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The following is an excerpt from a DEF 14A SEC Filing, filed by LIONBRIDGE TECHNOLOGIES INC /DE/ on 3/23/2015.
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LIONBRIDGE TECHNOLOGIES INC /DE/ - DEF 14A - 20150323 - COMMITTEE_INTERLOCKS

Compensation Committee Interlocks and Insider Participation

Messrs. Dallas, de Chazal, Kavanagh, and Sheer comprised the Nominating and Compensation Committee for fiscal year 2014, with Mr. Dallas joining the Committee in October 2014 shortly after his election as a director. Mr. Sheer served as its Chairman. No member of our Nominating and Compensation Committee was at any time

 

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during the past year an officer or employee of Lionbridge or any of its subsidiaries, was formerly an officer of Lionbridge or any of its subsidiaries, nor had any relationship with Lionbridge requiring disclosure herein.

No executive officer of Lionbridge served as a member of a compensation committee (or other board committee performing similar functions or, in the absence of any such committee, the entire board of directors) of another corporation, one of whose executive officers served on Lionbridge’s Nominating and Compensation Committee. None of our executive officers served as a director of another corporation, one of whose executives served on the Nominating and Compensation Committee. None of our executive officers served as a member of a compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another corporation, one of whose executive officers served as a director of Lionbridge. In accordance with the Company’s Policy on Insider Trading, all directors and employees are prohibited from hedging any shares of Lionbridge stock.

Consideration of Candidates for Director

As noted above, our Nominating and Compensation Committee has responsibility for recommending nominees for election as directors of the Company. Any stockholder may submit recommendations of candidates for election as directors for consideration by the Nominating and Compensation Committee in writing to the Secretary at the executive offices of Lionbridge. Stockholder recommendations must generally be submitted no later than the close of business on the 90  th  day or no earlier than the close of business on the 120  th  day prior to the first anniversary of the preceding year’s annual meeting. Such recommendations must clearly indicate the candidate’s qualifications for service as a director and that such candidate’s qualifications meet or exceed the criteria for service as a director set forth in the Nominating and Compensation Committee Charter and Lionbridge’s Corporate Governance Guidelines. In particular, any candidate for consideration must have the following qualities or qualifications:

 

   

Be an individual of the highest character and integrity;

 

   

Be free of any conflict of interest that would violate any applicable law or regulation or interfere with the proper performance of the responsibilities of a director;

 

   

Be willing and able to devote sufficient time to the affairs of the Company and be diligent in fulfilling the responsibilities of a director and Board committee member (including developing and maintaining sufficient knowledge of the Company and its industry);

 

   

Have broad experience in the industries which comprise the Company’s customer base, including the financial services, life sciences, industrial or information technologies industries. or in the information technologies services industry;

 

   

Have the ability to provide insights and practical wisdom based on his or her experience and expertise; and

 

   

Have a commitment to enhancing stockholder value.

The Board of Directors has also identified specific strategic and technical expertise and experience it values in current and prospective Board members. These specific strategic competencies include current or recent experience as a chief executive or other “C-Level” officer, public company experience as a director or officer, digital media experience, international business experience, international finance experience, international human capital management expertise, and experience with cloud-based technology development and marketing, and generally, with internet-based commerce, business and marketing.

 

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In 2014, the Board targeted and recruited a new director with expertise in international human capital management, a competency identified as a top priority, and in October 2014, welcomed Mr. Dallas as a director. Mr. Dallas brings to the Board deep expertise in international human resources, including resource planning, integration and utilization. The Board believes that the skills and experience represented among current Board members and as described in greater detail in the “Directors” section of this proxy statement, reflect a full complement of the strategic, technical and practical expertise and experience required to serve the interests of the Company and its stockholders.

As described in its Charter, the Nominating and Compensation Committee meets periodically to evaluate each new director candidate and each incumbent director before recommending that the Board nominate or re-nominate such individual for election or reelection as a director. The Nominating and Compensation Committee bases its decision whether to recommend a nominee to the Board of Directors on the extent to which such individual meets the criteria described above and any additional criteria that may have been established by the Committee. The Committee seeks nominees with a broad diversity of experience (including experience as a director of Lionbridge), professions, skills, geographic representation and backgrounds although Lionbridge does not have a formal diversity policy. The Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Lionbridge believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law. The Committee is authorized to engage third parties, such as a director search firm, to aid in the identification of director candidates meeting the Committee’s criteria. In addition, the bylaws of the Company permit stockholders to nominate directors for consideration at an annual meeting of stockholders.

In February 2015, the Committee determined that each of Messrs. Fisher, Noonan and Sheer met the identified criteria for nomination for an additional term as a director of Lionbridge, and recommended to the full Board of Directors their re-election as Class I Directors of the Company. In particular, the Committee took note of Mr. Fisher’s global financial expertise, Mr. Noonan’s deep knowledge of information technology and Mr. Sheer’s experience in executive compensation and cloud-based commerce. The Board concurred with the recommendation of the Committee and unanimously nominated each of Messrs. Fisher, Noonan and Sheer for re-election.

 

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COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

Our Executive Officer group is comprised of the following senior leaders:

 

   

Rory Cowan, our CEO;

 

   

Henri Broekmate, our Senior Vice President of Global Client Solutions (“GCS”);

 

   

Donald Muir, our CFO;

 

   

Paula Shannon, our Chief Sales Officer (“CSO”);

 

   

Richard Tobin, our Senior Vice President and General Manager of Global Language and Translation (“GLT”); and

 

   

Marc Osofsky, our Senior Vice President of Global Offerings (“GO”).

Messrs. Cowan, Muir, Broekmate, Osofsky and Tobin, and Ms. Shannon are our Named Executive Officers (“NEOs”) in 2014. Our Compensation Discussion and Analysis (“CD&A”), and our information in the “Executive Compensation” section of this Proxy Statement which follows CD&A, describe our executive compensation program and the compensation decisions made for the 2014 NEOs.

Lionbridge’s executive compensation programs emphasize execution of our long-term strategic and commercial goals. These goals include revenue expansion, profitable growth, investment in strategic opportunities (including strategic acquisitions), and development and deployment of expanded or new service and technology offerings complementary to our existing portfolio of services. Our executive compensation programs are designed to reward achievement of business, strategic and financial results.

2014 marks a year of continued achievement by Lionbridge of its financial and business results and execution of the Company’s long-term strategic goals, including the completion of two acquisitions that broaden our digital marketing and software offerings. Our acquisition of CLS Communication AG, completed in early January 2015, further advances the Company’s strategic vision by adding new end markets for its services, strengthening its European management and diversifying its customer base. The vision and leadership of the CEO, Mr. Cowan, in setting and executing these strategic, financial and operational initiatives have enhanced stockholder value:

 

   

Delivered the fourth consecutive year of positive GAAP net earnings, with 2014 GAAP net earnings reaching approximately $8.1 million or $0.13 a share. Our non-GAAP earnings were approximately $25.5 million or $0.41 a share.

 

   

Generated approximately $20.5 million in cash flow from operations, evidencing the Company’s continued prudent fiscal management.

 

   

Ended the year with a strong cash position of $36.9 million at year end, after funding two acquisitions, infrastructure investments, and executing approximately $5.9 million to repurchase 1.1 million shares.

 

   

Secured more than 20 new engagements with world-leading brands across industry sectors including eCommerce, consumer, consulting, aerospace, automotive, gaming, technology and entertainment, telecommunications, and pharmaceutical industries.

 

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Scaled Lionbridge onDemand (tm) , an online model to market, sell and deliver a range of our multilingual solutions to customers rapidly online. Within its first year of operation, onDemand finished 2014 at an annualized run rate of over $4 million with further acceleration expected in FY 2015.

 

   

Continued to successfully scale our Global Marketing Operations offering aimed at helping global marketing executives manage and optimize digital marketing campaigns in international markets, and acquired Darwin Zone to accelerate production of these services.

 

   

Executed our growth strategy through vertical market expansion, enhancement of our technology platform and solutions (including through the acquisition of Clay Tablet Technologies), application of our scalable cloud technologies and scalable crowd workforce to scalable end markets.

We have designed our 2015 executive compensation decisions to continue to build on these successes.  Our executive compensation programs reward  achievement  of our multi-year strategic transformation from our position as a provider of localization and translation services for the world’s leading global enterprises to a provider of innovative, scalable, and enduring global technology services that transform the way people communicate across geographies, platforms and channels.

EXECUTIVE SUMMARY

We have designed our executive compensation programs to retain and motivate our executive leadership team to reach defined long-term strategic, financial and operational goals which include:

 

   

Enhancing Lionbridge’s leadership as a provider of state-of-the-art global services, solutions and technologies through its global workforce, global human capital management capabilities, and new offerings, such as global content management and digital marketing operations and through our technology-enabled service and technology offerings.

 

   

Diversifying the customer base for the Company’s expanded capabilities and its range of multi-lingual products and services, including cloud-based and technology enhanced solutions for particular industries and applications, content development, engineering and technical writing services, real-time translation technologies, global human capital management, and global marketing and web operations services;

 

   

Identifying and executing strategic acquisitions (most recently the acquisition of CLS Communication) to expand our portfolio of products, services and technologies and to diversify our customer base and end-markets for our services;

 

   

Prudent and responsible fiscal management, including a strong balance sheet that can be leveraged to fund acquisitions, foreign currency management, the on-going stock buy-back to manage shareholder dilution, and to reduce the annual burn-rate associated our equity grants;

 

   

Offering our full suite of product and services solutions to new and existing customers while streamlining Lionbridge’s cost structure and improving operating efficiencies; and

 

   

Investing in internal systems and processes to improve operational efficiencies worldwide, including the completion of a three-year, 30 country implementation of a global cost management system.

 

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Program Design.

Our 2014 executive compensation program is consistent with our 2013 program, which received strong support (95%) from our stockholders in the “say on pay” advisory vote conducted at our Annual Meeting of Stockholders in May 2014.

Our 2014 executive compensation programs consist of four elements, which emphasize long- and short-term cash and equity components to reward achievement of these goals and to attract and retain the key talent necessary to meet them, without significant dilution of our stockholders. These components are:

 

   

Base Salary

 

   

Annual Cash-based Incentive Compensation

 

   

Annual Equity-based Incentive and Retention Compensation

 

   

Long-Term Performance-based Compensation

Based on the mix of these items, 74% of our CEO’s and 65% of our other NEOs’ compensation in 2014 was comprised of variable, or “at risk” compensation, which was a higher percentage than the average of our peers.

Emphasis on Performance.  Our ability to meet and exceed customer and stockholder expectations is directly linked to the performance of our leadership. Accordingly, we design and deliver an executive compensation program that is motivating, competitive, balanced across elements and strongly tied to annual and long-term performance. At the same time, our programs emphasize accountability and results and do not reward achievement below agreed-upon performance metrics. 2014 executive compensation programs were heavily weighted toward the achievement of performance objectives, primarily through the annual cash incentive plan (the “Management Incentive Plan” or “MIP”) and long-term performance-based equity awards (“LTIP”). Our MIP includes a “Product Line Performance Metric” or “PLPM”, applicable to NEOs responsible for a dedicated line of business. This provides an additional performance metric targeted to achievements within the product line for which the NEO is responsible. The Committee does not establish performance metrics with the expectation that these will easily be achieved; rather, it views these metrics as a meaningful incentive and “stretch” goals for senior managers to strive for exceptional performance. When performance metrics are not fully achieved, NEOs forfeit a portion of their performance-based cash or equity compensation.

The Committee has stringently assessed the attainment of these objectives by each NEO. In 2014, no NEO fully attained all of the performance targets of the MIP or the LTIP:

 

   

2014 MIP : In 2014, the revenue component of MIP was funded at 82%, reflecting 93% attainment of the revenue target and the profitability component was funded at 62%, reflecting 77.7% attainment of the profitability target. While both the revenue and profitability  thresholds  for payment of the 2014 MIP were achieved, the  target for full funding  of each component was not achieved.

 

   

LTIP : Approximately 4% of the shares granted under the 2013 LTIP, with vesting based on achievement of profitability and revenue metrics measured during the two year period starting on January 1, 2013 through December 31, 2014, were forfeited when the Company failed to fully meet the metrics applicable to that award.

 

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Declining Burn-Rate; Management of Dilution. At the direction of the Board of Directors and the Committee, the Company has reduced its annual unadjusted burn-rate (on both a granted and vested basis) in each year since 2012:

 

Year

   Percent (Granted  Basis) 1     Percent (Vested  Basis) 2  

2012:

     4.25     4.04

2013:

     3.53     3.85

2014:

     3.10     3.24

 

1  

Actual number of awards granted in the year, including the full number of shares issued as performance awards without regard to forfeitures when performance metrics have not been attained.

 

2  

Number of awards granted in the year, including the actual number of performance shares vested and excluding shares forfeited when performance metrics were not attained.

This consistent, year-on-year reduction of burn-rate was accomplished even though the Company made significant equity grants to attract key new talent, including Mr. Tobin in 2013, and equity awards to new employees in connection with four acquisitions during 2012 through 2014. The Board of Directors has authorized and executed an on-going stock buy-back program under which 2.8 million shares have been repurchased during 2013 and 2014 and expects to continue this program for the foreseeable future. The Committee also manages burn-rate and dilution by granting equity based on value rather than number of shares during grant cycles when the Company’s stock price has appreciated from year to year (as has been the case between January 2013 and January 2015), which results in the issuance of a lower number of shares.

Meaningful Incentives for Future Growth. The Nominating and Compensation Committee believes its executive compensation programs in 2014 rewarded revenue and profitability growth in 2014 as well as execution of key strategic initiatives that are intended to provide continued revenue and profitability growth in the future. These programs were also successful in providing a meaningful incentive for the achievement of the continued development and deployment of innovative, sophisticated and profitable commercial offerings based on Lionbridge’s multi-lingual and crowd management technologies and cloud-based solutions, as well as achievement of financial and operating leverage and technology advancements. The Committee notes the Company’s continued prudent fiscal management and development of a strong balance sheet, which allowed the Company to access capital on favorable terms to make key strategic acquisitions and investments in its business. The Committee has concluded that the design of executive compensation programs did not encourage inappropriate risk-taking as the Company carried out its strategic and operational investments. The Committee has determined that these programs have encouraged sustained achievement of longer-term goals and initiatives, and maintained a motivated and engaged leadership team. In particular, the Committee notes that these programs have helped attract key new talent to the Company’s senior management team, including Mr. Tobin, who joined the Company in September 2013 as Senior Vice President and General Manager of GLT.

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