DEF 14A 1 p59032_def14a.htm PROXY STATEMENT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

 

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þ   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-12

 

 

Halyard Health, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

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

 

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March 9, 2018

 

Joseph F. Woody

Chief Executive Officer

 

       
     

Fellow Stockholders:

 

It is our pleasure to invite you to the Annual Meeting of Stockholders of Halyard Health, Inc. (the “Company”). The meeting will be held on Thursday, April 26, 2018, at 9:00 a.m. Eastern time at the Company’s headquarters located at 5405 Windward Parkway, Alpharetta, Georgia 30004.

 

At the Annual Meeting, stockholders will be asked to elect three directors for a three-year term, ratify the selection of the Company’s independent auditors, and approve the compensation for our named executive officers. These matters are fully described in the accompanying Notice of Annual Meeting and proxy statement.

 

Your vote is important. Regardless of whether you plan to attend the meeting, we urge you to vote your shares as soon as possible. You may vote using the included proxy card by completing, signing, and dating it, then returning it by mail. You may also vote your shares by using the telephone or Internet by following the instructions set forth on the proxy card. Additional information about voting your shares is included in the proxy statement.

 

Sincerely,

 

 

 

Joseph F. Woody

Chief Executive Officer

 

March 9, 2018

 

 

Notice of Annual Meeting of Stockholders

 

 

TO BE HELD

April 26, 2018

 

Important Notice Regarding Availability of Proxy Materials for the Stockholders Meeting to be held on April 26, 2018

 

This proxy statement along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, are available at www.proxyvote.com.

The Annual Meeting of Stockholders of Halyard Health, Inc. (the “Company”) will be held at the Company’s headquarters, which is located at 5405 Windward Parkway, Alpharetta, Georgia 30004, on Thursday, April 26, 2018, at 9:00 a.m. Eastern time for the following purposes:

 

1. To elect as directors the three nominees named in the accompanying proxy statement for a three-year term;
   
2. To ratify the selection of Deloitte & Touche LLP as our independent auditors for 2018;
   
3. To approve a non-binding resolution to approve the compensation of our named executive officers; and
   
4. To take action upon any other business that may properly come before the meeting or any adjournments of the meeting.

 

Stockholders of record at the close of business on March 2, 2018, are entitled to notice of and to vote at the meeting or any adjournments.

 

It is important that your shares be represented at the meeting. I urge you to vote promptly by using the telephone or Internet or by signing, dating, and returning the enclosed proxy card.

 

To attend in person, please register by following the instructions on page 4. If you plan to attend the meeting, we ask that you nevertheless vote promptly by using the telephone or Internet or by signing, dating, and returning the enclosed proxy card. You may revoke your proxy and vote your shares in person if you would like to do so.

 

By Order of the Board of Directors.

 

 

 

Ross Mansbach

Vice President—

Deputy General Counsel

and Corporate Secretary


 

 

 

Table Of Contents

 

       
       

Information About Our Annual Meeting

  1 How We Provide Proxy Materials
  1 Who May Vote
  1 How to Vote
  2 Effect of Not Instructing Your Broker
  2 How Withhold Votes and Abstentions Will be Counted
  2 How to Revoke or Change Your Vote
  3 Votes Required
  3 Attending the Annual Meeting
  3 Costs of Solicitation
       
       

Corporate Governance

  4 Board Leadership Structure
  5 Director Independence
  5 Board Meetings
  5 Board Committees
  9 Communicating with Directors
  10 Other Corporate Governance Policies and Practices
       
       
Proposal 1   12 Process and Criteria for Nominating Directors
  14     Committee Review of Attributes of Current Directors
    14 Diversity of Directors
Election of Directors   14 The Nominees
  16 Directors Continuing in Office
  18 Director Compensation
  19 2017 Outside Director Compensation
       
       
Proposal 2   21 Principal Accounting Firm Fees
  21 Audit Committee Approval of Audit and Non-Audit Services
  22 Audit Committee Report
Ratification of Auditors      
       
       
Proposal 3   23 Advisory Vote to Approve Named Executive Officer Compensation
Advisory Vote to Approve Named Executive Officer Compensation      

 

       
Compensation Discussion and Analysis   25 Compensation Executive Summary
  27 Executive Compensation Objectives and Policies
  28 Executive Compensation Design Philosophy and Guiding Principles
  29 Components of Our Executive Compensation Program
  30 Setting Annual Compensation
  33 2017 Performance Goals, Performance Assessments, and Payouts
    36 Benefits and Other Compensation
    37 Executive Compensation for 2018
    39 Additional Information About Our Compensation Practices
    43 Analysis of Compensation-Related Risks
       
       
    44 Summary Compensation
    47 Grants of Plan –Based Awards
Compensation Tables   49 Discussion of Summary Compensation and Plan-Based Awards Tables
  49 Outstanding Equity Awards
  49 Option Exercises and Stock Vested
  50 Pension Benefits
  50 Nonqualified Deferred Compensation
    51 Potential Payments on Termination or Change of Control
       
       
Other Information   56 Security Ownership Information
  57 Section 16(a) Beneficial Ownership Reporting Compliance
  58 Transactions with Related Persons
  58 Stockholders Sharing the Same Household
  58 2019 Stockholder Proposals
    59 Stockholder Nominations for Board of Directors
    60 Annual Meeting Advance Notice Requirements
    60 Annual Report
       
       
Other Matters to be Presented at the Meeting   61 Other Matters to be Presented at the Meeting
       
       
Appendix A   62 Appendix A
 
Information About Our
Annual Meeting
Halyard Health, Inc. | 5405 Windward Parkway | Alpharetta, GA 30004 | 678-425-9273
March 9, 2018

 

On behalf of the Board of Directors of Halyard Health, Inc. (the “Company”), we are soliciting your proxy for use at the 2018 Annual Meeting of Stockholders,to be held on April 26, 2018, at 9:00 a.m. Eastern time at the Company’s headquarters located at 5405 Windward Parkway, Alpharetta, Georgia 30004.

 

At the Annual Meeting, stockholders will vote on the following matters:

1. The election of the three nominees named in this proxy statement as directors for a three-year term;
2. The ratification of the selection of Deloitte & Touche LLP as our independent auditors for 2018;

3. A non-binding resolution to approve the compensation of our named executive officers; and
4. Any other business that may properly come before the meeting or any adjournments of the meeting.

 

Our Board of Directors recommends that you vote your shares FOR each of proposals one through three.

 

 

How We Provide Proxy Materials

 

We began providing our proxy statement and form of proxy to stockholders on March 9, 2018.

 

As Securities and Exchange Commission (“SEC”) rules permit, we are making our proxy statement and our annual report available to many of our stockholders via the Internet rather than by mail. This reduces printing and delivery costs and supports our sustainability efforts. You may have received in the mail a “Notice of Electronic Availability” explaining how to access this proxy statement and our annual report on the Internet and how to vote online. If you received this Notice but would like to receive a paper copy of the proxy materials, you should follow the instructions contained in the Notice for requesting these materials.

 

Who May Vote

 

If you were a stockholder of record at the close of business on the record date of March 2, 2018, you are eligible to vote at the meeting. Each share of our common stock that you own entitles you to one vote. Shares may not be voted cumulatively.

 

As of the record date, 46,923,794 shares of common stock were outstanding.

 

If your shares are held by a bank or brokerage firm, you are considered the “beneficial owner” of the shares held in “street name.” If your shares are held in street name, your bank or brokerage firm (the record holder of your shares) forwarded to you these proxy materials, along with a voting instruction card. As the beneficial owner, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions. If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares with respect to “routine” items, but it will not be permitted to vote your shares with respect to “non-routine” items. In the case of non-routine items, your shares will be considered “broker non-votes” on those proposals.

 

 

How to Vote

 

If you are the record holder of shares of our common stock as of the record date, you may vote by using the telephone or Internet, by completing and returning the enclosed proxy card by mail, or by voting in person at the meeting. To vote by telephone or Internet, see the instructions on the proxy card and have the proxy card available when you place your telephone call or access the Internet website. To vote your proxy by mail, or by voting in person at the meeting, mark your


 

2018 Proxy Statement 1

 

 

Information About Our Annual Meeting

 

vote on the proxy card, then follow the instructions on the card to return it by mail.

 

If your shares are held in street name, please follow the instructions on the voting instruction card to vote your shares.

 

If you are the record holder of your shares and you attend the meeting, you may deliver your completed proxy card in person. Additionally, we will pass out written ballots to registered stockholders who wish to vote in person at the meeting. Beneficial owners of shares held in street name who wish to vote at the meeting will need to obtain a power of attorney or proxy from their record holder to do so.

 

If you return a completed and properly signed proxy card prior to the meeting, or if you vote by telephone or the Internet prior to the meeting, the persons named as proxies on the proxy card will vote your shares according to your directions. The voting results will be certified by independent Inspectors of Election.

 

If you are a stockholder of record and you sign and return your proxy card, or if you vote by using the telephone or Internet, but you do not specify how you want to vote your shares, the persons named as proxies on the proxy card will vote your shares as follows:

 

FOR the election of directors named in this proxy statement;
FOR ratification of the selection of our independent auditors; and
FOR approval of the compensation of our named executive officers.

 

If any other matters are properly presented at the Annual Meeting for consideration, the persons named as proxies on the proxy card will vote as recommended by the Board of Directors or, if no recommendation is given, in their discretion.

 

 

Effect of Not Instructing Your Broker

 

Routine Matters. If your shares are held in street name and you do not instruct the broker on how to vote your shares, your broker may choose to leave your shares unvoted or to vote your shares on routine

matters. “Proposal 2 — Ratification of Auditors” is the only routine matter on the agenda at this year’s Annual Meeting.

 

Non-Routine Matters. Without instructions from you on how to vote your shares, your broker cannot vote your shares on non-routine matters, including Proposals 1 and 3, resulting in what are known as “broker non-votes.” Broker non-votes will not be considered present or entitled to vote on non-routine matters and will also not be counted for the purpose of determining the number of votes cast on these proposals. Broker non-votes will not affect the outcome of any proposals considered at the Annual Meeting.

 

 

How Withhold Votes and Abstentions

Will be Counted

 

Election of Directors. “Withhold” votes for the election of directors will have no impact on the outcome of the vote. They will not be counted for the purpose of determining the number of votes cast or as votes “for” or “against” a nominee.

 

Other Proposals. Abstentions will be counted:

in determining the total number of shares entitled to vote on a proposal, and
as votes against a proposal

 

 

How To Revoke or Change Your Vote

 

If you are a stockholder of record, there are several ways to revoke or change your vote:

 

Mail a revised proxy card with a later date or a written notice of revocation with a later date to the Corporate Secretary of the Company (the revised proxy card or notice of revocation must be received by close of business on April 25, 2018). Use the following address: Halyard Health, Inc., Attn: Corporate Secretary, 5405 Windward Parkway, Suite 100 South, Alpharetta, GA 30004.
Use the telephone voting procedures or Internet voting website (the revocation or change must be completed by 11:59 p.m. Eastern time on April 25, 2018).
Attend the meeting and vote in person. Please note that attendance at the meeting will not revoke a proxy if you do not actually vote at the meeting.

 

2 2018 Proxy Statement

 

 

Information About Our Annual Meeting

 

If you hold your shares in street name, the above options for changing your vote or revoking your instructions do not apply and you must follow the instructions received from your bank or broker to change your vote or revoke your proxy.

 

 

Votes Required

 

There must be a quorum to conduct business at the Annual Meeting, which is established by having a majority of the outstanding shares of our common stock present in person or represented by proxy. If you vote, your shares will be included in the number of shares to establish the quorum. Abstentions (or “Withhold” votes for the elections of directors) or proxy cards returned without voting instructions and broker non-votes will be counted as present for the purpose of determining whether the quorum requirement is satisfied.

 

Election of Directors. The Company has a “plurality-plus” voting policy for directors in uncontested elections. Under our “plurality-plus” voting policy, if any nominee for director receives a greater number of votes “withheld” than votes “for” such nominee in an uncontested election, he or she will promptly tender his or her resignation. The Governance Committee, without the participation of the director who tendered his or her resignation, will then take action to accept or reject the director’s resignation and submit its recommendation to the full Board of Directors. The full Board of Directors, without the participation of the director who tendered his or her resignation, will accept or reject the resignation within 90 days of the certification of the election results and, if it chooses not to accept the resignation, will promptly disclose its decision in a Form 8-K or similar filing with the SEC. Further details about our “plurality plus” policy are included in our Corporate Governance Policies, which are available in the Investors’ section of our website at www.halyardhealth.com.

 

Other Proposals or Matters. Approval requires the affirmative vote of a majority of shares that are present at the Annual Meeting in person or by proxy and entitled to vote on the proposal.

If you are a stockholder of record and you do not sign and return a proxy card or vote by telephone or the Internet, your shares will not count toward the quorum requirement and will not affect the outcome of any proposal at the Annual Meeting.

 

 

Attending the Annual Meeting

 

If you are a stockholder of record, you or your duly appointed representative may attend the Annual Meeting in person. Returning your proxy card will not affect your right to attend the Annual Meeting and to vote in person. If you do plan to attend, we ask that you inform us electronically, by telephone, or by checking the appropriate box on your proxy form. This will assist us with meeting preparations and help to expedite your admittance.

 

If your shares are not registered in your own name and you would like to attend the meeting, please ask the broker, trust, bank or other nominee that holds your shares to provide you with written proof of your share ownership as of the record date. This will enable you to gain admission to the meeting.

 

If you need directions to the meeting, please contact Stockholder Services by telephone at 678-425-9273 or by e-mail at stockholder.services@hyh.com. Please bring a driver’s license or other photo-identification with you to the meeting to facilitate admission to the meeting.

 

 

Costs of Solicitation

 

The Company will bear all costs of this proxy solicitation, including the cost of preparing, printing and delivering materials, and the out-of-pocket expenses of brokers, fiduciaries and other nominees who forward proxy materials to stockholders. In addition to mail and electronic means, our employees may solicit proxies by telephone or otherwise. Our employees will not receive additional compensation for such solicitations. We have retained D. F. King & Co., Inc., to aid in the solicitation at a cost of approximately $10,000 plus reimbursement of out-of-pocket expenses.

 

  2018 Proxy Statement 3

 

 

Corporate Governance

 

Our governance structure and processes are based on a number of important governance documents including our Code of Conduct, Certificate of Incorporation, Corporate Bylaws, Corporate Governance Policies and our Board Committee Charters. These documents, which are available in the Investor’s section of our website at www.halyardhealth.com, guide the Board and our management in the execution of their responsibilities.

 

The Company believes that there is a direct connection between good corporate governance and long-term, sustained business success, and we believe it is important to uphold sound governance practices. As such, the Board reviews its governance practices and documents on an ongoing basis, and it considers changing regulatory requirements, governance trends, and issues raised by our stockholders. After careful evaluation, we may periodically make governance changes in view of these matters to maintain current good governance practices and promote stockholder value.

 

We believe we are in compliance with all applicable corporate governance requirements of the New York Stock Exchange (“NYSE”), the SEC, the Sarbanes-Oxley Act of 2002 and the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that have become effective as of the date of this proxy statement.

 

 

Board Leadership Structure

 

Prior to June 23, 2017, Robert E. Abernathy served as the Company’s Chairman of the Board (“Chairman”) and Chief Executive Officer (“CEO”), and Ronald Dollens served as the Company’s independent Lead Director. Mr.Abernathy retired as CEO on June 23, 2017, and as Chairman on September 1, 2017. Mr. Dollens assumed the role of Chairman on September 1, 2017, and at that time the Board ceased designating a separate independent Lead Director. The Board believes that this leadership structure provides for dynamic Board leadership while maintaining strong independence and oversight.

 

Consistent with this leadership structure, at least once a quarter our Chairman, who is an independent director, chairs executive sessions of our non-management directors. Members of the Company’s senior management team do not attend these sessions.

 

Under current circumstances, it is the Board’s view that separate Chairman and CEO roles promotes candid discourse and responsible corporate governance. The Board retains the discretion to combine the Chairman and CEO roles, and appoint an independent Lead Director, at any time if it deems that to be in the best interest of our Company and stockholders.

 

Ronald Dollens serves as our independent Chairman. Our Corporate Governance Policies outline the significant roles and responsibilities of the Chairman, which include:

Presiding over meetings of the Board and stockholders and providing perspective to the CEO regarding discussions at these meetings
Chairing executive sessions at which non-management directors meet outside management’s presence, and providing feedback from such sessions to the CEO
Serving as the Chair of the Executive Committee

 

4 2018 Proxy Statement

 

 

Corporate Governance

 

Coordinating the activities of the independent directors and serving as a liaison between the independent directors, as a group, and the CEO
Approving agendas and schedules for Board meetings
Reviewing, approving, and revising materials for distribution to the Board, in connection with Board meetings or otherwise, as appropriate
Leading (with the Chairman of the Governance Committee) the annual Board evaluation
Leading (with the Chairman of the Compensation Committee) the Board’s review and discussion of the CEO’s performance and compensation
Providing feedback to individual directors following their periodic evaluations
Acting as a direct conduit to the Board for stockholders, employees, and others according to the Board’s policies
Assuming such other responsibilities that the Board may designate from time to time.

 

 

Director Independence

 

We believe our independent board helps ensure good corporate governance and strong internal controls.

 

Our Corporate Governance Policies, as adopted by the Board, provide independence standards consistent with the rules and regulations of the SEC and the listing standards of the NYSE. Our independence standards can be found in Section 17 of our Corporate Governance Policies.

 

The Governance Committee of the Board has determined that all directors and nominees, except for Joseph F. Woody, are independent directors and meet the independence standards in our Corporate Governance Policies.

 

 

Board Meetings

 

The Board of Directors met 21 times in 2017. All of the directors attended in excess of 75 percent of the total number of meetings of the Board and the committees on which they served.

 

Although we do not have a formal policy with respect to director attendance at annual meetings, all directors attended the 2017 Annual Meeting, and we expect that all directors, including those standing for election, will be in attendance at the Annual Meeting on April 26, 2018.

 

 

Board Committees

 

In 2017, the standing committees of the Board included the Audit Committee, Compensation Committee, Compliance Committee, Governance Committee, and Executive Committee. In compliance with applicable NYSE corporate governance listing standards, the Board has adopted Charters for all Committees except the Executive Committee.

 

Our Committee Charters are available in the Investors section of our website at www.halyardhealth.com.

 

As set forth in our Corporate Governance Policies, and in the charter of each individual committee, the Board’s committees all have the authority to retain independent advisors and consultants, with all costs paid by the Company.

 

2018 Proxy Statement 5

 

 

Corporate Governance

 

Audit Committee

 

Chairman: Heidi Kunz

Other members: Gary Blackford and Patrick O’Leary

 

The Board has determined that Ms. Kunz and Messrs. Blackford and O’Leary are “audit committee financial experts” under SEC rules and regulations. In addition, all Audit Committee members satisfy the NYSE’s financial literacy requirements and qualify as independent directors under our Corporate Governance Policies.

 

No member of the Audit Committee serves on the audit committees of more than three public companies. Under our Audit Committee Charter and NYSE corporate governance listing standards, if a member were to serve on more than three such committees, the Board would then determine whether this situation impairs the member’s ability to serve effectively on our Audit Committee, and we would post information about this determination on the Investors section of our website at www.halyardhealth.com.

 

The Committee met 6 times in 2017, including once in joint session with the Compliance Committee.

 

The Committee’s principal functions, as specified in its Charter, include:

 

Overseeing:
the quality and integrity of our financial statements
our compliance programs in coordination with our Compliance Committee
our hedging strategies and policies
the independence, qualification, and performance of our independent auditors
the performance of our internal auditors
Selecting and engaging our independent auditors, subject to stockholder ratification
Pre-approving all audit and non-audit services that our independent auditors provide
Reviewing the scope of audits and audit findings, including any comments or recommendations of our independent auditors
Establishing policies for our internal audit programs
Overseeing our risk management program and receiving periodic reports from management on risk assessments, the risk management process, and issues related to the risks of managing our business

 

For additional information about the Audit Committee’s oversight activities with respect to our 2017 financial statements, see “Proposal 2. Ratification of Auditors — Audit Committee Report.”

 

Compensation Committee

 

Chairman: Julie Shimer

Other members: John Byrnes, William Hawkins, and Maria Sainz.

 

Each member of this Committee is an independent director. The Committee met 7 times in 2017.

 

The Committee’s principal functions, as specified in its Charter, include:

 

Establishing and administering the policies governing annual compensation and long-term compensation, including stock option awards, restricted stock awards, and restricted share unit awards, such that the policies are designed to align compensation with our overall business strategy and performance
Setting, after an evaluation of his overall performance, the compensation level of the CEO

 

6 2018 Proxy Statement
 

Corporate Governance

 

Determining, in consultation with the CEO, compensation levels and performance targets for our executive officers
Setting annual targets and certifying awards for corporate performance under our corporate incentive compensation plans
Advising the Board on outside director compensation
Overseeing:
leadership development for senior management and future senior management candidates
a periodic review of our long-term and emergency succession planning for the CEO and other key officer positions, in conjunction with our Board
key organizational effectiveness and engagement policies
Annually reviewing our compensation policies and practices for the purpose of mitigating risks arising from these policies and practices that could reasonably have a material adverse effect on the Company

 

Roles of the Committee and the CEO in Compensation Decisions

Each year, the Committee reviews and sets the compensation of our executive officers, including our CEO.

The Committee’s Charter does not permit the Committee to delegate to anyone the authority to establish any compensation policies or programs for the executive officers. With respect to officers that are not executive officers (our “non-executive officers”), our CEO has the authority to establish compensation programs and, subject to certain limits, to approve equity grants. However, only the Committee may make equity grants to our executive officers.

 

Our CEO makes a recommendation to the Committee each year on the appropriate target annual compensation for each of the other executive officers. The Committee makes the final determination of the target annual compensation for each executive officer, including our CEO. While our CEO and Chief Human Resources Officer typically each attend Committee meetings, none of the other executive officers is present during the portion of the Committee meetings when compensation for executive officers is set. In addition, neither our CEO nor our Chief Human Resources Officer is present during the portion of the Committee meetings when their compensation is set.

 

For additional information on the Committee’s processes and procedures for determining executive compensation, and for a detailed discussion of our compensation policies, see “Compensation Discussion and Analysis.”

 

Use of Compensation Consultants

The Committee’s Charter authorizes the Committee to retain advisors, including compensation consultants, to assist it in its work. The Committee believes that compensation consultants can provide important market information and perspectives that can help it determine compensation programs that best meet the objectives of our compensation policies. In selecting a consultant, the Committee evaluates the independence of the firm as a whole and of the individual advisors who will be working with the Committee.

 

The Committee retains an independent executive compensation consultant who, according to the Committee’s written policy, provides services solely to the Committee and not to the Company. The Committee’s consultant has no other business relationship with the Company and receives no payments from the Company other than fees for services to the Committee. The consultant reports directly to the Committee, and the Committee may replace the consultant or hire additional consultants at any time. The Committee has selected Meridian Compensation Partners, LLC (“Meridian”) as its independent consultant.

 

In 2017, the scope of activities for the Committee’s independent compensation consultant included:

Conducting a review of the executive compensation peer group
Reviewing and commenting on the Company’s executive compensation programs
Conducting a risk assessment of the Company’s executive compensation programs
Attending Committee meetings
Periodically consulting with the Chairman of the Committee

 

2018 Proxy Statement 7
 

Corporate Governance

 

Committee Assessment of Consultant Conflicts of Interest. The Committee has reviewed whether the work provided by Meridian raises any conflict of interest. Factors considered by the Committee include: (1) whether other services are provided to the Company by the consultant; (2) what percentage of the consultant’s total revenue is made up of fees from the Company; (3) policies or procedures of the consultant that are designed to prevent a conflict of interest; (4) any business or personal relationships between individual consultants involved in the engagement and Committee members; (5) any shares of the Company stock owned by individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Based on its review, the Committee does not believe that the compensation consultants that performed services to the Committee in 2017 have a conflict of interest with respect to the work performed for the Committee.

 

Committee Report

The Committee has reviewed the “Compensation Discussion and Analysis” section of this proxy statement and has recommended that it be included in this proxy statement. The Committee’s report is located at “Compensation Discussion and Analysis — Compensation Committee Report.”

 

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee during 2017 were Dr. Shimer, Messrs. Byrnes and Hawkins, and Ms. Sainz. None of the members of the Compensation Committee was, during 2017, a current or former officer or employee of the Company. Also, none of the members of the Compensation Committee had any relationship with the Company in 2017 requiring disclosure under Item 404 of Regulation S-K. For information about the Company’s policies on transactions with related parties, see “Transactions with Related Parties” later in this proxy statement. During 2017, none of our executive officers served as a member of the board of directors or compensation committee of any entity that had one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

 

Compliance Committee

 

Chairman: William Hawkins

Other Members: John Byrnes, Maria Sainz, and Julie Shimer

 

Each member of this Committee is an independent director. The Committee met 5 times in 2017, including once in joint session with the Audit Committee.

 

The Committee’s principal functions, as specified in its Charter, include the following:

Overseeing the Company’s compliance program in the areas of Code of Conduct, Conflicts of Interest, Consumer Protection, Ethics, Environment, Government Relations, Health and Safety, Customs and Export Controls, False Claims, Foreign Corrupt Practices Act and similar anti-bribery laws, Fraud and Abuse Laws including Anti-Kickback, Information Systems Security, Intellectual Property, International Distributors, Labor & Employment, Physical Security, Quality, Recalls, Regulatory, including FDA, Safety, Sunshine Act, and Transportation
Overseeing the Company’s sustainability, corporate social responsibility, and corporate citizenship matters
Monitoring the Company’s efforts to implement programs, policies, and procedures relating to compliance matters
Overseeing the investigation of any significant instances of noncompliance with laws or the Company’s compliance program, policies, or procedures, other than any instances involving financial noncompliance
Reviewing the Company’s compliance risk assessment plan
Identifying and investigating emerging compliance issues and trends which may affect the Company

 

8 2018 Proxy Statement
 

Corporate Governance

 

Governance Committee

 

Chairman: Gary D. Blackford

Other Members: Heidi Kunz and Patrick O’Leary

 

Each member of this Committee is an independent director. The Committee met 5 times in 2017.

 

The Committee’s principal functions, as specified in its Charter, include the following:

Overseeing the screening and recruitment of prospective Board members and making recommendations to the Board of Directors regarding specific director nominees, as well as overseeing the process for Board nominations
Overseeing corporate governance matters, including developing and recommending to the Board changes to our Corporate Governance Policies
Advising the Board on:
Board organization, membership, function, and performance
committee structure and membership
policies and positions regarding significant stockholder relations issues
Reviewing director independence standards and making recommendations to the Board with respect to the determination of director independence
Monitoring and recommending improvements to the Board’s practices and procedures
Reviewing stockholder proposals and considering how to respond to them

 

The Committee, in accordance with its Charter and our Certificate of Incorporation, has established criteria and processes for director nominations, including those proposed by stockholders. Those criteria and processes are described in “Proposal 1. Election of Directors — Process and Criteria for Nominating Directors” and “Other Information — Stockholder Nominations for Board of Directors.”

 

Executive Committee

 

Chairman: Ron Dollens (Chairman of the Board)

Other Members: Heidi Kunz, William Hawkins, Julie Shimer, and Joseph Woody

 

The Committee did not meet in 2017.

 

The Committee’s principal function is to exercise, when necessary between Board meetings, the Board’s powers to direct our business and affairs. Accordingly, the Committee has no regularly scheduled meetings and it is expected that, each year, the Committee will meet infrequently or not at all.

 

 

Communicating with Directors

 

The Board has established processes by which stockholders and other interested parties may communicate with the Board, as well as with the Audit Committee and Compliance Committee. Those processes can be found in the Investors section of our website at www.halyardhealth.com.

 

2018 Proxy Statement 9
 

Corporate Governance

 

 

Other Corporate Governance Policies and Practices

 

Corporate Governance Policies. The Board has adopted Corporate Governance Policies. These policies guide the Company and the Board on matters of corporate governance, including: director responsibilities, Board committees and their charters, director independence, director compensation and performance assessments, director orientation and education, director access to management, Board access to outside financial, business, and legal advisors, and management development and succession planning. To see these policies, go to the Investors section of our website at www.halyardhealth.com.

 

Code of Conduct. The Company has a Code of Conduct that applies to all of our directors, executive officers and employees, including our CEO, Chief Financial Officer, and Vice President and Controller. It is available in the Investors section of our website at www.halyardhealth.com. Any amendments to or waivers of our Code of Conduct applicable to our CEO, Chief Financial Officer, or Vice President and Controller will also be posted at that location.

 

Board and Management Roles in Risk Oversight. The Board is responsible for providing risk oversight with respect to our operations. In connection with this oversight, the Board particularly focuses on our strategic and operational risks, as well as related risk mitigation. In addition, the Board reviews and oversees management’s response to key risks facing the Company.

 

The Board’s committees review particular risk areas to assist the Board in its overall risk oversight of the Company:

The Audit Committee monitors risks relating to such matters as our internal controls, financial statement integrity and fraud risks, and related risk mitigation. In connection with this oversight, the Audit Committee receives regular reports from management on risk assessments, the risk management process, and issues related to the risks of managing our business. The Audit Committee also receives an annual enterprise risk management update, which discusses our key financial, strategic, operational and compliance risks.
The Compensation Committee reviews the risk profile of our compensation policies and practices. This process includes a review of an assessment of our compensation programs, as described in “Compensation Discussion and Analysis — Analysis of Compensation-Related Risks.”
The Compliance Committee monitors risks relating to certain compliance matters, such as those described in the section “Compliance Committee,” and recommends appropriate actions in response to those risks.
The Governance Committee monitors risks relating to governance matters and recommends appropriate actions in response to those risks.

 

Complementing the Board’s overall risk oversight, our senior executive team identifies and monitors key enterprise-wide and business unit risks, providing the basis for the Board’s risk review and oversight process. Our senior management team is supported by management members from core business units and from our finance, treasury, information technology, global risk management, compliance and legal functions. Management identifies significant risks for review and updates our policies for risk management in areas such as hedging, foreign currency, and country risks, product liability, property and casualty risks, and supplier and customer risks. The Board believes the allocation of risk management responsibilities described above supplements the Board’s leadership structure by allocating risk areas to an appropriate committee for oversight, allows for an orderly escalation of issues as necessary, and helps the Board satisfy its risk oversight responsibilities.

 

10 2018 Proxy Statement
 

Corporate Governance

 

Whistleblower Procedures. The Audit Committee has established procedures for receiving, recording and addressing any complaints we receive regarding accounting, internal accounting controls, or auditing matters, and for the confidential and anonymous submission, by our employees or others, of any concerns about our accounting or auditing practices. The Compliance Committee has adopted similar procedures for receiving, recording, and addressing any complaints we receive regarding compliance matters other than those addressed by the Audit Committee. The Audit Committee’s and Compliance Committee’s procedures are available in the Investor’s section of our website at www.halyardhealth.com. We also maintain a toll-free Code of Conduct telephone line and a website, each allowing our employees and others to voice their concerns anonymously.

 

Management Succession Planning. In conjunction with the Board, the Compensation Committee is responsible for periodically reviewing the long-term management development plans and succession plans for the CEO and other key officers, as well as the emergency succession plan for the CEO and other key officers if any of these officers unexpectedly becomes unable to perform his or her duties.

 

Disclosure Committee. We have established a Disclosure Committee to assist in fulfilling our obligations to maintain disclosure controls and procedures and to coordinate and oversee the process of preparing our periodic securities filings with the SEC. This committee is composed of members of management and is chaired by our Vice President and Controller.

 

No Executive Loans. We do not extend loans to our executive officers or directors and therefore do not have any such loans outstanding.

 

Charitable Contributions. The Governance Committee has adopted guidelines for the review and approval of charitable contributions by the Company to organizations or entities with which a director or an executive officer may be affiliated. We will disclose in the Investors section of our website at www.halyardhealth.com any contributions made by us to a tax-exempt organization under the following circumstances:

An independent director serves as an executive officer of the tax-exempt organization; and
If within the preceding three years, contributions in any single year from the Company to the organization exceeded the greater of $1 million or 2 percent of the tax-exempt organization’s consolidated gross revenues.

 

2018 Proxy Statement 11
 

Proposal 1.

Election of Directors

 

Our Board is divided into three classes, as required by our Certificate of Incorporation, with one class of directors elected each year for a three-year term. As of the date of this proxy statement, the Board consists of nine directors. Three of the directors have terms that expire at this year’s Annual Meeting (Class of 2018), three have terms that expire at next year’s Annual Meeting (Class of 2019), and three have terms that expire at the 2020 Annual Meeting (Class of 2020).

 

The three nominees standing for election at the Annual Meeting are being nominated to serve for a term to expire at the 2021 Annual Meeting of Stockholders (Class of 2021), and until their successors have been duly elected and qualified. All nominees have advised us that they will serve if elected; however, should any nominee become unable to serve, the Board may reduce the number of directors to be elected or select a substitute nominee. If the Board selects a substitute nominee, the shares represented by valid proxies will be voted for the substitute nominee, other than shares voted “Withhold” with respect to the original nominee.

 

Given the independent status of the nominees, if all nominees are elected at the Annual Meeting, eight of the nine directors on our Board will be independent directors.

 

 

Process and Criteria for Nominating Directors

 

The Board is responsible for approving candidates for Board membership. The Board has delegated the screening and recruitment process to the Governance Committee, in consultation with the Chairman and CEO. The Committee therefore recommends to the Board any new appointments and nominees for election as directors at our annual meeting of stockholders. It also recommends nominees to fill any vacancies. As provided in our Certificate of Incorporation, the Board may elect a new director when a vacancy occurs between annual meetings of stockholders.

 

The Committee may receive recommendations for Board candidates from various sources, including our directors, management, and stockholders. Stockholders may submit recommendations for Board candidates to the Chairman of the Governance Committee at Halyard Health, Inc., c/o Corporate Secretary, 5405 Windward Parkway, Suite 100 South, Alpharetta, GA 30004. Board candidates recommended by stockholders are evaluated using the same criteria as candidates recommended by other sources. For details on this process, see “Other Information — Stockholder Nominations for Board of Directors.” In addition, the Governance Committee may periodically retain a search firm to assist it in identifying and recruiting director candidates meeting the criteria specified by the Committee.

 

The Committee believes that the criteria for director nominees should foster effective corporate governance, support our strategies and businesses, take diversity into account, and ensure that our directors, as a group, have an overall mix of the attributes needed for an effective Board. The criteria should also support the successful recruitment of qualified candidates.

 

Qualified candidates for director are those who, in the judgment of the Committee, possess all of the personal attributes and a sufficient mix of the experience attributes listed below to ensure effective service on the Board.

 

12 2018 Proxy Statement
 

Proposal 1. Election of Directors

 

PERSONAL ATTRIBUTES

 

Leadership

Lead in personal and professional lives.

 

Ethical Character

Possess high standards for ethical behavior.

 

Collaborative

Actively participate in Board and committee matters.

Independence

Independent of management and Company (for non-management directors only).

 

Ability to communicate

Possess good interpersonal skills.

 

Effectiveness

Bring a proactive and solution-oriented approach.


 

EXPERIENCE ATTRIBUTES

 

         
  ATTRIBUTE FACTORS THAT MAY BE CONSIDERED  
         
  Financial acumen Satisfies the financial literacy requirements  
  Has good knowledge of business   of the NYSE  
  finance and financial statements Qualifies as an audit committee financial expert under the rules and regulations of the SEC  
    Has an accounting, finance or banking background  
         
         
  General business experience Has leadership experience as a chief or senior executive officer  
  Possesses experience that will aid in Has experience setting compensation  
  judgments concerning business issues      
         
         
  Industry knowledge
Possesses knowledge about
Has substantial knowledge of the healthcare industry, including with respect to caregiving, cost reimbursement or regulatory environment  
  our industries Has governance/public company board experience  
         
         
  Diversity of background and Brings a diverse viewpoint that is representative of our customer,  
  viewpoint   consumer, employee, and stockholder base  
  Brings to the Board an appropriate Provides a different perspective (stemming, for example, from an  
  level of diversity   academic background or experience from outside the healthcare  
      industries)  
         
         
  Special business experience Has international experience  
  Possesses global management Has a track record of successful innovation  
  experience and experience with Has supply chain management expertise  
  healthcare supplies and medical      
  devices      
         
         

 

2018 Proxy Statement 13
 

Proposal 1. Election of Directors

 

Committee Review of Attributes of Current Directors

 

The Governance Committee has reviewed the background of each of our current directors and their service on the Board in light of the personal and experience attributes described above. The Committee has determined that each director possesses all of the personal attributes as well as a sufficient mix of the experience attributes.

 

For details about each director’s specific experience attributes, see “The Nominees” and “Directors Continuing in Office” below.

 

Diversity of Directors

 

As noted above, the Governance Committee believes that diversity of backgrounds and viewpoints is a key attribute for directors. As a result, the Committee seeks to have a diverse Board that is representative of our customer, product user, employee and stockholder base. While the Committee carefully considers this diversity when considering nominees for director, the Committee has not established a formal policy regarding diversity in identifying director nominees.

 

The Nominees

 

The following three individuals are nominated for election to the Board for a three-year term expiring at the 2021 Annual Meeting of Stockholders (Class of 2021):

 

 

 

William A. Hawkins

 

 

William A. Hawkins, age 63, was elected to our Board of Directors in December 2015. Mr. Hawkins is the Chairman of our Compliance Committee. Mr. Hawkins serves as a Senior Advisor to EW Healthcare Partners. He also serves as the Lead Director at Immucor, Inc., a leading provider of transfusion and transplantation diagnostic products worldwide. He served as President and Chief Executive Officer of Immucor from October 2011 to July 2015. From 2008 to 2011, he served as Chairman and Chief Executive Officer of Medtronic, Inc., a global leader in medical technology. He served as President and Chief Executive Officer of Medtronic, Inc. from 2007 to 2008, President and Chief Operating Officer of Medtronic, Inc. from 2004 to 2007, and Senior Vice President and President, Vascular of Medtronic, Inc. from 2001 to 2004. From 1998 to 2001 Mr. Hawkins served as President and Chief Executive Officer of Novoste Corporation, a medical equipment company. Prior thereto, Mr. Hawkins served in a variety of senior roles at American Home Products, a consumer products company, Johnson & Johnson, a healthcare company, Guidant Corporation, a medical products company, and Eli Lilly and Company, a global pharmaceutical company. Mr. Hawkins also serves as Chairman of the Board of KeraNetics, LLC, and Bioventus, LLC, and as a director of Trice Medical, Inc., and Baebies, Inc., all of which are medical products companies. Mr. Hawkins has been a member of the Duke University Board of Trustees since 2011. Mr. Hawkins was selected to serve as a member of our Board of Directors due to his leadership experience as a chief executive officer, knowledge of, and experience in, the healthcare industry, international experience and governance and public company board experience.

     

 

 

Gary D. Blackford

 

Gary D. Blackford, age 60, was elected to our Board in October 2014. Mr. Blackford is the Chairman of our Governance Committee. From 2002 until February 2015, Mr. Blackford was the Chairman of the Board and Chief Executive Officer of Universal Hospital Services, Inc. (“UHS”), a leading, nationwide provider of medical technology outsourcing and services to the health care industry. Mr. Blackford was the Chief Executive Officer of Curative Health Services, Inc., a specialty pharmacy and health services company, from 2001 to 2002. He was also the Chief Executive Officer of ShopforSchool, Inc., an online retailer, from 1999 to 2001. Mr. Blackford has been a director of Wright Medical Group, N.V. (WMGI), since 2008, ReShape Lifesciences, Inc. (RSLS), since 2016, PipelineRX, Inc. (private), since 2016, and Children’s Hospitals and Clinics of Minnesota since 2017. Mr. Blackford has been selected to serve as a member of our Board of Directors

     
14 2018 Proxy Statement
 

Proposal 1. Election of Directors

 

   

due to his executive leadership experience as a chief executive officer, financial literacy and experience in finance and accounting, international experience, and governance and public company board experience.

     

 

 

Patrick J. O’Leary

 

 

Patrick J. O’Leary, age 60, was elected to our Board in October 2014. Mr. O’Leary served as Executive Vice President and Chief Financial Officer of SPX Corporation, a global industrial and technological services and products company, from December 2004 until August 2012, when he retired. Prior to that time, he served as Chief Financial Officer and Treasurer of SPX Corporation from October 1996 to December 2004. Mr. O’Leary has been a director of PulteGroup, Inc. (NYSE: PHM), since 2005 and a director and Chairman of SPX Corporation (NYSE: SPXC), since 2015. Mr. O’Leary has been selected to serve as a member of our Board of Directors due to his executive leadership experience as a chief financial officer, financial literacy and experience in finance and accounting, international experience, and governance and public company board experience.

 

 

The Board of Directors unanimously recommends a vote FOR the election of each of the three nominees for director named above.

 

  2018 Proxy Statement 15
 

Proposal 1. Election of Directors

 

Directors Continuing in Office

 

The following members of the Board of Directors are continuing in office and have terms expiring as indicated below:

 

Term Expiring at the 2020 Annual Meeting (Class of 2020):

 

 

 

Joseph F. Woody

 

 

Joseph F. Woody, age 52, was appointed as our CEO and elected as a member of our Board of Directors as of June 26, 2017. Mr. Woody has more than 20 years of experience in the healthcare sector. Prior to joining the Company, Mr. Woody served as Director, President and Chief Executive Officer of Acelity Holdings, Inc. (“Acelity”), a global advanced wound care and regenerative medicine company, from August 2015 until April 2017. Prior to that, Mr. Woody served as President and Chief Executive Officer for the combined organization of Kinetic Concepts, Inc. (“ KCI”), LifeCell Corporation (“LifeCell”), and Systagenix Wound Management B.V., which became Acelity, from September 2013 until August 2015. Prior to that, Mr. Woody served in leadership roles at KCI and LifeCell from November 2011 until September 2013, having been promoted to President and Chief Executive Officer of KCI in January 2012 and interim Chief Executive Officer of LifeCell in April 2013. Previously, Mr. Woody served as global president of Vascular Therapies for Covidien plc., and global president for Smith & Nephew Advanced Wound Management, and he held other leadership positions at Alliance Imaging, Inc., Acuson and GE Medical Systems. Mr. Woody was selected to serve as a member of the Board of Directors due to his leadership experience as our CEO, and knowledge of, and experience in, the healthcare industry, including significant acquisition and integration experience, international experience, and company board experience.

     

 

 

Ronald W. Dollens

 

Ronald W. Dollens, age 71, was elected to our Board in October 2014, and as Chairman of the Board in September 2017. As Chairman of the Board, Mr. Dollens serves as the Chairman of the Executive Committee. Mr. Dollens retired as the President and Chief Executive Officer of Guidant Corporation, a global producer of cardiovascular therapeutic devices and related products, in 2005, where he had served since its spin-off from Eli Lilly & Company in 1994. Prior to that time, he held various management positions at Eli Lilly & Company from 1972 until 1994. From 2000 until 2011, he served on the Board of Directors of Kinetic Concepts, Inc., a publicly-traded global medical technology company devoted to the discovery, development, manufacturing and marketing of innovative, high-technology therapies and products, and served as Chairman from 2005 until 2011. Mr. Dollens has also served on the Board of Directors of Abiomed, Inc. from 2006 until October 2010, and Beckman Coulter, Inc. from 1999 until April 2005. Mr. Dollens has been selected to serve as the Chairman of our Board of Directors due to his leadership experience as a chief executive officer, knowledge of, and experience in, the healthcare industry, international experience and governance and public company board experience.

     

 

 

Heidi Kunz

 

Heidi Kunz, age 63, was elected to our Board in October 2014. Ms. Kunz is the Chairperson of the Audit Committee. Ms. Kunz retired as the Executive Vice President and Chief Financial Officer of Blue Shield of California, a not-for-profit health plan provider, where she served from 2003 to 2012. Prior to that time, she served as the Executive Vice President and Chief Financial Officer of Gap, Inc., a multinational clothing and accessories retailer, from 1999 until 2003. Ms. Kunz also serves as a director of Agilent Technologies, Inc., a public research development and manufacturing company, and as a director of Financial Engines, Inc., an investment advisement company. Ms. Kunz has been selected to serve as a member of our Board of Directors due to her executive leadership experience as a chief financial officer, financial literacy and experience in finance and accounting, knowledge of, and experience in, the healthcare industry, international experience and governance and public company board experience.

 

16 2018 Proxy Statement
 

Proposal 1. Election of Directors

 

Term Expiring at the 2019 Annual Meeting (Class of 2019):

 

 

 

John P. Byrnes

 

John P. Byrnes, age 59, was elected to our Board in October 2014. Mr. Byrnes served as the Chairman of the Board of Lincare Holdings, Inc. (“Lincare”), a provider of home respiratory care, infusion therapy and medical equipment, from March 2000 through March 2015 and as a director of Lincare from May 1997 to August 2015. Mr. Byrnes was the Chief Executive Officer of Lincare from 1997 until March 2015 and served as Lincare’s President from June 1996 until April 2003. Prior to becoming Lincare’s President, Mr. Byrnes served in a number of capacities at Lincare over a ten-year period, including serving as Chief Operating Officer throughout 1996. Mr. Byrnes was a director of Kinetic Concepts, Inc., a publicly-traded global medical technology company devoted to the discovery, development, manufacturing and marketing of innovative, high-technology therapies and products, from January 2003 until February 2011 and of U.S. Renal Care, Inc., a dialysis provider, from August 2005 until 2012. Mr. Byrnes has served on the Board of Tenet Healthcare Corporation since 2016. Mr. Byrnes has been selected to serve as a member of our Board of Directors due to his leadership experience as a chief executive officer, knowledge of, and experience in, the healthcare industry, international experience and governance and public company board experience.

     

 

 

Maria Sainz

 

 

Maria Sainz, age 52, was elected to our Board in February 2015. Ms. Sainz has served as the President and Chief Executive Officer of Cardiokinetix, a medical device company pioneering a catheter-based treatment for heart failure, from May 2012 through June 2017. She was the President and Chief Executive Officer of Concentric Medical, Inc., a developer of minimally invasive products for the treatment of acute ischemic stroke, from April 2008 until May 2012. In October 2011, Concentric Medical was acquired by Stryker Corporation, a medical technology company, where she was named General Manager of the business unit of Stryker Neurovascular. From 2006 to 2008, Ms. Sainz led integration activities following the acquisition of Guidant Corporation by Boston Scientific. From February 2003 through July 2006, Ms. Sainz served as President of the Cardiac Surgery division of Guidant Corporation. From January 2001 through February 2003, Ms. Sainz served as Vice President, Global Marketing for the Vascular Intervention division of Guidant Corporation. From late 1998 through early 2001, Ms. Sainz served as Vice President of the Intermedics Cardiac Rhythm Management business of Guidant Corporation in Europe. Ms. Sainz also serves as a director of Orthofix International, N.V, a global medical device company, MRI Interventions, Inc., a medical device company, and Levita Magnetics, a private medical start up. Ms. Sainz has been selected to serve as a member of our Board of Directors due to her leadership experience as a chief executive officer, knowledge of, and experience in, the healthcare industry, international experience, and public company board experience.

     

 

 

Dr. Julie Shimer

 

Dr. Julie Shimer, age 65, was elected to our Board in October 2014. Dr. Shimer is the Chairman of the Compensation Committee. She is currently a private investor and has 30 years of product development experience, including many years with major communications companies. From March 2007 to April 2012 she served as Chief Executive Officer of Welch Allyn, Inc., a manufacturer of frontline medical products and solutions, having served on the board of directors beginning in July 2002. Previously, Dr. Shimer was President, Chief Executive Officer, and a member of the board of directors of Vocera Communications, Inc., a provider of wireless communications systems. She also has served as general manager at 3Com Corporation and Motorola and has been a product development leader at Motorola and AT&T Bell Laboratories. She has served as the Chairwoman of Empire State Development Corp., the State of New York’s economic development organization, and as an advisor to two private companies, Kitchology, a mobile platform empowering families dealing with special diets through the power of technology and community, and CPLANE Networks, a leader in end-to-end data center and wide area network service orchestration that enables software-defined networking (SDN) and network function virtualization (NFV) services to be launched and managed in a single environment. She also serves on the boards of directors of three nonprofit organizations. Dr. Shimer serves as a director of Netgear, Inc., a provider of home and small business network solutions, and Windstream, a leading telecommunications and cloud services provider. Dr. Shimer has been selected to serve as a member of our Board of Directors due to her leadership experience as a chief executive officer, knowledge of, and experience in, the healthcare industry, international experience and governance and public company board experience.

     
  2018 Proxy Statement 17
 

Proposal 1. Election of Directors

 

Director Compensation

 

Directors who are not officers or employees of the Company or any of our subsidiaries, affiliates or equity companies are Outside Directors for compensation purposes and are compensated for their services under our Outside Directors’ Compensation Plan. All independent directors currently on our Board are Outside Directors and are compensated under this Plan.

Our objectives for Outside Director compensation are:

to attract qualified candidates for Board service
to remain competitive with the median compensation paid to Outside Directors of comparable companies
to keep pace with changes in practices in director compensation
to reinforce our practice of encouraging stock ownership by our directors

 

In 2015, our Outside Director compensation was established based on the median non-management director compensation for our peers.

 

The table below shows how we structure Outside Director compensation:

 

Board Members

Cash retainer: $70,000 annually, paid in four quarterly payments at the beginning of each quarter.

Restricted share units: Annual grant with a value of $140,000, awarded and valued on the first business day of the year.

 

Chairman of the Board

Additional cash compensation of $115,000, paid in four quarterly payments at the beginning of each quarter.

 

Lead Director

Additional cash compensation of $20,000, paid in four quarterly payments at the beginning of each quarter.

 

Committee Chairs

Additional cash compensation of $15,000, paid in four quarterly payments at the beginning of each quarter.

 

New Outside Directors receive a pro-rated annual retainer and grant of restricted share units based on the month when they join the Board.

 

We also reimburse Outside Directors for expenses incurred in attending Board or committee meetings.

 

Restricted share units are not shares of our common stock. Rather, restricted share units represent the right to receive a pre-determined number of shares of our common stock within 90 days following a “restricted period” that begins on the date of grant and expires on the date the Outside Director retires from or otherwise terminates service on the Board. In this way, they align the director’s interests with the interests of our stockholders. Outside Directors may not dispose of the units or use them in a pledge or similar transaction. Outside Directors also receive additional restricted share units equivalent in value to the dividends, if any, that would have been paid to them if the restricted share units granted to them were shares of our common stock. The Company does not currently pay dividends on its common stock.

 

18 2018 Proxy Statement
 

Proposal 1. Election of Directors

 

 

 

2017 Outside Director Compensation

 

The following table shows the compensation paid to each Outside Director for his or her service in 2017:

 

NAME FEES EARNED OR
PAID IN CASH ($)
STOCK
AWARDS ($) (1)(2)
TOTAL ($)
Gary D. Blackford 85,000 140,000 225,000
John P. Byrnes 70,000 140,000 210,000
Ronald W. Dollens 145,417(3) 140,000 285,417
William A. Hawkins, III 85,000 140,000 225,000
Heidi Kunz 85,000 140,000 225,000
Patrick O’Leary 70,000 140,000 210,000
Maria Sainz 70,000 140,000 210,000
Dr. Julie Shimer 85,000 140,000 225,000

 

(1) Amounts shown reflect the grant date fair value of those grants, determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 — Stock Compensation (“ASC Topic 718”) for restricted share unit awards granted pursuant to our Outside Directors’ Compensation Plan. See Note 12 to our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for 2017 for the assumptions used in valuing these restricted share units.
(2) Each director received 3,749 restricted share units on January 3, 2017.
(3) Mr. Dollens assumed the role of Chairman of the Board effective September 1, 2017. Prior to that date, his compensation was as the Lead Director, and after that date his compensation was as Chairman of the Board, as described above.

 

Other than the cash retainer and grants of restricted share units previously described, no Outside Director received any compensation or perquisites from the Company for services as a director in 2017.

 

A director who is not an Outside Director does not receive any compensation for services as a member of the Board or any committee, but is reimbursed for expenses incurred as a result of the services.

 

2018 Proxy Statement 19
 

Proposal 2.

Ratification of Auditors

 

The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention, and oversight of our independent auditors. The Audit Committee is also responsible for overseeing the negotiation of the audit fees associated with retaining our independent auditors. To assure continuing auditor independence, the Audit Committee periodically considers whether a different audit firm should perform our independent audit work. Also, in connection with the mandated rotation of the independent auditor’s lead engagement partner, the Audit Committee and its chairman are directly involved in the selection of the lead engagement partner.

 

For 2017, the Audit Committee has selected Deloitte & Touche LLP (along with its member firms and affiliates, “Deloitte”) as the independent registered public accounting firm to audit our financial statements. In engaging Deloitte for 2018, the Audit Committee utilized a review and selection process that included the following:

 

a review of management’s assessment of the services Deloitte provided in 2017
discussions, in executive session, with the Chief Financial Officer and the Vice President and Controller regarding their viewpoints on the selection of the 2018 independent auditors and on Deloitte’s performance
discussions, in executive session, with representatives of Deloitte about their possible engagement
Audit Committee discussions, in executive session, about the selection of the 2018 independent auditors
a review and approval of Deloitte’s proposed estimated fees for 2018
a review and assessment of Deloitte’s independence

 

The Audit Committee and the Board believe that the continued retention of Deloitte to serve as our independent auditor is in the best interests of the Company and its stockholders, and they recommend that stockholders ratify this selection.

 

Representatives of Deloitte are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

 

Stockholders are not required to ratify the appointment of Deloitte as our independent auditor. However, we are submitting the ratification to our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment of Deloitte, or even if our stockholders do ratify the appointment of Deloitte, the Audit Committee in its discretion may select a different independent auditor at any time during the year if it determines that such change would be in the best interest of the Company and our stockholders.

 

The Board of Directors unanimously recommends a vote FOR ratification of Deloitte’s selection as the Company’s auditor for 2018.

 

20 2018 Proxy Statement
 

Proposal 2. Ratification of Auditors

 

 

Principal Accounting Firm Fees

 

Our aggregate fees to Deloitte (excluding value added taxes) with respect to the fiscal years ended December 31, 2017 and 2016, were as follows:

 

NAME 2017 ($) 2016 ($)
Audit Fees (1) 3,512,000 3,894,391
Audit-Related Fees (2) 1,830,000
Tax Fees (3) 15,000 360,150
All Other Fees 245,000

 

(1) These amounts represent fees billed or expected to be billed for professional services rendered by Deloitte for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2017 and December 31, 2016, reviews of the financial statements included in the Company’s Form 10-Qs, and other services that are normally provided by the independent registered public accounting firm in connection with statutory or regulatory filings or engagements for each of those fiscal years, including: fees for consolidated financial audits, statutory audits, comfort letters, attest services, consents, assistance with and review of SEC filings and other related matters.
(2) These amounts represent aggregate fees billed or expected to be billed by Deloitte for assurance and related services reasonably related to the performance of the audit or review of our financial statements for the fiscal years ended December 31, 2017 and December 31, 2016, which are not included in the audit fees listed above. The audit-related fees in 2017 were associated with Deloitte’s work on carve-out financials for the company’s S&IP business as part of the sale of that business to Owens & Minor, Inc.
(3) These amounts represent Deloitte’s aggregate fees for tax compliance, tax advice and tax planning for 2017 and 2016.

 

Audit Committee Approval of Audit and Non-Audit Services

 

Using the following procedures, the Audit Committee pre-approves all audit and non-audit services provided by Deloitte to the Company:

 

Before the first face-to-face Audit Committee meeting of the year, our Vice President and Controller prepares a detailed memorandum regarding non-audit services to be provided by Deloitte during the year. This memorandum includes the services to be provided, the estimated cost of these services, reasons why it is appropriate to have Deloitte provide these services, and reasons why the requested service is not inconsistent with applicable auditor independence rules;
At the first face-to-face Audit Committee meeting each year, our Vice President and Controller presents a proposal, including fees, to engage Deloitte for audit and non-audit services; and
Before each subsequent meeting of the Audit Committee, our Vice President and Controller prepares an additional memorandum that includes updated information regarding the approved services and highlights any new audit and non-audit services to be provided by Deloitte. All new non-audit services to be provided are described in individual requests for services.

 

The Audit Committee reviews the requests presented in these proposals and memoranda and approves all services it finds acceptable.

 

To ensure prompt handling of unexpected matters, the Audit Committee has delegated to the Chairperson of the Audit Committee the authority to amend or modify the list of audit and non-audit services and fees between meetings, as long as the additional or amended services do not affect Deloitte’s independence under applicable rules. Any actions taken under this authority are reported to the Audit Committee at its next meeting.

 

All Deloitte services and fees in 2017 were pre-approved by the Audit Committee or the Audit Committee Chairperson.

 

2018 Proxy Statement 21
 
 

Proposal 2. Ratification of Auditors

 

Audit Committee Report

In accordance with its Charter adopted by the Board, the Audit Committee assists the Board in overseeing the quality and integrity of the Company’s accounting, auditing, and financial reporting practices.

 

In discharging its oversight responsibility for the audit process, the Audit Committee obtained from the independent registered public accounting firm (the “auditors”) a formal written statement describing all relationships between the auditors and the Company that might bear on the auditors’ independence, as required by Public Company Accounting Oversight Board (“PCAOB”) Rule 3526, Communication with Audit Committees Concerning Independence, discussed with the auditors any relationships that may impact their objectivity and independence, and satisfied itself as to the auditors’ independence. The Audit Committee also discussed with management, the internal auditors, and the auditors, the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget, and staffing. The Audit Committee reviewed with both the auditors and the internal auditors their audit plans, audit scope, and identification of audit risks.

 

The Audit Committee discussed and reviewed with the auditors all communications required by the PCAOB’s auditing standards, including those required by PCAOB AS 16, “Communication with Audit Committees.” Also, with and without management present, it discussed and reviewed the results of the auditors’ examination of our financial statements.

 

Management is responsible for preparing the Company’s financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and for establishing and maintaining the Company’s internal control over financial reporting. The auditors have the responsibility for performing an independent audit of the Company’s financial statements, and expressing opinions on the conformity of the Company’s financial statements with GAAP. The Audit Committee discussed and reviewed the Company’s audited financial statements as of and for the fiscal year ending December 31, 2017, with management and the auditors.

 

Based on the above-mentioned review and discussions with management and the auditors, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for filing with the SEC. The Audit Committee also has selected and recommended to the Company’s stockholders for ratification the reappointment of Deloitte as the independent registered public accounting firm for 2018.

 

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Heidi Kunz, Chairperson

Patrick O’Leary

Gary Blackford

 

 

22 2018 Proxy Statement  
 
 
Proposal 3. Advisory Vote to Approve Named Executive Officer Compensation

 

In the Compensation Discussion and Analysis that follows, we describe in detail our executive compensation program, including its objectives, policies, and components. Our executive compensation program seeks to align the compensation of our executives with the objectives of our business plans and strategies. To this end, the Compensation Committee (the “Committee”) approved an executive compensation program for 2017 that was designed to achieve the following objectives:

 

Pay-for-Performance. Support a performance-oriented environment that rewards achievement of our financial and non-financial goals.
Focus on Long-Term Success. Reward executives for long-term strategic management and stockholder value enhancement.
Stockholder Alignment. Align the financial interest of our executives with those of our stockholders.
Quality of Talent. Attract and retain executives whose abilities are considered essential to our long-term success.

 

For a more detailed discussion of how our executive compensation program reflects these objectives, including information about the 2017 compensation of our named executive officers, see “Compensation Discussion and Analysis,” below.

 

We are asking our stockholders to support our executive compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our executives and the objectives, policies, and practices described in this proxy statement. Accordingly, our stockholders are being asked to vote on the following non-binding resolution at the Annual Meeting:

 

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved by the Company’s stockholders on an advisory basis.

 

The say-on-pay vote is advisory and is therefore not binding on the Company, the Committee, or our Board. Nonetheless, the Committee and our Board value the opinions of our stockholders. Therefore, to the extent there is any significant vote against the executive compensation as disclosed in this proxy statement, the Committee and our Board will consider our stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns.

 

The Board of Directors unanimously recommends a vote FOR the approval of named executive officer compensation, as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules.

 

  2018 Proxy Statement 23
 
 
Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis (“CD&A”) is intended to provide investors with an understanding of the compensation policies and decisions regarding 2017 compensation for our named executive officers as well as information on 2018 compensation decisions as of the date of this proxy statement.

 

For 2017, our named executive officers were:

 

NAMED EXECUTIVE OFFICER TITLE
Joseph F. Woody Chief Executive Officer
Robert E. Abernathy Retired Chairman of the Board and Chief Executive Officer
Steven E. Voskuil Senior Vice President and Chief Financial Officer
Rhonda D. Gibby Senior Vice President and Chief Human Resources Officer
Christopher M. Lowery Senior Vice President and Chief Operating Officer
John W. Wesley Senior Vice President and General Counsel

 

To assist stockholders in finding important information, this CD&A is organized as follows:

 

25 Compensation Executive Summary
27 Executive Compensation Objectives and Policies
28 Executive Compensation Design Philosophy and Guiding Principles
29 Components of our Executive Compensation Program
30 Setting Annual Compensation
33 2017 Performance Goals, Performance Assessments, and Payouts
36 Benefits and Other Compensation
37 Executive Compensation for 2018
39 Additional Information About our Compensation Practices

 

24 2018 Proxy Statement
 
 

Compensation Discussion and Analysis

 

Compensation Executive Summary

 

This executive summary provides a brief overview of our key accomplishments in 2017 and our key compensation principles and practices.

 

2017 Highlights

 

Business and Results:

 

2017 net sales for the Company were $1.624 million, a 2% increase over 2016 net sales of $1.592 million. 2017 net sales of Medical Devices were $612 million, an 8% increase over 2016 net sales of $566 million, including 3% growth attributed to the Company’s acquisition of Corpak. As described later in this CD&A, 2017 net sales on a constant currency basis and adjusted to eliminate sales to Kimberly-Clark and the impact of the Corpak acquisition, which we refer to as Adjusted Net Sales, was a performance metric under our 2016 incentive compensation programs.
  
2017 net income for the Company was $79 million, a 99% increase over 2016 net income of $40 million. For 2017, adjusted net income was $110 million, a 19% increase over 2016 net income of $93 million.
  
2017 diluted earnings per share were $1.69, a 99% increase over 2016 diluted earnings of $0.85 per share. For 2017 adjusted diluted earnings per share were $2.35, an 18% increase over 2016 adjusted diluted earnings of $1.99 per share. As described
  later in this CD&A, 2017 adjusted diluted earnings per share was a performance metric under our 2017 incentive compensation programs.

 

Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures. A description of these measures and a reconciliation to the most directly comparable GAAP financial measures is provided in Appendix A to this 2018 Proxy Statement.

 

Performance-Based Compensation

Pay-for-performance is a key objective of our compensation program. Consistent with that objective, performance-based compensation constituted a significant portion of our named executive officers’ target direct annual compensation for 2017. Also, to further align the financial interests of our executives with those of our stockholders, a majority of our executives’ target direct annual compensation for 2017 was equity-based. As discussed later in this CD&A, because the Company’s and management’s performance was above expectations for the year, management’s compensation for 2017 was above target.


 

  2018 Proxy Statement 25
 
 

Compensation Discussion and Analysis

 

Compensation Design Principles And Governance Practices

 

The design principles for our executive compensation program are intended to protect and promote the interests of our stockholders. Below we summarize certain practices we have implemented to drive performance and those we have not implemented because we do not believe they would serve our stockholders’ long-term interests:

 

What We Do   What We Don’t Do
     

Pay for performance

Perform an annual compensation risk assessment

Utilize an independent compensation consultant

Require that change-in-control agreements contain a double trigger

Maintain share ownership guidelines

Maintain a clawback policy on incentive payments in case of financial restatement

Benchmark our compensation practices to ensure executive compensation is consistent with our peer group

Cap short and long-term incentive payments at reasonable levels

 

Maintain employment contracts

Provide excise tax gross-up on change-in-control payments or perquisites (other than on certain relocation benefits)

Allow repricing of underwater options without stockholder approval

Allow current payment of dividends or dividend equivalents on unearned long-term incentives

Provide more than minimal perquisites

Allow executive officers to engage in hedging or pledging transactions

 

Committee Consideration Of Stockholder Advisory Votes On Compensation

 

At our 2017 Annual Meeting, our executive compensation program received the support of over 95 percent of shares represented at the meeting. Our Compensation Committee (the “Committee”) has considered the results of this vote and views this outcome as evidence of stockholder support of its executive compensation decisions and policies.

 

As noted under “Proposal 3. Advisory Vote to Approve Named Executive Officer Compensation,” the Committee will continue to review stockholder votes on our executive compensation and determine whether to make any changes to the program in light of those vote results.

 

26 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

Executive Compensation Objectives and Policies

 

The Committee is responsible for establishing and administering our policies governing the compensation of our executive officers. The Committee reviews our executive officer compensation objectives and policies annually, including determining whether they continue to support our business objectives and are consistent with the Committee’s charter.

 

Our 2017 executive officer compensation policies were designed to achieve the following objectives:

 

OBJECTIVE DESCRIPTION RELATED POLICIES
Pay for Performance Support a performance-oriented environment that rewards achievement of our financial and non-financial goals. The majority of executive officer pay varies with the levels at which annual and long-term performance goals are achieved. Performance goals are aligned with our strategies for sustained growth and profitability.
Focus on Long-Term Success Reward executive officers for long-term strategic management and stockholder value enhancement. A significant component of executive officer annual target compensation is in the form of performance-based restricted share units. The number of shares actually received on payout of these units depends on our performance over a three-year period.
Stockholder Alignment Align the financial interest of our executive officers with those of our stockholders. Equity-based awards make up the largest part of executive officer annual target compensation. Our executive officers also receive stock options, which vest over time and have value only if our stock price rises after the option grants are made. We also have other policies that link our executive officers’ interests with those of our stockholders, including stock ownership guidelines.
Quality of Talent Attract and retain executive officers whose abilities are considered essential to our long-term success as a global company. The Committee reviews peer group data to ensure our executive officer compensation program remains competitive so we can continue to attract and retain this talent.
     
2018 Proxy Statement 27
 

Compensation Discussion and Analysis

 

 

Executive Compensation Design Philosophy and Guiding Principles

 

The Committee has adopted the following design philosophies to guide the manner in which the key executive officer compensation objectives and policies are implemented:

 

PHILOSOPHY DESCRIPTION GUIDING PRINCIPLES
Aligned A majority of executive officer compensation should be at risk and vary with the performance outcomes of stockholders

•  50% or more of executive officer compensation is incentive based

•  Incentive metrics aligned to stockholder value

Performance goals should generally reflect year-over-year growth to achieve target funding

•  No annual grants of time-based restricted share units to executive officers

•  Within business groups, a majority of performance is placed on business unit performance goals

Compelling The value and structure of executive officer compensation provided should assist in the attraction of key executive talent

•  Base salaries at or above the 50th percentile with variance based on skills, experience, and performance

•  Actual total compensation payout opportunities are set well above the 50th percentile, allowing for meaningful upside payouts for over performance

Simple The executive officer compensation arrangements should maximize simplicity and focus on broad performance factors

•  Use minimal number of metrics; typically one or two

•  Strategic metrics (i.e., non-financial) are generally avoided

•  Special or one-time incentive awards are used sparingly

•  Perquisites and other special executive benefits are generally avoided

Sound Executive officer compensation policies and structure should support strong corporate governance and drive an ownership culture among executives

•  Ownership culture is reinforced through use of good governance

•  Individual contracts are avoided and severance practices should be conservative

•  Compensation deferral opportunities provided consistent with market practices

•  Encourage innovation while deterring excessive risk taking

 

The Committee retains the right to deviate from the guiding principles set out above whenever it determines that to do so is consistent with our overall executive officer compensation objectives and is in the best interest of the Company and its stockholders.

 

28 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

Components of Our Executive Compensation Program

 

The table below gives an overview of the compensation components used in our 2017 executive officer compensation program and matches each with one or more of the objectives described above.

 

COMPONENT OBJECTIVES PURPOSE TARGET COMPETITIVE POSITION
Base salary Quality of talent

Provide annual cash income based on:

• level of responsibility, performance and experience

comparison to market pay information

•  Compared to median of peer group

•  Actual base salary will vary based on the individual’s performance and experience in the position

Annual cash incentive Pay-for-performance Quality of talent Motivate and reward achievement of annual performance goals

•  Target compared to median of peer group

•  Actual payout will vary based on actual corporate and business unit or staff function performance

Long-term equity incentive Stockholder alignment Focus on long-term success Pay-for-performance Quality of talent

Provide an incentive to deliver stockholder value and to achieve our long-term objectives through awards of:

performance-based restricted share units

 stock option grants

Time-vested restricted share units may be granted from time to time for recruiting, retention or other purposes

•  Target compared to median of peer group

•  Actual payout of performance-based restricted share units will vary based on actual performance

•  Actual payout will also vary based on actual stock price performance

Retirement benefits Quality of talent Provide competitive retirement plan benefits through 401(k) plan and other defined contribution plans

•  Benefits comparable to those of peer group

Perquisites Quality of talent Provide minimal market-based additional benefits

•  Determined by the Committee

Post-termination compensation (severance and change of control) Quality of talent

Encourage attraction and retention of executives critical to our long-term success and competitiveness:

•  Severance Pay Plan, which provides eligible employees, including executives, with payments and benefits in the event of certain involuntary terminations

•  Executive Severance Plan, which provides eligible executives with payments in the event of a qualified separation from service following a change of control

•  Determined by the Committee

     
2018 Proxy Statement 29
 

Compensation Discussion and Analysis

 

 

Setting Annual Compensation

 

This section describes the processes followed in setting 2017 target annual compensation for our executive officers.

 

FOCUS ON TOTAL DIRECT ANNUAL COMPENSATION

In setting 2017 compensation for our executive officers, including our Chief Executive Officer (“CEO”), the Committee focused on total direct annual compensation, which consists of annual cash compensation (base salary and target annual cash incentive) and long-term equity incentive compensation (performance-based restricted share units and stock options). The Committee considered annual cash and long-term equity incentive compensation both separately and as a package to help ensure that the executive officer compensation objectives are met.

 

BENCHMARKING – EXECUTIVE COMPENSATION PEER GROUP

To ensure that our executive officer compensation program is reasonable and competitive in the marketplace, our program is compared to programs at other companies. In setting 2017 compensation for our executive officers, the Committee used the following peer group for the Company’s executive compensation:

 

   
2017 Executive Compensation Peer Group  
   
Align Technology, Inc. Haemonetics Corporation NuVasive, Inc.
C.R. Bard, Inc. Hill-Rom Holdings, Inc. ResMed Inc.
CONMED Corporation Invacare Sirona Dental Systems, Inc.
The Cooper Companies, Inc. Hologic, Inc. STERIS Corporation
DENTSPLY International Inc. Integer Holdings Corp Teleflex Incorporated
Edwards Lifesciences Corp Integra Lifesciences Holding Corp Varian Medical Systems, Inc.
Greatbatch, Inc. Merit Medical Systems, Inc. West Pharmaceutical Services, Inc.
     

 

The peer group is intended to consist of companies with whom we compete for talent. We believe that we generally compete for talent with healthcare and medical device companies with annual revenues ranging from approximately one-third to three times our annual revenues.

 

The Committee (working with its independent compensation consultant) reviews the executive compensation peer group annually to ensure that it continues to serve as an appropriate comparison for our compensation program.

 

PROCESS FOR SETTING TOTAL DIRECT ANNUAL COMPENSATION TARGETS

In setting the total direct annual compensation of our executive officers, both market data provided by the independent compensation consultant and information on the performance of each executive officer for prior years is evaluated. To remain competitive in the

marketplace for executive talent, the target levels for the executive officers’ compensation components, including our CEO, are compared to the median of the peer group.

 

To reinforce a pay-for-performance culture, targets for individual executive officers may be set above or below this median depending on the individual’s performance in prior years and experience in the position, as well as any applicable retention concerns. The Committee believes that comparing target levels to the median, setting targets as described above, and providing incentive compensation opportunities that will enable executives to earn above-target compensation if they deliver above-target performance on their performance goals, are consistent with the objectives of our executive officer compensation policies. In particular, the Committee believes that this approach enables us to attract and retain skilled and talented executive officers to guide and lead our businesses and supports a pay-for-performance culture.

 

30 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

When setting annual compensation for our executive officers, the Committee considers each compensation component (base salary, annual cash incentive and long-term equity incentive), but its decision regarding a particular component does not necessarily impact its decision about other components.

 

In setting compensation for executive officers that join us from other companies, the Committee will evaluate both market data for the position to be filled and the candidate’s compensation history. The Committee recognizes that in order to successfully recruit a candidate to leave his or her current position and to join the Company, the candidate’s compensation package may have to exceed his or her current compensation, which could result in a compensation package above the median of our peer group.

 

CEO TOTAL DIRECT ANNUAL COMPENSATION

Our CEO’s total direct annual compensation is determined in the same manner as the direct annual compensation of the other named executive officers. The difference between our CEO’s compensation and that of the other named executive officers reflects the fact that our CEO’s responsibilities for management and oversight of a global enterprise are significantly greater than those of the other executive officers. As a result, the market pay level for our CEO is appropriately higher than the market pay for our other executive officer positions.

 

TOTAL DIRECT ANNUAL COMPENSATION TARGETS FOR 2017

Consistent with the focus on total direct annual compensation, the Committee established the following 2017 direct annual compensation targets for our named executive officers based on their roles and responsibilities:

 

NAME 2017 TOTAL DIRECT ANNUAL COMPENSATION TARGET ($)
Joseph F. Woody 5,442,750
Robert E. Abernathy 4,724,992
Steven E. Voskuil 1,539,225
Rhonda D. Gibby 831,415
Christopher M. Lowery 1,918,690
John W. Wesley 1,080,000

 

These 2017 direct annual compensation target amounts differ from the amounts set forth in the Summary Compensation Table in the following ways:

Amounts paid or payable to Mr. Woody and Mr. Abernathy are prorated for the portion of the year in which they held their positions, while the amounts in the table above reflect full year targets.
Annual cash incentive compensation is included at the target level, while the Summary Compensation Table reflects the actual higher amounts earned for 2017;
Performance-based restricted share units are valued for direct annual compensation target purposes as equal to the value of a share of Halyard common stock on the date of grant, while the Summary Compensation Table reflects the grant date fair value as determined in accordance with ASC Topic 718 and as required by SEC rules (see Note 12 to our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the year-ended December 31, 2017, for the assumptions used in valuing performance-based restricted share units); and
In setting total direct annual compensation targets, the Committee does not include deferred compensation earnings or other compensation, while those amounts are required to be included in the Summary Compensation Table.

 

 

Executive Compensation for 2017

 

To help achieve the objectives discussed above, our executive officer compensation program for 2017 consisted of fixed and performance-based components, as well as short-term and long-term components.

 

2018 Proxy Statement 31
 

Compensation Discussion and Analysis

 

BASE SALARY

To attract and retain high-caliber executives, we pay our executive officers an annual fixed salary that we believe to be competitive in the marketplace.

 

Salary ranges and individual salaries for executive officers are reviewed annually, and salary adjustments generally are effective on April 1 of each year. In determining individual salaries, salary levels for similar positions at our peer group companies are considered, as well as the executive officer’s performance and experience in his or her position. This performance evaluation is based on how the executive officer performs during the year against results-based objectives established at the beginning of the year. In general, an experienced executive officer who is performing at a satisfactory level will receive a base salary at or around the median of our peer group companies. However, executive officers may be paid above or below the median depending on their experience and performance. From time to time, if warranted, executive officers and other employees may receive additional salary increases because of promotions, changes in duties and responsibilities, retention concerns, or market conditions.

 

The following table shows the 2017 base salaries in effect for each named executive officer during the year.

 

NAME 2017 BASE SALARY
JANUARY TO MARCH ($)
2017 BASE SALARY
APRIL TO DECEMBER ($)
Joseph F. Woody N/A 885,000
Robert E. Abernathy 837,375 862,496
Steven E. Voskuil 436,450 449,544
Rhonda D. Gibby 314,650 320,943
Christopher M. Lowery 482,125 496,589
John W. Wesley 393,750 393,750

 

ANNUAL CASH INCENTIVE PROGRAM

Consistent with our pay-for-performance compensation objective, our executive officer compensation program includes an annual cash incentive program to motivate and reward executives to achieve annual performance objectives established by the Committee.

 

2017 TARGETS

The target payment amount for annual cash incentives is a percentage of the executive officer’s base salary. The range of possible payouts is expressed as a percentage of the target payment amount. These ranges are set based on competitive factors. The following table sets forth the target payment amounts and range of possible payouts for each named executive officer in 2017:

 

TARGET PAYMENT AMOUNTS AND RANGE OF POSSIBLE PAYOUTS FOR

2017 ANNUAL CASH INCENTIVE PROGRAM

 

NAME TARGET PAYMENT AMOUNT RANGE OF POTENTIAL PAYOUT
Joseph F. Woody 115% of base salary 0% - 225% of target payment amount
Robert E. Abernathy 100% of base salary 0% - 225% of target payment amount
Steven E. Voskuil 70% of base salary 0% - 225% of target payment amount
Rhonda D. Gibby 50% of base salary 0% - 225% of target payment amount
Christopher M. Lowery 85% of base salary 0% - 225% of target payment amount
John W. Wesley 60% of base salary 0% - 225% of target payment amount

 

32 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

 

2017 Performance Goals, Performance Assessments, and Payouts

 

Payment amounts under the annual cash incentive program are dependent on performance measured against goals established at the beginning of the year. These performance goals are derived from our financial goals.

 

The table below shows the performance goals and weights established for 2017:

 

ANNUAL CASH INCENTIVE PROGRAM

2017 PERFORMANCE GOALS AND WEIGHTS

 

  JOSEPH F.
WOODY
ROBERT E.
ABERNATHY
STEVEN E.
VOSKUIL
RHONDA D.
GIBBY
CHRISTOPHER
M. LOWER
JOHN W.
WESLEY
Adjusted Net Sales 50% 50% 50% 50% 50% 50%
Adjusted EPS 50% 50% 50% 50% 50% 50%
Cash conversion cycle multiplier multiplier multiplier multiplier multiplier multiplier

 

In February 2018, the Committee determined the extent to which the goals were met in 2017 and the resulting payout. Below we explain how the Committee assessed the performance of the goals for the year and show the payout that was determined.

 

For 2017, the Committee chose the following as the performance goals for the annual cash incentive program:

 

2017 GOAL EXPLANATION REASON FOR USE AS A PERFORMANCE MEASURE
Adjusted Net Sales Net sales for 2017 on a constant currency basis, and adjusted to eliminate sales to Kimberly-Clark and corporate sales A key indicator of overall growth
Adjusted EPS Diluted net income per share, adjusted for spin-off related charges, intangible asset amortization, certain litigation costs, the impact of the Corpak acquisition, and the impact of certain tax reforms A key indicator of overall performance
Cash Conversion Cycle Days it takes to convert raw materials into finished goods and then collect on the sales of those finished goods A measure of operational efficiency

 

To determine the payout percentage, the Committee used the following process:

 

First, it determined an initial payout percentage based on how the Company performed against the adjusted net sales and adjusted EPS goals. For 2017, the Committee set these goals and the corresponding initial payout percentages at the following levels:

 

  RANGE OF PERFORMANCE LEVELS
MEASURE (EACH WEIGHTED 50%) THRESHOLD TARGET MAXIMUM
Adjusted Net Sales (millions) $ 1,473 $ 1,550 $ 1,628
Adjusted EPS $ 1.77 $ 1.97 $ 2.27
Initial Payout Percentage 0% 100% 200%

 

Second, the Committee applied a multiplier to this initial payout percentage. The multiplier was based on how the Company performed against its cash conversion cycle goals. Depending on the level of improvement in cash conversion cycle, the multiplier would either decrease or increase the initial payout percentage (but the amount of the final payout percentage could not exceed a 225 percent cap).

 

2018 Proxy Statement 33
 

Compensation Discussion and Analysis

 

 

For 2017, the Committee set the following ranges for this cash conversion cycle multiplier:

 

  RANGE OF PERFORMANCE LEVELS
  THRESHOLD TARGET MAXIMUM
Cash Conversion Cycle 114 days 104 days 95 days
Cash Conversion Cycle Multiplier Applied to Initial Payout Percentage 0.8 x 1.0 x 1.2 x

 

Actual results and actual payout percentages. For 2017, the Committee determined that the Company’s adjusted net sales were $1,542 million and its adjusted EPS was $2.33. Based on these results, the Committee determined the initial payout percentage to be 144.8 percent of target. To this percentage, the Committee then applied a cash conversion cycle multiplier of 115.6 percent, which was based on the actual 2017 cash conversion cycle of 97 days. After taking into account performance on all of these goals, the Committee determined that the payout percentage for achieving the 2017 performance goals should be 167.4 percent of target.

 

ANNUAL CASH INCENTIVE PAYOUTS FOR 2017

The following table shows the payout opportunities and the actual payouts of annual cash incentives for 2017 for each of our named executive officers. Payouts were based on the payout percentages for each element, weighted for each executive as shown above.

 

  ANNUAL
INCENTIVE TARGET
OPPORTUNITY
ANNUAL
INCENTIVE MAXIMUM
OPPORTUNITY
ACTUAL
2017 ANNUAL
INCENTIVE PAYOUT
NAME % OF BASE
SALARY
AMOUNT
($)
% OF
TARGET
AMOUNT ($) % OF
TARGET
AMOUNT
($)
Joseph F. Woody 115% 1,017,750 225% 2,289,938 167.4% 884,124*
Robert E. Abernathy 100% 862,496 225% 1,940,616 167.4% 952,032**
Steven E. Voskuil 70% 314,681 225% 708,032 167.4% 522,939
Rhonda D. Gibby 50% 160,472 225% 361,062 167.4% 267,312
Christopher M. Lowery 85% 422,101 225% 949,727 167.4% 701,451
John W. Wesley 60% 236,250 225% 531,563 167.4% 395,482

 

*Mr. Woody’s incentive payout for 2017 was prorated based on his first day of employment, June 23, 2017.

**Mr. Abernathy’s incentive payout for 2017 was prorated based on his last day of employment, August 31, 2017.

 

The Committee believes that the 2017 annual incentive payout is consistent with the pay-for-performance objective of our executive officer compensation program.

 

LONG-TERM EQUITY INCENTIVE COMPENSATION

Our executive officers receive annual long-term equity incentive grants as part of their overall compensation package. These awards are consistent with the objectives of aligning our senior leaders’ interests with the financial interests of our stockholders, focusing on our long-term success, supporting our performance-oriented environment, and offering competitive compensation packages.

 

Information regarding long-term equity incentive awards granted to our named executive officers can be found under “Summary Compensation,” “Grants of Plan-Based Awards,” and “Discussion of Summary Compensation and Plan-Based Awards Tables.”

 

2017 Grants

In determining the 2017 long-term equity incentive award amounts for our named executive officers, the following factors were considered by the Committee, among others: the specific responsibilities and performance of the

 

34 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

executive, business performance, retention needs, stock price performance, and other market factors. Because these awards are part of the annual compensation program that compares total direct annual compensation to the median of the peer group comparison, grants from prior years were not considered when setting 2017 targets or granting awards.

 

To determine target values, each executive officer’s total direct annual compensation was compared to the median of the peer group, and then individual performance and the other factors listed above, as applicable, were considered. Target grant values were then approved by the Committee and were divided into two types:

 

Performance-based restricted share units (60 percent of the target grant value).
Stock options (40 percent of the target grant value).

 

The Committee believed this allocation between performance-based restricted share units (PRSUs) and stock options supports the pay-for-performance and stockholder alignment objectives of our executive officer compensation program. In 2017, the following annual long-term equity incentive awards were granted to our named executive officers:

 

NAME TARGET GRANT VALUE
OF AWARDS ($)
TARGET PRSUS
AWARDED (#)
TARGET STOCK OPTIONS
AWARDED (#)
Joseph F. Woody 3,540,000 53,193 149,053
Robert E. Abernathy 3,000,000 46,083 134,680
Steven E. Voskuil 800,000 12,289 35,915
Rhonda D. Gibby 350,000 5,376 15,713
Christopher M. Lowery 1,025,000 15,745 46,016
John W. Wesley 450,000 7,680 22,447

 

For valuation purposes, each PRSU granted was assigned a value equal to the closing price of one share of Company common stock at the end of the day on the date of grant, and each stock option was assigned a value equal to the Black-Scholes valuation for that option at the end of the day on the date of grant.

 

Performance Goals and Potential Payouts for
2015 – 2017 PRSUs

For the PRSUs granted in 2015, the actual number of shares to be received by our named executive officers can range from zero to 200 percent of the target levels established by the Committee for each executive, depending on the degree to which the performance objectives for these awards are met over a three-year period.

 

The performance objectives for the 2015 awards are based on compounded annual net sales growth and adjusted EBITDA growth for the period January 1, 2015 through December 31, 2017. The potential payouts at varying levels of performance for the 2015-2017 PRSUs were:

 

GOAL WEIGHT THRESHOLD TARGET MAXIMUM
Net Sales (compounded) 50% 0% 2.3% 4.4%
Payout Scale   0% 100% 200%
Adjusted EBITDA Growth 50% 1.0% 4.0% 7.0%
Payout Scale   0% 100% 200%

 

2018 Proxy Statement 35
 

Compensation Discussion and Analysis

 

Payout of 2015-2017 PRSUs

In February 2017, the Committee evaluated the results of the three-year performance for the 2015 PRSUs. The Committee determined that net sales growth during that period was-1.6%, and Adjusted EBITDA growth during that period was -4.1%. As a result, the Committee determined that the payout percentage for these PRSUs would be zero.

 

Vesting Levels of Outstanding PRSUs

The performance goals of the PRSUs granted in 2017 and 2016 are based on relative total stockholder return and will vest on February 28, 2020 and March 1, 2019, respectively. As a result of the Company’s performance since those PRSUs were granted, the 2017 and 2016 PRSUs are on pace to vest at 81 percent and 200 percent of target, respectively.

 

 

Benefits and Other Compensation

 

RETIREMENT BENEFITS

Our named executive officers received contributions from the Company under the Halyard Health, Inc. 401(k) Plan (the “401(k) Plan”) and the Halyard Health, Inc. Supplemental Retirement 401(k) Plan (the “Supplemental 401(k) Plan”). The Company does not have a defined benefit pension plan in the United States, and none of our named executive officers participate in any Company defined benefit pension plans.

 

The 401(k) Plan and Supplemental 401(k) Plan are consistent with those maintained by our peer group companies and are therefore necessary to remain competitive for recruiting and retaining executive talent. The Committee believes that these retirement benefits are important parts of our compensation program. For more information, see “Nonqualified Deferred Compensation – Overview of Qualified and Non-Qualified Plans” and “Pension Benefits.”

 

OTHER COMPENSATION

We believe the perquisites provided to our executive officers are minimal and well below the median of those provided by our peer group. In addition, the Company does not provide tax reimbursement or gross-ups for perquisites offered to executive officers, except for certain relocation benefits.

 

POST-TERMINATION BENEFITS

We maintain two severance plans that cover our executive officers: the Severance Pay Plan and the Executive Severance Plan. An executive officer may not receive severance payments under more than one severance plan. Benefits under these plans are payable only if the executive’s employment terminates under the conditions specified in the applicable plan. We believe that our severance plans are consistent with those maintained by our peer group companies and that they are therefore important for attracting and retaining executives who are critical to our long-term success and competitiveness. For more information about these severance plans and their terms, see “Potential Payments on Termination or Change of Control – Severance Benefits.”

 

Severance Pay Plan

Our Severance Pay Plan provides severance benefits to most of our U.S. hourly and salaried employees, including our named executive officers, who are involuntarily terminated under the circumstances described in the plan. The objective of this plan is to facilitate the employee’s transition to his or her next position, and it is not intended to serve as a reward for the employee’s past service.

 

36 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

Executive Severance Plan

Our Executive Severance Plan provides severance benefits to eligible executives, including our named executive officers, in the event of a qualified termination of employment (as defined in the plan) in connection with a change of control. For an eligible employee to receive a payment under this plan, two things must occur: there must be a change of control of the Company, and the executive must have been involuntarily terminated without cause or have resigned for good reason (as defined in the plan) within two years of the change of control (often referred to as a “double trigger”). The objective of this plan is to encourage the executive to stay with the Company in the event of a change of control transaction to ensure a smooth transition. Each of our named executive officers has entered into an agreement under the plan that expires on October 31, 2020.

 

 

Executive Compensation for 2018

 

On October 31, 2017, the Company entered into a Purchase Agreement (“Purchase Agreement”) with Owens & Minor, Inc. (“OMI”). The Purchase Agreement provides for the sale of substantially all of the Company’s Surgical and Infection Prevention (“S&IP”) business, among other things. The Company expects the transaction to close early in the second quarter of 2018. After the transaction closes, the Company will transform from a one that sells medical supplies and devices with annual net sales of about $1.6 billion into a pure-play medical devices company with annual net sales in excess of $600 million.

 

The Committee considered this expected transformation when it established executive compensation for 2018. As an initial matter, the Committee determined that the Company’s post-transaction peer group will be different. It will consist of the following 15 medical device equipment companies with a median annual revenue of about $1 billion.

 

 

2018 Executive Compensation Peer Group

 

Abiomed, Inc. Hologic, Inc. Orthofix International Nv
Cantel Medical Corp Integer Holdings Corp. ResMed Inc.
CONMED Corporation Integra Lifesciences Holding Corp STERIS Corporation
Globus Medical Inc. Masimo Corp Teleflex Incorporated
Hill-Rom Holdings, Inc. NuVasive, Inc. Wright Medical Group Nv
     

 

The Committee asked its compensation consultant, Meridian Compensation Partners LLC, to review the Company’s executive compensation practices in light of the new peer group. As a result of that analysis, the Committee decided not to change the Company’s compensation objectives and policies, its compensation design philosophy and guiding principles, or the components of its executive compensation program. However, in light of the sale of the S&IP business and the new peer group, and taking into account the factors described above in the section on the “Process for Setting Total Direct Annual Compensation Targets,” the Committee made 2018 base salary and short and long term incentive compensation award decisions for the named executive officers are described below:

 

2018 Proxy Statement 37
 

Compensation Discussion and Analysis

 

2018 BASE SALARY

In February 2018, the Committee approved the base salaries for our named executive officers, effective April 1, 2018:

 

  2018 BASE SALARY ($)
NAME JANUARY TO MARCH APRIL TO DECEMBER
Joseph F. Woody 885,000 911,550
Steve E. Voskuil 449,544 463,030
Rhonda D. Gibby 320,943 324,152
John W. Wesley 393,750 393,750

 

2018 ANNUAL CASH INCENTIVE TARGETS

In February 2018, the Committee also established objectives for 2018 annual cash incentives, which will be payable in 2019. The target payment amounts and range of possible payouts for 2018 are as follows:

 

  TARGET PAYMENT AMOUNT POSSIBLE PAYOUT
Joseph F. Woody 115% of base salary 0% - 200% of target payment amount
Steven E. Voskuil 70% of base salary 0% - 200% of target payment amount
Rhonda D. Gibby 50% of base salary 0% - 200% of target payment amount
John W. Wesley 60% of base salary 0% - 200% of target payment amount

 

The Committee sets the appropriate split among the different elements of performance that make up our performance goals. The following are the 2018 performance goals and relative weights for our named executive officers.

 

ANNUAL CASH INCENTIVE PROGRAM

2018 PERFORMANCE GOALS AND WEIGHTS

 

  JOSEPH F.
WOODY
STEVEN E.
VOSKUIL
RHONDA D.
GIBBY
JOHN W.
WESLEY
Adjusted Net Sales 70% 70% 70% 70%
Adjusted EBITDA 30% 30% 30% 30%

 

The performance goals for 2018 are designed to encourage a continued focus on executing our long-term business plans and objectives.

 

38 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

2018 LONG-TERM EQUITY COMPENSATION INCENTIVE AWARDS

In February 2018, the Committee approved long-term incentive compensation awards for the named executive officers consisting of awards of performance-based restricted share units with a value equal to 60 percent of the target grant value for long-term equity incentive compensation, with the balance of the value to be granted in stock options. The performance objectives for the performance-based restricted share unit awards granted in 2018 are based on relative total stockholder return for the period January 1, 2018 through December 31, 2020. The actual number of shares to be received by our named executive officers will range from zero to 200 percent of the target levels established by the Committee for each executive, depending on the degree to which the performance objectives are met.

 

PERFORMANCE-BASED RESTRICTED SHARE UNITS GRANTED IN 2018

 

NAME TARGET AMOUNT
OF SHARES (#)
MAXIMUM AMOUNT
OF SHARES (#)
Joseph F. Woody 43,436 86,872
Steven E. Voskuil 9,509 19,018
Rhonda D. Gibby 4,294 8,588
John W. Wesley 5,521 11,042

 

The Committee also approved the dollar amount of stock options to be granted to our named executive officers in May 2018, along with our annual stock option grants to other employees. The number of options they will receive will be based on the fair market value of our stock on the date of grant.

 

NAME VALUE OF STOCK OPTIONS
TO BE GRANTED ($)
Joseph F. Woody 1,416,000
Steven E. Voskuil 310,000
Rhonda D. Gibby 140,000
John W. Wesley 140,000

 

Additional Information about Our Compensation Practices

 

As a matter of sound governance, we follow certain practices with respect to our executive officer compensation program. We regularly review and evaluate our executive officer compensation practices in light of regulatory developments, market standards and other considerations.

 

USE OF INDEPENDENT COMPENSATION CONSULTANT

The Committee engaged Meridian Compensation Partners LLC (“Meridian”) as its independent consultant to assist it in determining the appropriate executive officer compensation under our compensation policies described above. Consistent with the Committee’s policy in which its independent consultant may provide services only to the Committee, Meridian had no other business relationship with the Company and received no payments from us other than fees and expenses for services to the Committee. See “Corporate Governance—Compensation Committee” for information about the use of compensation consultants.

 

ROLE OF THE CHIEF EXECUTIVE OFFICER IN COMPENSATION DECISIONS

Our CEO makes a recommendation to the Committee each year on the appropriate target annual compensation for each of the other executive officers. The Committee makes the final determination of the target annual compensation for each executive officer, including our CEO. While our CEO and Chief Human Resources Officer typically attend

 

2018 Proxy Statement 39
 

Compensation Discussion and Analysis

 

Committee meetings, none of the other executive officers is present during the portion of the Committee’s meetings when compensation for executive officers is set. In addition, neither our CEO nor our Chief Human Resources Officer is present during the portion of the Committee’s meetings when their compensation is set.

 

ADJUSTMENT OF FINANCIAL MEASURES FOR ANNUAL AND LONG-TERM EQUITY INCENTIVES

Financial measures for the annual and long-term equity incentive programs are developed based on expectations about our planned activities and reasonable assumptions about the performance of our key business drivers for the applicable period. From time to time, however, discrete items or events may arise that were not contemplated by these plans or assumptions. These could include accounting and tax law changes, tax credits from items not within the ordinary course of our business operations, restructuring and write-off charges, significant acquisitions or dispositions, and significant gains or losses from litigation matters.

 

Under the Committee’s exception guidelines regarding our annual and long-term equity incentive program measures, the Committee may adjust in the future the calculation of financial measures for these incentive programs to eliminate the effect of the types of items or events described above. In making these adjustments, the Committee’s policy is to seek to neutralize the impact of the unexpected or unplanned items or events, whether positive or negative, in order to provide consistent and equitable incentive payments that the Committee believes are reflective of our performance. In considering whether to make a particular adjustment under its guidelines, the Committee will consider the potential tax impact of the adjustment under Code Section 162(m) and will review whether the item or event was one for which management was responsible and accountable, treatment of similar items in prior periods, the extent of the item’s or event’s impact on the financial measure, and the item’s or event’s characteristics relative to normal and customary business practices. Generally, the Committee will apply an adjustment to all compensation that is subject to that financial measure.

 

PRICING AND TIMING OF STOCK OPTION GRANTS AND TIMING
OF PERFORMANCE-BASED EQUITY GRANTS

Our policies and our Equity Participation Plan require stock options to be granted at no less than the closing price of our common stock on the date of grant, except for the options granted to replace Kimberly-Clark stock options forfeited as a result of the spin-off (which were priced to preserve the intrinsic value of the forfeited Kimberly-Clark options), and the other options granted following the spin-off which used a five-day variable weighted price. Stock option grants to our executive officers are generally made annually at a meeting of the Committee that is scheduled at least one year in advance, and the grants are effective on the date of this meeting. However, if the meeting occurs during a period when we do not permit insiders to trade Company common stock (a “Blackout Period”), the stock option grants will not be effective until the first business day following the end of the Blackout Period. Our Blackout Periods end at 11:59 p.m. on the day we issue our quarterly earnings press releases. Our executives are not permitted to choose the grant date for their individual stock option grants.

 

The CEO has been delegated the limited authority to approve equity grants, including stock options, to employees for recruiting and special employee recognition and retention purposes. These grants may not exceed 100,000 shares in calendar year 2018. The CEO is not permitted to make any grants to any of our executive officers.

 

Annual stock option grants to non-executive officers are effective on the same date as the annual stock option grants to our executive officers. Recruiting, special recognition, and retention stock-based awards are generally made on a pre-determined date following our quarterly earnings release.

 

The Committee awards performance-based restricted share units to executive officers at its February meetings. We believe this practice is consistent with award practices at other public companies of comparable size. Our executives are not permitted to choose the grant date for their individual restricted share unit awards.

 

40 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

POLICY ON INCENTIVE COMPENSATION CLAWBACK

As described in detail above, a significant percentage of our executive officer compensation is incentive-based. The determination of the extent to which the incentive objectives are achieved is based in part on the Committee’s discretion and in part on our published financial results. The Committee has the right to reassess its determination of the performance awards if the financial statements on which it relied are restated. The Committee has the right to direct management to seek to recover from any executive officer any amounts determined to have been inappropriately received by the individual executive officer. In addition, under the Company’s Equity Participation Plan, the Committee may require awards with performance goals under the Plan to be subject to any policy we may adopt relating to the recovery of that award to the extent it is determined that performance goals relating to the awards were not actually achieved. Further, the Sarbanes-Oxley Act of 2002 mandates that the CEO and the chief financial officer reimburse us for any bonus or other incentive-based or equity-based compensation paid to them in a year following the issuance of financial statements that are later required to be restated as a result of misconduct. The Committee intends to review and revise the incentive compensation clawback policy once the SEC issues final regulations on clawbacks under the Dodd-Frank legislation enacted in 2010.

 

STOCK OWNERSHIP GUIDELINES

We strongly believe that the financial interests of our executive officers should be aligned with those of our stockholders. Accordingly, the Committee has established the following stock ownership guidelines for our executive officers:

 

TARGET STOCK OWNERSHIP AMOUNTS

 

POSITION OWNERSHIP LEVEL
Chief Executive Officer Five times annual base salary
Other named executive officers Two times annual base salary

 

Failure to attain these targeted stock ownership levels within five years from date of hire for, or appointment to, an eligible position can result in the reduction of part or all of the executive’s annual cash incentive (with a corresponding grant of time-vested restricted share units or restricted stock in that amount), or a reduction in future long-term equity incentive awards, either of which may continue until the ownership guideline is achieved. In determining whether our stock ownership guidelines have been met, any restricted stock and time-vested restricted share units held are counted as owned, but performance-based restricted share units are excluded until they vest. Executive officer stock ownership levels will be reviewed annually for compliance with these guidelines.

 

OTHER POLICES RELATING TO TRANSACTIONS IN COMPANY SECURITIES

We require all executive officers to pre-clear transactions involving our common stock (and other securities related to our common stock) with our Legal Department.

 

We do not permit our executive officers to engage in transactions that hedge an executive officer’s economic risk of owning shares of our common stock. Additionally, our executives are not permitted to pledge shares of our common stock owned by them as collateral for loans or other obligations.

 

COMMITTEE EXERCISE OF DISCRETION TO REDUCE ANNUAL CASH INCENTIVE PAYMENT

In establishing performance goals and target levels under the annual cash incentive program, the Committee is exercising its discretion to limit the amount of the incentive payments, consistent with our pay-for-performance objective. In the absence of this exercise of discretion, our CEO would be entitled to an award equal to four percent of our earnings before unusual items, and each of our other executive officers would be entitled to an award equal to two percent of our earnings before unusual items; however, the Committee has exercised its discretion to limit the amount of the incentive payments each year of the program, and this potential maximum award has never been paid to any of the executive officers.

 

2018 Proxy Statement 41
 

Compensation Discussion and Analysis

 

CORPORATE TAX DEDUCTION FOR EXECUTIVE COMPENSATION

The United States income tax laws generally limit the deductibility of compensation paid to any of a company’s named executive officers to $1,000,000 per year. Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the “New Tax Law”), this limitation did not apply to compensation paid to the chief financial officer or to qualified performance-based forms of compensation if certain requirements were met. Several classes of our executive compensation, including option awards and portions of our long-term equity grants to executive officers, were designed to meet the requirements for deductibility.

 

Among other things, the New Tax Law included the chief financial officer as one of the covered employees and eliminated exceptions to the limit for qualified performance-based forms of compensation. Compensation paid to our named executive officers in excess of $1,000,000 will no longer be deductible unless it qualifies for the transition relief provisions of the New Tax Law, which are limited to certain arrangements that were in place as of November 2, 2017. Despite the fact that certain of our executive programs that were in place prior such date were intended to qualify as performance-based compensation and have not been materially amended or modified, the Company recognizes that the applicability of the New Tax Law is ambiguous and subject to further interpretation. Accordingly, there can be no assurance that these awards will be fully deductible under the transition relief provisions of the New Tax Law.

 

Although tax deductibility of compensation is preferred, it is not a primary objective of our compensation programs. In the Committee’s view, meeting the compensation objectives set forth above is more important than the benefit of being able to deduct the compensation for tax purposes. The Committee has always reserved the ability to award compensation that is not exempt from the deduction limits of 162(m).

 

Compensation Committee Report

In accordance with its written charter adopted by the Board, the Compensation Committee of the Company has oversight of compensation policies designed to align executive officers’ compensation with our overall business strategy, values, and management initiatives. In discharging its oversight responsibility, the Committee has retained an independent compensation consultant to advise the Committee regarding market and general compensation trends.

 

The Committee has reviewed and discussed the Compensation Discussion and Analysis with our management, which has the responsibility for preparing the Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2017.

 

COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS

Julie Shimer, Chairperson
John Byrnes
William Hawkins
Maria Sainz

 

42 2018 Proxy Statement
 

Compensation Discussion and Analysis

 

Analysis of Compensation-Related Risks

 

The Committee has reviewed an assessment of our compensation programs for our employees, including our executive officers, to analyze the risks arising from our compensation systems. The Committee’s independent consultant assisted with the review of our executive compensation programs.

 

Based on this assessment, the Committee believes that the design of our compensation programs, including our executive compensation program, does not encourage our executives or employees to take excessive risks and that the risks arising from these programs are not reasonably likely to have a material adverse effect on the Company.

 

Several factors contributed to the Committee’s conclusion, including:

 

The Committee believes the Company maintains a values-driven, ethics-based culture supported by a strong tone at the top.
   
The performance targets for annual cash incentive programs are selected to ensure that they are reasonably attainable in a manner consistent with the Company’s business plans without encouraging executives or employees to take inappropriate risks.
   
An analysis by the Committee’s consultant indicated that our compensation programs are consistent with those of our peer group. In addition, the analysis noted that target levels for direct annual compensation are compared to the median of our peer group.
   
The Committee believes the allocation among the components of direct annual compensation provides an appropriate balance between annual and long-term incentives, total fixed, and performance-based compensation.
   
Annual cash incentives and long-term performance-based restricted share unit awards under our executive compensation program are capped at a reasonable percent of the target award, and all other material non-executive cash incentive programs are capped at reasonable levels, which the Committee believes protects against disproportionately large incentives.
   
The Committee believes the performance measures and the multi-year vesting features of the long-term equity incentive compensation component encourage participants to seek sustainable growth and value creation.
   
The Committee believes inclusion of share-based compensation through the long-term equity incentive compensation component encourages appropriate decision-making that is aligned with the long-term interests of stockholders.
   
Our stock ownership guidelines further align the interests of management and stockholders.

 

2018 Proxy Statement 43
 
Compensation Tables

 

Summary Compensation

 

The following table contains information concerning compensation awarded to, earned by, or paid to the Company’s named executive officers by the Company for the years 2015 through 2017. Position titles refer to each Company named executive officer’s title at the Company effective December 31, 2017. Additional information regarding the items reflected in each column follows the table.

 

SUMMARY COMPENSATION TABLE

 

                     CHANGE      
                     IN PENSION      
                     VALUE AND      
                  NON-EQUITY  NONQUALIFIED      
                  INCENTIVE  DEFERRED      
NAME AND           STOCK  OPTION  PLAN  COMPENSATION  ALL OTHER   
PRINCIPAL     SALARY  BONUS  AWARDS  AWARDS  COMPENSATION  EARNINGS  COMPENSATION  TOTAL
POSITION  YEAR  ($)  ($)  ($)  ($)  ($)  ($)  ($)  ($)
Joseph F. Woody
Chief Executive Officer
  2017  442,500    3,135,706  1,416,004  884,124    284,761  6,163,095
Robert E. Abernathy,
Retired Chairman of the Board and Chief Executive Officer
  2017  664,566    2,259,910  1,199,999  952,032    127,689  5,204,197
  2016  837,375    2,465,829  1,199,999  1,400,091    55,752  5,959,046
  2015  837,375    1,800,021  2,699,994  161,613    96,755  5,595,758
Steven E. Voskuil
Senior Vice President and Chief Financial Officer
  2017  449,544    602,653  320,003  522,940    79,422  1,974,562
  2016  436,450    657,562  319,997  510,821    45,916  1,970,746
  2015  436,450    465,732  697,949  58,964    75,784  1,734,880
Rhonda D. Gibby
Senior Vice President and Chief Human
Resources Officer
  2017  320,943    263,639  140,003  267,312    43,008  1,034,905
  2016  314,650    300,006  146,000  263,047    19,128  1,042,831
  2015  314,650    209,980  315,008  30,364    22,891  892,892

 

44 2018 Proxy Statement

 

Compensation Tables

 

                            CHANGE        
                            IN PENSION        
                            VALUE AND        
                        NON-EQUITY   NONQUALIFIED        
                        INCENTIVE   DEFERRED        
NAME AND               STOCK    OPTION   PLAN   COMPENSATION   ALL OTHER     
PRINCIPAL       SALARY   BONUS   AWARDS   AWARDS   COMPENSATION   EARNINGS   COMPENSATION   TOTAL
POSITION    YEAR   ($)    ($)    ($)   ($)   ($)   ($)   ($)   ($) 
Christopher M. Lowery
Senior Vice President and Chief Operating Officer
  2017   496,589   250,000   772,135   410,003   701,451   —    75,511   2,705,689
  2016   482,125     863,029   419,997   685,196   —    31,262   2,481,609
  2015   482,125     604,232   902,739   79,093   —    42,381   2,110,570
John W. Wesley
Senior Vice President and General Counsel
  2017   393,750   —    376,627   200,003   395,482   —    51,263   1,417,125
  2016   393,750   —    410,971   200,000   395,010   —    24,392   1,424,123
  2015   393,750   —    239,991   360,014   45,596   —    35,771   1,075,122

 

Salary. The amounts in this column represent base salary earned during the year.

 

Bonus. The amount in this column reflects the value of the cash retention incentive payment paid to Mr. Lowery for his performance under the terms of the July 31, 2017 Retention Incentive Agreement between him and the Company.

 

Stock Awards and Option Awards. The amounts in these columns reflect the grant date fair value, computed in accordance with ASC Topic 718, of restricted share unit awards and stock options, respectively, granted under the Halyard Health, Inc. Equity Participation Plan in 2017, 2016, and 2015. See Note [10] to our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for the assumptions used in valuing and expensing these restricted share units and stock option awards in accordance with ASC Topic 718.

 

For awards that are subject to performance conditions, the value is based on the probable outcome of the conditions at grant date. This value, as well as the value of the awards at the grant date assuming the highest level of performance conditions will be achieved and using the grant date stock price, is set forth below:

 

NAME    YEAR    STOCK AWARDS AT GRANT   STOCK AWARDS AT HIGHEST
        DATE VALUE ($)   LEVEL OF PERFORMANCE
            CONDITIONS ($) 
Joseph F. Woody   2017   2,123,996   4,247,992
Robert E. Abernathy   2017   1,800,001   3,600,003
    2016   1,800,009   3,600,018
    2015   1,800,021   3,600,042
Steven E. Voskuil   2017   480,008   960,017
    2016   480,008   960,016
    2015   465,732   931,464
Rhonda D. Gibby   2017   209,986   419,973
    2016   218,999   437,998
    2015   209,980   419,960
Christopher M. Lowery   2017   614,999   1,229,999
    2016   629,995   1,259,990
    2015   604,232   1,208,464
John W. Wesley   2017   299,980   599,961
    2016   300,002   600,004
    2015   239,991   479,982

 

2018 Proxy Statement 45

 

Compensation Tables

 

Non-Equity Incentive Plan Compensation. The amounts in this column are the annual cash incentive payments described above in “Compensation Discussion and Analysis.” These amounts were earned during the years indicated and were paid to the Company’s named executive officers in February or March of the following year.

 

Change In Pension Value and Nonqualified Deferred Compensation Earnings. Each of the Company’s named executive officers participated in the Halyard Health Supplemental 401(k) Plan, a non-qualified defined contribution plan. Earnings on each of these plans are not included in the Summary Compensation Table because the earnings were not above-market or preferential. See “Nonqualified Deferred Compensation” below for a discussion of this plan and each named executive officer’s earnings under the plan in 2017.

 

All Other Compensation. All other compensation consists of the following:

 

NAME    YEAR    PERQUISITES ($) (1)    DEFINED   TAX GROSS-UP   TOTAL ($)
            CONTRIBUTION PLAN   ($) (3)     
            AMOUNTS ($) (2)         
Joseph F. Woody   2017   194,156   20,206   70,400   284,761
Robert E. Abernathy   2017     127,689     127,689
    2016     55,752     55,752
    2015     96,755     96,755
Steven E. Voskuil    2017   8,446   69,788   1,189   79,422
    2016   10,000   27,543   8,374   45,916
    2015   18,585   41,637   15,562   75,784
Rhonda D. Gibby    2017     43,008     43,008
    2016     19,128     19,128
    2015     22,891     22,891
Christopher M. Lowery    2017     75,511     75,511
    2016     31,262     31,262
    2015     42,381     42,381
John W. Wesley   2017     51,263     51,263
    2016     24,392     24,392
    2015     35,771     35,771

 

(1) Perquisites. Perquisites for Mr. Woody included reimbursement for moving expenses in connection with his relocation to the Atlanta area to assume his new role as CEO of the Company in 2017. Perquisites for Mr. Voskuil included reimbursement for moving expenses in connection with his relocation to the Atlanta area to continue in his role as CFO.
(2) Defined Contribution Plan Amounts. Matching contributions were made under the Halyard Health 401(k) Plan and Supplemental 401(k) Plan in 2017 for Mr. Woody and in 2017, 2016, and 2015 for each of the Company’s other named executive officers.
(3) Tax Gross-Ups. The amount shown for Mr. Woody reflects tax reimbursement under our executive relocation program in connection with his relocation to the Atlanta area to assume his new role as CEO of the Company in 2017.

 

46 2018 Proxy Statement

 

Compensation Tables

 

Grants of Plan-Based Awards

 

The following table sets forth Company plan-based awards granted to the Company’s named executive officers during 2017 on a grant-by-grant basis.

 

GRANTS OF PLAN-BASED AWARDS IN 2017

 

                ESTIMATED FUTURE PAYOUTS   ESTIMATED FUTURE PAYOUTS                
                UNDER NON-EQUITY   UNDER EQUITY INCENTIVE                
                INCENTIVE PLAN AWARDS (1)   PLAN AWARDS (2)                
                                        ALL OTHER   ALL OTHER        
                                        STOCK   OPTION       GRANT
                                        AWARDS:   AWARDS:   EXERCISE   DATE FAIR
                                        NUMBER   NUMBER OF   OR BASE   VALUE OF
        DATE                               OF SHARES   SECURITIES   PRICE OF   STOCK AND
        COMMITTEE                               OF STOCK   UNDERLYING   OPTION   OPTION
        TOOK   GRANT   THRESHOLD   TARGET    MAXIMUM   THRESHOLD   TARGET    MAXIMUM   OR UNITS   OPTIONS   AWARDS   AWARDS
NAME    GRANT TYPE   ACTION (3)   DATE (3)    ($)   ($)   ($)   (#)   (#)   (#)   (#)   (#) (4)   ($/SH)   ($) (5)
Joseph F.   Performance-   06/19/2017   6/26/2017                   53,193   106,386               2,135,699
Woody   based RSUs                                                
    Time-vested   06/19/2017   6/26/2017                               149,053   39.93   1,416,004
    stock option                                                
    Annual cash               1,017,750   2,289,938                            
    incentive                                                
    award                                                
    Sign-on   06/19/2017   6/26/2017                           25,044           1,000,007
    Grant (6)                                                
Robert E.   Performance-                           46,083   92,166               2,259,910
Abernathy   based RSUs                                                
    Time-vested                                       134,680   36.74   1,199,999
    stock option                                                
    Annual cash               862,496   1,940,616                            
    incentive                                                
    award                                                
Steven E.   Performance-   02/22/2017   2/28/2017                   12,289   24,578               602,653
Voskuil   based RSUs                                                
    Time-vested   02/22/2017   5/3/2017                               35,915   36.74   320,003
    stock option                                                
    Annual cash               314,681   708,032                            
    incentive                                                
    award                                                
Rhonda D.   Performance-   02/22/2017   2/28/2017                   5,376   10,752               263,639
Gibby   based RSUs                                                
    Time-vested   02/22/2017   5/3/2017                               15,713   36.74   140,003
    stock option                                                
    Annual cash               160,472   361,061                            
    incentive                                                
    award                                                
Christopher   Performance-   02/22/2017   2/28/2017                   15,745   31,490               772,135
M. Lowery   based RSUs                                                
    Time-vested   02/22/2017   5/3/2017                               46,016   36.74   410,003
    stock option                                                
    Annual cash               422,101   949,726                            
    incentive                                                
    award                                                
John W.   Performance-   02/22/2017   2/28/2017                   7,680   15,360               376,627
Wesley   based RSUs                                                
    Time-vested   02/22/2017   5/3/2017                               22,447   36.74   200,003
    stock option                                                
    Annual cash               236,250   531,563                            
    incentive                                                
    award                                                

 

(1) Represents the potential annual performance-based incentive cash payments each named executive officer could earn in 2017. These awards were granted under the Executive Officer Achievement Award Program, which is the annual cash incentive program for the Company’s executive officers. Actual amounts earned in 2017 were based on the 2017 objectives established by the Company’s Compensation Committee. See “Compensation Discussion and Analysis.” At the time of the grant, the incentive payment could range from the threshold amount to the maximum amount depending on the extent to which the 2017 objectives were met. The actual amounts paid in 2018 based on the 2017 objectives are set forth in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation.”
(2) Performance-based restricted share units granted to the named executive officers under the Equity Participation Plan.
(3) The grant date for each award is the effective date of each grant established by the Company’s Compensation Committee when it took action to grant the awards, unless there is a date for such grant in the column entitled “Date Committee Took Action.” If the date on which the Committee takes action to approve a grant falls during a blackout period during which insiders are not permitted to buy or sell shares of our common stock, then the grant is made effective as of a later date when the blackout period has expired. Our blackout periods typically expire at 11:59 p.m. Eastern time on the day after we publicly release the results of the prior quarter. In addition, as described in “Compensation Discussion and Analysis,” the Committee approved the dollar value of annual time-vested stock options grants to executive officers at its meetings in February but the option award is not effective until May when annual option awards are granted to non-executive officers.
(4) Time-vested stock options granted under the Equity Participation Plan to Mr. Woody on June 26, 2017, and to the other named executive officers on May 3, 2017, with respect to annual long-term incentive grants. See “Compensation Discussion and Analysis” for a discussion of our annual long-term annual grants.
(5) Grant date fair value is determined in accordance with ASC Topic 718. See Note 12 to our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for the assumptions used in valuing and expensing these restricted share units and stock option awards in accordance with ASC Topic 718.
(6) Time-vested restricted share units granted under the Equity Participation Plan to Mr. Woody on June 26, 2017 as a signing bonuses when he agreed to assume his role as Chief Executive Officer of the Company.

 

2018 Proxy Statement 47

 

Compensation Tables

 

OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2017 (1)

 

        OPTION AWARDS (2)   STOCK AWARDS
        NUMBER OF   NUMBER OF                        
        SECURITIES   SECURITIES           NUMBER OF   MARKET VALUE   EQUITY INCENTIVE PLAN   EQUITY INCENTIVE PLAN
        UNDERLYING   UNDERLYING           SHARES OR   OF SHARES OR   AWARDS: NUMBER OF   AWARDS: MARKET OR PAYOUT
        UNEXERCISED   UNEXERCISED   OPTION   OPTION   UNITS OF STOCK   UNITS OF STOCK   UNEARNED SHARES, UNITS   VALUE OF UNEARNED SHARES,
        OPTIONS (#)   OPTIONS (#)   EXERCISE   EXPIRATION   THAT HAVE NOT   THAT HAVE NOT   OR OTHER RIGHTS THAT   UNITS, OR OTHER RIGHTS THAT
NAME    GRANT DATE    EXERCISABLE    UNEXERCISABLE    PRICE ($) (3)    DATE    VESTED (#) (4)    VESTED ($) (7)    HAVE NOT VESTED (#)    HAVE NOT VESTED ($) (9) 
Joseph F.Woody   6/26/2017       149,053   39.93   6/26/2027                
  6/26/2017                   25,044   1,156,532        
    6/26/2017                           53,193   2,456,453
Robert E. Abernathy   5/3/2017   134,680       36.74   9/1/2022                
  2/28/2017                           46,083   2,128,113
    5/5/2016   155,844       29.48   9/1/2022                
    3/1/2016                           65,598(9)   3,029,316
    5/5/2015   96,154       45.53   9/1/2022                
    3/5/2015                           39,587   1,828,128
    11/7/2014   21,999       37.88   9/1/2022                
Steven E. Voskuil   5/3/2017       35,915   36.74   5/3/2027                
  2/28/2017                           12,289   567,506
    5/5/2016   12,467   29,091   29.48   5/5/2026                
    3/1/2016                           17,493(9)   807,827
    5/5/2015   14,904   9,936   45.43   5/5/2025                
    3/18/2015       713   47.62   3/5/2025                
    3/18/2015                           330(8)   15,239
    3/5/2015       21,404   45.47   3/5/2025                
    3/5/2015                           9,897(8)   457,043
    11/7/2014   14,135       26.04   5/2/2022                
    11/7/2014   20,443       34.24   5/1/2023                
    11/7/2014   31,671       37.50   6/19/2024                
    11/7/2014   6,000       37.88   11/7/2024                
Rhonda D. Gibby    5/3/2017       15,713   36.74   5/3/2027                
  2/28/2017                           5,376   248,264
    5/5/2016   5,688   13,273   29.48   5/5/2026                
    3/1/2016                           7,981(9)   368,563
    5/5/2015   6,730   4,488   45.53   5/5/2025                
    3/5/2015                           4,618(8)   213,259
    3/5/2015       9,989   45.47   3/5/2025                
    11/7/2014   5,378       26.04   5/2/2022                
    11/7/2014   10,223       34.24   5/1/2023                
    11/7/2014   11,333       37.50   6/19/2024                
    11/7/2014   3,600       37.88   11/7/2024                

 

48 2018 Proxy Statement

 

Compensation Tables

 

        OPTION AWARDS (2)   STOCK AWARDS
        NUMBER OF   NUMBER OF                        
        SECURITIES   SECURITIES           NUMBER OF   MARKET VALUE   EQUITY INCENTIVE PLAN   EQUITY INCENTIVE PLAN
        UNDERLYING   UNDERLYING           SHARES OR   OF SHARES OR   AWARDS: NUMBER OF   AWARDS: MARKET OR PAYOUT
        UNEXERCISED   UNEXERCISED   OPTION   OPTION   UNITS OF STOCK   UNITS OF STOCK   UNEARNED SHARES,   VALUE OF UNEARNED SHARES,
    GRANT   OPTIONS (#)   OPTIONS (#)   EXERCISE   EXPIRATION   THAT HAVE NOT   THAT HAVE NOT   UNITS OR OTHER RIGHTS   UNITS, OR OTHER RIGHTS
NAME    DATE    EXERCISABLE    UNEXERCISABLE    PRICE ($) (3)    DATE    VESTED (#) (4)    VESTED ($) (7)    THAT HAVE NOT VESTED (#)    THAT HAVE NOT VESTED ($) (9) 
Christopher M. Lowery   5/5/2016   16,363       29.48   5/5/2026                
  5/5/2015   19,230       45.53   5/5/2025                
    11/7/2014   5,840       26.04   5/2/2022                
    11/7/2014   9,713       34.24   5/1/2023                
    11/7/2014   19,336       37.50   6/19/2024                
    11/7/2014   14,200       37.88   11/7/2024                
John W. Wesley    5/3/2017       22,447   36.74   5/3/2027                
  2/28/2017                           7,680   354,662
    5/5/016   7,792   18,182   29.48   5/5/2026                
    3/1/2016                           10,933   504,886
    5/5/2015   7,692   5,129   45.53   5/5/2025                
    3/5/2015                           5,278   243,738
    3/5/2015       11,416   45.57   3/5/2025                
    11/7/2014   2,200       37.88   11/7/2024                

 

(1) The amounts shown reflect outstanding equity awards granted under the Equity Participation Plan.
(2) Stock options granted under the Equity Participation Plan generally become exercisable in three annual installments of 30 percent, 30 percent and 40 percent, beginning on the first anniversary of the grant date. Grow to Greatness awards become exercisable in three annual installments of 33.3% each, beginning on March 5, 2017.
  All options become exercisable for three years upon death or total and permanent disability and for the earlier of five years or the remaining term of the options, upon retirement of the officer. In addition, options generally become exercisable upon a termination of employment following a change of control, and options granted to the named executive officers are subject to the Executive Severance Plan. See “Potential Payments on Termination or Change of Control” below. The options may be transferred by the officers to family members or certain entities in which family members have interests.
(3) The option price per share is equal to the closing price per share of the Company’s common stock at grant date, except for replacement options which have a grant price intended to preserve the intrinsic value of the forfeited Kimberly-Clark option being replaced, and options granted immediately following the spin-off which were priced using a weighted average closing price for the first five trading days following the effective date of the spin-off.
(4) Time-vested restricted share units granted under the Equity Participation Plan to Mr. Woody on June 26,2017 as a signing bonus when he agreed to assume his role as Chief of Executive Officer of the Company.
(5) The values in this column are based on the closing price of our common stock on December 29, 2017 of $46.18 per share.
(6) These performance restricted share units vest on March 5, 2018.
(7) These performance restricted share units vest on March 1, 2019.
(8) These performance restricted share units vest on February 28, 2020.
(9) The values in this column are based on the closing price of our common stock on December 29, 2017 of $46.18 per share. The value assumes the performance-based restricted share units will payout at target. As of December 31, 2017, the performance-based share units issued in March 2015 are on pace to pay out at zero percent, the performance-based share units issued in March 2016 are on pace to payout at 200 percent, and the performance-based share units issued in February 2017 and June 2017 are on pace to payout at 81 percent.

 

2018 Proxy Statement 49
 

Compensation Tables

 

Discussion Of Summary Compensation And Plan-Based Awards Tables

The Company’s executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the Grants of Plan-Based Awards in 2017 table was paid or awarded, are described under “Compensation Discussion and Analysis” above.

 

Outstanding Equity Awards

The following table sets forth information concerning outstanding Company equity awards for the named executive officers as of December 31, 2017. The 2017 and 2016 awards were part of our annual long-term incentive compensation awards. The 2015 awards were part of our annual long-term incentive compensation awards or our 2015 Grow to Greatness awards. The March 18, 2015 grants to Messrs. Lowery and Voskuil were made to correct errors in the calculation of their annual long-term incentive compensation awards and our 2015 Grow to Greatness awards.

 

Option Exercises and Stock Vested

 

The following table sets forth information concerning Company stock options exercised and stock awards vested during 2017 for the Company’s named executive officers.

 

OPTION EXERCISES AND STOCK VESTED IN 2017

 

    OPTION AWARDS   STOCK AWARDS(1)
    NUMBER       NUMBER    
    OF SHARES       OF SHARES    
    ACQUIRED ON   VALUE REALIZED   ACQUIRED   VALUE REALIZED
NAME    EXERCISE (#)    ON EXERCISE ($)    ON VESTING (#)    ON VESTING ($) (2) 
Joseph F. Woody   —    —     
Robert E. Abernathy   —    —    38,302   1,512,929
Steven E. Voskuil   —    —    15,517   649,571
Rhonda D. Gibby   —    —    6,990   298,095
Christopher M. Lowery   —    —    19,904   872,946
John W. Wesley   —    —    8,024   330,386

 

(1) The amounts in this table reflect Company time-based restricted share units that vested during the year.
(2) The dollar amount reflects the total pre-tax value received by the Company’s named executive officers upon the vesting of the time-vested restricted share units (number of shares vested times the closing price of the Company’s common stock on the vesting date), including cash paid in lieu of fractional shares. It is not the grant date fair value disclosed in other locations in this proxy statement.

 

Pension Benefits

 

The Company does not offer a pension plan in the United States, and none of the Company’s executive officers participate in a Company pension plan.

 

Nonqualified Deferred Compensation

The following table sets forth information concerning the Company’s nonqualified defined contribution plan and deferred compensation plans for the Company’s named executive officers during 2017.

 

50 2018 Proxy Statement
 

Compensation Tables

 

2017 NONQUALIFIED DEFERRED COMPENSATION

 

NAME    PLAN    COMPANY   AGGREGATE   AGGREGATE BALANCE
        CONTRIBUTIONS IN   EARNINGS IN 2017   AT DECEMBER 31, 2017
        2017 ($) (1)    ($) (2)    ($) 
Joseph F. Woody   Supplemental 401(k) Plan   4,006   73   4,079
Robert E. Abernathy   Supplemental 401(k) Plan   111,489   148,710   966,553
Steven E. Voskuil   Supplemental 401(k) Plan   53,588   38,808   280,050
Rhonda D. Gibby   Supplemental 401(k) Plan   26,808   13,455   102,236
Christopher M. Lowery   Supplemental 401(k) Plan   59,311   16,438   168,307
John W. Wesley   Supplemental 401(k) Plan   35,063   53,398   399,590

 

(1) Contributions consist of amounts accrued by the Company under the Halyard Supplemental 401(k) Plan. These amounts are included in the Summary Compensation Table and represent a portion of the Defined Contribution Plan Payments included in All Other Compensation.
(2) The amounts in this column show the changes in the aggregate account balance for the Company’s named executive officers during 2017 that are not attributable to company contributions. Aggregate earnings are not included in the Summary Compensation Table because the earnings are not above-market or preferential.

 

Overview of Qualified and Non-Qualified Plans. The following is an overview of the Company’s qualified and non-qualified plans offered to our executive officers as of December 31, 2017.

 

  HALYARD 401(K) PLAN HALYARD SUPPLEMENTAL 401(K) PLAN
Purpose       To assist employees in saving for retirement       To provide benefits to the extent necessary to fulfill the intent of the Halyard 401(k) Plan without regard to the limitations imposed by the Code on qualified defined contribution plans
Eligible participants   Most employees   Salaried employees impacted by limitations imposed by the Code on the Halyard 401(k) Plan
Is the plan qualified under the Code? Yes No
Can employees make contributions? Yes  No
Does the Company make contributions or match employee contributions?   The Company matches 100% of employee contributions, to a yearly maximum of 6% of eligible compensation. The Company provides credit to the extent the Company’s contributions to the Halyard 401(k) Plan are limited by the Code
When do account balances vest? Immediately Immediately
How are account balances invested? Account balances are invested in certain designated investment options selected by the participant Account balances are credited with earnings and losses as if such account balances were invested in certain designated investment options selected by the participant
When are account balances distributed? Distributions of the participant’s vested account balance are only available after termination of employment. Loans, hardship and certain other withdrawals are allowed prior to termination of employment for certain vested amounts under the Halyard 401(k) Plan Distributions of the participant’s vested account balance are payable after termination of employment.

 

The Halyard Supplemental 401(k) Plan is not funded and represents a general obligation of the Company.

 

2018 Proxy Statement 51

 

Compensation Tables

 

Potential Payments on Termination or Change of Control

The Company’s executive officers are eligible to receive certain benefits in the event of termination of employment, including following a change of control of the Company. This section describes various termination scenarios as well as the payments and benefits payable under those scenarios.

 

Severance Benefits

The Company maintains two severance plans that cover its executive officers, depending on the circumstances that result in their termination. Those plans include the Executive Severance Plan, which is applicable when an executive officer is terminated following a change of control, and the Severance Pay Plan, which is applicable in the event of certain other involuntary terminations. An executive officer may not receive severance payments under more than one of the plans described below.

 

Executive Severance Plan. The Company’s Board of Directors determines the eligibility criteria for participation in the Executive Severance Plan. The Company has entered into an agreement under this plan with each of its named executive officers. The agreements provide that, in the event of a “Qualified Termination of Employment” (as described below), the executive officers will each receive a cash payment in an amount equal to the sum of:

For the CEO, two times the sum of annual base salary and the average of the annual cash incentive award for the prior three years, or such fewer number of years for which the CEO had been employed by the Company, and for any other executive officer, one and one-half times the sum of annual base salary and the average of the annual cash incentive award for the prior three years, or such fewer number of years for which the executive officer had been employed by the Company,
If the separation from service occurs after March 31 of a given year, the pro-rated annual cash incentive award for that year, assuming that performance was achieved at the target level of performance,
The value of any outstanding stock option awards, based on the closing price of the Company’s common stock at the date of the Qualified Termination of Employment,
The value of the employer match each executive officer would have received if he or she had remained employed an additional two years under the Halyard Health 401(k) Plan and Halyard Health Supplemental 401(k) Plan, and
For the CEO, two times the value of the amount of COBRA premiums for medical and dental coverage and for any other executive officer, one and one-half times the value of the amount of COBRA premiums for medical and dental coverage.

 

A “Qualified Termination of Employment” is a separation from service within two years following a change of control of the Company (as defined in the plan) either involuntarily without cause or by the participant with good reason (as defined in the plan). In addition, any involuntary separation from service without cause within one year before a change of control will also be determined to be a Qualified Termination of Employment if it is in connection with, or in anticipation of, a change of control.

 

The current agreements with each executive officer expire on October 31, 2020, unless extended by the Company’s Compensation Committee.

 

The Executive Severance Plan provides that the executive officers are not entitled to a tax gross-up if they incur an excise tax due to the application of Section 280G of the Code. Instead, payments and benefits payable to an executive officer will be reduced to the extent doing so would result in the officer retaining a larger after-tax amount, taking into account the income, excise and other taxes imposed on the payments and benefits.

 

The agreements with the executive officers provide that they will retain in confidence any confidential information known to them concerning the Company and the Company’s business so long as such information is not publicly disclosed.

 

52 2018 Proxy Statement
 
 

Compensation Tables

 

Severance Pay Plan. The Company’s Severance Pay Plan generally provides eligible employees (including the Company’s named executive officers) severance payments and benefits in the event of certain involuntary terminations. Benefits under the Severance Pay Plan depend on the participants’ employee classification. Under the Severance Pay Plan, if an executive officer’s employment was involuntarily terminated, he or she would receive:

For the CEO, two times the sum of annual base salary and the average annual incentive award for the three prior fiscal years, or such fewer number of years for which the CEO had been employed by the Company, and for any other executive officer, one and one-half times the sum of annual base salary and the average annual incentive award for the three prior fiscal years, or such fewer number of years for which the executive officer had been employed by the Company,
If the termination occurs after March 31 of a given year, a pro-rated annual incentive award for that year based on actual performance,
Six months of COBRA premiums for medical coverage, and
Six months of outplacement services and three months of participation in Halyard’s employee assistance program.

 

Severance pay under the Severance Pay Plan will not be paid to any participant who is terminated for cause (as defined in the plan), is terminated during a period in which the participant is not actively at work for more than 25 weeks (except to the extent otherwise required by law), voluntarily quits or retires, dies or is offered a comparable position (as defined in the plan).

 

A named executive officer must execute a full and final release of claims against the Company within a specified period of time following termination to receive severance benefits under the Severance Pay Plan. If the release has been timely executed, severance benefits are payable as a lump sum cash payment no later than 60 days following the participant’s termination date. Any current year annual incentive award that is payable under the Severance Pay Plan will be paid at the same time as it was payable under the Executive Officer Achievement Award Program or the Management Achievement Award Program, as applicable, but no later than 60 days following the calendar year of the separation from service.

 

Retirement, Death and Disability

Retirement. Retirement is defined as separation from service on or after the age of 60 with five years of service, or on or after age 55 with ten years of service. Years of service at Kimberly-Clark prior to the spin-off are considered years of service for the definition of retirement. In the event of retirement, the Company’s named executive officers are entitled to receive:

Accelerated vesting of unvested stock options (excluding the Grow-to-Greatness options granted in 2015), and the options will be exercisable until the earlier of five years or the remaining term of the options,
For units outstanding more than six months after the date of grant, performance-based restricted share units will be payable based on attainment of the performance goal at the end of the performance period,
Time-vested restricted share units will be vested pro rata, based on the number of full months of employment during the restricted period prior to the participant’s termination of employment, payable within 70 days following the end of the performance period,
Annual incentive award payment under the Executive Officer Achievement Award Program or the Management Achievement Award Program, as applicable, as determined by the Halyard Compensation Committee in its discretion.

 

Death. In the event of death while an active employee, the following benefits are payable:

Accelerated vesting of unvested stock options, and the options will be exercisable until the earlier of three years or the remaining term of the options,
Time-vested restricted share units will be vested pro rata, based on the number of full months of employment during the restricted period prior to the participant’s termination of employment, payable within 70 days following the end of the restricted period,
For units outstanding more than six months after the date of grant, performance-based restricted share units will be vested pro rata, based on attainment of the performance goal at the end of the restricted period, payable within 70 days following the end of the performance period,

 

2018 Proxy Statement 53
 
 

Compensation Tables

 

Annual incentive award payment under the Executive Officer Achievement Award Program or the Management Achievement Award Program, as applicable, as determined by the Halyard Compensation Committee in its discretion, and
Payment of benefits under the Company’s group life insurance plan (which is available to all salaried employees in the United States) equal to two times the participant’s annual pay, up to $1 million (plus any additional coverage of three, four, five or six times the participant’s annual pay, in increments of up to $1 million each, purchased by the participant at group rates). The Company-provided and employee-purchased benefits cannot exceed $6 million.

 

Disability. In the event of a separation from service due to a total and permanent disability, as defined in the applicable plan, the Company’s named executive officers are entitled to receive:

Accelerated vesting of unvested stock options, and the options will be exercisable until the earlier of three years or the remaining term of the options,
Time-vested restricted share units will be vested pro rata, based on the number of full months of employment during the restricted period prior to the participant’s termination of employment, payable within 70 days following the end of the performance period,
For units outstanding more than six months after the date of grant, performance-based restricted share units will be vested pro rata, based on attainment of the performance goal at the end of the restricted period, payable within 70 days following the end of the restricted period,
Annual incentive award payment under the Executive Officer Achievement Award Program or the Management Achievement Award Program, as applicable, as determined by the Company’s Compensation Committee in its discretion,
Continuing coverage under the Company’s group life insurance plan (available to all U.S. salaried employees), with no requirement to make monthly contributions toward coverage during disability, and
Payment of benefits under the Company’s Long-Term Disability Plan (available to all U.S. salaried employees). Long-term disability under the plan would provide income protection of monthly base pay, ranging from a minimum monthly benefit of $50 to a maximum monthly benefit of $20,000. Benefits are reduced by the amount of any other Company or government-provided income benefits received (but will not be lower than the minimum monthly benefit).

 

Potential Payments on Termination or Change of Control Table

The following table presents the approximate value of (1) the severance benefits for the named executive officers under the Executive Severance Plan had a Qualified Termination of Employment under that plan occurred on December 31, 2017; (2) the severance benefits for the Halyard named executive officers under the Severance Pay Plan if an involuntary termination had occurred on December 31, 2017; (3) the benefits that would have been payable on the death of the Halyard named executive officers on December 31, 2017; (4) the benefits that would have been payable on the total and permanent disability of the Halyard named executive officers on December 31, 2017; and (5) the potential payments to Mr. Wesley if he had retired on December 31, 2017. If applicable, amounts in the table were calculated using the closing price of Halyard’s common stock on December 31, 2017 of $46.18 per share. Because Mr. Abernathy retired during 2017, the amounts in the table for him reflect only the value of the retirement benefits he received as of the date of retirement.

 

Because none of the Company’s named executive officers, other than Mr. Wesley, were eligible to retire as of December 31, 2017, potential payments assuming retirement on that date are not included for the other named executive officers. The value of benefits that already were vested as of December 31, 2017, such as vested but unexercised stock options and the balances of the executive officers’ accounts under the Halyard Health 401(k) Plan and the Halyard Supplemental 401(k) Plan, are not included in the table.

 

54 2018 Proxy Statement
 
 

Compensation Tables

 

The amounts presented in the following table are in addition to amounts each Company named executive officer earned or accrued prior to termination, such as previously vested benefits under Company’s qualified and nonqualified plans, previously vested options, restricted stock and restricted share units and accrued salary and vacation. For information about these previously earned and accrued amounts, see the “Summary Compensation Table,” “Outstanding Equity Awards,” “Option Exercises and Stock Vested,” and “Nonqualified Deferred Compensation.”

 

NAME CASH EQUITY WITH ACCELERATED ADDITIONAL RETIREMENT CONTINUED BENEFITS TOTAL ($)
  PAYMENT ($) VESTING ($) BENEFITS ($) AND OTHER AMOUNTS ($)  
Joseph F. Woody          
Qualified Termination of Employment in connection with a Change in Control (1) 4,046,793 931,581 (2) 197,009 (3) 33,520 (4) 5,208,903
Involuntary termination absent a Change in Control (5) 4,046,793     13,799 (6) 4,060,592
Death (7) 1,884,124 (8) 1,533,745 (2)     3,417,869
Disability 884,124 1,533,745 (2)     2,417,869
Robert E. Abernathy          
Retirement   4,178,962 (2)     4,178,962
Steven E. Voskuil          
Qualified Termination of Employment in connection with a Change in Control (1) 1,305,760 1,917,044 (2) 85,580 (3) 34,777 (4) 3,343,160
Involuntary termination absent a Change in Control (5) 1,305,760     16,768 (6) 1,322,528
Death (7) 1,422,040 (8) 1,930,751 (2)     3,352,791
Disability 522,940 3,001,283 (2)     3,524,223
Rhonda D. Gibby          
Qualified Termination of Employment in connection with a Change in Control (1) 810,345 838,061 (2) 55,199 (3) 20,490 (4) 1,724,096
Involuntary termination absent a Change in Control (5) 810,345     12,243 (6) 822,588
Death (7) 909,212 (8) 869,682 (2)     1,778,894
Disability 267,312 1,327,744 (2)     1,595,056
Christopher M. Lowery          
Qualified Termination of Employment in connection with a Change in Control (1) 1,543,696 805,159 (2) 98,170 (3) 28,963 (4) 2,475,987
Involuntary termination absent a Change in Control (5) 1,543,696     14,825 (6) 1,558,521
Death (7) 1,694,651 (8) 2,506,055 (2)     4,200,706
Disability 701,451 2,213,627 (2)     2,915,078
John W. Wesley          
Qualified Termination of Employment in connection with a Change in Control (1) 1,075,267 680,364 (2) 71,846 (3) 34,777 (4) 1,862,254
Involuntary termination absent a Change in Control (5) 1,075,267     16,768 (6) 1,092,035
Death (7) 1,182,983 (8) 1,157,464 (2)     2,340,447
Disability 395,483 1,310,850 (2)     1,706,333
Retirement 395,483 1,157,464 (2)     1,552,947

 

(1) Represents amounts payable under the Halyard Health Executive Severance Plan.
(2) Assumes that performance-based restricted stock units would vest at target level.
(3) Includes the value of two additional years of employer contributions under the Halyard 401(k) Plan and the Halyard Supplemental 401(k) Plan, pursuant to the terms of the Executive Severance Plan.
(4) Includes an amount equal to 24 months of COBRA medical and dental coverage for Mr. Woody and 18 months of COBRA medical and dental coverage for the other executive officers.
(5) Benefits payable under the Halyard Health Severance Pay Plan.
(6) Equals six months of COBRA medical coverage and outplacement services.
(7) Balances in each executive’s accounts under the Halyard 401(k) Plan and the Halyard Supplemental 401(k) Plan are excluded because the payout of those balances upon death is a benefit available to all U.S. salaried employees.
(8) For death, includes the payment of benefits under the Company’s group life insurance plan (which is available to all U.S. salaried employees). For death and disability, assumes the Company Compensation Committee would approve payment under the Executive Officer Achievement Award Program for 2017 at the actual award level discussed in Compensation Discussion and Analysis.
 

The cost of continued coverage under the Company’s group life insurance plans has been excluded from the table because the benefit is available to all U.S. salaried employees and does not discriminate in scope or terms or operation in favor of our named executive officers. Figures also do not include benefits payable under Halyard’s Long-Term Disability Plan (which is available to all U.S. salaried employees), the value of which would be dependent on the life span of the Company’s named executive officer and the value of any Company or government-provided income benefits received.

 

2018 Proxy Statement 55
 
 

Compensation Tables

 

Ratio of CEO Compensation to Median Employee Compensation

The 2017 compensation disclosure ratio of the median annual total compensation of all Company employees worldwide to the annual total compensation of the Company’s CEO is as follows:

 

CATEGORY 2017 TOTAL COMPENSATION AND RATIO ($)
Annual total compensation of Mr. Woody (A) 6,605,595
Median annual total compensation of all employees worldwide (excluding Mr. Woody) (B) 5,285
Ratio of A to B 1,250:1

 

The Company identified the median employee by examining the following compensation elements for all individuals, excluding Mr. Woody: current base salary, 2016 bonus paid in 2017, grant date value of 2017 long-term grants, trailing 12 months of commissions and overtime. The Company determined the median employee based on its workforce as of December 31, 2017, and included all full-time and part-time employees. After identifying the median employee, the Company calculated annual total compensation for such employee using the same methodology used for named executive officers as set forth in the Summary Compensation Table.

 

56 2018 Proxy Statement
 
 
Other Information

 

Security Ownership Information

 

The following table shows the number of shares of our common stock beneficially owned as of March 3, 2018, by each director and nominee, by each named executive officer, and by all directors, nominees and executive officers as a group.

 

NAME NUMBER OF SHARES (1)(2)(3)(4)(5)(6)  PERCENT OF CLASS 
Gary D. Blackford 14,920 *
John P. Byrnes 14,948 *
Ronald W. Dollens 14,920 *
Rhonda D. Gibby 96,538 *
William A. Hawkins, III 14,296 *
Heidi Kunz 14,925 *
Patrick J. O’Leary 14,970 *
Maria Sainz 14,112 *
Dr. Julie Shimer 14,920 *
Steven E. Voskuil 220,175 *
John W. Wesley 82,337 *
Joseph F. Woody 121,673  
All directors, nominees and executive officers as a group (12 persons) 677,915 1.44

 

* Each director, nominee, and named executive officer owns less than one percent of the outstanding shares of our common stock.

(1) Except as otherwise noted, the directors, nominees and named executive officers, and the directors, nominees and executive officers as a group, have sole voting and investment power with respect to the shares listed.
(2)A portion of the shares owned by certain executive officers and directors may be held in margin accounts at brokerage firms. Under the terms of the margin account agreements, stocks and other assets held in these accounts may be pledged to secure margin obligations. As of the date of this proxy statement, none of the executive officers or directors has any outstanding margin obligations under any of these accounts.
(3)Share amounts include unvested restricted share units granted to the following named executive officers under the Halyard Health, Inc. Equity Participation Plan as indicated below. Amounts representing performance-based restricted share units (“PRSUs”) in the table below represent target levels for the awards. The PRSUs in the table below were granted on March 1, 2016, February 28, 2017 and February 27, 2018.

 

NAME TIME-VESTED RESTRICTED SHARE UNITS (#) PERFORMANCE-BASED RESTRICTED SHARE UNITS (#)
Joseph F. Woody 25,044 96,629
Steven E. Voskuil 0 49,518
Rhonda D. Gibby 0 22,269
John W. Wesley 0 29,412

 

2018 Proxy Statement 57
 

Other Information