perpetual confidentiality;

 

»   Non-solicitation of our employees and our affiliate employees during employment and for one year after;

 

»   Non-competition during employment and for any period while receiving severance payments under the agreement;

 

»   Cooperation in the context of litigation involving our affiliates or us during employment and for the pendency of any such litigation or other proceeding; and

 

»   Perpetual non-disparagement of us, our affiliates, and our officers and directors and our affiliates’ officers and directors.

Terminated Employment Agreement with Ismail Dawood

On October 3, 2017, we entered into a separation agreement with Mr. Dawood, which treated his departure as a termination “without cause” effective September 29, 2017. In accordance with his amended and restated employment letter agreement dated December 1, 2016, Mr. Dawood received separation benefits consisting of the following: (1) a lump sum payment equal to 225% of his annual base salary; (2) a lump sum cash payment equal to 12 months of company-paid healthcare coverage for Mr. Dawood and his eligible dependents; (3) full vesting of the RSU award granted upon his joining us; and (4) continued vesting for his deferred and unearned cash award and RSUs that were granted in settlement of the deferred portion of his annual bonus for the 2016 performance year. Mr. Dawood’s receipt of these benefits was contingent on his execution of a release of all claims against SC and its affiliates. Mr. Dawood also remains subject to the confidentiality and non-disparagement restrictive covenants, as well as the one-year non-competition, non-solicitation, and anti-raiding restrictive covenants of his employment agreement. Mr. Dawood also remains required to cooperate in the context of matters he was involved in during his employment.

Terminated Employment Agreement with Jason Kulas

On August 30, 2017, Mr. Kulas executed a separation agreement in our favor, which treated his departure as a termination “without cause” effective August 27, 2017. Under his May 1, 2009 employment agreement, Mr. Kulas received the following separation benefits, subject to the execution of a general release and waiver in favor of SC and its affiliates:

 

»   12 months of salary continuation;

 

»   Target annual performance bonus for 2017;

 

»   Continued vesting of certain deferred bonus payments—$250,000 in deferred cash bonus payments payable in accordance with the SRIP and $789,286 of the deferred cash portion of certain bonus awards ($295,050 of which is subject to the achievement of specified Company performance goals for the years 2020–2022);

 

»   Accelerated vesting and settlement of equity-related awards (a portion of which will continue to be subject to the satisfaction of specific performance measures in future periods); and

 

»   12 months of continued medical, dental, and life insurance coverage, valued at $7,183.

Mr. Kulas remains subject to the following restrictive covenants under his employment agreement:

 

»   Perpetual confidentiality;

 

»   Non-solicitation of our employees and our affiliate employees for one year after termination;

 

»   Non-competition while still receiving severance payments;

 

»   Cooperation in the context of litigation involving our affiliates or us during employment and for the pendency of any such litigation or other proceeding; and

 

»   Perpetual non-disparagement of us, our affiliates, our officers and directors, and our affiliates’ officers and directors.

 

 

      

 

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COMPENSATION - EXECUTIVE COMPENSATION TABLES

 

     

 

Table Illustrating Potential Payments upon Termination or Change in Control

The following table provides information regarding the payments and benefits to which our NEOs would be entitled in the event of termination of such individual’s employment with SC under specified circumstances and in the event of a change in control of SC. Except as otherwise noted, the amounts shown (1) are estimates only and (2) assume that the applicable termination of employment was effective, or that the change in control occurred, as of December 31, 2017.

 

NAME      CASH ($)      EQUITY ($)(6)     

 

PERQUISITES/

BENEFITS ($)

 

     TOTAL ($)  

 

Scott Powell(1)

 

                                   
    

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Juan Carlos Alvarez de Soto(1)

 

                                   
                             

 

Richard Morrin

 

                                   

 

Termination due to death

 

  

 

 

 

 

1,853,632(2)

 

 

 

 

  

 

 

 

 

1,065,958

 

 

 

 

  

 

 

 

 

1,004,392(7)

 

 

 

 

  

 

 

 

 

3,923,982

 

 

 

 

 

Termination due to disability

 

  

 

 

 

 

857,007(3)

 

 

 

 

  

 

 

 

 

1,065,958

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

1,922,965

 

 

 

 

 

Termination by SC without cause

 

  

 

 

 

 

1,853,632(2)

 

 

 

 

  

 

 

 

 

1,065,958

 

 

 

 

  

 

 

 

 

19,984(8)

 

 

 

 

  

 

 

 

 

2,939,574

 

 

 

 

 

Termination by NEO for good reason

 

  

 

 

 

 

219,507(4)

 

 

 

 

  

 

 

 

 

1,065,958

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

1,285,465

 

 

 

 

 

Change in control (no termination)

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

791,536

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

791,536

 

 

 

 

 

Christopher Pfirrman

 

                                   

 

Termination due to death

 

  

 

 

 

 

258,400(5)

 

 

 

 

  

 

 

 

 

418,596

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

676,996

 

 

 

 

 

Termination due to disability

 

  

 

 

 

 

258,400(5)

 

 

 

 

  

 

 

 

 

418,596

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

676,996

 

 

 

 

 

Termination by SC without cause

 

  

 

 

 

 

258,400(5)

 

 

 

 

  

 

 

 

 

418,596

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

676,996

 

 

 

 

 

Termination by NEO for good reason

 

  

 

 

 

 

258,400(5)

 

 

 

 

  

 

 

 

 

284,253

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

542,653

 

 

 

 

 

Change in control (no termination)

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

96,656

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

96,656

 

 

 

 

 

(1)  Mr. Powell and Mr. Alvarez de Soto joined SC in 2017. As of December 31, 2017, we had no employment agreements in place with either Mr. Powell or Mr. Alvarez de Soto.

 

(2)  Includes annual base salary of $850,000, $784,125 for the 2017 annual performance bonus, and continued vesting of deferred cash portion of bonus awards totaling $219,507.

 

(3)  Assumes that: (i) the NEO first receives compensation under our short-term salary continuation program 13 weeks prior to December 31, 2017 and begins receiving compensation and benefits under our long-term and individual disability insurance program on December 31, 2017; (ii) target level of annual cash performance bonus is achieved in 2017 and no bonus is payable for subsequent years due to our NEO receiving compensation and benefits under our long-term and individual disability insurance program; and (iii) the NEO is eligible for our short-term salary continuation benefits. Please see “Compensation—Potential Payments upon Termination or Change in Control—Employment Agreements” for additional information.

 

(4)  Represents the unpaid deferred cash portion of the 2014, 2015, and 2016 bonus awards.

 

(5)  Represents the unpaid deferred cash portions of the 2015 and 2016 bonus awards, and 2016 retention award.

 

(6)  Represents the value of accelerated vesting of option awards and stock awards. Please see the footnotes to the “Outstanding Equity Awards at Fiscal Year-End” table of this Proxy Statement for information regarding vesting upon employment termination and see “Compensation—Potential Payments upon Termination or Change in Control—Equity Compensation Plans” above for information regarding vesting upon change in control. Amounts reflected assume that all applicable performance targets for any performance-vesting awards are achieved.

 

(7)  Represents payment of life insurance proceeds and 12 months of continued dependent medical and dental benefits. Assumes no increase in the cost of welfare benefits

 

(8)  Represents 12 months of continued medical and dental benefits and life insurance coverage. Assumes no increase in the cost of welfare benefits.

Because Mr. Kulas separated from us in 2017, he is not included in the table immediately above. In connection with his separation, Mr. Kulas received $1,809,600 in cash, representing 12 months’ base salary; $2,070,000, representing his bonus for 2017 (half in cash, half in RSUs; half payable on March 1, 2018, the remainder settled in five equal installments on the first five anniversaries of March 1, 2018); $250,000, representing an award under the SRIP (settled on the same terms as his 2017 bonus); and $789,286 in deferred cash bonuses from previous years, subject to the same vesting conditions originally in place. For more details, please see Exhibit 10.1 to the Form 8-K filed with the SEC on September 13, 2017.

Similarly, because Mr. Dawood separated from us in 2017, he is not included in the table immediately above. In connection with his separation, Mr. Dawood received $2,367,563, representing 225% of his annual base salary; $20,745, representing 12 months of healthcare coverage for him and his dependents; full vesting of the 56,911 remaining unvested RSUs granted upon his joining us; and continued vesting of the deferred portion of his annual bonus for the 2016 performance year. For more details, please see Exhibit 10.1 to the Form 8-K filed with the SEC on October 6, 2017.

 

 

      

 

SC 2018 Proxy Statement

  

 

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Table of Contents

COMPENSATION - EXECUTIVE COMPENSATION TABLES

 

 

 

Mr. Cochran, who was an executive officer serving at the end of 2017, is not included in the table immediately above because, as of the date of this Proxy Statement, he is no longer an executive officer. Mr. Cochran entered into a separation agreement with us effective February 2, 2018 under which he will continue serving us as a non-executive employee until May 4, 2018. During this transition period, Mr. Cochran will continue to receive his base salary and remain eligible to participate in the benefit plans to the same extent as immediately prior to February 2, 2018. In connection with his separation, Mr. Cochran will receive: (1) a lump sum cash payment of $342,500, representing six months of base salary, paid on the first regular payroll date after May 4, 2018; (2) a lump sum cash payment of $6,600, representing three months of Company-paid healthcare coverage for Mr. Cochran and his dependents, paid at the same time as (1); (3) $400,000 in cash and RSUs, representing his guaranteed annual bonus for performance year 2017, paid out in accordance with the same terms except the requirement of his continued employment; (4) $250,000 in cash and RSUs, representing a SRIP award for performance year 2017, paid out in accordance with the same terms except the requirement of his continued employment; and (5) continued vesting of his sign-on RSU grant. Mr. Cochran will be subject to confidentiality and non-disparagement restrictive covenants, as well as one-year non-solicitation and anti-raiding restrictive covenants, as part of his separation agreement.

EQUITY COMPENSATION PLAN INFORMATION

We currently administer one equity plan: our Omnibus Plan. The following table provides information as of December 31, 2017 regarding shares of our Common Stock that may be issued under these equity plans.

 

PLAN CATEGORY

NUMBER OF SECURITIES
TO BE ISSUED UPON
EXERCISE OF
OUTSTANDING  OPTIONS,
WARRANTS, AND RIGHTS

(#)

WEIGHTED-AVERAGE
EXERCISE PRICE OF
OUTSTANDING OPTIONS,
WARRANTS, AND RIGHTS

($)(1)

 

NUMBER OF SECURITIES REMAINING
AVAILABLE FOR FUTURE ISSUANCE
UNDER EQUITY COMPENSATION
PLANS (EXCLUDING SECURITIES
REFLECTED IN COLUMN (a))

(#)

 

(a)

 

(b)

 

(c)

 

 

Equity compensation plans approved by security holders

 

 

 

 

 

1,695,008

 

 

 

 

 

 

 

 

12.39

 

 

 

 

 

 

 

 

2,976,545

 

 

 

 

 

Equity compensation plans not approved by security holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

1,695,008

 

 

 

 

 

 

 

 

12.39

 

 

 

 

 

 

 

 

2,976,545

 

 

 

 

 

(1)  Weighted-average exercise price is based solely on outstanding options.

 

 

      

 

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Table of Contents

COMPENSATION - PAY RATIO DISCLOSURE

 

     

 

PAY RATIO DISCLOSURE

As required by SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Scott Powell, our CEO as of December 31, 2017.

For 2017, the median of the annual total compensation of all our employees (other than our CEO) was $54,483; and the annual total compensation of our CEO, as reported in the Summary Compensation Table included above, then annualized for purposes of this pay ratio disclosure and adjusted as noted below, was $2,696,513. As a result, the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was approximately 49 to 1.

The SEC’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their pay ratios. The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below.

We took the following steps to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO.

 

1. To identify the “median employee” from our employee population, we used the amount of “gross wages” for the identified employees as reflected in our payroll records for the nine-month period beginning January 1, 2017. For gross wages, we generally used the total amount of compensation the employees were paid before any taxes, deductions, insurance premiums, and other payroll withholding. We did not use any statistical sampling techniques.

 

2. For the annual total compensation of our median employee, we identified and calculated the elements of that employee’s compensation for 2017 in accordance with the requirements of Item 402(c)(2)(x), resulting in annual total compensation of $54,483.

 

3. For the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2017 Summary Compensation Table included above, adjusted as follows.

 

  a) Mr. Powell began serving as our CEO effective August 27, 2017, upon the resignation of Jason Kulas, our former CEO. We identified Mr. Powell as our CEO for this pay ratio disclosure because he was serving in that position on October 1, 2017, the date that we selected to identify our median employee.

 

  b) As Mr. Powell served as our CEO for only a portion of 2017, in accordance with applicable SEC rules, we annualized the amount reported in the Summary Compensation Table for him (in other words, we estimated the compensation that Mr. Powell would have earned if he served as our CEO for all of 2017, based on the level of compensation he actually earned for the portion of 2017 that he did serve as our CEO). This resulted in annual total compensation for purposes of determining the ratio in the amount of $2,696,513, which is $2,076,315 higher than the amount reported in our 2017 Summary Compensation Table.

 

 

      

 

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STOCKHOLDER PROPOSAL

 

 

 

STOCKHOLDER PROPOSAL

 

 

WHAT YOU ARE VOTING ON:

 

At the Annual Meeting, stockholders may be asked to vote on a stockholder proposal,

which the Board recommends a vote “AGAINST.”

 

Proposal 4: Stockholder Proposal

The following stockholder proposal has been submitted to the Company for action at the Annual Meeting by the AFL-CIO Reserve Fund, 815 16th St., NW, Washington, DC 20006. We have been notified the proponent has continuously owned no fewer than 500 shares of our Common Stock since March 12, 2017. In accordance with the proxy regulations, the following text set forth below in italics is the complete text of the proposal, which is reproduced as submitted to us other than minor formatting changes. All statements contained in the stockholder proposal and supporting statement are the sole responsibility of the proponent. If properly presented at the Annual Meeting, the Board unanimously recommends a vote “AGAINST” the proposal, which the Board believes is unnecessary and not in the best interests of the Company or our stockholders.

RESOLVED: Shareholders of Santander Consumer USA Holdings Inc. (the “Company”) request