DEF 14A 1 cdk3256241-def14a.htm DEFINITIVE PROXY STATEMENT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

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

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

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CDK Global 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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MESSAGE FROM OUR CHIEF EXECUTIVE OFFICER

DEAR FELLOW STOCKHOLDERS:

I am very pleased to report that we demonstrated significant progress on our business transformation plan in fiscal 2017. We began more than two years ago with a plan to increase our operating efficiency and improve the cost structure within our global operations. Our transformation is a journey and by enhancing our products and processes and focusing on our dealer customers, we are building on our success and are confident in our continuing progress.

Meeting Our Transformational Goals

We continue to hit our targets for the aggressive financial transformation we started at the beginning of fiscal 2016. In two years, we have expanded consolidated net earnings attributable to CDK margin by 470 basis points to 13.3%, and our adjusted EBITDA margin by 920 basis points to 32.1%. We are well on our way to achieving our long-term transformation goals. Our success is driven by taking a disciplined approach and executing on more than 260 projects across our eight key transformation workstreams. Every CDK employee is part of this effort, and we all take pride in these significant financial results and the improved customer experience.

Our transformation goes beyond pure financial objectives. To promote ease of maintenance and increased product stability, we are reducing software versions as part of our MoveUp! workstream. By the end of fiscal 2017 we had reduced our software versions from over 1,500 to fewer than 400, exceeding our fiscal 2017 year-end target of 500 versions. To simplify the business, we set a goal to reduce our facility footprint and close 18 locations by the end of fiscal 2018. By the end of fiscal 2017, we had already exceeded this goal with the closure of 20 facilities. These efforts, combined with investments in our state-of-the-art service center in Norwood, Ohio, have translated into measurable improvements in the customer experience. In fiscal 2017, during our customers’ critical year-end period, we combined product, service, and training innovations to drive service interactions down by 11% despite record OEM and regulator-driven process changes and increased user counts. In addition, wait times for service fell by 90%. We are delivering on our business transformation goals, and I am excited about what we will achieve in the future.

Transforming our Culture to Better Serve our Customers

Listening carefully to our customers and making changes quickly has become a central tenant of the CDK brand. We are laser-focused on operating as a unified company with accountability and teamwork. This priority has called for realigning our organization into fewer, more global functions focused on a common purpose: to be the enabler of end-to-end automotive commerce. And with the right organization in place, our cultural emphasis is now on achieving competitive excellence.

Driving Profitable International Growth

Our CDK International business has made significant strides in improving its financial performance and is now approaching its long-term 25% adjusted EBITDA margin target. International markets also offer an increased opportunity for growth as we look to penetrate more fragmented markets and expand our OEM relationships. The new leadership at CDK International is focused on taking full advantage of these growth opportunities in the years to come.

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MESSAGE FROM OUR CHIEF EXECUTIVE OFFICER

Delivering continued innovation

While executing our transformation is critical, we continue to pursue product and service innovation in support of our customers and continued growth. In fiscal 2017 we introduced our redesigned NextGeneration websites and migrated approximately 5,000 website customers to the new platform. Websites are the #1 marketing tool for our dealer customers and our NextGeneration websites are state of the art, providing enhanced functionality across a range of devices, from computers to tablets to phones, and improving consumer experience and outcomes for our dealer customers.

Returning Capital to Shareholders

We continue to generate significant cash and are committed to using it to drive maximum benefits for our shareholders while continuing to invest in technology and service for customers. We completed our $1 billion return of capital plan in December and launched new leverage targets, with an anticipated ratio of net debt to adjusted EBITDA of 2.5 to 3.0 times in the coming years. Based on these targets, we anticipate dividends and share buybacks of $750 million to $1 billion each calendar year from 2017 to 2019. If strategic opportunities present themselves to deploy significant capital to acquisitions, we may slow the pace of returns in order to drive growth, but our guiding principal is to deliver significant shareholder value from capital deployment.

Continuously Improving

All of our employees are focused on exceeding expectations…always getting better. Starting with core processes, we are transforming the way we develop, deliver and service our products to put our dealer customers first and provide the technology that enables end-to-end automotive commerce. I am proud to have the opportunity to lead this team and I appreciate the support of our customers, stockholders, board of directors, and employees as we continue this journey.

Sincerely,

Brian P. MacDonald

President and Chief Executive Officer

October 3, 2017

 

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MESSAGE FROM OUR CHIEF EXECUTIVE OFFICER

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS

This proxy statement, including the letter from our chief executive officer, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including: our business outlook and forecasted GAAP and adjusted results for our fiscal year ending June 30, 2018 (“fiscal 2018”), and adjusted EBITDA targets for the Company’s fiscal year ending June 30, 2019 (“fiscal 2019”); statements concerning our payment of dividends or the repurchase of shares and the funding of such dividends and repurchases; our objectives for its multi-year business transformation plan; other plans; objectives; forecasts; goals; beliefs; business strategies; future events; business conditions; results of operations; financial position and business outlook and trends; and other information, may be forward-looking statements. Words such as “might,” “will,” “may,” “could,” “should,” “estimates,” “expects,” “continues,” “contemplates,” “anticipates,” “projects,” “plans,” “potential,” “predicts,” “intends,” “believes,” “forecasts,” “future,” “assumes,” and variations of such words or similar expressions are intended to identify forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed, or implied by, these forward-looking statements.

The Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. The Company gives no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on its results of operations and financial condition. You should carefully read the factors described in the Company’s reports filed with the Securities and Exchange Commission (“SEC”), including those discussed under “Part I, Item 1A. Risk Factors” in the Company’s most recent Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q for a description of certain risks that could, among other things, cause the Company’s actual results to differ from any forward-looking statements contained herein. These filings can be found on the Company’s website at www.cdkglobal.com and the SEC’s website at www.sec.gov.

All forward-looking statements speak only as of the date of this proxy statement even if subsequently made available by the Company on its website or otherwise. The Company disclaims any obligation to update or revise any forward-looking statements that may be made to reflect new information or future events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

Non-GAAP Reconciliation

Please refer to the tables in Appendix A to this proxy statement for a reconciliation of the “As Reported” results to the “As Adjusted” results.

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PROXY STATEMENT SUMMARY

 

 

 

November 15, 2017

8:00 a.m. central time

www.virtualshareholder
meeting.com/CDK2017

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all the information you should consider, and you should read the entire proxy statement carefully before voting.

CDK Global, Inc. (the “Company,” “CDK Global,” “us,” “our” or “we”) is holding its 2017 Annual Meeting of Stockholders (the “Annual Meeting”) on November 15, 2017. This proxy statement is furnished in connection with the solicitation by our Board of Directors (the “Board”) of proxies for use at the Annual Meeting and at any adjournment or postponement thereof.

A Notice of Internet Availability of Proxy Materials or the proxy statement for the Annual Meeting is first being mailed to stockholders on or about October 6, 2017. Only stockholders of record at the close of business on September 19, 2017 are entitled to receive notice of and to vote at the Annual Meeting.

Your vote is important, and we urge you to vote. The Notice of Internet Availability of Proxy Materials instructs you on how to access our proxy materials, including our proxy statement, our Annual Report on Form 10-K (which is not a part of the proxy soliciting material) and your proxy card to vote via the Internet or by telephone. If you receive a paper copy of the proxy materials, you may also vote by completing, signing, dating, and returning the accompanying printed proxy in the enclosed envelope, which requires no postage if mailed in the United States.

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PROXY STATEMENT SUMMARY

MANAGEMENT PROPOSALS

In addition to conducting any other business properly brought before the Annual Meeting, we have summarized the management proposals below. Please review this proxy statement for more information. Your vote is important.

Management Proposal:

Page
Reference
(for more
detail)

Board
Recommendation

Vote
Required for
Approval

Effect of
Abstentions

Effect of
Broker
Non-Votes

1. Elect ten directors named in this proxy statement

13

FOR each director nominee

Majority of votes cast

None

None

The Board and the nominating and governance committee believe that the ten director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to our management.

2. Act, by non-binding advisory vote, to approve the compensation of our named executive officers (“NEOs”) for the fiscal year ended June 30, 2017 (“fiscal 2017”)

32

FOR

Majority of shares present and entitled to vote

Against

None

The Board and the compensation committee believe that our compensation policies and practices are effective in achieving our goals of attracting, retaining, and motivating our executive officers, rewarding financial and operating performance and aligning our executives’ interests with those of our stockholders to create long-term value. The Board values stockholders’ opinions, and the compensation committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.

3. Ratify the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm (“Independent Auditor”) for fiscal 2018

71

FOR

Majority of shares present and entitled to vote

Against

None

The Board and the audit committee believe that the continued retention of Deloitte to serve as our Independent Auditor for fiscal 2018 is in our best interests and the best interests of our stockholders. As a matter of good corporate governance, stockholders are being asked to ratify the audit committee’s selection of the Independent Auditor.

 

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PROXY STATEMENT SUMMARY

ELECTION OF DIRECTORS (PROPOSAL 1)

The Board and the nominating and governance committee believe that the ten director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to our management. All of the nominees are currently serving as directors. The following table provides summary information about each director nominee.

 

Director

Age

Director
Since

Occupation

Other Public
Boards

Committee(s)

 

 

 

 

 

 

AC

CC

NGC

Leslie A. Brun, (Chairman)

65

2014

Chairman and Chief Executive Officer of SARR Group, LLC

Broadridge Financial Solutions, Inc.
Merck & Co., Inc.
Hewlett Packard Enterprise Company

 

 

 

Willie A. Deese

62

2014

Retired Executive Vice President of Merck & Co., Inc.

DENTSPLY International Inc.
Public Service Enterprise Group

 

Chair

 

Amy J. Hillman

52

2014

Dean of the W. P. Carey School of Business at Arizona State University

 

 

 

Chair

Brian P. MacDonald

51

2015

President and Chief Executive Officer

 

 

 

 

Eileen J. Martinson

63

2016

Chief Executive Officer of Sparta Systems

 

 

Member

 

Stephen A. Miles

 

49

2014

Chief Executive Officer of The Miles Group

 

 

 

Member

 

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PROXY STATEMENT SUMMARY

ELECTION OF DIRECTORS (PROPOSAL 1)

 

Director

Age

Director
Since

Occupation

Other Public
Boards

Committee(s)

 

 

 

 

 

 

AC

CC

NGC

Robert E. Radway

57

2014

Founder, Chairman and Chief Executive Officer of NXT Capital

 

Member

Member

 

Stephen F. Schuckenbrock

57

2016

Chief Executive Officer of CROSSMARK

Micro Focus International

Member

 

 

Frank S. Sowinski

61

2014

Former Chief Financial Officer of Dun & Bradstreet

Buckeye GP LLC, general partner of Buckeye Partners, L.P.

Chair

 

 

Robert M. Tarkoff

48

2016

President and Chief Executive Officer of Lithium Technologies

 

 

 

Member

BOARD SKILLS

The Board and the nominating and governance committee look for current and potential directors collectively to have a mix of skills, qualifications and attributes that help achieve the goal of having a well-rounded, diverse Board that functions collegially as a unit. The Board and the nominating and governance committee have carefully selected a slate of director nominees that, taken as a whole, has representatives with the following skills, qualifications and attributes.

 

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PROXY STATEMENT SUMMARY

GOVERNANCE HIGHLIGHTS

The Board is committed to sound corporate governance policies that we believe promote the long-term interests of the business and those of our stockholders. Highlights of our governance practices during fiscal 2017 include the following:

 

Proxy Access - We incorporated perspectives from stockholders on proxy access policies and practices to inform the Board's adoption of a proxy access by-law.

 

Updated Board Committees - The nominating and governance committee believes the periodic rotation of Board committee members and chairs can introduce fresh perspectives and to broaden and diversify the views and experience represented on Board committees. Effective November 16, 2016, the Board appointed Ms. Martinson as a member of the compensation committee, Mr. Schuckenbrock as a member of the audit committee and Mr. Tarkoff as a member of the nominating and governance committee.

 

Ongoing Stockholder Outreach - We seek a collaborative approach to issues that are of importance to our stockholders and that affect our business. We also seek to ensure that our stockholders see our governance and executive pay practices as well-structured. In fiscal 2017, our key executive officers and directors:

 

 

routinely reached out to our largest stockholders to gain valuable insights into the corporate governance and executive compensation issues they most care about; and

 

actively engaged with stockholders through participation in investor conferences, investor visits to our headquarters, one-on-one meetings, and conference calls.

 

 

Management Enhancements - As reflected in our Corporate Governance Guidelines, among the Board’s primary responsibilities is the approval of a Chief Executive Officer and executive officer succession plan. During fiscal 2017, in furtherance of these responsibilities, the nominating and governance committee together with the compensation committee oversaw, and the Board approved, significant changes and enhancements across our management team.

 

Director Orientation and Education – To ensure that the Board is appropriately oriented to its required roles and our business, we conducted orientation for our three new directors and ongoing education for all directors.

 

10


 

PROXY STATEMENT SUMMARY

APPROVAL OF EXECUTIVE COMPENSATION FOR FISCAL 2017 (PROPOSAL 2)

We are asking our stockholders to cast a non-binding vote, commonly referred to as “say on pay,” to approve our NEO compensation as described in the Compensation Discussion and Analysis (“CD&A”) section beginning on page 34 and the Compensation Tables section beginning on page 53. The Board believes that our compensation policies and practices are effective in achieving our goals of attracting, retaining and motivating our executive officers, rewarding financial and operating performance, and aligning our executives’ interests with those of our stockholders to create long-term value. The Board values stockholders’ opinions, and the compensation committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.

RATIFY THE APPOINTMENT OF DELOITTE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2018 (PROPOSAL 3)

We are asking our stockholders to ratify the audit committee’s selection of Deloitte as our independent registered public accounting firm for fiscal 2018. While we are not required to have our stockholders ratify the selection of Deloitte, we are doing so because we believe it is good corporate practice. If our stockholders do not ratify the selection, the audit committee will reconsider the appointment, but may nevertheless retain Deloitte as our independent registered public accounting firm. Even if the selection is ratified, the audit committee may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of us and our stockholders.

11


 

Table of Contents

CORPORATE GOVERNANCE AT CDK GLOBAL

Proposal 1: Election of Directors

Director Nomination Process

Board Independence

The Board’s Role and Responsibilities

The Board’s Role in Risk Oversight

Stockholder Communications

Compliance

Certain Relationships and Related Persons Transactions

Board Structure and Processes

Board Committees

Compensation of Non-Employee Directors

PROPOSAL 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Compensation Committee Interlocks and Insider Participation

Results of 2016 Stockholder Advisory Vote to Approve Executive Compensation

Compensation Discussion and Analysis

Compensation Tables

Compensation Committee Oversight

Compensation Committee Report

AUDIT COMMITTEE MATTERS

Proposal 3: Ratify the Appointment of Deloitte as our Independent Registered Public Accounting Firm for Fiscal 2018

OWNERSHIP OF AND TRADING IN OUR STOCK

Security Ownership of Certain Beneficial Owners and Management

Section 16(A) Beneficial Ownership Reporting Compliance

DEADLINES FOR SUBMISSION OF PROXY PROPOSALS, NOMINATION OF DIRECTORS AND OTHER BUSINESS OF STOCKHOLDERS

Exchange Act Rule 14a-8 Proposals

Director Nominations for Inclusion in our Proxy Materials (Proxy Access)

Other Proposals and Nominations

Additional Requirements

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

APPENDIX A: CDK GLOBAL, INC. GAAP TO NON-GAAP RECONCILIATIONS

 

12


 

CORPORATE GOVERNANCE AT CDK GLOBAL

Proposal 1: Election of Directors

The Board has nominated ten directors for election at the Annual Meeting. Each nominee is currently serving as one of our directors. If you re-elect them, they will hold office until our next annual meeting of stockholders or until their successors have been elected and qualified.

In recognition of the fact that the selection of qualified directors is complex and crucial to our long-term success, the nominating and governance committee has established director qualification criteria for membership on the Board. Those criteria are included in this proxy statement beginning on page 20.

All of our nominees are seasoned leaders, the majority of whom are or were chief executive officers or other senior executives and who bring to the Board skills and qualifications gained during their tenure at a wide array of public companies, private companies, non-profits, and other organizations. We have indicated below for each nominee certain of the experience, qualifications, attributes, or skills that led the nominating and governance committee and the Board to conclude that the nominee should continue to serve as a director.

13


 

CORPORATE GOVERNANCE AT CDK GLOBAL

INFORMATION ABOUT THE NOMINEES

The Board recommends that you vote FOR the election of the following nominees:

 

LESLIE A. BRUN

Age 65

Director since September 2014

Chairman and Chief Executive Officer of SARR Group, LLC

Independent Chairman of the Board

Director Qualification Highlights

Board Committee

Other Public Boards

None

Hewlett Packard Enterprise Company
Broadridge Financial
Solutions, Inc. (Chair)
Merck & Co., Inc.

 

CEO Experience

 

Capital Markets

 

Investor Relations

 

Enterprise Risk Management

 

BIOGRAPHY

Mr. Brun has been the Chairman and Chief Executive Officer of SARR Group, LLC, an investment holding company, since 2006. In addition, he was formerly Managing Director and head of investor relations at CCMP Capital Advisors, LLC, a global private equity firm. He is also the founder and Chairman Emeritus of Hamilton Lane Advisors, a provider of asset management services for which he served as Chief Executive Officer and Chairman from 1991 until 2005. From 1988 to 1991, he was Managing Director and co-founder of the investment banking group of Fidelity Bank in Philadelphia. Mr. Brun served as a director of Automatic Data Processing, Inc. (“ADP”) from 2003 to 2015 and as ADP’s Chairman of the Board from 2007 to 2015. Mr. Brun has served as a director of Broadridge Financial Solutions, Inc. (“Broadridge”), an investor communications and business process outsourcing provider, since 2007 and as Broadridge’s Chairman of the Board since 2011. He has served as a director of Merck & Co., Inc. (“Merck”), a health care company, since 2009 and lead director since 2016, and Hewlett Packard Enterprise Company, a technology solutions provider, since 2015. He is also a director of NXT Capital, Inc., a private company. Mr. Brun is a former trustee of Widener University, the University at Buffalo Foundation, Inc. and The Episcopal Academy in Merion, Pennsylvania. Mr. Brun’s investment banking and leadership experience provide him with extensive financial and management expertise, and his directorships at other public companies have given him broad experience with governance and other issues facing public companies.

14


 

CORPORATE GOVERNANCE AT CDK GLOBAL

 

WILLIE A. DEESE

Age 62

Director since September 2014

Retired Executive Vice President of Merck & Co., Inc.

Independent Director

Director Qualification Highlights

Board Committee

Other Public Boards

Compensation (Chair)

DENTSPLY
International Inc.

Public Service Enterprise Group

 

 

Operations / BPI / BPO

 

International Diversification

 

Enterprise Risk Management

 

BIOGRAPHY

Mr. Deese has served as an independent director of DENTSPLY International Inc., a leading manufacturer and distributor of dental and other consumable healthcare products, since 2011 and Public Service Enterprise Group, a diversified energy company, since 2015. Mr. Deese served as an Executive Vice President of Merck from 2008 to 2016 and as President of the Merck Manufacturing Division from 2005 to 2016. Mr. Deese also served as Merck’s Senior Vice President of Global Procurement from 2004 to 2005. Prior to joining Merck, Mr. Deese served as Senior Vice President of Global Procurement and Logistics at GlaxoSmithKline and as Vice President of Purchasing, at Kaiser Permanente. In addition to his experience as a director of a publicly traded company, Mr. Deese brings to the Board substantial experience and expertise in both business transformation and complex international operations and management from his roles at Merck and GlaxoSmithKline.

AMY J. HILLMAN

Age 52

Director since September 2014

Dean of the W. P. Carey School of Business at Arizona State University

Independent Director

Director Qualification Highlights

Board Committee

Other Public Boards

Nominating and
Governance (Chair)

None

 

 

M&A / Divestiture

 

Investor Relations

 

Strategy

 

BIOGRAPHY

Since 2013, Ms. Hillman has served as the Dean of the W. P. Carey School of Business at Arizona State University, where she has taught as a Professor since 2006 and as an Associate Professor from 2001 to 2006. She holds a PhD in Strategic Management and is a fellow of the Academy of Management. In addition to her management skills gained as the leader of one of the largest U.S. business schools, Ms. Hillman brings to the Board expertise in the areas of business strategy and corporate governance, on which she has taught, consulted with major corporations, and conducted research.

15


 

CORPORATE GOVERNANCE AT CDK GLOBAL

 

BRIAN P. MACDONALD

Age 51

Director since June 2015

President, Chief Executive Officer

Director

Director Qualification Highlights

Board Committee

Other Public Boards

None

None

 

CEO Experience

 

Capital Markets

 

Technology / Technologist

 

Automotive Retail

 

BIOGRAPHY

Mr. MacDonald has served as our President since January 1, 2016, as our Chief Executive Officer since March 8, 2016, and as a member of our Board of Directors since June 15, 2015. Prior to joining CDK Global, Mr. MacDonald served as President and Chief Executive Officer of Hertz Rental Equipment Corporation from June 2014 to May 2015, and as interim Chief Executive Officer of Hertz Corporation from September 2014 to November 2014. Prior to Hertz, Mr. MacDonald served as President and Chief Executive Officer of ETP Holdco Corp., an entity formed following Energy Transfer Partners' $5.3 billion acquisition of Sunoco, Inc. in 2012, where Mr. MacDonald had served as Chairman, President and Chief Executive Officer prior to ETP's acquisition of Sunoco. During his tenure at Sunoco, the company undertook a substantial restructuring to strengthen and transform the organization and better position it for growth. Sunoco exited unprofitable operations, significantly reduced costs, improved efficiencies, and refocused on established high-return businesses. Mr. MacDonald has also held executive management roles at Dell, General Motors Corporation, and Isuzu Motors Limited.

Mr. MacDonald previously served on the board of directors of Computer Sciences Corporation from August 2013 to April 2017, Sunoco and Sunoco Logistics from March 2012 to October 2012 and October 2009 to October 2012, respectively, and Ally Financial, Inc. from May 2013 to July 2014 following his appointment by the U.S. Department of the Treasury.

Mr. MacDonald brings to the Board substantial experience and expertise in management, business strategy, and capital markets from his roles at Hertz, Sunoco, and Ally Financial as well as his experience as a director of a various publicly traded companies.

EILEEN J. MARTINSON

Age 63

Director since September 2016

Chief Executive Officer of Sparta Systems

Independent Director

Director Qualification Highlights

Board Committee

Other Public Boards

Compensation

None

 

Technology / Technologist

 

Strategy

 

CEO Experience

 

Capital Markets

 

BIOGRAPHY

Ms. Martinson has been Chief Executive Officer of Sparta Systems, a leading provider of enterprise-quality management software solutions, since 2011. Prior to joining Sparta Systems, she served as the Chief Operating Officer at Allscripts. Before Allscripts, she served as Executive Vice President of global sales, services, and support at Misys and served in various management positions at Oracle, SAP, Siebel Systems, Gartner, Ariba and Accenture. She has served as a director at AdvancedMD since March 2016 and Chair of the Board of Trustees at Philadelphia University since 2013. As a result of her current executive position at Sparta Systems, as well as her former positions as a senior executive at other technology and consulting organizations, Ms. Martinson provides the Board with extensive and relevant executive leadership, software, sales and service and technology industry experience.

16


 

CORPORATE GOVERNANCE AT CDK GLOBAL

 

STEPHEN A. MILES

Age 49

Director since September 2014

Founder and Chief Executive Officer of The Miles Group

Independent Director

Director Qualification Highlights

Board Committee


Other Public Boards

Nominating
and Governance

None

 

CEO Experience

 

Strategy

 

CEO Succession

 

BIOGRAPHY

Mr. Miles has served as the founder and Chief Executive Officer of The Miles Group, a provider of global CEO and board consulting and advisory services (focused on the topics of succession, board and organizational effectiveness, and talent management), since 2012. Previously, Mr. Miles served as Vice Chairman, Leadership Advisory at Heidrick & Struggles, a global executive search and executive leadership consulting firm from 2010 to 2012 and as Managing Partner and Head, Leadership Advisory for Heidrick & Struggles from 2005 to 2010, where he was responsible for managing its global Leadership Advisory Services business. Mr. Miles specializes in CEO succession and brings to the Board substantial expertise in leadership selection, succession planning and organizational effectiveness from his roles at Heidrick & Struggles and The Miles Group.

ROBERT E. RADWAY

Age 57

Director since September 2014

Founder, Chairman and Chief Executive Officer of NXT Capital

Independent Director

Director Qualification Highlights

Board Committee

Other Public Boards

Audit, Compensation

None

 

 

CEO Experience

 

Capital Markets

 

Strategy

 

BIOGRAPHY

Mr. Radway has served as Founder, Chairman and Chief Executive Officer of NXT Capital, a privately held commercial finance company with approximately $6.5 billion in owned and managed assets, since 2010. From 2001 to 2008, Mr. Radway served as Managing Director and President of Merrill Lynch Capital, the commercial finance unit of Merrill Lynch Bank USA that, prior to its sale in 2008, had owned and managed assets in excess of $30 billion and approximately 550 employees. Prior to his service with Merrill Lynch Capital, Mr. Radway held senior positions with Heller Financial, Inc., including Executive Vice President of Corporate Strategy and Development responsible for the company’s strategic planning, business development, and M&A worldwide. Mr. Radway’s roles as the chief executive of NXT Capital and as president of Merrill Lynch Capital have provided him with extensive executive management, operational, and business strategy experience. He brings to the board the ability to analyze and oversee financial reporting and performance, as well as expertise in capital markets and financing initiatives, corporate strategy, and human resource development and retention.

17


 

CORPORATE GOVERNANCE AT CDK GLOBAL

 

STEPHEN F. SCHUCKENBROCK

Age 57

Director since September 2016

Chief Executive Officer of CROSSMARK Inc.

Independent Director

Director Qualification Highlights

Board Committee

Other Public Boards

Audit

Micro Focus
International

 

Digital Marketing

 

Technology / Technologist

 

Strategy

 

CEO Experience

 

Capital Markets

 

BIOGRAPHY

Mr. Schuckenbrock has served as the Chief Executive Officer of CROSSMARK Inc., a leading provider of sales, marketing and merchandising services for manufacturers and retailers, since 2014. Prior to joining CROSSMARK, he was the CEO of Accretive Health, and prior to that held numerous leadership positions at Dell. His career also includes management positions at EDS, IBM, PepsiCo and Frito Lay. He is currently a director at Micro Focus International and has served on a number of boards, including Compuware, Staples, and AT Kearney. Mr. Schuckenbrock also serves on the advisory boards of Texas Christian University and Enactus, an international non-profit that inspires students to improve the world through entrepreneurial action. As a result of his current executive position at CROSSMARK Inc., as well as his former positions as a senior executive at other technology organizations and his significant board experience, Mr. Schuckenbrock provides the Board with extensive and relevant board, executive leadership, sales and marketing, and technology industry experience.

FRANK S. SOWINSKI

Age 61

Director since September 2014

Former Chief Financial Officer of the Dun & Bradstreet Corporation

Independent Director

Director Qualification Highlights

Board Committee

Other Public Boards

Audit (Chair)

Buckeye GP LLC, general partner of Buckeye Partners, L.P.

 

 

Digital Marketing

 

Technology / Technologist

 

Strategy

 

Enterprise Risk Management

 

BIOGRAPHY

Mr. Sowinski serves as the lead independent director and chair of the nominating and corporate governance committee of Buckeye GP LLC, general partner of Buckeye Partners, L.P., a publicly-traded master limited partnership that provides mid-stream energy logistics services. Since 2006, Mr. Sowinski has served as an operating executive for MidOcean Partners, a private equity firm that identifies, invests in, and manages portfolio companies focusing on business, information, and marketing services. In his capacity as an operating executive for MidOcean Partners, Mr. Sowinski previously served as Vice Chairman of The Allant Group, Inc. a marketing services group, and also previously served as Vice Chairman of Pre-Paid Legal Services, Inc. dba LegalShield, a specialized legal service products company. In 2002, he served as Chief Financial Officer of PricewaterhouseCoopers Consulting, a global consulting firm. Previously, Mr. Sowinski spent 17 years with the Dun & Bradstreet Corporation, where he served in numerous positions including Chief Financial Officer of the Dun & Bradstreet Corporation, as well as Executive Vice President of Global Marketing and President of the D&B Operating Company. Mr. Sowinski’s numerous operating roles have provided him with broad managerial and operational expertise and a proven

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CORPORATE GOVERNANCE AT CDK GLOBAL

track record of achievement and business judgment. In addition, his extensive experience in financial management, including his roles as Chief Financial Officer of the Dun & Bradstreet Corporation and PricewaterhouseCoopers Consulting, provide him with expertise in enterprise risk management, corporate financial management, and financial reporting.

ROBERT M. TARKOFF

Age 48

Director since June 2016

President and Chief Executive Officer of Lithium Technologies

Independent Director

Director Qualification Highlights

Board Committee

Other Public Boards

Nominating and Governance

None

 

Digital Marketing

 

Technology / Technologist

 

Strategy

 

CEO Experience

 

Capital Markets

 

BIOGRAPHY

Mr. Tarkoff has been President and Chief Executive Officer of Lithium Technologies, a San Francisco-based computer software as a service (SaaS) platform leader in social customer solutions, since 2011. He was previously Senior Vice President and General Manager of Digital Enterprise Solutions at Adobe Systems, Inc., and prior to that served as Senior Vice President of Strategy, Ventures, and Mergers & Acquisitions. Prior to Adobe, he worked for EMC Corporation, serving as Senior Vice President and General Manager of the Input Management Software business, the Senior Vice President of Mergers and Acquisitions for EMC Software, and as the head of EMC's software outsourcing business. Prior to the acquisition of Documentum, Inc. by EMC, he was the Executive Vice President and Chief Strategy Officer of Documentum, where he was responsible for all strategic merger and acquisition activity, partner initiatives, indirect channel revenue, and product management. Before joining Documentum, Mr. Tarkoff was Executive Vice President at Commerce One, a business-to-business marketplace software solutions company. Prior to Commerce One, Mr. Tarkoff served as a securities associate at Wilson, Sonsini, Goodrich & Rosati. Mr. Tarkoff previously served on the boards of three publicly traded software companies; Onyx Software Corporation, Borland Software, and Advent Software. As a result of his current executive position at Lithium Technologies, as well as his former positions as a senior executive at other technology organizations, Mr. Tarkoff provides the Board with extensive and relevant executive leadership, worldwide operations and technology industry experience.

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CORPORATE GOVERNANCE AT CDK GLOBAL

DIRECTOR NOMINATION PROCESS

When considering current directors for re-nomination to the Board, the nominating and governance committee assesses changes to any director’s qualifications, including their independence, and takes into account the performance of each director, which is part of the committee’s annual Board evaluation process. The nominating and governance committee then recommends actions for the Board to consider and adopt as it sees fit.

The nominating and governance committee has not established specific minimum age, education, experience, or skill requirements for potential members. Instead, the nominating and governance committee reviews the composition of the Board in light of the Company’s current challenges and needs and the current challenges and needs of the Board. Based on this review, the Board then determines whether it may be appropriate to add or remove individuals after considering, among other things, the need for audit committee expertise and issues of independence, diversity, judgment, character, reputation, age, skills, background, and experience. The nominating and governance committee values diversity as a factor in selecting nominees to serve on the Board and considers the criteria noted above in selecting nominees for directors, including members from diverse backgrounds who combine a broad spectrum of experience and expertise. The nominating and governance committee believes that the Board, as currently constituted, is well-balanced and that it fully and effectively addresses our needs.

When the Board decides to recruit a new member, or when the Board considers any director candidates submitted for consideration by our stockholders, it seeks strong candidates who, ideally, meet its standards of director independence, and who bring skills and capabilities that complement and enhance those of the Board as a whole. Additionally, all potential candidates should possess the following personal characteristics: (i) business community respect for his or her integrity, ethics, principles, insights, and analytical ability and (ii) ability and initiative to frame insightful questions, speak out, and challenge questionable assumptions and disagree without being disagreeable. In addition, the nominating and governance committee considers a wide range of other factors in determining the composition of the Board, including age, diversity of background, diversity of thought, and other individual qualities such as professional experience, skills, education, and training.

Nominations of candidates for the Board by our stockholders for consideration at our 2018 Annual Meeting of Stockholders are subject to the deadlines and other requirements described on page 77 of this proxy statement.

BOARD INDEPENDENCE

The Board is currently composed of nine non-employee directors and one employee director. The Board has established that ten directors will be the number that will constitute the full Board at the time of the Annual Meeting. Under our Corporate Governance Guidelines and the NASDAQ Stock Market (“NASDAQ”) listing standards, at least a majority of our Board must be independent. The Board’s standards of director independence are consistent with the NASDAQ listing standards. Directors meeting these standards are considered to be “independent.” The Board has affirmatively determined that all directors other than Mr. MacDonald meet these standards and are, therefore, considered to be independent directors. Mr. MacDonald does not meet these standards and is, therefore, not considered to be an independent director. Based on the these standards, all current members of the audit, compensation, and nominating and governance committees are independent.

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CORPORATE GOVERNANCE AT CDK GLOBAL

THE BOARD'S ROLE AND RESPONSIBILITIES

We have robust policies and procedures for our directors and management and our commitment to good corporate governance is integral to our business. Our key governance practices are described below.

Corporate Governance Guidelines and Committee Charters

The Board has adopted Corporate Governance Guidelines. These guidelines address items such as the standards, qualifications, and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. The guidelines are subject to periodic review by the Board and to modification from time to time by the Board. The guidelines together with the charters of each of the Board’s audit, compensation, and nominating and governance committees are available under “Corporate Governance” in the “Investor Relations” section of our website at cdkglobal.com.

Corporate Hotline

We have established an independent CDK Global Ethics Hotline, utilizing a global Internet and telephone information and reporting service, to allow any employee, director, or vendor to confidentially and anonymously (i) ask questions about our Code of Business Conduct and Ethics and other ethics and compliance issues and (ii) submit a report or complaint about any potential accounting, internal control, auditing, Code of Business Conduct and Ethics, or other violation or matter of concern (unless prohibited by local privacy laws in the jurisdiction of the reporting employee, in which case an alternate inquiry and reporting system has been implemented).

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CORPORATE GOVERNANCE AT CDK GLOBAL

THE BOARD’S ROLE IN RISK OVERSIGHT

The Board provides oversight with respect to our enterprise risk assessment and risk management activities that are designed to identify, prioritize, assess, monitor, and mitigate the various risks we confront, including risks that are related to the execution of our business transformation plan, the achievement of other elements of our operational and financial strategy, and information security and system disruption. The Board performs this oversight function periodically as part of its meetings and also through its committees, each of which examines various components of enterprise risk as part of its assigned responsibilities. The committees report on risk oversight matters directly to the Board on a regular basis. Management is responsible for implementing and supervising day-to-day risk management processes and reporting to the Board and its committees as necessary.

The audit committee focuses on financial risks, including reviewing with management, our internal auditors, and our Independent Auditor our major financial risk exposures, the adequacy and effectiveness of internal control over financial reporting, and the steps management has taken to monitor and control financial risk exposures. In addition, the audit committee reviews risks related to our financial reporting, and compliance with other applicable laws, regulations, and ethical standards. The audit committee regularly receives, reviews, and discusses with management presentations and analyses on various risks we confront.

The nominating and governance committee oversees risks associated with Board structure and other governance policies and practices. The compensation committee oversees risks related to compensation matters.

STOCKHOLDER COMMUNICATIONS

Engagement and transparency with our stockholders provide us with useful feedback on a wide variety of topics, including governance, compensation, stockholder communication, Board composition, stockholder proposals, business performance, and operations. This information is shared regularly with our management and the Board and considered in the processes that set the governance practices and our strategic direction. We also use stockholder feedback to better tailor the public information we provide to address the interests and inquiries of our stockholders.

We interact and communicate with our stockholders through a number of forums, including quarterly earnings presentations, Securities and Exchange Commission (“SEC”) filings, annual meetings, investor conferences, and web communications.

In addition, the Board has endorsed the Shareholder-Director Exchange (“SDX”) Protocol as a guide for effective, mutually beneficial engagement between our stockholders and directors. The Board believes that management should speak for the Company and that the Chairman of the Board should speak for the Board. During fiscal 2017, the Chairman of the Board met with stockholders to discuss a variety of topics, including our strategy and performance.

In order to provide our stockholders and other interested parties with a direct and open line of communication to the Board, we have adopted the following procedures for communications to directors. Stockholders and other interested persons may communicate with the Board by written communications addressed in care of Lee J. Brunz, our Secretary, at CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169.

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CORPORATE GOVERNANCE AT CDK GLOBAL

All communications received in accordance with these procedures will be reviewed initially by our Secretary who will relay all such communications to the appropriate director or directors unless it is determined that the communication: (i) does not relate to our business or affairs or the functioning or constitution of the Board or any of its committees; (ii) relates to routine or insignificant matters that do not warrant the attention of the Board; (iii) is an advertisement or other commercial solicitation or communication; (iv) is frivolous or offensive; or (v) is otherwise not appropriate for delivery to directors.

The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made only in accordance with applicable laws and regulations relating to the disclosure of information.

The Secretary will retain copies of all communications received pursuant to these procedures for a period of at least one year. The Board will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes.

In addition, anyone who has a concern about the Company's conduct or about the Company's accounting, internal accounting controls or auditing matters may communicate those concerns directly to the audit committee. Such communications may be confidential or anonymous and may be submitted electronically, by phone or in writing to:

 

The Company’s Ethics Hotline at (800) 461-9330; CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169; or online via the Internet at www.convercent.com/report; or

 

The Legal Department at (847) 397-1700 (ask to speak to the general counsel or other attorney designated to handle ethics matters); or

 

The audit committee in writing to the attention of the Audit Committee of CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169.

 

COMPLIANCE

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to our executive officers, directors, and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions. The Code of Ethics may be viewed on our website at www.cdkglobal.com under “Corporate Governance” in the “Investor Relations” section. In the event we amend or waive any of the provisions of the Code of Ethics applicable to any of our directors, our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions that relates to any element of the definition of “code of ethics” enumerated in Item 406(b) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we intend to disclose these actions on our website within four business days following the date of the amendment or waiver.

Our credibility and reputation depend upon the good judgment, ethical standards, and personal integrity of each director, executive officer, and employee and we expect them to conduct themselves with the highest degree of integrity, ethics, and honesty. In order to better protect us and our stockholders, we regularly review our Code of Ethics and related policies to ensure that they provide clear guidance to our directors, executive officers, and employees.

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CORPORATE GOVERNANCE AT CDK GLOBAL

CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS

We have adopted a written Related Persons Transactions Policy (the “policy”), which sets forth our policy with respect to the review, approval, ratification, and disclosure of all related person transactions by our audit committee. In accordance with the policy, our audit committee has overall responsibility for implementation of and compliance with the policy. A “related person” means a director, executive officer, or beneficial holder of more than 5% of our outstanding common stock, or any immediate family member of the foregoing, as well as any entity at which any such person is employed, is a partner or principal (or holds a similar position), or is a beneficial owner of a 10% or greater direct or indirect equity interest. Our directors and executive officers must inform our general counsel at the earliest practicable time of any plan to engage in a potential related persons transaction. For purposes of the policy, a “related persons transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are, or will be a participant and the amount involved exceeded, exceeds, or will exceed $120,000 and in which any related person (as defined in the policy) had, has, or will have a direct or indirect material interest. A “related persons transaction” does not include any employment relationship or transaction involving an executive officer and any related compensation resulting solely from that employment relationship that has been reviewed and approved by the Board, the compensation committee, or a group of independent directors performing a similar function. Further, we have determined that “related persons transactions” do not include transactions in which the related person’s interest derives solely from his or her service as a director of another entity that is a party to the transaction.

The policy requires that notice of a proposed related persons transaction be provided to our legal department prior to entry into such transaction. If our legal department determines that such transaction is a related persons transaction, the proposed transaction will be submitted to our audit committee for consideration at its next meeting or, in those instances in which the legal department, in consultation with the Chief Executive Officer or the Chief Financial Officer, determines that it is not practicable or desirable for us to wait until the next audit committee meeting, to the Chair of the audit committee. Under the policy, our audit committee or the Chair of the audit committee, as applicable, may approve only those related persons transactions (i) that are in our best interests or (ii) that are not inconsistent with our best interests. In the event that we become aware of a related persons transaction that has not been previously reviewed, approved, or ratified under the policy and that is ongoing or is completed, the transaction will be submitted to the audit committee or Chair of the audit committee so that it may determine whether to ratify, rescind, or terminate the related persons transaction.

The policy also provides that the audit committee will review certain previously approved or ratified related persons transactions that are ongoing to determine whether the related persons transaction remains in our best interests and the best interests of our stockholders.

Additionally, we make periodic inquiries of directors and executive officers with respect to any potential related persons transaction of which they, or any of their immediate family members, may be a party or of which they may be aware.

RELATED PERSONS TRANSACTIONS

Mr. Tarkoff has served as a member of the Board since June 2016 and is the President and Chief Executive Officer of Lithium Technologies. In June 2017, we entered into a three-year agreement with Lithium Technologies pursuant to which Lithium Technologies agreed to provide subscription and professional services to us in support of our automotive retail and adjacent industry solutions in exchange for an aggregate fee of up to $955,000. In fiscal 2017, we did not make any payments to Lithium Technologies. The agreement with Lithium Technologies was approved by the Board, including all of the members of the audit committee in accordance with the policy.

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CORPORATE GOVERNANCE AT CDK GLOBAL

BOARD STRUCTURE AND PROCESSES

Board Leadership Structure

Our corporate governance principles do not require the separation of the roles of Chairman of the Board and Chief Executive Officer because the Board believes that effective board leadership can depend on the skills and experience of, and personal interaction between, people in leadership roles. The Board is currently led by Mr. Brun, our independent non-executive Chairman of the Board. Mr. MacDonald, our President and Chief Executive Officer, serves as a member of the Board. The Board believes this leadership structure is in the best interests of our stockholders at this time. Separating these positions allows our Chief Executive Officer to focus on developing and implementing our business plans and supervising our day-to-day business operations, and allows our Chairman of the Board to lead the Board in its oversight, advisory, and risk management roles.

Board Self-Assessments

The nominating and governance committee oversees an annual self-assessment process, whereby each director is surveyed to obtain his or her evaluation of the Board as a whole and the committees on which he or she serves. The surveys solicit ideas from the directors about, among other things, improving quality of Board and committee discussions on key matters, and identifying specific issues which should be discussed in the future. After these evaluations are complete, our general counsel summarizes the results, provides a preview for the Chairman of the Board and the Chair of each committee and then submits the summaries for discussion by the nominating and governance committee. If necessary, action plans are developed by the nominating and governance committee and recommended for discussion by the full Board.

In addition, as part of the annual self-assessment process, the nominating and governance committee facilitates structural sessions in which directors are encouraged to provide feedback on the performance of their peers. The Chairman of the Board and/or the Chair of the nominating and governance committee communicate relevant feedback to each director and take further action as they deem appropriate.

Director Orientation and Continuing Education

The nominating and governance committee oversees our orientation programs for new directors and continuing education programs for directors.

Each new director, after joining the Board, is provided with orientation regarding the Board and our operations. As part of this orientation, each new director has an opportunity to meet with members of our senior management team.

Directors are also provided with continuing education on various subjects that will assist them in discharging their duties. Such continuing education may include presentations by our management or the Board’s advisors on our business, compliance efforts, applicable legal, regulatory or other developments or other matters as the Board, or the nominating and governance committee in its oversight of the Board’s continuing education program, may deem appropriate.

Outside Advisors

The Board and each of its principal committees may retain independent legal, financial, or other advisors of their choosing at our expense. The Board need not obtain management’s consent to retain outside advisors. In addition, the principal committees need not obtain either the Board’s or management’s consent to retain outside advisors.

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CORPORATE GOVERNANCE AT CDK GLOBAL

BOARD COMMITTEES

The table below provides membership and meeting information for each of the committees of the Board. Green dots indicate that the member serves as the Chair of the committee.

 

Deese

Hillman

Martinson

Miles

Radway

Schuckenbrock

Sowinski

Tarkoff

Audit

 

 

 

 

 

Compensation

 

 

 

 

 

Nominating and Governance

 

 

 

 

 

All members of each committee satisfy the independence requirements of our Corporate Governance Guidelines, the applicable NASDAQ listing standards and any other applicable regulatory requirements currently in effect. Mr. Brun and Mr. MacDonald are not members of any of these Board committees. Effective November 16, 2016, Mr. Schuckenbrock replaced Mr. Deese as a member of the audit committee, Ms. Martinson replaced Mr. Miles as a member of the compensation committee and Mr. Tarkoff replaced Mr. Sowinski as a member of the nominating and governance committee.

Audit Committee

MEMBERS

PRINCIPAL FUNCTIONS

Mr. Sowinski (Chair)
Mr. Radway
Mr. Schuckenbrock

The members of our audit committee all satisfy the independence, financial sophistication, experience, and expertise requirements of our Corporate Governance Guidelines, Section 10A-3 of the Exchange Act, the applicable NASDAQ listing standards, and all other applicable regulatory requirements currently in effect.

The Board has also determined that Mr. Sowinski and Mr. Radway each qualify as an “audit committee financial expert” as such term is defined under the rules and regulations of the SEC.

 

Oversee our accounting and financial reporting processes and related internal controls, the audit of our financial statements, and other matters as mandated under applicable laws, rules, and regulations;

 

Appoint, compensate, retain, and oversee the work of our Independent Auditor (including resolution of disagreements between management and our Independent Auditor regarding financial reporting), including for the purpose of preparing its audit report;

 

Review in advance and pre-approve all audit or non-audit services to be provided by our Independent Auditor, as permitted by Section 10A of the Exchange Act, and to approve all related fees and other terms of engagement;

 

Review disclosures required to be included in our periodic reports filed under the Exchange Act;

 

Review the performance of the internal auditors and our Independent Auditor, including the lead audit partner, on at least an annual basis;

 

Review and advise on the appointment, replacement, or dismissal of our Chief Audit Executive; and

 

Review, approve or ratify related persons transactions pursuant to our Related Persons Transaction Policy.

 

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CORPORATE GOVERNANCE AT CDK GLOBAL

Compensation Committee

MEMBERS

PRINCIPAL FUNCTIONS

Mr. Deese (Chair)
Ms. Martinson
Mr. Radway

The members of our compensation committee all satisfy the independence requirements of our Corporate Governance Guidelines, the applicable NASDAQ listing standards and all other applicable regulatory requirements currently in effect.

 

Evaluate our Chief Executive Officer’s performance and set the Chief Executive Officer’s compensation based on such evaluation;

 

Evaluate our other executive officers’ performance and set their compensation based on such evaluations;

 

Review and approve the performance targets for the Company’s performance-based equity plans; and

 

Review and evaluate our compensation plans, policies, and programs for our executive officers.

 

Nominating and Governance Committee

MEMBERS

PRINCIPAL FUNCTIONS

Ms. Hillman (Chair)
Mr. Miles
Mr. Tarkoff

The members of our nominating and governance committee all satisfy the independence requirements of our Corporate Governance Guidelines, the applicable NASDAQ listing standards, and all other applicable regulatory requirements currently in effect.

 

Identify individuals qualified to become members of the Board;

 

Recommend to the Board director nominees;

 

Develop and recommend to the Board amendments to the Corporate Governance Guidelines;

 

Oversee the evaluation of the Board and its members; and

 

Develop and recommend to the Board succession plans for the Chief Executive Officer, interim Chief Executive Officer, and other executive officers.

 

Board and Committee Meeting Attendance

During fiscal 2017, the Board held nine meetings, the audit committee held 11 meetings, the compensation committee held eight meetings, and the nominating and governance committees held four meetings. Overall attendance at such meetings was approximately 97.4%. All of our directors attended at least 75%, in the aggregate, of the meetings of the Board and the committees of which they were members during the periods that they served on the Board during fiscal 2017. It is also our policy that our directors attend the Annual Meeting. Last year all directors attended the Annual Meeting.

Executive Sessions of the Board

Executive sessions of the non-management directors are held during each Board meeting and the majority of committee meetings. Mr. Brun, our independent non-executive Chairman of the Board, presides at each executive session of the Board.

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CORPORATE GOVERNANCE AT CDK GLOBAL

COMPENSATION OF NON-EMPLOYEE DIRECTORS

The compensation program for non-employee directors is designed to: (i) fairly pay directors for the work required at a company of our size and scope; (ii) align directors’ interests with the long-term interests of our stockholders; and (iii) be simple, transparent, and easy for our stockholders to understand.

Overview

For the service year beginning immediately after the 2016 Annual Meeting, our non-employee directors received annual compensation as shown in the table below. There are no additional meeting fees. The Chairman of the Board and the Chairperson of each Board committee receive additional compensation due to the workload and broad responsibilities of these positions.

     

All non-employee directors

$

245,000

 

Chairman of the Board*

$

150,000

 

Chair of the audit committee

$

15,000

 

Chair of the compensation committee

$

15,000

 

Chair of the nominating and governance committee

$

10,000

 

* The Chairman's retainer and each committee chair retainer are paid in addition to the regular retainer amount for all non-employee directors.

Form of Payment

$145,000 of the $245,000 is paid in the form of restricted stock units (“RSUs”) and $100,000 may, at the election of each director, be paid in cash or in deferred stock units (“DSUs”). One-half of the additional $150,000 paid to the Chairman of the Board is paid in the form of mandatory DSUs and one-half may, at the election of the Chairman of the Board, be paid in cash or in DSUs. 100% of the committee Chair compensation is paid in cash or DSUs at the election of each committee Chair.

Time of Payment

Equity awards, including mandatory and elective DSUs, are granted in full on or about the date of each annual meeting. Directors who elect to be paid in cash are paid the cash portion of their compensation quarterly in arrears beginning with the quarter following the effective date of appointment, and subsequently, beginning with the quarter following each annual meeting.

How Non-Employee Director RSUs Work

The restricted period with respect to the RSUs lapses on the earlier of one year from the grant date and the date of our next annual meeting of stockholders. Upon the lapse of the restricted period, the RSUs convert to DSUs. When a dividend is paid on our common stock after the lapse of the restricted period, but prior to a director ceasing to serve on the Board, such director’s account is credited with a dividend equivalent in an amount equal to the cash dividend. When a director ceases to serve on the Board, such director will receive a number of shares of common stock equal to the number of converted DSUs in such director’s account and a cash payment equal to the dividend equivalents accrued, without interest. Non-employee directors do not have any voting rights with respect to their RSUs or the converted DSUs.

How Non-Employee Director DSUs Work

DSUs are fully vested when credited to a director’s account. When a dividend is paid on our common stock, each director’s account is credited with a dividend equivalent in an amount equal to the cash

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CORPORATE GOVERNANCE AT CDK GLOBAL

dividend. When a director ceases to serve on the Board, such director will receive a number of shares of common stock equal to the number of DSUs in such director’s account and a cash payment equal to the dividend equivalents accrued, without interest. Non-employee directors do not have any voting rights with respect to their DSUs.

Changes to Director Compensation

The nominating and governance committee periodically reviews director compensation and recommends any changes to the Board for approval. Based on the recommendation of the nominating and governance committee, the Board last approved an adjustment to director compensation in connection with the 2015 review, for the service year beginning immediately after the 2015 Annual Meeting.

Stock Ownership Requirements for Non-Employee Directors

The stock ownership requirements set forth in the Corporate Governance Guidelines are intended to promote ownership in our stock by our non-employee directors and to align their financial interests more closely with those of our other stockholders. Each non-employee director is required to hold a minimum level of ownership of our common stock and/or DSUs while serving as a director, equal to five times the annual cash retainer payable to each director (including the Chairman's retainer and without regard to DSU elections). RSUs for which the restricted period has not lapsed do not count toward the ownership requirements. Directors will retain all shares of our common stock received pursuant to their service as a Board member until this minimum level is reached. Each director has five years from the date of his or her first election to the Board to attain this ownership threshold. In addition, non-employee directors are required to hold for at least one year the net shares obtained from exercising stock options after selling sufficient shares to cover the exercise price, taxes, and broker commissions. As of the end of fiscal 2017, the non-employee directors had satisfied, or progressed toward, the stock ownership guidelines as follows.

Anti-Hedging, Anti-Short Sale, and Anti-Pledging Policy

Our Insider Trading Policy prohibits directors, executive officers, and employees from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of our common stock. Our directors, executive officers, and employees are also prohibited from engaging in short sales related to our common stock. The policy also prohibits any pledging of our common stock, including holding common stock in a margin account.

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Director Compensation Table for Fiscal 2017

The following table presents compensation for our non-employee directors for fiscal 2017.

Name

Fees Earned or
Paid in Cash 1 ($)

Stock
Awards 2 ($)

Total ($)

Leslie A. Brun

 

175,000

   

219,918

   

394,918

 

Willie A. Deese

 

115,000

   

144,950

   

259,950

 

Amy J. Hillman 3

 

55,000

   

144,950

   

199,950

 

Eileen J. Martinson 4

 

79,125

   

172,725

   

251,850

 

Stephen A. Miles

 

100,000

   

144,950

   

244,950

 

Robert E. Radway

 

100,000

   

144,950

   

244,950

 

Stephen F. Schuckenbrock 5

 

94,157

   

172,725

   

266,882

 

Frank S. Sowinski

 

115,000

   

144,950

   

259,950

 

Robert M. Tarkoff 6

 

90,822

   

204,100

   

294,922

 

Footnotes:

1

The fees disclosed include the following fees earned or paid in cash during fiscal 2017: (i) the quarterly Board, committee Chair and incremental Chairman of the Board retainer payments made in July and October of 2016, which represented the final two quarterly payments for the service year that began immediately after the 2015 Annual Meeting; (ii) the quarterly Board and committee retainer payments made in January and April of 2017, which represented the first two quarterly payments for the service year that began immediately after the 2016 Annual Meeting; and (iii) elective DSUs granted in November 2016 to each of the non-employee directors for the service year that began immediately after the 2016 Annual Meeting. Except as described below in footnotes 3, 4 and 5, all of the non-employee directors elected to receive 100% of the elective portion of their retainers in cash.

2

The stock awards disclosed include the following stock awards granted during fiscal 2017: (i) RSUs granted in November 2016 to each of the non-employee directors for the service year that began immediately after the 2016 Annual Meeting; (ii) RSUs granted in August 2016 to Mr. Tarkoff and in September 2016 to Ms. Martinson and Mr. Schuckenbrock that represent the prorated portion of their RSU award for the service year that began immediately after the 2015 Annual Meeting; and (iii) mandatory DSUs granted in November 2016 to the Chairman of the Board for the service year that began immediately after the 2016 Annual Meeting. Stock award compensation amounts reflect the aggregate grant date fair value of the stock awards without regard to forfeitures, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”). This amount does not reflect the actual economic value realized by each non-employee director. The aggregate number of outstanding RSUs for which the restricted period has not lapsed that are held by each non-employee director as of June 30, 2017, was as follows: Mr. Brun, 7,616; Mr. Deese, 6,610; Ms. Hillman, 6,610; Ms. Martinson, 2,587; Mr. Miles, 5,604; Mr. Radway, 5,604; Mr. Schuckenbrock, 2,587; Mr. Sowinski, 6,610; and Mr. Tarkoff, 2,587. Excluding any cash-settled dividend equivalents earned, the aggregate number of outstanding deferred stock units held by each non-employee director as of June 30, 2017, was as follows: Mr. Brun, 12,399; Mr. Deese, 7,064; Ms. Hillman, 12,263; Ms. Martinson, 827; Mr. Miles, 9,719; Mr. Radway, 7,064; Mr. Schuckenbrock, 1,363; Mr. Sowinski, 7,064; and Mr. Tarkoff, 1,054. The aggregate number of outstanding stock options held by each non-employee director as of June 30, 2017, was as follows: Mr. Brun, 15,384; Mr. Deese, 15,384; Ms. Hillman, 15,384; Ms. Martinson, 0; Mr. Miles, 0; Mr. Radway, 15,384; Mr. Schuckenbrock, 0; Mr. Sowinski, 15,384; and Mr. Tarkoff, 0.

3

The cash portion of Ms. Hillman's fiscal 2017 compensation reflects the two quarterly payments made in January and April of 2017 for the service year that began immediately after the 2016 Annual Meeting. Ms. Hillman did not receive quarterly cash payments in July and October of 2016 as she elected to receive 100% of the elective portion of her retainer in DSUs for the service year that began immediately after the 2015 Annual Meeting. Such DSUs were granted in full in November 2015 and were previously disclosed in the Company's proxy statement for the 2016 Annual Meeting.

30


 

CORPORATE GOVERNANCE AT CDK GLOBAL

4

Ms. Martinson became a director on September 6, 2016, and during fiscal 2017 received a prorated portion of the RSU and elective portions of her retainer for the service year that began immediately after the 2015 Annual Meeting. Beginning with the service year that began immediately after the 2016 Annual Meeting, Ms. Martinson elected to receive 80% of the elective portion of her retainer in cash. Her stock awards reflect: (i) her RSU retainer granted in November 2016 with a grant date fair market value of $144,950, for the service year that began immediately after the 2016 Annual Meeting; and (ii) the prorated portion of her RSU retainer granted in September 2016 with a grant date fair market value of $27,775, in respect of her time served during the service year that began immediately after the 2015 Annual Meeting. Her fees earned or paid in cash reflect: (i) her January and April 2017 quarterly cash payments of $20,000, in connection with her election to receive 80% of the $100,000 elective portion of her retainer in cash for the service year that began immediately after the 2016 Annual Meeting; and (ii) her October 2016 quarterly cash payment of $19,178 in respect of her time served on the Board for the service year that began immediately after the 2015 Annual Meeting; and (iii) her DSUs granted in November 2016 with a grant date fair market value of $19,947, for the service year that began immediately after the 2016 Annual Meeting.

5

Mr. Schuckenbrock became a director on September 6, 2016, and during fiscal 2017 received a prorated portion of the RSU and elective portions of his retainer for the service year that began immediately after the 2015 Annual Meeting. Beginning with the service year that began immediately after the 2016 Annual Meeting, Mr. Schuckenbrock elected to receive 50% of the elective portion of his retainer in cash. His stock awards reflect: (i) his RSU retainer granted in November 2016 with a grant date fair market value of $144,950, for the service year that began immediately after the 2016 Annual Meeting; (ii) the prorated portion of his RSU retainer granted in September 2016 with a grant date fair market value of $27,775, in respect of his time served during the service year that began immediately after the 2015 Annual Meeting. His fees earned or paid in cash reflect: (i) his January and April 2017 quarterly cash payments of $12,500, in connection with his election to receive 50% of the $100,000 elective portion of his retainer in cash for the service year that began immediately after the 2016 Annual Meeting; and (ii) his October 2016 quarterly cash payment of $19,178 in respect of his time served on the Board for the service year that began immediately after the 2015 Annual Meeting; and (iii) his DSUs granted in November 2016 with a grant date fair market value of $49,979, for the service year that began immediately after the 2016 Annual Meeting.

6

Mr. Tarkoff became a director on June 19, 2016, and during fiscal 2017 received a prorated portion of the RSU and elective portions of his retainer for the service year that began immediately after the 2015 Annual Meeting. Accordingly, his stock awards reflect: (i) his RSU retainer granted in November 2016 with a grant date fair market value of $144,950, for the service year that began immediately after the 2016 Annual Meeting; and (ii) the prorated portion of his RSU retainer granted in August 2016 with a grant date fair market value of $59,150, in respect of his time served during the service year that began immediately after the 2015 Annual Meeting. His fees earned or paid in cash reflect: (i) his January and April 2017 quarterly cash payments of $25,000, for the service year that began immediately after the 2016 Annual Meeting; and (ii) his July and October 2016 quarterly cash payments of $15,822 and $25,000, respectively, in respect of his time served on the Board for the service year that began immediately after the 2015 Annual Meeting.

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

As discussed in the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement, the Board believes that our long-term success depends in large measure on the talents of our employees. Our compensation system plays a significant role in our ability to attract, retain, and motivate the highest quality workforce. The principal underpinnings of our compensation system are an acute focus on performance, stockholder alignment, sensitivity to the relevant marketplace, and a long-term orientation.

In accordance with Section 14A of the Exchange Act, we are asking our stockholders to vote on an advisory basis, commonly referred to as “say on pay,” to approve the compensation paid to our Named Executive Officers (“NEOs”) as disclosed in the CD&A, the compensation tables and the related narrative disclosure contained in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies, and practices described in this proxy statement.

This advisory proposal is not binding on the Board or us. Nevertheless, the views expressed by the stockholders, whether through this vote or otherwise, are important to management and the Board, and accordingly, the Board and the compensation committee intend to consider the results of this vote when making determinations in the future regarding NEO compensation arrangements.

Advisory approval of this proposal requires the vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.

The Board recommends that you vote FOR the approval of the compensation of our NEOs because, as discussed in these disclosures, the Board believes that our compensation policies and decisions are effective in achieving our goals. Therefore, the Board recommends that our stockholders adopt the following resolution:

“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.”

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee consists of Messrs. Deese and Radway and Ms. Martinson. No member of the compensation committee is an officer or employee of ours, and none of our executive officers serves as a director or member of a compensation committee of any entity that has one or more executive officers serving as a member of the Board or compensation committee.

RESULTS OF 2016 STOCKHOLDER ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

The compensation committee considers the outcome of prior stockholder advisory votes to approve executive compensation when making decisions relating to the compensation of the executive officers identified in the CD&A and our executive compensation programs and policies.

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Proposal 2: Advisory Vote to Approve Executive Compensation

Stockholders expressed their support of our executive compensation programs with approximately 94% of the votes cast for approval of the “say on pay” proposal at the 2016 Annual Meeting. The compensation committee believes that the voting results conveyed our stockholders’ support for the philosophy, strategy and objectives of our executive compensation programs.

Furthermore, we continue to engage in direct dialogue with our stockholders regarding our executive compensation programs and policies to ensure that investors understand the manner in which our policies support our long-term strategic objectives. Through our proactive stockholder engagement process, we held discussions with the majority of our 20 largest stockholders during fiscal 2017 about various corporate governance and executive compensation-related issues.

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Proposal 2: Advisory Vote to Approve Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

This CD&A section explains our compensation philosophy and summarizes the material components of our executive compensation program. Our NEOs for fiscal 2017 were:

 

Brian P. MacDonald, our President, Chief Executive Officer and Director;

 

Lee J. Brunz, our Executive Vice President, General Counsel and Secretary, and Interim Chief Financial Officer;1

 

Scott L. Mathews, our Executive Vice President, North America Sales;

 

Robert N. Karp, our President, CDK North America;

 

Daniel P. Flynn, our Executive Vice President, Business Transformation;

 

Alfred A. Nietzel, our Former Executive Vice President, Chief Financial Officer; and

 

Malcolm W. Thorne, our Former Executive Vice President, Chief Global Strategy Officer.

 

1

As was announced on June 27, 2017, Mr. Brunz served as Interim Chief Financial Officer through the end of fiscal 2017 as well as the portion of fiscal 2018 ending on August 9, 2017, the date on which Joseph A. Tautges began service as our new Chief Financial Officer. Mr. Tautges will be included as one of our NEOs in the proxy statement for our 2018 Annual Meeting.

The CD&A explains how our executive compensation programs are designed and operate with respect to our NEOs by discussing the following fundamental aspects of our compensation programs:

 

compensation principles;

 

cash compensation;

 

long-term incentive compensation programs; and

 

other compensation components and considerations (including retirement benefits and deferred compensation).

 

EXECUTIVE SUMMARY

When we announced our business transformation plan at the end of fiscal 2015, we communicated our intent to strengthen our financial profile and generate additional consolidated adjusted EBITDA of $250 to $275 million over the three years ending June 30, 2018. We also intend to achieve consolidated net earnings attributable to CDK margin of 14%-15%, or consolidated adjusted EBITDA margin between 35-36% for fiscal 2018. During fiscal 2017, we executed against this goal by expanding margin on consolidated net earnings attributable to CDK by 200 basis points to 13.3% and expanding consolidated adjusted EBITDA margin by 550 basis points to 32.1%.

As we execute the business transformation plan, we continually monitor, evaluate and refine its structure, including its design, goals, term and estimate of total restructuring expenses. As part of this process, during the second quarter of fiscal 2017, we extended the business transformation plan by one year, and updated our target of additional consolidated adjusted EBITDA generated to approximately $300 million through fiscal 2019. We also announced our intent to generate a targeted adjusted EBITDA exit margin of 40% or above for the last quarter of fiscal 2019.

The fiscal 2019 business transformation plan targets represent financial objectives distinct from forecasts of performance. Therefore, we have not provided a reconciliation of our fiscal 2019 adjusted EBITDA exit margin target to the most directly comparable GAAP measure of net earnings attributable to CDK, because projecting potential adjustments to GAAP results for the fiscal 2019 exit margin target is not practical and could be misleading to users of this financial information. The EBITDA reconciliation disclosed in Appendix A - GAAP to Non-GAAP Reconciliations is indicative of the reconciliations that will be prepared for the same fiscal 2019 adjusted measure in the future.

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Proposal 2: Advisory Vote to Approve Executive Compensation

Fiscal 2017 Executive Compensation Highlights

Fiscal 2017 Equity Awards and Fiscal 2018 “Pull Forward” Equity Awards

The compensation committee approves equity awards at levels that it believes appropriately reward individual performance, that meet competitive market conditions and retention objectives, and that focus our executives’ efforts on achieving our goals under the business transformation plan. To further align our executive officers’ incentives through the completion of the business transformation plan and to allow for a balanced focus on our operational growth with strategic flexibility, the compensation committee approved both of the following fiscal 2017 equity awards and fiscal 2018 equity awards (referred to as the “pull forward” equity awards) for our executive officers in September 2016. Vesting of the fiscal 2018 “pull forward” equity awards is not accelerated by being granted a year early and as a result of the fiscal 2018 “pull forward” equity awards being awarded in September 2016, the compensation committee has not approved additional fiscal 2018 equity awards during fiscal 2018, except for one-time grants of: (i) restricted stock awarded to Mr. Brunz in recognition for his services as interim chief financial officer and interim chief human resources officer during fiscal 2017; and (ii) restricted stock and PSUs to Mr. Flynn to encourage retention in recognition of his criticality to the success of the business transformation plan.

 

Performance Stock Units (PSUs): The fiscal 2017 PSUs have a performance period that runs from July 1, 2016, to June 30, 2019, and are earned based on the attainment of our targeted adjusted EBITDA margin goal for the full year fiscal 2019 of 37.5%. The fiscal 2018 “pull forward” PSUs have a performance period that runs from July 1, 2017, to June 30, 2020 and are earned based on the attainment of our targeted adjusted EBITDA margin goal for the full year fiscal 2018 of 31.67% (weighted 1/3) and our adjusted EBITDA growth goal of 20% during fiscal 2019 and fiscal 2020 (weighted 2/3). For both three-year performance periods, if our compounded annual revenue growth is below 3%, final awards cannot exceed 100% of target. Both grants of PSUs can also be adjusted for relative total stockholder return (“TSR”) during their respective three-year performance periods, as described in more detail below under “Compensation Review and Determination - Long-Term Incentive Compensation Programs - Performance-Based Stock Units.”

 

Stock Options: The fiscal 2017 stock options become exercisable in four equal installments on September 8, 2017, 2018, 2019 and 2020, and the fiscal 2018 “pull forward” stock options become exercisable in four equal installments on September 8, 2018, 2019, 2020, and 2021.

 

Settlement of Fiscal 2015 PSUs

Certain of our executive officers (including the NEOs, with the exception of Mr. MacDonald and Mr. Flynn) were awarded PSUs in fiscal 2015 (“fiscal 2015 PSUs”), which had a three-year performance period that ran from July 1, 2014, to June 30, 2017, and that consisted of three separate one-year measurement periods with specific performance goals for each measurement period that were set by the compensation committee at the start of each respective measurement period. For each of the fiscal 2015, fiscal 2016 and fiscal 2017 measurement periods, performance was achieved at 116.3%, 185.2% and 82.7% of target, respectively. The overall payout for the fiscal 2015 PSUs was at 128.1% of target based on the average of the three one-year measurement periods. The payout reflects the attainment of: (i) our EPS and TSR goals during fiscal 2015; (ii) our business transformation plan and TSR goals during each of fiscal 2016 and fiscal 2017; and (iii) annual revenue growth greater than 3% during each of fiscal 2016 and fiscal 2017. The specific goals and achievement levels are described in more detail below under “Compensation Review and Determination - Long-Term Incentive Compensation Programs - Performance-Based Stock Units.”

Annual Bonus Plan

 

For fiscal 2017, the compensation committee awarded annual executive cash bonus payments at an average of 109.7% of the applicable target bonus opportunity pursuant to the officer bonus plan (see the “NEOs Fiscal 2017 Bonuses” section in this Proxy Statement for results by NEO), taking into account our performance against pre-established metrics.

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

Beginning with fiscal 2017, the performance measures under the Annual Bonus Plan for all of our executives were changed to adjusted EBITDA margin, adjusted EBITDA growth, global revenue growth, and global sales; and

 

The weight of financial goals in each executive’s bonus plan was increased from 70% for fiscal 2016 to 80% for fiscal 2017.

 

A summary of fiscal 2017 total direct compensation for our NEOs is set forth in the following table, and additional detail is presented in the subsequent discussion as well as the tables and narratives that follow this CD&A.

Named Executive
Officer

Base
Salary
($)

Annual
Bonus
($)

Fiscal
2015
Final
Third
PSUs
($) 1

Fiscal
2017
PSUs
($) 1

Fiscal
2018
PSUs
($) 1

Fiscal
2017
Stock
Options
($) 2

Fiscal
2018
Stock
Options
($) 2

Restricted
Stock/
Units
($) 3

Total
($)

MacDonald, Brian P.

 

900,000

   

1,534,500

   

-

   

6,446,256

   

3,813,927

   

1,499,991

   

1,499,991

   

-

   

15,694,665

 

Brunz, Lee J.

 

355,000

   

245,520

   

139,775

   

300,767

   

305,055

   

119,999

   

119,999

   

-

   

1,586,115

 

Mathews, Scott L.

 

378,333

   

259,160

   

163,081

   

300,767

   

305,055

   

119,999

   

119,999

   

749,992

   

2,396,386

 

Karp, Robert N.

 

416,673

   

269,450

   

186,387

   

376,006

   

381,367

   

149,995

   

149,995

   

-

   

1,929,873

 

Flynn, Daniel P.

 

370,833

   

255,750

   

-

   

376,006

   

381,367

   

149,995

   

149,995

   

-

   

1,683,946

 

Nietzel, Alfred A.4

 

410,000

   

321,325

   

279,570

   

526,421

   

533,927

   

209,987

   

209,987

   

-

   

2,491,217

 

Thorne, Malcolm W.

 

391,000

   

248,800

   

163,081

   

376,006

   

381,367

   

149,995

   

149,995

   

-

   

1,860,244

 

 

1

In accordance with ASC 718, PSUs are deemed granted when the performance target is established. The PSU amounts include the grant date fair value of the fiscal 2017 PSU target awards and the fiscal 2018 “pull forward” PSU target awards, which vest at the end of their respective three-year performance cycles. Mr. MacDonald’s fiscal 2017 PSU award includes a one-time additional grant of PSUs to align him with our other NEOs who received a one-time grant of PSUs in fiscal 2016 as part of aligning executives’ focus on executing our business transformation plan. In addition, the PSU amounts for Messrs. Nietzel, Mathews, Karp, Thorne, and Brunz include the final third tranche of the fiscal 2015 PSU target award. The PSU amounts are the same amounts included within Stock Awards in the “Summary Compensation Table for Fiscal 2017” on page 53 of this proxy statement.

2

Stock option amounts represent the grant date fair value of the fiscal 2017 and fiscal 2018 awards, which are the same amounts disclosed in the “Summary Compensation Table for Fiscal 2017” on page 53 of this proxy statement. Under our Corporate Officer Severance Plan Mr. Nietzel’s stock options will continue to vest per their normal schedule during the eighteen month severance period. He will receive the first and second tranches of the fiscal 2017 stock options, and the first tranche of the fiscal 2018 stock options. The remaining tranches are canceled as of his last day worked, May 31, 2017. Mr. Thorne’s stock options were canceled as of July 1, 2017.

3

As part of an operating segment reorganization effective July 1, 2016, Scott Mathews moved into a new role to lead the North America sales organization and received a one-time grant of restricted stock. The dollar amount reported reflects the aggregate grant date fair value of awards granted during the fiscal year.

4

Mr. Nietzel’s employment terminated on May 31, 2017. The base salary displayed is actual earned base salary through his termination date.

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

Good Governance and Best Practices

We are committed to ensuring that our compensation programs reflect principles of good governance. The following practices are key aspects of our programs for fiscal 2017:

What We Do

What We Don’t Do

Structure a majority of pay as performance-based and not guaranteed

Permit employees to hedge, short-sell, or pledge our common stock

Mitigate undue risk in compensation programs

Reprice or buy out underwater stock options without shareholder approval

Include clawback provisions in our cash and equity incentive programs

Grant discounted stock options

Maintain stock ownership guidelines, including holding requirements to encourage share ownership by executives

Gross up employees for taxes under Internal Revenue Code 280G or 409A

Include “double-trigger” treatment on change in control payments

Pay cash dividends on unearned PSUs

Provide limited perquisites

 

Use an independent compensation consultant

 

COMPENSATION PRINCIPLES

We believe that compensation should be designed to create a direct link between performance and stockholder value. Five principles that guide our decisions involving executive compensation are that an executive’s compensation should be:

 

based on (i) our overall performance and (ii) the executive’s individual performance;

 

closely aligned with the short-term and long-term financial and strategic objectives that build sustainable long-term stockholder value;

 

competitive, in order to attract and retain executives critical to our long-term success;

 

consistent with high standards of corporate governance and best practices; and

 

designed so as not to encourage executives to take excessive risks or behave in ways that are inconsistent with our strategic-planning processes and high ethical standards.

 

Our compensation programs are designed so that target pay reflects the market for the executive’s skills and experience, and relative levels of responsibility among our key executives. In addition, the proportion of pay tied to operating performance and changes in stockholder value varies directly with executives’ levels of responsibility and accountability to stockholders. We assign all executives to pay grades by comparing their position-specific duties and responsibilities with market data and our internal management structure. Each pay grade has ranges for base salary, total annual cash compensation, and annual equity grants. Executives are positioned within these ranges based on a variety of factors, most notably their experience and skill set and their performance over time.

We design our performance-based compensation so that actual, realized compensation will vary relative to the target award opportunity based on performance. As such, actual compensation amounts may vary above or below targeted levels depending on our overall performance and the achievement of individual performance goals. We have adopted this compensation design to provide meaningful incentives for our

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Proposal 2: Advisory Vote to Approve Executive Compensation

key executives to achieve superior results. We also believe that it is important for our executive officers and other senior executives to have an ongoing long-term investment in us as outlined in this proxy statement under “Stock Ownership Guidelines.”

ELEMENTS OF COMPENSATION

The following table summarizes the major elements of our fiscal 2017 executive officer compensation programs.

Compensation Element

Objectives

Key Characteristics

Base Salary

To provide a fixed amount for performing the duties and responsibilities of the position

Determined based on overall performance, level of responsibility, pay grade, competitive compensation data, and comparison to our other executives

Annual Cash Bonus

To motivate executive officers to achieve company-wide and individual performance goals

 

 •
80% of bonus opportunity based on financial objectives, 20% based on individual strategic objectives

 

 •
Financial objectives and targets aligned with business strategy to grow revenue and increase margins

 

 •
Annual cash bonus payout range of 0-200%

 

Stock Options

To align the interests of executive officers with long-term stockholders’ interests and ensure that realized compensation occurs only when there is an increase in stockholder value

 

 •
Stock options represent 30% of long-term incentive grant value

 

 •
Granted annually (with the exception of the fiscal 2018 “pull-forward” awards granted in September 2016) based on pay grades and individual performance

 

 •
Grants vest in equal installments over four years (fiscal 2018 “pull-forward” stock option grant vests on the second, third, fourth and fifth anniversaries of the grant date)

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

Compensation Element

Objectives

Key Characteristics

PSU Awards

To motivate executive officers to achieve certain longer-term goals and create long-term alignment with stockholders

 

 •
PSUs represent 70% of long-term incentive grant value

 

 •
Based on a three-year performance period

 

 •
Performance metrics are aligned with the business transformation plan; fiscal 2017 award performance is measured against adjusted EBITDA margin during fiscal 2019 and fiscal 2018 award performance is measured against (i) adjusted EBITDA margin during fiscal 2018 (weighted 1/3), and (ii) adjusted EBITDA growth during fiscal 2019 and fiscal 2020 (weighted 2/3)

 

 •
For each three-year performance period, our TSR will be compared to a selected peer group of companies in similar Global Industry Classification Standards (“GICS”) codes as CDK, which can adjust the PSU award (upward and downward) and thereby focus executives to drive long-term value to stockholders

 

 •
If our compounded annual revenue growth is below 3% for the respective three-year performance period, final awards cannot exceed 100% of target

 

 •
PSUs have a payout range of 0-250% of target, including the TSR modifier

 

Consistent with a pay-for-performance philosophy, compensation for Mr. MacDonald and the other NEOs is structured so that a significant portion of their total compensation is at-risk and paid based on meeting certain performance goals. The mix of target total direct compensation (base salary, cash bonus, and long-term incentive awards) for fiscal 2017 (excluding the fiscal 2018 grant) was designed to deliver the following approximate proportions of total compensation to Mr. MacDonald, our Chief Executive Officer, and the other NEOs (on average) if company-wide and individual target levels of performance are achieved. Mr. MacDonald’s higher portion of at-risk compensation reflects his greater responsibility for overall Company performance.

1

PSUs and stock options include only the fiscal 2017 equity awards and exclude fiscal 2018 “pull forward” awards.

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Proposal 2: Advisory Vote to Approve Executive Compensation

COMPENSATION REVIEW AND DETERMINATION

Role of the Compensation Committee and Competitive Market Data

The compensation committee oversees and administers our executive compensation programs. Either before or near the beginning of the fiscal year the compensation committee reviews the executive compensation program and establishes base salaries, target annual cash bonus opportunities, and long-term incentive awards for executives and other eligible employees.

The compensation committee examines summary compensation sheets detailing the amounts and mix of base salary, cash bonus, and long-term equity incentives for each of the NEOs, which compare the amounts and mix to competitive compensation levels. We generally target base salary, annual cash bonus, and long-term equity incentives at the median of competitive compensation levels, but will set targets above or below the median when warranted in the judgment of the compensation committee. The degree to which target compensation ranges are above or below the median competitive rate is based on each executive’s skill set and experience relative to market peers. Executives who are new in their roles and therefore less experienced than market peers are typically positioned lower in the range, whereas executives with a long tenure in their role may be positioned higher in the range.

Role of the Compensation Consultant

Our compensation committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) to provide assistance with the design of our compensation programs regarding the amount and types of compensation that we provide our executives, and how these compare to peer company compensation practices. In June 2016, FW Cook examined the competitiveness of senior executive compensation levels and the Company’s aggregate share usage, dilution, and fair value cost of long-term incentives for all participants, which was used for setting fiscal 2017 target total compensation.

Representatives of FW Cook attend meetings of the compensation committee as requested and may also communicate with the Chair of the compensation committee outside of meetings. As part of its ongoing support to our compensation committee, FW Cook also reviews executive compensation disclosures, reviews and provides comments on changes to the committee’s charter, advises on emerging trends and the implications of regulatory and governance developments, and reviews and provides commentary on materials and proposals prepared by management that are presented at the committee’s meetings.

Our compensation committee determined that the work of FW Cook did not raise any conflicts of interest in fiscal 2017. In making this assessment, the compensation committee considered the independence factors enumerated in Rule 10C-1(b) under the Exchange Act and applicable NASDAQ listing standards, including the fact that FW Cook does not provide any other services to us, the level of fees received from us as a percentage of FW Cook’s total revenue, policies and procedures employed by FW Cook to prevent conflicts of interest, and whether the individual FW Cook advisers to the compensation committee own any of our stock or have any business or personal relationships with members of the compensation committee or our executive officers.

Role of Competitive Market Data

Survey Market Data

With respect to the total cash and long-term incentive compensation for our Chief Executive Officer and other NEOs, the compensation committee reviews competitive compensation market data based on compensation surveys reflecting the pay practices of publicly traded companies and our compensation peer group, discussed below, as a second market reference. The surveys used were the Willis Towers Watson U.S. General Industry Executive Database, the Hewitt Associates Executive Total Compensation by Industry Survey, and the Radford Global Technology Survey. In benchmarking compensation levels against the survey data, the compensation committee considered only the aggregated survey data, and the identity

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Proposal 2: Advisory Vote to Approve Executive Compensation

of the companies included in the survey data is not disclosed to, or considered by, the compensation committee in its decision-making process. The companies included were based on a revenue range such that the median company revenue approximates the annual revenue for CDK Global or the executive’s business unit, as appropriate. The compensation committee also compared the aggregate level of each executive officer’s compensation and compared it against the executive’s previous year’s totals and against compensation of our other executive officers.

Peer Companies

For fiscal 2017 the compensation committee, in conjunction with FW Cook, reviewed and approved the use of a compensation peer group of 16 publicly traded companies in a variety of industries related to our business. The purpose of the compensation peer group is to generate competitive data together with the survey data discussed previously for the compensation committee’s review in connection with executive compensation decisions. FW Cook provided to the compensation committee a comparative analysis of the total compensation delivered to the Company’s executives compared to the compensation peer group and the survey data. The companies are selected based on GICS codes that are of a similar business model to CDK, and revenues that are 33% to 300% of our annual revenue. For fiscal 2017 compensation decisions, the Compensation Committee removed Dealertrack Technologies, which was acquired by Cox Automotive in September 2015. The remaining companies below were part of our peer group for fiscal 2017 compensation decisions:

Acxiom

Adobe Systems

Alliance Data Systems

Broadridge Financial

Convergys

Equifax

Fiserv

Intuit

Jack Henry & Associates

Open Text

Paychex

SS&C Technologies

Total System Services

Vantiv

Verisk Analytics

Xura

For fiscal 2018, the compensation committee approved changing the compensation peer group to better align with our evolving business strategy and revenue mix. The new peer group was developed with assistance from FW Cook. We increased the proportion of companies in the Application/Systems Software, Automotive Retail, and Internet Software & Services industries, with an emphasis on companies with digital marketing operations, and decreased the proportion of companies in the Data Processing & Outsourced Services and IT/Research Consulting industries. Companies continued to be selected that are of a similar business model to CDK (including B-to-B operations, back-office services, and digital marketing services), and revenues that are 33% to 300% of our annual revenue. The following companies made up our peer group for fiscal 2018 compensation decisions:

Acxiom

Adobe Systems

Alliance Data Systems

Ansys

Autodesk

AutoNation

CA, Inc.

Cadence Design

CoStar Group

Gartner

Group 1 Automotive

Intuit

Open Text

Red Hat

ServiceNow

SS&C Technologies

Synopsys

Teradata

Total System Services

Verint Systems

Zillow Group

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

Role of Executive Officers

The Chief Executive Officer provides recommendations to the compensation committee with respect to the NEOs’ overall performance and actual achievement against performance objectives, and in the determination of the NEOs’ compensation, other than his own. The compensation committee takes the Chief Executive Officer’s general input into consideration when reviewing and approving compensation for NEOs other than the Chief Executive Officer.

The Chief Executive Officer and Chief Human Resources Officer participate in the development of the performance criteria measures and any plan design changes for our annual bonus and equity plans. The Chief Human Resources Officer presents the plan design changes to the compensation committee for their review and approval.

Cash Compensation

Base Salary

Base salaries represent fixed amounts paid to each executive for performing his normal duties and responsibilities. For fiscal 2017, the compensation committee determined the amount based on the executive’s overall performance in prior years, level of responsibility, pay grade, competitive positioning, and comparison to our other executives. Based on these criteria, our NEOs received the following annual salary increases in fiscal 2017:

 

Named Executive Officer

Fiscal Year
2016 Salary ($)

Increase

Fiscal Year
2017 Salary ($)

MacDonald, Brian P.1

 

900,000

   

-%

   

900,000

 

Brunz, Lee J.

 

330,000

   

9.1%

   

360,000

 

Mathews, Scott L.

 

370,000

   

2.7%

   

380,000

 

Karp, Robert N.

 

375,037

   

13.3%

   

425,000

 

Flynn, Daniel P.

 

350,000

   

7.1%

   

375,000

 

Nietzel, Alfred A.

 

435,000

   

3.4%

   

450,000

 

Thorne, Malcolm W.

 

346,000

   

15.6%

   

400,000

 

 

1

For Mr. MacDonald, upon assuming the role of Chief Executive Officer on March 8, 2016, Mr. MacDonald’s base salary was contractually increased to $900,000 and maintained for fiscal 2017.

Annual Cash Bonus

Overview

For fiscal 2017, the compensation committee approved changes to the annual cash bonus plan that would further align our executive incentives to our business transformation plan goals by setting annual goals based on our longer-term goal of achieving an adjusted EBITDA exit margin for the last quarter of fiscal 2019 in excess of 40%. The Committee increased the weight of financial objectives from 70% to 80% and reduced the weight of individual strategic objectives from 30% to 20%. The fiscal 2017 financial objectives were: (i) adjusted EBITDA margin; (ii) adjusted EBITDA growth; (iii) global revenue growth; and (iv) global sales. The compensation committee believes that the mix of financial and individual strategic goals motivates the NEOs to achieve critical growth objectives aligned with the business transformation plan, while also recognizing and rewarding individual contributions to our financial and strategic success. Potential payout ranges from 0% to 200% of target based on actual CDK performance against financial and individual strategic objectives. There was no minimum payment level, and the entire award opportunity would have been forfeited if the following threshold performance goals were not achieved.

In September 2016, the compensation committee established a threshold corporate performance target based on adjusted earnings per share. This metric must be met or exceeded before annual incentive

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Proposal 2: Advisory Vote to Approve Executive Compensation

awards are made to our named executive officers. Once the threshold corporate performance target is achieved, each named executive officer becomes eligible to receive up to the maximum potential annual bonus. When making final payout determinations, the compensation committee may exercise negative discretion to award less than the maximum potential bonus. This process allows the entire amount of the annual incentive award to be considered performance-based and tax deductible under Section 162(m) of the Internal Revenue Code (the “Code”).

In September 2016, the compensation committee established and approved the annual target bonus objectives and award opportunities for Mr. MacDonald, our Chief Executive Officer. The compensation committee, with Mr. MacDonald and our Chief Human Resources Officer, set the annual target bonus objectives and award opportunities for the other NEOs based largely on the objectives and opportunities that were applicable to Mr. MacDonald. The NEOs participate in the discussions regarding their bonus objectives so that they can provide their input and understand the expectations of each bonus plan component, but they do not participate in the actual establishment of the target award opportunities.

The compensation committee reviewed the performance of the NEOs relative to their annual fiscal year target bonus plan objectives at its regularly scheduled August meeting, which is the first meeting following the end of the fiscal year. Based on this review, the compensation committee determined and approved the annual cash bonuses for the NEOs.

NEOs’ Fiscal 2017 Bonuses

The threshold corporate performance goal for fiscal 2017 was adjusted earnings per share of $1.15. As the threshold performance level was achieved, the compensation committee considered the performance of Mr. MacDonald and the other NEOs for fiscal 2017 against their bonus objectives, and assessed which of the individual bonus targets were met, exceeded, or not fully achieved. The chart below sets forth the approved annual cash bonuses for our NEOs:

 

Named Executive Officer

Target Bonus
as % of Base
Salary

Target
Bonus
Amount ($)

Maximum
Bonus as
% of Target

Actual
Bonus
Amount ($)

Bonus
Amount as
% of Target

MacDonald, Brian P.

 

150%

   

1,350,000

   

200%

   

1,534,500

   

113.7%

 

Brunz, Lee J.

 

60%

   

216,000

   

200%

   

245,520

   

113.7%

 

Mathews, Scott L.

 

60%

   

228,000

   

200%

   

259,160

   

113.7%

 

Karp, Robert N.

 

60%

   

255,000

   

200%

   

269,450

   

105.7%

 

Flynn, Daniel P.

 

60%

   

225,000

   

200%

   

255,750

   

113.7%

 

Nietzel, Alfred A.1

 

75%

   

309,375

   

200%

   

321,325

   

103.7%

 

Thorne, Malcolm W.

 

60%

   

240,000

   

200%

   

248,800

   

103.7%

 

 

1

Mr. Nietzel’s target and actual bonus presented above reflects proration for the portion of the year worked.

Fiscal 2017 Target Bonus Objectives

The following table provides the fiscal 2017 targets and results for our annual bonus plan. Sales is an internal unit of measure that estimates the one-year value of sales transactions, and growth is determined by comparing fiscal 2017 sales to fiscal 2016 sales. For purposes of our target bonus objectives, actual results include the impact of budgeted foreign currency exchange rates and will differ from externally reported results.

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Proposal 2: Advisory Vote to Approve Executive Compensation

 

Bonus Objective

Target Weight

Threshold
(50% of Target)

Target

Maximum
(200% of Target)

Actual Result

Attainment

Adjusted EBITDA %1

25%

31.1%

32.1%

33.1%

32.1%

100.1%

Adjusted EBITDA $1

25%

$687.7 million

$709.7 million

$731.7 million

$712.9 million

102.4%

Global Revenue Growth

20%

3.6%

4.6%

6.1%

5.0%

104.9%

Global Sales

10%

$266.1 million

$295.7 million

$326.4 million

$310.9 million

120.9%

Strategic Objectives2

20%

-

-

-

-

-

 

1

Please refer to the tables in Appendix A to this proxy statement for a reconciliation of the adjusted EBITDA to the comparable GAAP measure of net earnings attributable to CDK.

2

Individual strategic objectives for each NEO are described below. The percentage attainment of such strategic objectives for each NEO was: (i) Mr. MacDonald, 150%; (ii) Mr. Brunz, 150%; (iii) Mr. Mathews, 150%; (iv) Mr. Karp, 110%; (v) Mr. Flynn, 150%; (vi) Mr. Nietzel, 100%; and (vii) Mr. Thorne, 100%.

The bonus objectives were designed to reward the achievement of goals that are aligned with the key components of our operational and strategic success and the degree to which Mr. MacDonald and the other NEOs have responsibility for overall performance results and to provide a set of common objectives that facilitate collaborative engagement. All NEOs had objectives to reduce expenses in their respective areas of responsibility. In addition, NEOs had individual strategic objectives in the areas of performance measurement, reporting and tracking; productivity and process improvement; strategic initiatives and operations, and “other.” The compensation committee established the financial goals for the NEOs as well as the following strategic objectives:

Strategic Objectives for Mr. MacDonald included:

 

Execute against FY17 Plan and transformation plan objectives

 

Assess and improve consulting organization

 

Drive R&D efficiency

 

Review sales structure

 

Enhance leadership development

 

Strategic Objectives for Mr. Brunz included:

 

Ensure effective onboarding process for new Board members

 

Manage litigation and relationships with shareholders

 

Onboard new executive management members

 

Strategic Objectives for Mr. Mathews included:

 

Define the North America sales structure

 

Leverage executive team into the sales and relationship process with dealers and OEMs

 

Implement customer-focused sales strategies

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

Strategic Objectives for Mr. Karp included:

 

Improve product installation process and efficiencies

 

Evolve business consulting organization

 

Further integrate digital and operations organizations

 

Strategic Objectives for Mr. Flynn included:

 

Develop key performance indicators/scorecards and define metrics

 

Assist implementation organization with productivity movements

 

Identify and begin execution of additional business transformation plan opportunities

 

Strategic Objectives for Mr. Nietzel included:

 

Develop key performance indicators/scorecards and define metrics

 

Implement efficiencies in the sales financial process and pricing

 

Identify and begin execution of additional business transformation plan opportunities

 

Strategic Objectives for Mr. Thorne included:

 

Continue to update the Board on our strategic process

 

Develop strategy for the consulting organization

 

Develop strategy for front office products

 

For the NEOs, Mr. MacDonald provided comments to the Compensation Committee describing how the NEOs accomplished their individual strategic objectives. For Mr. MacDonald, the Compensation Committee reviewed comments provided by Mr. MacDonald describing his own performance. The Compensation Committee considered Mr. MacDonald’s comments in their assessment of his performance, and the assessment of the NEOs performance, and determined that Mr. MacDonald and the NEOs had accomplished their individual strategic objectives.

Long-Term Incentive Compensation Programs

We believe that long-term incentive compensation is a significant factor in attracting and retaining key executives and in aligning their interests directly with the interests of our stockholders. For fiscal 2017, long-term incentives were awarded to the NEOs in the form of PSU awards and stock option grants. The compensation committee selected these awards because they ensure that the overall long-term incentive program is tied closely to changes in stockholder value and the degree to which critical operating objectives are attained and they support our talent retention objectives.

The compensation committee may also from time to time grant discretionary awards of time-based restricted stock. These awards are for special situations and are not considered in the target allocation of total long-term incentive compensation between PSU awards and stock option grants.

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Proposal 2: Advisory Vote to Approve Executive Compensation

Each executive officer is awarded a target dollar value of stock options, PSUs, and, if applicable, restricted stock and restricted stock units (“RSUs”). The target dollar value is converted into grants of the respective award based on the closing stock price on the date of grant and the grant date fair value of options.

As part of our annual market analysis of compensation data, we compare our long-term equity incentive grant values with competitive levels. We establish share grant target amounts or ranges of target amounts for each executive level by setting such target amounts, and the midpoints of such ranges of target amounts, at the market median levels. The compensation committee expects to review the share grant targets and target ranges annually to ensure that the resulting awards based on current stock price and option fair value remain generally consistent with our median-based compensation philosophy.

Prior to the beginning of each fiscal year, we analyze the target PSU award and stock option grant levels to confirm that our desired target long-term incentive compensation values are appropriate in the context of the compensation studies referred to under “Compensation Review and Determination” above. When comparing our desired values to these compensation studies, we look at both equity elements in total.

At its September 2016 meeting, to further align our executive officers’ incentives through the completion of the business transformation plan at the end of fiscal 2019, and to allow for a balanced focus on our operational growth with strategic flexibility, our compensation committee approved both the fiscal 2017 equity awards and the fiscal 2018 equity awards for grant in September 2016. As a result of the fiscal 2018 “pull forward” equity awards being awarded in September 2016, the compensation committee did not approve additional fiscal 2018 equity awards during fiscal 2018, except for one-time grants of: (i) restricted stock awarded to Mr. Brunz in recognition for his services as interim chief financial officer and interim chief human resources officer during fiscal 2017; and (ii) restricted stock and PSUs awarded to Mr. Flynn to encourage retention in recognition of his criticality to the success of the business transformation plan. Also, vesting of the fiscal 2018 “pull forward” equity awards is not accelerated by being granted a year early. At its September 2016 meeting the compensation committee also approved the final third of the 2015 PSU based on fiscal 2017 performance for all NEOs.

The awards granted during fiscal 2017, which include fiscal 2017 PSUs and stock options and fiscal 2018 “pull forward” PSUs and stock options for all NEOs, and fiscal 2017 restricted stock for Mr. Mathews are summarized in the table below (the fair market value of these awards can be found in the “Grants of Plan-Based Awards” Table on page 56 of this proxy statement):

       

Named Executive Officer

Fiscal 2017 Target PSU Award

Fiscal 2018 Target PSU Award

Fiscal 2017 Stock Options

Fiscal 2018 Stock Options

Restricted Stock

MacDonald, Brian P. 1

 

102,127

   

59,574

   

107,913

   

107,913

   

-

 

Brunz, Lee J.

 

4,765

   

4,765

   

8,633

   

8,633

   

-

 

Mathews, Scott L.

 

4,765

   

4,765

   

8,633

   

8,633

   

12,951

 

Karp, Robert N.

 

5,957

   

5,957

   

10,791

   

10,791

   

-

 

Flynn, Daniel P.

 

5,957

   

5,957

   

10,791

   

10,791

   

-

 

Nietzel, Alfred A.

 

8,340

   

8,340

   

15,107

   

15,107

   

-

 

Thorne, Malcolm W.

 

5,957

   

5,957

   

10,791

   

10,791

   

-

 

 

1

Mr. MacDonald’s fiscal 2017 PSU contains his one-time grant of 42,553 units.

Performance-Based Stock Units

Fiscal 2017 and Fiscal 2018 “Pull-Forward” PSUs

For fiscal 2017 PSUs and fiscal 2018 “pull forward” PSUs, the compensation committee approved PSU programs based on the following financial objectives that are measured over a three-year performance

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Proposal 2: Advisory Vote to Approve Executive Compensation

period. With the exception of Mr. MacDonald, each NEO's fiscal 2017 PSU award was equal in value and number of units to the fiscal 2018 “pull forward” PSU award.

Fiscal Year Grant

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

2017

Fiscal 2019 EBITDA Margin (%)

 

2018 “Pull Forward”

 

Fiscal 2018 EBITDA Margin (%)
(weighted 1/3)

Fiscal 2019 and Fiscal 2020 EBITDA Growth
(weighted 2/3)

Potential payouts can range from 50% to 200% of target for threshold and maximum performance respectively. If threshold performance is not achieved, the PSUs will be forfeited. The number of PSUs earned for each grant is subject to further adjustment (increase or decrease) depending on the TSR of our common stock compared against a performance peer group of companies in similar GICS codes, which can increase the maximum payout to 250% of target. Lastly, if our compounded annual revenue growth over each three-year performance cycle is below 3%, awards are capped at 100% of target. The following table displays the margin goals for each performance period, and the impact of relative TSR on each award payout:

Fiscal 2017 PSU Goals

 

Fiscal 2017 Goals

TSR Adjustment to Award

 

Fiscal 2019 Adjusted EBITDA
Margin (%)

Goal Achievement
Payout Percentage
of Target Award

25th Percentile
TSR

50th Percentile
TSR

75th Percentile
TSR

Threshold

36.50%

50%

38%

50%

63%

Target

37.50%

100%

75%

100%

125%

Maximum

39.00%

200%

150%

200%

250%

Fiscal 2018 “Pull Forward” PSU Goals

 

Fiscal 2018 “Pull Forward” Goals

TSR Adjustment to Award

 

Fiscal 2018 Adjusted EBITDA
Margin (%)
(1/3 weight)

Fiscal 2019 and Fiscal 2020 Adjusted EBITDA
Growth1
(2/3 weight)

Goal Achievement
Payout Percentage
of Target Award

25th Percentile
TSR

50th Percentile
TSR

75th Percentile
TSR

Threshold

30.00%

16.00%

50%

38%

50%

63%

Target

31.67%

20.00%

100%

75%

100%

125%

Maximum

35.00%

24.00%

200%

150%

200%

250%

 

1

Based on cumulative adjusted EBITDA growth during fiscal 2019 and fiscal 2020 from fiscal 2018 adjusted EBITDA.

After the conclusion of the three-year performance cycles for the fiscal 2017 PSUs and fiscal 2018 “pull forward” PSUs, the compensation committee will confirm the respective performance cycle results to determine the percentage of target achieved based on such results by using straight-line interpolation between lower and upper bounds of the award range. The compensation committee will also confirm the

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Proposal 2: Advisory Vote to Approve Executive Compensation

three-year TSR and compounded annual revenue growth results for the respective performance period. The PSU award earned will also be credited with dividend equivalents from the grant date of the target award until the issuance date, assuming all dividends were reinvested in our stock at the time dividends are paid. The PSUs earned will be paid in the form of shares of our common stock in September following the conclusion of the three-year performance period.

We believe that these programs are aligned to our business transformation plan to grow revenues and margin and further the Company’s long-term financial goals by aligning the compensation of our key executives with our long-term operating performance, creating commonality of interest between executives and stockholders, and supporting our talent retention objectives.

Settlement of Fiscal 2015 PSUs

Certain of our executive officers (including the NEOs, with the exception of Mr. MacDonald and Mr. Flynn) were awarded fiscal 2015 PSUs, which had a three-year performance period that ran from July 1, 2014, to June 30, 2017, and that consisted of three separate one-year measurement periods with specific performance goals for each measurement period that were set by the compensation committee at the start of each respective measurement period.

For each of the fiscal 2015, fiscal 2016 and fiscal 2017 measurement periods, performance was achieved at 116.3%, 185.2% and 82.7% of target, respectively. The overall payout for the fiscal 2015 PSUs was at 128.1% of target based on the average of the three one-year measurement periods. For fiscal 2017, our adjusted EBITDA margin was 32.1% and TSR was in the 33rd percentile. The payout reflects the attainment of: (i) our EPS and TSR goals during fiscal 2015; (ii) our business transformation plan and TSR goals during each of fiscal 2016 and fiscal 2017; and (iii) annual revenue growth was greater than 3% for each of fiscal 2016 and fiscal 2017. The same performance peer group is used for the one-year TSR measurement period program as is used for the three-year program.

Our TSR Peer Group

The companies in our TSR performance peer group1 are:

58.com

Fidelity National Information Services

ServiceNow

Activision Blizzard

FireEye

Splunk

Akamai Technologies

Fiserv

SS&C Technologies Holdings

Alliance Data Systems Corporation

FleetCor Technologies

Symantec

Amdocs

Fortinet

Synopsys

Ansys

Gartner

Tableau Software

Autodesk

Global Payments

Teradata Corporation

Autohome

IAC/InterActive

The Interpublic Group of Companies

Broadridge Financial Solutions

LendingClub

The Western Union Company

CA

Mercadolibre

Total System Services

Cadence Design Systems

Mobileye N.V.

Twitter

Check Point Software Technologies

NetEase

Vantiv

Citrix Systems

Nuance Communications

VeriSign

CoStar Group

Omnicom Group

Workday

DXC Technology (formerly Computer Sciences Corporation)

Paychex

Xerox

Electronic Arts

Red Hat

 

FactSet Research Systems

Sabre

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

 

1

Qihoo 360 Technology and NetSuite Inc. were acquired in 2016 and were removed from the peer group for fiscal 2017.

Fiscal 2017 and Fiscal 2018 “Pull Forward” Stock Options

We grant stock options to all of our officers annually based upon their pay grades, and for officers other than the Chief Executive Officer, based on input from the Chief Executive Officer to the compensation committee. Stock options have an exercise price equal to the closing market price of our common stock on the date of grant. Executives will realize value only if the market price of our common stock increases during the period the option is outstanding, which provides a strong incentive to our executives to increase stockholder value that can be sustained over time.

For fiscal 2017, the compensation committee approved September 2016 grants of fiscal 2017 stock options and fiscal 2018 “pull forward” stock options. Each NEO’s fiscal 2017 stock option grant was equal in value and number of options to the fiscal 2018 “pull forward” stock option grant. While the compensation committee can consider a stock option grant at any time, it expects the next regularly scheduled stock option grant to occur at its September 2018 meeting. The compensation committee generally sets its calendar of meetings in November of each year, and does not coordinate the September meeting date, or any other meeting dates, with any regularly scheduled announcement or corporate event. Additional stock option grants may be made to assist us in recruiting, promoting, or retaining executives.

Fiscal 2017 Time-Based Restricted Stock

The compensation committee may from time to time grant discretionary awards of restricted stock and RSUs to assist us in the recruitment, promotion, and retention of executives. During fiscal 2017, the compensation committee awarded Mr. Mathews a restricted stock award as part of our management team reorganization effective July 1, 2016, in connection with his appointment to lead the North America Sales organization. Retaining Mr. Mathews’ automotive and digital marketing expertise is critical to achieving our long-term financial objectives of growth in sales with existing and new customers.

Other Compensation Components and Considerations

In addition to the compensation components discussed above and the same health and welfare benefits and retirement benefits available to our U.S. employees generally, we offer the NEOs deferred compensation, limited perquisites, change in control protection, and severance benefits. We believe that these additional benefits are fair, competitive, and consistent with our overall compensation philosophy, and designed to ensure that we can effectively retain our NEOs and compete for executive talent.

Retirement Benefits

We do not provide a defined benefit plan to our employees. We offer a non-elective contribution (“NEC”) that is deposited into 401(k) accounts of employees who, at the time of the spin-off from ADP, were age 50 with 10 years of service. This contribution was for the purpose of replacing value lost due to termination of employees’ participation in ADP’s Pension Retirement Plan. This plan will be in effect for five years following the spin-off from ADP.

Deferred Compensation

All of our executive officers are eligible to defer into a deferred compensation account all or a portion of their annual cash bonuses. We make this program available to our executive officers to be competitive, to facilitate the recruitment of new executives, and to provide our executive officers with a tax-efficient way to save for retirement. We do not match deferrals by these executive officers or otherwise contribute any amounts to the NEOs’ deferred compensation accounts. We generally do not consider the executive’s deferred account balances, or investment earnings or losses on such balances, when we make compensation decisions because the value of such accounts reflects voluntary contributions made by the

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Proposal 2: Advisory Vote to Approve Executive Compensation

individual executives and the earnings thereon. Cash bonus contributions are fully vested from the date of deferral. Participants can elect to have payment of deferred amounts commence on an in-service date or upon retirement, and the form of payment can be in either installments or a lump sum. We also provide the CDK Global, Inc. Restoration Plan, which is designed to restore or replace company contributions that cannot be provided under the qualified 401(k) Plan due to IRS limits. Company contributions on eligible compensation above the IRS limits are deposited into the deferred compensation account.

Perquisites

We provide our NEOs with the use of automobiles leased by us. Consistent with our policy towards all attendees, we pay for the spouses of our executive officers to accompany them to our annual sales President’s Club event. We also provide relocation benefits when an employee is asked to change work locations as part of their employment with CDK.

Change in Control Severance Plan for Corporate Officers

Our Change in Control Severance Plan for Corporate Officers is designed (i) to retain our corporate officers and (ii) to align their interests with our stockholders’ interests so that they can consider transactions that are in the best interests of our stockholders and maintain their focus without concern regarding how any such transaction might personally affect them. Each of our NEOs participates in this plan.

The severance formulas used for the Chief Executive Officer and the other participating executive officers are each designed to provide the level of temporary replacement income that we feel is appropriate for that office, but the compensation that our executive officers may receive after termination of employment or a change in control is not taken into account when current compensation levels are determined.

Our Change in Control Severance Plan is described in more detail below under “Potential Payments to Named Executive Officers Upon Termination or Change in Control.”

Corporate Officer Severance Plan

Effective February 2, 2016, we adopted the Corporate Officer Severance Plan for purposes of involuntary terminations other than for cause in the absence of a change in control. This plan is designed to: (i) attract and retain executive officers by a level of protection against involuntary job loss; (ii) provide an appropriate level of benefit to enable executive officers to transition to new employment; and (iii) secure restrictive covenants such as non-competition, non-solicitation, etc.

As described below under “Potential Payments to Named Executive Officers Upon Termination or Change in Control,” our Chief Executive Officer and the other participating executive officers have separation entitlements under the Corporate Officer Severance Plan that differ from one another.

Our Corporate Officer Severance Plan is described in more detail below under “Potential Payments To Named Executive Officers Upon Termination or Change in Control.”

Accounting and Tax Considerations

We consider accounting and tax implications when we design our equity-based and cash compensation programs and when we make awards or grants. In particular, Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to “covered employees” (which is defined as a public company’s NEOs, other than the chief financial officer). However, qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. We strive to make only those equity-based awards and grants that qualify as performance-based compensation or that we can otherwise deduct when determining our corporate taxes. However, the overriding consideration when evaluating the pay level or design component of any portion of our executives’ compensation is the effectiveness of the component and the stockholder value that

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Proposal 2: Advisory Vote to Approve Executive Compensation

management and the compensation committee believe that the pay component reinforces. The compensation committee may, however, award compensation that is not deductible under Section 162(m) when, in the exercise of the committee’s judgment, it would be in our best interests and in the best interests of our stockholders to do so.

Our 2014 Omnibus Award Plan (the “2014 Plan”) is structured to permit us to make equity-based awards and cash bonuses that may qualify as performance-based compensation for purposes of Section 162(m) of the Code. In September 2016, the compensation committee established a threshold corporate performance target based on adjusted earnings per share. This metric must be met or exceeded before annual incentive awards are made to our named executive officers. Once the threshold corporate performance target is achieved, each named executive officer becomes eligible to receive up to the maximum potential annual bonus. When making final payout determinations, the compensation committee may exercise negative discretion to award less than the maximum potential bonus. This process allows the entire amount of the annual incentive award to be considered performance-based and tax deductible under Section 162(m) of the Code.

Compensation Recovery (Clawback)

In addition to the clawback provision contained in the 2014 Plan, the Board adopted a compensation recovery policy in September 2015, whereby the compensation committee will recoup any incentive compensation (including requiring the reimbursement of any cash incentive compensation or canceling any equity award granted pursuant to the 2014 Plan) if: (i) with respect to the recoupment of any equity award granted pursuant to the 2014 Plan, the recipient of such equity award, without the consent of the Company, while employed by or providing services to the Company or any affiliate or after termination of such employment or service, violates a non-competition, non-solicitation, or non-disclosure covenant or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any affiliate, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the compensation committee in its sole discretion; or (ii) with respect to the recoupment of any cash incentive compensation, the recipient of such cash incentive compensation engages in fraud or conduct contributing to any financial restatements or irregularities, as determined by the compensation committee in its sole discretion. In addition, if, with respect to the recoupment of any equity award granted pursuant to the 2014 Plan, a recipient engages in any activity referred to in clause (i) of the preceding sentence, the recipient will forfeit any gain as a result of any such incentive compensation (including any gain realized on the vesting or exercise of any equity award) and must repay that gain to the Company.

Anti-Hedging, Anti-Short Sale, and Anti-Pledging Policies

Our Insider Trading Policy prohibits directors, executive officers, and employees from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of our common stock. Our directors, executive officers, and employees are also prohibited from engaging in short sales related to our common stock. The policy also prohibits any pledging of our common stock, including holding common stock in a margin account.

Stock Ownership Guidelines

We have established stock ownership guidelines to encourage equity ownership by our executive officers in order to reinforce the link between their financial interests and those of our stockholders. The stock ownership guidelines were set on the basis of each executive officer’s pay grade, expressed as a multiple of the executive officer’s base salary on the first day of the fiscal year. Stock ownership (as defined under the guidelines) consists of stock owned outright by the executive officer or beneficially through ownership by direct family members (spouses and dependent children). Our executive officers are expected to satisfy the guidelines within five years of becoming an executive officer.

Under our stock ownership guidelines, Mr. MacDonald is expected to own an amount of our stock equal in value to six times his base salary. Our other executive officers are expected to own an amount of our stock

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Proposal 2: Advisory Vote to Approve Executive Compensation

equal in value to three times their respective base salaries. Executive officers whose ownership levels are below the minimum required levels are required to retain as shares of our common stock at least 75% of post-tax net gains on stock option exercises, and 75% of shares (net of taxes) received upon vesting of restricted stock or the settlement of PSUs. As of the end of fiscal 2017, Mr. Karp and Mr. Mathews had satisfied the guidelines. The other executive officers are making progress towards achievement and are expected to satisfy the guidelines within the relevant time period.

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Proposal 2: Advisory Vote to Approve Executive Compensation

COMPENSATION TABLES

Summary Compensation Table for Fiscal 2017

Name and
Principal Position

Year ($)

Salary ($) 1

Bonus

($)

Stock
Awards ($) 2, 3

Option
Awards ($) 2, 3

Non-Equity
Incentive Plan
Compensation ($) 4

Change in
Pension
Value and
Nonqualified&
Deferred
Compensation
Earnings ($) 5

All Other
Compen-
sation ($) 6

Total ($)

MacDonald, Brian P.

 

2017

   

900,000

   

 

   

10,260,183

   

2,999,982

   

1,534,500

   

-

   

117,918

   

15,812,583

 

President and Chief

 

2016

   

412,820

   

-

   

5,405,657

   

-

   

814,050

   

-

   

56,834

   

6,689,361

 

Executive Officer

 

2015

   

-

   

-

   

-

   

-

   

-

   

-

   

-

   

-

 

Brunz, Lee J.

 

2017

   

355,000

   

 

   

745,597

   

239,998

   

245,520

   

-

   

44,031

   

1,630,146

 

EVP, General Counsel

 

2016

   

325,000

   

-

   

786,453

   

120,003

   

221,100

   

-

   

53,174

   

1,505,730

 

and Interim Chief Financial Officer

 

2015

   

286,196

   

50,000

   

363,317

   

90,005

   

171,900

   

1,875

   

128,154

   

1,091,447

 

Mathews, Scott L.

 

2017

   

378,333

   

 

   

1,518,895

   

239,998

   

259,160

   

-

   

52,162

   

2,448,548

 

EVP, Sales North

 

2016

   

-

   

-

   

-

   

-

   

-

   

-

   

-

   

-

 

America

 

2015

   

-

   

-

   

-

   

-

   

-

   

-

   

-

   

-

 

Karp, Robert N.

 

2017

   

416,673

   

 

   

943,760

   

299,990

   

269,450

   

-

   

63,534

   

1,993,407

 

President, CDK North

 

2016

   

373,364

   

-

   

877,956

   

120,003

   

279,000

   

-

   

62,101

   

1,712,424

 

America

 

2015

   

356,250

   

-

   

881,352

   

120,010

   

254,478

   

-

   

47,198

   

1,659,288

 

Flynn, Daniel P.

 

2017

   

370,833

   

 

   

757,373

   

299,990

   

255,750

   

-

   

59,221

   

1,743,167

 

EVP, Business

 

2016

   

-

   

-

   

-

   

-

   

-

   

-

   

-

   

-

 

Transformation

 

2015

   

-

   

-

   

-

   

-

   

-

   

-

   

-

   

-

 

Nietzel, Alfred A.

 

2017

   

410,000

   

 

   

1,339,918

   

419,974

   

321,325

   

-

   

769,993

   

3,261,210

 

Forner EVP & Chief Financial

 

2016

   

432,500

   

-

   

1,382,511

   

209,999

   

364,095

   

-

   

72,724

   

2,461,829

 

Officer

 

2015

   

400,250

   

-

   

941,905

   

180,010

   

388,395

   

-

   

35,412

   

1,945,972

 

Thorne, Malcolm W.

 

2017

   

391,000

   

 

   

920,454

   

299,990

   

248,800

   

-

   

46,055

   

1,906,299

 

Forner EVP, Global Chief

 

2016

   

344,167

   

-

   

706,881

   

120,003

   

250,504

   

-

   

55,443

   

1,476,998

 

Strategy Officer

 

2015

   

323,750

   

-

   

1,007,894

   

120,010

   

238,788

   

1,764

   

795,126

   

2,487,332

 

 

1

Salary for fiscal 2015 represents pay for three months of services rendered prior to the spin-off and nine months of services rendered following the spin-off.

2

As previously described under the Fiscal 2017 Executive Compensation Highlights, at its September 2016 meeting, to further align our executive officers’ incentives through the completion of the business transformation plan at the end of fiscal 2019, and to allow for a balanced focus on our operational growth with strategic flexibility, our compensation committee approved both the fiscal 2017 equity awards and the fiscal 2018 equity awards for grant in September 2016. As a result of the fiscal 2018 “pull forward” equity awards being awarded in September 2016, the compensation committee did not approve additional fiscal 2018 equity awards during fiscal 2018, except for one-time grants of: (i) restricted stock awarded to Mr. Brunz in recognition for his services as interim chief financial officer and interim chief human resources officer during fiscal 2017; and (ii) restricted stock and PSUs awarded to Mr. Flynn to encourage retention in recognition of his criticality to the success of the business transformation plan. Also, vesting of the fiscal 2018 “pull forward” equity awards is not accelerated by being granted a year early. The grant date fair value amounts attributable to the fiscal 2018 “pull forward” PSU and stock option awards are set forth below in footnote 3.

3

Amounts set forth in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of awards granted in fiscal 2017 as computed in accordance with ASC 718, disregarding estimates of forfeitures related to service-based vesting conditions. For additional information about the assumptions used in these calculations, see Note 6 to our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

 

The amounts presented in the Stock Awards column include the grant date fair value of PSUs based upon the probable outcome of the performance condition as of the grant date. The amounts for PSUs represent the grant date fair value of the fiscal 2017 PSUs, fiscal 2018 “pull forward” PSUs, and the final third of the fiscal 2015 PSU target award. As previously described under the Fiscal 2017 Executive Compensation Highlights, the grant date fair value amounts attributable to the fiscal 2018 “pull forward” PSU and stock option awards are:

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Proposal 2: Advisory Vote to Approve Executive Compensation

 

         

Named Executive
Officer

Fiscal
2018
PSUs
($)

Fiscal
2018
Stock
Options
($)

MacDonald, Brian P.

 

3,813,927

   

1,499,991

 

Brunz, Lee J.

 

305,055

   

119,999

 

Mathews, Scott L.

 

305,055

   

119,999

 

Karp, Robert N.

 

381,367

   

149,995

 

Flynn, Daniel P.

 

381,367

   

149,995

 

Nietzel, Alfred A.

 

533,927

   

209,987

 

Thorne, Malcolm W.

 

381,367

   

149,995

 

 

 

The maximum grant date fair value of the fiscal 2017 PSU, fiscal 2018 “pull forward” PSU and the final third of the fiscal 2015 PSU target award granted in fiscal 2017, assuming achievement of the highest level of performance would be as follows: Mr. MacDonald, $25,650,459; Mr. Brunz, $1,863,993; Mr. Mathews, $1,922,207; Mr. Karp, $2,359,449; Mr. Flynn, $1,893,432; Mr. Nietzel, $3,349,744; and Mr. Thorne, $2,301,084.

4

Performance-based bonuses paid under the annual cash bonus program are shown in this column. A discussion of our annual cash bonus program may be found in our CD&A under “Cash Compensation—Annual Cash Bonus.”

5

Amounts shown for fiscal 2015 include the aggregate increase in the present value of the executive’s benefit under the ADP tax-qualified cash balance pension plan and the ADP Supplemental Officer’s Retirement Plan, the benefits of which remained with ADP.

6

Refer to the “All Other Compensation for Fiscal 2017” table below for further information.

All Other Compensation for Fiscal 2017

                       

Name

Automotive
($) 1

Employer-
Sponsored
Retirement
($) 2

Travel &
Living
Expenses
($) 3

Life and
Accidental
Death
Insurance
($) 4

Spousal
Travel
($) 5

Termination-
Related
Payments
($) 6

Tax Payments
($) 7

Matching Charitable
Contributions
($) 8

Other

($) 9

Total
($)

MacDonald

 

16,854

   

71,991

   

26,136

   

1,308

   

1,629

   

-

   

-

   

-

   

-

   

117,918

 

Brunz

 

15,845

   

13,746

   

-

   

706

   

-

   

-

   

4,269

   

4,085

   

5,380

   

44,031

 

Mathews

 

14,837

   

34,950

   

-

   

746

   

1,629

   

-

   

-

   

-

   

-

   

52,162

 

Karp

 

17,788

   

43,132

   

-

   

835

   

1,629

   

-

   

-

   

150

   

-

   

63,534

 

Flynn

 

14,690

   

22,795

   

21,000

   

736

   

-

   

-

   

-

   

-

   

-

   

59,221

 

Nietzel

 

16,332

   

49,875

   

-

   

883

   

-

   

692,903

   

-

   

10,000

   

-

   

769,993

 

Thorne

 

16,213

   

15,749

   

-

   

785

   

3,258

   

-

   

-

   

10,050

   

-

   

46,055

 

 

1

Actual costs to the Company of leasing automobiles (and covering related insurance, registration, and maintenance).

2

Represents matching contributions made by the Company on behalf of the employee to the Company’s Retirement and Savings Plan (Mr. MacDonald, $12,692; Mr. Brunz $10,596; Mr. Mathews, $11,340; Mr. Karp, $12,179; Mr. Flynn, $15,078; Mr. Nietzel, $11,393; Mr. Thorne, $11,591), non-elective contributions paid by the Company to augment the loss of the ADP Retirement Pension Plan and on compensation in excess of IRS limits for allowable compensation for the 401(k) Plan (Mr. Mathews, $5,400; Mr. Karp, $5,800; Mr. Nietzel, $5,058), and contributions to the Restoration Plan and Restoration NEC (Mr. MacDonald, $59,299; Mr. Brunz, $3,150; Mr. Mathews, $18,210; Mr. Karp, $25,153; Mr. Flynn, $7,717; Mr. Nietzel, $33,424; Mr. Thorne, $4,158).

3

Represents travel expenses incurred by Mr. MacDonald between his place of residence and our corporate headquarters as agreed to in his employment contract. Mr. Flynn’s employment offer included a travel allowance of $3,000 per month for 12 months beginning from his hire date.

4

Life insurance and accidental death and dismemberment premiums paid by the Company for the NEOs.

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Proposal 2: Advisory Vote to Approve Executive Compensation

5

Amounts paid by the Company on behalf of the executives and their spouses or significant others who accompanied them in connection with business-related travel sponsored by the Company.

6

Represents the amount payable to Mr. Nietzel in accordance with CDK Global, Inc. Corporate Officer Severance Plan. This amount includes cash severance, and accrued and unpaid time off as of June 30, 2017.

7

Gross up of relocation expenses provided to Mr. Brunz.

8

Reflects matching charitable contributions made by the CDK Global Matching Gift Program.

9

Relocation expenses paid by CDK Global for Mr. Brunz’s relocation.

 

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Proposal 2: Advisory Vote to Approve Executive Compensation

Grants of Plan-Based Awards Table for Fiscal 2017

                                                   

Name

Grant
Date 1

Award
Date 1

Plan Under
which Grant
was Made

Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards

Estimated Future
Payouts Under
Equity Incentive
Plan Awards 2

All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or Units
(#)

All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)

Exercise
or Base
Price of
Option
Awards
($/share)

Grant
Date
Fair
Value
of Stock
and
Option
Awards
($) 3

Threshold
($)

Target
(#)

Maximum
($)

Threshold
(#)

Target
(#)

Maximum
(#)

MacDonald

 

 

   

 

 

Cash Bonus

 

675,000

   

1,350,000

   

2,700,000

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

 

 

9/8/2016

   

 

 

FY 2017 PSU 4

 

 

   

 

   

 

   

38,808

   

102,127

   

255,318

   

 

   

 

   

 

   

6,446,256

 

 

 

9/8/2016

   

 

 

FY 2018 PSU 4

 

 

   

 

   

 

   

22,638

   

59,574

   

148,935

   

 

   

 

   

 

   

3,813,927

 

 

 

9/8/2016

   

 

 

FY 2017 Stock Options

 

 

   

 

   

 

   

 

   

 

   

 

   

 

   

107,913

   

58.75

   

1,499,991

 

 

 

9/8/2016

   

 

 

FY 2018 Stock Options

 

 

   

 

   

 

   

 

   

 

   

 

   

 

   

107,913

   

58.75

   

1,499,991

 

Brunz

 

 

   

 

 

Cash Bonus

 

108,000

   

216,000

   

432,000

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
 

9/8/2016

   

11/18/2014

 

FY 2015 PSU 4

 

 

   

 

   

 

   

883

   

2,323

   

5,808

   

 

   

 

   

 

   

139,775

 

 

 

9/8/2016

   

 

 

FY 2017 PSU 4