DEF 14A 1 d51571ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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Aramark

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Notice of 2021 Annual Meeting of Shareholders and Proxy Statement


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2021 Annual Meeting of Shareholders Tuesday, February 2, 2021 at 10:00 AM EST Meeting live via: www.virtualshareholdermeeting.com/ARMK2021


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A Message from Our Chief Executive Officer

To Our Shareholders,

This past year has tested the resolve of our world as the COVID-19 pandemic has profoundly impacted countless individuals. It has been heartbreaking to see so many lives upended, and norms shattered over the past nine months.

As the leader of a Company I’ve loved since first coming to work at Aramark decades ago and having the opportunity to rejoin in October of last year, it became clear that we needed to marshal the strength and resources of our entire organization—from the Board to the frontlines—to move quickly and take the measures necessary to weather the crisis, while ensuring the safety of our employees and everyone we serve.

I am incredibly proud of our teams around the globe for their passion, resilience and ability to provide innovative solutions to serve clients in their greatest time of need. Their heroic actions and extraordinary work ignited our ability to rapidly adapt and ensure continuity of service. As a result, I truly believe we are a stronger organization today, with a more clearly defined purpose, that ultimately will create a brighter future for our valued employees, partners and shareholders.

Fiscal 2020 Review

Our business transformation strategies over the past year—and most notably since COVID—have resulted in:

 

 

Leadership and organizational changes that advance execution of our initiatives;

 

 

Strengthened client and supplier relationships;

 

 

Renewed entrepreneurial spirit with a growth mindset;

 

 

Investments in accelerated growth;

 

 

Effective management of our flexible business model across a diverse portfolio; and

 

 

Delivering positive cash flow since the bond issuance in April resulting in our ability to maintain cash availability of $2.6 billion at year-end.

Importantly, our balance sheet remains robust, giving us ample liquidity to effectively manage through the pandemic. As the disruption from COVID-19 globally materialized, our team took timely, proactive steps to adapt the Company to the current environment, and to further bolster our strong financial position. These actions included fully drawing down our $1 billion revolving credit facility in March as well as completing an upsized debt offering of $1.5 billion in April.

At the end of our fiscal year, we had $2.6 billion in cash availability with no significant debt maturities until 2023. Our ability to quickly resize our flexible business model enabled us to manage through even the most dynamic periods while continuing to serve clients safe and hygienic food, facilities and uniforms services.

Beyond financials, I am very proud of our efforts to more clearly define Aramark’s purpose. We formed a new Executive Diversity Council, which I am leading along with our board member Calvin Darden, with the goal of leveraging diversity, equity and inclusion to elevate our culture, drive business outcomes and advance positive social impact.

We also named Ash Hanson, Chief Diversity & Sustainability Officer to lead the strategy and governance of Aramark’s 2025 sustainability plan—Be Well. Do Well—which is focused on positively impacting people and the planet for generations to come. This includes eight priorities, which align with the Sustainable Development Goals set by the United Nations: zero hunger; good health & wellbeing; decent work and economic growth; reduced inequality; responsible consumption & production; climate change; protect ocean life; and reduce carbon footprint.

Aramark’s Pandemic Response

Our resolve has been tested during the pandemic and I truly believe that we are a stronger organization today than we were 12 months ago. Our managers are nimbler and more creative. They have had to figure out how to serve large groups of people when large groups cannot gather. They have had to devise entirely new systems for hygiene and launch them at warp speed.

The same is true for our front-line team members. They are the true heroes here. Day in and day out, they serve other heroes in this pandemic: hospital staff and other essential workers—all the people who must be in contact with others to do their jobs.

 

 


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We are exceptionally proud of our participation in the launch of NYC Healthcare Heroes, a citywide philanthropic program to support the heroic efforts of the more than 100,000 healthcare professionals on the front lines combatting the COVID-19 pandemic at its initial U.S. epicenter. The program—launched in partnership with the Mayor’s Fund to Advance New York City, Robin Hood, New York City’s largest poverty fighting organization, and the American Red Cross—provided over 500,000 care packages to staff at hospitals across New York’s five boroughs, alleviating the burden of staff members having to shop for themselves and their families.

We have countless other initiatives and stories of individual team members stepping up in selfless ways. When viewed collectively, Aramark is playing a significant role as a key enabler in the broader recovery and I am eager for our organization to continue to give back to the communities we serve. Notable highlights over the past year include:

 

 

Served over 65 million meals to students across hundreds of school districts;

 

 

Opened 400 pop-up convenience and grocery locations for frontline healthcare workers;

 

 

Redeployed our Uniform Services production lines to manufacture tens of millions of essential personal protective equipment (PPE) for the heroes working in hospitals and other critical roles;

 

 

Donated 250,000 masks to the American Red Cross and over 175,000 pounds of food and other resources to local community organizations;

 

 

Partnered with the Urban League to provide meals during the summer to community members in several cities across the country; and

 

 

Mobilized our emergency relief and large-scale event expertise to aid temporary field hospital operations in various cities.

Focus on Future

I am grateful for our exceptional teams around the globe who demonstrate, day in and day out, an unwavering commitment to best serve our employees, clients and communities. The pandemic has forced us to question almost every practice and process in our business. That inquiry, in turn, unleashed immense energy and an ownership culture inside the organization. It has prompted our people to think more expansively about the way we serve our clients. From robotic capabilities and new applications in food delivery to autonomous grab-and-go convenience locations and cash-less, contact-free payment options, our teams quickly adapted service offerings to create seamless experiences for clients in the new environment.

I’m confident that this shift will create shareholder value in the future as standards for hygiene and safety rise, and outsourcing of these critical, more demanding services accelerates. Now, more than ever, our clients need Aramark’s expertise.

It is science that ensures safety, and we intend to lead the way with programs like EverSafe, the Aramark platform that supports the safe reopening and sustainable management of client locations. Developed with Jefferson Health, according to recommendations from the Centers for Disease Control and Prevention and the World Health Organization, EverSafe is a set of standards and practices, augmented with artificial intelligence and robotics, to minimize risks of infection.

It has truly been an extraordinary year since my return to Aramark. All of us have been tested in ways we never expected. Looking ahead, we remain highly committed to building Aramark’s growth paradigm and our belief in the Company’s success has never been stronger. It is with this passion and focus in mind that I have no doubt of our promising future.

 

Sincerely.

 

 

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John Zillmer

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Notice of 2021 Annual Meeting of Shareholders

 

DATE AND TIME:

Tuesday, February 2, 2021 at 10:00 am (Eastern Standard Time)

PLACE:

Meeting live via the internet – please visit www.virtualshareholdermeeting.com/ARMK2021. To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or on your Notice of Availability of Proxy Materials. You will not be able to attend the 2021 Annual Meeting in person.

ITEMS OF BUSINESS:

 

PROPOSAL 1.    To elect the 12 director nominees listed in the proxy statement to serve until the 2022 annual meeting of shareholders and until their respective successors have been duly elected and qualified;

 

PROPOSAL 2.

  

 

To consider and vote upon a proposal to ratify the appointment of Deloitte & Touche LLP as Aramark’s independent registered public accounting firm for the fiscal year ending October 1, 2021;

 

PROPOSAL 3.

  

 

To hold a non-binding advisory vote on executive compensation;

 

PROPOSAL 4.

  

 

To hold a non-binding advisory vote on the frequency of future advisory votes on executive compensation;

 

PROPOSAL 5.

  

 

To approve the Company’s Third Amended and Restated 2013 Stock Incentive Plan; and

 

PROPOSAL 6.

  

 

To approve the Company’s 2021 Employee Stock Purchase Plan.

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

RECORD DATE:

The Board of Directors has fixed December 10, 2020 as the record date for the meeting. This means that only shareholders as of the close of business on that date are entitled to receive this notice of the meeting and vote at the meeting and any adjournments or postponements of the meeting. A list of these stockholders will be open for examination by any stockholder electronically during the 2021 Annual Meeting at www.virtualshareholdermeeting.com/ARMK2021 when you enter your 16-Digit Control Number.

HOW TO VOTE:

Shareholders of record can vote their shares by using the Internet or the telephone or by attending the meeting and voting online. Instructions for voting by using the Internet or the telephone are set forth in the Notice of Internet Availability that has been provided to you. Shareholders of record who received a paper copy of the proxy materials also may vote their shares by marking their votes on the proxy card provided, signing and dating it, and mailing it in the envelope provided, or by attending the meeting and voting online.

 

By Order of the Board of Directors,

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Harold B. Dichter

Secretary

December 23, 2020

 

 

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Proxy Statement Summary

     1  

Corporate Governance Matters

     2  

Proposal No. 1 – Election of Directors

     2  

Overview of Our Director Nominees

     3  

Director Nominees

     4  

Corporate Governance

     12  

Director Compensation

     19  

Audit Committee Matters

     23  

Proposal No.  2 – Ratification of Independent Registered Public Accounting Firm

     23  

Fees to Independent Registered Public Accounting Firm

     25  

Report of Audit and Corporate Practices Committee

     26  

Compensation Matters

     27  

Proposal No.  3 – Advisory Vote to Approve Executive Compensation

     27  

Compensation Discussion and Analysis

     29  

Compensation Committee Report

     62  

Compensation Tables

     63  

Equity Compensation Plan Information

     81  

Proposal No.  4 – Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation

     82  

Proposal No.  5 – Vote to Approve Third Amended and Restated 2013 Stock Incentive Plan

     83  

Proposal No.  6 – Vote to Approve 2021 Employee Stock Purchase Plan

     92  

Certain Relationships and Related Transactions

     97  

Security Ownership of Certain Beneficial Owners and Management

     98  

General Information

     100  

2021 Annual Shareholders Meeting

     100  

2022 Annual Shareholders Meeting

     105  

Annex A

     Annex-1  

Appendix A

     A-1  

Appendix B

     B-1  

 

 

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Proxy Statement Summary

 

 

This summary highlights information contained elsewhere in this proxy statement, which is first being sent or made available to shareholders on or about December 23, 2020. You should read the entire proxy statement carefully before voting. For more information regarding the Company’s 2020 performance, please review Aramark’s Annual Report.

VOTING MATTERS AND BOARD RECOMMENDATIONS

 

 

Proposal

 

 

 

Board’s Recommendation

 

 

Proposal 1. Election of 12 Director Nominees (page 2)

 

 

 

FOR Each Director Nominee

 

 

Proposal 2. Ratification of Deloitte & Touche LLP as Independent

Registered Public Accounting Firm for 2021 (page 23)

 

 

 

FOR

 

 

Proposal 3. Advisory Approval of Executive Compensation (page 27)

 

 

 

FOR

 

 

Proposal 4. Advisory Approval of the Frequency of Future Advisory Votes on Executive Compensation (page 82)

 

 

 

ONE YEAR

 

 

Proposal 5. Approval of the Company’s Third Amended and Restated 2013 Stock Incentive Plan (page 83)

 

 

 

FOR

 

 

Proposal 6. Approval of the Company’s 2021 Employee Stock Purchase Plan (page 92)

 

 

 

FOR

 

2021 ANNUAL MEETING OF SHAREHOLDERS

 

Date and Time:

   Tuesday, February 2, 2021 at 10:00 am EST

Record Date:

   December 10, 2020

Place:

   Meeting live via the internet – please visit www.virtualshareholdermeeting.com/ARMK2021

 

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Corporate Governance Matters

 

 

 

PROPOSAL NO. 1 — ELECTION OF DIRECTORS

 

PROPOSAL SUMMARY

What Are You Voting On?

We are asking our shareholders to elect 12 director nominees listed below to serve on the Board for a one-year term. Information about the Board and each director nominee is included in this section.

Voting Recommendation

The Board recommends that you vote “FOR” each director nominee listed below. After consideration of the individual qualifications, skills and experience of each of our director nominees and his or her prior contributions to the Board, if applicable, it believes a Board composed of the 12 director nominees would be well-balanced and effective.

The Board, upon recommendation from the Nominating, Governance and Corporate Responsibility Committee (the “Nominating Committee”), has nominated 12 directors for election at the Annual Meeting. Each of the directors elected at the annual meeting will hold office until the annual meeting of shareholders to be held in 2022 or until his or her successor has been elected and qualified, or until his or her earlier death, resignation, removal or disqualification.

Unless contrary instructions are given, the shares represented by a properly executed proxy will be voted “FOR” each of the director nominees presented below. If, at the time of the meeting, one or more of the director nominees has become unavailable to serve, shares represented by proxies will be voted for the remaining director nominees and for any substitute director nominee or nominees designated by the Board of Directors, unless the size of the Board is reduced. The Board knows of no reason why any of the director nominees will be unavailable or unable to serve. Proxies cannot be voted for a greater number of persons than the director nominees listed.

 

 

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The Board of Directors recommends a vote "FOR" each nominee for director

 

 

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OVERVIEW OF OUR DIRECTOR NOMINEES

Each of our 12 nominees has extensive leadership experience and relevant expertise and, except for Ms. Heller, currently serves as a director for the Company. The Board undergoes an annual self-assessment and review to ensure that it has a balanced mix of skills and attributes to best oversee our business.

 

       

 

Director

 

 

Age

 

 

Background

 

 

Current Committee

Memberships

 

Susan M. Cameron

 

 

62

 

 

Former Chairman and Chief

Executive Officer, Reynolds

American Inc.

 

 

Compensation and Human Resources

Nominating, Governance and

Corporate Responsibility*

 

Greg Creed

 

 

63

 

 

Former Chief Executive Officer, Yum!

Brands, Inc.

 

 

 

Finance

Compensation and Human Resources

 

Calvin Darden

 

 

70

 

 

Former Senior Vice President, U.S.

Operations, United Parcel Service,

Inc.

 

 

Audit

Finance

 

Richard W. Dreiling

 

 

67

 

 

Former Chairman and Chief

Executive Officer, Dollar General

Corporation

 

 

Compensation and Human Resources

Nominating, Governance and

Corporate Responsibility*

 

Irene M. Esteves

 

 

61

 

 

Former Chief Financial Officer, Time

Warner Cable Inc.

 

 

 

Audit

Finance

 

Daniel J. Heinrich

 

 

64

 

 

Former Executive Vice President

and Chief Financial Officer, The

Clorox Company

 

 

Audit

Finance

 

Bridgette P. Heller

 

 

59

 

 

Founder and Chief Executive Officer,

The Shirley Procter Puller Foundation

 

 

New Director Nominee

 

Paul C. Hilal

 

 

54

 

 

Founder and Chief Executive Officer,

Mantle Ridge LP

 

 

Compensation and Human Resources

Nominating, Governance and

Corporate Responsibility*

 

Karen M. King

 

 

64

 

 

Former Executive Vice President,

Chief Field Officer, McDonald’s Corp.

 

 

 

Audit

Finance

 

Stephen I. Sadove

 

 

69

 

 

Former Chairman and Chief

Executive Officer, Saks Incorporated

 

 

Compensation and Human Resources

Nominating, Governance and

Corporate Responsibility*

 

Arthur B. Winkleblack

 

 

63

 

 

Former Executive Vice President and

Chief Financial Officer, H.J.

Heinz Company

 

 

Audit

Nominating, Governance and

Corporate Responsibility*

 

John J. Zillmer

 

 

65

 

 

Chief Executive Officer, Aramark

 

 

 

 

None

 

*

This committee was formerly known as the Nominating and Corporate Governance Committee. The Board determined to change the name of the committee in December 2020.

 

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DIRECTOR NOMINEES

The following information describes certain information regarding our director nominees as of December 10, 2020.

Director Nominee Composition

 

 

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Tenure 8 0-3 years 2 4-6 years 2 7+ years 3yrs. Average Tenure DIVERSITY 42% diversity 4 Women / 3 Racially/Ethnically Diverse

Director Nominee Skills, Experience, and Background

The Board regularly reviews the skills, experience, and background that it believes are desirable to be represented on the Board and, in conjunction with the Board’s refreshment process described below, has recently re-evaluated these skills and qualifications to better align with the Company’s strategic vision, and business and operations. The following is a description of some of these skills, experience, and background:

 

 

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Strategy Development Experience driving strategy direction and growth of an organization ARMK and related Related Industry Experience knowledge of or experience in on or more of the Companys specific industries (e.g., food, facilities management and uniform services) Accounting & Finance Experience or expertise in financial accounting and reporting or the financial management of a major organization C-Suite Leadership Experience serving in a senior leadership role of a major organization (e.g., Chief Financial Officer, General Counsel, President, or Division Head) CEO Leadership Experience serving as the Chief Executive Officer of a major organization compensation, Human Resources & Culture Experience or expertise in human resources and fostering Organizational goals, values and behaviors Supply Chain Experience in the large-scale procurement and distribution of goods for an enterprise Disruptive Risk and Innovation Experience or expertise in preparing for and responding to natural or man made business disruptions Public Company Board Service Experience as a board member of another publicly-traded company Corporate Finance & Capital Markets Experience in capital structure strategy, corporate debt, capital market transactions, private equity or investment banking IT & Cyber Security Experience or expertise in information technology or the use of digital media or technology to facilitate business objectives International Operations Experience doing business internationally Traditional and Digital Marketing & sales Experience in creating, communicating and delivering offerings of goods and services for customers and clients through either traditional or digital means M&A and Business Development Experience and involvement with significant mergers and acquisitionsss

 

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The following is a summary of some of the skills, experience, and background that our director nominees bring to the Board:

 

 

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SKILLS, EXPERIENCE AND BACKGROUND STRATEGY DEVELOPMENT 100% DISRUPTIVE RISK AND INNOVATION 58% CEO LEADERSHIP 42% TRADITIONAL AND DIGITAL MARKETING & SALES 67% M&A AND BUSINESS DEVELOPMENT 75% ARMK AND RELATED INDUSTRY BACKGROUND 58% PUBLIC COMPANY BOARD SERVICE 92% ACCOUNTING & FINANCE 83% IT & CYBER SECURITY 50% INTERNATIONAL OPERATIONS 67% SUPPLY CHAIN 58% C-SUITE LEADERSHIP 92% COMPENSATION, HUMAN RESOURCES & CULTURE 83% CORPORATE FINANCE & CAPITAL MARKETS 58% 12 Director Nominee

 

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Susan M. Cameron Director since: 2019 Age: 62 Former Chairman and Chief Executive Officer, Reynolds American, Inc. Biography: Susan M. Cameron most recently served as the Non-Executive Chairman of Reynolds American Inc. from May 2017 to July 2017, its Executive Chairman from January 2017 to May 2017, and its President and Chief Executive Officer and member of the board of directors from 2014 to December 2016 and 2004 to 2011. Prior to that, Ms. Cameron held various marketing, management and executive positions at Brown & Williamson Tobacco Corporation, a U.S. tobacco company. She currently serves as a director of nVent Electric plc and Tupperware Brands Corporation. Ms. Cameron previously served as a director of Reynolds American Inc., and R.R. Donnelley & Sons Company. Skills & Qualifications: Ms. Cameron's experience as a public company CEO, her experience on the boards of other public companies and her considerable experience in the marketing for international name-brand consumer products companies enable her to provide key leadership and strategic perspectives to the Board. Experience Highlights: CEO Leadership, Public Company Board Service, C-Suite Leadership, Compensation, Human Resources & Culture, Marketing & Sales, Strategy Development Independent Director Aramark Committees:Compensation & Human Resources (Chair); Nominating, Governance and Corporate Responsibility Other Public Boards:Tupperware Brands Corporation, nVent Electric plc

 

 

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Greg Creed Director since: 2020 Age: 63 Former Chief Executive Officer, Yum! Brands, Inc. Biography: Greg Creed most recently served as the Chief Executive Officer of YUM! Brands, Inc. from January 2015 to January 1, 2020, its Chief Executive Officer of Taco Bell Division from 2011 to 2014, and as President and Chief Concept Officer of Taco Bell U.S. from 2007 to 2011 after holding various other positions with the company since 1994. Mr. Creed currently serves as a director of Whirlpool Corporation and privately-held NetBase/Quid. He previously served as a director of YUM! Brands, Inc. and International Game Technology. Skills & Qualifications: Mr. Creed's expertise as a public company CEO for a leading global operator of quick service restaurants will allow him to contribute key insights and strategic leadership to the Board. His international experience will also be very valuable to the Board. Experience Highlights: CEO Leadership, Public Company Board Service, Related Industry Experience, C-Suite Leadership, Strategy Development, International Operations, Traditional and Digital Marketing & Sales Independent Director Aramark Committees: Compensation & Human Resources; Finance Other Public Boards: Whirlpool Corporation

 

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Experience Highlights: C-Suite Leadership, Strategy Development, Supply Chain, Public Company Board Service Independent Director Aramark Committees: Audit; Finance Other Public Boards: Cardinal Health, Inc., Target Corporation Calvin Darden Director since: 2018 Age: 70 Former Senior Vice President, U.S. Operations, United Parcel Service, Inc. Biography: Calvin Darden most recently served as the Chief Executive Officer and Chairman of Darden Petroleum & Energy Solutions. LLC, a national distributor and regional provider of refined petroleum products and bio fuels founded from 2015 to 2019. From 1995 to 2005, Mr. Darden served as Senior Vice President, U.S. Operations of United Parcel Service, Inc. Mr. Darden had a 33-year career with UPS where he served in a variety of senior leadership voles. Mr. Darden currently serves as a director of Target Corporation and Cardinal Health, Inc. Mr. Darden served on the board of directors of Coca-Cola Enterprises, Inc. (now known as Coca-Cola European Partners Plc) from 2004 to 2016. Skills & Qualifications: Mr. Darden's expertise in supply chain networks, logistics and other operational matters is highly valuable to the Board. In addition. Mr. Darden's senior management experience for many years in a high-headcount business with a significant customer service element provides important insights to the Board. Mr. Darden's service on a number of public company boards is also valuable to the Board as it relates to governance and similar matters.

 

 

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Experience Highlights: CEO Leadership, C- Suite Leadership, Related Industry Experience, Strategy Development, M&A & Business Development, Marketing & Sales, Public Company Board Service Independent Director Aramark Committees: Compensation & Human Resources; Nominating, Governance and Corporate Responsibility Other Public Boards: Kellogg Company, Lowe's Companies, Inc., PulteGroup, Inc. Richard W. Dreiling Director since: 2016 Age: 67 Former Chairman and Chief Executive Officer, Dollar General Corporation Biography: Richard Dreiling is the former Chairman and Chief Executive Officer of Dollar General Corporation, serving as Chief Executive Officer from January 2008 until June 2015 and Chairman of the board of directors from December 2008 until January 2016. Before joining Dollar General, Mr. Dreiling served as Chief Executive Officer, President and a director of Duane Reade Holdings, Inc. and Duane Reade Inc., from November 2005 until January 2008, and as Chairman of the Board of Duane Reade from March 2007 until January 2008. Prior to that, Mr. Dreiling, beginning in March 2005, served as Executive Vice President — Chief Operating Officer of Longs Drug Stores Corporation, an operator of a chain of retail drug stores on the West Coast and Hawaii, after having joined Longs in July 2003 as Executive Vice President and Chief Operations Officer. From 2000 to 2003, Mr. Dreiling served as Executive Vice President — Marketing, Manufacturing and Distribution at Safeway, Inc. Prior to that, Mr. Dreiling served from 1998 to 2000 as President of Vons, a southern California food and drug division of Safeway. Mr. Dreiling is a director of Kellogg Company, Lowe's Companies, Inc., and PulteGroup, Inc. Skills & Qualifications: Mr. Dreiling's over 40 years of retail industry experience at all operating levels has added significant value to the Board. Mr. Dreiling has served as Chief Executive Officer of a large public company and brings to the Board very valuable insight and leadership attributes as a result of that experience.

 

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Irene M. Esteves Director since: 2015 Age: 61 Former Chief Financial Officer, Time Warner Cable Inc. Biography: Irene M. Esteves most recently served as Chief Financial Officer of Time Warner Cable Inc. from July 2011 to May 2013. She previously served as Executive Vice President and Chief Financial Officer of XL Group plc. Prior to that, Ms. Esteves was Senior Vice President and Chief Financial Officer of Regions Financial Corporation. She currently serves as a director of KKR Real Estate Finance Trust Inc., R.R. Donnelley & Sons Company, and Spirit AeroSystems Holdings Inc. and previously served as a director of Level 3 Communications, Inc. and tw telecom inc. Skills & Qualifications: Ms. Esteves' experience as a public company CFO and her over 20 years of experience overseeing global finance, risk management, and corporate strategy for U.S. and multi-national companies make her well qualified to serve on the Board. The Board has determined Ms. Esteves to be an audit committee financial expert and her accounting experience and skills are important to the Company. Experience Highlights: C-Suite Leadership, Corporate Finance & Capital Markets, M&A and Business Development, Accounting & Finance, Strategy Development, Disruptive Risk & Innovation Independent Director Aramark Committees: Audit; Finance (Chair) Other Public Boards: KKR Real Estate Finance Trust Inc., R.R. Donnelley & Sons Company, Spirit AeroSystems Holdings Inc.

 

 

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Daniel J. Heinrich Director since: 2013 Age: 64 Former Executive Vice President and Chief Financial Officer, The Clorox Company Biography: Daniel J. Heinrich most recently served as Executive Vice President and Chief Financial Officer at The Clorox Company from June 2009 to November 2011. He started with Clorox in 2001 as Vice President and Controller and served in that role until 2003. In 2003, he became Vice President and Chief Financial Officer and in 2009 he became Senior Vice President and Chief Financial Officer. Prior to joining Clorox, his roles included Senior Vice President and Treasurer of Transamerica Finance Corporation; Senior Vice President, Controller and Treasurer of Granite Management Company; Senior Vice President, Controller and Chief Accounting Officer of First Nationwide Bank; and as Senior Audit Manager at Ernst & Young LLP. Mr. Heinrich serves as a director of Edgewell Personal Care, Inc. (formerly Energizer Holdings, Inc.), Ball Corporation, and privately-held E. & J. Gallo Winery. He previously served as a director of Advanced Medical Optics and privately-held G3 Enterprises, Inc. Skills & Qualifications: The Board greatly values Mr. Heinrich's extensive financial and business background and his tenure as a public company CFO. The Board has determined Mr. Heinrich to be an audit committee financial expert and his accounting experience and skills are important to the Company. In addition, Mr. Heinrich brings to the Board significant experience on information technology issues. Experience Highlights: C-Suite Leadership, Strategy Development, Corporate Finance and Capital Markets, M&A and Business Development, Accounting & Finance, Public Company Board Service, IT and Cyber Security Independent Director Aramark Committees: Audit (Chair); Finance Other Public Boards: Edgewell Personal Care, Inc., Ball Corporation

 

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Experience Highlights: C-Suite Leadership, Strategy Development, Marketing & Sales, International Operations, Public Company Board Service Independent Director Aramark Committees: New Nominee Other Public Boards: DexCom, Inc., Novartis Bridgette P. Heller Director since: New Nominee Age: 59 Founder and Chief Executive Officer, The Shirley Procter Puller Foundation Biography: Bridgette P. Heller is the founder and CEO of the Shirley Proctor Puller Foundation, a small non-profit committed to generating better educational outcomes for underserved children in St. Petersburg, Florida. Previously, Ms. Heller served as the Executive Vice President and President of Nutricia, the Specialized Nutrition Division of Danone from July 2016 to August 2019. From 2010 to 2015, she served as Executive Vice President of Merck & Co., Inc. and President of Merck Consumer Care. Prior to joining Merck, Ms. Heller was President of Johnson & Johnson's Global Baby Business Unit from 2007 to 2010 and President of its Global Baby, Kids, and Wound Care business from 2005 to 2007. She also worked for Kraft Foods from 1985 to 2002, ultimately serving as Executive Vice President and General Manager for the North American Coffee Portfolio. Ms. Heller serves as a director of Dexcom, Inc. and Novartis. She previously served as a director of Tech Data Corporation and ADT Corporation. Skills & Qualifications: Ms. Heller's substantial experience and expertise in the food and nutrition industries provides the Board with key insights on that significant portion of the Company's business as well as consumer focused businesses generally.

 

 

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Experience Highlights: Strategy Development, Public Company Board Service, Corporate Finance & Capital Markets, M&A & Business Development, C-Suite Leadership, IT & Cybersecurity Independent Director Aramark Committees: Compensation & Human Resources; Nominating, Governance and Corporate Responsibility Other Public Boards: CSX Corporation Paul C. Hilal Director since: 2019 Age: 54 Founder and Chief Executive Officer, Mantle Ridge LP Biography: Paul C. Hilal is the Founder and Chief Executive Officer of Mantle Ridge LP. Prior to founding Mantle Ridge, Mr. Hilal was a Partner and Senior Investment Professional at Pershing Square Capital Management from 2006 to 2016. He serves as Vice Chairman on the board of directors of CSX Corporation. Mr. Hilal was formerly on the boards of three other public companies, including Canadian Pacific Railway Limited, where he chaired the Compensation Committee; Ceridan Corporation; and WorldTalk Communications, where he served as Chairman of the Board. Skills & Qualifications: Mr. Hilal's experience as a value investor, capital allocator, and engaged steward during corporate transformations, provides the Board with valuable financial acumen and experience. In addition, Mr. Hilal's experience on the boards of a number of public companies allows him to provide a key strategic perspective to the Board.

 

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Karen M. King Director since: 2019 Age: 64 Former Executive Vice President, Chief Field Officer, McDonald's Corp. Biography: Karen M. King is the former Executive Vice President, Chief Field Officer of McDonald's Corp. from 2015 to 2016. Prior to that, Ms. King held various management and executive positions at McDonald's Corp. since 1994, including having served as its Chief People Officer, President, East Division, Vice-President, Strategy and Business Development and General Manager and Vice President, Florida Region, among others. Skills & Qualifications: Ms. King's substantial experience and expertise in field operations and talent development for a high head count business in the quick service food industry provides the Board with key insights and perspective on operations, consumer focused marketing and service delivery. Experience Highlights: C-Suite Leadership, Strategy Development, Related Industry Experience, Compensation, Human Resources & Culture, Marketing & Sales Independent Director Aramark Committees: Audit; Finance Other Public Boards: None

 

 

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Stephen I. Sadove Director since: 2013 Age: 69 Former Chairman and Chief Executive Officer, Saks Incorporated Biography: Stephen I. Sadove is currently principal of Stephen Sadove & Associates and a founding partner of JW Levin Partners. He served as Chief Executive Officer of Saks Incorporated from 2006 until November 2013 and Chairman and CEO from May 2007 until November 2013. He was Chief Operating Officer of Saks from 2004 to 2006. Prior to joining Saks in 2002, Mr. Sadove was with Bristol-Myers Squibb Company from 1991 to 2002, first as President, Clairol from 1991 to 1996, then President, Worldwide Beauty Care from 1996 to 1997, then President, Worldwide Beauty Care and Nutritionals from 1997 to 1998, and finally, Senior Vice President and President, Worldwide Beauty Care. He was employed by General Foods Corporation from 1975 to 1991 in various managerial roles, most recently as Executive Vice President and General Manager, Desserts Division from 1989 until 1991. Mr. Sadove currently serves as a director of Colgate-Palmolive Company, Park Hotels & Resorts Inc., and Movado Group, Inc. and previously served as director of Ruby Tuesday, Inc., J.C. Penney Company, Inc. and privately-held Buy It Mobility. Skills & Qualifications: Mr. Sadove's extensive knowledge of financial and operational matters in the retail industry, including as to technology matters, and his experience as a public company Chief Executive Officer are highly valuable to the Board. In addition, Mr. Sadove's service on a number of public company boards provides important insights to the Board on governance and similar matters. Experience Highlights: CEO Leadership, C-Suite Leadership, Related Industry Experience, International Operations, Strategy Development, Marketing & Sales, Public Company Board Service Independent Director Aramark Committees: Compensation & Human Resources; Nominating, Governance and Corporate Responsibility Other Public Boards: Colgate Palmolive, Company, Park Hotels & Resorts Inc., Movado Group, Inc.

 

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Experience Highlights: C-Suite Leadership, Accounting & Finance, Corporate Finance & Capital Markets, M&A and Business Development, Strategy Development, Public Company Board Service Aramark Committees: Audit; Nominating, Governance and Corporate Responsibility (Chair) Other Public Boards: The Wendy's Company, Church & Dwight Co., Inc. Arthur B. Winkleblack Director since: 2019 Age: 63 Former Executive Vice President and Chief Financial Officer, H.J. Heinz Company Biography: Arthur B. Winkleblack most recently provided financial, strategic planning and capital markets consulting services for Ritchie Bros. Auctioneers, where he has served as Senior Advisor to the CEO from 2014 to 2019. From 2002 to 2013, he served as Executive Vice President and Chief Financial Officer of H.J. Heinz Company. From 1999 to 2001, Mr. Winkleblack worked at Indigo Capital as Acting Chief Operating Officer of Perform.com and Chief Executive Officer of Freeride.com. Prior to that, he served as Executive Vice President and Chief Financial Officer of C. Dean Metropoulos Group from 1998 to 1999, as Vice President and Chief Financial Officer of Six Flags Entertainment Corporation from 1996 to 1998 and as Vice President and Chief Financial Officer of Commercial Avionics Systems, a division of AlliedSignal, Inc., from 1994 to 1996. Previously, he held various finance, strategy and business planning roles at PepsiCo, Inc. from 1982 to 1994. Mr. Winkleblack currently serves as a director of The Wendy's Company and Church & Dwight Co., Inc. He previously served as a director of Performance Food Group (PFG) Company, Inc. and RTI International Metals. Skills & Qualifications: Mr. Winkleblack's executive experience enables him to provide our Board with knowledgeable perspectives on strategic planning, international operations and mergers & acquisitions. In addition, as a former public company CFO, he brings important insights on performance management, business analytics, capital structure, compliance and investor relations. The Board has determined Mr. Winkleblack to be an audit committee financial expert, and his governance skills are important to the Company.

 

 

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Experience Highlights: CEO Leadership, Strategy Development, Industry Experience, International Operations, M&A & Business Development, Supply Chain, Public Company Board Service Aramark Committees: None Other Public Boards: CSX Corporation, Ecolab, Inc. John J. Zillmer Director since: 2019 Age: 65 Chief Executive Officer, Aramark Biography: John J. Zillmer has been our Chief Executive Officer ("CEO") since October 2019. Prior to joining us, Mr. Zillmer served as Chief Executive Officer and Executive Chairman of Univar from 2009 until 2012. Prior to that, Mr. Zillmer served as Chairman and Chief Executive Officer of Allied Waste Industries from 2005 to 2008 and various positions at Aramark, including Vice President of Operating Systems, Regional Vice President, Area Vice President, Executive Vice President Business Dining Services, President of Business Services Group, President of International and President of Global Food and Support Services, from 1986 to 2005. Mr. Zillmer serves on the board of directors as Non-Executive Chairman of CSX Corporation, as well as a director of Ecolab, Inc. Mr. Zillmer was formerly on the board of directors of Veritiv Corporation, Performance Food Group (PFG) Company, Inc. and Reynolds American Inc. Skills & Qualifications: Having served as our CEO since October 2019 and with over 30 years of experience in the managed food and services hospitality industry, including 23 years with Aramark, Mr. Zillmer's extensive knowledge of the Company and the industries in which it is engaged are invaluable to the Board. In addition, Mr. Zillmer's experience prior to joining Aramark as a Chief Executive Officer of two public companies provides key leadership experience and perspective and is greatly valued by the Board.

 

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CORPORATE GOVERNANCE

Agreement with Mantle Ridge

On October 6, 2019, the Company entered into a Stewardship Framework Agreement (as amended, the “Stewardship Framework Agreement”) with MR BridgeStone Advisor LLC (“Mantle Ridge”), on behalf of itself and its affiliated funds (such funds, together with Mantle Ridge, collectively, the “Mantle Ridge Group”), which have a combined beneficial ownership interest in approximately 9.7% of the Company’s outstanding shares of common stock and an additional economic interest of approximately 10%. Pursuant to the Stewardship Framework Agreement, former directors of the company, Mr. Pierre-Olivier Beckers-Vieujant, Ms. Lisa Bisaccia, Ms. Patricia B. Morrison and Mr. John A. Quelch each resigned from the Board of Directors and each of Messrs. Zillmer, Hilal and Winkleblack and Mses. Cameron and King were elected to the Board, and it was agreed that Mr. Creed would be nominated to the Board at the next annual meeting. Messrs. Zillmer, Hilal, Creed and Winkleblack and Mses. Cameron and King were then nominated for election to the Board and elected at the 2020 Annual Meeting. Pursuant to the Stewardship Framework Agreement, Mr. Hilal was also appointed Vice Chairman of the Board.

Pursuant to the Stewardship Framework Agreement, the Company had agreed to limit the size of the Board to eleven directors until October 6, 2022 and has agreed to permit Mr. Hilal to designate himself or another individual to be appointed to the Board during the term of the Stewardship Framework Agreement. On December 14, 2020 the Company and Mantle Ridge amended the Stewardship Framework Agreement to increase the limit on the size of the Board prior to October 6, 2022 to twelve directors; provided that if at any time prior to October 6, 2022, any director (other than Mr. Hilal or his designee) ceases to serve on the Board, then the limit shall again be eleven directors.

Board Structure and Leadership

The Board manages or directs the business and affairs of the Company, as provided by Delaware law, and conducts its business through meetings of the Board and four standing committees: the Audit Committee, the Compensation and Human Resources Committee (the “Compensation Committee”), the Nominating, Governance and Corporate Responsibility Committee (the “Nominating Committee”) and the Finance Committee. The Board is currently led by Mr. Sadove, our Chairman and Mr. Hilal, our Vice Chairman.

The Board, upon the recommendation of the Nominating Committee, has determined that, at this time, having a separate Chairman and Chief Executive Officer is the best board organization for Aramark. Eleven of the twelve Board nominees, if elected, will be independent directors. The Board’s committees are composed solely of, and chaired by, independent directors. Our independent directors meet at each regularly scheduled Board meeting in separate executive sessions, without Mr. Zillmer present, chaired by the Chairman.

Aramark’s strong Board, with an independent Chairman and Vice Chairman and independent committee chairs, ensures that the Board, and not the Chief Executive Officer alone, determines the Board’s areas of focus.

Director Independence and Independence Determinations

Under our Corporate Governance Guidelines and NYSE rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with the Company or any of its subsidiaries.

The Board has established guidelines of director independence to assist it in making independence determinations, which conform to the independence requirements in the NYSE listing standards. In addition to applying these guidelines, which are set forth in our Corporate Governance Guidelines (which may be found on the Corporate Governance page of the Investor Relations section on our website at www.aramark.com), the Board will consider all relevant facts and circumstances in making an independence determination. Our Corporate Governance Guidelines provide that none of the following relationships will disqualify any director or nominee from being considered “independent” and such relationships will be deemed to be an immaterial relationship with Aramark:

 

 

A director’s or a director’s immediate family member’s ownership of five percent or less of the equity of an organization that has a relationship with Aramark;

 

 

A director’s service as an executive officer or director of or employment by, or a director’s immediate family member’s service as an executive officer of, a company that makes payments to or receives payments from Aramark for property or services in an amount which, in any fiscal year, is less than the greater of $1 million or two percent of such other company’s consolidated gross revenues; or

 

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A director’s service as an executive officer of a charitable organization that received annual contributions from Aramark and its Foundation that have not exceeded the greater of $1 million or two percent of the charitable organization’s annual gross revenues (Aramark’s automatic matching of employee contributions will not be included in the amount of Aramark’s contributions for this purpose).

The policy of the Board is to review the independence of all directors at least annually. The Nominating Committee undertook its annual review of director independence and made a recommendation to the Board of Directors regarding director independence. In making its independence determinations, the Nominating Committee and the Board considered various transactions and relationships between Aramark and the directors or nominees or between Aramark and certain entities affiliated with a director or nominee. As a result of this review, the Board affirmatively determined that each of Messrs. Creed, Darden, Dreiling, Heinrich, Hilal, Sadove and Winkleblack, and Mses. Cameron, Esteves, Heller and King is independent under the guidelines for director independence set forth in our Corporate Governance Guidelines and for purposes of applicable NYSE standards. In addition, at the committee level, the Board has also determined that each member of the Audit Committee is “independent” for purposes of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and each member of the Compensation Committee is independent for purposes of applicable NYSE standards.

Board Assessment

The Board is focused on enhancing its performance through a rigorous assessment process of the effectiveness of the Board and its committees in order to increase shareholder value. We have designed our Board evaluation process to solicit input and perspective from all of our directors on various matters, including:

 

 

the effectiveness of the Board and its operations;

 

 

the Board’s leadership structure;

 

 

board composition, including the directors’ capabilities, experiences and knowledge;

 

 

the quality of Board interactions; and

 

 

the effectiveness of the Board’s committees.

As set forth in its charter, the Nominating Committee oversees the Board and committee evaluation process. Annually, the Chairman, the Vice Chairman, the Chair of the Nominating Committee and the Nominating Committee determine the appropriate form of evaluation and consider the design of the process to ensure it is both meaningful and effective. In 2017, the Board initially engaged an independent third party to assist with the evaluation of the Board and the Audit, Compensation, Nominating and Finance Committees and intends to do so in the future from time to time. In 2018 and in 2019, the Board conducted a self-evaluation process in which the Lead Director and CEO conducted interviews with the independent directors. In 2020, the Board conducted a self-evaluation process that involved each director responding to a survey distributed to the Board with respect to the Board and members of each committee responding to a survey with respect to each committee. The results of this process were reviewed by the Nominating Committee and presented to the full Board.

Board Committees and Meetings

The Board held 24 meetings during fiscal 2020 which was substantially more than the prior year due to the increased efforts required to oversee the business through the COVID-19 pandemic. During fiscal 2020, each director attended at least 75% of the aggregate of all Board meetings and all meetings of committees on which he or she served, in each case with respect to the portion of fiscal 2020 that they each served. All Aramark directors standing for election are expected to attend the annual meeting of shareholders. Except for Mr. Winkleblack, all of the directors attended the 2020 Annual Meeting.

 

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Each of our four standing committees operates under a written charter approved by the Board. The charters of each of our standing committees are available in the Investor Relations section of our website at www.aramark.com.

The current composition of each Board committee is set forth below:

 

Director   

Audit     

Committee*     

  

Compensation     

Committee     

  

Finance     

Committee     

  

Nominating     

Committee     

         

John J. Zillmer

    

 

    

 

    

 

    

 

         

Susan M. Cameron

    

 

   Chair         

 

   X    
         

Greg Creed

    

 

   X        X         

 

         

Calvin Darden

   X         

 

   X         

 

         

Richard W. Dreiling

    

 

   X         

 

   X    
         

Irene M. Esteves

   X#@     

 

   Chair         

 

         

Daniel J. Heinrich

   Chair#         

 

   X         

 

         

Paul C. Hilal, Vice Chairman

    

 

   X         

 

   X    
         

Karen M. King

   X         

 

   X         

 

         

Stephen I. Sadove, Chairman

    

 

   X         

 

   X    
         

Arthur B. Winkleblack

   X#       

 

    

 

   Chair    
         

Meetings in fiscal 2020

   6        9        4        4    

 

*

All members of the Audit Committee are financially literate within the meaning of the NYSE listing standards

#

Qualifies as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K

@

Ms. Esteves currently serves on the audit committee of three other public companies. The Board has determined that the simultaneous service by Ms. Esteves on the audit committee of three additional public companies would not impair her ability to effectively serve on the Audit Committee.

 

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Committee    Responsibilities

Audit Committee

  

•  Prepares the audit committee report required by the U.S. Securities and Exchange Commission (the “SEC”) to be included in our proxy statement

 

•  Assists the Board in overseeing and monitoring the quality and integrity of our financial statements

 

•  Oversees the Company’s management of enterprise risk and monitors our compliance with legal and regulatory requirements

 

•  Oversees the work of the internal auditors and the qualifications, independence, and performance of our independent registered public accounting firm

 

Compensation and Human Resources Committee

  

•  Sets our compensation program and compensation of our executive officers and recommends the compensation program for our directors

 

•  Monitors our incentive and equity-based compensation plans and reviews our contribution policy and practices for our retirement benefit plans

 

•  Prepares the compensation committee report required to be included in our proxy statement and annual report under the rules and regulations of the SEC

 

• Oversees Human Capital Management

 

Nominating, Governance and Corporate Responsibility Committee

  

•  Identifies individuals qualified to become new members of the Board, consistent with criteria approved by the Board of Directors

 

•  Reviews the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the Board select, the director nominees for the next annual meeting of shareholders

 

•  Identifies Board members qualified to fill vacancies on any Board committee and recommends that the Board appoint the identified member or members to the applicable committee

 

•  Reviews and recommends to the Board applicable corporate governance guidelines

 

•  Oversees the evaluation of the Board and handles such other matters that are specifically delegated to the Committee by the Board from time to time

 

• Oversees the Company’s Environmental, Social and Governance activities

 

Finance Committee

  

•  Reviews our long-term business and financial strategies and plans

 

•  Reviews with management and recommends to the Board our overall financial plans, including operating budget, capital expenditures, acquisitions and divestitures, securities issuances, incurrences of debt and the performance of our retirement benefit plans and recommends to the Board specific transactions involving these matters

 

•  Approves certain financial commitments and acquisitions and divestitures by the Company up to specified levels

 

 

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Oversight of Risk Management

Aramark’s management is responsible for day-to-day risk management activities. The Board, acting directly and through its committees, is responsible for the oversight of Aramark’s risk management.

Our Audit Committee periodically reviews our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. In addition, our Audit Committee reviews risks related to compliance with ethical standards, including our Business Conduct Policy, the Company’s approach to enterprise risk management and operational risks, including those related to information security and system disruption. With respect to cybersecurity, the Audit Committee monitors Aramark’s cybersecurity risk profile, receives periodic updates from management on all matters related to cybersecurity and reports out to the full Board. Through its regular meetings with management, including the accounting, finance, legal, information technology and internal audit functions, our Audit Committee reviews and discusses the risks related to its areas of oversight and reports to the Board with regard to its review. Our Finance Committee focuses on financial risks associated with the Company’s capital structure and acquisitions and divestitures that the Company is considering. Our Compensation Committee oversees compensation-related risk management, as discussed further in this proxy statement under “Compensation Matters-Compensation Discussion and Analysis-Compensation Risk Disclosure.” Our Nominating Committee oversees risks associated with board structure and other corporate governance policies and practices. Our Finance, Compensation and Nominating Committees also regularly report their findings to the Board.

Our Chief Executive Officer and other executive officers regularly report to the non-executive directors and the Audit, the Compensation, the Nominating and the Finance Committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. In addition, the Board receives periodic detailed operating performance reviews from management. Our Vice President of Internal Audit reports functionally and administratively to our Chief Financial Officer and directly to the Audit Committee. We believe that the leadership structure of the Board provides appropriate risk oversight of our activities.

Environmental Social Governance (ESG)

Board and Management Oversight

The Nominating, Governance and Corporate Responsibility Committee and the Board generally oversee Aramark’s environmental, social and governance (ESG) goals and objectives, and support implementation of the Company’s ESG priorities. An important element of this is Aramark’s 2025 sustainability plan, Be Well. Do Well., which accelerates the Company’s sustainability efforts and centers on positively impacting both people and planet. The Chief Diversity & Sustainability Officer and other members of management report directly to the Nominating Committee at least twice per year and to the Board once per year regarding key recommendations, progress and outcomes related to our ESG Goals.

Execution of Aramark’s ESG strategy is overseen by Aramark’s executive leadership team. Aramark’s ESG Steering Committee, including executive leaders from enterprise business and functional teams who report to the CEO, are responsible for setting direction and driving accountability as we address material issues, work with key stakeholders, and measure and report our progress.

Reporting to the ESG Steering Committee, Aramark’s ESG Operating Committee, a global cross-functional team, is responsible for implementing our Be Well. Do Well. plan, accelerating our initiatives, identifying significant emerging issues and driving measurable progress. Together, our teams work to better anticipate future challenges and opportunities and identify innovative ideas to drive continual performance improvements.

Our Approach Begins with Integrity

Our commitment to making a positive impact on people and planet, to doing the right thing always, begins with integrity. We are committed to conducting business according to the highest ethical standards and in compliance with the law. Our Business Conduct Policy details our commitment to operating ethically and transparently. It explains the basic rules and principles that apply to every Aramark team member. Annual training addresses anti-corruption, human rights and the workplace environment, accurate books and records, privacy and confidentiality, and safety, as well as how to report potential Business Conduct Policy violations.

 

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Priorities and Goals

Be Well. Do Well. accelerates our sustainability efforts and aligns with our vision for our future around two specific goals: improving the equity and wellbeing of people and reducing greenhouse gas emissions by 2025. These goals convey our priorities and ambitions, focus our efforts and inspire our organization. Our approach is to foster growth and longevity and to create long-term stakeholder value by considering every dimension of how our Company operates – ethical, economic, and environmental. Through this plan, we strive to contribute to bettering our world by making a positive impact on people and the planet.

Each goal is supported by four priorities, which align with the United Nations Sustainable Development Goals and are integrated with our business objectives. Our priorities include commitments to engage our employees; empower healthy consumers; support local communities; source ethically and inclusively; source responsibly; operate efficiently; minimize food waste; and reduce packaging. We have identified key performance indicators and internal targets tied to our business objectives to drive outcomes against these priorities.

 

 

 

 

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BE WELL. DO WELL PEOPLE ENABLE EQUITY AND WELLBEING OF MILLIONS Engage Employees Empower Healthy Consumers Build Local Communities Source Ethically & Inclusively PLANET REDUCE GREENHOUSE GAS EMISSIONS Source Responsibly Operate Efficiently Minimize Food Waste Reduce Packaging

 

We are proud of the progress we made in 2020, including:

 

• Establishing Aramark’s Executive Diversity Council to provide strategic focus and direction to advance diversity, equity and inclusion among our employees, client partners, customers, suppliers and communities.

 

• Publishing the Healthy for Life® Impact Report, highlighting Aramark’s and the American Heart Association’s (AHA) multi-year collaboration that has impacted the food environment, engaged consumers, supported underserved communities, and empowered employees.

 

• Completing the transition of 100% of specified soy oils sourced from regions with no-deforestation risk, 99% of margarines and shortenings use responsibly sourced palm oil and completing the transition to 100% cage-free liquid and processed eggs in the U.S. by the end of 2020.

 

Public Reporting

On our journey of continuous improvement, we are committed to expanding public reporting on our Be Well. Do Well. plan, building greater awareness among our employees, consumers, clients, partners and investors. For example, in 2020, Aramark CDP (Carbon Disclosure Project) Climate and Forestry responses are publicly available, building upon several years of reporting upon request. In early 2021, Aramark will release year-end reporting on our priorities and progress on ESG initiatives during 2020, including updates on time-bound public targets.

Management Succession Planning

The Board’s responsibilities include succession planning for the Chief Executive Officer and other executive officer positions. The Compensation Committee oversees the development and implementation of our succession plans. At least once annually, the Chief Executive Officer provides the Board with an assessment of senior managers and their potential to succeed to the position of Chief Executive Officer. This assessment is developed in consultation with the Chairman and the Chair of the Compensation Committee. The Compensation Committee is also responsible for follow-up actions with respect to succession planning as may be delegated by the Board from time to time. High potential executives meet regularly with the members of the Board.

 

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Executive Sessions

From time to time, and, consistent with our Corporate Governance Guidelines, at least at its regularly quarterly meetings, the Board meets in executive session without members of management present. The Chairman presides at these executive sessions.

Code of Conduct

Our Business Conduct Policy, which applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, is available on the Investor Relations section of our website at www.aramark.com. Our Business Conduct Policy contains a “code of ethics,” as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our Internet website.

Committee Charters and Corporate Governance Guidelines

The charters of the Compensation Committee, the Nominating Committee, the Audit Committee and the Finance Committee and our Corporate Governance Guidelines are available under the Investor Relations section of our website at www.aramark.com. Please note that all references to our website in this Proxy Statement are intended to be inactive textual references only.

Copies of our Business Conduct Policy, the charters of the Compensation Committee, the Nominating Committee, the Audit Committee and the Finance Committee and our Corporate Governance Guidelines also are available at no cost to any shareholder who requests them by writing or telephoning us at the following address or telephone number:

Aramark

2400 Market Street

Philadelphia, PA 19103

Attention: Investor Relations

Telephone: (215) 409-7287

Director Nomination Process

The Nominating Committee does not set specific, minimum qualifications that directors must meet in order for the Nominating Committee to recommend them to the Board. Rather, it believes that directors and director candidates should be evaluated based on their individual merits, taking into account Aramark’s needs and the composition of the Board. In nominating a slate of directors, the Nominating Committee’s objective is to select individuals with skills and experience that can be of assistance in operating our business and providing effective oversight of the Company’s strategy and management. The Nominating Committee will consider candidates recommended by shareholders and all candidates are evaluated in the same manner regardless of who recommended such candidate for nomination. When reviewing the qualifications of potential director candidates, the Nominating Committee considers:

 

 

whether individual directors possess the following personal characteristics: integrity, education, accountability, business judgment, business experience, reputation and high performance standards, and

 

 

all other factors it considers appropriate, which may include accounting and financial expertise; industry knowledge; experience in compensation, human resources and culture; strategy development experience; CEO and senior management leadership experience; prior public company board service; international operations experience; corporate finance and capital markets experience, mergers and acquisitions and business development experience; supply chain experience; IT and cybersecurity experience; experience in R&D and innovation; both traditional and digital marketing and sales, experience with disruptive risk and innovation; age, gender and ethnic and racial background; civic and community relationships; existing commitments to other businesses; potential conflicts of interest with other pursuits; legal considerations, such as antitrust issues; and the size, composition and combined expertise of the existing Board.

The Board believes that, as a whole, it should strive to possess the following core competencies: accounting and finance, management, crisis response, industry knowledge, international leadership and strategy/vision, among others. While the Board does not have a formal policy with regard to diversity, the Nominating Committee and the Board strive to ensure that the Board is composed of individuals who together possess a breadth and depth of experience relevant to the Board’s oversight of Aramark’s business and strategy and a diversity of backgrounds and perspective in order to effectively understand the needs of our employees, clients and customers. The Company’s

 

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Corporate Governance Guidelines provide that, except as may be approved by the Nominating Committee, no person may serve as a non-employee director if he or she would be 75 years or older at the commencement of such term as a director.

Each of Messrs. Zillmer, Creed, Hilal and Winkleblack and Mses. Cameron and King were previously nominated for election at the 2020 Annual Meeting in accordance with the Stewardship Framework Agreement. Prior to their election to the Board, each of Messrs. Creed and Winkleblack and Mses. Cameron and Ms. King entered into an Engagement and Indemnity Agreement with Mantle Ridge pursuant to which Mantle Ridge agreed to pay each of them certain amounts, and reimburse them for expenses incurred, in connection with their time and efforts relating to potentially joining the Board. The Engagement Agreements however do not provide for any agreements or obligations among Mantle Ridge or any of them with respect to any period following their joining the Board. Mr. Zillmer was party to a consulting agreement with Mantle Ridge that terminated when Mr. Zillmer was appointed to serve as the Chief Executive Officer of the Company.

In connection with the nomination of Ms. Heller, the most recent new nominee to the Board, the Nominating Committee reviewed recommendations for a number of potential directors from Board members and outside parties. The Nominating Committee then recommended that Ms. Heller, originally recommended by a non-management director, be evaluated by the Board and a number of directors met with Ms. Heller by phone. Following that process, and upon recommendation by the Nominating Committee, the Board nominated Ms. Heller for election to the Board.

Proxy Access

Our By-laws, as amended, permit a shareholder, or a group of up to 20 shareholders, that has continuously owned for three years at least 3% of the Company’s outstanding common shares, to nominate and include in the Company’s annual meeting proxy materials up to the greater of two directors or 20% of the number of directors serving on the Board, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in our By-laws. For further information regarding submission of a director nominee using the Company’s proxy access By-law provision, see “General Information – 2022 Annual Shareholders Meeting – How can I nominate a director or submit a Shareholder proposal for the 2022 Annual Meeting of Shareholders?”.

Board Refreshment

The Board and the Nominating Committee regularly consider the long-term make up of our Board and how the members of our Board change over time. The Board and Nominating Committee also consider the skills, experience, and backgrounds needed for the Board as our business and the industries and sectors in which we do business evolve. The Board and Nominating Committee also understand the importance of Board refreshment and aim to strike a balance between the knowledge that comes from longer-term service on the Board with the new experience, ideas and energy that can come from adding directors to the Board. In connection with our entry into the Stewardship Framework Agreement in October 2019, the Nominating Committee and Board recommended and elected five new directors to the Board and four of our directors retired. These five members and Mr. Creed were then nominated for election and elected to the Board at the 2020 Annual Meeting. The Nominating Committee and the Board are also recommending the election of a new additional director, Ms. Heller, at the 2021 Annual Meeting. Assuming the election of this year’s proposed director nominees, we believe we will have a good balance between tenured directors with significant experience with the Company and new directors with fresh perspectives, constituting a strong, independent Board that will be well-positioned to navigate the current challenging business environment and accelerate the Company’s growth.

DIRECTOR COMPENSATION

Annual Cash Compensation for Board Service

In fiscal 2020, each non-employee director received cash compensation at an annual rate of $100,000 for service on the Board, payable quarterly in arrears. The Chairman was eligible to receive an additional annual fee of $200,000 split equally between cash and equity, and the chairpersons of the Audit Committee, Compensation Committee, Nominating Committee and Finance Committee were eligible to receive an additional annual cash retainer of $20,000, provided, in each case, that such committee chairperson was a non-employee director. Directors who join the Board during the fiscal year or serve as a committee chairperson for a portion of the fiscal year receive a prorated amount of the relevant annual cash compensation. During 2020 as a result of the effect of the COVID-19

 

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pandemic on our business, the annual cash retainer of directors was reduced by 25% for the period from April 6, 2020 to October 2, 2020. As of October 3, 2020, the cash retainer was restored to $100,000. Mr. Hilal has declined his receipt of any cash compensation for his service on the Board.

In fiscal 2020, Messrs. Beckers-Vieujant, Heinrich, Sadove, and Winkleblack and Mses. Bisaccia, Esteves, and Cameron each received additional fees for serving as Lead Director, Chairman and/or chairing the Nominating, Audit, Compensation or Finance Committee.

Annual Deferred Stock Unit Grant

Under the Company’s current director compensation policy, which has been in effect since January 1, 2016, non-employee directors are eligible for an annual grant of deferred stock units (“DSUs”) with a value of $160,000 on the date of the annual meeting of shareholders. Directors have the right to elect whether the DSUs granted will deliver shares on: (i) the vesting date of the DSUs or (ii) the first day of the seventh month after the date the director ceases to serve on the Board.

In accordance with the director compensation policy, each member of the Board who was not an employee of the Company received a grant of approximately $160,000 worth of DSUs under the Amended and Restated 2013 Management Stock Incentive Plan (the “2013 Stock Plan”) in January 2020. Mr. Winkleblack, and Mses. Cameron and King received a grant of additional DSUs in January 2020 to reflect their period of service on the Board prior to the 2020 Annual Meeting and Mr. Sadove received additional DSUs for his period of service as Chairman prior to the 2020 Annual Meeting. All of these DSUs will vest on the day prior to the Company’s first annual meeting of shareholders that occurs after the grant date, subject to the director’s continued service on the Board through the vesting date, and will be settled in shares of the Company’s common stock pursuant to each director’s election as described above.

All DSUs accrue dividend equivalents from the date of grant until the date of settlement. The Chairman of the Board is also entitled to an additional grant of DSUs with a value of $100,000 on the date of each annual meeting of shareholders. Mr. Hilal has declined his receipt of any DSUs for his service on the Board.

Ownership Guidelines

Effective November 11, 2015, the Board of Directors has adopted a minimum ownership guideline, providing that each director must retain at least five times the value of the annual cash retainer in shares of common stock or DSUs, and that the required level of ownership be attained five years after the later of the date of approval of the guidelines and the director’s start date.

Director Deferred Compensation Plan

Non-employee directors are able to elect with respect to all or a portion of their cash board retainer fees to (i) receive all or a portion of such cash fees in the form of DSUs or (ii) defer all or a portion of such cash fees under our 2005 Deferred Compensation Plan. The DSUs that a director elects to receive in lieu of cash fees will be awarded under our 2013 Stock Plan and will be fully vested on grant and settled in shares of our common stock on the first day of the seventh month after the director ceases to serve on the Board. Cash amounts that a director elects to defer under the unfunded 2005 Deferred Compensation Plan are credited at an interest rate based on Moody’s Long Term Corporate Baa Bond Index rate for October of the previous year, which was 3.93% beginning January 1, 2020. From October 1, 2019 until December 31, 2019, we credited amounts deferred with an interest rate equal to 5.07%. The 2005 Deferred Compensation Plan permits participants to select a payment date and payment schedule at the time they make their deferral election, subject to a three-year minimum deferral period. All or a portion of the amount then credited to a deferral account may be withdrawn, if the withdrawal is necessary in light of a severe financial hardship.

The interest rate for 2005 Deferred Compensation Plan will be adjusted on January 1, 2021, based on the Moody’s Long Term Corporate Baa Bond Index rate for October 2020 which was 3.44%.

Other Benefits

All directors are eligible for an annual matching contribution to a college or other non-profit organization in an amount up to $10,000 and directors are also eligible for matching contributions in an amount up to $10,000 in response to natural disasters through the Company’s community involvement efforts to the same extent as employees of the Company.

 

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Director Compensation Table for Fiscal 2020

The following table sets forth compensation information for our non-employee directors in fiscal 2020.

 

Name  

Fees

Earned
or Paid in

Cash(1) ($)

   

Stock

Awards(2)

($)

   

Option

Awards

($)

   

Change in

Pension Value
and

Nonqualified

Deferred

Compensation

Earnings(3) ($)

   

All Other

Compensa-
tion(4) ($)

   

Total

($)

 

 

Susan M. Cameron

 

 

 

 

 

 

105,151

 

 

 

 

 

 

 

 

 

198,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

303,313

 

 

 

 

 

Greg Creed

 

 

 

 

 

 

54,327

 

 

 

 

 

 

 

 

 

160,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

214,339

 

 

 

 

 

Calvin Darden

 

 

 

 

 

 

88,118

 

 

 

 

 

 

 

 

 

160,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

248,389

 

 

 

 

 

Richard W. Dreiling

 

 

 

 

 

 

88,118

 

 

 

 

 

 

 

 

 

160,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

248,130

 

 

 

 

 

Irene M. Esteves

 

 

 

 

 

 

108,118

 

 

 

 

 

 

 

 

 

160,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

278,130

 

 

 

 

 

Daniel J. Heinrich

 

 

 

 

 

 

108,118

 

 

 

 

 

 

 

 

 

160,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,760

 

 

 

 

 

 

 

 

 

280,890

 

 

 

 

 

Paul Hilal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Karen M. King

 

 

 

 

 

 

85,646

 

 

 

 

 

 

 

 

 

198,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

283,808

 

 

 

 

 

Stephen I. Sadove

 

 

 

 

 

 

192,789

 

 

 

 

 

 

 

 

 

295,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,271

 

 

 

 

 

 

 

 

 

513,417

 

 

 

 

 

Arthur B. Winkleblack

 

 

 

 

 

 

105,151

 

 

 

 

 

 

 

 

 

198,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

303,313

 

 

 

 

 

Pierre-Olivier Beckers-Vieujant(5)

 

 

 

 

 

 

2,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,967

 

 

 

 

 

Lisa G. Bisaccia(5)

 

 

 

 

 

 

2,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

475

 

 

 

 

 

 

 

 

 

83,000

 

 

 

 

 

 

 

 

 

86,442

 

 

 

 

 

Patricia B. Morrison(5)

 

 

 

 

 

 

2,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,473

 

 

 

 

 

John A. Quelch(5)

 

 

 

 

 

 

2,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,473

 

 

 

 

 

(1)

Includes base director retainers at an annual rate of $100,000, as well as a Chairman retainer at an annual rate of $100,000 for Mr. Sadove. Committee chairperson retainers at an annual rate of $20,000 pro rated based on their time served were provided to each of Messrs. Heinrich and Winkleblack and Mses. Cameron and Esteves. Messrs. Creed and Dreiling, and Ms. Esteves elected to defer 100% of their cash retainers (inclusive of chair retainers) into DSUs. Mr. Darden elected to defer 20% of his cash retainer (inclusive of retainers) into the 2005 Deferred Compensation Plan. If applicable, cash retainers (exclusive of chair retainers) were subject to a 25% reduction from April 6, 2020, through October 2, 2020.

 

(2)

Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 with respect to the 3,477 DSUs granted to Messrs. Dreiling, Creed, Darden, and Heinrich and Ms. Esteves, 4,306 DSUs granted to Mr. Winkleblack and Mses. Cameron and King, and 6,418 DSUs granted to Mr. Sadove on January 29, 2020 (which had a grant date fair value of $46.02 per DSU). As of the end of fiscal 2020, directors held the following deferred stock units (including dividend equivalent units), all of which are vested except for those granted on January 29, 2020 and related dividend equivalents:

 

Name  

DSUs and

Equivalents

          Name  

DSUs and

Equivalents

 

 

Cameron, Susan

 

 

 

 

 

 

4,354

 

 

 

 

   

 

Heinrich, Daniel J

 

 

 

 

 

 

32,908

 

 

 

 

 

Creed, Greg

 

 

 

 

 

 

5,373

 

 

 

 

   

 

Hilal, Paul

 

 

 

 

 

 

 

 

 

 

 

Darden, Calvin

 

 

 

 

 

 

12,151

 

 

 

 

   

 

King, Karen

 

 

 

 

 

 

4,354

 

 

 

 

 

Dreiling, Richard W

 

 

 

 

 

 

35,653

 

 

 

 

   

 

Sadove, Stephen I

 

 

 

 

 

 

35,882

 

 

 

 

 

Esteves, Irene

 

 

 

 

 

 

42,213

 

 

 

 

   

 

Winkleblack, Art

 

 

 

 

 

 

4,354

 

 

 

 

For additional information on the valuation assumptions and more discussion with respect to the deferred stock units, refer to Note 12 to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 2, 2020.

 

(3)

Includes amounts earned on deferred compensation in excess of 120% of the applicable federal rate, based upon the above-market return at the time the rate basis was set.

 

(4)

The following are included in this column:

 

  a)

Charitable contributions of $10,000 made in the name of or on behalf of each of Messrs. Heinrich and Sadove and Ms. Esteves in accordance with the Company’s director charitable contribution matching program.

 

  b)

The dollar value of dividend equivalents accrued on deferred stock units granted prior to February 5, 2014 (the date the Company announced the payment of its first quarterly dividend), where dividends were not factored into the grant date fair value required to be

 

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  reported for such awards. The total value of dividend equivalents accrued on deferred stock units for the directors during fiscal 2019, in each case for awards granted prior to February 5, 2014, is as follows: for Mr. Heinrich, $2,760 and for Mr. Sadove, $2,760. For awards granted on or after February 5, 2014, the value of dividend equivalents allocated to deferred stock units in the form of additional units with the same vesting terms as the original awards is not included in this column because their value is factored into the grant date fair value of awards. Additional units awarded in connection with dividend adjustments are subject to vesting and delivery conditions as part of the underlying awards.

 

  c)

Includes $12,511 for Mr. Sadove for personal use of the Company aircraft. The calculation of incremental cost for personal use of Company aircraft includes the variable costs incurred as a result of his personal flight activity, including charges for aircraft fuel, landing fees, and any travel expenses for the flight crew.

 

  d)

$83,000 to compensate Ms. Bisaccia for estimates of certain income potentially foregone due to administrative errors of the Company in connection with the settlement of certain amounts of her director compensation following her resignation as a director.

 

(5)

Messrs. Beckers-Vieujant and Quelch and Mses. Bisaccia and Morrison resigned from the board on October 6, 2019.

 

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Audit Committee Matters

 

 

 

PROPOSAL NO. 2 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

PROPOSAL SUMMARY

What Are You Voting On?

We are asking our shareholders to ratify the appointment of Deloitte & Touche LLP (“Deloitte”) to serve as the Company’s independent registered public accounting firm for fiscal 2021, which ends October 1, 2021. Although the Audit Committee has the sole authority to appoint the Company’s independent registered public accounting firm, the Audit Committee and the Board submit the selected firm to the Company’s shareholders as a matter of good corporate governance.

Voting Recommendation

The Board recommends that you vote “FOR” the ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm for fiscal 2021.

The Audit Committee has selected Deloitte to serve as the Company’s independent registered public accounting firm for fiscal 2021. Although action by the shareholders on this matter is not required, the Audit Committee values shareholder views on the Company’s independent registered public accounting firm and believes it is appropriate to seek shareholder ratification of this selection. If the shareholders do not ratify the appointment of Deloitte, the selection of the independent registered public accounting firm may be reconsidered by the Audit Committee. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time of the year if it determines that such a change would be in the best interests of the Company and its shareholders. The Company has been advised that representatives of Deloitte are scheduled to attend the Annual Meeting, and they will have an opportunity to make a statement if the representatives desire to do so. It is expected that the Deloitte representatives will also be available to respond to appropriate questions.

The shares represented by your properly executed proxy will be voted “FOR” this proposal, which would be your vote to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm, unless you specify otherwise.

 

 

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The Board recommends that you vote "FOR" the ratification of the appointment of Deloitte & Touche LLP

The Audit Committee assists the Board in its oversight of the Company’s independent registered public accounting firm, which assistance includes the responsibility to appoint, compensate, retain, and oversee the firm. The independent registered public accounting firm reports directly to the Audit Committee. The Audit Committee reviews the independent registered public accounting firm’s qualifications, independence, and performance at least annually. In connection with this review, the Audit Committee considers whether there should be a regular rotation of the independent registered public accounting firm to assure continuing auditor independence. Further, in conjunction with the mandated rotation of the independent audit firm’s lead engagement partner, the Audit Committee is involved in the selection of the independent audit firm’s lead engagement partner.

KPMG LLP (“KPMG”) served as our independent auditors for the fiscal year ended October 2, 2020 (“fiscal 2020”) and audited our consolidated financial statements for fiscal 2020 and prior years. On December 1, 2020, following a competitive process undertaken by the Audit Committee, the Company informed Deloitte & Touche LLP (“Deloitte”) that the Audit Committee had selected Deloitte to serve as the Company’s independent registered public accounting firm for the fiscal year ending October 1, 2021, subject to completion of Deloitte’s standard client acceptance procedures and execution of an engagement letter. On the same date, the Company informed KPMG that the Audit Committee had determined to dismiss KPMG. KPMG’s dismissal became effective December 1, 2020 which followed the completion of KPMG’s audit of the Company’s consolidated financial statements for fiscal 2020 and the filing of the related Annual Report on Form 10-K.

 

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The audit reports of KPMG on the Company’s consolidated financial statements for fiscal 2020 and the fiscal year ended September 27, 2019 (“fiscal 2019”), did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except for the following:

KPMG’s report on the Company’s consolidated financial statements as of and for the fiscal years ending October 2, 2020 and September 27, 2019, contained a separate paragraph stating that “As discussed in Note 8 to the consolidated financial statements, the Company has changed its method of accounting for leases as of September 28, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases. As discussed in Note 7 to the consolidated financial statements, the Company has changed its method of accounting for revenue as of September 29, 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.”

The audit reports of KPMG on the effectiveness of internal control over financial reporting as of and for the fiscal years ending October 2, 2020 and September 27, 2019 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During fiscal 2020 and fiscal 2019 and the period from October 2, 2020 to December 1, 2020, there were (i) no “disagreements” as that term is defined in Item 304 (a)(1)(iv) of Regulation S-K with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of KPMG would have caused KPMG to make reference to the subject matter of the disagreement(s) in connection with its report on the Company’s consolidated financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

The change in independent auditors was previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on December 4, 2020. A copy of KPMG’s related letter, dated December 4, 2020, was included as an exhibit to such Form 8-K filing.

During fiscal 2020 and fiscal 2019 and the period from October 2, 2020 to December 1, 2020, neither the Company nor anyone acting on its behalf consulted with Deloitte, regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that Deloitte concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a “disagreement,” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, or a “reportable event,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

The Audit Committee has appointed Deloitte as the independent registered public accounting firm for the fiscal year ending October 1, 2021. The Audit Committee believes that the appointment of Deloitte as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. In addition to Deloitte’s independence, the Audit Committee considered:

 

•  Deloitte’s capabilities, qualifications and expertise;

 

  

•  Deloitte’s compliance with regulations; and

 

•  The effectiveness and efficiency of Deloitte’s audit services;

  

•  technological capabilities, relative benefits of tenure versus fresh perspective and fees.

Representatives of KPMG and Deloitte are expected to be present at the Annual Meeting in order to respond to appropriate questions and to make any other statement if they desire to do so.

 

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FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Set forth below is information relating to the aggregate fees billed by KPMG for professional services rendered for each of the last two fiscal years as well as a description of each fee category.

 

    

 

Fiscal

2019

   

 

Fiscal

2020

 

 

Audit Fees

 

 

 

$

 

 

6,571,162

 

 

 

 

 

 

$

 

 

7,233,883

 

 

 

 

 

Audit-related Fees

 

 

 

$

 

 

252,941

 

 

 

 

 

 

$

 

 

338,387

 

 

 

 

 

Tax Fees

 

 

 

$

 

 

522,493

 

 

 

 

 

 

$

 

 

291,400

 

 

 

 

 

All Other Fees

 

 

 

$

 

 

75,000

 

 

 

 

 

 

$

 

 

38,500

 

 

 

 

 

TOTAL

 

 

 

$

 

 

7,421,596

 

 

 

 

 

 

$

 

 

7,902,170

 

 

 

 

Audit fees include the audit of annual financial statements, the review of quarterly financial statements, the performance of statutory audits, procedures and comfort letters related to registration statements.

Audit-related fees include assurance and related services that were reasonably related to the audit of annual financial statements and reviews of quarterly financial statements, but not reported under Audit Fees. Audit-related fees include: retirement plan audits, accounting consultations for proposed transactions and certain reports.

Tax fees include domestic and international tax consulting.

All other fees include participation in Executive education workshops.

The Audit Committee considered whether providing the non-audit services shown in this table was compatible with maintaining KPMG’s independence and concluded that it was.

Policy for the Pre-Approval of Audit and Permissible Non-Audit Services

The Audit Committee annually reviews and pre-approves the services that may be provided by the Company’s independent registered public accounting firm without obtaining further specific pre-approval from the Audit Committee. The Audit Committee has also adopted a Pre-Approval Policy that contains a list of pre-approved services, which the Audit Committee may revise from time to time, based on subsequent determinations. The Audit Committee has delegated pre-approval authority to the chairman of the Audit Committee, or in his absence or unavailability, to another specified member of the Audit Committee. The chairman of the Audit Committee or such specified member will report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the audit fees, audit-related fees, tax fees and all other fees were pre-approved by the Audit Committee or the chairman of the Audit Committee.

 

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REPORT OF AUDIT COMMITTEE

The Audit Committee represents and assists the Board and is composed solely of directors who satisfy the independence and financial literacy requirements, and the heightened independence criteria applicable to audit committee members, of the NYSE Rules and applicable securities laws. In addition, the Board has determined that each of Daniel J. Heinrich, Irene M. Esteves and Arthur B. Winkleblack is an audit committee financial expert as defined under the rules of the SEC.

The Audit Committee operates under a written charter approved and adopted by the Board, which sets forth its duties and responsibilities. This charter can be found on the Company’s website at www.aramark.com under the Investor Relations section. This charter is reviewed annually and updated as appropriate to reflect the Audit Committee’s evolving role, changes in regulatory requirements and oversight practices, and investor feedback.

The Audit Committee’s purpose is to assist the Board in its oversight of:

 

 

The performance of the Company’s internal audit function;

 

 

The qualifications, independence, and performance of the independent auditors;

 

 

The Company’s management of enterprise risk and compliance with legal and regulatory requirements; and

 

 

The accounting, reporting, and financial practices of the Company, including the quality and integrity of the Company’s financial statements.

The Audit Committee met six times in fiscal 2020 and fulfilled each of its duties and responsibilities as outlined in its charter. The Audit Committee regularly conferred with KPMG, the Company’s internal auditors, and senior management in separate executive sessions to discuss any matters that the Audit Committee, KPMG, the Company’s internal auditors, or senior management believed should be discussed privately with the Audit Committee. The Audit Committee has direct access to KPMG and the Company’s internal auditors, which each report directly to the Audit Committee.

2020 Audited Financial Statements and Internal Controls

The Company’s management has primary responsibility for establishing and maintaining effective internal control over financial reporting and preparing the Company’s financial statements and disclosures. KPMG, the Company’s independent registered public accounting firm for fiscal 2020, was responsible for performing an independent audit of the Company’s consolidated financial statements and expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles in the United States and on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee oversaw the performance of these responsibilities by KPMG and management, including the processes by which these responsibilities are fulfilled.

In the performance of its oversight function and in accordance with its responsibilities under its charter, the Audit Committee has reviewed and discussed with management and KPMG the Company’s audited financial statements as of and for the fiscal year ended October 2, 2020. The Audit Committee also discussed with KPMG the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Securities and Exchange Commission.” Finally, the Audit Committee received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, and discussed with KPMG their independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2020 filed with the SEC.

Members of the Audit Committee:

Daniel J. Heinrich, Chairman

Calvin Darden

Irene M. Esteves

Karen M. King

Arthur B. Winkleblack

 

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Compensation Matters

 

 

PROPOSAL NO. 3 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

PROPOSAL SUMMARY

What Are You Voting On?

Pursuant to Section 14A of the Exchange Act, we are asking our shareholders to vote on a non-binding, advisory basis to approve the compensation paid to our Named Executive Officers, as disclosed in this proxy statement.

Voting Recommendation

The Board recommends that you vote “FOR” this proposal, because it believes that the Company’s compensation policies and practices effectively achieve the Company’s primary goals of attracting and retaining key executives, rewarding achievement of the Company’s short-term and long-term business goals, and aligning our executives’ interests with those of our shareholders to create long-term sustainable value.

This proposal calls for the approval of the following resolution:

“RESOLVED, the shareholders of the Company hereby approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement, pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”

In considering your vote, we invite you to review the Compensation Discussion and Analysis beginning on page 29. This advisory proposal, commonly referred to as a “say on pay” proposal, is not binding on the Board. However, the Board takes shareholder feedback seriously and it and the Compensation Committee will review and consider the voting results when evaluating the Company’s executive compensation program.

The shares represented by your properly executed proxy will be voted “FOR” this proposal, which would be your vote to approve, on a non-binding basis, the compensation paid to our named executive officers, unless you specify otherwise.

This year, in a separate proposal, we are asking our shareholders to vote on a non-binding, advisory basis whether future “say on pay” votes should occur every one, two, or three years. The Board will review and consider the voting results of that proposal when determining its policy on the frequency of future “say on pay” votes.

 

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The Board recommends that you vote "FOR" approval of executive compensation

 

 

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 EXECUTIVE COMPENSATION

 

Aramark is committed to maintaining a transparent executive compensation program especially during turbulent times.

 

The following message from the Chair of the Compensation and Human Resources Committee highlights key aspects of our executive compensation program. A detailed discussion follows in the Compensation Discussion and Analysis (CD&A).

 

Message from the Chair of the Compensation and Human Resources Committee

Dear Fellow Shareholder,

As the Chair of Aramark’s Compensation and Human Resources Committee, I wanted to share with you the Committee’s approach to executive compensation and the rationale for our decisions in this challenging and unprecedented year. We considered that our two most important responsibilities in this year were to:

 

 

Protect our employee’s safety and well-being

 

 

Ensure the financial stability of the business

We made difficult decisions in an extraordinary year to position Aramark for growth as the world returns to normal.

We experienced unprecedented aggressive recruitment of our employees with transferable skills by businesses that were less negatively impacted by COVID-19 or had a faster or more controllable path to full business recovery.

To recognize our employees’ efforts and accomplishments, while retaining and motivating our team for the future as we recover and grow our business, we took six key compensation actions, which are unusual and which we do not expect to repeat. These actions are detailed in the CD&A:

1. Salary ReductionsWe reduced salaries for all NEOs by 25% from April 6, 2020 to the end of fiscal 2020.

2. Discretionary Fiscal 2020 Annual IncentivesWe exercised discretion to provide a minimum bonus of 40% of target to each of our 5,300 annual incentive eligible employees. This well-below target payout rewarded employees for their efforts and accomplishments in a very difficult year and provides an incentive to continue the intense and difficult work of growing Aramark’s business for the future.

3. Discretionary PSU PayoutWe exercised discretion to provide a 29.2% payout factor for the fiscal 2018-2020 PSUs, to recognize the performance achieved during the first 30 months of the 36 month performance period for these PSUs.

4. Early Fiscal 2021 Long Term Incentive AwardsWe awarded fiscal 2021 long term incentives in September of 2020, rather than waiting until the first quarter of fiscal 2021, to address a critical and immediate retention issue, without increasing overall compensation.

5. Special Award of Premium Priced Stock OptionsWe awarded special premium priced stock options to our key executives. These options require significant share price increases to generate substantial value and have six tranches with exercise prices ranging from $35 to $85—27% to 209% higher than our fiscal 2020 year-end share price of $27.55.

6. Mix of Vehicles for Regular Fiscal 2021 Long Term IncentivesWe awarded the fiscal 2021 regular long-term incentives 50% as stock options and 50% as restricted stock units. We did this to provide reasonable long term incentive opportunities, because the significant effect of COVID-19 does not allow us to set meaningful 3-year stretch targets. We intend to return to an LTI mix for fiscal 2022 awards that is at least 50% performance stock units.

The Committee and the Board took these very unusual actions to reward our employees who demonstrated enormous flexibility and stamina in one of the most demanding and difficult years in Aramark’s history. We are proud that our team kept our people and our customers safe and sustained the business. We hope and expect that in fiscal 2021 and beyond these extraordinary efforts will translate into significant growth in our business and for our shareholders.

Sincerely,

 

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Susan Cameron

Chair, Compensation and Human Resources Committee

 

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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)

 

This Compensation Discussion and Analysis (CD&A) describes material elements of our Named Executive Officer (“NEO”) compensation and describes the objectives and principles underlying Aramark’s executive compensation programs, the compensation decisions we made under those programs, and factors we considered in making those decisions.

CD&A Contents

 

 

 

 

Aramark’s executive compensation program is designed to link pay with performance, while aligning management incentives with long-term shareholder interests. We believe it reflects appropriate governance practices and shareholder feedback, aligns with the needs of our business, and maintains a strong link between executive pay and successful execution of our strategy and long-term value creation.

 

Our 2020 Named Executive Officers

 

 

 

 

 

 

 

 

 

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John Zillmer(1)

CEO

 

Thomas Ondrof(2)

EVP, CFO

 

Lynn McKee(3)

EVP, HR

 

Marc Bruno

COO, US Food & Facilities

 

Lauren Harrington(3)

SVP, General Counsel

Stephen Bramlage(3), our former CFO, was also an NEO during 2020. Mr. Bramlage served as CFO through January 6, 2020, and then served as an Executive Advisor to the Company until April 3, 2020.

Stephen Sadove(3), our Board Chairman and former Office of the Chairman member, served, along with other members of the Office of the Chairman, as the Company’s Principal Executive Officer (PEO) during a six-week period ending October 6, 2019, when Mr. Zillmer was named CEO. At that time, Mr. Sadove relinquished his PEO duties and the Office of the Chairman was dissolved, but Mr. Sadove remained Board Chairman. See Director Compensation for details related to Mr. Sadove’s pay for his Board Chairman duties.

 

(1)

John Zillmer became CEO on October 6, 2019.

 

(2)

Thomas Ondrof became CFO on January 7, 2020.

 

(3)

From August 25, 2019, the date our prior CEO stepped down and the date Stephen Sadove was appointed Board Chairman, through October 6, 2019, Stephen Sadove, Stephen Bramlage, Lynn McKee, and Lauren Harrington served as members of the Office of the Chairman. Following Mr. Zillmer’s appointment as CEO on October 6, 2019, the Office of the Chairman was dissolved, at which time Mr. Sadove remained Board Chairman, and Mr. Zillmer was appointed as a director. Members of the Office of the Chairman received no additional compensation for service in such role.

 

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CD&A EXECUTIVE SUMMARY

COVID-19 adversely affected global economies, financial markets and the overall business environment for Aramark. We recognize that COVID-19 has had significant impacts on most American businesses—while many businesses experienced downturns, some essential businesses experienced unanticipated demand translating to growth. Aramark and other businesses in the hospitality, airline, and related sectors experienced a more profound negative business impact, with major uncontrollable and unfavorable external influences.

Some significant aspects of our operations depend on the reopening of sports stadiums, students returning to in-person school, college and university attendance, and businesses resuming operations at their corporate offices. These factors are altogether outside the Company’s control. The timing of the Company’s return to fully normal business operations depends on, among other things, widespread vaccinations and permitted reopening of the key businesses we serve.

We have significant operations around the world, including in China, which meant that COVID-19 started to have a negative impact on our operations towards the end of January 2020. Aramark responded quickly and proactively to the pandemic, taking steps to manage costs by temporarily reducing salaries for executives and compensation for the board of directors, reducing headcount and furloughing employees, shutting down or limiting operations and reducing capital expenditures and other expenses. Aramark pivoted to find new opportunities and took courageous action to mitigate the impact of COVID-19 on our business.

These actions, particularly those that impacted our employees directly, were very difficult decisions for the Company. However, management and the Board of Directors swiftly took action to keep employees and customers safe and to protect the business and appropriately manage COVID-19’s negative impact on our shareholders. The impact of COVID-19 drove a decrease in our revenue by an estimated 50% at the trough in April, making both our stretch revenue and adjusted operating income goals under our executive compensation incentive programs unattainable. Throughout this CD&A, we provide shareholders insight into the deliberative process and the underlying compensation philosophies and objectives that guided our decision-making during this challenging year.

The Compensation and Human Resources Committee (“Committee”) is committed to ensuring that Aramark’s executive compensation program promotes the alignment of executive and shareholder interests and focuses on Aramark’s key performance objectives. We have designed our programs to attract and retain outstanding leaders, to motivate and reward them for achieving performance goals, and to support the creation of long-term shareholder value. The Committee believes its decisions reward Aramark executives appropriately for their performance and encourage them to focus on long-term value creation. Additionally, Aramark’s Board regularly seeks input from shareholders on a variety of issues, including corporate governance and executive compensation. For fiscal 2020, the Committee implemented several enhancements based on shareholder feedback, which we discuss in this CD&A.

Fiscal 2020 Executive Transitions

 

   
New CEO Appointment (October 2019)   New CFO Appointment (January 2020)
   
On October 6, 2019, Mr. Zillmer was appointed CEO and a member of the Board. A respected business leader, Mr. Zillmer previously spent 23 years at Aramark. Following his prior Aramark tenure, Mr. Zillmer served as Chairman and CEO of Allied Waste Industries from 2005 until its merger with Republic Services in December 2008. Mr. Zillmer then led Univar, a global chemical and ingredients distributor, as its CEO and Executive Chairman from 2009 to 2012.   Effective January 7, 2020, Mr. Ondrof was appointed as EVP, CFO. Mr. Ondrof most recently served as the Strategic Growth Leader and CFO of Performance Food Group. Prior to joining Performance Food Group in 2016, Mr. Ondrof served at Compass Group North America for 24 years in roles of increasing responsibility, most recently as Chief Development Officer, and prior to that as Chief Strategy Officer as well as CFO. Prior to Compass Group, Mr. Ondrof spent two years at ITT Rayonier, and started his career as an auditor with PricewaterhouseCoopers.

Addressing Shareholder Feedback – Fiscal 2020 Executive Compensation Practices

As part of the fiscal 2020 executive transitions, and in response to shareholder feedback, in early fiscal 2020, the Committee developed overall target pay packages for our new CEO and CFO to align with those of Aramark’s comparably sized peers, in addition to other process and policy changes.

 

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Key highlights of our 2020 executive compensation program design in early fiscal 2020:

 

     
  Adopted New Compensation Peer Group for Fiscal 2020.   The Committee worked with its independent consultant to develop a new peer group for fiscal 2020 consisting of 19 comparably sized peers – see Market Benchmarking for more details.
  New CEO Target Pay Package.   Set new CEO’s target pay opportunity to align with comparably sized peers and 24% lower than the prior CEO’s. Reduced or eliminated certain CEO perquisites of approximately $300,000 annually.
  New CFO Target Pay Package.   Set new CFO’s target pay opportunity to align with comparably sized peers and 21% lower than the prior CFO’s.
  Tax Gross-up Elimination.   Eliminated tax gross up provision in the EVP, HR’s legacy employment agreement.
  Relative Total Shareholder Return (TSR) Performance Modifier.   Performance share units (PSUs) granted for the fiscal 2020—2022 performance period are subject to vesting based on operational metrics with final payouts modified negatively or positively based on Aramark’s TSR relative to a performance peer group. This modifier is designed to result in final payouts aligned to the experience of shareholders.

2020 Shareholder Advisory Vote on Aramark’s Executive Compensation Program

The Committee considers shareholder feedback and results of the annual advisory vote on executive pay (“Say on Pay”) in determining the structure of the executive pay program, and whether changes should be considered. We routinely engage shareholders to better understand their views on governance and pay practices. The feedback we received from shareholders enabled the Board to better understand shareholder perspectives, which resulted in meaningful changes to our programs over the past several years. In our “Say-on-Pay” proposal last year, over 93% of the shares voted were in favor of “Say-on-Pay” a significant increase from the prior year.

COVID-19 PANDEMIC – IMPACT ON BUSINESS AND EXECUTIVE COMPENSATION

Impact on Aramark’s Business

Through nearly the first two quarters of fiscal 2020, the Company was performing consistently or outperforming (depending on metric) comparable quarters of fiscal 2019 and generally on pace to meet or potentially exceed annual performance expectations. Prior to the end of the Company’s second quarter, however, the Company’s business was meaningfully impacted by the global COVID-19 pandemic, which continued beyond the end of our 2020 fiscal year. The pandemic has created a challenging environment that resulted in decreased revenues of an estimated 50% at the trough in April due to disrupted operations across geographies and businesses.

 

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Aramark’s Response to Pandemic

Below we summarize key actions we undertook to protect our employees, shareholders, business, and customers. Management quickly flexed Aramark’s business model and purposefully managed liquidity. We successfully managed the Company through the tumultuous early months of the pandemic with proactive actions that included the initial draw down of our $1 billion revolving credit facility in March 2020 as well as issuing $1.5 billion of senior notes in April 2020 to further bolster the Company’s liquidity. These actions as well as those taken through the remainder of fiscal 2020 allowed Aramark to adapt to changing market conditions, while preserving our ability to maximize future performance.

 

 

What we did for our Employees?

We implemented the following measures to help our employees:

 

• Provided up to 21 additional days of sick time at no cost for U.S. employees in locations with a confirmed COVID-19 case or who were quarantined due to COVID-19 related symptoms/exposure.

 

• Extended company-paid medical benefits for employees enrolled in Aramark benefit plans who are dealing with reduced hours or site closures due to the COVID-19 outbreak.

 

• Connected U.S. hourly employees whose jobs had been affected or hours reduced with temporary work opportunities.

 

• Provided all Aramark employees access to Telehealth, a 24/7 resource for people who feel sick and need immediate access to advice and care from a licensed medical professional.

 

• Reinforced availability of our existing Employee Assistant Program (EAP) that is available to all employees and their families at no cost. The EAP provides helpful tools for managing anxiety and fears for employees and their children.

 

What we did for our Shareholders?

• We engaged shareholders in direct conversations regarding our pandemic actions.

 

• Our Board was regularly informed about all major aspects of our business and remains actively engaged with management. Our Board and the Committee met and continue to meet more frequently (relative to prior years) to understand the unique challenges we are encountering.

 

• Our top executive team (~150 global executives) and the Board accepted temporary salary and annual cash retainer reductions ranging from 15%—25% through the end of the fiscal year, to preserve liquidity and in recognition of decreased wage earnings across many of our business units.

 

• We maintained our quarterly dividend of $0.11 per share.

 

• Invested in and reallocated growth-oriented resources to continue creating a fit-for-purpose business.

 

What we did for our Business?

Recognizing that maintaining ample liquidity is key to withstanding the pandemic and emerging in a position of strength, we prudently managed cash, including:

 

• Drew down our $1 billion revolver in March, a portion of which has since been repaid to reduce interest expense, and issued $1.5 billion of senior notes in April to increase cash availability

 

• Initiated cost-reduction strategies at the end of the second fiscal quarter

 

• Quickly flexed our variable cost structure to the changing market conditions

 

• Remained disciplined in capital allocation priorities, including deferring capital expenditures, as appropriate

 

• Amended our credit facility to suspend secured debt ratio covenant requirements for four quarters beginning the quarter ended October 2, 2020

 

• Launched EverSafeTM proprietary platform that supports safe reopening and ongoing management of client locations

 

• Converted certain uniform manufacturing plants to produce millions of medical masks, scrubs and isolation gowns for hospitals and other critical facilities

 

• Renegotiated client contracts to meet evolving business needs

 

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Pandemic-Related Compensation Decisions

Aramark’s global portfolio was meaningfully impacted by COVID-19 beginning at the end of the second quarter of fiscal 2020. While performance has improved since the trough in April, the Company continued to experience business interruption from government-imposed restrictions and changing market dynamics. These factors are outside the Company’s control and the precise timing of the Company’s return to fully normal business operations is unclear. The pandemic’s effect on our business has raised compensation issues unlike any in the Company’s history. Incentives granted prior to the pandemic have been impacted beyond what could have been contemplated and addressed through the initial design. Throughout the pandemic, the Committee and Board have regularly discussed how best to balance and fairly recognize management’s substantial achievements in navigating the pandemic, while accounting for the adverse impact on shareholders and employees. To guide its decision making, the Committee relied on our executive compensation principles.

Aramark’s Existing Executive Compensation Principles

 

 

Pay for Performance

 

        

 

Shareholder Alignment

 

        

 

Attract and Retain Key Talent

 

The vast majority of pay for executives is at-risk and performance-based with metrics that are aligned to the Company’s strategy and that drive long-term shareholder value creation.    

Programs align executives’ interests with those of our shareholders. The majority of executive pay is provided through equity and tied to stock price. We also maintain stock ownership guidelines for all executives reinforced with conditional holding requirements for executives who have not met their guideline.

 

   

We provide competitive pay and benefits to attract and retain talented, high-performing executives with specific skill sets and relevant experience to drive the business, create shareholder value, and develop future leaders.

 

Given the pandemic’s dramatic impact on Aramark’s businesses, the Committee believed it was important to recognize pre-pandemic performance and management through COVID-19, while incentivizing future growth. The Committee determined in certain cases to award amounts despite the ability to achieve the performance conditions established prior to the pandemic and to revise performance periods and criteria to mitigate the unanticipated effect of the pandemic on evaluation of performance, recognizing that (i) the Company was on pace to achieve a payout under both short-term and long-term incentives in fiscal 2020 prior to the pandemic’s onset, and (ii) maintaining a rigid focus on payout calculations based on pre-pandemic goals would prevent the Company from appropriately rewarding the adaptability and successful execution of evolving business priorities. In making its decisions, the Committee holistically reviewed our executive pay programs based on actual amounts received after considering salary reductions, lost bonus opportunity, and stock price declines.

 

 
Pandemic-Related Compensation Decisions
   

1.  Base Salary Reductions

 

• NEO base salaries were reduced 25% effective April 6, 2020, through the end of the 2020 fiscal year (October 2, 2020).

 

• The Committee declared there will be no NEO salary increases during fiscal 2021.

   

2. Significantly Below-Target Annual Incentives for Fiscal 2020 Performance

 

• Due to the extreme variability of the pandemic’s impact across Aramark businesses and to recognize the efforts that allowed the Company to manage its business successfully through fiscal 2020, the Committee approved annual incentive payouts beyond what was earned under the Management Incentive Bonus Plan (the “Plan”).

 

• Each of the Plan’s global 5,300 bonus-eligible employees were awarded an additional annual incentive amount to the extent that their regular incentive payout determined under the Plan (described herein for the NEOs) did not equal at least 40% of the employee’s target opportunity. Company-wide, aggregate payouts under the Plan totaled 53% of the aggregate target.

 

 

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Pandemic-Related Compensation Decisions
 

 

 

 

• The Company maintains transparent and well-defined compensation arrangements for all employees, including the NEOs. This exercise of discretion to provide additional annual incentive is to recognize incredible efforts in an extraordinary year in which regular compensation arrangements would have otherwise resulted in payouts that the Committee believes did not properly reflect the contributions by all employees, including the NEOs, to achieve Company-wide results and keep the business running in an unprecedented pandemic.

   

3. Significantly Below-Target PSU Payout for Fiscal 2018–2020 Performance Period

 

• The Board determined the payout level for the PSUs granted in fiscal 2018 (covering the fiscal 2018 – 2020 performance period) by adjusting the performance calculation to moderate the pandemic impact by measuring performance for the first approximately 30 months of the 36-month performance period, removing both the Company financial results and the portion of the financial performance targets attributable to the period when our business was hardest hit by the pandemic, generally March 2020 through September 2020.

 

• Following this approach, the Board determined the payout to be 29.2% (of target) for the PSUs awarded in fiscal 2018.

 

• The Committee believes this significantly below-target payout provides a modest reward for extraordinary performance during the pandemic, aligned with impact on the business and shareholders.

 

   

4. Early Fiscal 2021 Annual Equity Award to Combat Retention Concerns

 

• The Committee made the fiscal 2021 equity grant in September 2020, rather than November 2020, to provide critical equity retention value at a time when we were experiencing aggressive recruitment of our key talent by businesses that were either less impacted by the pandemic or which had a more controllable path to recovery.

 

• The decision to grant the fiscal 2021 equity awards early was made because, particularly for newer executives, the effect of the pandemic materially reduced the value of long-term incentives and their retentive value.

 

• The Company does not currently intend to grant annual equity awards to the NEOs in fiscal 2021, as the awards made in September 2020 were for fiscal 2021.

 

• The fiscal 2021 equity grant was 50% RSUs and 50% stock options.

 

• We made the decision to remove PSUs from the fiscal 2021 awards because our financial performance is so significantly impacted by factors fully outside management’s control and the timeframe to recovery is so uncertain, that we could not reasonably set stretch targets.

 

• Any targets we set would not likely have resulted in fair compensation, but either a significant windfall driven by earlier recovery of the broader economy, or under compensation—most likely due to external factors such as vaccine effectiveness and implementation.

 

• The Committee viewed the significant performance orientation of the special award of premium stock options as a reasonable offset for the reduction in performance-based equity in the fiscal 2021 LTI mix.

 

   

5. Premium Priced Stock Option Grant to Drive Recovery and Future Growth

 

Due to the uncertain pace of a full business recovery together with the extraordinary management efforts that will be required to position Aramark to recover and grow, we awarded special premium priced stock options to our key executives. Throughout this CD&A, these stock options with premium exercise prices are referred to as “premium priced” stock options.

 

• These options have 6 tranches, which vest 33% after three years, 33% after four years, and 33% after five years. The initial tranche has an exercise price of $35, and other five tranches have exercise prices that increase by $10 increments, ranging from $45 to $85. The first tranche’s exercise price of $35 was 27% higher than our Fiscal 2020 year-end share price of $27.55, and the highest tranche’s $85 exercise price was 209% above that share price.

 

 

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Pandemic-Related Compensation Decisions
 

 

 

 

• The premium exercise price structure means that, not only do we need to achieve a share price of more than $85 dollars for all options to deliver value to the executive, but each option only has real value to the extent the price of our common stock exceeds the exercise price. This structure imposes very rigorous performance criteria on the ultimate value of these options – requiring far more appreciation in our common stock price than regular stock options, typically granted with an exercise price equal to the price of common stock on the date of grant, to generate value as illustrated below, strongly aligning executive compensation outcomes with shareholder experience.

 

 

• At lower share prices, the premium priced options have little or no value. It is not until the share price increases very substantially that premium priced options have significant value. This is illustrated in the following graph.

 

 

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Pandemic-Related Compensation Decisions
   

• The gray highlighted area in the table below reflects the share price of $58.12 at which in-the-money value of the premium priced options equals the grant date value. A share price of $58.12 reflects a 111% premium to the October 2, 2020 closing share price of $27.55. Even at this share price, three tranches of the premium priced options are still “out-of-the-money”.

                                                               In-the-Money Value of  $1,000        
          

 

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  Aramark
Share
Price
    Premium to
Shareholder
(Before
Dividends)1
    $35
Tranche
    $45
Tranche
    $55
Tranche
    $65
Tranche
    $75
Tranche
   

$85

Tranche

    Six-Tranche
Premium
Priced Option
Grant
    Regular
Option
Grant
       
      $ 105       281   $ 1,545     $ 1,721     $ 1,820     $ 1,812     $ 1,661     $ 1,339     $ 9,897     $ 8,579      
      $ 95       245   $ 1,325     $ 1,434     $ 1,456     $ 1,359     $ 1,107     $ 669     $ 7,350     $ 7,461      
      $ 85       209   $ 1,104     $ 1,147     $ 1,092     $ 906     $ 554     $ 0     $ 4,802     $ 6,342      
      $ 75       172   $ 883     $ 861     $ 728     $ 453     $ 0     $ 0     $ 2,924     $ 5,224      
      $ 65       136   $ 662     $ 574     $ 364     $ 0     $ 0     $ 0     $ 1,600     $ 4,105      
      $ 58.12       111   $ 510     $ 376     $ 113     $ 0     $ 0     $ 0     $ 1,000     $ 3,335      
      $ 55       100   $ 442     $ 287     $ 0     $ 0     $ 0     $ 0     $ 728     $ 2,987      
      $ 45       63   $ 221     $ 0     $ 0     $ 0     $ 0     $ 0     $ 221     $ 1,868      
      $ 35       27   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 749      
     

1   Reflects the premium of Aramark share price to the October 2, 2020 closing share price of $27.55.

    

   
   

6. Mix of Vehicles for Regular Fiscal 2021 Long Term Incentives

 

• Fiscal 2021 regular long-term incentives reflect a mix of 50% stock options and 50% restricted stock units.

 

• The Committee chose this approach because the significant effect of COVID-19 makes it difficult for the Committee to set meaningful three-year stretch targets. Although the stock options vest based on the passage of time, they only provide value to the degree Aramark share price grows from the time of grant.

 

• We intend to return to an LTI mix for fiscal 2022 awards that is at least 50% performance stock units.

Realizable Fiscal 2020 NEO Pay Impact vs. Total Shareholder Return (TSR)

The pandemic’s impact on NEOs’ projected realizable 2020 pay (-45% to -50%) is strongly aligned with one-year TSR (-35%).

 

 

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1 

Target Pay: Annualized base salary plus target annual incentive plus fiscal 2020 target LTI grant fair value – see Fiscal 2020 Long-Term Incentive Awards.

 

2 

2020 Realizable Pay: Earned salary reflects 25% reduction for approximately second-half of fiscal 2020; 40% (of target) annual incentive payout; threshold level (estimated) fiscal 2020 PSUs (granted November 2019) valued at $27.55 per unit, (the closing price of our common stock on the last day of fiscal 2020); fiscal 2020 options (granted November 2019) valued at 60% of grant date value based on an approximate updated Black-Scholes value using a $27.55 market price and $42.24—$43.57 strike prices; and fiscal 2020 RSUs (granted November 2019) valued at $27.55. Realizable Pay does not include fiscal 2021 equity grant (made in September 2020 intended to represent the annual grant for fiscal 2021) or the special premium priced options that have an average strike price of $60 and do not fully vest until 2025.

 

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2020 Performance Results

While navigating the unusual challenges of the current environment, management remained focused on delivering results to position Aramark for accelerated long-term growth and enhanced efficiency post pandemic. Below are some fiscal 2020 performance highlights.

Key Business Highlights

 

 

Transformative Actions – Executed on business transformation while navigating challenges presented by COVID-19

     Invested in growth-oriented resources throughout the year; shifted certain production lines to manufacture PPE
     Initiated disciplined cost-reduction actions and reallocated resources to continue creating a fit-for-purpose business
     Generated positive cash flow since bond issuance in April

Innovative Client Solutions – Implemented client solutions focused on safety and hygiene

     Developed and facilitated adoption of EverSafeTM platform that helps clients meet superior hygienic and safety standards
     Launched additional in-demand offerings including delivery and contact-free solutions
     Supported local communities in providing essential meals and health supplies

Disciplined Capital Structure – Maintained focus on efficiency and cost-reduction initiatives

     After seasonal use of cash in fiscal first quarter, the subsequent three quarters collectively generated positive free cash flow
     At year-end, the Company had ~$2.6 billion in cash availability
     Subsequent to year-end, the Company repaid $680 million on its revolving credit facility

Key Fiscal 2020 Financial Highlights

We note the following key financial highlights as context in reviewing Aramark’s fiscal 2020 executive pay decisions.

 

Revenue

 

    

Adjusted Operating Income

 

    

Free Cash Flow—Q4

 

$12.8B

21% year-over-year decrease. Underlying growth in first half of year prior to impact of COVID-19

 

 

    

$294M

Similarly affected by COVID-19. Reflects cost-reduction strategies, salary adjustments and reductions to general corporate expenses

    

$146M

Effective cash management and seasonal cash inflows more than offset net loss from the impact of COVID-19 in Fiscal 2020 Q4

 

 

Note: Reconciliation of the above measures to measures calculated in accordance with generally accepted accounting principles (“GAAP”) are provided in Annex A.

 

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GENERAL EXECUTIVE COMPENSATION PROGRAM AND PRACTICES OVERVIEW

Our executive compensation program adheres to high standards of compensation governance.

 

What We Do        What We Don’t Do

 

Risk Mitigation – Varied metrics and measurement periods in incentives mitigate risk that executives will be motivated to pursue results with respect to any one metric.

Compensation Recoupment Policy – Robust “clawback” policy for reimbursement of pay in certain circumstances.

Stock Ownership Guidelines – All NEOs and directors are subject to stock ownership guidelines with conditional holding requirements.

Double-Trigger Change-in-Control Provisions – Both a change-in-control and termination are required for equity vesting acceleration benefits to apply.

Annual Say-on-Pay Vote – We seek annual shareholder feedback on our executive pay program and directly engage with our shareholders on executive pay matters.

Annual Evaluation – We annually review our executive pay program to ensure it continues to be aligned with market.

Independent Advisor – Independent consultant provides advice on executive pay matters directly to the Committee.

 

     

 

×   No Guaranteed Bonuses – Our annual bonus plans are performance-based and do not include any minimum payment levels or guarantees.

×   No Executive Pensions or Supplemental Executive Retirement Plans (SERP).

×   No Hedging and Restriction on Pledging – We prohibit directors and employees from engaging in hedging and prohibit directors and NEOs from pledging Aramark shares without specific pre-approval.1

×   No Dividends on Unvested Equity Awards – We do not pay dividends or dividend equivalents on equity awards prior to vesting.

×   No Repricing or Exchange of Underwater Stock Options

×   No Tax Gross-Ups We do not provide tax gross-ups on benefits or perquisites in any employment agreements.

×   No Recycling of Shares withheld for taxes.

 

1. 

The prohibition on hedging and requirements with respect to pledging do not apply to transactions by Mantle Ridge.

Fiscal 2020 Target Executive Pay Mix1

The Committee designed our executive compensation program so a significant percentage of pay is variable, at risk, and performance-based. A significant portion is delivered in the form of equity, which promotes alignment with shareholder interests and creates incentive for long-term value creation. The target pay mix applicable to our NEOs demonstrates strong alignment with long-term shareholder value creation. CEO compensation is closely linked to financial, strategic and operational performance. The CEO’s target total compensation is 90% performance-based (based on target grant fair value of equity awards), while other NEOs, on average, have overall target pay that is 78% performance-based (based on target grant fair value of equity awards). PSUs comprise 50% of our regular long-term incentive mix.

Fiscal 2020 CEO Target Annual Compensation

 

 

    Salary    

 

10%

 

 

 

 

 

 

+

 

 

 

 

  

 

 

 

 

 

    Annual Incentive    

 

17%

 

 

 

 

 

 

 

 

 

 

 

+

 

 

 

 

  

 

PSUs

 

36%

 

 

 

+

 

  

 

 

 

 

 

    Options    

 

22%

 

 

 

 

 

 

 

 

 

 

 

+

 

 

 

 

  

 

 

 

 

 

    RSUs    

 

15%

 

 

 

 

 

 

                   
                     

 

73% Exposed to Aramark’s Share Price

 

 

       90% Performance-Based  

 

 

 

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Fiscal 2020 Average Other NEO Target Annual Compensation

 

 

              Salary               

 

22%

 

 

 

 

 

 

+

 

 

 

 

  

 

 

 

 

 

    Annual Incentive    

 

21%

 

 

 

 

 

 

 

 

 

 

 

+

 

 

 

 

  

 

PSUs

 

28%

 

 

 

+

 

  

 

 

 

 

 

    Options    

 

17%

 

 

 

 

 

 

 

 

 

 

 

+

 

 

 

 

 

 

 

 

 

 

    RSUs    

 

12%

 

 

 

 

 

 

                  
                     

 

57% Exposed to Aramark’s Share Price

 

 

       78% Performance-Based  

 

 

 

1

Excludes fiscal 2021 equity grant (provided in September 2020 and intended to represent the annual award for fiscal 2021) and the special, one-time premium priced option award granted in September 2020 as described earlier in this Executive Summary and in more detail later in this CD&A.

2020 Actual Performance Pay Outcomes Reflect Our Pay-for-Performance Philosophy

Fiscal 2020 compensation decisions and pay outcomes reflect shareholder feedback as well as our pay-for-performance philosophy tempered by the Committee’s consideration of the impact of the COVID-19 pandemic and management’s significant efforts to manage through the unprecedented disruption to our business.

Fiscal 2020 Annual Incentives: Based on fiscal 2020 performance and the pandemic’s impact, annual incentive payouts were, on average, significantly below target. Our 2020 annual incentive payout was 40% (of target) for the NEOs, based on the financial and individual performance outcomes detailed below (resulting in 10% of target payout) and an additional amount awarded by the Committee (resulting in an additional 30% of target payout) to recognize extraordinary contributions in addressing the pandemic and positioning the Company for a strong recovery and future growth – see Pandemic-Related Compensation Decisions for more details.

 

 

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Long-Term Incentives (2018 – 2020 Performance Period): As discussed above, the Board determined the payout for the fiscal 2018 PSUs by adjusting the performance calculation outcome to moderate the pandemic’s impact by measuring performance for the first approximately 30 months of the 36-month period, removing both the performance results and the portion of the performance targets attributable to the period when our business was most significantly impacted by the effects of the pandemic (generally March through September 2020) not contemplated at the time of the award’s grant.

 

 

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1

For purposes of calculating three-year Adjusted EPS performance achievement under the PSU awards for each of the three fiscal years during the performance period, Adjusted EPS previously disclosed annually was further adjusted to better align payouts with items not within management control. For example, the Committee made adjustments to reflect the effect of currency translation over the three years, the number of outstanding shares set forth in the award agreements, the change in our definition of Adjusted EPS in FY 2019 from the FY 2018 definition, the impact of certain natural disasters on our results, the impact of our sales growth initiatives undertaken in FY 2020, the impact on the Company’s tax rate as a result of the Tax Cuts and Jobs Act passed in December 2017 and to remove both the results and the portion of the financial performance targets attributable to the period when our business was hardest hit by the COVID-19 pandemic.

Compensation Decision Impacts on Summary Compensation Table Disclosure: As a result of our decisions to award fiscal 2021 long term incentives early and to award premium priced options (described above), our summary compensation table disclosure this year and next year is anomalous. For the fiscal 2020 Summary Compensation Table, we are required to include:

 

 

The normal fiscal 2020 long term incentive awards

 

 

The fiscal 2021 awards, which were made in fiscal 2020 (NEOs are currently not expected to receive annual equity awards in fiscal 2021)

 

 

The full value of the special premium priced options (which vest 1/3 on each of the 3rd, 4th, and 5th anniversaries of grant).

Conversely, our Summary Compensation Table for fiscal 2021 is expected to show a zero dollar value for long term incentives, as illustrated below. We also illustrate what normalized 2020 compensation would have been for the CEO if the fiscal 2021 LTI grant was not awarded early (the intended value delivered to the CEO in fiscal 2020) and the special premium priced stock options were amortized over 5 years.

 

Year

 

 

Salary ($)

 

   

Bonus ($)

 

   

Stock
Awards ($)

 

   

Option
Awards ($)

 

   

Non-Equity
Incentive

Plan
Compensation
($)

 

   

Change in
Pension

Value
and Non-

Qualified
Deferred
Compensation
Earnings ($)

 

   

All Other
Compensation
($)

 

   

Total ($)

 

 

 

2020

(As Reported)

 

 

 

 

 

 

1,118,750

 

 

 

 

 

 

 

 

 

682,500

 

 

 

 

 

 

 

 

 

11,400,063

 

 

 

 

 

 

 

 

 

13,600,026

 

 

 

 

 

 

 

 

 

227,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,189

 

 

 

 

 

 

 

 

 

27,094,029

 

 

 

 

 

2021

(Anticipated)1

 

 

 

 

 

 

1,300,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,275,000

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

65,189

 

 

 

 

 

 

 

 

3,640,189

 

 

 

 

 

2020

(Normalized)2

 

 

 

 

 

 

1,118,750

 

 

 

 

 

 

 

 

 

682,500

 

 

 

 

 

 

 

 

 

6,650,000

 

 

 

 

 

 

 

 

 

4,050,000

 

 

 

 

 

 

 

 

 

227,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,189

 

 

 

 

 

 

 

 

 

12,793,939

 

 

 

 

 

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1

Anticipated value assumes current base salary, current target annual incentive, same All Other Compensation as 2020 reported, but no equity awards granted.

2 

Normalized value reflects the intended equity value in fiscal 2020, being the sum of the fiscal 2020 award of 50% PSUs, 30% stock options and 20% RSUs and one-fifth of the special option award of $6,000,000 (amortized over the intended vesting period of the award). The normalized equity values do not include the fiscal 2021 regular award of 50% RSUs and 50% stock options that was granted at the end of fiscal 2020.

 

 

 

 

 

END OF CD&A EXECUTIVE SUMMARY

 

 

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Detailed Compensation Program Discussion

 

 

 

Aramark’s Executive Compensation Principles

Our executive pay program directly supports one of the anchors of the Company’s strategy – attracting and retaining the best talent – which in turn supports two of the other anchors of the Company’s strategy: accelerating growth and activating productivity. The executive pay program has three key principles:

 

1.

Pay for Performance: Provide the vast majority of executive pay as at-risk, performance-based pay with performance metrics that are aligned to the Company’s strategy and that drive long-term value creation; and

 

2.

Shareholder Alignment: Align executives’ interests with those of our shareholders by providing a significant portion of executive pay through equity, tying significant portions of pay to performance, and subjecting equity compensation to multi-year performance conditions, vesting periods, and ownership guidelines with conditional holding requirements; and

 

3.

Attract and Retain High Performing Talent: Attract and retain key executives with the capability to lead the business forward.

Shareholder Outreach Update

Our annual say-on-pay vote is an opportunity to receive shareholder feedback regarding our executive pay program. We actively seek shareholders’ feedback to better understand what motivated their votes and what actions we could take to address their concerns about our executive pay program. Our Committee considered these vote results and the corresponding feedback we received as it developed the fiscal 2020 pay package for our new CEO and CFO and evaluated pay opportunities provided to other executives. We received a significant increase in shareholder support for our NEO pay program to 93% of votes in favor of our fiscal 2019 compensation program.

Since our last Annual Shareholder Meeting, we engaged with shareholders representing more than 70% of our outstanding common stock to specifically review our governance practices, including our executive pay program, as part of the Company’s ongoing proactive investor outreach efforts. In our meetings with shareholders, we heard positive feedback related to the following changes we made with respect to our fiscal 2020 executive compensation program.

 

 

What We Heard

 

 

 

How We Responded

 

  

 

Intended Outcome and When Effective

 

   
Proxy compensation peer group included several substantially larger companies.  

In early fiscal 2020, adopted a new peer group to eliminate significantly larger peers and add new size and industry appropriate peers.

 

  

Committee made decisions related to fiscal 2020 NEO pay based on a market review conducted in early fiscal 2020 based on the new compensation peer group

 

   
Overall magnitude of executive pay is high   Target pay opportunity set in early fiscal 2020 for new CEO and CFO were set more than 20% lower than the prior incumbents in those roles   

Aligns fiscal 2020 total target direct pay (excluding equity award intended for fiscal 2021 and special premium priced options both granted in September 2020) with comparably sized peers

 

   
Potential disconnect of PSU payout alignment with the shareholder experience  

Introduced relative total shareholder return modifier into PSU design; PSUs not granted for fiscal 2021 due to pandemic

 

  

Ensures PSU payouts based on operational achievements are tied to shareholder experience over the same time period

 

 

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CEO Fiscal 2020 Target Total Pay1 is $4 Million Lower vs. Fiscal 2019

The Committee set the new CEO’s target pay opportunity $4 million (approximately 24%) lower than the compensation of the former CEO. We believe this change directly addresses shareholder feedback relating to the overall magnitude of CEO pay.

 

Fiscal Year    CEO   

Base

Salary

     Target Annual
Incentive
     Target Long-Term
Incentive
    

Target Total

Direct Pay

 
         

2020

   John Zillmer      $1,300,000        $2,275,000        $9,500,000        $13,075,000  
         

2019

   Eric Foss      $1,700,000        $3,400,000        $12,000,000        $17,100,000  

CFO Fiscal 2020 Target Total Pay1 is $1 Million Lower vs. Fiscal 2019

The Committee set the new CFO’s target pay opportunity $1 million (approximately 21%) lower than the compensation of the former CFO. We believe this change directly addresses shareholder feedback relating to overall pay magnitude.

 

 

Fiscal Year    CFO   

Base

Salary

     Target Annual
Incentive
     Target Long-Term
Incentive
    

Target Total

Direct Pay

 
         

2020

   Thomas Ondrof      $800,000        $800,000        $2,000,000        $3,600,000  
         

2019

   Stephen Bramlage      $777,950        $777,950        $3,000,000        $4,555,900  

 

1 

Does not include fiscal 2021 LTI award (granted in September 2020) since it is intended to cover fiscal 2021 not fiscal 2020. Additionally, does not include the special, premium priced option grant, which was a one-time award due to the extraordinary circumstances of the pandemic and will not fully vest until 2025 and has an average exercise price of $60 (or 100%+ above fiscal 2020 year-end stock price of $27.55).

 

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COMPENSATION PROGRAM DESIGN

Overview of the 2020 Compensation Components

As discussed in the CD&A Executive Summary, the principal components of Aramark’s executive compensation program are base salary, an annual cash incentive and long-term equity incentives. We also provide market competitive employee benefits, post-employment benefits, and a limited number of perquisites.

 

     
Compensation Element    Description    Link to Strategy
     
Base Salary   

• Base salaries are determined based on scope of responsibility, experience, and performance

  

• To attract and compensate high-performing and experienced leaders at a competitive level based on market (internal and external)

     
Annual Incentives   

• 90% evaluated on a formulaic basis relative to pre-established financial goals

 

• 10% evaluated based on individual performance

  

• To motivate and reward executives for achieving annual corporate, business, and function goals in key areas of financial, operational, and individual performance

     
Long-Term Incentive Compensation (LTI)   

• Performance Stock Units: 50% of overall LTI

 

  40% based on 3-year revenue growth

 

  30% based on 3-year adjusted operating income growth

 

  30% based on 3-year return on invested capital

 

  Relative total shareholder return modifier

 

  For the fiscal 2021 equity grant, no PSUs were granted as described above

  

• Focuses executives on the achievement of specific long-term performance goals directly aligned with our strategic operating plans

 

• Relative TSR component modifies the payout based on three-year TSR relative to a performance peer group

     
    

• Stock Options: 30% of annual LTI

 

  4 year ratable vesting term (except for fiscal 2021 equity grant, which vests ratably over 3 years)

  

• Directly aligns the interests of executives with shareholders. Stock options only have value for executives if performance results in stock price appreciation after the grant date

     
    

• Restricted Stock Units: 20% of annual LTI

 

  4 year ratable vesting term (except for fiscal 2021 equity grant, which vests ratably over 3 years)

  

• Strengthens key executive retention to promote executive team consistency and successful execution of long-term strategies

Base Salary

Base salary reflects the value of the executive position and attributes the executive brings to Aramark, including tenure, experience and skill level. The Committee annually reviews base salaries of the Executive Leadership Team (ELT), including all NEOs, and adjusts them periodically as needed to maintain market positioning and consistency with evolving role responsibilities. Upon consideration of a competitive market analysis (see Market Benchmarking for more details) and input from its independent consultant, the Committee increased Ms. Harrington’s salary by 4.5% on January 1, 2020. Additionally, to reflect his promotion into this current role in November 2019, Mr. Bruno’s salary was increased by 3.1% to reflect his new, expanded role.

 

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Mr. Bramlage and Mses. McKee and Harrington did not receive any additional compensation during the period from August 25, 2019 until October 6, 2019 in which they served in the role of Office of the Chairman.

 

          Fiscal 2019     Fiscal 20201     Fiscal 2021  
NEO   Job Title   Salary     % Increase     Salary     % Increase     Salary     % Increase  
               

John Zillmer

  CEO     N/A       N/A     $ 1,300,000       N/A     $ 1,300,000       0
               

Thomas Ondrof

  EVP, CFO     N/A       N/A     $ 800,000       N/A     $ 800,000       0
               

Lynn McKee

  EVP, HR   $ 717,738       2.5   $ 717,738       0   $ 717,738       0
               

Marc Bruno

  COO, US Food & Facilities   $ 606,152       N/A     $ 625,000       3.1   $ 625,000       0
               

Lauren Harrington

  SVP, General Counsel   $ 478,500       N/A     $ 500,000       4.5   $ 500,000       0
               

Stephen Bramlage

  Former CFO   $ 777,950       10   $ 777,950       0     N/A       N/A  

 

1

From April 6, 2020, through October 2, 2020, the salaries of the NEOs were reduced by 25%. Actual 2020 salary earned is provided in the Summary Compensation Table.

Annual Incentives

The annual cash incentive is designed to drive and reward performance and is based on financial objectives and individual objectives established by the Committee. Annual incentive targets as a percentage of base salary are provided in the table below. The Committee made no adjustments to the NEOs’ annual incentive targets for fiscal 2020 or 2021 beyond Mr. Bruno’s increase as detailed below.

 

          Fiscal 2019     Fiscal 2020*     Fiscal 2021  
NEO   Job Title   Target     % Change     Target     % Change     Target     % Change  
               

John Zillmer

  CEO     N/A       N/A       175     N/A       175     0
               

Thomas Ondrof

  EVP, CFO     N/A       N/A       100     N/A       100     0
               

Lynn McKee

  EVP, HR     100     0     100     0     100     0
               

Marc Bruno 1

  COO, US Food & Facilities     85     N/A       100     +15     100     0
               

Lauren Harrington

  SVP, General Counsel     85     N/A       85     0     85     0
               

Stephen Bramlage

  Former CFO     100     0     100     0     N/A       N/A  

 

1 

Mr. Bruno’s target annual incentive opportunity was increased from 85% (of base salary) to 100% (of base salary) upon his November 2019 promotion into his current role.

Fiscal 2020 Annual Incentive Performance Metrics

For 2020, the Annual Incentive Plan included two financial objectives – Adjusted Operating Income and Adjusted Revenue – for a combined weighting of 90%, and individual objectives weighted 10%. The Company must attain a threshold, or minimum, performance on each measure for the participant to be entitled to receive any payout under such part of the financial portion, while payout under the individual portion is based on achievement of individual objectives as reviewed and approved by the Committee. If maximum is achieved across all metrics, maximum payout for fiscal 2020 was 195% (of target).

 

Annual Incentive Performance Metric Weighting
Financial Performance Metrics1    
       

 

Adjusted

Operating Income

(45%)

 

    +      

 

Adjusted

Revenue

(45%)

 

    +      

 

Individual

Performance

(10%)

 

 

1 

All NEOs except Mr. Bruno are subject to 100% Corporate-level performance. The financial portion (90%) of Mr. Bruno’s annual incentive payout is determined based 80% on the financial performance (in the same weights described above) of his sector (U.S. Food & Support Services) and 20% based on Corporate-level financial performance

 

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Fiscal 2020 Annual Incentive Metric Selection

Financial objectives for the annual incentive plan are chosen to drive Company performance and are closely linked to our strategy.

 

 

Adjusted Operating Income: The Committee selected this metric because it is an important measure of the Company’s operating profitability and a key component of the Company’s long-term expectations for the business.

 

 

Adjusted Revenue: The Committee selected Adjusted Revenue because it allows for an assessment of the Company’s revenue without the effect of currency fluctuations, which are beyond the control of management.

 

         
Type   Metric   Weight   Definition   Rationale
         

Financial

  Adjusted Operating Income   45%   Operating income adjusted to eliminate the change in amortization of acquisition-related intangible assets; the impact of the change in fair value related to certain gasoline and diesel agreements; severance and other charges; merger and integration related charges; tax reform related employee reinvestments; the estimated impact of the 53rd week; and other items impacting comparability.  

•  Focuses management on driving profitable growth and managing expenses

• Drives tangible goal achievement and focuses on factors in executives’ control

•  Focuses management on overall profitability of the Company

• Key measure reviewed externally

         
 

 

  Adjusted Revenue   45%   Adjusted Revenue represents revenue growth, adjusted to eliminate the impact of currency translation, the effects of material divestitures, and the estimated impact of the 53rd week.  

•  Allows for an assessment of the Company’s revenue without the effect of currency fluctuations, which are beyond the control of management

• Key measure reviewed externally

         

Non-Financial

  Individual Performance Objectives   10%   Evaluation of individual performance contributions, as determined by the Committee (e.g., improve year-over-year overall employee engagement based on employee engagement survey).  

•  Focuses executives on critical, non-financial objectives that are important and expected to drive value creation

Fiscal 2020 Annual Goal-Setting Process

Performance targets are designed to be challenging and take into consideration prior year results, expectations going forward, and the Company’s strategic plan. The Committee establishes targets at the beginning of the fiscal year consistent with the Company’s long-term expectations for the business, which, prior to the pandemic, included:

 

 

Mid-to-high single-digit growth in adjusted operating income

 

 

Organic or adjusted revenue growth of two percent to five percent

 

 

For fiscal 2020, Adjusted Operating Income and Adjusted Revenue targets were set above 2019 performance outcomes

 

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Fiscal 2020 Annual Incentive Outcomes

Fiscal 2020 Payout Factors – Financial Metrics

Payout factors begin at 25% of target (for threshold performance) and are capped at 200% of target (for maximum performance). There are no payouts required for below threshold performance and at no point can the Committee approve a payout above 200% of target.

 

Performance Metrics

& Payout Factors

 

 

Threshold

 

 

Target

 

 

Maximum

 

 

Result

 

 

% Earned
before
Weighting

 

 

Weighted
% of
Target
Earned

 

 

Corporate-Level Results (100% Financial Weighting for all NEOs except Mr. Bruno’s 20% Financial Weighting)

 

AOI (45% Weight)

 

$990M

 

$1,100M

 

$1,210M

 

$294M

           

Payout Factor (% of Target)

 

25%

 

100%

 

200%

     

0%

 

 

0%

 

Adjusted Revenue (45% Weight)

 

$15,837M

 

$16,670M

 

$17,504M

 

$12,788M

           

Payout Factor (% of Target)

 

25%

 

100%

 

200%

     

0%

 

 

0%

 

Total Corporate Financial Metric Payout Result

    0

Payouts under Mr. Bruno’s annual incentive award is based on the same financial metrics noted above; however, 80% of Mr. Bruno’s annual incentive payout is determined based on the performance of the businesses he oversees and 20% is determined based on corporate-level performance as disclosed above. Based on actual fiscal 2020 performance outcomes, Mr. Bruno did not earn a payout under the financial metrics of the Plan.

Fiscal 2020 Payout Factors – Individual Performance Evaluation

Non-financial objectives have a payout range of 0% to 150%, based on the Committee’s evaluation, which consisted of the following:

 

Non-Financial Performance Outcomes

 

 

Result

 

 

% Earned
before
Weighting

 

 

Weighted
% of
Target
Earned

 

 

The Committee determined each NEO achieved a 100% level of performance of their Non-Financial Individual Performance objectives. While not a specific goal at the beginning of the year, the Committee considered the executive team’s pandemic response in evaluating individual performance outcomes.

 

 

 

At
Target

 

 

100%

 

 

10%

Fiscal 2020 Payout Factors – Committee Consideration

In light of the unprecedented events that the Company and employees faced during fiscal 2020 and the NEOs’ roles in managing the Company through this environment, the Committee approved additional payments to eligible employees, including NEOs.

 

 

All ~5,300 employees in the Plan were eligible for an additional payment to the extent their regular incentive payout determined under the targets set in the Plan did not provide a payout at least equal to 40% of the employee’s target opportunity, which the Committee believes to be an appropriate payout minimum based on the Company’s fiscal 2020 performance during unprecedented circumstances.

 

 

The Committee took this approach to foster the Company’s pay for performance culture and ensure that employees who achieved strong financial results, despite COVID-19, would be recognized for their accomplishments in a difficult year. The Committee also took into account that most employees were not able to achieve results due to factors outside their control. Nonetheless, these employees made extraordinary efforts, which significantly mitigated COVID-19 impacts on our business and its future.

 

 

At management job levels we have seen unprecedented and aggressive recruitment of our talented management employees who have transferrable skills, in particular, by businesses less materially impacted by COVID-19. Additionally, we recognize that the pandemic required our management employees to do much more with a greatly reduced workforce supporting them.

 

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The Company maintains transparent compensation arrangements for all employees, including the NEOs. Our regular compensation arrangements did not contemplate the pandemic and the effects on our business and, absent the additional award, resulted in a payout the Committee did not believe reflected the contributions of the Company’s employees, including the NEOs and the resulting benefit to our business and shareholders.

Fiscal 2020 Payouts by NEO

In light of the unprecedented events that the Company and our employees faced during fiscal 2020, the Committee determined payouts considering both financial, individual, and company-wide performance to provide what it believed to be reasonable in light of results.

 

          Target Annual
Incentive
   

Earned Payout

(10% of Target)

   

Additional
Payout

(30% of Target)

   

Final Payout

(40% of Target)

 
NEO   Job Title   $     % of
Salary
    $     % of
Target
    $     % of
Target
    $     % of
Target
 
                   

John Zillmer

  CEO   $ 2,275,000       175   $ 227,500       10   $ 682,500       30   $ 910,000       40
                   

Thomas Ondrof 1

  EVP, CFO   $ 600,000       100   $ 60,000       10   $ 180,000       30   $ 240,000       40
                   

Lynn McKee

  EVP, HR   $ 717,738       100   $ 71,774       10   $ 215,321       30   $ 287,095       40
                   

Marc Bruno 2

  COO, US Food & Facilities   $ 606,701       100   $ 60,670       10   $ 182,010       30   $ 242,680       40
                   

Lauren Harrington

  SVP, General Counsel   $ 425,000       85   $ 42,500       10   $ 127,500       30   $ 170,000       40
                   

Stephen Bramlage 3

  Former CFO   $ 777,950       100   $ 0       0   $ 0       0   $ 395,283       100

 

1 

Mr. Ondrof’s target annual incentive opportunity was pro rated to reflect his partial year as CFO (January through September). His full year annual target is $800,000.

 

2 

Mr. Bruno’s target annual incentive opportunity was pro rated to reflect a change to his salary and incentive target upon his November 2019 promotion into his current role.

 

3 

Mr. Bramlage’s annual incentive, per his Separation Agreement reflects a pro rata portion (51%) of his annualized target incentive based on his April 3, 2020, separation.

Fiscal 2021 Annual Incentive Performance Metrics

To support the Company’s strategic priorities in light of the pandemic and the uncertainty of its duration, for fiscal 2021, the Committee made adjustments to performance metrics and weightings to focus on net new revenue, operating margin, and free cash flow, which were identified as critical to the Company’s success through the pandemic. Fiscal 2021 annual incentive plan metric changes include:

 

 

Adjusted Operating Income Margin – Slightly decreased the weight of the Adjusted Operating Income metric from 45% to 40% and changed the measurement to margin to reinforce profitability and expense controls.

 

 

Net New Revenue Slightly decreased Revenue metric weight from 45% to 40% and changed the metric to Net New Revenue which is Annualized New Business less Annualized Lost Business in order to incentivize management to focus on a metric that the Committee believes will contribute more immediately to the Company’s success.

 

 

Free Cash Flow (FCF) – Reintroduced FCF with a 20% weighting given the criticality of cash management during the pandemic.

 

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Individual Objective – Eliminated the 10% weighting on individual performance to focus the leadership team on achieving financial results.

 

    Weight        2021 Performance Targets and Payouts
Metric   2019   2020   2021   2021 Performance and
Payouts
  Threshold   Target   Maximum
         

• Adjusting Operating Income (2019 & 2020)

 

•  Adjusted Operating Income Margin (2021)

 

40%

 

45%

 

40%

 

Performance Range

 

 

40% of target

 

 

100% of target

 

 

150% of target

 

Payout Range

 

25% of target

 

100% of target

 

200% of target

• Adjusted Revenue (2019 & 2020)

 

• Net New Revenue (2021)

 

25%

 

 

45%

 

 

40%

 

 

Performance Range

 

 

50% of target

 

 

100% of target

 

 

150% of target

 

 

Payout Range

 

25% of target

 

100% of target

 

200% of target

• Free Cash Flow

 

25%

 

0%

 

20%

 

Payout Range

 

25% of target

 

100% of target

 

200% of target

• Individual Objectives

 

10%

 

10%

 

0%

 

N/A

 

N/A

 

N/A

 

N/A

Additionally, the Committee broadened fiscal 2021 performance shoulders (the performance required to achieve threshold and maximum performance) to take into account the challenging goal setting environment in which the Company is operating, the uncertainty around projecting the pandemic’s scope and duration, and to avoid outsized payments.

Long Term Incentives (LTI)

Fiscal 2020 Long-Term Incentive Grant: Aligns executives’ interests with those of shareholders. Generally grants are made early in the fiscal year (generally mid-November). For fiscal 2020, LTI awards for NEOs were granted in November 2019 and comprised three vehicles:

 

Performance Share Units – PSUs (50%)    Options (30%)    RSUs (20%)

Performance Based Vesting

  

Time-Based Vesting

  

Time-Based Vesting

3-Year Cliff based on Achievement of Performance Targets

• Revenue Growth (40%)

• Adjusted Operating Income Growth (30%)

• Return on Invested Capital (30%)

• Relative TSR Modifier (+/- 25%)

Payout can range from 0% to 250% (of target)

   4-Year Annual    4-Year Annual

RSUs and PSUs accrue dividend equivalents until settlement, subject to the same vesting terms as the underlying RSUs and PSUs (with dividend equivalents earned on PSUs determined based upon actual performance; no dividends or equivalents are paid on RSUs that do not vest or PSUs that are not earned and distributed). Time vesting RSUs, PSUs, and stock options also vest in connection with certain termination events, as described in more detail in the “Potential Post-Employment Benefits” section.

Fiscal 2020 PSU Performance Metrics. For the fiscal 2020 – 2022 performance period, PSUs are based on three metrics: 1) Revenue Growth; 2) Adjusted Operating Income Growth; and 3) Return on Invested Capital (ROIC). Performance targets are set by the Committee at challenging levels to drive company performance and to ensure continued long-term executive focus. Long-term targets are designed to be challenging and exceed prior achievement levels, while considering future expectations and the Company’s strategic plan. Goals align with the Company’s long-term targets communicated to investors. The Revenue and Adjusted Operating Income growth targets for the fiscal 2020 – 2022 performance period were set higher than historical performance to reflect the Company’s performance outlook at the time of grant and would not have been attained based on results during the prior three-year performance period (fiscal 2018 – 2020). The ROIC target is generally aligned with historical averages and capital cost considerations. The Committee believes these three metrics closely align executive interests with long-term value creation.

 

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To ensure payouts based on operational metrics are aligned with the shareholder experience, the Company introduced a relative total shareholder return modifier. The modifier is designed to adjust final payouts by +/- 25% based on the Company’s TSR relative to a broad performance peer group consisting of 51 companies (see Market Benchmarking for details) over the three-year period.

 

 

Metric

  

 

Weight   

 

 

Definition

 

 

Rationale

  Performance Goals
  Threshold      Target      Maximum   

 

3-Year Revenue Growth

  

 

40%   

 

 

Revenue growth which may be adjusted to consider the impact of currency translation and M&A.

 

 

Transparent metric that aligns with our goal of long-term growth

 

 

2.0%   

 

 

4.0%   

 

 

5.0%   

 

3-Year Adjusted Operating Income Growth

  

 

30%   

 

 

Operating income growth adjusted to consider: (a) change in amortization of acquisition-related tangible assets; (b) impact of change in fair value related to gasoline and diesel agreements; (c) severance and other charges; (d) effect of M&A; (e) integration related charges; (f) currency changes; and (g) other items impacting comparability.

 

 

Focuses management on driving profitable growth and managing expenses. Drives tangible goal achievement and focuses on factors in executives’ control

 

 

1.4%   

 

 

5.0%   

 

 

6.7%   

 

3-Year Return on Invested Capital (ROIC)

  

 

30%

 

 

Adjusted Operating Income divided by Average Invested Capital

 

 

Measures the return we are driving for our shareholders and incentivizes efficient capital use.

 

 

10.2%   

 

 

10.7%   

 

 

11.2%   

 

Relative Total Shareholder Return

  

 

Modifier
(+/-25%)

 

 

Stock price appreciation plus the compounding effect of reinvested dividends.

 

 

Aligns PSU payouts to the investor experience.

 

 

25th %ile

 

 

50th %ile

 

 

75th %ile

Fiscal 2020 Long Term Incentive Awards

The following table shows grant date target values for each LTI award type by NEO. Factors considered in making fiscal 2020 awards included value of previously granted awards, pay relative to target market positioning (see Market Benchmarking for more details), individual performance, and the value of outstanding equity awards.

 

NEO

 

Job Title

 

Total

Target Grant Fair
Value LTI ($)

    2020 LTI Allocation  
  PSUs     Options     RSUs  

John Zillmer

 

  CEO

 

$

9,500,000

 

 

$

4,750,000

 

 

$

2,850,000

 

 

$

1,900,000

 

Thomas Ondrof

 

  EVP, CFO

 

$

2,000,000

 

 

$

1,000,000

 

 

$

600,000

 

 

$

400,000

 

Lynn McKee

 

  EVP, HR

 

$

1,500,000

 

 

$

750,000

 

 

$

450,000

 

 

$

300,000

 

Marc Bruno

 

  COO, US Food & Facilities

 

$

1,750,000

 

 

$

875,000

 

 

$

525,000

 

 

$

350,000

 

Lauren Harrington

 

  SVP, General Counsel

 

$

1,500,000

 

 

$

750,000

 

 

$

450,000

 

 

$

300,000

 

Stephen Bramlage

 

  Former CFO

 

$

3,000,000

 

 

$

1,500,000

 

 

$

900,000

 

 

$

600,000

 

 

 

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Fiscal 2021 Long Term Incentive Awards (September 2020 Grant – Expedited from November 2020)

In order to address retention concerns, the Board granted the fiscal 2021 equity awards in September 2020, rather than November 2020, for all equity-eligible employees, including the NEOs, and structured the awards to vest ratably over three years (vs. four-year typical vesting structure). Given the challenging goal setting environment caused by the pandemic, this grant consisted solely of 50% options and 50% RSUs. The Committee expects this approach to be limited to the fiscal 2021 grant and expects to again grant PSUs of at least 50% of the grant value for the next grant, the fiscal 2022 grant (which is expected to occur in November 2021).

 

NEO

 

Job Title

 

Total

Target Grant Fair
Value LTI ($)

    

Expedited Fiscal 2021 LTI Allocation

(September 2020 Grant)

 
   PSUs     Options     RSUs  

John Zillmer

 

  CEO

 

$

9,500,000

 

  

$

0

 

 

$

4,750,000

 

 

$

4,750,000

 

Thomas Ondrof

 

  EVP, CFO

 

$

2,000,000

 

  

$

0

 

 

$

1,000,000

 

 

$

1,000,000

 

Lynn McKee

 

  EVP, HR

 

$

1,500,000

 

  

$

0

 

 

$

750,000

 

 

$

750,000

 

Marc Bruno

 

  COO, US Food & Facilities

 

$

1,750,000

 

  

$

0

 

 

$

875,000

 

 

$

875,000

 

Lauren Harrington

 

  SVP, General Counsel

 

$

1,500,000

 

  

$

0

 

 

$

750,000

 

 

$

750,000

 

Premium Priced Stock Option Grant (September 2020 Grant) – Special One-Time Grant

Given the extraordinary circumstances caused by the pandemic, the Board decided to provide a one-time premium priced option grant (i.e., option exercise prices exceed closing stock price on grant date) to a limited group of executives it believes critical to driving shareholder value creation over the next 5 to 10 years. The grant vests over five years (33% after 3 years, 33% after 4 years, and 33% after 5 years) and consists of six tranches with equal target grant date values, with exercise prices of $35, $45, $55, $65, $75, and $85, all of which were materially above the Company’s stock price on the grant date. These exercise prices represent premiums of +27%, +63%, +100%, +136%, +172%, and +209%, respectively, above Aramark’s $27.55 closing stock price on October 2, 2020.

The premium priced stock option grants demonstrate the Board’s strong confidence in the executive team’s leadership of Aramark and the momentum of its strategic direction. The grant also reinforces the need for extraordinary performance through a critical period navigating Aramark’s response to the pandemic and driving future growth post-pandemic.

While one-time equity grants are not uncommon for leaders navigating companies through extraordinary periods or circumstances, this grant is notable in two ways. First, it is 100% in the form of options with value derived only when incremental shareholder value is created. Second, its premium exercise price structure requires significant incremental value to be created for shareholders compared to a typical option grant (for which the exercise price is set at fair market value on the grant date) for executives to realize value. Executives participate only in the value created in excess of the premium exercise price. For example, at a $60 share price, the in-the-money value of the $55 exercise price options is $5 and three of the tranches remain out of the money. This performance sensitivity ensures recipients are only compensated if there is significant appreciation in shareholder value. These options will provide no value to recipients if the stock price fails to appreciate above the premium exercise prices. The one-time grant therefore reinforces the incentive for recipients to drive meaningful and sustained value creation, and ensures that realized compensation, if any, will be tied to strong execution of future growth initiatives, with no compensation for simply recovering from the pandemic. The Board believes that this growth will be a defining moment for Aramark and this grant reflects that significance and delivers value if, and only if, future growth is extraordinary.

 

NEO

 

Job Title

  Total Target
Premium
Option Value
    Target Fair Value – Premium Option Grant by Exercise Price Tranche  
  $35     $45     $55     $65     $75     $85  

John Zillmer

 

CEO

 

$

6,000,000

 

 

$

1,000,000

 

 

$

1,000,000

 

 

$

1,000,000

 

 

$

1,000,000

 

 

$

1,000,000

 

 

$

1,000,000

 

Thomas Ondrof

 

EVP, CFO

 

$

2,000,000

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

Lynn McKee

 

EVP, HR

 

$

1,500,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

Marc Bruno

 

COO, US Food &
Facilities

 

$

2,000,000

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

 

$

333,333

 

Lauren Harrington

 

SVP, General
Counsel

 

$

1,500,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

 

$

250,000

 

 

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Payout Outcomes for PSUs Related to Fiscal 2018 – 2020 Performance Period

PSUs that vested at the end of fiscal 2020 had performance targets based on three-year Cumulative Adjusted EPS and three-year Return on Invested Capital for the fiscal 2018 – 2020 performance period. The Board determined payouts for the fiscal 2018 – 2020 performance period by adjusting the performance calculation outcomes to moderate the pandemic’s impact by measuring performance for the first approximately 30 months of the 36-month performance period, removing both the results and the portion of the financial performance targets attributable to the period when our business was hardest hit by the pandemic (generally March 2020 through September 2020). As a result of this determination, the PSUs granted in fiscal 2018 that covered the fiscal 2018 – 2020 performance period paid out at 29.2% of target, as detailed below.

 

Performance Metrics

& Payout Factors

 

Threshold

   

Target

   

Maximum

   

Result

   

% Earned
before
Weighting

   

Weighted
% of Target
Earned

 

Fiscal 2018 – 2020 Performance Period

                                               

Cumulative Adjusted EPS (50% Weight)

 

 

$5.13

 

 

 

$5.77

 

 

 

$6.14

 

 

$

5.24

1 

   

Payout Factor (% of Target)

 

 

50%

 

 

 

100%

 

 

 

200%

 

   

 

58.4

 

 

29.2%

 

Return on Invested Capital (50% Weight)

 

 

10%

 

 

 

11%

 

 

 

12%

 

 

 

9.7%

 

   

Payout Factor (% of Target)

 

 

50%

 

 

 

100%

 

 

 

200%

 

   

 

0

 

 

0%

 

Total Fiscal 2018 PSU Payout Result

                                         

 

29.2%

 

 

1

For purposes of calculating three-year Adjusted EPS performance achievement under the PSU awards for each of the three fiscal years during the performance period, Adjusted EPS previously disclosed annually was further adjusted to better align payouts with items not within management control. For example, the Committee made adjustments to reflect the effect of currency translation over the three years, the number of outstanding shares set forth in the award agreements, the change in our definition of Adjusted EPS in FY 2019 from the FY 2018 definition, the impact of certain natural disasters on our results, the impact of our sales growth initiatives undertaken in FY 2020, the impact on the Company’s tax rate as a result of the Tax Cuts and Jobs Act passed in December 2017 and to remove both the results and the portion of the financial performance targets attributable to the period when our business was hardest hit by the COVID-19 pandemic.

Outstanding PSU Grants

In the table below, we show other outstanding PSU grants, which were provided in fiscal 2019 and fiscal 2020. PSUs are earned based on performance relative to the performance metrics shown below and will not be determined until the end of each respective three-year performance period.

 

Outstanding PSU Grants

    

Weight

    

2019

    

2020

    

2021

    

2022

Fiscal 2019 PSUs

                

• Adjusted EPS

    

50%

    

Three-Year Performance (2019 – 2021)

      

• Return on Invested Capital

    

50%

    

Three-Year Performance (2019 – 2021)

      

Fiscal 2020 PSUs

                

• Revenue Growth

    

40%

         

Three-Year Performance (2020 – 2022)

• Adjusted Operating Income Growth

    

30%

         

Three-Year Performance (2020 – 2022)

• Return on Invested Capital

    

30%

         

Three-Year Performance (2020 – 2022)

• Relative Total Shareholder Return

    

+/- 25%


Modifier

           

Three-Year Performance (2020 – 2022)

 

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EXECUTIVE TRANSITIONS

Mr. Zillmer’s Fiscal 2020 Target Pay Pursuant to October 6, 2019, Offer Letter

Our Offer Letter with Mr. Zillmer provides the following compensation- and benefit-related terms, which were developed based on benchmarking results reflecting comparably sized peer organizations. Actual payouts for incentive plans are based on performance achievement as defined by the plan. The post-termination payments described below are payable pursuant to the employment agreement Mr. Zillmer entered into upon commencement of employment with us and are conditioned on Mr. Zillmer’s agreement not to compete with the Company for two years following his termination of employment.

 

Element   Value or Description

Base Salary

 

 

$1,300,000

 

Annual Cash Incentive Target

 

 

175% (of Base Salary)

 

Long-Term Incentive

 

Overall equity award to be provided with a minimum grant date fair value of $9.5 million when granted in November 2019:

 

• Performance Share Units: $4,750,000

 

• Stock Options: $2,850,000

 

• Restricted Stock Units: $1,900,000

 

Benefits and Perquisites

 

 

Generally consistent with those provided to other Aramark executives.

 

Mr. Zillmer’s current post-termination benefits are summarized below (see Potential Post-Employment Benefits section for full details):

 

Termination Scenario   Payments and Benefits Triggered

Involuntary Termination or Termination for Good Reason In Anticipation of or Within Two Years after a Change of Control (the “CIC Protected Period”)

 

• Lump sum payment equal to the sum of: (x) 2.5 times salary, (y) 2.5 times target annual bonus, and (z) pro rata portion of annual target bonus for year of termination

 

• 2.5-year continuation of company-paid medical and life insurance

 

• Equity awards to be treated in accordance with applicable plan and agreements that are generally consistent with those provided to other executives

 

• Continued car allowance for 30 months

Involuntary Termination or Termination for Good Reason Other Than During the CIC Protected Period

 

• 2 years of salary continuation

 

• 2 times target annual bonus

 

• Pro rata bonus for the year of termination based on actual performance

 

• 2-year continuation of company-paid medical and life insurance

 

• Continued car allowance for 24 months

 

 

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Mr. Ondrof’s Fiscal 2020 Target Pay Pursuant to January 5, 2020 Offer Letter

Our Offer Letter with Mr. Ondrof provides the following compensation- and benefit-related terms, which were developed based on benchmarking results reflecting comparably sized peer organizations. Actual incentive plan payouts are based on performance achievement as defined by the plan. The post-termination payments described below are payable pursuant to the employment agreement Mr. Ondrof entered into upon commencement of employment and are conditioned on Mr. Ondrof’s agreement not to compete with the Company for 18 months following employment termination.

 

Element   Value or Description

Base Salary

 

 

$800,000