DEF 14A 1 d920815ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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  

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

DXC Technology Company

(Name of Registrant as Specified in its Charter)

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

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  1.  

Title of each class of securities to which transaction applies:

 

     

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Aggregate number of securities to which transaction applies:

 

     

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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0 -11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

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Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 

 

 

1.

 

 

 

Amount previously paid:

 

     

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Form, Schedule or Registration Statement No.:

 

     

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Date Filed:

 

     

 

 

 


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LOGO

 





Corporate Office

1775 Tysons Boulevard

Tysons, VA 22102

www.dxc.technology

 

July 2, 2020

 

Dear Fellow Stockholder,

 

We hope you and your family are doing well.

 

The Board of Directors and executive leadership team of DXC Technology are pleased to invite you to join our Annual Meeting of Stockholders on August 13, 2020. This will be a virtual meeting of stockholders, conducted via live webcast.

 

Attend our virtual meeting

You can attend the annual meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/DXC2020. The Notice of Annual Meeting of Stockholders and the Proxy Statement that accompany this letter provide important information about the meeting and will serve as a guide to the business that will be conducted during the online meeting.

 

Our transformation journey

During the meeting, we will share an update on our business. At the heart of our transformation journey is taking care of our customers and our people who deliver every day for those customers. We have received overwhelmingly positive feedback for the way we have delivered through COVID-19. We have done this by focusing on the well-being of all of our people and enabling 99% of them to work from home. We are also executing our cost-optimization plans to better serve our customers by eliminating complexity and confusion. And, we are seizing the market opportunity to grow our relationships and cross-sell our services. If COVID-19 taught us anything, it has reinforced the importance of the IT estate, which is highlighting our expertise and capabilities across the Enterprise Technology Stack. All of this creates a strong foundation for DXC’s growth.

 

Your vote is important

We encourage you to vote as soon as possible, whether you plan to participate in the meeting or not. You can vote by proxy over the Internet, by telephone or by completing the printed proxy card, or voting instruction card if you received paper copies of the proxy materials by mail. The printed card includes instructions for returning the card by mail.

 

We are excited about the future of DXC Technology, our strategic direction, and the growth opportunities ahead for our company, people, customers and stockholders.

 

We value your support and are committed to communicating regularly and openly. Thank you for your continued trust and confidence.

 

 

LOGO   

LOGO

LOGO    LOGO

 

MICHAEL J. SALVINO

President & CEO

  

 

IAN READ

Chairman of the Board

 


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LOGO

Notice of 2020 Annual Meeting of Stockholders

 

Date:

Thursday, August 13, 2020

 

Time:

10:30 a.m., Eastern Time

 

Place:

Online at www.virtualshareholdermeeting.com/DXC2020

The 2020 Annual Meeting of Stockholders of DXC Technology will be held on Thursday, August 13, 2020, at 10:30 a.m. Eastern Time, and will be a virtual meeting conducted via live webcast. You will be able to attend the meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/DXC2020. To participate in the Annual Meeting, you will need the 16-digit control number included on your notice of Internet availability of proxy materials, on your proxy card or on the instructions that accompanied your proxy materials.

The purpose of the meeting is:

 

1.

to elect the 10 director nominees listed in the proxy statement,

 

2.

to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021,

 

3.

to approve, in a non-binding advisory vote, named executive officer compensation,

 

4.

to approve an increase in the number of shares available under the DXC Technology Company 2017 Omnibus Incentive Plan,

 

5.

to approve an increase in the number of shares available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan, and

 

6.

to transact any other business that may properly come before the meeting and any postponements or adjournments thereof.

Only stockholders of record at the close of business on June 15, 2020 will be entitled to vote electronically at the Annual Meeting and any postponements or adjournments thereof.

Your vote is important. Whether or not you plan to attend the meeting online, we encourage you to read this proxy statement and vote as soon as possible. Information on how to vote is contained in this proxy statement. In addition, voting instructions are provided in the notice of Internet availability of proxy materials, or, if you requested printed materials, the instructions are printed on your proxy card and included in the accompanying proxy statement. You can revoke a proxy at any time prior to its exercise at the Annual Meeting by following the instructions in the proxy statement.

By Order of the Board of Directors,

 

 

LOGO

William L. Deckelman, Jr.

Executive Vice President, General Counsel & Secretary

Tysons, Virginia

July 2, 2020

This notice of annual meeting and proxy statement were first made available to stockholders on or about July 2, 2020.


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Proxy Summary

  

 

 

 

 

 

 

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Proxy Summary

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

Annual Meeting of Stockholders

 

 

Meeting Date: August 13, 2020

Meeting Time: 10:30 a.m. Eastern Time

Meeting Place: Online at www.virtualstockholdermeeting.com/DXC2020

Virtual Meeting Admission: Stockholders as of the record date will be able to participate in the annual meeting by visiting www.virtualstockholdermeeting.com/DXC2020. To participate in the meeting, you will need the 16-digit control number included on your notice of Internet availability of proxy materials, on your proxy card or on the instructions that accompanied your proxy materials.

The annual meeting will begin promptly at 10:30 a.m. Eastern Time. Online check-in will begin at 10:15 a.m. Eastern Time, and you should allow ample time for the online check-in procedures.

Record date: June 15, 2020

Voting: Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on.

Meeting Agenda

 

 

 

 

Election of the 10 director nominees listed in this proxy statement

 

 

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021

 

 

Approval, in a non-binding advisory vote, of named executive officer compensation

 

 

Approval of increase in shares available under the DXC Technology Company 2017 Omnibus Incentive Plan

 

 

Approval of increase in shares available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan

 

 

Such other business that may properly come before the meeting

 

 

 

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Proxy Summary

  

 

Voting Matters and Vote Recommendation

 

 

Management Proposals    Vote Recommendation

 

Proposal No. 1:

 

 

Election of each of the director nominees listed in this proxy statement

  

 

FOR each nominee

 

Proposal No. 2:

 

 

 

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021

 

  

FOR

 

 

Proposal No. 3:

 

 

 

Approval, in a non-binding advisory vote, of named executive officer compensation

 

  

FOR

 

 

Proposal No. 4:

 

 

 

Approval of increase in shares available under the DXC Technology Company 2017 Omnibus Incentive Plan

 

  

 

FOR

 

Proposal No. 5:

 

 

 

Approval of increase in shares available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan

 

   FOR

Proposal 1: Election of directors

Our Director Nominees

The following table provides summary information about each director nominee. Each director nominee is elected annually by a majority of votes cast.

 

Name    Age  

Director

Since

  Independent    Principal Occupation    Other Public
Company Boards
Mukesh Aghi    64   2017      President & CEO of US-India Strategic Partnership Forum   
Amy E. Alving    57   2017      Former Chief Technology Officer of SAIC and current member of Fannie Mae and Howmet Aerospace boards    2
David A. Barnes    64        Former SVP and Chief Information and Global Business Services Officer of UPS and current member of Hertz board    1
Raul J. Fernandez    54        Vice Chairman and owner of Monumental Sports & Entertainment and current member of Broadcom and GameStop boards    2
David L. Herzog    60   2017      Former CFO of AIG and current member of MetLife, AMBAC Financial Group and PCCW Limited (Hong Kong) boards    3
Mary L. Krakauer    63   2018      Former EVP and Chief Information Officer of Dell Corporation and current member of Mercury Systems and Xilinx boards    2
Ian C. Read1    67   2020      Chairman of DXC Technology, former Chairman and CEO of Pfizer and current member of Kimberly-Clark Corporation board    1
Michael J. Salvino2    54   2019    

 

   President and CEO of DXC Technology   

 

ii   2020 Proxy Statement   


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Name    Age  

Director

Since

  Independent    Principal Occupation    Other Public
Company Boards
Manoj P. Singh    67   2017     

Former Chief Operating Officer for

Deloitte Touche Tohmatsu Ltd.

  
Robert F. Woods    65   2017      Former SVP and CFO at Sungard Data Systems Inc.   

 

 

1

Effective March 16, 2020, Mr. Read was designated Chairman of the Board.

2

Effective September 12, 2019, Mr. Salvino was designated President and CEO of DXC. He has been a member of the Board since May 23, 2019.

Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021

We are asking stockholders to consider and to vote upon the ratification of the appointment of Deloitte & Touche LLP as DXC’s independent registered public accounting firm for the fiscal year ending March 31, 2021. The members of the Audit Committee and the Board believe that the continued retention of Deloitte & Touche LLP to serve as DXC’s independent registered public accounting firm is in the best interests of DXC and its stockholders.

Proposal 3: Approval, in a non-binding advisory vote, of named executive officer compensation

We are asking stockholders to approve, on a non-binding advisory basis, the compensation of the named executive officers as disclosed in this proxy statement for the fiscal year ended March 31, 2020 (fiscal 2020). In evaluating this proposal, we recommend you review our Compensation Discussion and Analysis (CD&A). As discussed in the CD&A, our executive compensation program is designed to align management and stockholder interests by linking pay outcomes with achievement of relevant and objective financial and strategic goals and unlocking stockholder value.

Proposal 4: Approval of increase in shares available under the DXC Technology Company 2017 Omnibus Incentive Plan

We are asking stockholders to approve an increase in the number of shares of our common stock available for issuance under the DXC Technology Company 2017 Omnibus Incentive Plan, as amended as proposed herein (the “Incentive Plan”), by 17,000,000 shares from 34,200,000 to 51,200,000 shares.

In addition to the increase in the number of available shares, the proposed amendment to the Incentive Plan also:

 

 

prohibits the replacement of options and stock appreciation rights without stockholder approval; and

 

 

removes certain provisions relating to the qualification of awards for the performance-based compensation exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) as these provisions are no longer required after the enactment of the Tax Cuts and Jobs Act of 2017. However, we are not proposing to eliminate the individual award limits set forth in Section 4.3 of the Incentive Plan or otherwise to change our pay-for-performance policy.

Proposal 5: Approval of increase in shares available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan

We are asking stockholders to approve an increase in the number of shares of our common stock available for issuance under the DXC Technology Company 2017 Non-Employee Director Incentive Plan, as amended as proposed herein (the “Director Plan”), by 515,000 shares, from 230,000 to 745,000 shares.

In addition to the increase in the number of available shares, the proposed amendment to the Director Plan also imposes an annual limit on the value of equity awards that may be granted under the Director Plan to our Independent Chairman during any calendar year to $900,000 and to any other single non-employee director during any calendar year to $500,000, based on the value of our shares as of the grant date of the award.

 

 

 

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A. PROPOSALS

     1  

Proposal 1: Election of Directors

     1  

Proposal 2: Ratification of the Appointment of Deloitte  & Touche LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending March 31, 2021

     12  

Proposal 3: Non-Binding Advisory Vote to Approve Named Executive Officer Compensation

     13  

Proposal 4: Approval of Increase in Shares Available under the DXC Technology Company 2017 Omnibus Incentive Plan

     14  

Proposal 5: Approval of Increase in Shares Available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan

     21  

B. CORPORATE GOVERNANCE

     25  

The Board

     25  

Stockholder Engagement

     25  

Corporate Governance Guidelines

     25  

Board Leadership Structure

     26  

Separation of CEO and Board Chairman Positions

     26  

Independent Board Chairman Duties & Responsibilities

     26  

Director Independence

     27  

Risk Oversight

     27  

Compensation and Risk

     28  

Prohibition on Hedging or Pledging of Company Stock

     28  

Equity Ownership Guidelines

     29  

Talent Management and Succession Planning

     29  

Director Education

     29  

Code of Ethics and Standards of Conduct

     29  

Board Diversity

     30  

Mandatory Retirement of Directors

     30  

Resignation of Employee Directors

     30  

Communicating with the Board

     30  

Committees of the Board

     31  

Audit Committee

     32  

Compensation Committee

     32  

Nominating/Corporate Governance Committee

     33  

Risk Committee

     33  

Audit Committee Report

     34  

Director Compensation

     35  

C.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     38  

Security Ownership

     38  

Delinquent Section 16(a) Reports

     39  

D.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     40  

Related Party Transaction Policy

     40  

Fiscal 2020 Related Party Transactions

     40  

 

iv   2020 Proxy Statement   


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E. EXECUTIVE COMPENSATION

     41  

Section 1: Executive Summary

     43  

Background

     43  

Business Overview

     43  

About DXC Technology

     43  

Leadership Transitions and Strategic Realignment

     44  

Our Strategic Priorities

     45  

Transformation Journey

     45  

Taking Care of Our People

     45  

Unlocking Value

     46  

Compensation Highlights

     46  

Stockholder Feedback and Evolution of Compensation Program

     46  

Fiscal 2020 Executive Compensation Overview

     47  

Section 2: Compensation Governance

     49  

Role of the Compensation Committee

     49  

Role of the Independent Compensation Consultant

     49  

Role of Management

     49  

Compensation Best Practices

     50  

Section 3: Compensation Framework

     51  

Compensation Philosophy and Guiding Principles

     51  

Executive Compensation Peer Group

     51  

Additional Compensation Policies

     52  

Section 4: Fiscal 2020 Compensation Decisions

     53  

Setting Compensation for the NEOs

     53  

Base Salary

     53  

Annual Cash Incentives

     54  

Long-Term Incentives

     56  

New Hire Compensation

     59  

Section  5: Other Aspects of Compensation

     60  

Section  6: Executive Compensation Tables

     62  

Section  7: Potential Payments Upon Change in Control and Termination of Employment

     68  

Change in Control Termination Benefits

     68  

Termination Benefits Unrelated to Change in Control

     71  

CEO Agreements

     73  

Section 8: Fiscal 2020 CEO Pay Ratio

     75  

F.  ABOUT THE ANNUAL MEETING

     76  

Questions and Answers about the Annual Meeting and Voting

     76  

How Do I Vote?

     81  

G.  ADDITIONAL INFORMATION

     83  
APPENDIX A—INDEPENDENCE STANDARDS      85  
APPENDIX B—NON-GAAP FINANCIAL MEASURE      86  
APPENDIX C—DXC TECHNOLOGY COMPANY 2017 OMNIBUS INCENTIVE PLAN      87  
APPENDIX D—DXC TECHNOLOGY COMPANY 2017 NON-EMPLOYEE DIRECTOR INCENTIVE PLAN      101  

 

 

 

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Proxy Statement

for the 2020 Annual Meeting of Stockholders

A.    Proposals

Proposal 1: Election of Directors

 

There are 10 nominees for election to our Board of Directors. The directors elected will hold office until the 2021 Annual Meeting or until their successors have been elected and qualified. Under our Bylaws, directors must retire by the close of the first annual meeting of stockholders held after they reach age 72, unless the Board determines that it is in the best interests of DXC and its stockholders for the director to continue to serve until the close of a subsequent annual meeting. Each nominee has informed the Board that he or she is willing to serve as a director.

Vote required

Directors are elected by a majority vote in uncontested elections; therefore, each director nominee must receive a majority of the votes cast with respect to such nominee at the annual meeting (the number of FOR votes must exceed the number of AGAINST votes).

In accordance with DXC’s Corporate Governance Guidelines, if an incumbent director nominee fails to receive the requisite number of votes, such director nominee shall promptly tender his or her resignation for consideration by the Nominating/Corporate Governance Committee.

Director Nomination Process

The Nominating/Corporate Governance Committee is responsible for reviewing and assessing with the Board the appropriate skills, experience, and background sought for Board members in the context of our business and then-current membership on the Board. This assessment of Board skills, experience, and background involves considering numerous diverse factors including independence, experience, professional and personal ethics and values, age, gender and ethnic diversity, as well as skills and attributes. The Board seeks directors whose expertise achieves a balance across the following skills and attributes:

 

 

Leadership and Management: Includes experience as a senior executive in a global public or private organization with practical skills and insights around setting business strategy, overseeing operations, driving cost leadership, facilitating change management, leading transformation, and driving results.

 

 

Public Company Governance: Experience with corporate and board governance, including oversight of compliance, risk, regulatory requirements, executive compensation practices and policies and processes to effectively manage and monitor these, in support of the stockholders’ interests.

 

 

Industry: Experience in the professional services industry, with a good understanding of DXC’s offerings, enabling technologies (e.g. cloud, AI, ML, IoT and SaaS), digital transformation, innovation, customers, marketplace dynamics and success drivers.

 

 

Audit and Financial Expertise: Experience and understanding of areas such as accounting policies and standards, financial reporting, disclosure requirements, financial statements, internal controls, audit (internal and external), complex financial transactions, capital allocation, and mergers and acquisitions.

 

 

Enterprise Transformation and Culture Building: Experience in workforce transformation, restructuring and building a high-performance culture in a complex global environment as the landscape for technology services embraces marketplace led disruption. Experience aligning HR policies and practices to attract, onboard, develop and retain top talent in support of DXC’s strategic talent plan.

 

 

Capital Markets and Treasury: Experience globally in raising funds in the debt and equity markets, managing liquidity and the complex interplay of operational performance, rating agencies and stockholder relationships.

 

 

 

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The Nominating/Corporate Governance Committee also considers skills and experience related to Environmental, Sustainability and Corporate Responsibility matters as it believes it strengthens the Board’s oversight and assures that strategic business imperatives and long-term value creation are achieved within a reasonable, sustainable business model.

In addition to the skills and expertise listed above, the Nominating/Corporate Governance Committee and the Board also believe that the following key attributes are important to an effective Board:

 

 

integrity and demonstrated high ethical standards,

 

 

sound judgment,

 

 

analytical skills,

 

 

the ability to engage management and each other in a constructive and collaborative fashion, and

 

 

the commitment to devote significant time and energy to service on the Board and its committees.

In evaluating potential director nominees, the Nominating/Corporate Governance Committee considers the applicable qualifications. The committee then considers the contribution they would make to the quality of the Board’s decision making and effectiveness.

The Nominating/Corporate Governance Committee will also consider potential director candidates recommended by stockholders as described under Business for 2021 Annual Meeting at the end of this proxy statement. Director candidates recommended by stockholders are evaluated on the same basis as all other candidates. This committee may retain from time to time third-party search firms to identify qualified director candidates and to assist the Nominating/Corporate Governance Committee in evaluating candidates that have been identified by others.

2020 Director Nominees

Each of the nominees has a strong reputation and experience in areas relevant to the strategy and operations of DXC’s businesses, particularly industries and growth segments that DXC serves, as noted above. Each of the nominees holds or has held senior executive positions in global, complex organizations or has relevant operating experience. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, risk management, thought leadership, executive management and leadership development. Many of our directors also have experience serving on boards of directors and board committees of other public companies.

The following chart provides summary information about each of our director nominees’ skills and attributes. More detailed information is provided in each director nominee’s biography.

 

Top Skills   

Leadership

and

Management

  

Public

Company

Governance

   Industry   

Audit
and

Financial

Expertise

  

Enterprise

Transformation

and Culture

Building

  

Capital

Markets
and

Treasury

Mukesh Aghi              

 

       

 

Amy E. Alving              

 

       

 

David A. Barnes                 

 

    

 

Raul J. Fernandez                    

 

David L. Herzog           

 

        
Mary L. Krakauer              

 

       

 

Ian C. Read           

 

          

 

Michael J. Salvino              

 

       

 

Manoj P. Singh                    

 

Robert F. Woods           

 

       

 

  

 

There are no family relationships among any of our directors, director nominees and executive officers.

 

2   2020 Proxy Statement   


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2020 Director Nominees Biographies

The biographies of each of the nominees below contains information as of the date of this proxy statement regarding the person’s service as a director, director positions held currently or at any time during the last five years, and skills, experience and qualifications that led to the conclusion that such person should serve as one of our directors.

 

 

 

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Mukesh Aghi

Age: 64

Director Since: 2017

  

DXC Committees:

•  Compensation (Chair)

  

Other Public Company Boards:

 

Former (Past Five Years):

•  Computer Sciences Corporation

Dr. Aghi has served as a member of our Board since April 1, 2017. Dr. Aghi is President and CEO of U.S.-India Strategic Partnership Forum (USISPF) since 2017, a strategic policy organization focused on fostering a stronger relation between the two democracies. Dr. Aghi has over 35 years of experience in international business and IT environment. Earlier, Dr. Aghi served as Chief Executive Officer of L&T Infotech from 2012 to 2015, where he expanded the business internationally, and as Chairman and CEO of Steria India Ltd. from 2007 to 2012. Additionally, Dr. Aghi was the founding CEO of Universitas 21 Global, the world’s largest consortium of research-led universities and global leader in providing post-graduate online education. He was also the President of IBM India for IBM Corporation and worked at Ariba and J.D. Edwards. Dr. Aghi is a Trustee at the Claremont Graduate University.

Qualifications: Dr. Aghi brings to the DXC Board of Directors extensive leadership and management experience, including global and international business experience, a broad understanding of the professional services industry, with a good understanding of DXC’s offerings, enabling technologies, digital transformation, innovation, customers, marketplace dynamics and success drivers, strong experience with corporate and board governance, including oversight of compliance, risk, regulatory requirements, executive compensation practices and policies and processes to effectively manage and monitor these, and robust enterprise transformation and culture building experience.

 

 

 

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Amy E. Alving

Age: 57

Director Since: 2017

  

DXC Committees:

•  Nominating/Corporate Governance

•  Risk Committee (Chair)

  

Other Public Company Boards:

 

Current:

•  Federal National Mortgage Association

•  Howmet Aerospace, Inc. (formerly named
Arconic Inc.)

 

Former (Past Five Years):

•  Pall Corporation

 

Trusteeship:

•  Trustee, Princeton University

Dr. Alving has served as a member of our Board since April 1, 2017. Dr. Alving is the former Senior Vice President and Chief Technology Officer of Leidos Holdings, Inc. (formerly Science Applications International Corporation (SAIC)), one of the nation’s top defense sector providers of hardware, software and services, where she worked from 2005 to 2013. From 2007 to 2013, she was SAIC’s Chief Technology Officer, where she was responsible for the creation, communication and implementation of SAIC’s technical and scientific vision and strategy. Prior to joining SAIC, Dr. Alving was the director of the Special Projects Office (SPO) at the Defense Advanced Research Projects Agency (DARPA) until 2005, where she was a member of the federal Senior Executive Service. Prior to her time at DARPA, Dr. Alving was a White House Fellow for the Department of Commerce serving as a senior technical advisor to the Deputy Secretary of Commerce from 1997 until 1998. Dr. Alving is a member of the board of directors of the Federal National Mortgage Association (Fannie Mae) and Howmet Aerospace, Inc. (formerly named Arconic Inc.). She is also a member of the board of trustees of Princeton University.

Qualifications: Dr. Alving brings to the DXC Board of Directors robust leadership and management experience, including experience in a global organization with practical skills and insights around setting business strategy, overseeing operations, driving cost leadership, facilitating change management, leading transformation, and driving results. Dr. Alving has extensive experience in the professional services industry, with a robust understanding of DXC’s offerings, enabling technologies, digital transformation, innovation, customers, marketplace dynamics and success drivers. She also brings to the Board strong public company governance experience and leadership and management experience.

 

4   2020 Proxy Statement   


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David A. Barnes

Age: 64

  

DXC Committees:

  

Other Public Company Boards:

 

Current:

•  Hertz

 

Former (Past Five Years):

•  Ingram Micro Inc.

Mr. Barnes is the former Senior Vice President, Chief Information and Global Business Services Officer of United Parcel Service, Inc. (“UPS”) a role he served in from 2011 to 2016. From 2005 to 2011, Mr. Barnes served as Senior Vice President and Chief Information Officer for UPS. UPS is the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry, a provider of global supply chain management and advanced logistic solutions and an operator of one of the world’s largest airlines. In his role as Chief Information Officer of UPS and a member of the UPS Management Committee, Mr. Barnes was responsible for all aspects of UPS technology utilized in over 220 countries and territories. He also chaired the UPS Information Technology Governance Committee responsible for global technology strategy, architecture, mobility, hardware design and research and development. In addition, he was responsible for information security, served as Co-Chair of the Enterprise Risk Committee and was a member of the UPS Corporate Strategy and the Finance Committees. Prior to serving as a member of the UPS Management Committee, he held a number of key leadership positions throughout his 39-year career at UPS in areas including technology development, operations, UPS airline, international custom house brokerage, mergers and acquisitions and finance. Mr. Barnes also has served as Senior Advisor for Bridge Growth Partners LLC (“Bridge Growth”), a private equity fund, since 2016 and in this capacity serves as a member of the board of directors for several privately-held companies in Bridge Growth’s technology investment portfolio. Mr. Barnes is currently a member of the board of directors of Hertz. He was a director at Ingram Micro Inc., a global technology and supply chain service provider, from June 2014 to December 2016, where he was a member of the Audit Committee and chair of the Technology Committee. Mr. Barnes also serves as a director for Solace Corporation, a software company, since 2016 where he serves on the Audit Committee and BackOffice Associates, a software company, since 2017 where he serves on the Audit and Technology Committees.

Qualifications: Mr. Barnes brings to the DXC Board of Directors robust leadership and management experience, including experience in a global organization with practical skills and insights around setting business strategy, overseeing operations, driving cost leadership, facilitating change management, leading transformation, and driving results. Mr. Barnes has extensive experience with corporate and board governance, including oversight of compliance, risk, regulatory requirements, executive compensation practices and policies and processes to effectively manage and monitor these, in support of the stockholders’ interests. Mr. Barnes also brings to the Board broad experience in the professional services industry, with an understanding of DXC’s offerings, enabling technologies, digital transformation, innovation, customers, marketplace dynamics and success drivers, as well as experience and understanding of areas such as accounting policies and standards, financial reporting, disclosure requirements, financial statements, internal controls, audit (internal and external), complex financial transactions, capital allocation, and mergers and acquisitions.

 

 

 

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Raul J. Fernandez

Age: 54

  

DXC Committees:

  

Other Public Company Boards:

 

Current:

•  Broadcom, Inc.

•  GameStop Corp.

 

Former (Past Five Years):

•  Kate Spade & Co.

Mr. Fernandez has served as Vice Chairman and owner of Monumental Sports & Entertainment, a private partnership that co-owns the NBA’s Washington Wizards, the NHL’s Washington Capitals, the WNBA’s Washington Mystics and Wizards District Gaming NBA 2K team, and which co-owns and operates the Capital One Arena in Washington, DC, since 2000. He also serves as Special Advisor to, and is a Limited Partner of, each of General Atlantic Partners, a growth equity firm, and Carrick Capital Partners, a growth equity firm. Mr. Fernandez previously served in several leadership roles at various technology companies, including, from 2004 to 2017, as Chairman and Chief Executive Officer for ObjectVideo, Inc., a developer of intelligent video surveillance software. Mr. Fernandez also founded Proxicom, Inc. (NASDAQ:PXCM), a global provider of e-commerce solutions for Fortune 500 companies, and served as its Chief Executive Officer and Chairman of its board of directors since its inception in 1991 until its acquisition in 2001. He is currently on the board of directors of GameStop Corp., where he also serves on the Audit Committee, and on the board of directors of Broadcom, Inc., where he also serves on the Audit and Nominating and Corporate Governance Committees. Mr. Fernandez also served as a director of Kate Spade & Co. from 2001 through 2017, and previously served as a member of President George W. Bush’s Council of Advisors on Science and Technology.

Qualifications: Mr. Fernandez brings to the DXC Board of Directors extensive leadership and management experience, including experience in a global organization with practical skills and insights around setting business strategy, overseeing operations, driving cost leadership, facilitating change management, leading transformation, and driving results. Mr. Fernandez has strong experience with corporate and board governance, including oversight of compliance, risk, regulatory requirements, executive compensation practices and policies and processes to effectively manage and monitor these, in support of the stockholders’ interests. Mr. Fernandez also has strong experience as a direct investor in early-stage and mature technology companies, and working with management teams on business strategy and execution. Mr. Fernandez also has experience in workforce transformation, restructuring and building a high-performance culture in a complex global environment, and aligning HR policies and practices to attract, onboard, develop and retain top talent, as well as experience in the professional services industry, with a good understanding of DXC’s offerings, enabling technologies, digital transformation, innovation, customers, marketplace dynamics and success drivers.

 

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David L. Herzog

Age: 60

Director Since: 2017

  

DXC Committees:

•  Audit (Chair)

  

Other Public Company Boards:

 

Current:

•  MetLife, Inc.

•  Ambac Financial Group

•  PCCW Limited (Hong Kong)

 

Former (Past Five Years):

•  AerCap Holdings N.V.

Mr. Herzog has served as a member of our Board since April 1, 2017. Mr. Herzog served as the Chief Financial Officer and Executive Vice President of American International Group (AIG) from 2008 to 2016. Mr. Herzog served as Senior Vice President and Comptroller of AIG from June 2005 to October 2008, Chief Financial Officer for worldwide life insurance operations from April 2004 to June 2005 and Vice President, Life Insurance from 2003 to 2004. In addition, Mr. Herzog has served in other senior officer positions for AIG and its subsidiaries, including as the Chief Financial Officer and Chief Operating Officer of American General Life following its acquisition by AIG. Previously, Mr. Herzog served in various executive positions at GenAmerica Corporation and Family Guardian Life, a Citicorp company, and at a large accounting firm that is now part of PricewaterhouseCoopers LLP. In addition, Mr. Herzog holds the designations of Certified Public Accountant and Fellow, Life Management Institute. Mr. Herzog is also a member of the board of directors and chair of the audit committees of MetLife Inc. and of Ambac Financial Group, Inc. He is also a member of the Board of Directors of PCCW Limited (Hong Kong).

Qualifications: Mr. Herzog has extensive experience and understanding of accounting policies and standards, financial reporting, disclosure requirements, financial statements, internal controls, audit (internal and external), complex financial transactions, capital allocation, and mergers and acquisitions. Mr. Herzog brings more than three decades of life insurance and financial service expertise to DXC, and his financial and international business experience in the oversight of AIG and its subsidiaries, uniquely positions him to enhance stockholder value by leveraging his financial and risk management expertise and deep understanding of the insurance business. Mr. Herzog also has broad capital markets and treasury experience as well as enterprise transformation and culture building experience.

 

 

 

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Mary L. Krakauer

Age: 63

Director Since: 2018

  

DXC Committees:

•  Nominating/Corporate Governance

•  Risk Committee

  

Other Public Company Boards:

 

Current:

•  Mercury Systems

•  Xilinx

Mrs. Krakauer has served as a member of our Board since March 15, 2018. Mrs. Krakauer retired as the Executive Vice President, Chief Information Officer of Dell Corporation in 2017, where she was responsible for global IT, including all operations and integration activity. She served as the Chief Information Officer and EVP, Global Business Services of EMC Corporation in 2016. Prior to that she served as EVP, Business Development, Global Enterprise Services for EMC Corporation during 2015 and as Executive Vice President, Global Human Resources for EMC Corporation from 2012 to 2015, where she was responsible for executive, leadership, and employee development, compensation and benefits, staffing, and all of the people-related aspects of acquisition integration. Previously, she held executive leadership roles in the services businesses at EMC Corporation, Hewlett-Packard Corporation, Compaq Computer Corporation, and Digital Equipment Corporation. Mrs. Krakauer currently serves as a director of Mercury Systems and Xilinx.

Qualifications: Mrs. Krakauer brings to the Board extensive experience in workforce transformation, restructuring and building a high-performance culture in a complex global environment, and aligning HR policies and practices to attract, onboard, develop and retain top talent. Mrs. Krakauer has extensive experience in the professional services industry, with a good understanding of DXC’s offerings, enabling technologies, digital transformation, innovation, customers, marketplace dynamics and success drivers. Mrs. Krakauer brings to the Board leadership and management expertise from her extensive experience gained from serving as an executive at multi-national technology companies as well as public company governance experience.

 

 

 

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Ian C. Read

Age: 67

Director Since: 2020

  

DXC Committees:

  

Other Public Company Boards:

•  Kimberly-Clark Corporation

 

Former (Past Five Years):

•  Pfizer, Inc.

Mr. Read has served as Chairman of our Board since March 16, 2020. Mr. Read served as Pfizer Inc.’s Executive Chairman from January 2019 until his retirement on December 31, 2019, completing a 41-year career with the global pharmaceutical company. Prior to that, he had served as Chairman of the Board and Chief Executive Officer since December 2011 and as President and CEO since December 2010. Mr. Read joined Pfizer in 1978 in its financial organization. He worked in Latin America through 1995, holding positions of increasing responsibility, and was appointed President of the Pfizer International Pharmaceuticals Group, Latin America/Canada, in 1996. In 2000, Mr. Read became Executive Vice President of Europe/Canada and was named a Corporate Vice President in 2001. In 2006, he was named Senior Vice President of Pfizer, as well as Group President of its worldwide biopharmaceutical businesses. Mr. Read is also a member of the board of directors and chair of the executive committee of Kimberly-Clark Corporation.

Qualifications: Mr. Read brings to the DXC Board of Directors robust leadership and management experience, including experience in a global organization with practical skills and insights around setting business strategy, overseeing operations, driving cost leadership, facilitating change management, leading transformation, and driving results. Mr. Read has broad experience in workforce transformation, restructuring and building a high-performance culture in a complex global environment, and aligning HR policies and practices to attract, onboard, develop and retain top talent. Mr. Read also brings to the Board strong experience and understanding of areas such as accounting policies and standards, financial reporting, disclosure requirements, financial statements, internal controls, audit (internal and external), complex financial transactions, capital allocation, and mergers and acquisitions, as well as public company governance experience. In addition, the DXC Board of Directors believes that his extensive experience at Pfizer Inc., including his position as executive chairman, qualifies Mr. Read to serve as Chairman of the Board and to help communicate the Board’s priorities to management and management’s perspective to the Board.

 

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Michael J. Salvino

Age: 54

Director Since: 2019

  

DXC Committees:

  

Other Public Company Boards:

Mr. Salvino became the President and Chief Executive Officer of DXC in September 2019 and has been a member of the Board of Directors of DXC since May 2019. Prior to joining DXC, Mr. Salvino served as Managing Director of Carrick Capital Partners from 2016 to 2019. Prior to his tenure at Carrick, from 2009 to 2016, Mr. Salvino served as group chief executive of Accenture Operations, where he led a team of more than 100,000 consulting and outsourcing professionals focused on providing business process outsourcing, infrastructure, security and cloud services to deliver business value and drive productivity and digital improvements for clients. Prior to that, he held leadership roles in the HR outsourcing business at Hewitt Associates Inc. and as President of the Americas Region at Exult Inc. Mr. Salvino is a board member of the Atrium Health Foundation, the largest healthcare system in the Carolinas, where he serves on the Investment Oversight Committee for both the hospital and the foundation. Mr. Salvino graduated from Marietta College with a Bachelor of Science degree in industrial engineering. He serves on the Marietta College Board of Trustees and is Chair of its Investment Committee. Mr. Salvino is also a member of the Board of Visitors of the Duke University Pratt School of Engineering.

Qualifications: Mr. Salvino brings to the DXC Board of Directors extensive experience in the professional services industry, with a robust understanding of DXC’s offerings, enabling technologies, digital transformation, innovation, customers, marketplace dynamics and success drivers. Mr. Salvino has broad experience in workforce transformation, restructuring and building a high-performance culture in a complex global environment, and aligning HR policies and practices to attract, onboard, develop and retain top talent in support of DXC’s strategic talent plan. Mr. Salvino also brings to the Board strong leadership and management experience and public company governance experience. In addition, the Board believes that his expertise and perspective in operations, digital, artificial intelligence and security, and strong international business experience qualifies Mr. Salvino to serve as our President and Chief Executive Officer.

 

 

 

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Manoj P. Singh

Age: 67

Director Since: 2017

  

DXC Committees:

•  Nominating/Corporate Governance (Chair)

•  Audit

  

Other Public Company Boards:

 

Trusteeship:

•  Trustee, The Putnam Funds

Mr. Singh has served as a member of our Board since April 1, 2017. Mr. Singh is the former Chief Operating Officer and Global Managing Director of Deloitte Touche Tohmatsu, Ltd. Prior to his mandatory retirement from that position in June 2015, Mr. Singh’s responsibilities included leading various Deloitte initiatives, including setting global strategy, directing investments globally, leading areas such as finance, global technology, knowledge management and branding, and guiding country leadership in high-growth markets such as China, India, Africa, Southeast Asia, Mexico and Germany. He has been a Director at Abt Associates Inc. since December 2015 and a Trustee of The Putnam Funds since March 2017. He also holds an advisory role at Altimetrik Inc. since April 2016. He served on the board of directors of Deloitte U.S. and the boards of Deloitte member firms in China, Mexico and Southeast Asia. Over his 36-year career with Deloitte, Mr. Singh held numerous other positions, including leading the company’s Asia-Pacific region and consulting in the Americas.

Qualifications: Mr. Singh brings to the DXC Board of Directors robust leadership and management experience, including experience in a global organization with practical skills and insights around setting business strategy, overseeing operations, driving cost leadership, facilitating change management, leading transformation, and driving results. Mr. Singh has strong experience in workforce transformation, restructuring and building a high-performance culture in a complex global environment, and aligning HR policies and practices to attract, onboard, develop and retain top talent. Mr. Singh also brings to the Board broad experience in the professional services industry, with an understanding of DXC’s offerings, enabling technologies, digital transformation, innovation, customers, marketplace dynamics and success drivers, as well as audit and financial expertise.

 

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Robert F. Woods

Age: 65

Director Since: 2017

  

DXC Committees:

•  Audit

  

Other Public Company Boards:

 

Former (Past Five Years):

•  Computer Sciences Corporation

Mr. Woods has served as a member of our Board since April 1, 2017. Mr. Woods served as Senior Vice President—Finance and Chief Financial Officer of SunGard Data Systems, Inc. from 2010 to 2012. Prior to that, from 2004 to 2009, Mr. Woods served as Senior Vice President and Chief Financial Officer of IKON Office Solutions, Inc., a document management systems and services public company. Mr. Woods also served as Vice President and Controller of IBM Corporation from 2002 to 2004 and Vice President and Treasurer of IBM Corporation from 2000 to 2002. Mr. Woods served as a director of Computer Sciences Corporation from 2015 to 2017. Mr. Woods also served as a director of Insight Enterprises, Inc., from 2009 to 2011 and as a member of its audit and compensation committees.

Qualifications: As the former Chief Financial Officer of two publicly traded companies and having served as an audit committee member of two other publicly traded companies, Mr. Woods brings to the DXC Board of Directors robust experience globally in raising funds in the debt and equity markets, managing liquidity and the complex interplay of operational performance, rating agencies and stockholder relationships. He has strong leadership and management experience, including experience in a global organization with practical skills and insights around setting business strategy, overseeing operations, driving cost leadership, facilitating change management, leading transformation, and driving results. Mr. Woods also brings to the Board public company governance experience and experience and understanding of areas such as accounting policies and standards, financial reporting, disclosure requirements, financial statements, internal controls, audit (internal and external), complex financial transactions, capital allocation, and mergers and acquisitions.

The Board of Directors recommends a vote FOR the election of

each of these 10 nominees for director.

 

 

 

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Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021

 

The Audit Committee has selected Deloitte & Touche LLP as DXC’s independent registered public accounting firm for the fiscal year ending March 31, 2021, and the Board asks stockholders to ratify that selection. Although current law, rules, and regulations, as well as the charter of the Audit Committee, require the Audit Committee to engage, retain, and oversee DXC’s independent registered public accounting firm, the Board considers the selection of the independent registered public accounting firm to be an important matter of stockholder concern and is submitting the selection of Deloitte & Touche LLP for ratification by stockholders as a matter of good corporate practice. The Board considers the selection of Deloitte & Touche LLP as DXC’s independent registered public accounting firm for the fiscal year ending March 31, 2021 to be in the best interests of DXC and its stockholders. A representative from Deloitte & Touche LLP will attend the meeting and will have the opportunity to make a statement and respond to appropriate questions.

The affirmative vote of holders of a majority of the shares of common stock cast at the meeting is required to approve the ratification of the selection of Deloitte & Touche LLP as DXC’s independent auditor for the current fiscal year. If a majority of stockholders does not ratify the selection of Deloitte & Touche LLP, the Audit Committee will consider the result a recommendation to consider the selection of a different firm.

Vote Required

A majority of the votes cast at the annual meeting is necessary for the approval of this proposal.

The Board of Directors recommends a vote FOR the ratification

of the appointment of Deloitte & Touche LLP as our independent registered public

accounting firm for the fiscal year ending March 31, 2021.

Fees

The following table summarizes the aggregate fees billed by DXC’s principal accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates, which include Deloitte Tax LLP and Deloitte Consulting LLP (Deloitte), for services provided to DXC during fiscal years 2019 and 2020.

 

(in millions)    Fiscal 2020    Fiscal 2019

Audit Fees1

    

$

27

    

$

32

Audit-Related Fees2

    

 

17

    

 

4

Tax Fees3

    

 

2

    

 

4

All Other Fees4

    

 

1

    

 

1

Total Fees

    

$

47

    

$

41

 

1.

Includes fees associated with the audit of our consolidated annual financial statements, review of our consolidated interim financial statements, and the audit of our internal control over financial reporting. This would also include services that an independent auditor would customarily provide in connection with subsidiary audits, non-US statutory requirements, regulatory filings, and similar engagements for the fiscal year such as comfort letters.

 

2.

Consists primarily of fees for third-party assurance audits for outsourced services, carve-out audits required for proposed transactions, employee benefit plan audits, due diligence related to mergers and acquisitions, and accounting consultations related to proposed transactions.

 

3.

Consists of fees for tax compliance, tax planning, and tax advice related to mergers and acquisitions.

 

4.

Consists primarily of advisory services to analyze and provide recommendations with respect to the rationalization of legal entities.

 

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Pre-Approval Policy

Pursuant to its charter, and in accordance with Section 10A of the Securities Exchange Act of 1934 (Exchange Act), the Audit Committee pre-approves all audit, audit-related, tax and other services to be provided by the independent auditors. The Audit Committee may delegate to one or more members of the Audit Committee the authority to pre-approve services to be provided by the independent auditors. Such pre-approval decisions of any Audit Committee member to whom such authority is delegated must be presented to the full Audit Committee at its next scheduled meeting.

Proposal 3: Non-Binding Advisory Vote to Approve Named Executive Officer Compensation

 

In accordance with Section 14(a) of the Exchange Act, we are providing our stockholders the opportunity to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. We urge the stockholders to read the CD&A appearing elsewhere in this proxy statement, as well as the 2020 Summary Compensation Table and related compensation tables and narrative, which provide detailed information on the compensation policies and practices and the compensation paid to our named executive officers in fiscal 2020, as well as compensation design considerations for fiscal year 2021.

We are therefore asking our stockholders to approve the following advisory resolution at the 2020 Annual Meeting:

RESOLVED, that the stockholders of DXC Technology Company approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the DXC Technology Company 2020 definitive proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and the accompanying footnotes and narratives.

The vote on the compensation of our named executive officers as disclosed in this proxy statement is advisory, and therefore not binding on DXC, the Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our stockholders and, to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. We have determined that our stockholders should cast an advisory vote on the compensation of our named executive officers on an annual basis. Unless this determination changes, the next advisory vote on the compensation of our named executive officers will be at the 2021 Annual Meeting of Stockholders.

Vote required

The affirmative vote of a majority of votes cast is required to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.

The Board of Directors recommends a vote FOR the approval of the advisory resolution on

named executive officer compensation.

 

 

 

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Proposal 4: Approval of Increase in Shares Available under the DXC Technology Company 2017 Omnibus Incentive Plan

 

We are asking stockholders to approve an increase in the number of shares of our common stock available for issuance under the DXC Technology Company 2017 Omnibus Incentive Plan, as amended as proposed herein (the “Incentive Plan”), by 17,000,000 shares, from 34,200,000 to 51,200,000 shares.

As of March 31, 2020, 19,571,067 shares of the original 34,200,000 share pool remain available for issuance. If approved, the additional 17,000,000 shares would increase the total number of shares available under the Incentive Plan to 36,571,067 shares.

In addition to the increase in the number of available shares, the proposed amendment to the Incentive Plan does the following:

 

 

Expands current provisions prohibiting the repricing of stock options to include a ban on the replacement of stock option or stock appreciation right awards without stockholder approval; and

 

 

Removes certain provisions relating to the qualification of awards for the performance-based compensation exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). These provisions are no longer applicable after the enactment of the Tax Cuts and Jobs Act of 2017. However, we are not proposing to eliminate the individual award limits set forth in Section 4.3 of the Incentive Plan or otherwise to change our pay-for-performance policy.

Factors Regarding our Equity Usage and Needs under the Omnibus Incentive Plan

 

 

Equity is Essential to Talent Acquisition & Retention: Under the leadership of our new CEO, DXC has highlighted new strategic priorities that will guide the next phase of DXC’s transformation. A significant focus of our new strategic priorities is on investing in our people and strengthening our employee value proposition to help us drive better outcomes for our customers, which will in turn help us create value for stockholders. Equity-based compensation is a critical component of our ability to both attract and retain talent in a very competitive technology sector. Since Mr. Salvino’s appointment as CEO, we have hired senior talent as part of our transformation, and we will continue to recruit top talent. It is critical that we have the ability to issue shares to these individuals to help attract them to the company, retain their services, and align their interests to those of stockholders and the creation of long-term stockholder value.

 

 

Increased Market Volatility Driving Need for More Shares: As we realign the Company with our new strategic priorities, our stock price has been negatively impacted in the short term, and this decline was exacerbated by market-wide impacts due to the COVID-19 pandemic. The decrease in our share price, combined with equity share issuances in connection with new hires, has impacted the pool of shares we have available under the Incentive Plan and contributed to a sooner-than-expected need for additional shares. In order to continue to attract and retain employees and align their interests with those of our stockholders, we are seeking stockholder approval to make an additional 17,000,000 shares available for issuance under the Incentive Plan, which would increase the number of available shares under the Incentive Plan from 19,571,067 shares as of March 31, 2020 to 36,571,067 shares in total. We would expect this increased share pool under the Incentive Plan to be sufficient for equity grants to our employees for up to the next four fiscal years at the current stock price, or longer if our stock price increases as we execute on our transformation strategy.

Historic Use of Equity and Outstanding Awards

If approved by our stockholders, the overall total dilution represented by the total shares available under the Incentive Plan (and the 2017 Non-Employee Director Incentive Plan, as described below), including the proposed increase to the shares available for issuance under both plans and the shares attributable to currently outstanding awards under both plans, would be 16.9%, based on our outstanding shares as of March 31, 2020. Our historical average burn rate under both plans combined for the past three years has been 1.76%.

 

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Promotion of Good Governance Practices in the Omnibus Incentive Plan

The Incentive Plan includes a number of responsible corporate governance provisions which will not be impacted by the changes proposed in this Proposal Four. These include, but are not limited to, the following:

 

 
Description
   
No “Evergreen”   The Incentive Plan does not include an “evergreen” feature pursuant to which the reserve of shares authorized for issuance would be automatically replenished periodically.
   

No Return of Shares

Used for Withholding

  Shares tendered or withheld in satisfaction of withholding obligations of the Company or any of our affiliates resulting from the exercise of an option or vesting of an RSU or PSU award will not be available again under the Incentive Plan.
   
Executive Pay Aligned to Company Performance   A portion of each executive’s stock compensation is ‘‘at risk’’, with payout dependent on achievement of certain performance metrics.
   
Dividend Accrual   Dividends and dividend equivalents on restricted stock, restricted stock units and performance share awards vest and are paid only if and to the extent those underlying awards become vested.
   
Clawback   DXC’s compensation recoupment or clawback policy allows us to recover cash or equity performance-based compensation from participants whose fraud or intentional illegal conduct materially contributed to a financial restatement. The policy allows for the recovery of the difference between compensation awarded or paid and the amount which would have been paid had it been calculated based on the restated financial statements, excluding any tax payments. In addition, under our equity grant agreements, employees may be required to forfeit awards or gains if the recipient breaches the non-competition, non-solicitation of employees, or non-disclosure provisions of such agreements.
   
No Gross-Ups   The Incentive Plan does not provide for any tax gross-ups.
   
Repricings   Other than in connection with certain corporate events where a reduction in exercise price is necessary for equitable treatment of award holders (such as a share split), we may not, without stockholder approval, reduce the exercise price of a stock option or stock appreciation right or exchange a stock option or stock appreciation right for a new award with a lower (or no) purchase price or for cash.
   
No Transferability   Awards generally may not be transferred, except by will or the laws of descent and distribution, unless approved by the Compensation Committee of our Board.

Vote required

A majority of the votes cast at the annual meeting is necessary for the approval of this proposal.

The Board of Directors recommends a vote FOR the approval of the increase in the number of shares

available under the DXC Technology Company 2017 Omnibus Incentive Plan.

Summary of Proposed Incentive Plan

The following summary is qualified in its entirety by reference to the Incentive Plan, which is attached to this proxy statement as Appendix C.

Eligibility

All employees of DXC and its subsidiaries are eligible for awards under the Incentive Plan. However, only employees at certain job levels are eligible to receive annual equity awards. As of March 31, 2020, there are approximately 138,000 employees eligible to receive awards under the Incentive Plan, of which approximately 1,000 employees are eligible to receive annual equity awards,

 

 

 

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including eight executive officers. In addition, holders of employee equity awards granted under one or more HPE equity incentive plans, which were converted and assumed by us in connection with our spinoff from HPE (“Spinoff Awards”), and employee equity awards granted under one or more CSC equity incentive plans, which were converted and assumed by us in connection with the CSC merger (“CSC Rollover Awards”), are eligible to participate in the Incentive Plan.

Administration

The Incentive Plan is administered by our Compensation Committee, except as otherwise provided with respect to actions or determinations by the Board.

Types of Awards

Options to purchase shares of common stock, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”) and cash awards may be granted under the Incentive Plan. Awards may be structured as performance awards subject to the attainment of one or more performance goals. Performance awards may be in the form of performance-based RSUs or PSUs, restricted stock, options, SARs or cash awards.

The per share exercise price of an option or SAR cannot be less than the fair market value per share of the common stock on the date of grant. Options and SARs must have fixed terms no longer than 10 years. Options may be granted as incentive stock options under Section 422 of the Code or nonqualified stock options. Options may not include provisions that “reload” the option upon exercise.

Repricing and Exchanges

Repricing of options and SARs and the replacement or cancellation of options and SARs in exchange for cash or other awards or options or SARs having a lower exercise price is prohibited under the Incentive Plan without approval of our stockholders.

Vesting Limitations

Any award (other than a Spinoff Award or CSC Rollover Award) generally must have a minimum vesting period of one year. Earlier vesting of awards may occur in the events of death, disability, change in control, retirement, involuntary termination without cause or voluntary termination for good reason and to the extent provided for in an employee’s employment agreement that was effective prior to the effective date of the Incentive Plan. Vesting of options, SARs, restricted stock, RSUs, and PSUs may occur incrementally over the one-year vesting period. However, we may currently issue up to 1,710,000 shares (which would increase to 2,560,000 shares if this proposal is approved by our stockholders) that are not subject to the minimum vesting period.

Shares Reserved

The maximum number of shares of our common stock as to which awards may be granted under the Incentive Plan is currently 34,200,000 shares, which, if this proposal is approved by our stockholders, would increase by 17,000,000 shares to 51,200,000 shares. Each Award (including a Spinoff Award or CSC Rollover Award) granted under the Incentive Plan, regardless of type, reduces the maximum share limit by one share for each share associated with the Award. Awards that by their terms may only be settled in cash do not reduce the maximum share limit. If an award expires or is terminated, cancelled or forfeited, the shares of common stock associated with the expired, terminated, cancelled, or forfeited award will again be available for awards under the Incentive Plan. However, the following shares of common stock will not become available again for issuance under the Incentive Plan:

 

 

shares of common stock that are tendered by a participant or withheld as full or partial payment of minimum withholding taxes or as payment for the exercise price of an award; and

 

 

shares of common stock reserved for issuance upon grant of a SAR, to the extent the number of reserved shares of common stock exceeds the number of shares of common stock actually issued upon exercise or settlement of such SAR.

 

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If cash is issued in lieu of shares of common stock pursuant to an award, the shares will not become available for issuance under the Incentive Plan.

Award Limits

Under the Incentive Plan, no employee may be granted, in any fiscal year period: options or SARs that are exercisable for more than 1,000,000 shares of common stock; stock awards covering more than 1,000,000 shares of common stock; or cash awards or RSUs that may be settled solely in cash having a value greater than $10,000,000. Spinoff Awards and CSC Rollover Awards are disregarded for purposes of applying these limitations.

Adjustments

The Incentive Plan provides for appropriate adjustments in the number of shares of common stock subject to awards and available for future awards, the exercise price or other price of outstanding awards, as well as the maximum award limits under the Incentive Plan, in the event of changes in our outstanding common stock by reason of a merger, stock split, reorganization, recapitalization, or similar events.

Award Agreements

Each award granted under the Incentive Plan will be evidenced by an agreement that contains additional terms and conditions not inconsistent with the Incentive Plan as may be determined by the Compensation Committee in its sole discretion. These terms and conditions may include, among other things, the date of grant, the number of shares covered by the award or the cash amount of the award, the purchase or exercise price per share, the treatment upon a termination of employment of a participant, the means of payment for the shares, the purchase or exercise period and the terms and conditions of purchase or exercise, if applicable. No awards will provide any right to continued employment.

Dividends

The Compensation Committee may include provisions in stock awards for the payment or crediting of dividends or dividend equivalents upon vesting of the award. No dividends or dividend equivalents will be paid on unvested stock, RSU, or PSU awards prior to vesting, and no dividends or dividend equivalents will be paid on options or SARs.

Performance Awards

Any award available under the Incentive Plan may be structured as a performance award. Performance awards will be based on achievement of goals and will be subject to terms, conditions and restrictions as the Compensation Committee determines.

Performance goals may apply to the employee, one or more of our business units, divisions or sectors, or our entire company, and if so desired by the Compensation Committee, by comparison with a peer group of companies including by direct reference to peers, by reference to an index, or by a similar mechanism. Performance awards may be based on any performance criteria determined by the Compensation Committee.

The Compensation Committee may provide in any particular performance award agreement that any evaluation of performance may include or exclude particular factors, including any of the following:

 

 

asset write-downs,

 

 

litigation or claim judgments or settlements,

 

 

the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results,

 

 

any reorganization and restructuring programs,

 

 

unusual or infrequent items as described in applicable accounting guidance or in management’s discussion and analysis of financial condition and results of operations appearing in the annual report to stockholders for the applicable year,

 

 

 

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acquisitions or divestitures,

 

 

foreign exchange gains and losses, and

 

 

settlement of hedging activities.

The Compensation Committee may retain the discretion to adjust any performance awards upward or downward, either on a formula or discretionary basis or any combination, as the Compensation Committee determines.

Change in Control

Unless (i) an award agreement provides otherwise or (ii) we are not the surviving company and the agreement effectuating a change in control fails to provide for the assumption or substitution of awards, upon a participant’s qualifying termination of employment within two years after the date of a change in control:

 

 

all outstanding options that have not vested in full shall be fully vested and exercisable;

 

 

all restrictions applicable to outstanding restricted stock will lapse in full;

 

 

all outstanding RSUs that have not vested in full will be fully vested; and

 

 

all performance awards will be considered earned and payable at their target value and prorated (if the qualifying termination occurs during the performance period), and will be immediately paid or settled. If the qualifying termination occurs after the end of the performance period, all performance awards will be paid or settled based on the actual achievement of the applicable performance.

Assignability and Transfer

Generally, no award under the Incentive Plan will be assignable or otherwise transferable except by will or the laws of descent and distribution or pursuant to a domestic relations order issued by a court of competent jurisdiction.

Award Termination; Forfeiture; Disgorgement

The Compensation Committee will have full power and authority to determine whether, to what extent, and under what circumstances any award will be terminated, forfeited, or the participant should be required to disgorge the gains attributable to the award. In addition, awards will be subject to any recoupment or clawback policy adopted by, or applicable to, the Company.

Duration; Plan Amendments

The Incentive Plan, as amended, has a term of ten (10) years from its original effective date and will expire on March 30, 2027. The Board may at any time amend, modify, suspend, or terminate the Incentive Plan (and the Compensation Committee may amend or modify an award agreement). but in doing so cannot adversely affect any outstanding award without the participant’s written consent. Plan amendments are subject to stockholder approval, if stockholder approval is otherwise required by applicable legal or exchange listing requirements.

Material Federal Income Tax Consequences of Awards Under the Incentive Plan

The following summary is based on current interpretations of existing U.S. federal income tax laws. The discussion below does not purport to be complete, and it does not discuss the tax consequences arising in the context of the participant’s death or the income tax laws of any local, state, or foreign country in which a participant’s income or gain may be taxable.

Stock Options

Some of the options issuable under the Incentive Plan may constitute incentive stock options, while other options granted under the Incentive Plan may be nonqualified stock options. The Internal Revenue Code provides for special tax treatment of stock options qualifying as incentive stock options, which may be more favorable to employees than the tax treatment accorded

 

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nonqualified stock options. On grant of either form of option, the optionee will not recognize income for tax purposes, and we will not receive any deduction. Generally, on the exercise of an incentive stock option, the optionee will recognize no income for U.S. federal income tax purposes. However, the difference between the exercise price of the incentive stock option and the fair market value of the shares at the time of exercise is an adjustment in computing alternative minimum taxable income that may require payment of an alternative minimum tax. On the sale of shares of common stock acquired by exercise of an incentive stock option (assuming that the sale does not occur within two years of the date of grant of the option or within one year of the date of exercise), any gain will be taxed to the optionee as long-term capital gain. In contrast, on the exercise of a nonqualified option, the optionee generally recognizes taxable income (subject to withholding) in an amount equal to the difference between the fair market value of the shares of common stock acquired on the date of exercise and the exercise price. On any sale of those shares by the optionee, any difference between the sale price and the fair market value of the shares on the date of exercise of the nonqualified option will be treated generally as capital gain or loss. No deduction is available to us on the exercise of an incentive stock option (although a deduction may be available if the employee sells the shares acquired on exercise before the applicable holding periods expire); however, on exercise of a nonqualified stock option, we generally are entitled to a deduction in an amount equal to the income recognized by the employee. Except in the case of the death or disability of an optionee, an optionee has three months after termination of employment in which to exercise an incentive stock option and retain favorable tax treatment on exercise. An incentive stock option exercised more than three months after an optionee’s termination of employment other than on death or disability of an optionee cannot qualify for the tax treatment accorded incentive stock options. Any such option would be treated as a nonqualified stock option for tax purposes.

Stock Appreciation Rights (“SARs”)

The amount of any cash or the fair market value of any shares of common stock received by the holder on the exercise of SARs in excess of the exercise price will be subject to ordinary income tax in the year of receipt, and we will be entitled to a deduction for that amount.

Restricted Stock

Generally, a grant of shares of common stock under the Incentive Plan subject to vesting and transfer restrictions will not result in taxable income to the participant for federal income tax purposes or a tax deduction to us at the time of grant. The value of the shares will generally be taxable to the participant as compensation income in the year in which the restrictions on the shares lapse. Such value will be the fair market value of the shares as to which the restrictions lapse on the date those restrictions lapse. Any participant, however, may elect pursuant to Internal Revenue Code Section 83(b) to treat the fair market value of the restricted shares on the date of grant as compensation income in the year of grant, provided the participant makes the election pursuant to Internal Revenue Code Section 83(b) within 30 days after the date of grant. In any case, we will receive a deduction for federal income tax purposes equal to the amount of compensation included in the participant’s income in the year in which that amount is so included.

Restricted Stock Units

A grant of a right to receive shares of common stock or cash in lieu of the shares will result in taxable income for federal income tax purposes to the participant at the time the award is settled in an amount equal to the fair market value of the shares or the amount of cash awarded. We will be entitled to a corresponding deduction at that time for the amount included in the participant’s income.

Performance Units

The amount of any cash or the fair market value of any shares of common stock received by the holder on the settlement of performance units under the Incentive Plan will be subject to ordinary income tax in the year of receipt, and we will be entitled to a deduction for that amount in the year in which that amount is included.

 

 

 

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Cash Awards

Cash Awards under the Incentive Plan are taxable income to the participant for federal income tax purposes at the time of payment. The participant will have compensation income equal to the amount of cash paid, and we will have a corresponding deduction for federal income tax purposes.

Basis; Gain

A participant’s tax basis in vested shares of common stock purchased under the Incentive Plan is equal to the sum of the price paid for the shares, if any, and the amount of ordinary income recognized by the participant on the transfer of vested shares. The participant’s holding period for the shares generally begins on the transfer to the participant of vested shares. If a participant sells shares, any difference between the amount realized in the sale and the participant’s tax basis in the shares is taxed as long-term or short-term capital gain or loss (provided the shares are held as a capital asset on the date of sale), depending on the participant’s holding period for the shares.

Certain Tax Code Limitations on Deductibility

In order for us to deduct the amounts described above, such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses. The ability to obtain a deduction for awards under the Incentive Plan could also be limited by Code Section 280G, which provides that certain excess parachute payments made in connection with a change in control of an employer are not deductible.

The ability to obtain a deduction for amounts paid under the Incentive Plan could also be affected by Code Section 162(m), which limits the deductibility, for U.S. federal income tax purposes, of compensation paid to certain employees to $1 million during any taxable year.

Internal Revenue Code Section 409A

Code Section 409A generally provides that deferred compensation subject to Code Section 409A that does not meet the requirements for an exemption from Code Section 409A must satisfy specific requirements, both in operation and in form, regarding: (1) the timing of payment; (2) the election of deferrals; and (3) restrictions on the acceleration of payment. Failure to comply with Code Section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% penalty at the federal level (and possibly penalties at the state level) on the participant of the deferred amounts included in the participant’s income.

New Plan Benefits

The number and type of awards that may be granted under the Incentive Plan in the future are not determinable at this time as the Compensation Committee or the Board, as applicable, will make these determinations in its sole discretion.

Other information

As of March 31, 2020, the following persons have received the following numbers of stock options under the Incentive Plan (all of which represent pre-merger awards that were assumed by DXC under the Incentive Plan in connection with the merger):

 

 

Mr. Saleh has received 224,328 stock options under the Incentive Plan, Mr. Lawrie has received 604,033 stock options under the Incentive Plan, and none of our other current named executive officers have received any stock options under the Incentive Plan.

 

 

Our current executive officers as a group have received 1,071,129 stock options under the Incentive Plan, and our non-executive officer employees as a group have received 4,830,687 stock options under the Incentive Plan.

 

 

We have not granted any stock options under the Incentive Plan to any of our non-employee directors or any other person, including any associate of any of the above.

 

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As of March 31, 2020, the closing price of a share of our common stock on the New York Stock Exchange was $13.05 per share.

Equity Compensation Plan Information

The following table gives information about our common stock that may be issued under our equity compensation plans as of March 31, 2020. See Note 16—“Stock Incentive Plans” of the Annual Report on Form 10-K for the fiscal year which ended on March 31, 2020 for information regarding the material features of these plans.

 

     Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
   Weighted-average exercise
price of outstanding options,
warrants and rights
   Number of securities
remaining available for future
issuance under equity

compensation  plans
excluding securities
reflected in column (a)
Plan Category    (a)    (b)    (c)
Equity compensation plans approved by security holders        6,158,906      $ 9.08        19,610,518
Equity compensation plans not approved by security holders                     
Total        6,158,906      $ 9.08        19,610,518

Proposal 5: Approval of Increase in Shares Available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan

 

We are asking stockholders to approve an increase in the number of shares of our common stock available for issuance under the DXC Technology Company 2017 Non-Employee Director Incentive Plan, as amended as proposed herein (the “Director Plan”), by 515,000 shares, from 230,000 to 745,000 shares.

As of March 31, 2020, 39,451 shares of the original 230,000 share pool remain available for issuance. If approved, the additional 515,000 shares would increase the total number of shares available under the Director Plan to 554,451 shares.

Factors Regarding Our Equity Usage and Needs under the Director Plan

 

 

Increased Market Volatility Driving Need for More Shares: As we realigned the Company with our new strategic priorities, our stock price was negatively impacted in the short term. This decline was exacerbated by market-wide impacts due to the COVID-19 pandemic. These impacts contributed to a sooner-than-expected need for additional shares in our Director stock plan. As of March 31, 2020, we had 39,451 shares remaining available for issuance under the Director Plan and this pool is no longer sufficient for our expected August 2020 non-employee director grants. In order to continue to attract and retain non-employee directors and align their interests with those of our stockholders, we are seeking stockholder approval to make an additional 515,000 shares available for issuance under the Director Plan, which would increase the number of available shares under the Director Plan to 554,451 shares in total.

 

 

Reasonable Amount of Dilution for Market Competitive Grant Capabilities: If approved by our stockholders, the dilution represented by the total shares available under the Director Plan (and the 2017 Omnibus Incentive Plan, as described in Proposal 4 above), including the proposed increase to the shares available for issuance under both plans and the currently outstanding awards under both plans, would be 16.9%, based on our outstanding shares as of March 31, 2020. Our historical burn rate under both plans combined for the past three years has been 1.76%. In addition to the increase in the number of available shares, the proposed amendment to the Director Plan also imposes an annual limit on the value of equity awards that may be granted under the Director Plan to our Independent Chairman during any calendar year of $900,000 and to any other single non-employee director during any calendar year of $500,000 based on the value of our shares as of the grant date of the award.

 

 

 

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Vote required

A majority of the votes cast at the annual meeting is necessary for the approval of this proposal.

The Board of Directors recommends a vote FOR the approval of the increase in the number of shares

available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan.

Summary of Proposed Director Plan

The following summary is qualified in its entirety by reference to the Director Plan, which is attached to this proxy statement as Appendix D.

Shares Available for Issuance

If the stockholders approve this proposal, the maximum number of shares of our common stock that may be issued pursuant to awards granted under the Director Plan will increase by 515,000 shares to 745,000 shares in total, subject to certain adjustments for corporate transactions, as described in “Adjustments” below. Shares of our common stock issued under the Director Plan may consist of newly issued shares, treasury shares and/or shares purchased in the open market or otherwise. Only shares of our common stock actually issued pursuant to awards granted under the Director Plan will be counted against the authorized shares. If an award is settled or terminates by expiration, forfeiture, cancellation or otherwise without the issuance of all shares originally covered by the award, then the shares not issued will again be available for use under the Director Plan.

Eligibility

Each member of the Board of Directors of the Company who is not an employee of the Company or any of its subsidiaries is eligible for the grant of awards under the Director Plan. As of March 31, 2020, there were 10 non-employee directors who were eligible to receive awards under the Director Plan.

Award Limits

The maximum dollar value of all awards that may be granted under the Director Plan to our Independent Chairman during any calendar year may not exceed $900,000 and for any other single non-employee director during any calendar year may not exceed $500,000 based on the fair market value of the shares subject to such award as of the grant date.

Administration

The Director Plan will be administered by the Board or, in the Board’s discretion, a committee of the Board consisting of three or more directors, each of whom is:

 

 

“independent” for purposes of our Corporate Governance Guidelines; and

 

 

a “non-employee director” for purposes of SEC Rule 16b-3(b)(3).

The administrator of the Director Plan (the “Administrator”) will have full and final authority to select the non-employee directors to whom awards will be granted under the Director Plan, to grant awards and to determine the terms and conditions of those awards.

Types of Awards

The Director Plan provides for the grant of:

 

 

restricted stock; and

 

 

RSUs

 

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Subject to the Director Plan, the Administrator will determine the terms and conditions of each award, which will be set forth in an award agreement executed by the Company and the participant.

The Director Plan authorizes the Administrator to grant awards of restricted stock and RSUs with time-based vesting. An RSU represents the right to receive a specified number of shares of our common stock, or cash based on the market value of those shares, upon vesting or at a later date permitted in the award agreement. The terms and conditions of the restricted stock and RSUs will be determined by the Administrator, subject to the requirements of the Director Plan. Among those requirements are the following:

 

 

Unless the Administrator determines otherwise, all restricted stock will have full voting rights;

 

 

Rights to dividends or dividend equivalents may be extended to and made part of any award of restricted stock or RSUs, subject to such terms, conditions and restrictions as the Administrator may establish; and

 

 

The Administrator may also establish rules and procedures for the crediting of interest on deferred cash payments.

Transferability

Unless the Administrator determines otherwise, no award, and no shares of our common stock subject to an outstanding award as to which any applicable restriction or deferral period has not lapsed, may be sold or transferred except by will or the laws of descent and distribution.

Change in Control

Unless an award agreement specifies otherwise, upon the date of a change in control of the Company (as such term is defined under Section 409A of the Internal Revenue Code):

 

 

all restrictions applicable to outstanding restricted stock will lapse in full; and

 

 

all outstanding RSUs will become fully vested.

Adjustments

If there is a reorganization, merger, consolidation, recapitalization, restructuring, reclassification, dividend (other than a regular, quarterly cash dividend) or other distribution, stock split, reverse stock split or similar transaction, or a sale of substantially all of our assets, then, unless the terms of the transaction provide otherwise and the outstanding shares of our common stock are increased, decreased or exchanged for or converted into cash, property and/or a different number or kind of securities (or if cash, property, and/or securities are distributed in respect of such shares), the Administrator will make such adjustments as it deems appropriate and proportionate in:

 

 

the number and type of shares, cash or property subject to outstanding awards granted under the Director Plan, and the exercise or purchase price per share; and

 

 

the maximum number and type of shares authorized for issuance under the Director Plan.

Plan Amendments

The Board may amend or terminate all or any part of the Director Plan at any time and in any manner, subject to the following:

 

 

Our stockholders must approve any amendment or termination if (i) stockholder approval is required by the SEC, NYSE or any taxing authority, or (ii) the amendment or termination would materially increase the benefits accruing to non-employee directors or the maximum number of shares which may be issued under the Director Plan, or materially modify the Director Plan’s eligibility requirements; and

 

 

Non-employee directors must consent to any amendment or termination that would impair their rights under outstanding awards.

 

 

 

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The Administrator may amend the terms of any outstanding award, but no such amendment may impair the rights of any non-employee director without his or her consent.

Plan Duration

No award may be granted under the Director Plan after March 30, 2027, but any award granted prior to that date may extend beyond that date.

Material Federal Income Tax Treatment

The following is a brief description of the principal effect of U.S. federal income taxation upon a non-employee director and the Company with respect to the grant and settlement of awards under the Director Plan, based on U.S. federal income tax laws in effect on the date hereof. The following is only a summary and therefore is not complete, does not discuss the income tax laws of any state or foreign country in which a non-employee director may reside, and is subject to change.

Restricted Stock. Pursuant to the Director Plan, non-employee directors may be granted restricted stock. Unless the non-employee director makes a timely election under Section 83(b) of the Internal Revenue Code, he or she will generally not recognize any taxable income until the restrictions on the shares expire or are removed, at which time the non-employee director will recognize ordinary income in an amount equal to the excess of the fair market value of the shares at that time over the purchase price for the restricted shares, if any. If the non-employee director makes an election under Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income on the date of grant equal to the fair market value of the shares on the date of grant. We will generally be entitled to a deduction equal to the amount of ordinary income recognized by the non-employee director.

Restricted Stock Units. Pursuant to the Director Plan, non-employee directors may be granted RSUs. The grant of an RSU is generally not a taxable event for the non-employee director. In general, the non-employee director will not recognize any taxable income until the shares of our common stock subject to the RSU (or cash equal to the value of such shares) are distributed to him or her without any restrictions, at which time the non-employee director will recognize ordinary income equal to the fair market value of the shares (or cash) at that time. We will generally be entitled to a deduction equal to the amount of ordinary income recognized by the non-employee director.

Section 409A. Awards made under the Director Plan are intended to comply with or be exempt from Section 409A of the Internal Revenue Code. If any provision or award under the Director Plan would result in the imposition of an additional tax under Section 409A, that Plan provision or award will be reformed to avoid imposition of the additional tax and no action taken to comply with Section 409A shall be deemed to adversely affect the non-employee director’s rights to an award.

New Plan Benefits

The number and type of awards that may be granted under the Director Plan in the future are not determinable at this time as the Board, as applicable, will make these determinations in its sole discretion.

Other information

Since the inception of the Director Plan on March 30, 2017, we have not granted any stock options under the Director Plan to any of our non-employee directors or to any named executive officer, other executive, employee or other person, including any associate of the above.

As of March 31, 2020, the closing price of a share of our common stock on the New York Stock Exchange was $13.05 per share.

 

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B. Corporate Governance

The Board

 

DXC is committed to maintaining the highest standards of corporate governance. The Board’s responsibilities include, but are not limited to:

 

 

overseeing the management of our business and the assessment of our business risks

 

 

overseeing the processes for maintaining integrity with regard to our financial statements and other public disclosures, and compliance with law and ethics

 

 

reviewing and approving our major financial objectives and strategic and operating plans, and other significant actions, and

 

 

overseeing our talent management and succession planning.

The Board discharges its responsibilities through regularly scheduled meetings as well as telephonic meetings, action by written consent and other communications with management as appropriate. DXC expects directors to attend all meetings of the Board and the Board committees upon which they serve, and all annual meetings of DXC’s stockholders at which they are standing for election or re-election as directors.

During the fiscal year ended March 31, 2020, DXC held 12 meetings of the full DXC Board of Directors, DXC’s Audit Committee held 13 meetings, DXC’s Compensation Committee held 7 meetings and DXC’s Nominating/Corporate Governance Committee held 5 meetings. No DXC director on the DXC Board as of March 31, 2020 attended fewer than 97% of the aggregate of (1) the total number of meetings of the Board, and (2) the total number of meetings held by all committees of the Board on which he or she served during the fiscal year ended March 31, 2020. Each of the DXC directors then serving attended the 2019 Annual Meeting of Stockholders. The Risk Committee was formed in May 2020 and became effective on June 15, 2020.

In this section, we describe some of our key governance policies and practices.

Stockholder Engagement

Governance is a continuing focus at DXC, starting with the Board and extending to all employees.

Management and the Board believe that stockholder engagement is an important component of our governance practices. DXC has a stockholder outreach program to build relationships with our stockholders and develop a dialogue about DXC’s corporate governance program. We engage with stockholders on a variety of matters, such as corporate governance, executive compensation, and human capital management, and strive to be responsive to that feedback. We continue our stockholder outreach program as part of an ongoing engagement process.

For details regarding stockholder engagement relating to our executive compensation program, please refer to Section 1 of the Compensation Discussion and Analysis–Stockholder Feedback and Evolution of Compensation Program.

Corporate Governance Guidelines

The Board adheres to governance principles designed to assure excellence in the execution of its duties and regularly reviews the company’s governance policies and practices. These principles are outlined in DXC’s Corporate Governance Guidelines (Guidelines), which, in conjunction with our Articles of Incorporation (Articles of Incorporation), Bylaws (Bylaws), Code of Business Conduct (Code of Conduct), Board committee charters and related policies, form the framework for the effective governance of DXC.

The full text of the Guidelines, the charters for each of the Board committees, the Code of Conduct and DXC’s Equity Grant Policy, Related Party Transactions Policy and Executive Compensation Clawback Policy are available on DXC’s website, www.dxc.technology, under About Us/Leadership and Governance. These materials are also available in print to any person, without charge, upon request, by calling 1-703-245-9700 or writing to Investor Relations, DXC Technology Company, 1775 Tysons Boulevard, Tysons, VA 22102.

 

 

 

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Corporate Governance

  

 

Board Leadership Structure

On September 12, 2019, Michael J. Salvino, a member of the Board of Directors of DXC, was appointed to serve as President and Chief Executive Officer of DXC. Mr. Salvino succeeded J. Michael Lawrie, who served as DXC’s Chairman of the Board, President and Chief Executive Officer since DXC’s formation in 2017. Mr. Lawrie continued to serve as DXC’s Chairman until his retirement from the Board on December 31, 2019.

Separation of CEO and Board Chairman Positions

Following Mr. Lawrie’s retirement, David L. Herzog, a member of the Board of Directors of DXC and chair of the Audit Committee, was appointed to serve as Board chair until the Board completed its evaluation process for appointing a new Board chair. Effective March 16, 2020, Ian C. Read was appointed independent Chairman of the Board, succeeding Mr. Herzog, who remains as chair of the Audit Committee of the Board. Mr. Read has extensive senior level management experience and familiarity with the global aspects of our business and operations.

The new Board leadership structure consists of a Chairman, a Chief Executive Officer and independent chairs for our Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee and Risk Committee. The Board of Directors has determined that this leadership structure, which separates the Chairman and Chief Executive Officer roles, provides independent Board leadership and engagement and is appropriate at this time considering the evolution of DXC’s business strategy and operating environment. In particular, the Board of Directors believes that this structure clarifies the individual roles and responsibilities of Chief Executive Officer and Chairman and enhances accountability. The Board also believes that the separation of roles allows our Chairman to focus on establishing priorities and procedures and to set Board and committee agendas while our CEO focuses on execution of our strategy, and management of the Company’s day-to-day operations. The Board regularly reviews its leadership structure to determine the most beneficial arrangement, based on the Company’s unique individual circumstances.

Independent Board Chairman Duties & Responsibilities

In accordance with the Guidelines, as Chairman of the Board, Mr. Read has the following duties and responsibilities:

 

 

presiding at annual and special meetings of the stockholders

 

 

presiding at Board of Director meetings, including executive sessions of independent directors

 

 

organizing and presenting the agenda for regular and special Board meetings in consultation with the Chief Executive Officer and other directors

 

 

serving as a focal point for management to inform the Board, ensuring the proper flow of information to the Board by maintaining close contact with the Chief Executive Officer and other members of senior management

 

 

lead Board reviews of the performance of the Chief Executive Officer and other key senior managers

 

 

working with the Nominating/Corporate Governance Committee to develop guidelines for the conduct of directors and to advise in making recommendations to the Board regarding director candidates

 

 

working with the Nominating/Corporate Governance Committee to determine standing and ad hoc committees, committee structure and charters, committee assignments and committee chairpersons

 

 

serving as an ex-officio, non-voting member of each standing committee of the Board and attending committee meetings as deemed appropriate

 

 

assisting in representing the Company to external groups, and

 

 

recommending outside advisors and consultants that report to the Board on board-wide issues.

DXC’s governance processes include executive sessions of the independent directors after the conclusion of each regularly scheduled Board meeting, annual evaluations by the independent directors of the CEO’s performance, succession planning, annual Board and committee self-assessments and the various governance processes contained in the Guidelines and the Board committee charters.

 

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Director Independence

Independent Directors. The Board assesses the independence of our directors and examines the nature and extent of any relations between the company and our directors, their families and their affiliates. The Guidelines provide that a director is “independent” if he or she satisfies the New York Stock Exchange (NYSE) requirements for director independence (as set forth in Appendix A to this proxy statement) and the Board of Directors affirmatively determines that the director has no material relationship with DXC (either directly, or as a partner, stockholder or officer of an organization that has a relationship with DXC).

The Board has determined that, except for Michael J. Salvino, the Company’s President and CEO, all of the Company’s director nominees, namely Mukesh Aghi, Amy E. Alving, David A. Barnes, Raul J. Fernandez, David L. Herzog, Mary L. Krakauer, Ian C. Read, Manoj P. Singh and Robert F. Woods, are independent for purposes of DXC’s Corporate Governance Guidelines. The Board also determined that, except for Michael J. Salvino, the Company’s President and CEO, all of the Company’s directors during fiscal 2020 were independent.

Independent Director Meetings. The non-management directors regularly meet in executive session after the conclusion of each regularly scheduled Board meeting, and meet at such additional times as they may determine.

Committee Independence Requirements. All members serving on the Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee and Risk Committee must either be independent as defined by the Guidelines or otherwise be eligible to be a committee member under Section 303A of the NYSE Listed Company Manual. In addition, Audit Committee members must meet heightened independence criteria under the rules and regulations of the NYSE and the SEC relating to audit committees, and each Compensation Committee member must meet heightened independence criteria under the rules and regulations of the NYSE and the SEC relating to compensation committees, be a “non-employee director” pursuant to Rule 16b-3 under the Exchange Act and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (Internal Revenue Code). The company’s Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee and Risk Committee are comprised entirely of independent members.

Risk Oversight

We believe our Board leadership structure supports a risk-management process in which senior management is responsible for our day-to-day risk-management processes and the Board provides oversight of our risk management. As part of its oversight responsibility, the Board oversees and maintains our governance and compliance processes and procedures to promote high standards of responsibility, ethics and integrity.

Management Role. We appointed a Chief Risk Officer (CRO) in fiscal 2020 to focus on leading the Company’s risk and security efforts and on risk management, including the ethics and compliance function, cybersecurity preparedness, resiliency and security, brand protection initiatives, asset protection and environmental, social and governance (ESG) risks. The CRO also works to advance DXC’s enterprise-level resilience strategy to enable leaders to respond to security and business disruptions in an efficient and consistent manner, keeping the safety and security of employees at the forefront while protecting company assets. The CRO reports to the President and Chief Executive Officer.

In order for us to identify and mitigate our risk exposures, we have also established an Enterprise Risk Management (ERM) function to (i) identify risks in the strategic, operational, financial reporting and compliance domains, for DXC as a whole, as well as for each operating unit, and (ii) evaluate the effectiveness of existing mitigation strategies. The ERM function coordinates and reviews assessments of internal processes and controls for ongoing compliance with internal policies and legal regulatory requirements. The ERM function periodically reports potential areas of risk to the Board and its committees.

Our enterprise risk, issue and opportunity management framework is centralized under a single executive owner to facilitate consistent processes, definitions and tools to proactively address operational, financial, compliance and strategic risks, issues and opportunities.

 

 

 

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Board Role. The Board has overall responsibility for oversight of risk and assessment of our strategic and operational risks throughout the year on an ongoing basis. Members of senior management regularly report on the opportunities and risks faced by us in the markets in which we conduct business.

Committee Role. In fulfilling its oversight role, the Board delegates certain risk management oversight responsibility to the Board’s committees. The committees meet regularly and report any significant issues and recommendations discussed during the committee meetings to the Board. Specifically, each committee fulfills the following oversight roles:

 

 

The Audit Committee oversees the accounting, financial reporting processes and related internal control framework of DXC and audits of the Company’s financial statements and internal control over financial reporting, and discusses our policies with respect to risk assessment and risk management.

 

 

The Compensation Committee oversees succession planning and leadership development as well as compensation plans. The Compensation Committee retains an independent compensation consultant to assist with its oversight responsibilities and to ensure that the compensation and benefit programs are designed in a manner that aligns DXC’s executive compensation program with the interests of DXC and its stockholders.

 

 

The Nominating/Corporate Governance Committee monitors the risks related to DXC’s governance structure and process. The Nominating/Corporate Governance Committee is responsible for overseeing the Board’s annual self-evaluation of its performance and overall Board effectiveness, and periodic review and recommendation to the Board of any proposed changes to DXC’s significant corporate governance documents.

 

 

The Risk Committee oversees the Company’s Enterprise Risk Management program and Ethics and Compliance program. The Risk Committee is responsible for addressing the Company’s exposure across the range of operational risk, brand/reputational risk, strategic risk, compliance risk, environmental and social governance (“ESG”) risk and other risk categories as appropriate and for overseeing the development and implementation of the Company’s risk management program.

The risks referenced above do not represent an exhaustive list of all enterprise risks that we face or that are considered and addressed from time to time by the Board and its committees. For more information on risks that affect our business, please see our most recent Annual Report on Form 10-K and other filings we make with the SEC.

Compensation and Risk

Management reviewed DXC’s executive and non-executive compensation programs for fiscal 2020 and determined that none of its compensation programs encouraged or created unnecessary risk taking, and none was reasonably likely to have a material adverse effect on DXC. The Compensation Committee’s independent compensation consultant (see more in section below “Role of the Independent Compensation Consultant”) also reviewed the programs for fiscal 2020 and made the same determination. In conducting this assessment, DXC inventoried its executive and non-executive plans and programs and analyzed the components and design features of these programs in the context of risk mitigation. A summary of the findings of the assessment was provided to the Compensation Committee and the Board. Overall, DXC concluded that (1) DXC’s executive compensation programs provided a mix of awards with performance goals and design features that mitigated excessive risk taking, (2) non-executive employee (non-sales) arrangements were primarily fixed compensation (salary and benefits) with limited incentive opportunity and did not encourage excessive risk taking, and (3) sales force incentive compensation plans moderated risk by using metrics that focused on driving sales growth, but not at the expense of profitability. DXC also considered its robust executive stock ownership guidelines, clawback policy and anti-hedging policy as risk mitigating features of its executive compensation program.

Prohibition on Hedging or Pledging of Company Stock

Our policy against insider trading prohibits employees, officers and directors from engaging in any speculative or hedging transactions in our securities. We prohibit hedging transactions such as puts, calls, collars, swaps, forward sale contracts, exchange funds, and similar arrangements or instruments designed to hedge or offset decreases in the market value of DXC’s securities. No employee, officer or director may engage in short sales of DXC securities, hold DXC securities in a margin account, or pledge DXC securities as collateral for a loan.

 

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Equity Ownership Guidelines

Under stock ownership guidelines adopted by the Board, Board members, other than the CEO, have an equity ownership requirement of five times their annual retainer to be achieved over a five-year period. Restricted stock units, as well as directly held shares, are taken into account for purposes of determining whether requirements have been met. Stock ownership guidelines for the executive officers, including the CEO, are described under Compensation Discussion and Analysis–Additional Compensation Policies–Equity Ownership Guidelines.

Talent Management and Succession Planning

Our Compensation Committee and Board are responsible for reviewing succession plans. The Compensation Committee oversees succession planning and leadership development for DXC’s senior management. The Compensation Committee has responsibility to review and make recommendations with respect to (a) the Board’s succession plan for the CEO and (b) the company’s succession plans for other members of senior management.

Director Education

The Board recognizes the importance of its members keeping current on DXC and industry issues and their responsibilities as directors. All new directors attend orientation training soon after being elected to the Board. Also, the Board encourages attendance at continuing education programs for Board members, which may include internal strategy or topical meetings, third-party presentations, and externally-offered programs.

Code of Ethics and Standards of Conduct

DXC is committed to high standards of ethical conduct and professionalism, and our Code of Conduct confirms our commitment to ethical behavior in the conduct of all DXC activities and reflects our CLEAR values. The Code of Conduct applies to all directors, all officers (including our CEO, CFO and Principal Accounting Officer (PAO)) and employees of DXC and it sets forth our policies and expectations on a number of topics including avoiding conflicts of interest, confidentiality, insider trading, protection of DXC and customer property and providing a proper and professional work environment. We maintain a worldwide toll-free and Internet-based helpline, the DXC OpenLine, which employees can use to communicate any ethics-related concerns, and we provide training on ethics and compliance topics for all employees. The DXC OpenLine is administered by a third-party provider. The ethics and compliance function resides in the Ethics and Compliance Office and is managed by DXC’s Chief Ethics and Compliance Officer.

For the year ended March 31, 2020, there were no waivers of any provisions of DXC’s Code of Conduct for our CEO, CFO or PAO. In the event DXC amends the Code of Conduct or waives any provision of the Code of Conduct applicable to our CEO, CFO and PAO that relates to any element of the definition of “code of ethics” enumerated in Item 406(b) of Regulation S-K, we intend to disclose these actions on our website.

 

 

 

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Board Diversity

The Nominating/Corporate Governance Committee is responsible for developing and recommending to the Board the appropriate qualifications including specific qualities or skills sought for Board members in the context of our business and then-current membership on the Board. The Board believes that maintaining a diverse membership with varying backgrounds, skills, expertise and other differentiating personal characteristics promotes inclusiveness, enhances the Board’s deliberations and enables the Board to better represent all of DXC’s constituents, including its diverse customer base and workforce. Accordingly, the Board is committed to seeking out highly qualified candidates with diverse backgrounds, skills and experiences as part of each Board search we undertake. These considerations and goals have been important factors in the Board’s refreshment efforts, which, since DXC’s inception in 2017, have included the addition of Mary L. Krakauer in March 2018 and the nomination of Raul J. Fernandez for election as director at our 2020 annual meeting of stockholders.

 

Board Diversity—Background of Director Nominees
  

 

  Mukesh
Aghi
  Amy E.
Alving
  David A.
Barnes
  Raul J.
Fernandez
  David L.
Herzog
  Mary L.
Krakauer
  Ian C.
Read
  Michael J.
Salvino
  Manoj P.
Singh
  Robert F.
Woods
Tenure/Age/Gender                                                                                                    
Years on the Board       3       3                   3       2       0       1       3       3
Age       64       57       64       54       60       63       67       54       67       65
Gender       M       F       M       M       M       F       M       M       M       M
Race/Ethnicity                                                                                                    
African American/Black                                                                                                    
Asian/South Asian                                                                                            
White/Caucasian                                                                        
Hispanic/Latino                                                                                                
Native American                                                                                                    

Mandatory Retirement of Directors

Under our Bylaws, directors must retire by the close of the first annual meeting of stockholders held after they reach age 72, unless the Board determines that it is in the best interests of DXC and its stockholders for the director to continue to serve until the close of a subsequent annual meeting.

Resignation of Employee Directors

Under the Guidelines, the CEO must offer to resign from the Board when he or she ceases to be a DXC employee.

Communicating with the Board

Stockholders and other interested parties may communicate with the Board, individual directors, the non-management directors as a group, or with the non-executive Chairman, by writing in care of the Corporate Secretary, DXC Technology Company, 1775 Tysons Boulevard, Tysons, VA 22102. The Corporate Secretary reviews all submissions and forwards to members of the Board all appropriate communications that in his judgment are not offensive or otherwise objectionable and do not constitute commercial solicitations.

 

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Committees of the Board

 

As of the date of this proxy statement, the Board has 11 directors and four standing committees: the Audit Committee, the Compensation Committee, the Nominating/Corporate Governance Committee and the Risk Committee.

Each director serving on the Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee or the Risk Committee (per its charter) must be and are independent.

In addition:

 

 

Each Audit Committee member must meet heightened independence criteria under the rules and regulations of the NYSE and the SEC relating to audit committees, and must be financially literate. No member of the Audit Committee may simultaneously serve on the audit committees of more than three other public companies unless the Board determines that such simultaneous service would not impair the member’s ability to effectively serve on the Audit Committee.

 

 

Messrs. Herzog, Singh and Woods each qualifies as an “audit committee financial expert”, for purposes of the rules of the SEC, and all members of the Audit Committee are financially literate.

 

 

Each Compensation Committee member must meet heightened independence criteria under the rules and regulations of the NYSE and SEC relating to compensation committees, be a “non-employee director” for purposes of Rule 16b-3 promulgated under the Exchange Act and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code. The Board has determined that each committee member satisfies all applicable requirements for membership on that committee.

 

     

Current Committee Memberships

Effective from August 15, 2019 to
August 13, 2020

  

Prospective Committee Memberships

Expected to be effective beginning
August 13, 2020 until 2021 Annual
Meeting of Stockholders

Audit Committee

  

                        David L. Herzog, Chair

  

                   David L. Herzog, Chair

  

                        Peter Rutland

  

                   David A. Barnes

  

                        Manoj P. Singh

  

                   Manoj P. Singh

    

                        Robert F. Woods

  

                   Robert F. Woods

Compensation Committee

  

                        Mukesh Aghi, Chair

  

                   Mukesh Aghi, Chair

  

                        Sachin Lawande

  

                   Raul J. Fernandez

    

                        Julio A. Portalatin

  

                   Mary L. Krakauer

Nominating/Corporate Governance Committee

  

                        Manoj P. Singh, Chair

  

                   Manoj P. Singh, Chair

  

                        Amy E. Alving

  

                   Amy E. Alving

    

                        Mary L. Krakauer

  

                   Raul J. Fernandez

Risk Committee

  

                        Amy E. Alving, Chair

  

                   Amy E. Alving, Chair

  

                        Mary L. Krakauer

  

                   David A. Barnes

         

                   Mary L. Krakauer

The current committee membership, the number of meetings during the last fiscal year and the function of each of the standing committees are described below.

 

 

 

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Audit Committee

 

Committee            Current Members    Primary Responsibilities   

Number of Fiscal

2020 Meetings

 

Audit

  

 

David L. Herzog (Chair)

 

Peter Rutland

 

Manoj P. Singh

 

Robert F. Woods

  

 

•  Oversee DXC’s accounting and financial reporting processes and related internal control framework and audits of the company’s financial statements and internal control over financial reporting.

 

•  Assist the Board in its oversight of:

 

•  the integrity of the company’s financial statements

 

•  the company’s compliance with legal and regulatory requirements

 

•  the independent auditor’s qualifications and independence, and the performance of the company’s internal audit function and independent auditors.

 

•  Prepare the Audit Committee report for inclusion in our annual proxy statement.

 

  

 

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Anyone with questions or complaints regarding accounting, internal accounting controls, or auditing matters may communicate them to the DXC Ethics and Compliance Office and our Audit Committee by contacting DXC’s OpenLine on the Company’s website, www.dxc.technology, under About Us/Leadership and Governance/Ethics and Compliance/SpeakUp!:DXC OpenLine. Calls may be confidential or anonymous. Questions and complaints marked for the Audit Committee are forwarded to the committee’s chairman for its review, and reviewed and addressed, as appropriate, by DXC’s General Counsel, the Vice President of Ethics and Compliance, the Head of Internal Audit, and the Principal Accounting Officer. The Audit Committee may direct special treatment, including the retention of outside advisors, for any concern communicated to it. The Code of Business Conduct makes clear DXC’s zero tolerance position on matters of retaliation by management or anyone against DXC employees for any report or communication made in good faith through the DXC OpenLine.

Compensation Committee

 

Committee            Current Members    Primary Responsibilities   

Number of Fiscal

2020 Meetings

 

Compensation

  

 

Mukesh Aghi (Chair)

 

Sachin Lawande

 

Julio A. Portalatin

  

 

•  Assist the Board in determining the performance and compensation of the CEO and the compensation of the non-management directors.

 

•  Discharge the responsibilities of the Board with respect to the compensation of other executives.

 

•  Administer our incentive stock plans.

 

•  Oversee succession planning and leadership development for our senior management.

 

•  Report on executive compensation for inclusion in our annual proxy statement.

 

  

 

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Compensation Committee Interlocks and Insider Participation. Mukesh Aghi, Sachin Lawande and Julio A. Portalatin were not at any time during fiscal 2020, or at any other time, one of DXC’s officers or employees. No executive officer of DXC served on the compensation committee or board of any company that employed any member of the DXC Compensation Committee or Board.

 

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Nominating/Corporate Governance Committee

 

Committee            Current Members    Primary Responsibilities   

Number of Fiscal

2020 Meetings

 

Nominating/

Corporate

Governance

  

 

Manoj P. Singh (Chair)

 

Amy E. Alving

 

Mary L. Krakauer

  

 

•  Identify and recommend to the Board the slate of individuals to be nominated for election as directors.

 

•  Develop and recommend to the Board qualifications for director nominees.

 

•  Develop process for identifying and evaluating director nominees and identify and recommend individuals to fill Board vacancies.

 

•  Recommend to Board directors to serve as members and chair of each committee of the Board.

 

•  Review and recommend to Board appropriateness of director’s continued service in circumstances such as material change in director’s job responsibility.

 

•  Oversee orientation of new directors and education of all directors.

 

•  Oversee Board’s annual self-evaluation of its performance.

 

•  Periodically review and recommend to the Board proposed changes to size, structure and operations of the Board and its committees.

 

•  Periodically review and recommend to the Board proposed changes to our significant corporate governance documents.

 

•  Review any “interested transactions” in accordance with the terms of DXC’s policy on related party transactions.

 

  

 

5

Risk Committee

 

Committee            Current Members    Primary Responsibilities   

Number of Fiscal

2020 Meetings

 

Risk

  

 

Amy E. Alving (Chair)

 

Mary L. Krakauer

  

 

•  Oversee and review with management DXC’s enterprise risk management framework, addressing DXC’s exposure across the range of operational risk, brand/reputational risk, strategic risk, compliance risk and other risk categories as appropriate.

 

•  Oversee the development and implementation of DXC’s risk management program.

 

•  Oversee DXC’s ethics and compliance program.

 

  

 

N/A1

 

1

The Risk Committee was formed in May 2020 and became effective on June 15, 2020. Therefore, no meetings were held during Fiscal 2020.

During fiscal 2020 the Board initiated informal meetings on a regular basis to support DXC’s new management team as it instituted a transformation plan for the Company and has continued these meetings as the Company navigates the ongoing COVID-19 pandemic. Through these meetings, the Board determined that separate meetings dedicated to risk oversight would be valuable for the Company and its stockholders and decided to establish a separate Board committee to continue the work that began with the Board in fiscal 2020. The Risk Committee was formed in May of 2020 and became effective on June 15, 2020. The formation of the Risk Committee increases the Board’s effectiveness of its risk oversight processes, focuses director attention on DXC’s most critical risks and risk management capabilities, and fosters an integrated, enterprise-wide approach to

 

 

 

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identifying and managing risk. The Board believes that the directors assigned to the Risk Committee have the requisite knowledge and expertise to provide effective oversight over the risks falling within the Risk Committee’s scope. However, the Board will add at least one more member to the Risk Committee after the 2020 Annual Meeting.

The Risk Committee’s current primary responsibilities include overseeing the development and implementation of DXC’s enterprise risk management program, the scope of which includes establishing DXC’s risk appetite, aligning risk appetite with strategy and operations, defining the policies and processes for risk identification, assessment and mitigation, and monitoring evolving risks and mitigation effectiveness. Oversight will be provided for specific high-risk areas of the business, such as cyber security, asset protection, and business continuity.

Audit Committee Report

 

The Audit Committee reviewed and discussed with management and Deloitte & Touche LLP, DXC’s independent auditors, DXC’s audited financial statements for the fiscal year ended March 31, 2020, management’s assessment of the effectiveness of DXC’s internal control over financial reporting and Deloitte & Touche LLP’s evaluation of DXC’s internal control over financial reporting. The Audit Committee also discussed with the independent auditors the materials required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the Securities and Exchange Commission. In addition, the Audit Committee received from Deloitte & Touche LLP the written disclosures and the letter required by the applicable requirements of the PCAOB and discussed with them their independence.

Based on such review and discussions, the Audit Committee recommended to the Board of Directors, and the Board approved the inclusion of the audited financial statements of DXC in DXC’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 for filing with the SEC.

The Audit Committee also appointed Deloitte & Touche LLP as DXC’s independent auditors for the fiscal year ending March 31, 2021 and recommended to the Board of Directors that such appointment be submitted to our stockholders for ratification.

David L. Herzog, Chair

Peter Rutland

Manoj P. Singh

Robert F. Woods

 

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Director Compensation

 

Director compensation is reviewed annually and approved by the Board of Directors at the recommendation of the Compensation Committee. The annual review includes an analysis by the Compensation Committee’s independent consultant, Pearl Meyer, of the program’s framework and pay levels relative to DXC’s peer group.

The Director compensation program reflects several best practices to ensure sound governance and alignment with our stockholders:

 

 
Description
   
Annual Benchmarking   Director compensation is reviewed annually relative to DXC’s peer group to ensure it is market-competitive.
   
Mix of Cash and Equity   The program includes an appropriate mix of annual cash compensation, committee compensation and equity awards.
   
Vesting Requirements of   Annual Equity Awards   Restricted stock units granted under the Director Plan are scheduled to vest in full at the earlier of the first anniversary of the grant date, or the date of the next annual stockholders meeting.
   
Ownership Guidelines   As described in Section B above, Directors have an equity ownership guideline of five times their annual retainer to be achieved over a five-year period.
   
Anti-Hedging or Anti-Pledging of Company Stock   As described in Section B above, our insider trading policy prohibits employees and directors from engaging in any speculative or hedging transactions in our securities. Additionally, the policy prohibits employees and directors from pledging DXC securities as collateral for a loan.

In addition to the best practices above, the proposed amendment to our Director Plan, if approved, will impose annual limits on the value of equity awards that may be granted under the Director Plan during any calendar year. See “Proposal 5 – Approval of increase in shares available under the DXC Technology Company 2017 Non-Employee Director Incentive Plan.”

In the tables and narrative below, we describe our non-employee director compensation program and the compensation paid to our non-employee directors for fiscal 2020. Mr. Salvino, our President and CEO, does not receive any separate compensation for his activities on our Board. In addition, Mr. Lawrie, our former President and CEO, did not receive any separation compensation for his activities on our Board.

 

Fiscal 2020 Director Retainers and Fees        

Annual Cash Retainer for Directors other than Independent Chairman1

  

 

$90,000

 

Annual Cash Retainer for Independent Chairman1,4

  

 

$100,000

 

Annual Equity Award for Directors other than Independent Chairman2

  

 

$200,000

 

Independent Chairman of the Board Annual Equity Award4

  

 

$450,000

 

Audit Committee Chairman Retainer1

  

 

$30,000

 

Compensation Committee Chairman Retainer1

  

 

$25,000

 

Nominating/Corporate Governance Committee Chairman Retainer1

  

 

$20,000

 

Risk Committee Chairman Retainer1

  

 

$20,000

 

Committee Member Retainer1

  

 

$10,000

 

Additional Meeting Attendance Fee1,3

  

 

$2,500 per meeting

 

 

1.

Amounts payable in cash could be deferred pursuant to the Deferred Compensation Plan, which is described further below in this proxy statement.

 

 

 

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Corporate Governance

  

 

2.

The Annual Equity Award is designed to be payable in the form of restricted stock units (“RSUs”) scheduled to vest in full at the earlier of (i) the first anniversary of the grant date or (ii) the date of the next annual meeting of DXC’s stockholders. The RSUs are redeemed for DXC stock and dividend equivalents either at that time or, if an RSU deferral election form is submitted, upon the date or event elected by the director. Directors may elect to receive deferred RSUs at either a fixed in-service distribution date, which may be in August of any year after the year in which the RSUs vest within 15 years after the grant date, or upon their separation from the board of directors. Distributions made upon a director’s separation from the board of directors may occur in either a lump sum or in annual installments over periods of 5, 10 or 15 years, per the director’s election.

 

3.

A director is eligible to receive the additional meeting attendance fee for meetings, special projects and assignments involving travel, once the director has exceeded (i) an aggregate of eight Board meetings, projects and assignments or (ii) an aggregate of committee meetings, projects and assignments equal to six times the number of committees on which the director serves.

 

4.

The Annual Cash Retainer for the Independent Chairman was implemented effective as of January 1, 2020. Mr. Herzog received a pro-rated portion of this retainer for his service as Independent Chairman from January 1, 2020 until March 15, 2020. The Independent Chairman Annual Equity Award was implemented effective as of March 16, 2020. Mr. Herzog did not receive the Independent Chairman Annual Equity Award. Mr. Read was appointed Independent Chairman effective as of March 16, 2020 and received a pro-rated portion of the Independent Annual Equity Award for the period between March 16, 2020 and the date of DXC’s 2020 Annual Meeting of Stockholders (August 13, 2020), which was granted on April 30, 2020, after the end of the year. All other components of the compensation program for non-employee directors are not applicable to Mr. Read.

The following table sets forth for each individual who served as a non-employee director of DXC during fiscal 2020 certain information with respect to compensation paid to them by DXC in fiscal 2020.

 

Name

(a)

  

Fees Earned1 or

Paid in Cash

(b)

  

Stock Awards2

(c)

  

Total

(d)

Mukesh Aghi

    

 

$125,000

    

 

$198,476

    

$

323,476

Amy E. Alving

    

 

100,000

    

 

198,476

    

 

298,476

David L. Herzog3

    

 

155,000

    

 

198,476

    

 

353,476

Mary L. Krakauer

    

 

100,000

    

 

198,476

    

 

298,476

Sachin Lawande

    

 

100,000

    

 

198,476

    

 

298,476

Julio A. Portalatin

    

 

100,000

    

 

198,476

    

 

298,476

Ian C. Read4

    

 

    

 

    

 

Peter Rutland

    

 

145,000

    

 

198,476

    

 

343,476

Michael J. Salvino5

    

 

28,148

    

 

245,186

    

 

273,334

Manoj P. Singh

    

 

130,000

    

 

198,476

    

 

328,476

Robert F. Woods

    

 

100,000

    

 

198,476

    

 

298,476

 

1.

Column (b) reflects all cash compensation earned during fiscal 2020, whether or not payment was deferred pursuant to the Deferred Compensation Plan.

 

2.

Each director serving as a non-employee director of DXC as of the close of DXC’s 2019 Annual Meeting of Stockholders on August 15, 2019 received 5,900 RSUs determined by (i) dividing $200,000 by the closing price of our common stock on the New York Stock Exchange Composite Tape on the grant date of August 20, 2019 ($33.64) and (ii) rounding the result to the nearest multiple of 100. The RSUs are scheduled to vest in full on the date of DXC’s 2020 annual meeting (August 13, 2020). In addition, Mr. Salvino received a pro-rata RSU grant of 900 RSUs for his service from May 23, 2019, when he joined the Board, to the date of the August 15, 2019 Annual Meeting of Stockholders.

 

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Column (c) reflects the grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 – Compensation – Stock Compensation (“FASB ASC Topic 718”) in connection with the RSUs granted during fiscal 2020. For a discussion of the assumptions made in the valuation of restricted stock and RSUs, reference is made to the section of Note 1 to the Consolidated Financial Statements in DXC’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 providing details of DXC’s accounting under FASB ASC Topic 718. The aggregate number of unvested DXC stock awards outstanding for each DXC non-employee director at March 31, 2020 were as follows:

 

       Name   

Aggregate Unvested

Stock Awards Outstanding

as of March 31, 2020

        

            

 

Mukesh Aghi

  

5,900

 

Amy E. Alving

  

5,900

 

David L. Herzog

  

5,900

 

Mary L. Krakauer

  

5,900

 

Sachin Lawande

  

5,900

 

Julio A. Portalatin

  

5,900

 

Peter Rutland

  

5,900

 

Michael J. Salvino

  

5,900

 

Manoj P. Singh

  

5,900

 

Robert F. Woods

  

5,900

 

3.

Mr. Herzog served as independent chairman from January 1, 2020 until March 15, 2020.

 

4.

Mr. Read was appointed to the Board as independent chairman on March 16, 2020 but did not receive any compensation for his service on the Board during fiscal 2020.

 

5.

Reflects the director fees received by Mr. Salvino since his appointment to the Board on May 23, 2019 until his appointment as President and CEO on September 12, 2019. Mr. Salvino’s compensation as President and CEO for the period after September 12, 2019 is reflected in the Summary Compensation Table. Mr. Salvino did not and does not receive separate compensation for his activities on our Board after he became President and CEO.

 

 

 

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Security Ownership of Certain Beneficial Owners and Management

  

 

C. Security Ownership of Certain Beneficial Owners and Management

Security Ownership

 

The following table provides information on the beneficial ownership of our common stock as of June 15, 2020, by:

 

 

each person or group believed by the Company to be the beneficial owner of more than 5% of our outstanding common stock;

 

 

each of our named executive officers;

 

 

each of our directors and director nominees;

 

 

all executive officers and directors, as a group.

Unless otherwise indicated, each person or group has sole voting and investment power with respect to all shares beneficially owned.

 

Name and Address of Beneficial Owner1   

Number of Shares

Beneficially Owned

 

Percentage

of Class2

The Vanguard Group, Inc.

    100 Vanguard Blvd.

    Malvern, Pennsylvania 19355

      

29,118,590

    

3 

 
     

11.46

         

%

BlackRock, Inc.

    40 East 52nd Street

    New York, New York 10022

      

19,079,721

    

4 

 
     

7.51

    

%

Michael J. Salvino

      

6,800

    

6 

 
     


    

8

 

Paul N. Saleh

      

241,169

    

5, 7 

 
     


    

8

 

Mary E. Finch

      


    


     


    

8

 

Vinod Bagal

      


    


     


    

8

 

Edward Ho

      

6,881

    


     


    

8

 

William L. Deckelman, Jr.

      

251,463

    

5, 7 

 
     


    

8

 

James R. Smith

      

172,757

    

5 

 
     


    

8

 

Neil A. Manna

      

21,366

    


     


    

8

 

J. Michael Lawrie

      

1,707,130

    

5 

 
     


    

8

 

Mukesh Aghi

      

20,917

    

6 

 
     


    

8

 

Amy E. Alving

      

11,759

    

6 

 
     


    

8

 

David L. Herzog

      

11,806

    

6 

 
     


    

8

 

Mary L. Krakauer

      

9,124

    

6 

 
     


    

8

 

Sachin Lawande

      

21,546

    

6 

 
     


    

8

 

Julio A. Portalatin

      

11,759

    

6 

 
     


    

8

 

Ian C. Read

      

12,900

    

6 

 
     


    

8

 

Peter Rutland

      

20,659

    

6 

 
     


    

8

 

Manoj P. Singh

      

11,759

    

6 

 
     


    

8

 

Robert F. Woods

      

22,231

    

6 

 
     


    

8

 

David A. Barnes

      


    


     


    

8

 

Raul J. Fernandez

      


    


     


    

8

 

All executive officers and directors of the Company, as a group (21 persons)

      

2,562,026

    


     

1.01

    

%

 

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1

Unless otherwise indicated, the address of each person or group is c/o DXC Technology Company, 1775 Tysons Boulevard, Tysons, Virginia 22102.

 

2

Based on 254,072,906 shares of common stock issued and outstanding on June 15, 2020.

 

3

Based solely on the most recently available Schedule 13G/A filed by The Vanguard Group (“Vanguard”) with the SEC on February 12, 2020. The Schedule 13G/A provides that Vanguard had sole voting power over 381,301 shares of DXC, shared voting power over 72,457 shares of DXC, sole dispositive power over 28,685,879 shares of DXC, and shared dispositive power over 432,711 shares of DXC.

 

4

Based solely on the most recently available Schedule 13G/A filed with the SEC on February 5, 2020 by BlackRock, Inc. (“BlackRock”). The Schedule 13G/a provides that (i) BlackRock is a parent holding company or control person and (ii) BlackRock, through its subsidiaries identified therein, had sole voting power over 16,303,361 shares of DXC and sole dispositive power over 19,079,721 shares of DXC.

 

5

With respect to Messrs. Saleh, Deckelman, Smith and Lawrie and all executive officers and directors of the Company as a group, includes 49,787; 175,092; 102,382; 698,384; and 1,025,645 shares of common stock, respectively, subject to employee options which were outstanding on June 15, 2020, and currently are exercisable or which are anticipated to become exercisable within 60 days thereafter. These shares have been deemed to be outstanding in computing the Percentage of Class.

 

6

With respect to Messrs. Aghi, Herzog, Lawande, Portalatin, Read, Rutland, Salvino, Singh and Woods, and Mses. Alving and Krakauer and all executive officers and directors of the Company, as a group, includes 5,900; 5,900; 5,900; 5,900; 12,900; 5,900; 5,900; 5,900; 5,900; 5,900; 5,900; and 71,900 Restricted Stock Units (“RSUs”), respectively, outstanding as of June 15, 2020 that would vest or could settle on or within 60 days after June 15, 2020. Each RSU entitles the reporting person to receive one share of common stock upon the vesting date. These shares have been deemed to be outstanding in computing the Percentage of Class.

 

7

With respect to Messrs. Saleh and Deckelman and all executive officers and directors of the Company, as a group, includes 530; 4 and 534 shares of common stock, respectively, which are held for the accounts of such persons under the Company’s Matched Asset Plan and with respect to which such persons had the right, as of June 15, 2020, to give voting instructions to the Trustee administering the Plan.

 

8

Less than 1%.

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires DXC directors and executive officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of DXC common stock and other equity securities of DXC. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of information furnished to DXC, reports filed through DXC and representations that no other reports were required, all of DXC’s executive officers, directors and greater than 10% beneficial owners, filed the reports required under Section 16(a) on a timely basis for the fiscal year ended March 31, 2020, except that, due to administrative error, a late Form 4 was filed on behalf of each of Messrs. Manna and Lawrie on July 31, 2019 and October 25, 2019, respectively.

 

 

 

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Certain Relationships and Related Party Transactions

  

 

D. Certain Relationships and Related Party Transactions

Related Party Transaction Policy

 

DXC has adopted a written policy requiring the approval of the Nominating/Corporate Governance Committee of all transactions in excess of $120,000 between the company and any related person (Interested Transactions). For the purposes of this policy, a related person is any person who was in any of the following categories at any time during the most recently completed fiscal year:

 

 

A director or executive officer of the company

 

 

Any nominee for director

 

 

Any immediate family member of a director or executive officer, or of any nominee for director. Immediate family members are any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such director, executive officer or nominee for director, and any person (other than a tenant or employee) sharing the household of such director, executive officer or nominee for director, and

 

 

Any person who was in any of the following categories when a transaction in which such person had a direct or indirect material interest occurred or existed:

 

   

Any beneficial owner of more than 5% of DXC common stock, or

 

   

Any immediate family member, as defined above, of any such beneficial owner.

A transaction includes any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships.

In determining whether to approve an interested transaction, the Nominating/Corporate Governance Committee will take into account, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director will participate in any discussion or approval of an interested transaction for which he or she (or an immediate family member) is a related party, except that the director will provide all material information concerning the interested transaction to the Nominating/Corporate Governance Committee.

Fiscal 2020 Related Party Transactions

 

There have been no transactions since April 1, 2019, nor are there any currently proposed transactions, in which the company was or is to be a participant and the amount involved exceeds $120,000, which required the approval of the Nominating/Corporate Governance Committee under our related party transaction policy, and in which any related person had, has or will have a direct or indirect material interest and which is required to be disclosed under applicable SEC rules.

 

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E. Executive Compensation

Compensation Committee Report

The Compensation Committee of the Board of Directors has reviewed and discussed this CD&A with management. Based on this review and discussion, it has recommended to the Board that the CD&A be included in this proxy statement and in DXC’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Compensation Committee of the Board of Directors

Mukesh Aghi, Chairman of the Committee

Sachin Lawande

Julio A. Portalatin

Compensation Discussion and Analysis

 

The Compensation Discussion and Analysis (CD&A) describes the objectives, principles, and process the Compensation Committee of the Board of Directors (Compensation Committee) used to evaluate the executive compensation program and determine fiscal year 2020 compensation for our executive officers, including the named executive officers (NEOs) identified below:

 

Michael J. Salvino

 

President and Chief Executive Officer

Paul N. Saleh

 

Executive Vice President and Chief Financial Officer

Mary E. Finch

 

Executive Vice President and Chief Human Resources Officer

Vinod Bagal

 

Executive Vice President, Global Transformation

Edward Ho

 

Executive Vice President and General Manager, Americas

J. Michael Lawrie

 

Former Chairman, President and Chief Executive Officer

 

 

 

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Table of contents

 

 

Section 1: Executive Summary

    43  

Background

    43  

Business Overview

    43  

About DXC Technology

    43  

Leadership Transitions and Strategic Realignment

    44  

Our Strategic Priorities

    45  

Transformation Journey

    45  

Taking Care of Our People

    45  

Unlocking Value

    46  

Compensation Highlights

    46  

Stockholder Feedback and Evolution of Compensation Program

    46  

Fiscal 2020 Executive Compensation Overview

    47  

Section 2: Compensation Governance

    49  

Role of the Compensation Committee

    49  

Role of the Independent Compensation Consultant

    49  

Role of Management

    49  

Compensation Best Practices

    50  

Section 3: Compensation Framework

    51  

Compensation Philosophy and Guiding Principles

    51  

Executive Compensation Peer Group

    51  

Additional Compensation Policies

    52  

Section 4: Fiscal 2020 Compensation Decisions

    53  

Setting Compensation for the NEOs

    53  

Base Salary

    53  

Annual Cash Incentives

    54  

Long-Term Incentives

    56  

New Hire Compensation

    59  

Section  5: Other Aspects of Compensation

    60  

Section  6: Executive Compensation Tables

    62  

Section  7: Potential Payments Upon Change in Control and Termination of Employment

    68  

Change in Control Termination Benefits

    68  

Termination Benefits Unrelated to Change in Control

    71  

CEO Agreements

    73  

Section 8: Fiscal 2020 CEO Pay Ratio

    75  

 

 

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Section 1: Executive Summary

Background

 

Since its inception in 2017, DXC has successfully executed a complex integration while delivering strong customer impact for many of the largest companies in the world.

During the last seven months of the fiscal year, DXC made several changes at the executive level. The Board appointed a new President and CEO, Michael J. Salvino, in September 2019. Shortly thereafter, DXC continued to build out its senior leadership team. Mary E. Finch was brought in as Executive Vice President and Chief Human Resources Officer, highlighting the importance of taking care of our people. Vinod Bagal joined the team as Executive Vice President of Global Transformation, underscoring the importance of delivering for our customers.

Under Mr. Salvino’s leadership, DXC is on a transformation journey focused on unlocking value across the Enterprise Technology Stack and building stronger relationships with customers. DXC is seizing opportunities to cross-sell to its customers. Core to this new strategy is a re-emphasis on the ITO business. DXC is best known for its ability to help customers securely modernize their IT estate, by running on-prem technology, migrating relevant on-prem resources to the cloud, developing and adapting innovative applications and harvesting data with advanced analytics and engineering.

We are confident this strategy will position DXC for long-term financial success and stability. We recognize, however, that in the short-term our operating and financial results will be impacted as we work to implement this strategy. Our fiscal 2020 financial results—and accordingly our executive compensation outcomes—reflect this. As financial and operating results for fiscal 2020 were below the threshold funding level for the Annual Cash Incentive plan, no payout was made for relevant NEOs, consistent with our pay-for-performance philosophy.

Going forward, the Compensation Committee is committed to reviewing the executive compensation program – including metrics and weightings—to ensure it aligns with our evolving strategy and that it reflects the unprecedented market conditions we are facing in fiscal 2021.

Business Overview

 

 

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                Enterprise Technology Stack

  

About DXC Technology

DXC Technology runs mission-critical systems with the latest technology innovations to deliver better business outcomes and new levels of performance, competitiveness and experiences for our customers.

 

The performance of the IT estate is top of mind for customers, particularly in this COVID-19 environment. The need to work from home is testing the performance of these estates daily. This is good news for DXC because this is exactly the work we have done for years.

 

This puts DXC in a strong position to help customers manage their IT estate across the Enterprise Technology Stack. The criticality of the IT estate is top of mind for customers as they manage previous investments in enterprise infrastructures and migrate some or all of their IT estate to the cloud. We help our customers run on-prem technology infrastructure and migrate relevant on-prem resources to the cloud, developing and adapting innovative applications, and harvesting data with advanced analytics and engineering.

 

DXC delivers innovative solutions on a global scale with speed and agility. Our technology independence, combined with a broad ecosystem of partners and leading technology talent, positions us to deliver maximum value to our customers across their enterprise technology investments.

 

 

 

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Leadership Transitions and Strategic Realignment

In September 2019, the DXC Board appointed Michael J. Salvino as President and Chief Executive Officer. Mr. Salvino succeeded J. Michael Lawrie, who terminated as President and CEO, and as DXC’s Executive Chairman in January 2020.

Mr. Salvino has an extensive background in leadership roles in the IT services industry with more than 30 years of experience building profitable businesses that delivered value for customers and stockholders. Mr. Salvino is the right choice to lead DXC into its next phase of growth as he is a proven leader with a strong track record of successfully running businesses, forging trusted customer relationships, and creating an environment to grow and develop talent, all critical to DXC’s long-term success.

As CEO, Mr. Salvino spent several months meeting with our largest customers, each of our strategic partners and our employees around the world. Mr. Salvino shared his observations following this strategic and operational review with investors during our November 2019 earnings presentation, including the strengths of our business and areas that need improvement. Mr. Salvino also announced a go-forward strategy for operating the business and unlocking value that leverages the strengths and opportunities he identified. In addition, he discussed that DXC will be making investments to acknowledge, recognize and reward our people, which will strengthen our employee value proposition.

Our CEO, along with a team composed of continuing and new management, has set forth a plan to execute the new strategy, with a focus on the next phase of our transformation, forging trusted customer relationships and creating an environment to grow and develop talent. Several key leadership changes were made to help drive the successful execution of DXC’s new strategy, including the appointment of two leaders who are named executive officers for fiscal 2020—Mary E. Finch as Executive Vice President and Chief Human Resources Officer and Vinod Bagal as Executive Vice President of Global Transformation.

 

 

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Our Strategic Priorities

 

Our key strategic priorities include advancing our transformation journey, taking care of our people, and unlocking value.

Transformation Journey

 

 

LOGO

 

 

Focus on customers and ensure we are delivering for our customers:

 

   

Received overwhelmingly positive feedback from customers on our ability to innovate and execute through the COVID-19 environment

 

   

Fixed vast majority of the accounts designated as “challenged” accounts in Mr. Salvino’s first six months

 

   

Closed $2.1 billion in total contract value from these accounts as a result of improvements in customer delivery

 

 

Optimize costs to better serve our customers and eliminate confusion and complexity:

 

   

Simplified the operating model by re-emphasizing regional execution to enable faster decision making and increased accountability

 

   

Eliminated unnecessary management layers, taking appropriate steps to right-size cost structure to revenue

 

   

Prioritized the quality and speed of delivery execution capabilities focusing on the delivery footprint, utilization and talent, while streamlining processes

 

 

Seize the market opportunity by cross-selling and expanding what we do with our customers across the Enterprise Technology Stack:

 

   

Launched a program leveraging the capabilities of the Virtual Clarity team to assess the ITO estate of our top 200 customers—addressing their cloud migration and IT modernization roadmaps to reinvigorate our ITO business

 

   

Significantly increased focus on the top 200 accounts

 

   

Assessed how each of our current businesses are aligned to the Enterprise Technology Stack to meet emerging customer demands and unlock value

Taking Care of Our People

 

 

Rewarded our people who are closest to our customers and delivering value around the Enterprise Technology Stack

 

 

Established COVID-19 Command Center to navigate through the crisis. Enabled 99% of our people to successfully work from home, taking care of their total well-being while seamlessly serving our customers

 

 

Ensured our people are focused and engaged. Motivated people will help us drive better outcomes for our customers, which will in turn help us create value for stockholders. An important component of this strategy is the ability to continue to use equity-based compensation to both attract and retain talent in our very competitive technology sector

 

 

Developed action plans around employee engagement results, with focus on three impact drivers—Decision Making, Career Goals and Customer Focus

 

 

 

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Unlocking Value

 

 

Two key priorities in this area are running a long-term sustainable business focused on the Enterprise Technology Stack and unlocking value by pursuing strategic alternatives for businesses that do not fit our long-term strategy

 

 

Announced the sale of the U.S. State and Local Health and Human Services Business to Veritas Capital for $5 billion; at transaction close, proceeds will be used to pay down debt

 

 

Continue rationalizing our portfolio and strengthening our balance sheet while positioning DXC for growth

 

 

Also pursuing a balanced capital allocation strategy consistent with an investment grade credit profile

 

 

Improving liquidity and enhancing financial flexibility by increasing cash position, extending maturities and paying down debt

Compensation Highlights

 

The Compensation Committee was focused on taking actions to recruit and retain key talent and leadership, while also ensuring decisions consistent with a mission to align pay and performance and incentivize superior value creation. Key actions and decisions included:

 

 

Successful Transition Year: Appointed DXC’s new CEO—and several other key leaders critical to driving the successful execution of DXC’s new strategy

 

 

Flat Target Compensation Levels: Year-over-year base salaries remained flat, as did target short-term and long-term incentive opportunities for continuing executives

 

 

Pay for Performance: Financial and operating results were below the threshold funding level for the Annual Cash Incentive Plan, leading to no payout for relevant NEOs, consistent with our pay-for-performance philosophy. The performance period for PSU awards granted in fiscal 2018 concluded, and the PSU awards paid out at 50% of target, demonstrating the alignment of our executives’ compensation with performance outcomes

Stockholder Feedback and Evolution of Compensation Program

 

Stockholder feedback has informed the evolution of our executive compensation program since DXC’s inception. We receive feedback from stockholders on our executive compensation program directly through regular engagement with them and based on how they vote on our say-on-pay proposal. We value the input we receive from stockholders, engage on a variety of matters, including corporate governance, executive compensation, and human capital management, and strive to be responsive to that feedback. Leading up to our 2019 annual meeting, we engaged with stockholders representing approximately half of our outstanding shares. Our Lead Independent Director and Chairman of the Compensation Committee participated in several of these meetings.

Over the last few years we have introduced several changes to our program to ensure that it remains aligned with our business strategy and reflects stockholder feedback. These enhancements include:

 

 

Replacing stock options with a mix of PSUs and RSUs to better incentivize performance and retention

 

 

Introducing a strategic performance modifier for NEOs, which may result in final payout modifications from 0% to 200%

 

 

Implementing a double trigger change-in-control provision for outstanding equity awards

 

 

Modifying the vesting of PSUs to require employment through the end of the three-year performance period to earn any payout

We will continue to seek input from our stockholders on our executive compensation program and to ensure it aligns with our strategy and market practices.

 

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Fiscal 2020 Executive Compensation Program Overview

 

The executive compensation program for our NEOs for fiscal 2020 is outlined in the table below. Our program was structured with a mix of variable and fixed compensation that incentivizes short- and long-term stockholder value creation and gives appropriate consideration to the objectives and measures of success entailed in our strategic priorities.

 

  Type of Pay    Purpose    Key Characteristics
  Base salary

 

  Fixed

  

 

•  Fixed cash compensation based on the individual’s experience, skills and competencies, relative to competitive market value of the role

  

 

•  Reflects competitive market conditions and individual performance

•  Commensurate with scope of responsibility, internal value of the position and impact to the company, reflecting internal pay equity

  Annual Cash-Incentive

 

  Performance-Based

  

 

•  Variable cash compensation motivates achievement of annual strategic goals, as measured by objective, pre-established financial and customer satisfaction metrics

•  Metrics are intended to drive consistent growth and shareholder value creation by measuring successful execution of our current strategy

•  Performance modifier incentivizes achievement of strategic, non-financial goals

  

 

•  Target opportunities are based on market data and reflect impact to the company

•  Actual awards are based on achievement of measurable performance targets and individual performance

•  Heavier weighting on financial goals promotes continued focus on sustainable growth of revenue and profit

•  Inclusion of customer satisfaction metric ensures a direct focus on customer retention

  Long-Term Incentive

 

  Performance-Based

  Restricted Stock

  Units (PSUs)

  

 

•  Encourages focus on long-term shareholder value creation through profitable growth and increase in stock price over time

•  Aligns compensation with key indicators of success of our strategy

•  Promotes retention through long-term performance achievement and vesting requirements

  

 

•  70% PSU weighting ensures a substantial proportion of equity and overall compensation is performance-based

•  Payouts based on company performance against EPS and cash flow

•  Cliff vesting feature requires continued employment through the end of the three-year performance period

 

  Restricted Stock   Units (RSUs)

  

 

•  Aligns to shareholder interests by providing a retention incentive and rewarding increase in stock price over time

  

 

•  30% RSU weighting incentivizes long-term retention

•  Vest increments over a three-year period

 

 

 

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Fiscal 2020 Target Compensation Mix

Consistent with our compensation philosophy, which emphasizes “at-risk” pay and a balanced approach to short-term and long-term performance incentives, our executive compensation program is predominantly performance-based. As an executive’s ability to impact operational performance increases, so does the proportion of at-risk compensation. Target LTI grows proportionately as job responsibilities increase, which encourages our officers to focus on the Company’s long-term success and aligns with the long-term interests of our stockholders. The graphics below illustrate the mix of fixed, annual and long-term target incentive compensation we provided to our CEO and other NEOs for fiscal 2020. These graphics also illustrate the amount of target direct compensation tied to achievement of performance goals.

 

 

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Section 2: Compensation Governance

Role of the Compensation Committee

 

The Compensation Committee is responsible for overseeing DXC’s executive compensation policies and programs. In fulfilling its responsibilities, the Compensation Committee reviews general trends in executive compensation, compensation plan design, and the total value and mix of compensation for our executive officers, including the CEO. On an annual basis, the Compensation Committee evaluates DXC’s executive compensation program to ensure it remains competitive in attracting, retaining, and motivating qualified executives, and supports our short-term and long-term business objectives.

The Compensation Committee considers various factors in determining compensation, including the performance and contributions of each executive, as well as the company’s financial performance and overall business context. This flexibility is particularly important in designing compensation arrangements to attract and retain executives in a highly-competitive, rapidly changing market. In addition, the Committee considers feedback the company receives from stockholders when making decisions on the Company’s executive compensation practices.

Role of the Independent Compensation Consultant

 

Since 2012, the Compensation Committee has retained Pearl Meyer and Partners (Pearl Meyer), an independent compensation consulting firm, to advise on executive compensation matters and provide additional assurance that DXC’s executive compensation program is reasonable and consistent with its objectives. Pearl Meyer reports directly to the Compensation Committee, and regularly participates in Compensation Committee meetings at the request of the Committee Chairman. During fiscal 2020, Pearl Meyer advised the Compensation Committee on trends in pay practices; proxy trends; CEO and Section 16 officer compensation; non-employee director compensation; pay for performance; selection of peer group companies; and peer group pay comparisons.

Pearl Meyer does not perform any other services for the company, other than its work for the Compensation Committee. The Compensation Committee has assessed the independence of Pearl Meyer according to SEC and NYSE rules and concluded that Pearl Meyer’s work does not raise any conflict of interest that prevents them from providing independent advisory services to the Compensation Committee.

Role of Management

 

The Compensation Committee coordinates with the Chief Human Resources Officer (CHRO) and head of Global Total Rewards, in collaboration with Management and the finance and legal groups as appropriate, to design and develop the compensation program. This group supports the preparation of analyses of financial data, peer comparisons and other materials to assist the Compensation Committee in making its decisions, and implement the decisions of the Compensation Committee.

The CEO, with the assistance of the CHRO, also conducts an annual review of the total compensation of each executive officer, including the NEOs. The review includes an assessment of each executive officer’s performance, the performance of the executive officer’s respective business or function, and market pay levels within our peer group. After this review, the CEO recommends base salaries, target annual cash and long-term incentive opportunities, any payouts related to the annual cash incentive plan, and annual equity grants for the executive officers to the Compensation Committee for approval.

 

 

 

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Compensation Best Practices

 

We have adopted several best practices to ensure our compensation program, policies, and decision-making processes are rooted in sound governance, and structured to drive the right outcomes to create stockholder value.

 

  Target total direct compensation is heavily weighted toward performance-based elements to ensure rewards are aligned with stockholder value creation

 

  Short- and long-term incentive plans use a variety of performance measures and performance periods

 

  Target compensation is benchmarked against our compensation peer group, but an executive’s actual compensation will vary based on company and individual performance

 

  Executives must comply with significant stock ownership guidelines

 

  Short- and long-term incentive plans include a limit on maximum incentive payouts

 

  Our clawback policy allows us to recover performance-based compensation and gains on equity awards
  Annual stockholder say-on-pay vote, with ongoing stockholder engagement and targeted outreach, as appropriate

 

  Compensation Committee engages in robust executive sessions without management present to ensure an appropriate level of independent oversight and approvals

 

  Compensation Committee uses an independent compensation consultant to advise on compensation design, practices, and pay level benchmarking

 

  Compensation Committee conducts an annual compensation review and risk assessment

 

  Excise tax gross-ups not permitted

 

  No repricing or exchange of underwater options

 

  Financial insider policy, robust pre-clearance process, and anti-hedging policy
 

 

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Section 3: Compensation Framework

Compensation Philosophy and Guiding Principles

 

Throughout our evolution, our compensation program has been grounded in a philosophy aimed at achieving strong alignment between the company’s financial and strategic goals and our stockholders’ interests:

 

 

We understand that our people are critical to our success. We aim to attract and retain the best talent with a range of backgrounds, skills, capabilities and experiences to unlock value for our customers and enable our business to thrive.

 

 

We are committed to a pay for performance culture. Our compensation program aims to motivate our people to perform at a consistently high level and rewards contributions that enhance our ability to deliver outstanding results for our customers and create value for our stockholders.

 

 

We believe that compensation should be competitive to attract the best talent. Actual pay varies based on individual and company performance.

 

 

We believe that compensation should reflect an appropriate mix of short-term and long-term pay elements that make executives accountable for both short-term and long-term performance. Compensation should be aligned to stockholder interests and the long-term value realized by our stockholders through a balance of cash and equity.

 

 

We believe that the majority of an executive’s total compensation should be variable and tied to performance of measurable financial and strategic objectives that support the company’s business strategy. Performance measures are reviewed annually to ensure that we continue to align our pay programs with our business strategy, create sustainable value and motivate the right behaviors.

Executive Compensation Peer Group

 

DXC’s executive compensation peer group is reviewed annually to ensure we appropriately assess the competitiveness of our compensation program as well as the compensation levels of our executive officers. Selection of our peer group was based on the following considerations:

 

 

Start with our existing peer group

 

 

Exclude any companies less than 1/3x or greater than 3x the revenue of DXC

 

 

Add companies based on similar company size, industry, financial characteristics, and comparable organizational complexity

 

 

Add companies with whom we compete for talent

DXC operates in an industry where the market for top talent is very competitive. Accordingly, the Compensation Committee recognizes that an accurate representation of DXC’s competition for talent includes a broad number of companies across the IT services landscape. While DXC’s unique position as a leading end-to-end IT services company means there are relatively few pure-play IT companies of our size that are considered direct comparators, we believe that the resulting peer group provides DXC and the Compensation Committee with a valid set of comparators and benchmarks for the company’s executive compensation program and governance practices.

Our peer group for fiscal 2020 was unchanged from fiscal 2019:

 

•  Accenture plc (ACN)

 

•  Automatic Data Processing (ADP)

 

•  Cisco Systems, Inc. (CSCO)

 

•  Cognizant Technology Solutions Corp (CTSH)

 

•  Fidelity National Information Systems Inc. (FIS)

 

•  Hewlett Packard Enterprise Company (HPE)

  

•  Intel Corporation (INTC)

 

•  International Business Machines (IBM)

 

•  Texas Instruments Inc. (TXN)

 

•  VMWare Inc. (VMW)

 

•  Western Digital Corp (WDC)

 

•  Xerox Corporation (XRX)

We will continue to evaluate our executive compensation peer group annually to ensure its appropriateness as our business strategy evolves and our talent needs change.

 

 

 

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Additional Compensation Policies

 

We have a number of compensation policies as part of our compensation governance.

Equity Ownership Guidelines

We have equity ownership guidelines for senior level executives to encourage them to build their ownership positions in DXC’s common stock over time and retain shares they earn through DXC’s equity incentive plans. The Compensation Committee believes that stock ownership by executive officers further aligns their interests with those of long-term stockholders. The ownership guidelines for the CEO and NEOs, expressed as a percentage of base salary, are as follows:

 

 

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Each executive who has not yet achieved their equity ownership level is required to retain a certain percentage of the net shares (after withholding for taxes and exercise price) resulting from stock option exercises, PSU payouts or other long-term incentives until the level is achieved. To encourage executives to meet the guidelines more quickly, executives who satisfy 50% or less of their ownership guideline are required to retain 100% of their net shares, executives who satisfy between 51% and 75% of their ownership guideline are required to retain 75% of their net shares, and executives who satisfy more than 75% of their ownership guidelines are required to retain 50% of their net shares. The Compensation Committee reviews compliance with the guidelines on an annual basis.

Compensation Recoupment Policy

DXC’s compensation recoupment or clawback policy allows us to recover cash or equity performance-based compensation from participants whose fraud or intentional illegal conduct materially contributed to a financial restatement. The policy allows for the recovery of the difference between compensation awarded or paid and the amount which would have been paid had it been calculated based on the restated financial statements, excluding any tax payments. In addition, under our equity grant agreements, employees may be required to forfeit awards or gains if the recipient breaches the non-competition, non-solicitation of employees, or non-disclosure provisions of such agreements.

Policies on Transactions in Company Securities and Related Derivatives, Hedging and Pledging

The Board has adopted a policy that prohibits directors, corporate officers and each employee of DXC or its subsidiaries who are financial insiders, and members of their immediate families, from entering into any transactions in DXC’s securities except during announced trading periods, or according to a trading plan under SEC rules. These transactions must be pre-approved by our CEO, CFO, CHRO and General Counsel. In addition, directors, officers and financial insiders, and members of their immediate families, are prohibited from derivative security transactions with respect to equity securities of DXC. We also discourage directors, officers and financial insiders from margining or pledging DXC stock to secure a loan or purchase shares of DXC stock on margin.

Tax Deductibility of Compensation

Section 162(m) of the Code generally disallows a deduction for annual compensation in excess of $1 million that we pay to our CEO, CFO, our next three most highly compensated officers and any other individual who has served as one of our covered executive officers after 2016, other than pursuant to certain “grandfathered” compensation arrangements in effect on November 2, 2017. Compensation decisions for our NEOs are driven by market competitiveness and the other factors described above in this CD&A and the Compensation Committee approves non-deductible compensation whenever it feels that corporate objectives justify the cost of being unable to deduct such compensation.

 

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Section 4: Fiscal 2020 Compensation Decisions

Setting Compensation for the NEOs

 

DXC’s executive compensation program is designed to motivate, retain and engage our executive leadership and appropriately reward them for their contributions to the achievement of our business strategy.

Since becoming CEO in September 2019, Mr. Salvino has committed DXC to focusing on its new strategic priorities as described in Section 1 of this CD&A. As part of this, our leadership recognized the need to hire top talent to lead the organization as we execute on this strategy. Over the last several months, DXC has recruited several high performing individuals to join the Company in roles that are critical to ensuring our success. The Compensation Committee and our leadership considered various challenges in their recruitment, including the competitive market for talent across the IT services industry and the perceived risk that established executives must consider when joining a company that is in the midst of a transformation and that has a strong, but new, senior leadership team engaged in a new strategy, such as DXC. The Committee determined that securing the employment of these experienced executives required a competitive compensation package to incentivize them to join DXC and retain them through the Company’s transformation.

The Compensation Committee determined the fiscal 2020 compensation for the NEOs based on a range of factors including an assessment of performance, market competitiveness, and demonstration of DXC’s values.

 

 

Assessing Performance: The Compensation Committee engaged in robust discussions about both company and individual performance to set pay levels for the NEOs in fiscal 2020. NEO compensation was structured to encourage executives to deliver strong results over multiple time horizons to promote sustained value for our stockholders. The majority of NEO total target compensation is at risk and based on performance.

 

 

Staying Competitive with the Market: The Compensation Committee compared our pay practices and pay levels with market data to make sure executive pay was competitive with the market, particularly as we seek to attract candidates whom the Committee and CEO believed have the right leadership skills, experience, and agility to lead us through our transformation.

 

 

Demonstrating our Values: We believe that how results are achieved are just as important as the results themselves. The Compensation Committee considered each executive’s performance through the lens of DXC’s core values.

 

 

Using Informed Judgment: While performance and market competitiveness remained the cornerstones of DXC’s executive compensation program, the Compensation Committee also relied on their informed judgment to set compensation for our NEOs. The Compensation Committee believed that this allowed them to respond to certain unique circumstances in a way that was still consistent with our compensation philosophy and guiding principles. This flexibility was especially important in developing competitive pay packages to induce executive new hire candidates to join DXC during a time of dynamic and unpredictable change and risk.

Base Salary

 

Base salary is designed to compensate executives for normal day-to-day responsibilities. It is the only component of executive compensation considered fixed and not at risk.

 

 

 

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Fiscal 2020 Base Salaries

The table below shows the fiscal 2020 base salaries for the NEOs compared to fiscal 2019.

 

     Annualized Base Salary    Change from Last Fiscal Year
      Fiscal 2019    Fiscal 2020        % Change           $ Change    

Michael J. Salvino

 

      

 

 

 

     $

 

1,250,000

 

 

       —      

 

     

 

 

 

Paul N. Saleh

 

     $

 

800,000

 

 

     $

 

800,000

 

 

   0.0%

 

    $

 

0.00

 

 

Mary E. Finch

 

      

 

 

 

     $

 

700,000

 

 

       —      

 

     

 

 

 

Vinod Bagal

 

      

 

 

 

     $

 

625,000

 

 

       —      

 

     

 

 

 

Edward Ho

 

     $

 

675,000

 

 

     $

 

675,000

 

 

   0.0%

 

    $

 

0.00

 

 

J. Michael Lawrie

 

     $

 

1,250,000

 

 

     $

 

1,250,000

 

 

   0.0%

 

    $

 

0.00

 

 

The Compensation Committee reviewed the salaries of Messrs. Lawrie, Saleh, and Ho as part of its annual process and in consultation with its independent compensation consultant. Their salaries were determined to be competitively positioned and as a result, no adjustments were made.

Messrs. Salvino and Bagal and Ms. Finch were hired mid-year and their salaries were determined as part of their employment offers. In establishing Mr. Salvino’s salary, the Compensation Committee conducted a thorough review of peer compensation and considered the skills, expertise, and experience he would bring as CEO during a critical phase in DXC’s transformation.

Annual Cash Incentives

 

The annual cash incentive award is designed to motivate and reward the achievement of annual financial and customer satisfaction goals. The target award is based on the executive’s position and is calculated as a percentage of salary. Actual awards, which are paid in cash, are based on both company and individual performance against targets established at the beginning of the fiscal year.

Fiscal 2020 Financial Goals

The fiscal 2020 annual cash incentive plan included two key financial metrics – revenue and adjusted EBIT. The Committee sets rigorous targets for each metric based on a reasonable range of expectations for the year, based on Company and industry outlooks, while also weighing prior year performance and economic conditions. Targets are designed to incentivize high performance without encouraging excessive risk-taking. Fiscal 2020 targets, including the weighting for each metric, are shown below.

DXC believes these metrics provided a balance between top line and bottom line goals and reflected DXC’s focus on driving stockholder value creation.

 

Financial Metric    Weighting    Fiscal 2020 Target

(in millions)

 

Revenue

  

 

20%

  

 

$20,070

Adjusted EBIT1    60%    $3,100

 

1 

Fiscal 2020 adjusted EBIT was determined by adjusting net income determined in accordance with GAAP to exclude the effects of income from discontinued operations, net of taxes; income tax expense; interest income; interest expense; restructuring costs; transaction, separation and integration-related costs; amortization of acquired intangible assets; and pension and OPEB actuarial and settlement losses.

 

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Performance against targets was assessed using the following payout scales for our NEOs, established for fiscal 2020 and approved by the Compensation Committee.

 

 

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Fiscal 2020 Customer Satisfaction Goal

In addition to financial metrics, the annual cash incentive plan included a customer satisfaction metric, weighted at 20%. The customer satisfaction metric, which used the Net Promoter Score methodology, was intended to ensure that DXC remained focused on customer retention, building strong customer relationships, and ensuring satisfaction with our services and solutions. Payout for the customer satisfaction metric was contingent upon both the achievement of a response rate of at least 50% and a Net Promoter Score at or above target.

Fiscal 2020 Strategic Goals

The inclusion of strategic goals was to enable DXC to recognize and reward strategic accomplishments that drive value for stockholders within the annual cash incentive plan’s framework. Given the transformative nature of the business, it was important to incentivize and reward successful execution of DXC’s long-term strategy, especially in areas that strengthen our ability to deliver solutions across the enterprise stack to our customers.

Strategic goals were established for each executive at the beginning of the fiscal year and were evaluated at year-end. Based on the attainment of strategic goals, each executive was assigned a strategic performance modifier. The strategic performance modifier, which ranged from 0% to 200%, served to adjust the executive’s cash incentive plan payout upward or downward based on the degree to which strategic goals were achieved.

How the Fiscal 2020 Annual Cash Incentive Plan Worked

The annual cash incentive plan included a performance threshold of 75% adjusted EBIT achievement, which was required to be met for there to be any funding of the plan for the NEOs.

 

Assuming the adjusted EBIT threshold was met, payout levels for revenue and adjusted EBIT were based on the payout scales described in the Fiscal 2020 Financial Goals section above, while payout for the customer satisfaction metric was contingent upon both the achievement of a response rate of at least 50% and a Net Promoter Score at or above target.

    

Metric Weightings Aligned with Business Strategy

DXC continued to put a strong emphasis on financial results with the heavier weighting of financial metrics. Customer Satisfaction also remained a key metric.

 

    
    

 

 

 

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The plan’s funding pool, subject to threshold adjusted EBIT achievement, was calculated as follows.

 

Financial (80%)

          

Customer Satisfaction (20%)

            
                    

Revenue    

20%    

      

 

EBIT    

60%    

      

 

Net Promoter    

Score    

20%    

      

 

Annual Cash  

Incentive Plan  

Pool Funding %  

The pool funding percentage was then applied to the executive’s base salary, target bonus percentage, and strategic performance modifier to determine the executive’s final payout:

 

 

Base Salary  

      

 

Target Award  

Percentage  

      

 

Strategic Goal  

Performance  

Modifier  

      

 

Annual Cash  

Incentive Plan  

Pool Funding %  

      

 

Annual Cash 

Incentive Plan 

Payout 

Fiscal 2020 Annual Cash Incentive Plan Target Awards

The following target awards were approved for fiscal 2020.

 

    

Annual Incentive Target as a % of Base Salary

     

Fiscal 2019

 

Fiscal 2020

Michael J. Salvino

  

 

200%

Paul N. Saleh

  

125%

 

125%

Mary E. Finch

  

 

110%

Vinod Bagal

  

 

110%

Edward Ho

  

110%

 

110%

J. Michael Lawrie

  

200%

 

200%

The Compensation Committee believed that the target opportunities for the NEOs were appropriate relative to the peer group and ensured that a substantial portion of their compensation was tied to performance. No adjustments to targets were made.

Fiscal 2020 Annual Cash Incentive Plan Performance

We recognize that achieving success based on a focused new strategy is a multi-year effort. While we continued to make steady progress, we did not reach the threshold EBIT target under our annual cash incentive plan and therefore, there was no funding of the plan for fiscal 2020.

Fiscal 2020 Annual Cash Incentive Awards

Certain fiscal 2020 award payments were made to new NEOs pursuant to the terms of their employment offers.

In recognition of their mid-year hire dates, Messrs. Salvino and Bagal and Ms. Finch were entitled to participate in the fiscal 2020 annual cash incentive plan on a prorated basis. Messrs. Salvino and Bagal and Ms. Finch received a prorated payment of $1,250,000, $288,185, and $383,945, respectively, consistent with their employment offers.

Long-Term Incentives

 

DXC believes that stock-based grants create an ownership culture by giving executives an equity stake in the business, which gives them a strong incentive to manage the company with the long-term perspective of an owner.

Annual long-term incentive awards are prospective in nature and intended to tie a substantial portion of an executive’s pay to creating long-term stockholder value. Multi-year vesting improves retention because it gives executives an incentive to stay with

 

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the company throughout the vesting period and be actively engaged in driving strong financial results. A significant weighting of performance-based incentives motivates executives to achieve superior financial results.

 

LOGO    Restricted Share Units (RSUs) RSUs vest one-third each year on the first, second, and third anniversaries of the date of grant. Multi-year vesting encourages a long-term commitment from the executive, reinforcing the alignment with long-term stockholder value creation, while still allowing the executive to monetize a portion of the award on vesting.
LOGO    Performance Restricted Share Units (PSUs) Executives earn DXC common stock only if targeted performance goals are met over a three-year performance period, underscoring DXC’s commitment to a pay for performance philosophy.

Performance Conditions for the Fiscal 2020 PSUs

PSUs vest and pay out based on three-year performance of non-GAAP Earnings per Share (EPS) weighted at 75%, and adjusted Free Cash Flow (FCF) weighted at 25%. The Compensation Committee chose EPS because it believes that, in addition to being a prevalent key indicator of stockholder value, EPS is the best measure of performance and profitability in light of DXC’s multi-year transformation strategy. The Compensation Committee also selected FCF as a metric because it promotes cash flow generation, improvements in working capital, and reduction in capital intensity.

EPS and FCF performance are measured and paid out independently (there may be a payout for one metric but not the other). Payout of the PSUs is capped at 200%. PSUs vest only at the end of a three-year performance period subject to the executive’s continued employment through the end of the third fiscal year. The Compensation Committee reviews progress against targets each year and ascertains the probability that a portion (up to 25%) of the target PSUs may be earned for each of the first two years. However, it is not until the end of the three-year period when final performance is measured that the Committee conclusively determines whether any PSUs were earned and would vest.

 

 

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EPS and FCF goals are based on DXC’s operating plan and budget. The threshold EPS and FCF goals for the fiscal 2020 PSU awards were set by the Compensation Committee at $7.50 per share and $1,850 million, respectively, at the beginning of fiscal 2020.2

 

 

2 

Fiscal 2020 EPS determined in accordance with GAAP was adjusted to exclude the effects of restructuring costs; transaction, separation and integration-related costs; amortization of acquired intangible assets; pension and OPEB actuarial and settlement gains; goodwill impairment losses; gain on arbitration award; and tax adjustment. Fiscal 2020 FCF was determined by adjusting net cash provided by operating activities and net cash used in investing activities excluding short-term investments determined in accordance with GAAP to exclude the effects of acquisitions, net of cash acquired; payments on capital leases and other long-term asset financings; payments on transaction, separation and integration-related costs; payments on restructuring costs; and gain on arbitration award.

 

 

 

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Fiscal 2020 Performance and Fiscal 2018, 2019 and 2020 PSUs

Fiscal 2020 represented the last year in the three-year performance period for the fiscal 2018 PSUs. The Committee determined that 50% of the fiscal 2018 target PSUs were earned and vested based on EPS and FCF results during the three-year performance period. No portion of the fiscal 2019 or fiscal 2020 PSUs was earned based on fiscal 2020 performance.

Fiscal 2020 Long-Term Incentive Plan Target Awards

The following long-term incentive targets were approved for fiscal 2020.

 

    

Long-Term Incentive Target as a % of Base  Salary

     

            Fiscal 2019             

 

            Fiscal 2020             

Michael J. Salvino

  

—  

 

800%

Paul N. Saleh

  

500%

 

500%

Mary E. Finch

  

—  

 

300%

Vinod Bagal

  

—  

 

250%

Edward Ho

  

400%

 

400%

J. Michael Lawrie

  

975%

 

975%

The Compensation Committee believed that the target opportunities for the NEOs were appropriate relative to the peer group and aligned a higher proportion of their compensation to driving stockholder value creation over a multi-year period. No adjustments to targets were made.

Fiscal 2020 Long-Term Incentive Awards

Below is a summary of the annual fiscal 2020 long-term incentive awards granted to our NEOs:

 

     

 

Form of Award

 

     

 

30%

Restricted
Stock Units (RSUs)

 

 

70%

Performance-Based Restricted
Stock Units (PSUs)

 

 

 

Award as a % of

Fiscal 2020

Base Salary

 

Total Long-Term

Incentive Award

 

Grant Value

of RSUs

 

Number of

RSUs

 

Grant Value

of PSUs

 

 

Target
     Number of     

PSUs

 

Michael J. Salvino1

 

400

%

$

5,000,000

$

1,500,000

 

46,182

$

3,500,000

 

107,759

Paul N. Saleh

 

500

%

$

4,000,000

$

1,200,000

 

19,151

$

2,800,000

 

44,686

Mary E. Finch1

 

$

$

 

$

 

Vinod Bagal1

 

104

%

$

651,042

$

195,313

 

6,360

$

455,729

 

14,840

Edward Ho

 

400

%

$

2,700,000

$

810,000

 

19,927

$

1,890,000

 

30,463

J. Michael Lawrie2

 

975

%

$

12,187,500

$

3,656,250

 

58,351

$

8,531,250

 

136,151

 

1.

The annual fiscal 2020 awards for Messrs. Salvino and Bagal were pro-rated based on their respective employment commencement dates. Ms. Finch did not receive an annual fiscal 2020 award.

 

2.

Per Mr. Lawrie’s employment agreement, fiscal 2020 PSU awards were forfeited and fiscal 2020 RSU awards vested in full upon his termination as President and Chief Executive Officer on September 12, 2019.

In line with DXC’s Equity Grant Policy, the number of RSUs and PSUs granted was calculated by dividing the dollar amount of each award by the average closing price of DXC stock for the three-month period ending on the grant date. This approach reduces the impact positive or negative swings in our stock price can have on the executive’s award. The grant value that appears in the Summary Compensation Table will be different because it is calculated by multiplying the number of RSUs and

 

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PSUs granted by the grant date closing price. Per the terms of his employment agreement, the number of PSUs and RSUs granted to Mr. Salvino as part of his annual fiscal 2020 award was based on the grant date price.

New Hire Compensation

 

In connection with Mr. Salvino’s appointment as CEO, we granted him an RSU award with an aggregate value of $4,350,000, vesting subject to his continued employment in three equal annual installments on the first, second and third anniversaries of the grant date. In addition, we paid him a cash lump sum equal to $2,000,000 subject to repayment if he resigns his employment with DXC other than for good reason or if we terminate his employment for cause, in either case prior to September 12, 2021. In addition, Mr. Salvino received a guaranteed annual bonus for fiscal 2020 equal to 200% of his pro-rated annual salary of $625,000 and Mr. Salvino also received pro-rata LTI awards for the fiscal 2020 cycle on the same terms as the other NEOs, as described above under Fiscal 2020 Long-Term Incentive Awards. The Board determined that this was consistent with our compensation strategy and appropriate to secure Mr. Salvino’s hire at a critical time in our transformation and to effectively align his interests with stockholders.

Mr. Bagal and Ms. Finch were granted awards of RSUs with values of $750,000 and $2,250,000, respectively, in connection with their hire. The inducement grants vest one-third per year on the first, second, and third anniversaries of the grant date. As additional inducements, Mr. Bagal and Ms. Finch each received a lump sum cash payment of $750,000. Mr. Bagal and Ms. Finch are obligated to repay the cash payment if they voluntarily terminate employment or if they are terminated for cause, within 24 months of their hire date.

 

 

 

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Section 5: Other Aspects of Compensation

In addition to base salary and annual cash and long-term incentives, DXC provides a mix of other benefits as part of each NEO’s total rewards package.

Retirement Benefits

 

The Compensation Committee views retirement benefits as an important component of DXC’s executive compensation program. DXC offers its employees, including the NEOs, a retirement program that provides the opportunity to accumulate retirement income. DXC reviews the benefits program against the peer group periodically, to ensure the program remains competitive with the market.

 

 

Matched Asset Plan (MAP)

 

 

Broad-based, qualified, defined contribution 401(k) plan with company match on a portion of employee contributions and directed investment alternatives.

 

Deferred Compensation Plan

 

 

Unfunded plan offered to a select group of management or highly compensated employees. Allows participants to defer receipt of incentive compensation and salary.

Health Care Benefits

DXC provides health and welfare benefits to eligible employees, including medical, dental, life, disability and accident insurance. These benefits are available to all U.S. employees generally, including the NEOs. These programs are designed to provide certain basic quality of life benefits and protections.

Perquisites

DXC provides certain limited perquisites to senior executives, including the NEOs, to enhance their security and productivity. Perquisites include optional financial planning services, optional executive health screening benefits, and relocation benefits for new hires, as applicable.

We reimburse Mr. Salvino for up to $25,000 annually for assistance with tax preparation and financial planning. In addition, Mr. Salvino may use DXC-owned or leased aircraft for business purposes and reasonable personal use for domestic flights only and subject to such limits as may be reasonably imposed by the Board. Mr. Salvino takes an active approach to overseeing and managing our global operations, which necessitates a significant amount of U.S. domestic and international travel due to our diverse set of business and operations centers and many client locations around the world. Additionally, access to corporate aircraft is provided to Mr. Salvino to ensure business efficiency and security/privacy of business information and communications, especially given the global nature of DXC’s business.

Mr. Salvino is taxed on the value of this usage according to IRS rules and no tax gross-up is provided for personal usage of corporate aircraft or any other perquisite he receives. See the notes to the Summary Compensation Table for more information about the perquisites provided to the NEOs.

Career Shares

DXC grants Career Shares in the form of RSUs to a select, limited number of key executives. The Compensation Committee believes that the Career Share program is a valuable compensation tool for attracting and retaining mid-career executive talent. Once vested, delivery of shares is designed to commence at retirement and be spread ratably in ten annual installments following retirement, thereby continuing to tie a portion of the executive’s post-retirement income to share value and promoting long-term alignment with stockholder interests.

The Career Share program replaced CSC’s Supplemental Executive Retirement Plan which was frozen in 2009 and is no longer maintained by DXC. The Career Share program is closed to new executives. At the beginning of fiscal 2020, Messrs. Lawrie and Saleh received grants of Career Shares equal to 25% of their fiscal 2019 base salary and annual cash incentive award for fiscal 2019. Career Shares for Messrs. Lawrie and Saleh have all fully vested as each of them has satisfied the requisite age and service for retirement.

 

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Severance and Change in Control Compensation

 

 

 

Change in Control Best Practices

DXC includes a double trigger change in control provision for equity awards to ensure that executives cannot monetize equity awards unless there is a qualifying termination of employment following a change of control.

 

 

 

  

 

To offer competitive total compensation packages to our executive officers, as well as to ensure the ongoing retention of these individuals, DXC offers certain post-employment benefits to a select group of executives, including its NEOs. Additional details about these severance arrangements are provided under the Potential Payments Upon Change in Control and Termination of Employment section.

 

DXC has also entered into non-compete agreements with each of its executive officers other than the CEO. These agreements generally prohibit DXC’s executives from competing with DXC for 12 months following any termination of employment, prohibit DXC’s executives from soliciting DXC’s employees or clients for 24 months following any termination of employment, and contain a non-disclosure provision. DXC entered into these agreements in an effort to protect vital DXC interests. Mr. Salvino is subject to separate non-compete requirements under the terms of his employment agreement. In addition, all of our employees who receive equity awards under our 2017 Omnibus Incentive Plan (including our NEOs) are subject to the terms of certain non-compete and other restrictive covenants pursuant to the terms of such awards.

 

 

 

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Section 6: Executive Compensation Tables

Summary Compensation Table

 

The following table provides information on the compensation of the NEOs paid or awarded by DXC for fiscal 2020, fiscal 2019 and fiscal 2018.

 

Name and Principal Position

(a)

Fiscal Year

(b)

Salary1

(c)

Bonus2

(d)

Stock

Awards3

(e)

Option

Awards4

(f)

Non-Equity

Incentive Plan

Comp.5

(g)

Change in Pension

Value and

Nonqualified

Deferred

Comp.

Earnings6

(h)

All Other

Comp.7

(i)

Total

(j)

 

Michael J. Salvino

President and

Chief Executive Officer

 

 

 

 

2020

 

 

 

 

$

 

 

658,654

 

 

 

 

$

 

 

3,250,000

 

 

 

 

$

 

 

9,350,018

 

 

 

 

$          —

 

 

$

 

 

 

 

 

 

$          —

 

 

$

 

 

61,833

 

 

 

 

$

 

 

13,320,505

 

 

 

 

 

 

 

2019

 

 

 

 

$

 

 

 

 

 

 

$

 

 

 

 

 

 

$

 

 

 

 

 

 

$          —

 

 

$

 

 

 

 

 

 

$          —

 

 

$

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

$

 

 

 

 

 

 

$

 

 

 

 

 

 

$

 

 

 

 

 

 

$          —

 

 

$

 

 

 

 

 

 

$          —

 

 

$

 

 

 

 

 

 

$

 

 

 

 

 

 

Paul N. Saleh

Executive Vice President and 

Chief Financial Officer

 

 

 

 

2020

 

 

 

 

$

 

 

800,000

 

 

 

 

$

 

 

 

 

 

 

$

 

 

3,575,368

 

 

 

 

$          —

 

 

$

 

 

 

 

 

 

$          —

 

 

$

 

 

9,565

 

 

 

 

$

 

 

4,384,933

 

 

 

 

 

 

 

2019

 

 

 

 

$

 

 

800,000

 

 

 

 

$

 

 

1,500,000

 

 

 

 

$

 

 

4,151,523

 

 

 

 

$          —

 

 

$

 

 

1,244,421

 

 

 

 

$          —

 

 

$

 

 

9,517

 

 

 

 

$

 

 

7,705,461