0001140361-20-008487.txt : 20200409 0001140361-20-008487.hdr.sgml : 20200409 20200409163241 ACCESSION NUMBER: 0001140361-20-008487 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20200522 FILED AS OF DATE: 20200409 DATE AS OF CHANGE: 20200409 EFFECTIVENESS DATE: 20200409 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERICYCLE INC CENTRAL INDEX KEY: 0000861878 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 363640402 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-37556 FILM NUMBER: 20784836 BUSINESS ADDRESS: STREET 1: 2355 WAUKEGAN ROAD CITY: BANNOCKBURN STATE: IL ZIP: 60015 BUSINESS PHONE: 847-367-5910 MAIL ADDRESS: STREET 1: 2355 WAUKEGAN ROAD CITY: BANNOCKBURN STATE: IL ZIP: 60015 DEF 14A 1 brhc10010616-formdef14a.htm DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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



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STERICYCLE, INC.
(Name of registrant as specified in its charter)
 
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Notice of 2020 Annual Meeting of Stockholders
Friday, May 22, 2020
8:30 a.m. Central Time

DEAR STOCKHOLDER:
You are cordially invited to attend our 2020 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Friday, May 22, 2020 at 8:30 a.m. Central Time. The Annual Meeting will be a completely virtual meeting of stockholders. You may attend the online meeting, submit questions, and vote your shares electronically during the meeting via the Internet by visiting www.virtualshareholdermeeting.com/SRCL2020. To enter the Annual Meeting you will need the 16-digit control number that is printed in the box marked by the arrow on your Notice of Internet Availability of Proxy Materials. We recommend that you log in at least 15 minutes before the meeting to ensure that you are logged in when the meeting starts.
At the Annual Meeting, you will be asked to consider and vote on the following matters:
1.
election to the Board of Directors (the “Board”) of the twelve nominees for director named in this proxy statement;
2.
an advisory vote to approve executive compensation (the “say-on-pay” vote);
3.
approval of an amendment to the Stericycle, Inc. Employee Stock Purchase Plan increasing the number of shares available for issuance;
4.
ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020;
5.
a stockholder proposal entitled Special Shareholder Meeting Improvement, if it is properly presented at our Annual Meeting;
6.
a stockholder proposal with respect to amendment of our compensation clawback policy, if it is properly presented at our Annual Meeting; and
7.
any other matter that properly comes before the Annual Meeting.
Only stockholders of record at the close of business on the record date of March 27, 2020 are entitled to vote at the Annual Meeting.
It is important that your shares are voted, whether or not you attend the virtual meeting. You are encouraged to vote your shares, as instructed in the Notice of Internet Availability of Proxy Materials, as soon as possible. You may also follow the instructions on the Notice of Internet Availability of Proxy Materials to vote by telephone or request a paper proxy card, which will include a reply envelope, to submit your vote by mail. Your prompt response will help reduce solicitation costs incurred by us.
For the Board of Directors
Dated: April 9, 2020
Bannockburn, Illinois
 
Robert S. Murley
Cindy J. Miller
Chairman of the Board
President and Chief Executive Officer

Important Notice Regarding the Availability of Proxy Materials for the 2020
Annual Meeting of Stockholders to be Held on May 22, 2020:
The Proxy Statement and 2019 Annual Report to
Stockholders are available at www.proxyvote.com


Stericycle, Inc. - 2020 Proxy Statement
1

Table of Contents

3
 
 
5
5
6
7
10
11
13
14
18
18
18
18
 
 
20
21
36
37
39
41
44
45
46
   
48
   
51
53
   
54
   
56
58
62
64
   
65
   
68

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Stericycle, Inc. - 2020 Proxy Statement
SUMMARY INFORMATION

This summary highlights information contained elsewhere in this proxy statement. It does not contain all information that you should consider, and you should read the entire proxy statement carefully before voting. In this proxy statement, “we,” “us,” “our,” “Stericycle” and the “Company” all refer to Stericycle, Inc.

Annual Meeting of Stockholders

 

 Time and Date:
8:30 a.m. Central Time on Friday, May 22, 2020
 Place:
The completely virtual Annual Meeting will be held at www.virtualshareholdermeeting.com/SRCL2020.
 Record Date:
March 27, 2020
 Voting:
Stockholders as of the record date are entitled to vote.
 Proxy Materials:
This proxy statement and our annual report to stockholders (which includes a copy of our Annual Report on Form 10-K for the year ended December 31, 2019) are first being made available to stockholders on or about April 9, 2020.

Meeting Agenda and Voting Recommendations

 
Agenda Item
Board
Recommendation
Page
Election of twelve directors
FOR each Nominee
5
Advisory vote to approve executive compensation (the “say-on-pay” vote)
FOR
20
Approval of an amendment to the Stericycle, Inc. Employee Stock Purchase Plan increasing the number of shares available for issuance
FOR
48
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020
FOR
51
Stockholder proposal entitled Special Shareholder Meeting Improvement
AGAINST
54
Stockholder proposal with respect to amendment of our compensation clawback policy
AGAINST
56

Stericycle, Inc. - 2020 Proxy Statement
3
Board Nominees

 
The following table provides summary information about the nominees for director. Each director is elected by a majority of votes cast.

 
  Nominee
Age
Director
Since
Principal Occupation
Current Committees
           
 
Robert S. Murley
70
2017
Chairman of the Board, Stericycle, Inc.; Senior Advisor, Credit Suisse, LLC
None
 
Cindy J. Miller
57
2019
President and Chief Executive Officer, Stericycle Inc.
None
 
Brian P. Anderson
69
2017
Former Executive Vice President, OfficeMax Incorporated
     Audit (Chair)
 
Lynn D. Bleil
56
2015
Former Senior Partner, McKinsey & Company
   Compensation
 
•   Nominating and Governance 
(Chair)
 
Thomas F. Chen
70
   2014
Former Senior Vice President and President of International Nutrition,
Abbott Laboratories
   Compensation
 
•   Nominating and Governance
 
J. Joel Hackney, Jr.
50
2019
Chief Executive Officer, nThrive, Inc.
   Nominating and Governance
 
Veronica M. Hagen
74
2018
Former President and Chief Executive Officer, Polymer Group Inc.
   Audit
 
Stephen C. Hooley
57
2019
Former Chairman and Chief Executive Officer, DST Systems, Inc.
 
•   Audit
   Compensation
 
James J. Martell
65
Former Chairman and Chief Executive Officer, Express-1 (the predecessor company to XPO Logistics, Inc.)
 
Kay G. Priestly
64
2018
Former Chief Executive Officer, Turquoise Hill Resources Ltd.
   Audit
 
James L. Welch
65
Former Chief Executive Officer, YRC Worldwide
 
Mike S. Zafirovski
66
2012
Former Director, President and Chief Executive Officer, Nortel Networks Corporation
   Compensation (Chair)
 
•   Nominating and Governance

Compensation Highlights

 
Our compensation program is performance oriented and designed to incent our executive officers to improve our operating performance and thereby create value for all of our stockholders. The following table sets forth the 2019 compensation for each named executive officer as determined under the rules of the U.S. Securities and Exchange Commission (“SEC”). See the notes accompanying the Summary Compensation Table herein for more information.
 
  Named Executive Officer
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
Total
Compensation
($)
 
Cindy J. Miller
804,808
1,344,412
844,387
222,306
3,215,913
 
Janet H. Zelenka
331,730
444,429
338,914
2,654
1,117,727
 
Daniel V. Ginnetti
575,000
462,965
350,826
3,000
1,391,791
 
Joseph A. Reuter
353,077
222,253
193,591
169,078
937,999
 
David W. Stahl
358,000
222,251
168,384
3,000
751,635
 
Charles A. Alutto
342,308
1,473,077
1,815,385
 
William J. Seward
276,923
315,545
422,642
61,038
1,076,148
 
Kurt M. Rogers
500,000
311,102
235,748
3,000
1,049,850

4
Stericycle, Inc. - 2020 Proxy Statement
ITEM 1   Election of Directors for a One-Year Term

Board Refreshment

In conjunction with our comprehensive, multi-year program to transform the Company for long-term sustainability and to drive profitable growth and long-term shareholder returns, we embarked on a similar transformation on Corporate Governance.

As part of our continuing efforts to ensure that our Board has the right skills and experience to best oversee management and the execution of our strategy and the associated risks, we have added seven new directors since 2017, who have substantial experience in finance, accounting and financial reporting, and broad experience in business transformation. In addition, since the beginning of 2017, several long-tenured directors have stepped down from the Board. The average tenure of the nominees for election as a director is less than three years.

We also revamped Board leadership with Robert S. Murley being elected as independent Chairman of the Board in March 2018 and new Chairs of the Audit, Compensation and Nominating and Governance Committees were elected in 2017, 2019 and 2016, respectively.

Our Board is currently composed of 10 directors. On March 26, 2020, we entered into a Cooperation Agreement (the “Cooperation
Agreement”) with Saddle Point Management, L.P., Maxima Fund I, L.P. and Roy J. Katzovicz (collectively, the “Investors”) pursuant to which we agreed, among other things, to increase the size of our Board from ten to twelve directors and to nominate James J. Martell and James L. Welch for election to our board at the Annual Meeting. The Cooperation Agreement, including certain standstill commitments made by the Investors, is described in a Form 8-K filed with the SEC.
With the exception of Ms. Miller, our President and Chief Executive Officer, all of our director nominees are outside directors (i.e., directors who are neither an officer nor an employee of ours). The Board has determined that all of our outside directors are independent under the applicable rules of the SEC and listing standards of the Nasdaq Stock Market LLC (“Nasdaq”).
 Each director elected at the Annual Meeting will hold office until our 2021 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified. All of the director nominees were elected to serve as directors at our 2019 Annual Meeting of Stockholders except for Messrs. Martell and Welch as noted above.















 
Snapshot of 2020 Director Nominees

 
The nominees for Director are overwhelmingly independent. The nominees for Director also represent diverse points of view that contribute to a more effective decision-making process.

Board Independence
 
Board Tenure
Diversity of Director
Nominees





12
Directors  
All Director nominees
are independent
except the President and CEO
Tenure of
Director nominees
(years of consecutive service)
50%  
Gender, ethnic or
other minority
representation
       
2.7 years  
Average
Tenure

Stericycle, Inc. - 2020 Proxy Statement

5

Voting in Uncontested Director Elections

Under our bylaws, a nominee for election as a director must receive a majority of the votes cast in order to be elected as a director in an uncontested election (an election in which the number of nominees for election is the same as the number of directors to be elected). In other words, the nominee must receive more “for” votes than “against” votes, with abstentions and broker non-votes not having any effect on the voting.

If a nominee for election as a director is an incumbent director and the nominee is not re-elected, Delaware law provides that the
director continues to serve as a “holdover” director until his successor is elected and qualified or until he resigns. Under our bylaws, an incumbent director who is not re-elected is required to tender his resignation as a director. Our Nominating and Governance Committee will review the circumstances and recommend to the Board whether to accept or reject the director’s resignation or take any other action. The Board is required to act on this recommendation and publicly disclose its decision and the rationale behind its decision within 90 days from the date that the election results are certified.






 
   
6
Stericycle, Inc. - 2020 Proxy Statement
Nominees for Director

ROBERT S. MURLEY, INDEPENDENT CHAIRMAN

 
Director since January 2017
Age 70
Experience: Robert S. Murley has served as our Chairman since March 2018. Mr. Murley is a Senior Advisor to Credit Suisse, LLC, a financial services company. From 1975 to April 2012, Mr. Murley was employed by Credit Suisse, LLC and its predecessors. In 2005, he was appointed Chairman of Investment Banking in the Americas. Prior to that time, Mr. Murley headed the Global Industrial and Services Group within the Investment Banking Division, as well as the Chicago investment banking office. He was named a Managing Director in 1984 and appointed a Vice Chairman in 1998. Mr. Murley is a member of the board of directors of Health Insurance Innovations Inc., on privately held Brown Advisory Incorporated, and on the board of advisors of Harbour Group. He was formerly on the board of directors of Stone Energy Corporation and Apollo Education Group, Inc. Mr. Murley is an Emeritus Charter Trustee of Princeton University, a Trustee and the former Chairman of the Board of the Educational Testing Service in Princeton, New Jersey, is Vice Chairman of the Board of the Ann & Robert Lurie Children’s Hospital of Chicago and Chair of the Board of the Lurie Children’s Foundation, is a Trustee of the Museum of Science & Industry in Chicago, Illinois, and is Chairman of the Board of the UCLA Anderson Board of Advisors.
Skills & Qualifications: Mr. Murley’s existing company board experience, his deep knowledge of the capital markets and the economy, and his extensive experience leading and advising a range of businesses across multiple industries make him a valuable member of the Board.
CINDY J. MILLER

 
Director since February 2019
Age 57
Experience: Ms. Miller joined Stericycle as President and Chief Operating Officer in October 2018. She was named President and Chief Executive Officer effective May 2019. Ms. Miller previously served as President, Global Freight Forwarding for United Parcel Service (“UPS”), a multinational package delivery and supply chain management company, from April 2016 to September 2018 and as President of UPS’s European region from March 2013 to March 2016.
Skills & Qualifications: From her 30-year career at UPS, Ms. Miller brings to the Board significant transportation and logistics expertise, and she also has deep knowledge and experience in business transformation and change management, operations management, strategy, logistics, and international business.
BRIAN P. ANDERSON

 
Director since January 2017
Age 69
Experience: Mr. Anderson served as Senior Vice President and Chief Financial Officer of OfficeMax Incorporated from 2004 to 2005 and as Senior Vice President and Chief Financial Officer of Baxter International from 1997 to 2004. He joined Baxter in 1991, as Vice President, Corporate Audit, and became Corporate Controller in 1993 and then Vice President, Finance in 1997. Before joining Baxter, he spent 15 years with Deloitte in the Chicago office and the Washington, D.C. office as an Audit Partner. He is a member of the Board of Directors of W. W. Grainger, Inc., PulteGroup, Inc., and James Hardie Industries plc. He currently serves as Chairman of the Audit Committee of James Hardie Industries plc, and is the former Chairman of the Nemours Foundation, Chairman of the Audit Committee of the Pulte Group, Inc. and Lead Director and Audit Committee Chairman of W. W. Grainger, Inc. Mr. Anderson serves on The Governing Board of the Center for Audit Quality and served on the Board of A.M. Castle & Co. from 2005 to 2016, as Audit Committee Chairman (2005-2010) and Chairman of the Board 2010-2016.
Skills & Qualifications: Mr. Anderson brings to our Board his significant experience as a chief financial officer of two large multinational companies, in-depth knowledge with respect to the preparation and review of complex financial reporting statements, and experience in risk management and risk assessment.
LYNN D. BLEIL

 
Director Since May 2015
Age 56
Experience: Ms. Bleil was the leader of the West Coast Healthcare Practice of McKinsey & Company (“McKinsey”), a management consulting firm. Ms. Bleil was also a leader of McKinsey’s worldwide Healthcare Practice. She retired in November 2013 as a Senior Partner (Director) in the Southern California Office of McKinsey. During her more than 25 years with McKinsey, she worked exclusively within the healthcare sector, advising senior management and boards of leading companies on corporate and business unit strategy, mergers and acquisitions and integration, marketing and sales, public policy and organization. Ms. Bleil also serves as a director of Amicus Therapeutics Inc., a biotechnology company, Alcon AG, Sonova Holdings AG, a global leader in hearing aids and cochlear implants, and Intermountain Healthcare’s Park City Medical Center, a non-profit healthcare organization. She was formerly a director of DST Systems, Inc.
Skills & Qualifications: Ms. Bleil brings to the Board significant experience in the healthcare industry, as well as commercial expertise and expertise in corporate strategy, mergers and acquisitions, and financial reporting, compliance and risk management.




































Stericycle, Inc. - 2020 Proxy Statement
7
THOMAS F. CHEN

 
Director Since May 2014
Age 70
Experience: Mr. Chen served as senior vice president and president of international nutrition of Abbott Laboratories (“Abbott”) before retiring in 2010. During his 22-year career at Abbott, Mr. Chen served in a number of roles with expanding responsibilities, primarily in Pacific/Asia/Africa where he oversaw expansion into emerging markets. Prior to Abbott, he held several management positions at American Cyanamid Company, which later merged with Pfizer, Inc. Mr. Chen currently serves as a director of Baxter International Inc. and an advisor to Cooperation Fund, a partnership between Goldman Sachs and the sovereign fund, China Investment Corporation, to bolster U.S. manufacturers’ market presence in China. Mr. Chen previously served as a director of Cyanotech Corporation.
Skills & Qualifications: With his extensive international business experience in pharmaceutical, hospital products and nutritionals through his 22-year career at Abbott, Mr. Chen provides our Board with a distinct global perspective resulting from his experience with diverse geographies and healthcare products. He also provides our Board with significant operational, strategy, mergers and acquisitions, healthcare industry, governmental and regulatory, and commercial expertise.
J. JOEL HACKNEY, JR.

Director Since March 2019
Age 50
Experience: Mr. Hackney has been the Chief Executive Officer and a director of nThrive, Inc., a revenue cycle management company providing medical billing and coding, business analytics and advisory services, since January 2016. Previously, he was the Chief Executive Officer and a director of AVINTV from June 2013 to November 2016.
Skills & Qualifications: With more than 25 years of experience leading both private and public companies domestically and abroad, Mr. Hackney brings to our Board deep expertise in driving business transformation and profitable growth.
VERONICA M. HAGEN
 

Director Since June 2018
Age 74
Experience: From 2007 until her retirement in 2013, Ms. Hagen served as Chief Executive Officer of Polymer Group, Inc., a global engineering materials company, and served from 2007 to 2015 as a Director. She also served as President of Polymer Group, Inc. from January 2011 until her retirement in 2013. Prior to joining Polymer Group, Inc., Ms. Hagen was the President and Chief Executive Officer of Sappi Fine Paper, a division of Sappi Limited. She has served as Vice President and Chief Customer Officer at Alcoa Inc. and owned and operated Metal Sales Associates. She is a Director of American Water Works Company, Inc., and Newmont Mining Corporation. She previously served as a director of The Southern Company.
Skills & Qualifications: Ms. Hagen brings business transformation expertise, senior leadership experience, corporate governance knowledge and experience, environmental matters experience and risk management experience. Ms. Hagen’s experience as chief executive officer of two global companies allows her to contribute key valuable insights to our Board regarding operations management, customer service and strategic planning.
STEPHEN C. HOOLEY

Director Since March 2019
Age 57
Experience: Mr. Hooley served as Chairman, Chief Executive Officer and President of DST Systems, Inc., a provider of advisory, technology and operations outsourcing to the financial and healthcare industries, from July 2014 to April 2018. He was Chief Executive Officer and President of DST Systems from September 2012 to July 2014 and President and Chief Operating Officer from July 2009 to September 2012. He was previously the President and Chief Executive Officer of Boston Financial Data Services.
Skills & Qualifications: Mr. Hooley brings service as a public company chief executive officer and director, deep experience in the financial services and healthcare industries and extensive IT, business transformation and strategy expertise.








 

   
8
Stericycle, Inc. - 2020 Proxy Statement
JAMES J. MARTELL

 
Director Nominee
Age 65
Experience: Mr. Martell is a logistics veteran with 40 years of industry experience previously serving as Chairman and Chief Executive Officer of Express-1, the predecessor company of XPO Logistics, Inc., a company engaged in freight logistics. Mr. Martell served on the XPO board until 2016. Mr. Martell joined Express-1 after serving as Chief Executive Officer of SmartMail, which he sold to DHL, from 1999 to 2006. Before that, Mr. Martell was a founding senior executive of UTi Worldwide, a global transportation and logistics company, which he managed from 1995 to 2000. Prior to UTi Worldwide, Mr. Martell spent nearly 14 years in various management positions at FedEx and UPS. Mr. Martell has served on the boards of multiple private logistics and transportation companies and has served on the board of publicly-traded Mobile Mini since 2010.
Skills & Qualifications: Mr. Martell brings extensive operational and leadership experience, including extensive logistics experience, as a former chief executive offer and senior leader of several major transportation organizations.
KAY G. PRIESTLY

 
Director Since June 2018
Age 64
Experience: Ms. Priestly served as Chief Executive Officer of Turquoise Hill Resources Ltd., an international mining company, from May 2012 until her retirement in December 2014. She previously served as Chief Financial Officer of Rio Tinto Copper, a division of the Rio Tinto Group (“Rio Tinto”), from 2008 until her appointment as Chief Executive Officer of Turquoise Hill Resources in 2012. From 2006 to 2008, she was Vice President, Finance and Chief Financial Officer of Rio Tinto’s Kennecott Utah Copper operations. She previously spent over 24 years with global professional services firm Arthur Anderson, where she provided tax, consulting and M&A services to global companies across many industries. She is a director of TechnipFMC plc and Alacer Gold Corp.  She formerly served as a director of New Gold Inc., FMC Technologies, Inc. SouthGobi Resources Ltd., Turquoise Hill Resources and Stone Energy Corporation.
Skills & Qualifications: Ms. Priestly brings to our Board extensive executive management experience as a chief executive offer and senior officer of major organizations with international operations. She also brings substantial business transformation, accounting, financial, risk management, M&A and consulting expertise.
JAMES L. WELCH

Director Nominee
Age 65
Experience: Before retiring in 2018, Mr. Welch served as Chief Executive Officer of YRC Worldwide, a holding company of several brands focused on shipping and supply chain solutions in North America. In 2011, Mr. Welch re-joined YRC Worldwide from same-day transportation provider Dynamex Inc., where he had served as President and CEO since 2008. Prior to that, he served as a Consultant at Goldman Sachs Special Situations Group. Mr. Welch started his career in 1978 at Yellow Transportation, where he spent over 28 years and held multiple operations and sales positions across the organization, including President and CEO for seven years. Mr. Welch currently sits on the boards of Schneider National, where he has served since 2018, and SkyWest, Inc., where he has served since 2007. He previously sat on the boards of YRC Worldwide from August 2011 to July 2018, Roadrunner Transportation Systems from 2010 to 2011, and Spirit Aerosystems Holdings from 2008 to 2011.
Skills & Qualifications: Mr. Welch brings to our Board extensive executive management experience as a chief executive offer in the transportation and supply chain industries. He also brings substantial public company, international business, operations, accounting, financial, risk management, and consulting expertise.
 MIKE S. ZAFIROVSKI

Director Since November 2012
Age 66
Experience: Mr. Zafirovski is the founder and President of The Zaf Group LLC, a management consulting and investment firm established in November 2012. Mr. Zafirovski has also served as an executive advisor to The Blackstone Group, a private investment banking company, since October 2011. From November 2005 to August 2009, Mr. Zafirovski served as President, Chief Executive Officer and a director of Nortel Networks Corporation. Prior to that, he was the President, Chief Operating Officer and a director of Motorola, Inc. from July 2002 to January 2005, and remained a consultant to and a director of Motorola until May 2005. He served as Executive Vice President and President of the personal communications sector of Motorola from June 2000 to July 2002. Prior to joining Motorola, Mr. Zafirovski spent nearly 25 years with General Electric Company, where he served in management positions, including 13 years as President and Chief Executive Officer of five businesses in the consumer, industrial and financial services areas, his most recent being President and Chief Executive Officer of GE Lighting from July 1999 to May 2000. Mr. Zafirovski also serves as a director of The Boeing Company and Apria Healthcare Group Inc.
Skills & Qualifications: Mr. Zafirovski provides guidance to the Board on a wide variety of strategic, operational and business matters based on his substantial experience leading enterprises with significant international operations. He also provides business transformation, information technology, mergers and acquisitions, healthcare industry, and government and regulatory expertise.














 
The Board of Directors recommends a vote “FOR” the election of these twelve Director nominees. Proxies solicited by the Board will be so voted unless stockholders specify a different choice.


Stericycle, Inc. - 2020 Proxy Statement
9

Director Qualifications

We believe that the twelve director nominees possess the experience, qualifications and skills that warrant their election as directors. Our directors have in common, among other qualities, a breadth of business experience, seasoned judgment and a long-term perspective in directing and supporting our management. From their service on the boards of other public and private companies, our directors also bring to us the insights that they gain from the operating policies, governance structures and growth dynamics of these other companies.

The Nominating and Governance Committee seeks to ensure an experienced, exceptionally qualified Board with deep expertise in areas relevant to Stericycle. When evaluating potential director nominees, the committee considers each individual’s professional expertise and background, in addition to his or her personal characteristics. The committee always conducts this evaluation in the context of the Board as a whole. The committee works with the Board to determine the appropriate mix of backgrounds and experiences that will foster and maintain a Board strong in its collective knowledge and best able to perpetuate our long-term success. To assist in this objective, the Nominating and Governance Committee conducts annual evaluations of the Board and the Board’s committees, assessing the experience, skills, qualifications, diversity, and contributions of each individual and of the group as a whole.
Key skill sets and competencies for the Board include:
 •
public company board service and governance expertise, which provides directors with a solid understanding of their extensive and complex oversight responsibilities and furthers our goals of greater transparency, accountability for management and the Board, and protection of stockholder interests;
operational expertise, which gives directors specific insight into, and expertise that will foster active participation in the oversight, development and implementation of our operating plan and business strategy;
transportation and logistics expertise, as our business involves management of an extensive fleet.  A deep understanding of routing, transportation and logistics brings insights to drive best practices and operational efficiencies;
financial reporting, compliance and risk management expertise, which enables directors to analyze our financial statements, capital structure and complex financial transactions and oversee our accounting, financial reporting and enterprise risk management; and
healthcare industry expertise, which is vital in understanding and reviewing our strategy as the majority of our customer base is healthcare.
















The following table highlights each nominee’s specific skills, knowledge and experiences in these areas. A particular director may possess additional skills, knowledge or experience even though they are not indicated below:

   
10
Stericycle, Inc. - 2020 Proxy Statement
Committees of the Board

Our Board of Directors has three standing committees: Compensation, Audit, and Nominating and Governance. All of the members of each committee are outside directors who are independent under the applicable SEC rules and Nasdaq listing standards. Following the Annual Meeting, the Board will form an Operations and Safety Committee, which will be chaired by our President and CEO, Cindy Miller.

Compensation Committee


The Compensation Committee determines the structure, award and public disclosure of all elements of compensation and benefits paid to our CEO and other executive officers. The committee reviews and approves financial and strategic performance objectives with respect to our annual and long-term incentive plans. The committee reviews and approves the respective salaries of the Company’s executive officers in light of the Company’s goals and objectives relevant to each officer, including, as the committee deems appropriate, consideration of (i) the individual officer’s salary grade, scope of responsibilities and level of experience, (ii) the rate of inflation, (iii) the range of salary increases for the Company’s employees generally, and (iv) the salaries paid to comparable officers in comparable companies. The committee determines appropriate cash bonuses, if any, for the Company’s executive officers (based upon an applicable percentage of base
salary as determined by the committee), after consideration of specific individual and Company performance goals and criteria and periodically reviews the aggregate amount of compensation and benefits being paid or potentially payable to the Company’s executive officers. The committee also has responsibility for overseeing the Company’s regulatory compliance with respect to compensation matters. Pursuant to the committee’s charter, the committee has responsibility for facilitating a risk review of incentive compensation programs and assessing if those incentives create risks that are reasonably likely to have a material adverse effect on our Company. At the request of the Board, the committee periodically reviews executive leadership development and CEO succession planning and makes recommendations to our Board of Directors.





 
Audit Committee


The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the integrity of our financial statements, the qualifications and experience of our independent accountants, the performance of our internal audit function and our independent accountants, and our compliance with legal and regulatory requirements.

The Audit Committee regularly reviews with the Company’s legal counsel any legal or regulatory matters that may have a material effect on the Company’s financial statements or operations. The Audit Committee also oversees, reviews and evaluates the adequacy and effectiveness of the Company’s compliance program. The Audit Committee reviews and evaluates the qualifications, performance and independence of our independent
public accountants. The Audit Committee also reviews the performance, effectiveness and objectivity of the Company’s internal audit function, including its staffing, audit plan, examinations and related management responses.

The Audit Committee reviews our risk management policies and practices and reports any significant issues to the Board. Matters of risk management are brought to the committee’s attention by our Executive Vice President and Chief Financial Officer, our internal legal counsel, our Executive Vice President and Chief Ethics and Compliance Officer, or by our principal internal auditor. Our management reviews and reports on potential areas of risk at the committee’s request or at the request of other members of the Board.



 
Nominating and Governance Committee


The Nominating and Governance Committee develops, recommends to the Board and oversees the implementation of our corporate governance policies and practices. The committee monitors ongoing legislative and regulatory changes and initiatives pertaining to corporate governance principles, SEC disclosure rules and Nasdaq listing rules. The committee identifies and
evaluates possible nominees for election to the Board of Directors and recommends to the Board a slate of nominees for election at the annual meeting of stockholders. The committee also recommends to the Board director assignments to the Board’s committees.



 
Operations and Safety Committee


For 2020, the Board will establish an Operations and Safety Committee to provide oversight and strategic direction on our operational objectives, including transportation and logistics initiatives, ERP implementation and technology-enabled operational improvements. Additionally, the Operations and Safety Committee will focus on advancing our overall corporate social
responsibility efforts by guiding our safety initiatives, matters of regulatory and environmental compliance, and operational improvements which may positively impact environmental sustainability. The Operations and Safety Committee will formally commence its efforts following the Annual Meeting.



 


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Process for Selecting Directors


As discussed above, the Nominating and Governance Committee considers a variety of factors in evaluating a candidate for selection as a nominee for election as a director. These factors include the candidate’s personal qualities, with a particular emphasis on probity, independence of judgment and analytical skills, and the candidate’s professional experience, educational background, knowledge of our business and healthcare services generally, and experience serving on the boards of other public companies. In evaluating a candidate’s qualification for election to the Board, the committee also considers whether and how the candidate would contribute to the Board’s diversity, which we define broadly to include gender and ethnicity as well as background, experience and other individual qualities and attributes. The committee has not established any minimum qualifications that a candidate must possess. In determining whether to recommend an incumbent director for re-election, the committee also considers the director’s tenure and capacity to serve, preparation for and participation in meetings of the Board of Directors and the committee or committees of the Board on which the director serves.

In identifying potential candidates for selection in the future as nominees for election as directors, the Nominating and Governance Committee relies on suggestions and recommendations from the other directors, management, stockholders and others and, when appropriate, may retain a search firm for assistance. In February 2019 and 2020, the Nominating and Governance Committee retained a leading third-party search firm to assist with identifying potential director nominees. The committee will consider candidates proposed by stockholders and will evaluate any candidate proposed by a stockholder on the same basis that it evaluates any other candidate. Any stockholder who wants to propose a candidate should submit a written recommendation to the committee
indicating the candidate’s qualifications and other relevant biographical information and providing preliminary confirmation that the candidate would be willing to serve as a director. Any such recommendation should be addressed to the Board of Directors, Stericycle, Inc., 2355 Waukegan Road, Bannockburn, Illinois 60015.
In addition to recommending director candidates to the Nominating and Governance Committee, stockholders may also, pursuant to procedures established in our bylaws, directly nominate one or more director candidates to stand for election at an annual meeting of stockholders. A stockholder wishing to make such a nomination must deliver written notice of the nomination that satisfies the requirements set forth in our bylaws to the secretary of the Company not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting of stockholders. If, however, the date of the annual meeting is more than 30 days before or after the first anniversary, the stockholder’s notice must be received no more than 120 days prior to such annual meeting nor less than the later of (x) 90 days prior to such annual meeting and (y) the close of business on the 10th day following the date on which notice or public disclosure of the date of the meeting was first given or made.
Stockholders may also submit director nominees to the Board to be included in our annual proxy statement, known as “proxy access.” Stockholders who intend to submit director nominees for inclusion in our proxy materials for the 2021 Annual Meeting of Stockholders must comply with the requirements of proxy access as set forth in our bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the Company not less than 120 days nor more than 150 days prior to the one-year anniversary of the date that the Company first mailed its proxy materials for the annual meeting of the previous year.



 

Committee Charters


The charters of the Compensation, Audit and Nominating and Governance Committees are available on our investor relations website, http://investors.stericycle.com.

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Stericycle, Inc. - 2020 Proxy Statement
Committee Members and Meetings


The following table provides information about the current membership of the committees of the Board of Directors.

 Director
Compensation
Committee
Audit Committee
Nominating and
Governance
Committee
Operations
and Safety
Committee(1)
Robert S. Murley(2)
 
 
 
 
Brian P. Anderson(3)
 
C
 
 
Lynn D. Bleil
X
 
C
 
Thomas F. Chen
X
 
X
 
J. Joel Hackney, Jr.
 
 
X
 
Veronica M. Hagen
 
X
 
X
Stephen C. Hooley
X
X
 
X
Cindy J. Miller
 
 
 
C
Kay G. Priestly(3)
 
X
 
 
Mike S. Zafirovski
C
 
X
 


X
Member

C
Committee Chair

(1)
The Operations and Safety Committee will be formed following the Annual Meeting and is expected to be comprised of the members noted above as well as Messrs. Martell and Welch.

(2)
Mr. Murley serves as the independent Chairman of the Board.

(3)
The Board of Directors has determined that Mr. Anderson, the Chair of the Audit Committee, and Ms. Priestly are “audit committee financial experts” as defined in the applicable SEC rules.

In accordance with the Cooperation Agreement, if Mr. Martell is elected at the Annual Meeting, the Board will appoint him to the Compensation Committee and the Operations and Safety Committee, and if Mr. Welch is elected at the Annual Meeting, the Board will appoint him to the Audit Committee and the Operations and Safety Committee.

Our Board of Directors held 11 meetings in person or by telephone during 2019 and acted without a formal meeting on several occasions by the unanimous written consent of the directors. The Audit Committee held 15 meetings during the year. The Compensation Committee held eight meetings during the year. The Nominating and Governance Committee held eight meetings during the year. Each director attended 75% or more of the aggregate number of Board meetings and the total number of meetings of all Board committees on which he or she served during his or her term of service.

We encourage our directors to attend the annual meeting of stockholders. Each of the director nominees attended the 2019 Annual Meeting of Stockholders, and we anticipate that all of our director nominees will attend this year’s Annual Meeting.

Board Leadership

Our Company’s Board of Directors does not have a current requirement that the roles of Chief Executive Officer and Chairman of the Board be either combined or separated because the Board believes it is in the best interest of our Company to make this determination based upon the position and direction of the Company and the constitution of the Board and management team. The Board regularly evaluates whether the roles of Chief Executive Officer and Chairman of the board should be combined or separated.

As part of the evolution of the Board of Directors, in March 2018, Mr. Murley, one of our independent directors, was elected Chairman of the Board. The Chairman confers with our CEO on matters of general policy affecting the day-to-day management of our company’s business. The Chairman coordinates the scheduling and agenda of Board meetings and the preparation and distribution of agenda materials. The Chairman presides at all meetings of the Board of Directors and may call special meetings of the Board when he considers

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it appropriate. In general, the Chairman oversees the scope, quality, and timeliness of the flow of  information from our management to the Board and serves as an independent contact for stockholders wishing to communicate with the Board.
Our Board believes that an independent Chairman serves the Company and its stockholders well at this time. The combined experience and knowledge of Ms. Miller and Mr. Murley in their respective roles as CEO and Chairman provide the Board and the Company with a day-to-day focus on the operations of the Company combined with independent oversight of the Board and management. Our non-management directors further facilitate the Board’s independence by meeting frequently as a group and fostering a climate of transparent communication. A high level of contact between our Chairman and Chief Executive Officer between Board meetings also serves to foster effective Board leadership.

Corporate Governance

Executive Sessions of the Board


Our Board of Directors excuses our Chief Executive Officer, as well as any of our other executive officers who may be present by invitation, from a portion of each meeting of the Board in order to allow the Board, with our Chairman presiding, to review the Chief
Executive Officer’s performance and to enable each director to raise any matter of interest or concern without the presence of management.


 
Board Evaluation


Our directors annually review the performance of the Board of Directors and its committees and the performance of their fellow directors by completing a confidential evaluation that is returned to the Chair of the Nominating and Governance Committee. The evaluations elicit input from our directors with respect to the Company’s vision, strategy, and operating performance, our CEO and senior management, and the composition and management of our Board and its committees. The evaluations also seek input from members of the Board committees in such areas as trends and issues affecting the Company, the roles and responsibilities of the committee members, the makeup and composition of the committees, participation and preparation of the committee members, and the effectiveness of the committees. Each director also has the opportunity to provide confidential feedback on each other director. At a subsequent meeting of the Board, the chair of the Nominating and Governance Committee leads a discussion with the full Board of any issues and suggestions for improvement identified in the review of the director evaluations.


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Stericycle, Inc. - 2020 Proxy Statement
Required Resignation on Change in Job Responsibilities


The Board of Directors has adopted a policy that a director must tender his or her resignation if the director’s principal occupation or business association changes substantially from the position that he or she held when originally elected to the Board. The Nominating and Governance Committee will then review the
circumstances of the director’s new position or retirement and recommend to the full Board whether to accept or reject the director’s resignation in light of the contributions that he or she can be expected to continue to make to the Board.



 
Director Tenure


In order to assist with Board refreshment and in bringing fresh ideas and perspectives to the Board, in March 2019, the Board revised our Corporate Governance Guidelines with respect to director tenure. The revised Guidelines generally provide that no
non-management Director may be nominated to serve a new term if he or she has already served on the Board for 15 years at the time of election. The Board of Directors may make exceptions to this policy on a case-by-case basis.


 

Policy on Related Party Transactions


The Board of Directors has adopted a written policy requiring certain transactions with related parties to be approved in advance by the Audit Committee. For purposes of this policy, a related party includes any director, director nominee or executive officer or an immediate family member of any director, director nominee or executive officer. The transactions subject to review include any transaction, arrangement or relationship (or any series of similar transactions, arrangements and relationships) in which (i) we or one of our subsidiaries will be a participant, (ii) the aggregate amount involved exceeds $100,000 and (iii) a related party will
have a direct or indirect interest. In reviewing proposed transactions with related parties, the Audit Committee considers the benefits to us of the proposed transaction, the potential effect of the proposed transaction on the director’s independence (if the related party is a director), and the terms of the proposed transaction and whether those terms are comparable to the terms available to an unrelated third party or to employees generally. There were no such transactions during the year ended December 31, 2019 that required the Audit Committee’s approval.


 
Succession Planning


The strength of our leadership team is critical to our Company’s short and long-term success. As such, the recruitment, development and retention of talented executives and senior leaders is a priority for the Company and the Board.

On an annual basis, the Board devotes time during a dedicated session to discuss talent management and succession planning. Led by our Chief People Officer, this session includes an overview of senior leaders across the Company’s service lines, global markets, and functional shared services up to and including the executive officers of the company. The Board is also given exposure to emerging, high-potential leaders through formal presentations to the Board and working groups with Board committees.
Beyond the annual succession planning session, the Board is routinely updated on workforce matters including key workforce indicators, team member engagement, recruiting programs, and talent development programs.
During 2018, Stericycle announced the appointment of Ms. Miller as President and Chief Operating Officer. The Board was heavily engaged in the recruitment and selection process for this role and leveraged the appointment of a new Chief Operating Officer to build a succession plan for the Chief Executive Officer role. With the announcement in February 2019 that Mr. Alutto would be stepping down as Chief Executive Officer, Ms. Miller was named Chief Executive Officer, effective May 2, 2019.





 
Stockholder Engagement


During 2018 and under the oversight of a new Chairman of the Board, Stericycle expanded its efforts for engaging with stockholders.  In addition to the Company’s previous monitoring and routine stockholder engagement practices, the Company introduced a proactive Board outreach program led by Investor Relations and the Corporate Secretary’s Office that focused on building relationships with governance representatives among our top stockholders.  The feedback received during our outreach was conveyed to the full Board and was an integral part of the decisions at the Board and respective Committees. These outreach efforts continued throughout 2019.
During the 2019 proxy season, we proactively reached out to Stericycle’s top 40 stockholders, representing approximately 78% of outstanding shares, offering the opportunity to discuss compensation, governance, and matters up for election at the annual stockholder meeting.  In December 2019, we furthered our outreach efforts by contacting our top 25 stockholders, representing approximately 82% of outstanding ownership, to review planned changes to the 2020 executive compensation plan and to discuss broader governance matters. Nine stockholders,




 
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15
who held 37% of outstanding shares, met with the Company in response to this outreach.

The proxy and off-cycle outreach programs provided our Board with useful input from our stockholders. The Board acknowledges that transparency and responsiveness is an important component of our governance commitment to stockholders. We remain
committed to engaging with our shareholders and value their input and feedback on the governance practices at the Company.

For detailed updates to the Executive Compensation Program, please see our “Executive Compensation Program Changes for 2020 Align with Our Transformation” included in our Compensation Discussion & Analysis section below.



 

Risk Oversight


The Board regularly devotes time during its meetings to review and discuss the most significant risks facing the Company, and management’s responses to those risks. During these discussions, the Chief Executive Officer, Chief Financial Officer, in-house legal counsel and other members of senior management present management’s assessment of risks, a description of the most significant risks facing the Company and any mitigating factors and plans or practices in place to address and monitor those risks.

Each Board committee addresses relevant risk topics as part of its committee responsibilities. The committees oversee the Company’s risk profile and exposures relating to matters within the scope of their authority and provide periodic reports to the full Board about their deliberations and recommendations. The Audit Committee reviews with management significant risks and exposures identified by management, our internal audit staff or the
independent accountants, and management’s steps to address these risks. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and its overall compensation philosophy. The Nominating and Governance Committee reviews overall governance risk, including Board and committee composition, governance processes and stockholder proposal and relations. The Operations and Safety Committee will review and monitor risks related to operational, safety, environmental and regulatory matters.

Responsibility for risk management flows to individuals and entities throughout our Company as described above, including our Board, Board committees and senior management. We believe our culture has facilitated, and will continue to facilitate, effective risk management across the Company.









 
Anti-Hedging and Anti-Pledging Policy


Our directors, officers, consultants, independent contractors and employees of the Company and its subsidiaries are prohibited from (i) short selling our securities, including as part of an arbitrage transaction; (ii) other speculative trading in our securities or hedging of their ownership of our securities, including writing or trading in options, warrants, puts and calls, prepaid variable
forward contracts, equity swaps, collars or exchange funds; (iii) other transactions that are designed to hedge or offset decreases in the price of our securities; or (iv) holding our securities in a margin account or otherwise pledging our common stock in any manner.



 
Clawback Policy


In order to encourage sound financial reporting and enhance individual accountability, we have adopted a clawback policy that allows us to recover from our executive officers certain performance-based compensation in the event of certain accounting restatements. If we are required to prepare a restatement of our financial statements due to material noncompliance with any financial reporting requirement under the
securities laws, the Compensation Committee may seek to recover from a covered officer certain performance-based compensation if the covered officer is determined to have engaged in fraud or intentional misconduct that materially contributed to the need for the restatement or if otherwise required by applicable SEC or Nasdaq rules.



 
10b5-1 Trading Plan Guidelines


In March 2019, our Board adopted guidelines with respect to trading plans (“10b5-1 Plans”) adopted by employees or directors pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “10b5-1 Plan Guidelines”). These 10b5-1 Plan Guidelines are in addition to the requirements and conditions of applicable law and other Company policies, including our Securities Trading Policy. The 10b5-1 Plan Guidelines require that 10b5-1 Plans be approved by our General Counsel or his designee and that they only be adopted or amended while a trading blackout
is not in effect. The 10b5-1 Plan Guidelines provide for a “cooling off” period of at least 30 days before trades can occur after adoption or amendment of a 10b5-1 Plan and before adoption of a new plan after early termination of an existing 10b5-1 Plan. Our 10b5-1 Plan Guidelines also set restrictions on the number of 10b5-1 Plans a covered individual may have in effect, trading outside of an existing 10b5-1 Plan and the length of time a plan may be in effect





 
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Stericycle, Inc. - 2020 Proxy Statement
Internal Controls


Under the oversight of the Audit Committee, we have prioritized the establishment of an effective, efficient and stable control environment that will also address historical material weaknesses. To advance the Company’s overall control environment, we made several critical leadership changes in 2019, including the promotion of Cindy Miller, Chief Executive Officer and hiring of Janet Zelenka, Chief Financial Officer, that have allowed us to make positive progress in establishing an effective, efficient and stable control environment. Although we have only had Ms. Miller and Ms.

Financial Reporting Controls:
We have continued to focus on establishing an effective, efficient and stable control environment, including internal controls over financial reporting. Our remediation actions related to improving the controls over our financial statement preparation and reporting process included the following:

The Audit Committee and our company’s management have had additional and more frequent communications regarding our financial reporting, internal control environment and internal controls training to control owners.

We performed walkthroughs of our significant processes to identify and minimize the risks of material misstatement. We

General Information Technology Controls:

During the course of 2019, we made progress in advancing foundational elements of our general information technology controls. Our remediation actions related to our GITC environment included the following:
We improved consistency in change management supported by standard operating procedures to govern the authorization, testing and approval of changes to systems supporting all of the Company’s internal control processes.

Planned Remediation of Remaining Material Weaknesses:
Because of the divestiture of our Environmental Solutions business, the material weaknesses impacting the Company as of December 31, 2019 associated with Environmental Solutions will no longer impact the Company.

The most significant planned activities to improve our GITCs are changes to our user access processes associated with the implementation of SAP which began in January in 2020 with the implementation of a new global human capital management system. The commercial, operational and financial systems in the U.S. and Canada will begin to rollout later this year. This implementation is expected to transition the Company from a manual, disparate user access process to a real-time automated user access process for the
Zelenka in their roles since mid-2019, we have obtained positive improvements to our material weakness remediation efforts in 2019. Although we did not fully remediate our material weaknesses in 2019, the remaining material weaknesses are associated with the divested Environmental Solutions business and general information technology controls (“GITCs”), which are expected to materially be improved by our planned ERP system implementations. We highlight below significant remediation activities undertaken in 2019.

have implemented certain new controls and re-designed and enhanced existing controls to sufficiently mitigate those risks as part of our SOX program efforts to drive accountability and efficiency.
We expanded our finance, accounting, information technology, and technical accounting teams through the addition of experienced and qualified personnel.
We continued to expand our use of specialists to assist with highly complex and technical areas of accounting, valuation and new accounting standards adoption.

We formalized IT Global Risk and Compliance office responsibilities within the IT function to provide governance, drive accountability and perform GITC compliance monitoring.
We designed and implemented a technology enabled user entitlement review process.
We delivered additional internal controls training.

Company’s core North America operations by the end of the year. We will also continue to mature our technology enabled user entitlement review process to support internal controls in 2020.

When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiencies that have led to the material weaknesses we have identified and strengthen our internal controls over financial reporting.





 
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Code of Conduct

The board has adopted a Code of Business Conduct and Ethics that sets forth standards regarding matters such as honest and ethical conduct, compliance with law, and full, fair, accurate, and timely disclosure in reports and documents we file with the SEC and in other public communications. The Code of Business Conduct and Ethics applies to all our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer. The Code of
Business Conduct and Ethics is available at our website, www.stericycle.com, and is available free of charge on written request to Investor Relations, Stericycle, Inc., 2355 Waukegan Road, Bannockburn, Illinois 60015. Any amendments to certain provisions of the Code of Business Conduct and Ethics or waivers of such provisions granted to certain executive officers will be disclosed promptly on our website.




 
Additional Information

We will provide a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 without charge to each stockholder as of the record date who sends a written request to Investor Relations, Stericycle, Inc., 2355 Waukegan Road, Bannockburn, Illinois 60015. Copies of this proxy statement and
our Form 10-K as filed with the SEC are available in .pdf format on our investor relations website, http://investors.stericycle.com. Copies of this proxy statement and our Annual Report on Form 10-K also may be accessed directly from the SEC’s website, www.sec.gov.



 
Communications with the Board

Stockholders and other interested parties who would like to communicate with the Board may do so by writing to the Board of Directors, Stericycle, Inc., 2355 Waukegan Road, Bannockburn, Illinois 60015. Our Investor Relations department will process all communications received. Communications relating to matters within the scope of the Board’s responsibilities will be forwarded to the Chairman of the Board and, at his direction, to the other
directors. Communications relating to ordinary day-to-day business matters that are not within the scope of the Board’s responsibilities will be forwarded to the appropriate officer or executive. Communications addressed to a particular committee of the Board will be forwarded to the chair of that committee and, at his or her direction, to the other members of the committee




 
Director Compensation

For 2019, each outside director’s compensation remained unchanged from 2018 and consisted of an annual cash retainer of $80,000 and an annual equity retainer of $125,000. Unless deferred, the annual equity retainer was paid entirely in time-based restricted stock units (“RSUs”), which vest on the first anniversary of the grant date. We also paid the following retainers to directors with additional responsibilities as the Chairman of the Board or the Chair of a committee:
Chairman of the Board – $50,000 cash and $50,000 in RSUs
Chair of the Audit Committee – $20,000
Chair of the Compensation Committee – $15,000
Chair of the Nominating and Governance Committee – $12,500
Under the terms of the Director Compensation Plan, directors may elect to convert all or a portion of the annual cash retainer to time-based RSUs. Directors may also elect to defer receipt of any or a portion of their annual director compensation and convert such compensation to deferred stock units (“DSUs”). DSUs are generally payable in the form of shares of our common stock within a certain period after a director’s death or other separation from service. We did not pay any other fees or other cash compensation to our directors who served during 2019 or provide them with any perquisites or other personal benefits. Directors are not paid separate fees for attending meetings of the Board or its committees. Director cash compensation is payable on a quarterly basis in arrears and prorated if the director did not serve the entire quarter.











 
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Stericycle, Inc. - 2020 Proxy Statement
The following table provides information about the compensation paid to our directors in 2019. Neither Ms. Miller nor Mr. Alutto received any additional compensation for their services as a director.

Name
Fees Earned
or Provided
in Cash(1)
($)
Stock
Awards(2)
($)
Total
($)
Robert S. Murley
130,000
174,960
304,960
Brian P. Anderson
100,000
124,992
224,992
Lynn D. Bleil
46,250
171,207
217,457
Thomas F. Chen
80,000
124,992
204,992
J. Joel Hackney Jr.
50,545
124,992
175,537
Veronica M. Hagen
80,000
124,992
204,992
Stephen C. Hooley
10,545
164,972
175,517
Kay G. Priestly
80,000
124,992
204,992
Mike S. Zafirovski
87,500
124,992
212,492

(1) 
Ms. Bleil converted $46,250 of cash compensation into 904 DSUs, and Mr. Hooley converted $40,000 of his cash compensation into 782 DSUs.

(2) 
Stock awards are valued in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, based on the closing price of our common stock on the date of the grant. As of December 31, 2019, our non-employee directors held the following outstanding awards:

Name
Stock Options
RSUs
DSUs
Robert S. Murley
4,887
3,904
4,264
Brian P. Anderson
4,887
2,865
 1,506
Lynn D. Bleil
16,522
5,586
Thomas F. Chen
21,720
2,604
1,506
J. Joel Hackney, Jr.
2,604
Veronica M. Hagen
2,604
Stephen C. Hooley
3,386
Kay G. Priestly
 –
2,604
 –
Mike S. Zafirovski
32,602
6,080

Compensation Plan for 2020


The Compensation Committee regularly reviews director compensation to ensure it remains competitive with our peer group. During 2019, the Compensation Committee asked its independent compensation consultant to conduct a market evaluation of our director pay programs relative to the market and to our peer group and the results indicated that Stericycle’s director compensation was well below the median of the peer group at less than the 25th percentile. For 2020, the independent compensation consultant
recommended changes to director compensation, taking into account the pay positioning relative to the peer group and that no change was made to director compensation for 2019. After reviewing the results of that analysis and reflecting on the uncertainly of current economic conditions due to the COVID-19 pandemic, the Compensation Committee recommended no changes to the director pay program for 2020




 
Stock Ownership Guidelines


Under our recently updated Stock Ownership Guidelines, all directors are expected to hold at least five times their annual cash retainer in our common stock. Previously, each non-employee director was expected to hold four times his or her annual cash retainer. We established this program, and recently increased the
ownership requirement, to help further align the long-term interests of directors with the interests of our stockholders.

Although there is no specific period of time in which directors are required to achieve the applicable ownership threshold, they are expected to make continuous progress toward that goal. To that





 
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end, each non-employee director must retain 75% of his or her stock or option awards until the minimum position requirement has been achieved.  All of our directors who have served on our Board of Directors for at least three years are in compliance with our previous minimum stock ownership requirement of four times the annual cash retainer. Our directors are continuing to make
progress with respect to the updated five times annual cash retainer requirement.
Compliance with these ownership guidelines is measured following the same process used for confirming stock ownership by executive officers. See “Stock Ownership Guidelines” under the “Other Compensation Matters” section.




 

ITEM 2   Advisory Vote to Approve Executive Compensation

Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are asking our stockholders to approve, by means of a non-binding advisory vote, the compensation of our named executive officers as disclosed in this proxy statement.
This proposal, popularly known as “say-on-pay,” enables stockholders to express or withhold their approval of our executive compensation program in general. The vote is intended to provide an assessment by our stockholders of our overall executive compensation program and not of any one or more particular elements of that program. The Compensation Committee and the full Board intend to consider and take into account the outcome of this non-binding advisory vote in making future executive compensation decisions. Because this vote is advisory and non-binding, it will not necessarily affect or otherwise limit any future compensation of any of our named executive officers. This advisory vote to approve executive compensation will be held on an annual basis at least until the next advisory vote to determine the frequency of such vote, which is expected to be in 2023.
Our executive compensation program is described in the “Compensation Discussion and Analysis” section of this proxy statement and the related tables and narrative discussion. Stockholders are strongly urged to read this material in its entirety, and in particular to read the “Executive Summary” section of “Compensation Discussion and Analysis” to obtain an informed understanding of our executive compensation program.

We believe that our executive compensation program is firmly aligned with the long-term interests of our stockholders. Our executive compensation program has as its objectives (i) attracting, motivating and retaining highly qualified executive officers and (ii) structuring most of their compensation, aside from their base salaries, to be dependent on our attainment of measurable Company-wide performance targets and sustained growth in our stock price, so that they benefit only if our stockholders benefit.
We believe that our executive compensation program satisfies these objectives. Our executive compensation program consists of short-term cash compensation and long-term equity-based incentive compensation. For 2019, cash compensation was paid in the form of a base salary and annual bonus, and long-term incentive compensation was paid in the form of stock options, time-based RSUs and performance-based RSUs. Annual cash performance bonuses are dependent on Company-wide performance. Stock options and RSUs are linked to the performance of our common stock, and in the case of performance-based RSUs, achievement of pre-established earnings per share (“EPS”) goals. With respect to 2019, cash compensation represented 30% and equity compensation 70% of Ms. Miller’s total direct compensation, and cash compensation represented 42% and equity compensation represented 58% of the total direct compensation of our other named executive officers other than Mr. Alutto. Based on 2019 fiscal year performance, our executive officers did not earn any of their cash incentive target or their performance-based RSUs which were tied to 2019 performance.
As more fully discussed in the “Compensation Discussion and Analysis” section and the related tables and narrative discussion, the Board of Directors requests stockholders to approve the following resolution:
Resolved, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Compensation Discussion and Analysis section, the compensation tables, and the related narrative disclosure in this Proxy Statement.

The Board of Directors recommends a vote “FOR” the approval of this advisory resolution on the compensation of our Company’s named executive officers, as disclosed in this proxy statement. Proxies solicited by the Board will be so voted unless stockholders specify a different choice.






 
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Stericycle, Inc. - 2020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Stericycle’s Transformational Journey
At the beginning of 2018, we announced the launch of a comprehensive business transformation to standardize operating processes, drive efficiencies, and position the company for long-term growth.  The backbone of the transformation is the implementation of an enterprise resource planning (ERP) system.  The need for evolution and the new ERP system were clear.  More than 500 acquisitions over our company’s history with a lack of thorough systems integration resulted in a patchwork of standalone business applications and financial systems, weaknesses in our control environment, a lack of synergies, and inconsistent standards of operation.
With a new leadership team in place during the first half of 2019, we focused our efforts on five key business priorities:

1.
Portfolio rationalization

2.
Debt reduction and leverage improvement

3.
Quality of revenue

4.
Operational efficiencies

5.
ERP implementation
We’ve made notable progress.  During 2019, we closed five divestitures with combined gross proceeds of approximately $83.7 million dollars and announced a definitive agreement in February 2020 to sell our Domestic Environmental Solutions business, excluding the healthcare hazardous waste services and unused consumer pharmaceutical take-back services, for $462.5 million in cash.  We improved our cash flow generation over the year and repaid approximately $100 million of our debt. We executed multiple revenue quality initiatives that resulted in three sequential quarters of organic revenue growth in our core medical waste business and organic revenue growth of 3.6% within secure information destruction, excluding the impact of sorted office paper pricing.  With respect to operational efficiencies, we created an engineering team, a new skill set for Stericycle, to partner with our operational teams and lead our efforts to drive efficiencies.  The engineering team expanded the centralization of strategic sourcing, implemented a new capital planning model, and began the development of master operating plans to standardize operations at our domestic transfer and treatment facilities.  Each of these efforts lays the groundwork for long-term margin improvement. We also centralized our global focus and leadership on safety while implementing standard safety performance metrics.  The 2019 impact includes a 22% reduction in lost workdays, and a 13% reduction in automobile accident claims. Finally, we executed on the development, testing and training for the ERP system in 2019, which positioned us to begin deployment of the new system.  During January 2020, we successfully launched our new global human capital management system; we will begin deployment of the commercial, operational and financial systems in the U.S. and Canada later this year.

We are committed to building on our momentum and continuing our focus on these key priorities to drive profitable growth across all our business areas and enhance stockholder value.
A New Leadership Team to Drive Change
Over the last 18 months, we have significantly evolved the executive management team to drive the transformation of our company.  We brought in a new Chief Executive Officer with deep experience in change management, logistics and operational excellence. We added a Chief Financial Officer with a strong audit and operational finance background who also had prior experience as a Chief Information Officer to aid in our ERP implementation.  We created additional executive roles that focus our organization on new competencies like commercial and engineering expertise.  We also added new operational leaders with a long history in logistics-based businesses. These new leaders and the skills they bring are a critical component of our journey to reposition Stericycle with our customers, improve our long-term growth and profitability, and drive stockholder value.
Our leadership changes began with the appointment of Cindy J. Miller as Stericycle’s President and Chief Operating Officer during October 2018.  In February 2019, we announced that Ms. Miller would become President, Chief Executive Officer and a member of the Board of Directors effective May 2, 2019, and that Charles A. Alutto would depart from the company.
Additional leadership appointments took place throughout 2019 and included the following direct reports to the CEO:

Joseph A. Reuter was named Executive Vice President and Chief People Officer in January to fill a vacant position following the departure of Brenda R. Frank.

Daniel V. Ginnetti, former Chief Financial Officer, was named Executive Vice President, International in February following the departure of Robert Guice.
Stericycle, Inc. - 2020 Proxy Statement
21

Richard Moore was named Executive Vice President, North American Operations in February to lead our U.S. and Canada field operations, a newly created role.

S. Cory White was named Executive Vice President, Communication and Related Services (“C&RS”) in April to drive stabilization in the C&RS business and support the subsequent divestitures of three C&RS businesses. Ruth-Ellen Abdulmassih, former Executive Vice President, C&RS departed the company at the end of January 2019.

The position of Executive Vice President and Chief Commercial Officer was created during February to advance global sales and marketing efforts.  This role was originally filled by Bill Seward, who departed the company in September 2019, at which time Cory White was named Chief Commercial Officer.

Dominic Culotta was named Executive Vice President and Chief Engineer in April, a newly created role to drive centralization and standardization across our organization with specific emphasis on field operations.

Janet Zelenka joined as Executive Vice President and Chief Financial Officer in June.
Stericycle’s leadership team includes the CEO and nine executive vice presidents.  We recently filled the vacant position for EVP and General Counsel by rehiring Kurt Rogers, our former EVP and General Counsel.  Among the ten occupied officer roles, eight are filled by candidates who have been with Stericycle less than three years, and no officer has been with the company more than four years except for Dan Ginnetti.
Our 2019 Named Executive Officers
This Compensation Discussion and Analysis explains our executive compensation program and the compensation awarded to our CEO (current and former), CFO (current and former), and our four other most highly compensated executive officers who were serving as executive officers as of the end of 2019. These executives, referred to as our “named executive officers” or “NEOs”, were:


Name
Title (as of December 31, 2019)

Cindy J. Miller
President and Chief Executive Officer

Janet H. Zelenka
Executive Vice President and Chief Financial Officer

Daniel V. Ginnetti
Currently Executive Vice President, International
Former Executive Vice President and Chief Financial Officer

Joseph A. Reuter
Executive Vice President and Chief People Officer

David W. Stahl
Executive Vice President and Chief Information Officer

Charles A. Alutto
Former Chief Executive Officer

William J. Seward
Former Executive Vice President and Chief Commercial Officer

Kurt M. Rogers
Executive Vice President and General Counsel
Stericycle’s Executive Compensation Philosophy

Our executive compensation program is developed by the Compensation Committee and approved annually by the Board of Directors. The compensation program for executive officers has two objectives:
1.
To attract, motivate, and retain highly qualified executive officers; and
2.
To structure the bulk of executive compensation to be dependent on Stericycle’s attainment of measurable Company-wide performance targets and sustained growth in our stock price so that executives benefit only if our stockholders benefit.
Our executive compensation program has three components: base salary, short-term incentive awards, and long-term incentive awards. In 2019, base salary and annual performance bonuses were paid in cash, and long-term incentive compensation was paid in the form of stock options, time-based Restricted Stock Units
(RSUs), and performance-based RSUs (PRSUs). For 2020, we have changed the program to eliminate stock options and award long-term incentives in the form of time-based RSUs and performance stock units (PSUs). We generally target our executive officers’ total direct compensation to be aligned with the median of our peer group. To ensure appropriate alignment, the Compensation Committee considers experience, individual contributions, and the Company’s performance relative to its peer group when setting pay levels.
The Compensation Committee and the Board work to ensure that our executive compensation program is both market-competitive and performance-oriented. Our executive officers earn base salaries, but the majority of their target compensation comes in the form of annual cash performance bonuses, time-based RSUs and, for 2020, PSUs. As a result, a substantial portion of our executive officers’ compensation is influenced, either positively or negatively, by Company performance.

 
22
Stericycle, Inc. - 2020 Proxy Statement
Our Executive Compensation Best Practices
The Compensation Committee regularly reviews the executive compensation program to ensure that it is aligned with our compensation philosophy, our Company objectives, and stockholder interests. Highlights of key elements of and exclusions from our program are noted below.


What We Do:
What We Don’t Do:

Deliver a significant percentage of target annual compensation as variable compensation tied to performance
No re-pricing of underwater stock options

Align executives’ interests with stockholders’ interests through long-term incentive compensation paid in equity
No excessive perquisites or personal benefits

Maintain an executive compensation clawback policy
No employment contracts for NEOs

Cap annual and long-term incentive awards
 
 

Retain an independent compensation consultant to advise the Compensation Committee
 
 

Prohibit officers and directors from engaging in hedging, pledging or short sale transactions involving our securities
 
 

Conduct a regular review of proxy advisor policies and corporate governance best practices
 
 

Maintain stock ownership and retention guidelines
 
 

Provide “double-trigger” vesting of equity awards in connection with a change in control
 
   

Our Executive Compensation Program for 2019

Historically, our named executive officers received salaries significantly below those of comparable executives in our peer group of companies. Between 2015-2017, base salaries for the majority of our NEOs were increased to align with the median for our peer group and no changes were made to the salaries or bonus targets for the named executive officers for 2018. For 2019, the Compensation Committee engaged its compensation consultant to conduct an independent review of executive officer salaries, as it had been several years since the last such review. After considering the results of the independent review, the Compensation Committee approved salary increases for two of our executive officers and a cash incentive target increase for one executive officer, which were effective January 1, 2019. The remaining executive officers did not receive increases to base compensation or to cash incentive targets for 2019.
For 2019, our named executive officers’ annual cash performance bonuses were based upon the achievement of Adjusted EBITDA targets developed from our annual operating plan and adjusted return on invested capital (Adjusted ROIC). Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and other various expenses that do not reflect the ongoing performance of the business. Adjusted EBITDA also excludes the impact of foreign exchange rates and businesses that have been divested as of the time such businesses are no longer part of Stericycle. The approach used for Adjusted EBITDA for executive compensation was reviewed quarterly by both the Audit Committee and Compensation Committee.
In 2019, Adjusted ROIC excluded the impact of the business transformation, acquisition and integration expenses, restructuring and plant conversion expenses, the change in fair value of contingent considerations, contract exit costs, asset impairment charges, litigation expenses, and insurance proceeds. For additional detail and reconciliations, see Appendix A to this proxy statement.
Our executives are also compensated with a long-term incentive program in the form of equity grants. For 2019, the award structure of the long-term incentive plan was equally divided among stock options, time-based RSUs, and performance-based RSUs. These grants of equity were designed to incentivize our named executive officers to focus on long-term value creation.


Stericycle, Inc. - 2020 Proxy Statement
23
The principal elements of our executive compensation program for 2019 are summarized below. These elements are discussed in more detail under “2019 Compensation Program Highlights.”

 
Compensation
Element
Form of
Compensation
Performance and
Vesting Criteria
 
Purpose
 
Base Salary
Cash
N/A
 
Provide fixed compensation to attract and retain key executives and to offset external factors that may impact incentive pay
 
 
 
Annual Cash
Bonus
 
 
Cash
 
Annual Adjusted EBITDA and Adjusted ROIC objectives
 
 
 
Incentivize executives to achieve annual performance goals and be rewarded commensurately
 
 
Long-term
Incentives
Stock Options (1/3)
Time-based RSUs (1/3)
 
Performance-based
RSUs (1/3)
Three-year ratable vesting based on continuous service
 
Vest, or not, in three equal annual installments depending on achievement of pre-established performance metrics
 
Incentivize long-term value creation and align management’s interests with those of our stockholders
For 2019, approximately 79% of our current CEO’s target total compensation and approximately 69% of the target total compensation  of our other NEOs other than Mr. Alutto was at risk.
The chart below illustrates how these components were allocated in actual total compensation received by our CEO and NEOs other than Mr. Alutto in 2019.
2018 CEO Compensation Mix 2018 Other NEO Compensation Mix
Outcomes of 2019 Incentive Compensation
A.
Annual Cash Performance Bonuses
In 2019, our executive officers were eligible to earn annual cash performance bonuses based 70% upon the achievement of Adjusted EBITDA objectives developed from our annual operating plan and 30% upon Adjusted ROIC objectives.
Our Adjusted EBITDA for 2019 for the purpose of the annual cash performance bonus program was $589 million and was below the threshold for earning a payout on this metric. Our Adjusted ROIC performance in 2019 for the purpose of the annual cash performance bonus program was 5.81% and was below threshold for earning a payout on this metric. Because the performance achievement on both metrics was below threshold, no annual cash bonus payout was earned or paid to the executive officers.  Details on the annual cash performance goals and results for 2019 are described below.
B.
Performance-based Restricted Stock Units (PRSUs)
In 2019, our executive officers held performance-based RSUs with vesting opportunities from grants made in 2017, 2018, and 2019 based upon performance against Adjusted EPS goals.  Our Adjusted EPS for 2019 for the purpose of the performance-based RSU program was $2.65, resulting in zero vesting for the applicable tranches of the 2017, 2018 and 2019 performance-based RSU grants. Details on the performance-based RSU goals and results for 2019 are described below.

24
Stericycle, Inc. - 2020 Proxy Statement
Executive Compensation Program Changes for 2020 Align with Our Transformation
At our 2019 Annual Stockholders’ Meeting, our Say on Pay Advisory vote garnered 70.6% support, an outcome significantly below results for 2016, 2017, and 2018 which returned support of 96.0%, 91.9%, and 89.8%, respectively.  Following the 2019 annual meeting, we proactively reached out to our top 25 stockholders (82% of outstanding shares) to review changes for the 2020 compensation programs and to discuss feedback from the 2019 Say on Pay Advisory vote. 
During this outreach, we heard feedback that was generally supportive of the changes to the 2020 compensation plans but also critical of having paid severance to the former CEO, Mr. Alutto, given that his departure was announced as a retirement. We recognize the validity of this feedback and confirm that we will not make any future agreements to pay severance to retiring executives.
In addition to reflecting the priorities of our stockholders, our Compensation Committee, with the input of a new independent advisor, approved changes in compensation for 2020 to focus management on driving improvements to both the balance sheet and the income statement and to better align Stericycle with compensation best practices.  We believe evolving and advancing our compensation program is also an important element in the Company’s transformation.  Noted below is a summary of the changes for 2020.
 

Plan Impacted
Key Changes

Reasons

 
Annual cash 
bonus
 
Most NEO cash bonus opportunities were unchanged compared to 2019; two changes were made effective February 9, 2020 – for the current CEO (Miller) and the current CFO (Zelenka)

 
To keep target cash compensation aligned with the median of our peer group and reflect company performance

 
 
Selected new metrics of EBIT1 (40%), Free Cash Flow1 (35%), Safety Improvements (15%), and Service (10%)

 
To focus the emphasis on key metrics that represent Company performance and drive stockholder value

 
Stock options
 
Eliminated stock options from the long-term incentive program

 
To align the long-term incentive program with peer group benchmarks and stockholder feedback indicating a desire for a higher concentration of performance-based awards

 
Time-based RSUs
 
Adjusted the time-based RSU component of the total long-term incentive award to 45% of the total long-term incentive award

 
To allow for a long-term incentive mix that is consistent with market norms but weighted less heavily than PSUs

 
Performance-
based RSUs
(PRSUs)/
Performance Stock
Units (PSUs)
 
Replaced the performance-based RSU component of the long-term incentive award with PSUs which allow for payouts above 100% if achievement of performance goals exceeds targets and weighted the PSUs at 55% of the total long-term incentive award
 
Added a second, equally-weighted performance metric to supplement EPS1 in the form of ROIC less goodwill and included an rTSR modifier to be measured over the 3-year period
 
Changed vesting from a 3-year ratable schedule to a 3-year cliff vesting schedule which pays out only at the end of the 3-year period

 
Move from PRSUs to PSUs provides incentive for exceeding results; weighting at 55% results in over half of the long-term incentive to be linked to company performance goals
 
Growth and return are classic value creation metrics and two metrics (rather than one) are considered better indicators of financial performance; rTSR modifier further aligns Stericycle payouts with stockholder return
 
Ratable vesting for PSUs is uncommon and cliff vesting creates additional incentive for retention of NEOs

 
Peer group
 
 
Peer group was adjusted to remove eight companies and add one company
 

 
Peer group analysis showed that the previous peer group contained a number of companies that were no longer categorized as a good industry fit; the revised peer group prioritizes quality over quantity and is a better benchmark for the Company
1Metrics have pre-approved and clearly defined adjusted items that are reasonable and customary.

Stericycle, Inc. - 2020 Proxy Statement
25
Our Compensation-Setting Process

Compensation Committee

Compensation decisions for our executive fficers are made by the Compensation Committee of our Board of Directors, subject in  some instances to approval by the full Board. All of the Committee’s members are independent under the applicable SEC rules and Nasdaq listing standards.
 
Decision-Making Processes

The Compensation Committee considers a number of factors in setting compensation and incentive award opportunities for our executive officers. These decisions are made with a view to reaching an overall result that the Committee believes is appropriate and fair to each executive officer – both in absolute terms and relative to the compensation of the other executive officers – and fair as well to Stericycle and to our stockholders. The Committee also considers each executive officer’s role, contribution to our performance, and the officer’s compensation history in making compensation decisions.
Compensation decisions are typically made at the regular meeting of the Compensation Committee during the first quarter of the year based on market study results and prior year performance of the Company and the executive officers. The Committee considers these results in determining the executive officers’ annual cash performance bonuses for the prior year and their base salaries and annual cash performance bonus targets for the upcoming year.

Our Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of our other NEOs, but management generally does not otherwise participate in the Committee’s decisions.
Decisions regarding the annual equity grants to our executive officers and to our employees generally are made during the first Compensation Committee meeting of the year, subject to approval by the Board of Directors. The Committee determines the equity grant amounts for our executive officers taking into account (i) our overall operating performance, (ii) each executive officer’s individual responsibilities and performance, (iii) competitive market data, (iv) prior equity grants, and (v) the goal of limiting equity grants to no more than 10% of our fully-diluted shares over a trailing five-year period, thus averaging dilution of no more than 2% a year.

 
Compensation Consultant

The Compensation Committee previously engaged Deloitte Consulting LLP as its independent compensation consultant and did so through July of 2019.  In August of 2019, the Compensation Committee ended its engagement with Deloitte and engaged Pay Governance LLC as its independent compensation consultant to review our executive compensation philosophy and practices and the composition of our peer group of companies. After a review of the factors prescribed by SEC and Nasdaq rules and regulations, the Compensation Committee determined that both Deloitte Consulting LLP and Pay Governance LLC are independent.
Pay Governance provides consulting services to Stericycle’s Compensation Committee, in the form of research, market data and design expertise in developing executive and director compensation programs.  A representative of Pay Governance attended each of Stericycle’s Compensation Committee meetings in 2019 from the time Pay Governance was retained by the Committee and advised the Committee on all principal aspects of executive compensation, including the competitiveness of program design and award values and specific analyses with respect to the Company’s executive officers, including the CEO. The compensation consultant reports directly to Stericycle’s Compensation Committee, and the Committee is free to replace the consultant or hire additional consultants or advisers at any time.
 
Peer Group

Our peer group is composed of companies that are similar to us in terms of revenue, number of employees, services offered, and industries served. The companies in the peer group are also representative of the types of companies we compete with for executive talent. The Compensation Committee refers to information about our peer group primarily for the purpose of benchmarking the NEOs’ total direct compensation pay levels, pay practices, and industry pay trends. The Compensation Committee reviews the peer group annually and makes adjustments if necessary (for example, to remove companies in the case of an acquisition).
In 2019, the Compensation Committee engaged its independent advisor to conduct a review of the peer group.  Based on that review, the Compensation Committee made several changes to the peer group for 2020, including removing eight companies which were deemed to be too dissimilar in industry type to serve as good comparisons for Stericycle and adding one new peer company.  The Committee focused on quality versus quantity when finalizing the peer group and has determined that the new peer group provides a stronger basis for analysis and benchmarking over the prior peer group.

 
26
Stericycle, Inc. - 2020 Proxy Statement
For 2019, the peer group consisted of the following companies:



Company Name
2019 Revenue
($MM)

Employees

Industry Focus

ABM Industries Incorporated
6,499

140,000

Environmental and Facilities Services

Advanced Disposal Services, Inc.
1,623

6,200

Environmental and Facilities Services

Cintas Corporation
6,892

45,000

Diversified Support Services

Clean Harbors, Inc.
3,412

14,400

Environmental and Facilities Services

Covanta Holding Corporation
1,870

4,000

Environmental and Facilities Services

Ecolab Inc.
14,906

50,200

Specialty Chemicals

Iron Mountain Incorporated
4,263

5,000

Business Services

Pitney Bowes, Inc.
3,205

11,000

Office Services and Supplies

Republic Services, Inc.
10,299

36,000

Environmental and Facilities Services

Tetra Tech, Inc.
2,390

20,000

Environmental and Facilities Services

Waste Connections, Inc.
5,389

18,204

Environmental and Facilities Services

Waste Management, Inc.
15,455

44,900

Environmental and Facilities Services

Stericycle, Inc.
3,309

19,500

Environmental and Facilities Services

Median
4,826

22,500

 

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27
2019 Compensation Program Highlights
Base Salaries
 
The table below illustrates the NEOs’ base salaries over the past three fiscal years.

   
2019 Salary ($)
2018 Salary ($)
2017 Salary ($)
 
Ms. Miller
625,000/900,0001
625,000
N/A2
 
Ms. Zelenka
575,000
N/A3
N/A3
 
Mr. Ginnetti
575,000
550,000
380,000
 
Mr. Reuter
360,000
N/A3
N/A3
 
Mr. Stahl
358,000
N/A3
N/A3
 
Mr. Alutto
1,000,000
1,000,000
585,000
 
Mr. Seward
400,000
N/A3
N/A3
 
Mr. Rogers
500,000
400,000
N/A2
1Ms. Miller’s salary was prorated between her roles as President and Chief Operating Officer (through May 1, 2019) and CEO (effective May 2, 2019).
2Ms. Miller and Mr. Rogers were not NEOs in 2017.
3Ms. Zelenka, Mr. Reuter, Mr. Stahl, and Mr. Seward were not NEOs in 2018 and 2017.

Based on the independent review conducted by the Compensation Committee’s independent consultant in 2018, the majority of our NEOs were in line with the median for our peer group in 2019.
For 2020, the Compensation Committee engaged its new compensation consultant to conduct an independent review of executive officer salaries, as many of the executive officers were new to Stericycle. After considering the results of the independent review, the Compensation Committee approved salary increases
for our CEO, CFO and Chief People Officer and cash incentive target increases for our CEO and CFO. These changes were effective on February 9, 2020. Given the economic impact of the global pandemic, the NEOs then volunteered to relinquish the increases to base salary and the Compensation Committee approved. Effective March 22, 2020, the NEOs’ salaries were returned to their 2019 amounts. The remaining NEOs did not receive increases to base compensation or to cash incentive targets for 2020. The Compensation Committee will assess returning the salaries to the previously approved amounts later in 2020 depending on developments related to the economic impact of the global pandemic.
 
Annual Cash Performance Bonuses

Our annual cash performance bonus program is intended to reward our executive officers for achieving our annual operating plans and budgets. Each executive officer is eligible for an annual cash performance bonus equal to a specified percentage of base salary.
In 2019, our executive officers were eligible to earn annual cash performance bonuses based upon the achievement of Adjusted
EBITDA targets developed from our annual operating plan and Adjusted ROIC targets.
As a result, 70% of each NEO’s 2019 annual cash performance bonus target was tied to achievement of our Adjusted EBITDA goal and 30% was tied to achievement of our Adjusted ROIC goal.


 
Performance Goals for 2019

Based upon our annual business plans, the Compensation Committee established minimum, target, and maximum achievement levels for the 2019 Adjusted EBITDA portion of the annual cash performance bonus.
For 2019, the Adjusted EBITDA target was $697 million. There was no payout for this metric if we failed to attain Adjusted EBITDA of $660 million, and the payout for performance at or above the maximum goal of $750 million was capped at 200%.
As with the Adjusted EBITDA portion of the bonus, the Compensation Committee fixed minimum, target, and maximum 2019 Adjusted ROIC performance goals and related payout percentages. For 2019, the Adjusted ROIC target was 7.06%. There was no payout for this metric if we failed to attain the minimum Adjusted ROIC of 6.14%, and the payout for performance at or above the maximum goal of 7.98% was capped at 200%.


 
28
Stericycle, Inc. - 2020 Proxy Statement
The following table shows how different levels of actual Adjusted EBITDA and Adjusted ROIC were designed to affect the payout.
 


Adjusted EBITDA
Cash Bonus Program for 2019
70% Total Cash Bonus
Adjusted ROIC
Cash Bonus Program for 2019
30% Total Cash Bonus


Percentage of
Award Payout
Percent Adjusted
EBITDA
Attainment
Adjusted EBITDA
Target (in $ millions)
Percentage of
Award Payout
Adjusted
ROIC Target

Minimum
25%
94.7%
660
50%
6.14%

Target
100%
100%
697
100%
7.06%

Maximum
200%
107.6% or more
750 or more
200%
7.98% or more
 
Both sets of performance targets allowed for payout of the annual cash performance bonuses at levels that increase proportionally from the minimum tier (an annual cash performance bonus equal to the specified percentage of the executive officer’s base salary) to the maximum.

 
For 2019, the annual target cash performance bonus percentages for our named executive officers were as follows:


 
Base Salary
($)
Cash Performance
Bonus Percentage

Ms. Miller (1)
625,000
900,000
90%

Ms. Zelenka
575,000
75%

Mr. Ginnetti
575,000
75%

Mr. Reuter
360,000
60%

Mr. Stahl
358,000
60%

Mr. Alutto
1,000,000
100%

Mr. Seward
400,000
60%

Mr. Rogers
500,000
70%
1Ms. Miller’s salary was prorated between her roles as President and Chief Operating Officer (through May 1, 2019) and CEO (effective May 2, 2019).
Performance Results for 2019
Our Adjusted EBITDA for 2019 for the purpose of the annual cash performance bonus program was $589 million and was below the threshold for any payout on this metric. Our Adjusted ROIC performance in 2019 for purpose of the annual cash performance bonus program was 5.81% and was below threshold for a payout on this metric. Because performance achievement on both metrics was below the payout threshold, no annual cash bonus payout was earned or paid to the executive officers.
Long-Term Equity Incentive Awards

When making long-term equity incentive awards, the Compensation Committee determines the desired total grant date fair value of each NEO’s award in the manner described above under “Our Compensation-Setting Process.” For 2019, 1/3 of that
total amount was awarded in the form of stock options, 1/3 of that total amount was awarded in the form of time-based RSUs and the remaining 1/3 was awarded in the form of performance-based RSUs.
 
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29
Stock Option Grants for 2019


Until 2016, executive officers’ long-term incentive awards were entirely in the form of stock options. In 2019, with the addition of time-based RSUs and performance-based RSUs to the long-term incentive program, stock options constituted approximately one third of our NEOs’ long-term compensation.
 
Stock options vest over a period of three years and must be exercised within eight or ten years, depending on the terms of the grant. Our stock options were granted at the closing price of our
common stock on the date of the grant. The future value of stock options depends entirely on the growth in the value of our common stock in the years after the options are issued. Based on feedback during 2019 from stockholders and proxy advisory firms, in 2020 the Compensation Committee eliminated stock options as part of the NEOs’ long-term incentive package in order to weight more of the long-term incentive in PSUs. For more information see “Our Executive Compensation Program for 2020”.


 
The 2019 stock option awards for our named executive officers were as follows:

   
Number of
Stock
Options
Grant Date
Fair Value
 
Ms. Miller
55,476
$ 844,386
 
Ms. Zelenka
24,488
338,914
 
Mr. Ginnetti
24,654
350,826
 
Mr. Reuter
15,148
193,591
 
Mr. Stahl
11,833
168,384
 
Mr. Alutto
 
Mr. Seward
27,842
422,642
 
Mr. Rogers
16,567
235,748
Time-based Restricted Stock Units for 2019

In 2019, time-based RSUs constituted approximately one-third of our NEOs’ long-term incentive compensation. The number of RSUs awarded to a NEO were determined based on the target grant date fair value of the NEO’s total equity award. The time-
based RSUs granted to executive officers in 2019 vest in equal annual installments over three years, beginning on the first anniversary of the grant date.

 
The 2019 time-based RSU awards for our named executive officers were as follows:
 


Time-based
Restricted
Stock Units
Grant Date
Fair Value

Ms. Miller
16,080
$ 816,617

Ms. Zelenka
7,098
333,322

Mr. Ginnetti
7,146
347,224

Mr. Reuter
 3,787
166,666

Mr. Stahl
3,430
166,664

Mr. Alutto

Mr. Seward
3,421
176,626

Mr. Rogers
4,802
233,329

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Stericycle, Inc. - 2020 Proxy Statement
Performance-based Restricted Stock Units for 2019

Performance-based RSUs were the final one-third of our NEOs’ long-term incentive compensation for 2019. The number of performance-based RSUs awarded to a NEO was determined based on the target grant date fair value of the NEO’s total equity
award. Performance-based RSUs granted to executive officers in 2019 vest, if at all, in equal installments over three years, depending on achievement during each year of the applicable annual EPS performance goal.


The 2019 performance-based RSU awards for our named executive officers were as follows:
 

 
Performance-based
Restricted
Stock Units
Grant Date
Fair Value

Ms. Miller
31,858
$ 527,795

Ms. Zelenka
7,098
111,107

Mr. Ginnetti
7,146
115,741

Mr. Reuter
3,430
55,587

Mr. Stahl
3,430
55,587

Mr. Alutto

Mr. Seward
8,575
138,919

Mr. Rogers
4,802
77,773
Performance Goals and Results for 2019

The Company began the practice of granting performance-based RSUs in 2017. Each year, the Compensation Committee establishes minimum and maximum achievement levels for payout of the performance-based RSUs (and PSUs, beginning in 2020).  With respect to the 2019 performance year, the Committee established an Adjusted EPS goal minimum and maximum of $3.31 and $3.61, respectively. Performance in between these two points is interpolated on a straight-line basis to determine the vesting of shares. No performance-based RSUs vest if we failed to attain a minimum Adjusted EPS of $3.31, and the payout for performance at or above 100% of the target of $3.61 is capped at 100%.
The first performance period ended December 31, 2017 and no performance-based RSUs were earned for that period. The second performance period ended December 31, 2018 and 43% of the first tranche of the performance-based RSUs granted in 2018 and 43% of the second tranche of the performance-based RSUs granted in 2017 were earned.
The third performance period ended December 31, 2019. Our Adjusted EPS for 2019 for purpose of the performance-based RSU program was $2.65, resulting in zero vesting for the applicable tranches of the 2017, 2018 and 2019 performance-based RSU grants.
 
Stericycle, Inc. - 2020 Proxy Statement
31
Our Executive Compensation Program for 2020
Compensation Program for 2020

After conducting a thorough selection process, including reviewing the RFP (Request for Proposal) responses of several leading executive compensation advisory firms and interviewing finalists, the Compensation Committee engaged a new independent advisor in 2019. With the new advisor in place, the Compensation Committee reviewed a market analysis of all of our executive compensation programs.  As a result of that analysis and stockholder feedback, we made several changes to our compensation programs for 2020 to drive desired business results.
All of our ongoing NEOs are relatively new to their roles.  As a result, pay targets were established below median so that successful experience and performance could be recognized with pay increases to achieve market median over time.  In keeping with that philosophy, at an individual level, we made salary adjustments for our CEO, CFO and Chief People Officer and bonus target changes for our CEO and CFO to align their compensation more closely with the market. These changes were effective February 9, 2020. Given the economic impact of the global pandemic, the NEOs then volunteered to relinquish these increases and the Compensation Committee approved. Effective March 22, 2020, the NEOs’ salaries were returned to their 2019 amounts. The Compensation Committee will assess returning the salaries to the previously approved amounts later in 2020 depending on developments related to the economic impact of the global pandemic.
For our annual cash incentive program, we selected new performance metrics that align with our 2020 goals and will better represent achievement of those goals.  For 2020, achievement of payouts under the annual cash incentive plan will be based 40% on EBIT and 35% on Free Cash Flow.  EBIT provides the best representation of how we are achieving results and managing our capital; effective capital management will ultimately show expansion in operating margin if we are putting that capital to its best use. The Free Cash Flow metric measures our progress on generating cash from operations, improving our balance sheet, and the effective deployment of capital investments. Both metrics have pre-approved and clearly defined adjustment categories that are reasonable and customary.
The metrics for the remaining 25% will focus on annual priorities, which for 2020 include performance improvement in safety weighted at 15% and maintenance of customer service weighted at 10%. The addition of these annual priorities adds a non-financial metric (similar to many peers) that will sharpen focus on behaviors not captured in financials.  Safety is an essential component of everything we do at Stericycle and reflects our commitment to our customers and employees in keeping all of us and the materials that we collect and dispose of out of harm’s way. Likewise, service
is critical to Stericycle’s customer experience, particularly during this time of business transformation and change, and excellence in customer service yields satisfied customers who are less likely to seek services elsewhere.
We also redesigned our equity program to better align with market practices and respond to stockholder feedback. Beginning in 2020, Stericycle’s long-term equity incentive plan will remove stock options entirely and divide equity grants by 55% PSUs and 45% RSUs.  The vesting of PSUs will be based 50% on the achievement of an EPS target and 50% on a ROIC less goodwill and intangible amortization target.  The PSUs will also be tied to a relative total stockholder return (or rTSR) modifier which will adjust the number of shares to be vested up or down by up to 25% based upon Stericycle’s three-year performance relative to the S&P Mid Cap 400.  The rTSR modifier further aligns plan performance with stockholder return. Like EBIT and Free Cash Flow, the EPS metric has pre-approved and clearly defined adjustment categories that are reasonable and customary.
For 2020, PSUs will no longer vest ratably over a three-year period and will instead vest at the end of the three-year period.  Performance goals for each tranche of the 2020 award will be set annually according to each year’s business plan. Due to the business transformation and portfolio rationalization initiatives that the Company has undertaken, the annual goal-setting process has been necessary to achieve alignment between the performance targets and the annual business plan.  Upon completion of the Company’s business transformation, the Committee intends to change the goal-setting process from an annual process to an approach which incorporates a three-year measurement period for the chosen metric. In assessing the 2020 results for both our annual cash incentive program and our equity program, the Committee may consider the effect of the global pandemic and other linked economic and environmental pressures that may negatively impact results.
In designing the 2020 compensation plans, the Committee took into account the result of the stockholders’ advisory vote as well as feedback from stockholder outreach initiatives. During the 2019 “say on pay vote,” we received 70.6% support “for” the executive compensation program.  While we believe the results of this vote were a reflection of the severance paid to former CEO Mr. Alutto, we continued to evolve our compensation program to more closely align with peers. Our program changes include weighting our long-term incentive plan more highly in PSUs, replacing the ratable PSU vesting schedule with a cliff vesting schedule, selecting new incentive plan metrics with pre-approved adjusting items categories and amending our Executive Severance and Change in Control Plan (discussed below).
 
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Stericycle, Inc. - 2020 Proxy Statement
2020 Executive Compensation Plans
In order to maintain competitiveness with the market but reflect our company’s overall performance, the Committee approved compensation plans for our NEOs that included increases in base salary for Ms. Miller, Ms. Zelenka and Mr. Reuter, an increase in the cash performance incentives for Ms. Miller and Ms. Zelenka, and a two-part equity program. The salary and bonus target changes went into effect on February 9, 2020. Given the economic impact of the global pandemic, the NEOs then volunteered to relinquish these base salary increases, and the Compensation Committee approved. Effective March 22, 2020, the NEOs’ salaries were returned to their 2019 amounts. The compensation plans for our named executive officers in 2020 are as follows (no information is given for those executives who are no longer employed by the Company):

 
Base Salary
Cash Performance
Bonus Percentage
Granted
Performance Share Units
Granted
Time-based RSUs
 Ms. Miller
$900,000
125%
37,335
30,546
Ms. Zelenka
$575,000
90%
17,136
14,021
 Mr. Ginnetti
$575,000
75%
10,733
8,782
 Mr. Reuter
$360,000
60%
8,107
6,633
Mr. Stahl
$358,000
60%
6,301
5,155
Mr. Rogers
 $300,000  70%    

(1)
Mr. Rogers' annualized base salary will be $300,000 through September 30,2020.  Beginning October 1,2020, his annualized base salary will increase to $500,000.  Subject to Board approval, Mr. Rogers will also receive a new-hire grant of RSUs with a grant date fair value of approximately $548,000 and an annual equity grant with a grant date fair value of $875,000 with 55% of such amount consisting of PSUs and 45% consisting

Executive Severance and Change in Control Plan

Upon the recommendation of the Compensation Committee, the Board of Directors approved an amended version of the plan for executive severance for 2020, including following a change in control. The plan, which originally went into effect on September 1, 2016, applies to all named executive officers. Stericycle introduced this plan to be competitive with the market and enhance retention, and amended the plan in 2020 to stay aligned with market trends and business goals. The amended plan prohibits executives who voluntarily resign or retire from the company from receiving severance payments under the plan.
Under the plan, NEOs are entitled to benefits in the event of a termination of employment by the Company other than for “Cause”, “Death” or “Disability” (as each is defined in the plan). A covered executive will receive the following benefits so long as the executive executes and honors a full waiver and release of claims against Stericycle, as well as non-competition, non-solicitation, confidentiality, and other restrictive covenants that we may deem necessary to protect our interests:
An amount equal to the actual annual incentive the executive would have been paid had the executive remained employed on the payment date applicable to then current employees, prorated based on the executive’s period of service through the executive’s termination date.
 
An amount equal to the sum of the executive’s base salary and target annual incentive, each determined as of the termination date, multiplied by the applicable “severance multiple.”

For the Chief Executive Officer, the severance multiple is two.

For all other executive officers, the severance multiple is one.
Non-qualified deferred compensation benefits and employee welfare benefits pursuant to the terms of the applicable plans and policies.
Payment of or reimbursement for the cost of COBRA premiums in connection with the executive’s medical, vision, prescription and dental coverage in effect as of the date of termination, to the extent such premiums exceed the premiums paid for similar provided coverage by active employees, for up to 18 months.
Reimbursement for outplacement benefits up to $25,000.
For involuntary termination (other than for “Cause”) associated with a change in control, which includes voluntary termination for “Good Reason” (as defined in the plan) within 24 months after a change in control, the benefits above remain in place but the annual incentive payment and the severance multiple changes, as follows:
An amount equal to the executive officer’s target annual incentive, prorated based on the executive officer’s period of service through the executive officer’s termination date.
An amount equal to the sum of the executive officer’s base salary and target annual incentive, each determined as of the termination date, multiplied by the applicable “severance multiple.”


For the Chief Executive Officer, the severance multiple is three.

For all other executive officers, the severance multiple is two.
In situations involving voluntary termination other than for Good Reason during the 24-month post-change period or termination for cause, we would only be required to pay accrued obligations to the employee.

 
Stericycle, Inc. - 2020 Proxy Statement
33
Other Compensation Matters
Retirement Plans and Deferred Compensation Arrangements

Our Board of Directors adopted the Stericycle, Inc. Supplemental Retirement Plan effective for deferrals of compensation on and after April 1, 2017. Our NEOs are eligible to participate in the plan. The Plan is unfunded and designed to be a nonqualified deferred compensation plan in compliance with Section 409A of the Internal Revenue Code.
Under the Plan, a bookkeeping account will be created for each participant. Each year, we will credit a participant’s account with the designated portion of the participant’s compensation that the participant elected to defer for that year (the “Elective Deferral Contributions”) and may credit the participant’s account with a discretionary amount declared by us for that year (the “Company Discretionary Contributions”). Earnings on the credited amounts will be based on the performance of various investment funds available under the Plan (and as directed by the participant).
The Plan permits participants to elect to receive distributions, which generally become payable upon a termination of employment or a
specified date prior to termination of employment, in either a lump sum or in installments over a period of up to 15 years. All distributions from the Plan are in cash. The participant will always be fully vested in that portion of the participant’s account attributable to the Elective Deferral Contributions, and will be vested in Company Discretionary Contributions, if any, five years from the date the first Company Discretionary Contribution is credited to the participant’s account, subject to the participant’s continued service. Vesting will be accelerated upon a participant’s termination of service due to death or disability or a change in control while the participant is still in service.
The unvested portion of a participant’s account will generally be forfeited upon termination of employment. A participant’s vested interests under the Plan will be forfeited upon a termination of employment for Cause (as defined in the Plan).


 
Perquisites and Personal Benefits
We provide limited perquisites and personal benefits to our executive officers. See “2019 Summary Compensation Table – All Other Compensation” and the related footnotes.

Stock Ownership Guidelines
 All of our executive officers and non-employee directors are expected to hold a minimum position in our common stock. We established this program to help align the long-term interests of our executive officers and non-employee directors with those of our stockholders. For 2020, we increased the stock ownership guidelines for the Chief Executive Officer and Non-Employee Directors from four times annual base salary (for the CEO) or respective annual cash retainer (for the Non-Employee Directors) to five times that amount.

 
2019 Stock Ownership Guideline
2020 Stock Ownership Guideline
 Chief Executive Officer
 Four times annual base salary
 Five times annual base salary
 Other NEOs
Three times annual base salary
 Three times annual base salary
 Non-Employee Directors
 Four times annual cash retainers
 Five times annual cash retainers

Although there is no specific period of time in which the executive officers and non-employee directors are required to achieve the applicable ownership threshold, they are expected to make continuous progress toward that goal, and to comply with the following retention ratios until such guidelines have been achieved:
The CEO must hold 75% of the net shares acquired upon the vesting or exercise of any equity awards (“Net Profit Shares”) until the minimum position requirement has been achieved; and
The other NEOs must hold 50% of their respective Net Profit Shares until the minimum position requirement has been achieved.
The non-employee directors must retain 75% of their Net Profit Shares until the minimum position requirement has been achieved.
Shares that will count toward achievement of the stock ownership guidelines include:
Shares owned outright (including employee stock purchase plan shares and securities convertible into shares of common stock on an as-converted basis) by the executive officer or director or any of such person’s immediate family members residing in the same household;
 
Shares held in trust for the benefit of the executive officer or director or such person’s family;
Shares held in our employee benefit plans, including the 401(k) Savings Plan;
Shares obtained through stock option exercises and the in-the-money value of vested and unvested stock options;
Shares of unvested restricted stock and RSUs; and
 
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Stericycle, Inc. - 2020 Proxy Statement
Shares of vested or unvested restricted stock or RSUs which are deferred under one of Stericycle’s deferred compensation plans (deferred stock units).
Compliance with these stock ownership guidelines is measured periodically by our internal team responsible for handling executive compensation matters, and the results of such measurement are reported to the Compensation Committee at least once per year. On each measurement date, compliance is measured using each
executive officer’s base salary then in effect, and the average trailing 180-day trading price per share of our common stock on the Nasdaq Stock Market on such date. Once an executive officer has achieved the applicable ownership threshold, that person will be considered in compliance, regardless of any change in the price of our common stock, so long as such person continues to own at least the number of shares of our common stock and other awards owned at the time of achieving that threshold.


 
Anti-Hedging and Anti-Pledging Policy

As described earlier in the document, our directors, officers, consultants, independent contractors and employees of the Company and its subsidiaries are prohibited from (i) short selling our securities, including as part of an arbitrage transaction; (ii) other speculative trading in our securities or hedging of their ownership of our securities, including writing or trading in options,
warrants, puts and calls, prepaid variable forward contracts, equity swaps, collars or exchange funds; (iii) other transactions that are designed to hedge or offset decreases in the price of our securities; or (iv) holding our securities in a margin account or otherwise pledging our common stock in any manner.


 
Clawback Policy

In order to encourage sound financial reporting and enhance individual accountability, we have a clawback policy that allows us to recover from our executive officers certain performance-based compensation in the event of certain accounting restatements. If we are required to prepare a restatement of our financial statements due to material noncompliance with any financial reporting requirement under the securities laws, the
Compensation Committee may seek to recover from a covered officer certain performance-based compensation if the covered officer is determined to have engaged in fraud or intentional misconduct that materially contributed to the need for the restatement or if otherwise required by applicable SEC or Nasdaq rules.
 
Stericycle, Inc. - 2020 Proxy Statement
35
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s executive management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
 
Compensation Committee
 
Mike S. Zafirovski, Chairman
 
Lynn D. Bleil
 
Thomas F. Chen
 
Stephen C. Hooley

36
Stericycle, Inc. - 2020 Proxy Statement
2019 SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or earned for the fiscal years noted in the table by our named executive officers:

 
Name and Principal Position
Year

Salary
($)
 
Bonus
($)

Stock
Awards(1)
($)

Option
Awards(2)
($)

Non-Equity
Incentive Plan
Compensation(3)
($)

All Other
Compensations(4)
($)

Total
($)
 
 
Cindy J. Miller
President and Chief
Executive Officer
2019

804,808



1,344,412

844,387


222,306

3,215,913
 
2018

156,250



822,209

894,995



 33,526

1,906,980
 
 
Janet H. Zelenka
Executive Vice President and
Chief Financial Officer
2019

331,730


 444,429

338,914


2,654

1,117,727
 
 
Daniel V. Ginnetti(5)
Executive Vice President,
International
2019

575,000


  462,965

  350,826


3,000

1,391,791
 
2018

550,000



591,531

482,280

99,743

3,000

1,726,554
 
2017

550,000


555,444

489,363

 

3,000

1,597,807
 
 
Joseph A. Reuter
Executive Vice President and
Chief People Officer
2019

353,077



222,253

193,591

 –

169,078

937,999
 
 
David W. Stahl
Executive Vice President and
Chief Information Officer
2019

358,000

 

222,251

168,384



3,000

751,635
 
 
     
 
 
 
 
   
 
Charles A. Alutto(6)
Former President and Chief
Executive Officer
2019

342,308








1,473,077

1,815,385
 
2018

1,000,000



1,582,185

1,289,942

241,800

5,693

4,119,620
 
2017

1,000,000


1,495,299

1,317,342



3,000

3,815,641
 
 
William J. Seward(7)
Former Executive Vice
President and Chief
Commercial Officer
2019

276,923


315,545

422,642


61,038

1,076,148
 
 
Kurt M. Rogers(8)
2019

500,000


311,102

235,748



3,000

1,049,850
 
 
Executive Vice
President and General Counsel
2018

400,000


299,529

244,217

58,032

3,000

1,004,778
 
 (1)
The amounts shown represent the aggregate grant date fair value of the awards for fiscal years 2019, 2018 and 2017, determined in accordance with FASB ASC Topic 718, based on the closing price of our common stock on the date of the grant. The grant date fair value of time-based RSUs and performance-based RSUs granted in 2019 are as follows:

Name
Time-Based RSUs
Performance-Based RSUs
Cindy J. Miller
$816,617
$527,795
Janet H. Zelenka
333,322
111,107
Daniel V. Ginnetti
347,224
115,741
Joseph A. Reuter
166,666
55,587
David W. Stahl
166,664
55,587
Charles A. Alutto
William J. Seward
176,626
138,919
Kurt M. Rogers
233,329
77,773
Because the performance-related component of the performance-based RSUs is based on separate measurements of our performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated with respect to one-third of the total performance-based RSUs in each year of the three-year performance cycle. For 2019, the grant date fair value of the performance-based RSUs, as measured in accordance with FASB ASC Topic 718, is based on our closing stock price on the grant date and the probable outcome of target performance of the annual performance-related component for 2019. With respect to the performance-based RSUs, target performance and maximum performance are the same.
(2)
The amounts shown represent the aggregate grant date fair value of the awards for fiscal years 2019, 2018 and 2017. We calculated these amounts in accordance with the provisions of FASB ASC Topic 718, utilizing the assumptions discussed in Note 14 to our financial statements for the fiscal year ended December 31, 2019, Note 13 to our financial statements for the fiscal year ended December 31, 2018, and in Note 12 to our financial statements for the fiscal year ended December 31, 2017.
(3)
The amounts shown represent the gross amounts of the named executive officer’s annual cash incentive for the applicable fiscal year.

Stericycle, Inc. - 2020 Proxy Statement
37
(4)
The amounts shown include the following. With respect to relocation expenses, the aggregate incremental cost to our Company is determined by the amounts paid to third-party providers.
Name
 
401(k) Matching
Contribution
 
Relocation
Expenses
 
Tax Gross-Up
on Relocation
Expenses
 
Consulting
Fees
 
Severance
Cindy J. Miller
$
3,000
$
122,131
$
97,175
$
$
Janet H. Zelenka
 
2,654
 
 
 
 
Daniel V. Ginnetti
 
3,000
 
 
 
 
Joseph A. Reuter
 
3,000
 
96,666
 
69,412
 
 
David W. Stahl
 
3,000
 
 
 
 
Charles A. Alutto
 
 
 
 
150,000
 
1,323,077
William J. Seward
 
 
61,038
 
 
 
Kurt M. Rogers
 
3,000
 
 
 
 

(5)
Mr. Ginnetti, our former Chief Financial Officer, transitioned to become Executive Vice President of International in June 2019.
(6)
Mr. Alutto stepped down as Chief Executive Officer and as a director in May 2019. Pursuant to his transition agreement, Mr. Alutto received: (i) cash separation pay, payable in accordance with our Executive Severance and Change in Control Plan, equal to two times the sum of his base salary and target annual incentive for 2019; and (ii) $50,000 per month from May through July for consulting services provided to the company.
(7)
Mr. Seward ceased employment with the Company in October 2019.
(8)
Mr. Rogers ceased employment with the Company in January 2020 and was subsequently rehired in March 2020.

38
Stericycle, Inc. - 2020 Proxy Statement
2019 GRANTS OF PLAN-BASED AWARDS
The following table provides information about the plan-based awards for our named executive officers during 2019.

   
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
Estimated Future Payouts Under
Equity Incentive Plan  Awards(2)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(3)
(#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options(4)
(#)
Exercise
or Base
Price of
Option
Awards
($/Share)
Grant
Date
Fair
Value
of Stock
and
Option
Awards(5)
($)
Name
Grant
Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Cindy J. Miller

255,938
787,500
1,575,000



 
 

3/12/2019
             
41,417
48.59
605,102
5/02/2019
             
14,059
57.25
239,284
3/12/2019




   
12,005
   
583,323
5/02/2019
           
4,075
   
233,294
3/12/2019
     
6,946
27,783
27,783
     
449,992
5/02/2019
     
1,019
4,075
4,075

   
77,803
Janet H.
Zelenka

81,758
251,563
503,125
             
7/01/2019
             
24,488
46.96
338,914
7/01/2019
           
7,098
   
333,322
7/01/2019
     
1,775
7,098
7,098
     
111,107
Daniel V.
Ginnetti
 
140,156
431,250
862,500
             
3/12/2019
             
24,654
48.59
350,826
3/12/2019
           
7,146
   
347,224
3/12/2019
     
1,787
7,146
7,146
     
115,741
Joseph A.
Reuter

70,200
216,000
432,000
             
2/01/2019
             
15,148
44.01
193,591
2/01/2019
           
3,787
   
166,666
3/12/2019
     
858
3,430
3,430
     
55,587
David W. Stahl

69,810
214,800
429,600
             
3/12/2019
             
11,833
48.59
168,384
3/12/2019
           
3,430
   
166,664
3/12/2019
     
858
3,430
3,430
     
55,587
Charles A.
Alutto
 
108,630
334,247
668,493
             
                     
William J. Seward
 
71,500
220,000
440,000
             
3/01/2019
             
27,842
51.63
422,642
3/01/2019
           
3,421
   
176,626
3/12/2019
     
2,144
8,575
8,575
     
138,919
Kurt M. Rogers
 
113,750
350,000
700,000
             
3/12/2019
             
16,567
48.59
235,748
3/12/2019
           
4,802
   
233,329
3/12/2019
     
1,201
4,802
4,802
     
77,773
(1)
These amounts consist of the threshold, target and maximum cash award levels set in 2019 under the annual cash performance bonus program. For Mses. Miller and Zelenka and Messrs. Alutto and Seward the amounts reflect their prorated payout opportunities given their time of employment during 2019. The amounts included in the threshold column reflect the payout if threshold performance were achieved on both of the performance metrics. Please see “Compensation Discussion and Analysis” for further information regarding the annual cash performance bonus program.
(2)
The amounts shown at target represent the aggregate number of performance-based RSUs that may be earned under the 2017 Incentive Stock Plan. The performance-based RSUs vest, if at all, in three annual installments based on annual EPS performance goals. The earnout percentage may range from 0% to 100% of the target performance-based RSUs granted, with a range of 25%-100% earned at threshold to maximum performance. Please see “Long-Term Equity Incentive Awards – Performance-based Restricted Stock Units for 2019” in “Compensation Discussion and Analysis” above.

Stericycle, Inc. - 2020 Proxy Statement
39
(3)
The amounts represent the time-based RSUs granted under the 2017 Incentive Stock Plan to the named executive officers. The time-based RSUs vest in equal annual installments over three years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these RSU grants.
(4)
These amounts represent stock options granted under the 2014 Incentive Stock Plan and the 2011 Incentive Stock Plan to the named executive officers. These options vest in equal annual installments over three years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the applicable vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these stock option awards.
(5)
The grant date fair value of each time-based RSU award was computed in accordance with FASB ASC Topic 718 based on the closing stock price on the applicable grant date. Because the performance-related component of the performance-based RSUs is based on separate measurements of our performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated with respect to one-third of the total performance-based RSUs in each year of the three-year performance cycle. For 2019, the grant date fair value of the performance-based RSUs, as measured in accordance with FASB ASC Topic 718, is based on our closing stock price on the grant date and the probable outcome of target performance of the annual performance-related component for 2019. With respect to the performance-based RSUs, target performance and maximum performance are the same. The grant date fair value of each option award was calculated in accordance with the provisions of FASB ASC Topic 718, utilizing the assumptions discussed in Note 14 to our financial statements for the fiscal year ended December 31, 2019.

40
Stericycle, Inc. - 2020 Proxy Statement
2019 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information about the outstanding equity awards held by the named executive officers as of December 31, 2019. Mr. Seward forfeited his equity awards upon his termination and therefore had no equity awards outstanding as of December 31, 2019.

   
Option Awards
 
Stock Awards
 
 
Name
Option
Grant Date
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
Option
Exercise
Price
($)
Option
Expiration
Date
 
Stock
Award
Grant Date
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested(2)
(#)
Market
Value of
Shares or
Units
That
Have Not
Vested(3)
($)
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(4)
(#)
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(3)
($)
 
Cindy J. Miller
5/02/2019

14,059
57.25
5/02/2027
 
5/02/2019
4,075
260,026
4,075
260,026
 
3/12/2019

41,417
48.59
3/12/2027
 
3/12/2019
12,005
766,039
27,783
1,772,833
   
11/01/2018
12,079
48,312
50.78
11/01/2026
 
11/01/2018
8,928 
569,696


 
Janet H. Zelenka
7/01/2019

24,488
46.96
7/01/2027
 
7/01/2019
7,098
452,923
7,098
452,923