HOULIHAN LOKEY, INC.
10-Ks and 10-Qs
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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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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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Houlihan Lokey, Inc.
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(Name of Registrant as Specified In Its Charter)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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August 5, 2020
Dear Stockholder,
We cordially invite you to attend our
2020
Annual Meeting of Stockholders, to be held on
Thursday, September 24, 2020
, at 9:00 a.m. (Pacific Time), at our headquarters located at 10250 Constellation Blvd., 5th Floor, Los Angeles, CA 90067.
The Notice of Annual Meeting of Stockholders and the proxy statement that follow describe the business to be conducted at the meeting.
Your vote is important. We encourage you to vote by proxy in advance of the meeting, whether or not you plan to attend the meeting.
Sincerely,
Scott L. Beiser
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Meeting Date:
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Thursday, September 24, 2020
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Time:
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9:00 a.m. (Pacific Time)
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Place:
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Houlihan Lokey, Inc.
10250 Constellation Blvd., 5th Floor
Los Angeles, CA 90067
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We are holding our
2020
annual meeting of stockholders for the following purposes, which are described in more detail in the proxy statement:
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1.
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to elect two Class II directors to our board of directors;
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2.
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to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the accompanying Proxy Statement;
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3.
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to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending
March 31, 2021
; and
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4.
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to transact any other business as may properly come before the meeting or any adjournment or postponement thereof.
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Only stockholders of record as of the close of business on
July 28, 2020
will be entitled to notice of, and to vote at the annual meeting.
As permitted by the rules of the Securities and Exchange Commission, we are sending our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) rather than a paper set of the proxy materials. The Notice includes instructions on how to access our proxy materials over the internet, as well as how to request the materials in paper form.
Your vote is important. We encourage you to vote by proxy in advance of the meeting, whether or not you plan to attend the meeting. The Notice includes instructions on how to vote, including by internet or telephone. If you hold your shares through a brokerage firm, bank, broker-dealer or other similar organization, please follow their instructions.
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By order of the board of directors,
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Christopher Crain
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General Counsel and Secretary
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August 5, 2020
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING TO BE HELD ON
SEPTEMBER 24, 2020
.
The Company’s Proxy Statement and
2020
Annual Report on Form 10-K
are also available at www.proxyvote.com.
TABLE OF CONTENTS
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Page
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Although we refer to our website in this Proxy Statement, the contents of our website are not included or incorporated by reference into this Proxy Statement. All references to our website in this Proxy Statement are intended to be inactive textual references only.
PROXY STATEMENT
2020
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
SEPTEMBER 24, 2020
GENERAL INFORMATION
Houlihan Lokey, Inc. (“Houlihan Lokey” or the “Company”) is making this Proxy Statement available to its stockholders on or about
August 5, 2020
in connection with the solicitation of proxies by the board of directors for our
2020
Annual Meeting of Stockholders (the “Annual Meeting”) to be held on
Thursday, September 24, 2020
, at 9:00 a.m. (Pacific Time), at our headquarters located at 10250 Constellation Blvd., 5th Floor, Los Angeles, CA 90067, and any adjournment or postponement of the Annual Meeting. As a stockholder, you are invited to attend the Annual Meeting and are entitled and encouraged to vote on the proposals described in this Proxy Statement. On or about
August 5, 2020
, we mailed our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement and our
2020
Annual Report on Form 10-K (“Form 10-K”).
Houlihan Lokey (NYSE:HLI) is a global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation. The firm serves corporations, institutions, and governments worldwide with offices in the United States, Europe, the Middle East, and the Asia-Pacific region. Independent advice and intellectual rigor are hallmarks of the firm’s commitment to client success across its advisory services. Houlihan Lokey is the No. 1 M&A advisor for the past five consecutive years in the U.S., the No. 1 global restructuring advisor for the past six consecutive years, and the No. 1 global M&A fairness opinion advisor over the past 20 years, all based on number of transactions and according to data provided by Refinitiv (formerly Thomson Reuters).
Unless the context otherwise requires, as used in this Proxy Statement, the terms the “Company,” “Houlihan Lokey, Inc.,” “Houlihan Lokey,” “HL,” “our firm,” “we,” “us” and “our” refer to (i) prior to the corporate reorganization described under “Organizational Structure,” in the Form 10-K, Houlihan Lokey, Inc., a California corporation (“HL CA”), and (ii) following such corporate reorganization, Houlihan Lokey, Inc., a Delaware corporation, and, in each case, unless otherwise stated, all of its subsidiaries. We use the term “ORIX USA” to refer to ORIX Corporation USA, a Delaware corporation and a wholly owned subsidiary of ORIX Corporation, a Japanese corporation. References to ORIX USA as a holder of our shares mean ORIX USA acting through its indirect wholly owned subsidiary, ORIX HLHZ Holding LLC, a Delaware limited liability company. We use the term “HL Holders” to refer to our current and former employees and members of our management who hold our Class B common stock through the Houlihan Lokey Voting Trust (the “HL Voting Trust”). We use the term “Fram” to refer to Fram Holdings, Inc., a Delaware corporation and formerly our indirect parent. References to the “IPO” mean our initial public offering in August 2015 of 12,075,000 shares of Houlihan Lokey, Inc. Class A common stock in connection with which HL CA reorganized its business. Our fiscal year ends on March 31st; references to any fiscal year are to the 12-month period ending on March 31st of such year; references in this Proxy Statement to years are to calendar years unless otherwise noted.
Below are answers to common questions stockholders may have about the Proxy Materials and the Annual Meeting.
What are the Proxy Materials?
The “Proxy Materials” are this Proxy Statement and our Form 10-K. If you request printed versions of the Proxy Materials, and you are entitled to vote at the Annual Meeting, you will also receive a proxy card.
Why did I receive a Notice of Internet Availability of Proxy Materials instead of a full set of materials?
Under rules adopted by the Securities and Exchange Commission (the “SEC”), we are furnishing Proxy Materials to many of our stockholders on the internet, rather than mailing printed copies. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive printed copies of the Proxy Materials unless you request them. Instead, the notice will instruct you how to access and review the Proxy Materials on the internet. If you would like printed copies of the Proxy Materials, please follow the instructions in the notice.
Who may vote at the meeting?
Holders of our Class A common stock and holders of our Class B common stock as of the close of business on
July 28, 2020
(the “Record Date”) may vote at the Annual Meeting. Pursuant to the Voting Trust Agreement by and among the Company, each HL Holder and the Trustees named therein dated August 18, 2015, as amended (as so amended, the “Voting Trust Agreement”), each HL Holder agreed that the Trustees of the HL Voting Trust have full authority to vote his or her shares on all matters.
Because all outstanding shares of Class B common stock are held by the HL Voting Trust and voted by the Trustees of the HL Voting Trust, individual HL Holders of Class B common stock will not receive proxy cards and are not eligible to cast votes at the Annual Meeting.
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How many votes do I have?
Holders of our Class A common stock are entitled to one vote for each share held as of the Record Date. Holders of our Class B common stock are entitled to ten votes for each share held as of the Record Date. Holders of our Class A common stock and Class B common stock will vote as a single class on all matters at the Annual Meeting. Pursuant to the Voting Trust Agreement, each HL Holder has agreed that the Trustees of the HL Voting Trust have full authority to vote his or her shares on all matters.
Because all outstanding shares of Class B common stock are held by the HL Voting Trust and voted by the Trustees of the HL Voting Trust, individual HL Holders of Class B common stock will not receive proxy cards and are not eligible to cast votes at the Annual Meeting.
What items will be voted on at the Annual Meeting and how does the board of directors recommend that I vote?
There are
three
proposals to be voted on at the Annual Meeting:
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1.
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to elect
two
Class II
directors to our board of directors;
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2.
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to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the accompanying Proxy Statement; and,
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3.
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to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending
March 31, 2021
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Our board of directors recommends a vote FOR each nominee as a Director and FOR proposals 2 and 3. Our amended and restated bylaws require that we receive advance notice of any proposals to be brought before the Annual Meeting by our stockholders. We have not received any such proposals. We do not anticipate any other matters will come before the Annual Meeting. If any other matter properly comes before the Annual Meeting, the proxy holders appointed by our board of directors will have discretion to vote the shares subject to such proxies on those matters.
How many shares may be voted at the Annual Meeting?
Only stockholders of record as of the close of business on the Record Date will be entitled to vote at the Annual Meeting. As of the close of business on the Record Date, there were
50,733,185
shares of Class A common stock and
18,745,572
shares of Class B common stock entitled to vote. Holders of our Class A common stock are entitled to one vote for each share held as of the Record Date, and holders of our Class B common stock are entitled to ten votes for each share held as of the Record Date.
What vote is required for each proposal?
For the election of the directors, each director must be elected by a plurality of the votes cast. This means that the two nominees receiving the largest number of “for” votes will be elected as directors. We do not have cumulative voting.
The approval, on an advisory basis, of the compensation of our named executive officers, and the ratification of the Company’s independent registered public accounting firm for the fiscal year ending
March 31, 2021
, and any other proposals that may come before the Annual Meeting will be determined by the majority of the votes cast.
We expect the HL Voting Trust to vote in favor of the
two
nominees for
Class II
directors. As of the Record Date, the HL Voting Trust holds sufficient shares of our common stock to ensure the election of such nominees at the Annual Meeting.
How are abstentions and broker non-votes counted?
Abstentions (shares present at the meeting in person or by proxy that are voted “abstain”) and broker non-votes (explained below) are counted for the purpose of establishing the presence of a quorum, but are not counted as votes cast.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Stockholder of Record.
If your shares are registered directly in your name with our transfer agent, Computershare, you are a stockholder of record. Each HL Holder is not a stockholder of record by virtue of shares he or she beneficially holds through the HL Voting Trust.
Beneficial Owner of Shares Held in Street Name.
If your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are a beneficial owner of shares held in “street name.” The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct the organization holding your account on how to vote the shares you hold in your account.
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How do stockholders of record vote?
There are four ways for stockholders of record to vote:
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Via the internet:
You may vote via the internet until 11:59 p.m. (Eastern Time) on the day before the Annual Meeting by visiting
http://www.proxyvote.com
and entering the unique control number for your shares located on the Notice of Internet Availability of Proxy Materials.
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By telephone:
You may vote by phone until 11:59 p.m. (Eastern Time) on the day before the Annual Meeting by calling (800) 690-6903. You will need the control number from your Notice of Internet Availability of Proxy Materials.
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By mail:
If you requested that Proxy Materials be mailed to you, you will receive a proxy card with your Proxy Materials. You may vote by filling out and signing the proxy card and returning it in the envelope provided. The proxy card must be received by 5:00 p.m. (Pacific Time) on the day before the Annual Meeting.
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In person:
You may also vote your shares in person by completing a ballot at the Annual Meeting.
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How do beneficial owners of shares held in street name vote?
If you hold your shares through a brokerage firm, bank, broker-dealer or other similar organization, please follow their instructions.
Can I change my vote after submitting a proxy?
Stockholders of record may revoke their proxy before the Annual Meeting by delivering to the Company’s General Counsel and Secretary a written notice stating that a proxy is revoked, by signing and delivering a proxy bearing a later date, by voting again via the internet or by telephone or by attending and voting in person at the Annual Meeting.
Beneficial owners of shares held in street name who wish to change their votes should contact the organization that holds their shares.
If I hold shares in street name through a broker, can the broker vote my shares for me?
If you hold your shares in street name and you do not vote, the broker or other organization holding your shares can vote on certain “routine” proposals but cannot vote on other proposals. Proposals 1 and 2 are not considered “routine” proposals. Proposal 3 is a “routine” proposal. If you hold shares in street name and do not vote on Proposal 1 and 2, your shares will be counted as “broker non-votes.”
Who is paying for this proxy solicitation?
The Company is paying the costs of the solicitation of proxies. Members of our board of directors and officers and employees may solicit proxies by mail, telephone, fax, email or in person. We will not pay directors, officers or employees any extra amounts for soliciting proxies. We may, upon request, reimburse brokerage firms, banks or similar entities representing street name holders for their expenses in forwarding Proxy Materials to their customers who are street name holders and obtaining their voting instructions.
What do I need to do if I want to attend the meeting?
You will need to provide evidence that you are a stockholder as of the Record Date. This can be a copy of your proxy card or a brokerage statement showing your shares. You should also bring photo identification. If you hold your shares in street name and wish to vote in person at the meeting, you will need to contact the organization that holds your shares in order to obtain a legal proxy from that organization.
Where can I find voting results?
We will file a Current Report on Form 8-K with the SEC including the final voting results from the Annual Meeting within four business days of the Annual Meeting.
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I share an address with another stockholder. Why did we receive only one set of Proxy Materials?
Some banks, brokers and nominees may be participating in the practice of “householding” Proxy Materials. This means that only one copy of our Proxy Materials may be sent to multiple stockholders in your household. If you hold your shares in street name and want to receive separate copies of the Proxy Materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact the bank, broker, or other nominee who holds your shares.
Upon written or oral request, the Company will promptly deliver a separate copy of the Proxy Materials to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Proxy Materials, you can contact Houlihan Lokey Investor Relations at (212) 331-8225, IR@HL.com, or by mail at HLI Investor Relations, c/o ICR, 685 Third Avenue, New York, NY 10017.
Who should I contact if I have additional questions?
You can contact Houlihan Lokey Investor Relations at (212) 331-8225 or IR@HL.com. Stockholders who hold their shares in street name should contact the organization that holds their shares for additional information on how to vote.
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PROPOSAL 1: ELECTION OF DIRECTORS
Our amended and restated bylaws provide that our board of directors shall consist of such number of directors as shall from time to time be fixed by our board of directors. Currently, our board of directors is composed of
eight
members,
four
of whom are independent directors as defined under the rules of the New York Stock Exchange. Further, our amended and restated certificate of incorporation and our amended and restated bylaws provide for the division of our board of directors into three classes, as nearly equal in number as possible, with each class serving for three‑year staggered terms. At each annual meeting of stockholders after the initial classification, the successors to the directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following their election. Our directors currently are divided among the three classes as follows:
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the Class I directors are Scott L. Beiser, Paul A. Zuber and Jacqueline B. Kosecoff, and their terms will expire at the annual meeting of stockholders to be held in
2022
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the Class II directors are Irwin N. Gold and Gillian B. Zucker, and their terms will expire at the annual meeting of stockholders to be held in
2020
; and
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the Class III directors are Scott J. Adelson, David A. Preiser and Robert A. Schriesheim, and their terms will expire at the annual meeting of stockholders to be held in
2021
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At the Annual Meeting, the stockholders will vote to elect as Class II directors of the Company the two nominees named in this Proxy Statement. Each of the Class II directors elected at the Annual Meeting will hold office until the
2023
Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified. The board of directors has nominated Mr. Gold and Ms. Zucker for re-election to serve as the Class II directors of the Company. The persons named as proxies will vote to elect this nominee unless a stockholder indicates that his or her shares should be withheld with respect to one or more of such nominees.
We expect the HL Voting Trust to vote in favor of the
two
nominees for
Class II
directors. Please see “Certain Relationships and Related Person Transactions,” below for a description of the HL Voting Trust Agreement.
In the event that any nominee for director becomes unavailable or declines to serve as a director at the time of the Annual Meeting, the persons named as proxies will vote the proxies in their discretion for any nominee who is designated by the current board of directors to fill the vacancy. All of the nominees are currently serving as directors and we do not expect that any of the nominees will be unavailable or will decline to serve.
In determining that each director should be nominated for re-election, our board of directors considered his or her service, business experience, prior directorships, and the qualifications, attributes and skills described in the biography set forth below under “Corporate Governance - Executive Officers and Directors.”
Our Board of Directors recommends that you vote “FOR” each of Mr. Gold and Ms. Zucker as the
Class II
Directors in this Proposal 1.
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CORPORATE GOVERNANCE
Executive Officers and Directors
Below is a list of the names and ages, as of
July 28, 2020
, of our directors and executive officers, and a description of the business experience of each of them.
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Name
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Age
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Position
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Scott L. Beiser
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60
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Chief Executive Officer and Director
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Irwin N. Gold
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63
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Executive Chairman and Director
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Scott J. Adelson
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59
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Co‑President and Director
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David A. Preiser
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63
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Co‑President and Director
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J. Lindsey Alley
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53
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Chief Financial Officer
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Christopher M. Crain
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59
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General Counsel and Secretary
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Robert A. Schriesheim
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60
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Director
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Jacqueline B. Kosecoff
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71
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Director
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Paul A. Zuber
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60
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Director
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Gillian B. Zucker
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51
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Director
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Scott L. Beiser
has served as our Chief Executive Officer since 2003 and on our board of directors since 1991. His responsibilities include managing Houlihan Lokey’s operations, identifying and developing new strategic opportunities, and pursuing and managing new and existing client relationships. Mr. Beiser previously led Houlihan Lokey’s Infrastructure Services and Materials practice and has specialized expertise in investment banking services for engineering and construction businesses, including ownership and management transition programs, corporate acquisitions, divestitures, leveraged recapitalizations, and ESOP transactions. Mr. Beiser serves on the board of directors of FNF Construction and is an advisor to several boards and executives in the engineering and construction industry. Mr. Beiser earned both a B.S. and an M.S. in Finance from the College of Business and Economics at California State University, Northridge. Mr. Beiser was chosen to be on our board of directors because of his leadership in our development and growth, and his particular knowledge and experience in strategic planning and leadership of complex organizations. Mr. Beiser has been with Houlihan Lokey for more than
36 years
.
Irwin N. Gold
has served as our Executive Chairman since 2013 and on our board of directors since 1994. Mr. Gold is one of Houlihan Lokey’s senior executives responsible for strategic planning, client relations and business development, and manages the firm in conjunction with the other three members of the Office of the Executives. Mr. Gold co‑founded the Company’s industry‑leading Financial Restructuring practice and was the Global Co‑Head of Financial Restructuring from 1988 until 2012. In that role, Mr. Gold has led many of the Company’s largest and most complex Financial Restructuring engagements, both in bankruptcy and out‑of‑court situations. Mr. Gold has previously served on the boards of directors of Cole National Group, Inc., Advantica Restaurant Group, Inc. and The Bibb Company. Mr. Gold earned a B.A. in Economics, summa cum laude and Phi Beta Kappa, from Duke University and a J.D. from the University of Virginia Law School. Mr. Gold was chosen to be on our board of directors because of his long career in the financial services industry, and because he possesses particular knowledge and experience in the financial services industry and in leadership of complex organizations. Mr. Gold has been with Houlihan Lokey for more than
32 years
.
Scott J. Adelson
has served as our Co‑President since 2013, and has been a Senior Managing Director in our Corporate Finance group since 2002. As Co-President, Mr. Adelson is one of Houlihan Lokey’s senior executives responsible for strategic planning, client relations and business development, and manages the firm in conjunction with the other three members of the Office of the Executives. Mr. Adelson also serves as the Global Co‑Head of Corporate Finance. His practice embraces all aspects of corporate finance, including mergers and acquisitions, leveraged buyouts, and the issuance of debt and equity capital. He is an active board member of various public and private companies, including Motorcar Parts of America, Inc. and QAD Inc. Mr. Adelson completed his undergraduate studies at the University of Southern California and earned his M.B.A. from the University of Chicago Booth School of Business. Mr. Adelson was chosen to be on our board of directors because of his long career in the financial services industry, and because he possesses particular knowledge and experience in strategic planning and board practices of other corporations. Mr. Adelson has been with Houlihan Lokey for more than
32 years
.
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David A. Preiser
has served as our Co‑President since 2013 and has been a Senior Managing Director in our Financial Restructuring group since 2008. Among his duties, he serves as Chairman of Houlihan Lokey EMEA, LLP. In the course of his more than two decades at Houlihan Lokey, Mr. Preiser has led many major transactions involving financially distressed companies, both in bankruptcy and in out‑of‑court situations, many of which have involved the sale or purchase of distressed assets. Mr. Preiser earned a B.A. in Economics and graduated magna cum laude from the University of Virginia. He earned a J.D. with honors from Columbia University, where he also served as an Editor of the Columbia Law Review, was named a Harlan Fisk Stone Scholar, and is currently a member of the Dean’s Council. Mr. Preiser currently sits on the board of directors of NVR, Inc., a New York Stock Exchange‑listed company, where he currently chairs the Nominating and Governance Committee, and serves on the Compensation Committee. Mr. Preiser has previously served on the boards of directors of Joseph A. Bank, Inc., where he served as chair of the Compensation Committee, as well as Sudbury, Inc. and MLX, Inc. Mr. Preiser was chosen to be on our board of directors because of his long career in the financial services industry, his leadership role in our development and growth, and his particular knowledge and expertise in managing and growing international organizations and executing international transactions. Mr. Preiser has been with Houlihan Lokey for more than
29 years
.
J. Lindsey Alley
has served as our Chief Financial Officer since December 2012. In his role as Chief Financial Officer, Mr. Alley oversees our accounting and financial reporting operations as well as acquisition business development. Mr. Alley joined Houlihan Lokey in 1995 and was an investment banker focusing on advising public and private clients, boards of directors, and special committees on sell side and buy side mergers and acquisitions prior to being appointed to the Chief Financial Officer role in December 2012. Mr. Alley earned a B.S. in Systems Engineering from the University of Virginia and graduated with highest distinction with an M.B.A. in Finance from the University of Michigan. Mr. Alley has been with Houlihan Lokey for more than
25 years
.
Christopher M. Crain
has served as our General Counsel since September 2004. In that role, he directly manages our Legal and Compliance department. Mr. Crain earned a B.A. in Political Science from the University of California at Davis and a J.D., cum laude, from Loyola Law School. Mr. Crain’s experience prior to Houlihan Lokey includes working as an attorney with a global law firm, where he focused on financing transactions, infrastructure projects and environmental law, and as an executive for related nationally-recognized non-profit organizations focused on K-12 education, medical research, and access to capital. Mr. Crain has been with Houlihan Lokey for more than
15 years
.
Robert A. Schriesheim
has served on our board of directors since 2015. Mr. Schriesheim is chairman of Truax Partners LLC and serves as a board member of public and private companies typically undergoing transformations while partnering with boards and institutional investors. Previously, Mr. Schriesheim served as the Executive Vice President and Chief Financial Officer of Sears Holdings Corporation from August 2011 until October 2016. He served as the Chief Financial Officer of Hewitt Associates, Inc., a global human resources consulting and outsourcing company, from January 2010 to October 2010. From 2006 to 2009, he served as Executive Vice President and Chief Financial Officer of Lawson Software, Inc., an ERP software provider. From August 2002 to October 2006, he was affiliated with ARCH Development Partners, LLC, a seed stage venture capital fund. Before joining ARCH, Mr. Schriesheim held executive positions at Global TeleSystems, SBC Equity Partners, Ameritech, AC Nielsen and Brooke Group Ltd. Mr. Schriesheim has served as a director of Skyworks Solutions, Inc. since May 2006 and is chairman of its audit committee. From August 2015 until its sale in December 2019, he served as a director of NII. Since December 2018, he has served as a director of Frontier Communications, where he serves on the Audit Committee and is the chair of the finance committee. From April to December 2018, he also served as a director of Forest City Realty Trust and served as the chair of its audit committee until its sale. Mr. Schriesheim earned an AB in Chemistry from Princeton University and an M.B.A. from the University of Chicago Booth School of Business. Mr. Schriesheim was chosen to be on our board of directors because of his expertise in corporate finance and capital markets, as well as his particular knowledge in public company governance and board practices of other corporations.
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7
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Jacqueline B. Kosecoff
is a Managing Partner of Moriah Partners, where she works to identify, select, mentor and manage health services and IT companies, and has served on our board of directors since 2015. Dr. Kosecoff is also a Senior Advisor of Warburg Pincus. From 2002 to 2012, Dr. Kosecoff was a senior executive inside UnitedHealth Group-PacifiCare. Dr. Kosecoff joined UnitedHealth Group as part of its acquisition of PacifiCare Health Systems in 2005. At PacifiCare, Dr. Kosecoff served as Executive Vice President with responsibility for various business segments including its behavioral, dental, Part D and PBM businesses and, upon joining UnitedHealth Group, Dr. Kosecoff was appointed Chief Executive Officer of Prescription Solutions (now known as OptumRx). Prior to joining UnitedHealth Group-PacifiCare, Dr. Kosecoff was founder, President and Chief Operating Officer of Protocare, a firm whose lines of business included the clinical development of drugs, devices, biopharmaceutical and nutritional products, and health services consulting. Dr. Kosecoff served as Professor of Medicine and Public Health at the University of California, Los Angeles from 1975 to 2006. From July 2012 through February 2019, Dr. Kosecoff served on the board of directors of athenahealth, Inc. Currently, Dr. Kosecoff sits on the board of directors of three other public companies: Sealed Air Corporation, STERIS Corporation, and TriNet. Dr. Kosecoff holds a B.A. from the University of California, Los Angeles, an M.S. in Applied Mathematics from Brown University, and a doctorate from University of California, Los Angeles. Dr. Kosecoff was appointed to serve on our board of directors because of her extensive experience in managing organizations and her experience serving on the boards of other public companies.
Paul A. Zuber
is an Operating Partner at Thoma Bravo, a private equity firm focused on the software and technology-enabled services sectors and has served on our board of directors since 2018. Prior to joining Thoma Bravo in 2011, Mr. Zuber was the founding Chief Executive Officer of Dilithium Networks, a global provider of mobile video infrastructure solutions until Dilithium was acquired by OnMobile, a global leader in telecommunications services listed on the National Stock Exchange of India. Mr. Zuber was previously the Chief Executive Officer and co-founder of Bluegum Group, a full-service, electronics manufacturing services provider serving the Asia Pacific region, which was acquired in 2002 by Solectron, a global electronics manufacturing company. Prior to founding Bluegum Group in 1997, Mr. Zuber held a variety of senior management positions at Ready Systems, a leader in software development environments for microprocessor-based embedded systems. Ready Systems merged with Microtec, went public, and was later acquired by Mentor Graphics, a leader in electronic design automation software. Mr. Zuber began his career as a management consultant with Bain & Company, where he was a founding member of the team that became the private equity group Bain Capital and also performed strategy consulting for Fortune 500 technology companies. Mr. Zuber currently serves on the board of directors of several software and technology service companies in which certain private equity funds advised by Thoma Bravo hold an investment, including Dynatrace Holdings LLC (“Dynatrace”), an enterprise cloud software company. Mr. Zuber has been a director and Nominating committee member at Dynatrace since January 2015. Mr. Zuber is a Phi Beta Kappa graduate of Stanford University, where he earned B.A. degrees with honors in both International Relations and Economics. Mr. Zuber also holds an M.B.A. from Stanford University Graduate School of Business. Mr. Zuber was chosen to serve on our board of directors because of his extensive experience in successfully creating, growing and managing global companies.
Gillian B. Zucker
is the President of Business Operations of the L.A. Clippers and has served on our board of directors since 2019. Ms. Zucker is a sports industry veteran with more than 25 years of experience in the industry. Prior to joining the Clippers in 2014, Ms. Zucker served in various roles at the Auto Club Speedway, the largest race track on the West Coast, including serving as President from 2005 to 2014. During this time, she also served on the International Speedway Corporation executive management team overseeing the Chicagoland and Kansas Speedways from 1998 to 2014. Prior to her time at Auto Club Speedway, Ms. Zucker served as Daytona International Speedway’s Vice President of Business and Development from 1998 to 2014. She joined International Speedway Corporation (“ISC”), the owner of Auto Club Speedway, in 1998, where she served on the executive management team from 2005 to 2014. Before joining ISC, Ms. Zucker worked in Minor League Baseball, serving as Assistant General Manager of the Durham (NC) Bulls from 1995 to 1998. A graduate of Hamilton College, Ms. Zucker serves on the board of the Young Presidents Organization and acts as the Clippers’ NBA Alternate Governor. Ms. Zucker was chosen to serve on our board of directors because of her extensive experience in successfully managing complex business organizations as well as her experience in creating and demonstrated commitment to diversity and inclusion initiatives in those companies.
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8
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Composition of our Board of Directors
Our business affairs are managed under the direction of our board of directors.
Our amended and restated bylaws provide that our board of directors shall consist of such number of directors as shall from time to time be fixed by our board of directors. Currently, our board of directors is composed of
eight
members,
four
of whom are independent directors as defined under the rules of the New York Stock Exchange. Further, our amended and restated certificate of incorporation and our amended and restated bylaws provide for the division of our board of directors into three classes, as nearly equal in number as possible, with each class serving for three‑year staggered terms. At each annual meeting of stockholders after the initial classification, the successors to the directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following their election. Our directors currently are divided among the three classes as follows:
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•
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the Class I directors are Messrs. Beiser and Zuber and Dr. Kosecoff, and their terms will expire at the annual meeting of stockholders to be held in
2022
;
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•
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the Class II directors are Mr. Gold and Ms. Zucker, and their terms will expire at the annual meeting of stockholders to be held in
2020
; and
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•
|
the Class III directors are Messrs. Adelson, Preiser and Schriesheim, and their terms will expire at the annual meeting of stockholders to be held in
2021
.
|
Each of our executive officers serves at the discretion of our board of directors and holds office until his or her successor is duly appointed and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.
When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth herein. We believe that our directors provide an appropriate mix of experiences and skills relevant to the size and nature of our business.
Director Nomination and Removal Process
Our board of directors selects candidates for nomination to our board of directors and welcomes recommendations for director candidates from stockholders.
Our amended and restated certificate of incorporation provides that, prior to the Final Conversion Date (the date on which (x) the aggregate outstanding shares of common stock owned by (i) ORIX USA, (ii) the HL Voting Trust and (iii) the beneficiaries of the HL Voting Trust or certain of their transferees, together with (y) the outstanding shares of our common stock (A) received by a holder of our common stock in connection with the grant, vesting and/or payment of an equity compensation award and (B) with respect to which such holder has given the right to vote, pursuant to an irrevocable proxy, to the person or persons as may be designated by us from time to time, collectively represent less than 20% of the then aggregate outstanding shares of common stock, or on a date specified by the holders of at least 66-2/3% of the outstanding shares of Class B common stock), directors may be removed with or without cause by the affirmative vote of the holders of a majority of the voting power of the then aggregate outstanding shares of common stock entitled to vote generally in the election of directors, voting together as a single class. From and after the Final Conversion Date, directors may be removed by stockholders only for cause and only with the affirmative vote of at least 66-2/3% of the voting interest of stockholders entitled to vote. Our amended and restated certificate of incorporation also provides that any vacancy on our board of directors may be filled by a majority of the directors then in office.
On November 19, 2019, Ms. Zucker was appointed to the Board of Directors.
On June 30, 2020, Hideto Nishitani resigned from the board of directors, and the board subsequently reduced the size of the board to eight members.
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9
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The board of directors will consider a candidate nominated by a stockholder in a manner consistent with its evaluation of potential nominees, so long as the nomination meets the requirements of our bylaws, as summarized below. The notice of nomination should include the following information:
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•
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the stockholder’s name, record address, and name and principal place of business;
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•
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the name, age, business address, residence address, and principal occupation or employment of the nominee;
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•
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the class or series, and number of all shares of the Company’s stock owned beneficially or of record by the stockholder and the nominee;
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•
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whether and the extent to which any derivative or other instrument, transaction, agreement, or arrangement has been entered into by the stockholder or the nominee with respect to the Company’s stock;
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•
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a description of all agreements or arrangements to which the stockholder or the nominee is a party with respect to the nomination, the Company or the Company’s stock;
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a description of agreements or arrangements entered into by the stockholder or the nominee with the intent to mitigate loss, manage risk or benefit from changes in the stock price or increase or decrease the stockholder’s voting power;
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•
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a representation that the stockholder will attend the meeting in person or by proxy to nominate the persons named in its notice; and
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•
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any other information related to the stockholder or the nominee required to be disclosed in the solicitation of proxies for election of directors under federal securities laws.
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The notice must be accompanied by the nominee’s consent to be elected and to serve as a director and include certain representations and agreements by the nominee set forth in our bylaws. This notice must be updated, if necessary, so that the information is true and correct as of the record date for the meeting.
Stockholder nominees should be submitted to the Company’s General Counsel and Secretary at the Company’s principal executive offices. Stockholder nominations may be made at any time. However, in order for a candidate to be included in the slate of director nominees for approval by stockholders in connection with a meeting of stockholders and for information about the candidate to be included in the Company’s proxy materials for such a meeting, the stockholder must submit the information required by our bylaws and other information reasonably requested by the Company within the time frame described in the proxy materials for such a meeting.
When the Company or the board of directors is required by contractual obligation (including pursuant to the Stockholders’ Agreement) to nominate candidates designated by any person or entity, the selection and nomination of these directors is not subject to the above process.
The nominating and corporate governance committee is responsible for identifying and evaluating potential candidates and recommending such candidates to the board for nomination at the annual meeting. In evaluating director candidates, the nominating and corporate governance committee and the board may consider the following criteria, as well as any other factors that they deem to be relevant: (i) the candidate’s executive and directorial experience; (ii) the candidate’s professional and academic experience relevant to the company’s industry; (iii) the strength of the candidate’s leadership skills; (iv) the candidate’s experience in finance and accounting and/or executive compensation practices; and (v) the candidate’s time availability. Generally, the nominating and corporate governance committee and the board will consider candidates who have a high level of personal and professional integrity, strong ethics, and the ability to make mature business judgments. The nominating and corporate governance committee and the board monitor the mix of specific experience, qualifications and skills of its directors in order to assure that the board, as a whole, has the necessary tools to perform its oversight function effectively in light of the company’s business and structure.
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10
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Controlled Company
The HL Voting Trust controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” under the rules of the New York Stock Exchange. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance standards, including the requirements that (i) a majority of our board of directors consist of independent directors and (ii) that our board of directors have compensation and nominating and corporate governance committees composed entirely of independent directors, as independence is defined in Rule 10A‑3 of the Exchange Act and under the New York Stock Exchange listing standards. For an indeterminate period, we intend to utilize these exemptions. As a result, although we have a fully independent audit committee as required by the New York Stock Exchange, a majority of our directors are not currently independent and we do not expect in the immediate future that the majority of our directors will be independent. Accordingly, although we may transition to a board with a majority of independent directors prior to the time we cease to be a “controlled company,” for such period of time our shareholders will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. Holders of Class A common stock do not have the same protections afforded to stockholders of companies that are subject to such requirements. In the event that we cease to be a “controlled company” and our shares continue to be listed on the New York Stock Exchange, we will be required to comply with these provisions within the applicable transition periods.
Director Independence
Prior to each director’s appointment, our board of directors undertook a review of the independence of our directors and determined that Messrs. Schriesheim and Zuber, Dr. Kosecoff, and Ms. Zucker, are each independent directors as defined under the rules of the New York Stock Exchange. Under the listing requirements of the New York Stock Exchange, our board of directors is required to have at least three independent directors meeting the New York Stock Exchange’s independence standards and we fulfill such requirements.
Board and Committee Meetings; Annual Meeting Attendance
During fiscal
2020
, our board of directors held
five
meetings, our audit committee held
eight
meetings, our compensation committee held
six
meetings and our nominating and corporate governance committee held
four
meetings. During fiscal
2020
, each director attended at least 75% of the total number of meetings of the board of directors and committees on which the director served. Under our corporate governance guidelines, directors are expected to attend the Company’s annual meetings of stockholders, either in person or by telephone. A director who is unable to attend an annual meeting of stockholders (which it is understood will occur on occasion) is expected to notify the chairman of the board of directors. All or our directors attended the
2019
Annual Meeting of Stockholders in person or by telephone.
The chair of the Audit Committee, or in his or her absence a director designated by the chair of the Audit Committee, presides over executive sessions of the independent directors which are held on a regularly scheduled basis, not less than once per year.
Communication with the Board of Directors
Any stockholder or other interested parties who would like to communicate with the board of directors, the independent directors as a group or any specific member or members of the board of directors should send such communications to the attention of our General Counsel and Secretary at Houlihan Lokey, Inc., 10250 Constellation Blvd., 5
th
Floor, Los Angeles, CA 90067. Communications should contain instructions specifying for which member or members of the board of directors the communication is intended. Such communications generally will be forwarded to the intended recipients. However, our General Counsel and Secretary may, in his sole discretion, decline to forward any communications that are inappropriate.
Compensation Committee Interlocks and Insider Participation
During fiscal
2020
, the members of our compensation committee were Messrs. Beiser, Schriesheim, Preiser, and Zuber. Mr. Beiser is our Chief Executive Officer and Mr. Preiser is our Co-President. Other than Messrs. Beiser and Preiser, none of the members of our compensation committee have ever been an officer or employee of our Company or any of our subsidiaries. None of our executive officers currently serve, or have served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
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11
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Board Committees
We currently have three standing committees, an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Current copies of each committee’s charter are posted on our website, www.hl.com. The information on any of our websites is deemed not to be incorporated in or be a part of this Proxy Statement or any other document filed with or furnished to the SEC.
Audit Committee
The audit committee is responsible for, among other matters:
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•
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appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm;
|
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•
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discussing with our independent registered public accounting firm their independence from management;
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•
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reviewing with our independent registered public accounting firm the scope and results of their audit;
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•
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approving all audit and permissible non‑audit services to be performed by our independent registered public accounting firm;
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•
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overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;
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•
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reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; and
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•
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establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters.
|
Our audit committee currently consists of Messrs. Schriesheim and Zuber, Dr. Kosecoff, and Ms. Zucker, with Mr. Schriesheim serving as chair. Rule 10A‑3 of the Exchange Act and the New York Stock Exchange rules require us to have an audit committee composed entirely of independent directors. Our board of directors has affirmatively determined that Messrs. Schriesheim and Zuber, Dr. Kosecoff, and Ms. Zucker, meet the definition of an “independent director” for purposes of serving on an audit committee under Rule 10A‑3 and the New York Stock Exchange rules. In addition, our board of directors has determined that Mr. Schriesheim qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S‑K.
Compensation Committee
The compensation committee’s responsibilities include:
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•
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reviewing and approving (either alone or, if directed by the board, in conjunction with a majority of the independent directors on the board) the compensation of our Chief Executive Officer;
|
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•
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reviewing and setting, or recommending to the board, the compensation of our other executive officers;
|
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•
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reviewing and recommending to our board of directors the compensation of our directors;
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•
|
selecting independent compensation consultants and advisors and assessing whether there are any conflicts of interest with any of the committee’s compensation consultants or advisors; and
|
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•
|
reviewing and approving, or recommending that our board of directors approve, incentive compensation and equity plans.
|
Our compensation committee currently consists of Messrs. Beiser, Schriesheim, Preiser, and Zuber, with Mr. Beiser serving as chair. Mr. Beiser, an executive officer, participates in the deliberations of the compensation committee in determining executive officer and director compensation, except as otherwise determined by the committee. As a controlled company, we rely upon the exemption from the requirement that we have a compensation committee composed entirely of independent directors. During fiscal
2020
, the compensation committee retained Compensation Advisory Partners (CAP) to conduct a survey and provide an analysis of compensation paid to executive officers of companies within our peer group, and the Company retained Semler Brossy Consulting Group, LLC to assist in the preparation of the Compensation Discussion and Analysis (CD&A) and the
2020
CEO Pay Ratio disclosure below.
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12
|
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Nominating and Corporate Governance Committee
The nominating and corporate governance committee’s responsibilities include:
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•
|
identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; and
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•
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developing and recommending to our board of directors a set of corporate governance guidelines and principles, which are posted on our website, www.hl.com.
|
The committee, in nominating director candidates, considers candidates who have a high level of personal and professional integrity, strong ethics and values, and the ability to make mature business judgments. The committee may also consider the following criteria, as well as any other factors that they deem relevant: potential conflicts of interest with the candidate’s other personal and professional pursuits; experience in corporate management; public company board experience; professional and academic experience; leadership skills; experience in finance, accounting or executive compensation; and, whether the candidate has the time available to prepare for, and participate in, board and committee meetings.
The members of our nominating and corporate governance committee are Messrs. Gold and Adelson, Dr. Kosecoff, and Ms. Zucker, with Mr. Gold serving as chair. As a controlled company, we rely upon the exemption from the requirement that we have a nominating and corporate governance committee composed entirely of independent directors.
Risk Oversight
Our board of directors is responsible for overseeing our risk management process. Our board of directors focuses on our general risk management strategy, the most significant risks facing us, and oversees the implementation of risk mitigation strategies by management. Our board of directors is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and significant transactions.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code, as well as a copy of our corporate governance guidelines, on our website, www.hl.com. In addition, we intend to post on our website all disclosures that are required by law or the New York Stock Exchange listing standards concerning any amendments to, or waivers from, any provision of our code of business conduct and ethics. The information on any of our websites is deemed not to be incorporated in or be a part of this Proxy Statement or any other document filed with or furnished to the SEC.
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13
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DIRECTOR COMPENSATION
Overview
We maintain a compensation policy which is applicable for our directors who are not, or were not during the applicable period, our employees or employees of our subsidiaries or a designee of ORIX USA (each an “outside director”). Directors who are not or were not outside directors did not receive compensation for their services as directors in fiscal
2020
.
Each director was reimbursed for their travel expenses incurred in connection with his or her attendance at full board of directors or committee meetings.
Cash Compensation
Each outside director receives an annual cash retainer for his or her services equal to
$62,500
, payable quarterly in arrears, and pro-rated to reflect any partial year served.
Equity Compensation
Pursuant to our Director Compensation Program, each outside director receives an annual fully vested award of Class A common stock with a dollar-denominated grant-date value of
$87,500
(“the Annual Director Award”). In addition, the compensation committee may, at its discretion, grant an additional award of Class A common stock to each outside director who serves as a committee chair with a grant-date value equal to
$30,000
(the “Committee Chair Award”). The compensation committee also has the discretion to grant an award of the Company’s Class A common stock to each outside director who is elected with a grant-date value equal to
$100,000
.
For fiscal
2020
, on May 28,
2020
, each outside director received the annual award of Class A common stock referred to above (with Ms. Zucker’s award being a pro-rated amount based on her partial year of service as a director). For fiscal
2020
, Mr. Schriesheim was granted, as compensation for his service as chair of the audit committee, a fully vested award with a grant-date value of
$30,000
, and Ms. Zucker was awarded, in connection with her election to the board, an award with a grant-date value of
$100,000
, which vests in equal installments on
November 19
of each of
2021
,
2022
and
2023
, subject to continued service.
Changes Effective in Fiscal 2021
On May 8, 2020, our board of directors adopted revisions to our Director Compensation Program, which are effective for fiscal 2021. No changes were made to the cash compensation portion of the program. With respect to the equity compensation portion, the dollar value of the awards remain the same from the program described above; however, going forward the number of shares issued to an outside director will be determined by dividing the dollar value of each Annual Director Award and Committee Chair Award by the average closing price of the Company’s Class A common stock for the ten consecutive trading days occurring immediately after the date on which the Company publicly announces its earnings for the immediately preceding fiscal year.
The following table provides additional detail regarding the
2020
compensation of our outside directors:
|
Fiscal 2020 Outside Director Compensation
|
|||||||||
|
Name
(1)
|
Fees Earned or Paid in Cash ($)
|
Stock Awards
(2)
($)
|
Total ($)
|
||||||
|
Robert A. Schriesheim
|
62,500
|
|
117,500
|
|
180,000
|
|
|||
|
Jacqueline B. Kosecoff
|
62,500
|
|
87,500
|
|
150,000
|
|
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|
Paul A. Zuber
|
62,500
|
|
87,500
|
|
150,000
|
|
|||
|
Gillian B. Zucker
|
32,616
|
|
97,848
|
|
130,464
|
|
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|
(1)
|
Messrs. Adelson, Beiser, Gold, and Preiser (directors who are employees of the Company) and Mr. Nishitani (director nominee of ORIX USA) are not included in this table. None of Messrs. Adelson, Beiser, Gold, Preiser, and Nishitani received any compensation for services as a director in fiscal 2020.
|
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(2)
|
Amounts reflect the full grant‑date fair value of common stock awards granted during the relevant fiscal year, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the outside director. We provide information regarding the assumptions used to calculate the value of all stock awards made to directors in
Note 14
- Employee Benefit Plans to our audited consolidated financial statements included in our most recent Form 10-K. As of
March 31, 2020
, Mr. Zuber and Ms. Zucker held
1,572
and
2,118
shares, respectively, of unvested restricted shares of our Class A common stock (and our other outside directors did not hold any unvested restricted shares or other equity-based awards).
|
|
14
|
||
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Our named executive officers for the fiscal year ended
March 31, 2020
consisted of our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers who were serving as executive officers as of
March 31, 2020
(the “NEOs” or “named executive officers”):
|
•
|
Scott L. Beiser, Chief Executive Officer;
|
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•
|
J. Lindsey Alley, Chief Financial Officer;
|
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•
|
Irwin N. Gold, Executive Chairman;
|
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•
|
Scott J. Adelson, Co‑President and Global Co‑Head of Corporate Finance; and
|
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•
|
David A. Preiser, Co-President.
|
Our executive compensation programs and policies remained substantially similar from fiscal
2019
to fiscal
2020
. At our
2019
annual meeting, approximately
97%
of votes cast were voted in favor of our say-on-pay proposal, which we believe affirms our stockholders’ support of our approach to our executive compensation program. As we did last year, we will hold a non-binding stockholder advisory vote to approve the compensation paid to our named executive officers; following the vote at this year’s annual meeting we expect the next vote will be at our annual meeting following fiscal year
2021
.
Business and Strategy
Established in 1972, Houlihan Lokey, Inc., is a leading global independent investment bank with expertise in mergers and acquisitions (M&A), capital markets, financial restructurings, and financial and valuation advisory. Through our offices in the United States, Europe, Asia, Australia, and Dubai, we serve a diverse set of clients worldwide including corporations, financial sponsors and government agencies. We provide our financial professionals with an integrated platform that enables them to deliver meaningful and differentiated advice to our clients. We advise our clients on critical strategic and financial decisions, employing a rigorous analytical approach coupled with deep product and industry expertise. We market our services through our product areas, our industry groups and our Financial Sponsors group, serving our clients in three primary business practices: Corporate Finance (encompassing M&A and capital markets advisory), Financial Restructuring (both out-of-court and in formal bankruptcy or insolvency proceedings) and Financial and Valuation Advisory (including financial opinions and a variety of valuation and financial consulting services).
We are committed to a set of principles that serve as the backbone of our success. Independent advice and intellectual rigor, combined with consistent senior-level involvement, are hallmarks of our commitment to client service. Our entrepreneurial culture engenders our flexibility to collaborate across our business practices to provide world-class solutions for our clients. Our broad-based employee ownership serves to align the interests of employees and shareholders and further encourages a collaborative environment where our Corporate Finance, Financial Restructuring and Financial and Valuation Advisory business practices work together productively and creatively to solve our clients’ most critical financial issues. We enter into businesses or offer services where we believe we can excel based on our expertise, analytical sophistication, industry focus and competitive dynamics. Finally, we remain independent and specialized, focusing on advisory products and market segments where our expertise is both differentiating and less subject to conflicts of interest arising from non-advisory products and services, and where we believe we can be a market leader in a particular segment. We do not lend or engage in any securities sales and trading operations or research which might conflict with our clients’ interests.
As of
March 31, 2020
, we had a team of
1,068
financial professionals across
22
offices globally, serving more than
1,000
clients annually over the past several years, ranging from closely held companies to Fortune Global 500 corporations.
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15
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Performance Highlights
Company performance played a significant role in the process for determining named executive officer compensation for fiscal year
2020
. Below, we capture some highlights of our strong fiscal
2020
performance:
|
•
|
Achieved record high revenues of
$1.159 billion
, an increase of
7%
from fiscal
2019
, and marking the eighth consecutive year of revenue growth
|
|
•
|
Continued our quarterly dividend of
$0.31
per share
|
|
•
|
Hired
12
new Managing Directors, in addition to
10
internal promotions
|
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•
|
Completed the acquisition of Fidentiis Capital, an independent advisory business providing independent corporate finance advisory services relating to mergers and acquisitions, capital raising, and financing
|
|
•
|
Completed the acquisition of Freeman & Co., an independent advisory business providing mergers and acquisitions advisory, capital raising, and other investment banking advisory services for the financial services sector.
|
Fiscal Year
2020
Compensation
Annual incentive compensation is the primary driver of our NEOs’ compensation each year. Awards under our annual bonus program typically are paid in a combination of cash and either restricted or unrestricted shares of our Class B common stock. Following a review of full-year business and individual NEO performance, the compensation committee determined fiscal
2020
total compensation for each NEO as outlined in the table below. This table is different from the Summary Compensation Table that follows this CD&A because the payment in fiscal
2020
of 2/9 of the cash portion of bonuses granted at our IPO (the “Pre-IPO Grants”) that were made to the named executive officers in connection with our IPO are reported in the Summary Compensation Table in accordance with SEC rules.
|
Named Executive Officer
|
Salary Paid During FY20 ($)
|
FY20 Incentive Paid in Cash ($)
|
FY20 Incentive Paid in Shares ($)
|
FY20 Total Compensation ($)
|
||||
|
Beiser
|
500,000
|
3,077,486
|
842,164
|
4,419,650
|
||||
|
Alley
|
400,000
|
742,068
|
160,830
|
1,302,898
|
||||
|
Gold
|
500,000
|
2,201,236
|
508,414
|
3,209,650
|
||||
|
Adelson
|
500,000
|
4,412,501
|
1,115,776
|
6,028,277
|
||||
|
Preiser
|
500,000
|
1,968,819
|
437,331
|
2,906,150
|
||||
In light of changes to the deductibility of certain executive compensation resulting from the Tax Cuts and Job Act enacted in December 2017 (the “TCJA”), the Compensation Committee determined it was advisable to maximize the deduction for compensation paid to the NEOs for fiscal 2018 by (i) not deferring a portion of the cash bonus to November 2018 (and instead paying the entire cash bonus in May 2018), (ii) granting the share-based incentive awards as fully vested (rather than subject to a multi-year vesting schedule), and (iii) for the NEOs other than Mr. Adelson, paying cash bonuses that were historically larger than those paid for performance in prior fiscal years. In determining awards under our fiscal 2020 performance-based bonus program following the funding of the bonus pool (which is described in greater detail under “Annual Incentive Compensation” below), the Compensation Committee took into account that additional cash compensation was paid for fiscal 2018 to the NEOs (other than Mr. Adelson), and used its discretion to approve reduced awards for fiscal 2020 by an amount equal to 50% of the excess amount paid to the NEO under our fiscal 2018 performance-based bonus program.
|
16
|
||
Key Compensation Practices
We believe our executive compensation practices align with the interests of our shareholders and support our long-term performance orientation.
|
What We Do
|
What We Don’t Do
|
|
Align pay with Company performance
|
No guaranteed incentive compensation
|
|
Encourage significant ownership of Company stock by executives
|
No tax gross-ups or reimbursements
|
|
Prohibit hedging of Company stock
|
No excessive perquisites
|
|
Consider performance on strategic initiatives that can impact the Company’s prospects when making individual compensation decisions
|
No severance or change-in-control payments
|
|
Engage an independent compensation consultant to provide market information and discuss NEO compensation with the Committee
|
|
How We Determine Executive Compensation
The Compensation Committee reviews and approves all components of compensation for each executive officer and regularly reviews (without the involvement of the CEO) the performance of the CEO. The CEO reviews the performance of other executive officers and develops recommendations for each component of compensation to discuss with the Compensation Committee.
Our CEO and Compensation Committee considered the following factors in determining the fiscal
2020
compensation of our named executive officers:
|
•
|
Financial and market performance of the Company, with a focus on revenue growth, earnings per share (EPS) growth, net income growth, and total shareholder return (TSR), on both an absolute basis and relative to the performance of peer firms
|
|
•
|
Strategic performance against key initiatives
|
|
•
|
Risk management of the Company in achieving its financial, market-based, and strategic results
|
|
•
|
Individual performance
|
|
•
|
Internal pay positioning
|
|
•
|
Additional compensation paid in fiscal 2018 as a result of tax deductions that are not available in fiscal 2020 and thereafter
|
The compensation committee has the authority to retain a compensation consultant, and to approve the consultant’s fees and all other terms of its engagement. During fiscal
2020
, the committee retained Compensation Advisory Partners (CAP) as its compensation consultant. CAP assisted the compensation committee by providing market data and discussing named executive officer pay recommendations with the committee. Further, pursuant to SEC rules, the committee conducted a conflicts of interest assessment and determined that there is no conflict of interest resulting from retaining CAP. Additionally, while we consider third-party survey information to understand competitive compensation practices and levels, we do not benchmark to a specific level when referencing this information.
Overview of Compensation Components
Salary
Salaries provide a fixed component of compensation commensurate with the executive’s skill set, experience, role and responsibilities, and are reviewed periodically by the Compensation Committee. Historically, salaries have represented the smallest portion of our named executive officers’ compensation. For fiscal
2020
, based on input from its compensation consultant, the compensation committee decided to increase Mr. Alley’s base salary from
$375,000
to
$400,000
and each of the other NEOs from
$400,000
to
$500,000
in order to better align their salaries with those holding comparable positions in our peer firms. As examples, according to data compiled by CAP in its report to the Compensation Committee for fiscal 2020, the base salaries for certain executive officers of publicly reporting peer firms at the 75th percentile level is: for the highest paid officer (generally the CEO), $900,000; for the second highest paid officer (generally the Chief Operating Officer), $650,000; and for the third highest paid officer (often the CFO or executive vice president), $550,000. The salaries paid to our NEOs for fiscal
2020
are included in the Summary Compensation Table below.
|
17
|
||
Annual Incentive Compensation
For fiscal
2020
, the Compensation Committee established a performance-based bonus program pursuant to which our named executive officers were eligible to earn awards based on our achievement during fiscal
2020
of revenue equal to or exceeding
90%
of the average revenues of the Company in fiscal
2017
,
2018
and
2019
(
$875,952,000
). If the Company achieved this revenue goal, then a bonus pool would be established equal to
4%
of our revenues earned during fiscal
2020
. Our actual revenue for fiscal
2020
was
$1.159 billion
; therefore, the maximum bonus pool established was
$46,374,720
.
The Compensation Committee was permitted to allocate the bonus pool among the named executive officers in its discretion and was not required to allocate the entire pool.
In determining each named executive officer’s actual aggregate award, the Compensation Committee determined that each executive played a significant role in the Company’s outstanding financial performance during fiscal
2020
and its achievement of record results. In particular, the Committee noted that Messrs. Beiser and Alley were instrumental in driving record revenues and earnings and managing non-compensation expenses, Mr. Gold successfully developed and managed numerous strategic relationships on behalf of the Company, Mr. Preiser successfully oversaw the growth and development of the Company’s European operations, and Mr. Adelson led the record growth of the Company’s Corporate Finance business unit and successful integration of acquisitions. The Committee then applied its judgment in determining the incentive awards paid to each NEO under the fiscal
2020
bonus program. As noted above, in light of the additional compensation paid to certain of the NEOs in fiscal 2018 as a result of tax law changes under the TCJA, the Compensation Committee took into account that additional cash compensation was paid for fiscal 2018 to the NEOs (other than Mr. Adelson), and used its discretion to approve reduced awards for fiscal 2020 by an amount equal to 50% of the excess amount paid to the NEO under our fiscal 2018 performance-based bonus program. The Compensation Committee approved the payment of the aggregate award in cash and restricted shares of our Class B common stock, as follows:
|
Named Executive Officer
|
Aggregate FY2020 Bonus Program Award ($)
|
Cash Portion of FY2020 Bonus Program Award ($)
|
Equity Portion of FY2020 Bonus Program Award ($)
|
|||
|
Beiser
|
3,919,650
|
3,077,486
|
842,164
|
|||
|
Alley
|
902,898
|
742,068
|
160,830
|
|||
|
Gold
|
2,709,650
|
2,201,236
|
508,414
|
|||
|
Adelson
|
5,528,277
|
4,412,501
|
1,115,776
|
|||
|
Preiser
|
2,406,150
|
1,968,819
|
437,331
|
|||
The restricted shares of our Class B common stock awarded under our fiscal
2020
bonus program will vest in four equal installments on May 15 of each of
2021
,
2022
,
2023
, and
2024
, subject to continued employment. The number of shares subject to each award was determined by dividing the applicable value by the average of the closing prices of the Company’s Class A common stock as traded on the New York Stock Exchange for the ten consecutive trading days occurring immediately after the Company publicly announced its earnings for fiscal 2020, which occurred on May 12, 2020.
|
18
|
||
Awards Granted in Fiscal Year
2020
for
2019
Performance
The total number of shares of restricted Class B common stock that was awarded to each named executive officer in fiscal
2020
, as well as the corresponding grant-date value, is set forth in the following table. These awards were granted during fiscal
2020
under our fiscal
2019
performance-based bonus program. As such, in accordance with SEC rules, the value of awards were previously disclosed under the heading “Non-Equity Incentive Compensation” (and the related footnote) for fiscal
2019
in the Summary Compensation Table contained in our definitive proxy statement filed with the SEC in
2019
.
|
Named Executive Officer
|
Stock Awards Granted in Fiscal 2020 (#)
|
Value of Stock Awards Granted in Fiscal 2020 ($)
|
||
|
Beiser
|
18,893
|
892,127
|
||
|
Alley
|
3,644
|
172,070
|
||
|
Gold
|
11,825
|
558,377
|
||
|
Adelson
|
48,512
|
2,290,737
|
||
|
Preiser
|
10,108
|
477,300
|
||
As described in that proxy statement, the restricted shares of our Class B common stock awarded under our fiscal 2019 bonus program vest in four equal installments on May 15 of each of 2020, 2021, 2022 and 2023, subject to continued employment. The number of shares subject to each award was determined by dividing the applicable value by the closing price per share of our Class A common stock on May 15, 2019 (the date of grant). Because these awards were granted in fiscal 2020, they appear in the Grants of Plan-Based Awards in Fiscal 2020 Table below.
Payment of Pre-IPO Awards
In connection with our IPO, each named executive officer was granted a pre-IPO restricted stock award and a restricted cash award, in each case, 1/9 of which vested on April 30, 2016, and 2/9 of which was scheduled to vest on each of April 30, 2017, 2018, 2019 and 2020, subject to the executive’s continued employment through the applicable vesting date. While we do not consider these awards as a component of the executive’s annual compensation, the portion of each restricted cash award that vested (and was paid) on April 30, 2019 is included in the Summary Compensation Table below. The cash payments to our named executive officers in fiscal
2020
were as follows:
|
Named Executive Officer
|
Cash Payment ($)
|
|
|
Beiser
|
142,812
|
|
|
Alley
|
33,323
|
|
|
Gold
|
142,812
|
|
|
Adelson
|
595,033
|
|
|
Preiser
|
142,812
|
|
Other Compensation Program Features
We provide customary employee benefits to our full and eligible part time employees in the United States, including our named executive officers. These include medical and dental benefits, short term and long-term disability insurance, accidental death and dismemberment insurance and life insurance.
We also maintain a 401(k) retirement savings plan for our employees in the United States, including our named executive officers. Eligible employees may defer a portion of their compensation, within prescribed tax code limits, on a pretax basis through contributions to the 401(k) plan. We did not make any matching contributions under our 401(k) plan to our named executive officers’ 401(k) accounts during fiscal
2020
.
We do not make gross up payments to cover our named executive officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by us.
Finally, we have not entered into any employment, severance or change-in-control arrangements with our named executive officers.
|
19
|
||
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallows a tax deduction for annual compensation paid to a chief executive officer or “covered employee” in excess of $1 million. For tax years beginning on or prior to December 31, 2017, the deduction limitation has an exception for “qualified performance-based compensation.” However, the TCJA includes changes to Section 162(m), including eliminating the exemption for “qualified performance-based compensation,” effective for tax years beginning after December 31, 2017.
The TCJA provides for a grandfathered provision, pursuant to which remuneration that is provided pursuant to a written binding contract in effect on November 2, 2017, and which has not been modified in any material respect on or after that date, will not be subject to the amendments made to Section 162(m) by the TCJA. To the extent available, we intend to continue to treat “qualified performance-based compensation” that is grandfathered under the TCJA as deductible compensation. However, our Compensation Committee may determine in any year that it would be in our best interest for compensation to be paid that would not satisfy the deductibility requirements under Section 162(m).
|
20
|
||
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on our review and discussion with management, we recommended to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement issued in connection with our Annual Meeting and in our Form 10-K.
Compensation Committee
Scott L. Beiser (Committee Chair)
David A. Preiser
Robert A. Schriesheim
Paul A. Zuber
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers for our fiscal years ended
March 31, 2018
,
March 31, 2019
and
March 31, 2020
.
|
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus
(1)
($)
|
Stock Awards
(2)
($)
|
Non-Equity Incentive Compensation
(3)
($)
|
All Other Compensation ($)
|
Total
($)
|
|||||||
|
Scott L. Beiser
|
2020
|
500,000
|
142,812
|
—
|
3,919,650
|
—
|
4,562,462
|
|||||||
|
Chief Executive Officer
|
2019
|
400,000
|
142,812
|
—
|
4,116,655
|
—
|
4,659,467
|
|||||||
|
2018
|
400,000
|
142,812
|
816,668
|
5,267,000
|
—
|
6,626,480
|
||||||||
|
J. Lindsey Alley
|
2020
|
400,000
|
33,323
|
—
|
902,898
|
—
|
1,336,221
|
|||||||
|
Chief Financial Officer
|
2019
|
375,000
|
33,323
|
—
|
977,220
|
—
|
1,385,543
|
|||||||
|
2018
|
360,000
|
33,323
|
141,334
|
1,662,000
|
—
|
2,196,657
|
||||||||
|
Irwin N. Gold
|
2020
|
500,000
|
142,812
|
—
|
2,709,650
|
—
|
3,352,462
|
|||||||
|
Executive Chairman
|
2019
|
400,000
|
142,812
|
—
|
2,906,655
|
—
|
3,449,467
|
|||||||
|
2018
|
400,000
|
142,812
|
566,696
|
3,767,000
|
—
|
4,876,508
|
||||||||
|
Scott J. Adelson
|
2020
|
500,000
|
595,033
|
—
|
5,528,277
|
—
|
6,623,310
|
|||||||
|
Co‑President and Global Co‑Head of Corporate Finance
|
2019
|
400,000
|
595,033
|
—
|
9,211,104
|
—
|
10,206,137
|
|||||||
|
2018
|
400,000
|
595,033
|
1,240,288
|
9,211,000
|
—
|
11,446,321
|
||||||||
|
David A. Preiser
|
2020
|
500,000
|
142,812
|
—
|
2,406,150
|
—
|
3,048,962
|
|||||||
|
Co-President
|
2019
|
400,000
|
142,812
|
—
|
2,603,115
|
—
|
3,145,927
|
|||||||
|
2018
|
400,000
|
142,812
|
504,194
|
3,392,000
|
—
|
4,439,006
|
||||||||
|
(1)
|
Amounts in this column reflect the payment of 2/9 of the cash portion of Pre-IPO grants that were made to the named executive officers in connection with our IPO, which vested and were paid in fiscal 2020, 2019, and 2018, respectively.
|
|
(2)
|
Amounts reflect the full grant‑date fair value of restricted stock awards granted during the relevant fiscal year, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individuals. We provide information regarding the assumptions used to calculate the value of all stock awards made to executive officers in
Note 14
- Employee Benefit Plans to our audited consolidated financial statements included in our Form 10-K for fiscal
2020
.
|
|
(3)
|
Amounts in this column for fiscal 2020 constitute the amount of the annual incentive compensation determined by the Board’s Compensation Committee for each named executive officer pursuant to our fiscal 2020 bonus program, and includes (i) the value of cash bonuses awarded with respect to fiscal 2020 performance (a portion of which was paid on May 15, 2020 and a portion of which is scheduled to be paid on November 30, 2020) and (ii) the grant-date value of restricted stock awards granted on May 28, 2020. The total value of the cash bonus awards to Messrs. Beiser, Alley, Gold, Adelson and Preiser with respect to fiscal 2020 performance was
$3,077,486
,
$742,068
,
$2,201,236
,
$4,412,501
and
$1,968,819
, respectively. Of these amounts of cash bonus awards, a portion (
$1,177,663
,
$263,616
,
$803,863
,
$1,484,109
, and
$710,063
to Messrs. Beiser, Alley, Gold, Adelson and Preiser, respectively) is expected to be paid on November 30, 2020, subject to the applicable named executive officer being employed in good standing on such date. The number of shares issued to Messrs. Beiser, Alley, Gold, Adelson and Preiser on May 28, 2020 was 13,897, 2,653, 8,389, 18,412, and 7,216 shares, respectively, which have grant-date dollar denominated values of approximately $842,164, $160,830, $508,414, $1,115,776, and $437,331, respectively. The number of shares was determined by dividing the applicable value by the average of the closing prices of the Company’s Class A common stock as traded on the New York Stock Exchange for the ten consecutive trading days occurring immediately after the Company publicly announced its earnings for fiscal 2020, which occurred on May 12, 2020. The equity portion of awards under our fiscal 2020 bonus program was paid in shares of common stock subject to vesting over four years in equal installments in May of each of 2021 - 2024.
|
|
21
|
||
Grants of Plan-Based Awards in Fiscal
2020
Table
The following table sets forth information regarding maximum and actual grants of plan-based awards made to our named executive officers during fiscal
2020
:
|
Name
|
Grant Date
|
Estimated Possible Payouts under Non-Equity Incentive Plan Awards
(1)
|
All Other
Stock Awards: Number of
Shares of
Stock (#)
(2)
|
Grant Date Fair Value of Stock Awards ($)
|
||||||||
|
Threshold (#)
|
Target
(#)
|
Maximum (#)
|
||||||||||
|
Scott L. Beiser
|
May 15, 2019
|
—
|
—
|
—
|
18,893
|
892,127
|
||||||
|
J. Lindsey Alley
|
May 15, 2019
|
—
|
—
|
—
|
3,644
|
172,070
|
||||||
|
Irwin N. Gold
|
May 15, 2019
|
—
|
—
|
—
|
11,825
|
558,377
|
||||||
|
Scott J. Adelson
|
May 15, 2019
|
—
|
—
|
—
|
48,512
|
2,290,737
|
||||||
|
David A. Preiser
|
May 15, 2019
|
—
|
—
|
—
|
10,108
|
477,300
|
||||||
|
(1)
|
For fiscal
2020
, the Compensation Committee established a performance-based bonus program pursuant to which our named executive officers were eligible to earn awards based on our achievement during fiscal
2020
of revenue equal to or exceeding
90%
of the average revenue of the Company in fiscal 2017, 2018, and 2019 (
$875,952,000
). If the Company achieved this fee revenue goal, then a bonus pool would be established equal to
4%
of our fee revenue earned during fiscal
2020
. Our actual revenue for fiscal
2020
was
$1.159 billion
; therefore, the maximum bonus pool established was
$46,374,720
. Under our
2020
bonus program, there was no individual threshold, target, or maximum for any named executive officer under this program. The amount of the performance-based bonuses actually made to each NEO for fiscal
2020
are presented under the heading “Non-Equity Incentive Compensation” for fiscal
2020
in the Summary Compensation Table above, and the amount of cash and stock comprising each such award are presented in footnote 3 of such Table.
|
|
(2)
|
Stock awards presented were granted in fiscal
2020
with respect to fiscal
2019
performance pursuant to our fiscal
2019
performance-based bonus program. As such, in accordance with SEC rules, the value of awards were previously disclosed under the heading “Non-Equity Incentive Compensation” (and the related footnote) for fiscal
2019
in the Summary Compensation Table contained in our definitive proxy statement filed with the SEC in
2019
. We provide information regarding the assumptions used to calculate the value of all stock awards made to executive officers in
Note 14
- Employee Benefit Plans to our audited consolidated financial statements included in our Form 10-K for fiscal
2020
.
|
|
22
|
||
Outstanding Equity Awards at Fiscal Year
‑
End
The following table summarizes the number of shares of our Class B common stock underlying outstanding equity incentive plan awards for each named executive officer as of
March 31, 2020
.
|
Name
|
Grant Date
|
Stock Awards
|
||||
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
Market Value of Shares or Units of Stock That Have Not Vested
(1)
($)
|
|||||
|
Scott L. Beiser
|
August 12, 2015
|
9,073
(2)
|
472,885
|
|||
|
April 30, 2016
|
11,315
(3)
|
589,738
|
||||
|
May 15, 2017
|
11,728
(4)
|
611,263
|
||||
|
May 15, 2019
|
18,893
(5)
|
984,703
|
||||
|
J. Lindsey Alley
|
August 12, 2015
|
2,118
(2)
|
110,390
|
|||
|
April 30, 2016
|
2,352
(3)
|
122,586
|
||||
|
May 15, 2017
|
2,031
(6)
|
105,856
|
||||
|
May 15, 2019
|
3,644
(5)
|
189,925
|
||||
|
Irwin N. Gold
|
August 12, 2015
|
9,073
(2)
|
472,885
|
|||
|
April 30, 2016
|
6,688
(3)
|
348,579
|
||||
|
May 15, 2017
|
8,139
(7)
|
424,205
|
||||
|
May 15, 2019
|
11,825
(5)
|
616,319
|
||||
|
Scott J. Adelson
|
August 12, 2015
|
37,803
(2)
|
1,970,292
|
|||
|
April 30, 2016
|
8,945
(3)
|
466,213
|
||||
|
May 15, 2017
|
17,810
(8)
|
928,257
|
||||
|
May 15, 2019
|
48,512
(5)
|
2,528,445
|
||||
|
David A. Preiser
|
August 12, 2015
|
9,073
(2)
|
472,885
|
|||
|
April 30, 2016
|
6,261
(3)
|
326,323
|
||||
|
May 15, 2017
|
7,240
(9)
|
377,349
|
||||
|
May 15, 2019
|
10,108
(5)
|
526,829
|
||||
|
(1)
|
The market value of shares of stock that were not vested as of
March 31, 2020
is calculated based on the closing price per share of our Class A common stock as of
March 31, 2020
(
$52.12
).
|
|
(2)
|
Remaining shares outstanding under this restricted stock award vested on April 30, 2020.
|
|
(3)
|
Remaining shares outstanding under this restricted stock award vested on May 15, 2020.
|
|
(4)
|
5,863 shares outstanding under this restricted stock award vested on
May 15, 2020
, and 5,865 are scheduled to vest on May 15, 2021.
|
|
(5)
|
One-quarter of the shares outstanding under this restricted stock award as of March 31, 2020 vested on May 15, 2020, one-quarter are scheduled to vest on May 15, 2021, one-quarter are scheduled to vest on May 15, 2022, and one-quarter are scheduled to vest on May 15, 2023.
|
|
(6)
|
1,014 shares outstanding under this restricted stock award vested on May 15, 2020, and 1,017 are scheduled to vest on May 15, 2021.
|
|
(7)
|
4,068 shares outstanding under this restricted stock award vested on May 15, 2020, and 4,071 are scheduled to vest on May 15, 2021.
|
|
(8)
|
8,905 shares outstanding under this restricted stock award vested on May 15, 2020, and 8,905 are scheduled to vest on May 15, 2021.
|
|
(9)
|
3,620 shares outstanding under this restricted stock award vested on May 15, 2020, and 3,620 are scheduled to vest on May 15, 2021.
|
|
23
|
||
Fiscal
2020
Option Exercises and Stock Vested
The following table summarizes the vesting of stock awards held by our named executive officers during fiscal
2020
. None of the named executive officers held any options during fiscal
2020
:
|
Stock Awards
|
||||
|
Name
|
Number of Shares Acquired on Vesting
(#)
|
Value Realized
on Vesting
($)
|
||
|
Scott L. Beiser
|
26,251
|
1,258,625
(1)
|
||
|
J. Lindsey Alley
|
5,483
|
263,353
(2)
|
||
|
Irwin N. Gold
|
19,828
|
955,331
(3)
|
||
|
Scott J. Adelson
|
56,976
|
2,769,793
(4)
|
||
|
David A. Preiser
|
18,954
|
914,061
(5)
|
||
|
(1)
|
Reflects
9,073
shares vested on
April 30, 2019
at a per share value of
$49.32
and
17,178
shares vested on
May 15, 2019
at a per share value of
$47.22
.
|
|
(2)
|
Reflects
2,117
shares vested on
April 30, 2019
at a per share value of
$49.32
and
3,366
shares vested on
May 15, 2019
at a per share value of
$47.22
.
|
|
(3)
|
Reflects
9,073
shares vested on
April 30, 2019
at a per share value of
$49.32
and
10,755
shares vested on
May 15, 2019
at a per share value of
$47.22
.
|
|
(4)
|
Reflects
37,803
shares vested on
April 30, 2019
at a per share value of
$49.32
and
19,173
shares vested on
May 15, 2019
at a per share value of
$47.22
.
|
|
(5)
|
Reflects
9,073
shares vested on
April 30, 2019
at a per share value of
$49.32
and
9,881
shares vested on
May 15, 2019
at a per share value of
$47.22
.
|
Summary of Potential Payments Upon Termination or Change in Control
We have not entered into any employment, severance or change in control arrangements with our named executive officers.
2020
CEO Pay Ratio
In accordance with applicable SEC rules, we are providing the ratio of the total annual compensation of our CEO, Scott L. Beiser, to that of our median compensated employee for fiscal
2020
. Mr. Beiser’s total annual compensation for
2020
, as reported in the Summary Compensation Table, was
$4,562,462
. The total annual compensation of the employee identified as our median compensated employee (excluding our CEO) for
2020
was
$153,662
. The ratio of our CEO’s total compensation for
2020
to the total compensation of our median compensated employee was approximately 30 to 1.
To identify our median compensated employee for purposes of this pay ratio disclosure, we first determined that on December 31,
2019
, we had
1,461
full-time, part-time, and temporary employees other than Mr. Beiser. We ranked the annual compensation of this employee population based on compensation reportable on IRS Form W-2 in the United States and comparable tax reporting documents in other countries. After identifying the median compensated employee from this ranking, we calculated annual total compensation for such employee during fiscal
2020
using the same methodology we use for our CEO as set forth in the Summary Compensation Table above.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on his or her annual total compensation allow companies to use a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio we report above, as other companies may have different employment and compensation practices and may use different methodologies, exclusions, estimates and assumptions to calculate their own pay ratios.
The information disclosed in this section was developed and is provided solely to comply with specific legal requirements. We do not use this information in managing our Company.
|
24
|
||
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our common stock, as of
July 28, 2020
, for:
|
•
|
each person known by us to beneficially own more than 5% of our Class A common stock or Class B common stock;
|
|
•
|
each of our named executive officers and directors; and
|
|
•
|
all of our executive officers, directors and director nominees as a group.
|
The number of shares of our common stock beneficially owned by each stockholder is determined under rules issued by the SEC and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares of our common stock as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares of our common stock beneficially owned by an individual or entity and the percentage ownership of that person, shares of our common stock subject to options, or other rights, held by such person that are currently exercisable or will become exercisable within 60 days of
July 28, 2020
, are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the address of all listed stockholders is c/o Houlihan Lokey, Inc., 10250 Constellation Blvd., 5th Floor, Los Angeles, CA 90067. Each of the stockholders listed has sole voting and investment power with respect to the shares of our common stock beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
|
Class A
|
Class B
|
% Total Voting Power***
|
||||||||
|
Name of Beneficial Owner
|
Shares
|
Percentage**
|
Shares
|
Percentage**
|
||||||
|
5% Stockholders
|
||||||||||
|
HL Voting Trust
(1)
|
—
|
—
|
18,745,572
|
100.0%
|
78.7%
|
|||||
|
The Vanguard Group, Inc.
(2)
|
3,829,748
|
7.6%
|
—
|
—
|
1.6%
|
|||||
|
Black Rock Fund Advisors
(3)
|
3,087,729
|
6.1%
|
—
|
—
|
*
|
|||||
|
Named Executive Officers, Directors and Director Nominees
|
||||||||||
|
Scott L. Beiser
(4)
|
—
|
—
|
18,745,572
|
100.0%
|
78.7%
|
|||||
|
Irwin N. Gold
(5)
|
—
|
—
|
18,745,572
|
100.0%
|
78.7%
|
|||||
|
Scott J. Adelson
(6)
|
—
|
—
|
840,151
|
4.5%
|
3.5%
|
|||||
|
J. Lindsey Alley
(7)
|
—
|
—
|
88,748
|
*
|
*
|
|||||
|
David A. Preiser
|
—
|
—
|
552,091
|
2.9%
|
2.3%
|
|||||
|
Robert A. Schriesheim
|
24,054
|
*
|
—
|
—
|
*
|
|||||
|
Jacqueline B. Kosecoff
|
10,742
|
*
|
—
|
—
|
*
|
|||||
|
Paul A. Zuber
|
4,634
|
*
|
—
|
—
|
*
|
|||||
|
Gillian B. Zucker
|
2,871
|
*
|
—
|
—
|
*
|
|||||
|
All directors and executive officers as a group (10 persons)
|
42,301
|
*
|
18,745,572
|
100.0%
|
78.7%
|
|||||
|
*
|
Less than 1%.
|
|
**
|
Based on
50,733,185
shares of Class A common stock and
18,745,572
shares of Class B common stock outstanding as of
July 28, 2020
.
|
*** Represents the voting power with respect to all shares of our Class A common stock and Class B common stock, voting as a single class. Each share of Class A common stock will be entitled to one vote per share and each share of Class B common stock will be entitled to ten votes per share. For more information, see “Description of Capital Stock—Class A Common Stock and Class B Common Stock,” in our Annual Report on Form 10-K.
|
(1)
|
Consists of shares of Class B common stock held indirectly through the HL Voting Trust of which Scott L. Beiser and Irwin N. Gold are the trustees. All decisions with respect to the voting of the Class B common stock held by the HL Voting Trust will be made by the trustees of the HL Voting Trust, in their sole and absolute discretion. The HL Voting Trust will terminate on the earlier of (1) the written agreement of the Company and the trustees and (2) the conversion of all of the shares of Class B common stock into Class A common stock in accordance with our charter.
|
|
(2)
|
Based solely on the information provided pursuant to a statement on a Schedule 13G/A filed with the SEC on February 12, 2020, The Vanguard Group (“Vanguard”) has sole power to vote or direct the vote of 88,527 shares of Class A common stock, and sole power to dispose or direct the disposition of 3,743,184 shares of Class A common stock, respectively; and has shared power to vote or direct the vote of 3,419 shares of Class A common stock, and shared power to dispose or direct the disposition of 86,564 shares of Class A common stock, respectively. As of February 12, 2020, Vanguard was the aggregate beneficial owner of 3,829,748 shares of Class A common stock. The address for Vanguard is 100 Vanguard Blvd. Malvern, PA 19355.
|
|
(3)
|
Based solely on the information provided pursuant to a statement on a Schedule 13G/A filed with the SEC on February 5, 2020, Blackrock, Inc. (“Blackrock”) has sole power to vote or direct the vote of 3,010,189 shares of Class A common stock, and sole power to dispose or direct the disposition of 3,087,529 shares of Class A common stock, respectively. As of February 5, 2020, BlackRock was the beneficial owner of 3,087,529 shares of Class A common stock. The address for Blackrock is 55 East 52nd Street. New York, NY 10055.
|
|
(4)
|
Consists of shares of Class B common stock held through the HL Voting Trust, of which Mr. Beiser is a trustee. Mr. Beiser disclaims beneficial ownership of such shares except to the extent of
899,158
shares held by The Beiser Stock Trust, over which Mr. Beiser has disposition power.
|
|
(5)
|
Consists of shares of Class B common stock held indirectly through the HL Voting Trust, of which Mr. Gold is a trustee. Mr. Gold disclaims beneficial ownership of such shares, except to the extent of
1,168,214
shares held by The Gold Stock Trust, over which Mr. Gold has disposition power.
|
|
(6)
|
Consists of
840,151
shares held by the Adelson Stock Trust, over which Mr. Adelson has disposition power.
|
|
(7)
|
Consists of
88,748
shares held by the Alley Stock Trust, over which Mr. Alley has disposition power.
|
|
25
|
||
Equity Compensation Plan Information
The following table sets forth information, as of
March 31, 2020
, concerning compensation plans under which our equity securities are authorized for issuance.
|
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#)
|
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights ($)
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (#)
|
||
|
Equity compensation plans approved by security holders
(1)
|
231,645
(2)
|
—
|
17,581,478
(3)
|
||
|
Equity compensation plans not approved by security holders
|
—
|
—
|
—
|
||
|
Total
|
231,645
|
—
|
17,581,478
|
||
|
(1)
|
Consists of the Houlihan Lokey, Inc. Second Amended and Restated 2006 Incentive Compensation Plan (“2006 Plan”) and the Houlihan Lokey, Inc. Amended and Restated 2016 Incentive Award Plan, as amended (“2016 Plan”). The aggregate number of securities available for issuance under awards granted pursuant to the 2016 Plan is equal to the sum of (i) 8,000,000 shares and (ii) any shares of our Class B common stock, which as of October 19, 2017, were underlying awards under the 2006 Plan that, on or after such date, terminate, expire or lapse for any reason following the IPO or that remained available for issuance under the 2006 Plan as of the IPO. The annual increase will be equal to the lowest of (i) 6,540,659 shares of our Class A common stock and Class B common stock, (ii) six percent of the shares of Class A common stock and Class B common stock outstanding on the final day of the immediately preceding fiscal year (beginning with fiscal year 2017) and (iii) such smaller number of shares as determined by our board of directors. Calculations of outstanding shares are determined on a fully-diluted, as-converted basis.
|
|
(2)
|
Represents the number of shares issuable under dollar-denominated awards and unvested restricted stock units granted under the 2006 Plan and the 2016 Plan that were outstanding as of
March 31, 2020
, assuming that such awards were settled in shares based on the closing price of our Class A common stock on that date. Awards ultimately will be settled in either cash or shares of our Class B common stock based on the closing price on the applicable vesting date.
|
|
(3)
|
Represents the number of shares remaining available for future issuance under the 2016 Plan as of
March 31, 2020
. From and after the date of our IPO, no additional awards have been granted under the 2006 Plan. Shares can be issued under the 2016 Plan as either Class A common stock or Class B common stock.
|
|
26
|
||
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Transactions and Relationships with ORIX USA and its Affiliates
We have been and expect to continue to be a party to various agreements with ORIX USA and its affiliates, some of which were entered into or modified in connection with the corporate reorganization that preceded the IPO.
As part of the corporate reorganization that occurred in connection with the IPO, we entered into a letter agreement with ORIX USA and Fram (and, solely with respect to certain sections of the letter agreement, a representative of certain former shareholders of our predecessor entity). Pursuant to the letter agreement, Fram assigned and we assumed, certain promissory notes issued in connection with the redemption of shares of Fram stock following the termination of employment of our former employees. The letter agreement also provides for cross‑indemnities (other than with respect to taxes, which indemnity will be governed by the Tax Sharing Agreement (as defined below)) that (a) generally place the financial responsibility on us for liabilities associated with (i) the assets, liabilities, operations, business, affairs and other activities of or relating to our business prior to the corporate reorganization that occurred in connection with the IPO and (ii) claims from former stockholders of Fram (other than ORIX USA or its affiliates) regarding the corporate reorganization, the previous issuance, redemption or repurchase by Fram of equity awards and restricted stock under the 2006 Plan and the Fram Stockholders’ Agreement and the payment of other compensation by Fram and (b) generally place the financial responsibility on ORIX USA for liabilities associated with the assets, liabilities, operations, business, affairs or other activities of or relating to the Fram business (other than our business) prior to the corporate reorganization that occurred in connection with the IPO. The letter agreement also released parties from certain pre‑existing indemnity obligations.
Prior to the IPO, we and each of our corporate subsidiaries as well as Fram were, for United States federal income tax purposes, members of an affiliated group filing a consolidated return of which ORIX USA was the parent. As is customary in affiliated groups of corporations that file a consolidated return, notwithstanding that ORIX USA acted as agent for the entire group and filed a single United States federal income tax return on behalf of the group which included the taxable income of each member of the group, each such member, including us and our subsidiaries, was required, under a tax sharing agreement, to remit to ORIX USA its share of the consolidated tax liability of the group. In connection with the IPO, we agreed, pursuant to the Amended and Restated Tax Sharing Agreement dated August 18, 2015 (the “Tax Sharing Agreement”) with ORIX USA, that ORIX USA will be responsible for all taxes attributable to the assets (the “OCC business”), which were separately managed and controlled by ORIX USA but historically held within the consolidated corporate ownership structure of Fram, including any taxes incurred on the extraction thereof, and we will be responsible for all taxes attributable to (i) our business for any period and (ii) any steps of the corporate reorganization apart from the extraction of the OCC business. Thus, in the event that ORIX USA were to be assessed for taxes attributable to our business for any period, we would be required to compensate ORIX USA for such liability. Similarly, in the event we were assessed for taxes attributable to the OCC business or the extraction thereof, ORIX USA would be required to compensate us for such liability. In addition, if ORIX USA is unable to pay any prior period taxes for which it is responsible, we could be required to pay the entire amount of such taxes.
In May 2019, the Company conducted a public offering of Class A common stock in which ORIX USA sold a total of 3,000,000 shares of our Class A common stock.
In August 2019, pursuant to a registered underwritten public offering, ORIX USA sold its remaining ownership of 3,377,935 shares of our Class A common stock to the public at a price per share equal to $45.62.
Agreements with the HL Holders
HL Voting Trust Agreement
In connection with the corporate reorganization preceding the IPO, we entered into the Voting Trust Agreement. Pursuant to the Voting Trust Agreement, the trustees have the right to vote the shares of our common stock deposited by any HL Holder, together with any future voting securities received by such HL Holder, in their sole and absolute discretion on any matter, without fiduciary duties of any kind to the HL Holders. As of
July 28, 2020
the HL Voting Trust controlled approximately
78.7%
of the total voting power of the Company.
|
27
|
||
Lock‑Up Agreements
In connection with the corporate reorganization and subsequent grants of Class B common stock, each HL Holder depositing shares of our common stock into the HL Voting Trust also entered into an individual lock-up agreement with the Company. Under these lock-up agreements, shares of our common stock deposited into the HL Voting Trust and beneficially owned by the HL Holders generally were locked up for a period of three years following the effective date of the IPO, after which these shares become transferable in three equal installments on each of the third, fourth and fifth anniversaries of the IPO; provided that shares of our common stock held by managing directors and certain senior corporate officers of the Company whose employment with us or any of our subsidiaries terminated prior to the third anniversary of the IPO for reasons other than death or disability generally are subject to transfer restrictions, and are ineligible to participate in any follow-on offerings, in each case, through the seventh anniversary of the IPO. The fifth anniversary of the IPO will occur on August 18, 2020, meaning that, except with respect to shares held by thirteen managing directors and senior corporate officers whose employment terminated prior to the third anniversary of the IPO and whose shares will remain subject to the lock-up until the seventh anniversary of the IPO, all shares of Class B common stock held by the HL Holders will no longer be subject to the IPO lock-up agreements as of such date. Notwithstanding the foregoing, the lock-up agreements provide that:
|
•
|
up to 10% of each HL Holder’s shares held through the HL Voting Trust may be transferred for the purpose of charitable gifts and transfers to various family trusts for estate planning purposes, with any shares transferred under this exception reducing the number of shares that become transferable on the next transferability date; and
|
|
•
|
our board of directors may authorize sales in underwritten offerings in accordance with the terms of the registration rights agreement entered into between HL and the HL Holders;
provided
that any shares sold under this exception will reduce the number of shares that become transferable on the next transferability date.
|
Under the lock‑up agreements, our board of directors may consent to exceptions to those transfer restrictions, subject to any limitations or conditions imposed by it.
Stockholders’ Agreement
In connection with the IPO, we entered into the Stockholders’ Agreement. The Stockholders’ Agreement was terminated in August 2019 when ORIX USA disposed of all of its shares of the Company’s common stock. Prior to the termination of this agreement, pursuant to the Stockholders’ Agreement, our board of directors initially consisted of ten members, with ORIX USA and the trustees on behalf of the HL Voting Trust each having the right to recommend the nomination of four of the ten board members. The number of board members that ORIX USA was entitled to recommend for nomination was subject to maintaining certain ownership thresholds. If ORIX USA lost its right to recommend for nomination any director nominees pursuant to the terms of the Stockholders’ Agreement, these positions would generally have been filled by individuals recommended for nomination by the trustees on behalf of the HL Voting Trust. See “Corporate Governance
—
Director Nomination and Removal Process,” above.
The Stockholders’ Agreement also provided that approval of two‑thirds of the board was previously required for certain corporate actions for a period of time based on ORIX USA’s continuing ownership level.
Under the Stockholders’ Agreement, we agreed with ORIX USA upon certain standards to be satisfied in order for shares of our common stock subject to individual lock‑up agreements to participate in underwritten offerings. In particular:
|
•
|
the price, size, timing and other terms of any such sales must be approved by our board of directors
|
|
•
|
all HL Holders not subject to a seven‑year lock‑up will generally be offered the opportunity to participate on a pro rata basis, and no HL Holder who is also a member of our board of directors may sell more than his or her pro rata share without board approval; and
|
|
•
|
if ORIX USA is participating in an underwritten offering, then the relative participation of ORIX USA and the participating HL Holders in the offering will be determined consistent with the applicable registration rights agreement, pursuant to which, in the event of any necessary reduction in the size of the offering, such reduction shall be applied so that, unless otherwise agreed between ORIX USA and the HL Holders, 75% of the shares in the offering will be sold by ORIX USA and 25% of the shares in the offering will be sold by the HL Holders (or as close to such ratio as possible, given the desired amounts and the size of any necessary reduction).
|
|
28
|
||
Registration Rights Agreements
In connection with the IPO, we entered into Registration Rights Agreements with each of ORIX USA and the HL Holders (each dated as of August 18, 2015) pursuant to which these holders can demand that we file a registration statement relating to shares of our common stock, including shares of our Class A common stock issuable upon conversion of the shares of our Class B common stock, which common stock we refer to as registrable shares, and can request that their registrable shares be covered by a registration statement that we are otherwise filing. In the case of the HL Holders, these rights are subject to the lock‑up provisions discussed above. All of ORIX USA’s rights under its Registration Rights Agreement terminated in August 2019 when ORIX USA disposed of all of its shares of the Company’s common stock.
Demand Registration Rights.
Subject to the terms of the lock‑up agreements entered into by the selling stockholders, the holders of registrable shares entitled to demand registration rights may request that we register all or a portion of their registrable shares for sale under the Securities Act of 1933, as amended (the “Securities Act”). We will effect the registration as requested unless, in the good faith and reasonable judgment of our board of directors, such registration should be delayed. We may be required to effect up to three such registrations each year commencing August 18, 2016, any of which may involve an underwritten offering. In addition, when we are eligible for the use of Form S‑3, or any successor form, holders of registrable shares entitled to demand registration rights may make unlimited requests that we register all or a portion of their registrable shares for sale under the Securities Act on Form S‑3, or any successor form.
Incidental Registration Rights.
In addition, if at any time after the IPO we register any shares of our Class A common stock, the holders of all registrable shares are entitled to notice of the registration and to have all or a portion of their registrable shares included in the registration.
Other Provisions.
In the event that any registration in which the holders of registrable shares participate pursuant to either of our Registration Rights Agreements is an underwritten public offering, the number of registrable shares to be included may, in specified circumstances, be limited due to market conditions.
We will pay all registration expenses related to any demand or incidental registration, other than underwriting discounts, selling commissions and transfer taxes. The Registration Rights Agreements contain customary cross‑indemnification provisions, pursuant to which we will be obligated to indemnify the selling stockholders in the event of material misstatements or omissions in the registration statement attributable to us, and they will be obligated to indemnify us for material misstatements or omissions in the registration statement attributable to them.
Indemnification Agreements
Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by law. In addition, we have entered into indemnification agreements with each of our directors and executive officers.
|
29
|
||
Policies and Procedures for Related Person Transactions
Our board of directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). Prior to the IPO, our board of directors adopted a Related Person Transaction Policy and Procedures that is in conformity with the requirements for issuers having publicly‑held common stock that is listed on the New York Stock Exchange. Under this policy:
|
•
|
any related person transaction, and any material amendment or modification to a related person transaction, must be reviewed and approved or ratified by a committee of the board of directors composed solely of independent directors who are disinterested or by the disinterested members of the board of directors; and
|
|
•
|
any employment relationship or transaction involving an executive officer and any related compensation must be approved by the compensation committee of the board of directors or recommended by the compensation committee to the board of directors for its approval.
|
In connection with the review and approval or ratification of a related person transaction:
|
•
|
management must disclose to the committee or disinterested directors, as applicable, the name of the related person and the basis on which the person is a related person, the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction, and all the material facts as to the related person’s direct or indirect interest in, or relationship to, the related person transaction;
|
|
•
|
management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction complies with the terms of our agreements governing our material outstanding indebtedness that limit or restrict our ability to enter into a related person transaction;
|
|
•
|
management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction will be required to be disclosed in our applicable filings under the Securities Act or the Exchange Act, and related rules, and, to the extent required to be disclosed, management must ensure that the related person transaction is disclosed in accordance with such Acts and related rules; and
|
|
•
|
management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction constitutes a “personal loan” for purposes of Section 402 of the Sarbanes‑Oxley Act.
|
|
30
|
||
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act and Exchange Act Rule 14a-21(a), we are including in this Proxy Statement a separate resolution to approve, in a non-binding, stockholder advisory vote, the compensation paid to our named executive officers as disclosed in “Executive Compensation,” above.
While the results of the vote are non-binding and advisory in nature, our Board and Compensation Committee intend to consider the results of this vote in making future compensation decisions.
The language of the resolution is as follows:
“RESOLVED, that the compensation paid to the Company’s named executive officers for fiscal
2020
, as discussed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement, is hereby APPROVED, on an advisory basis.”
In considering their vote, stockholders are encouraged to read the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure included in this Proxy Statement.
Our Board of Directors recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers.
|
31
|
||
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITOR
Our audit committee has appointed KPMG LLP (“KPMG”) as our independent registered public accounting firm for our fiscal year ending
March 31, 2021
. Although stockholder ratification of the appointment of KPMG is not required by law, we are submitting the appointment to our stockholders for ratification as a matter of good corporate governance. The ratification of the appointment of KPMG requires the affirmative vote of a majority of the votes cast at the Annual Meeting. If stockholders do not ratify the appointment of KPMG, the audit committee will reconsider the appointment. Even if stockholders ratify the appointment of KPMG, the audit committee retains the discretion to appoint a different independent auditor at any time if it determines that such a change would be in the best interests of the Company and its stockholders.
Representatives of KPMG are expected to attend the Annual Meeting, will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Our Board of Directors recommends that you vote “FOR” the ratification of KPMG as our independent registered public accounting firm for the fiscal year ending
March 31, 2021
.
KPMG Fees
The following table presents aggregate fees billed to the Company for services rendered by KPMG during the years ended
March 31, 2020
and
March 31, 2019
.
|
2020
|
2019
|
|||
|
Audit fees
(1)
|
$2,545,800
|
$2,669,500
|
||
|
Audit-related fees
(2)
|
536,500
|
635,000
|
||
|
Tax fees
(3)
|
296,803
|
297,649
|
||
|
All other fees
|
—
|
—
|
||
|
Total
|
$3,379,103
|
$3,602,149
|
||
|
(1)
|
Audit fees include fees for the audit of our fiscal
2020
and
2019
consolidated financial statements and other services that are normally provided by the independent accountants in connection with regulatory filings, including reviews of documents filed with the SEC and all associated out-of-pocket expenses. Audit fees incurred in fiscal
2020
and
2019
include fees of
$265,000
and
$157,500
, respectively, related to services performed in connection with the stock offerings, including comfort letters, consents and review of documents filed with the SEC
|
|
(2)
|
Audit-related fees in fiscal
2020
and
2019
fees billed for our foreign statutory audits.
|
|
(3)
|
Tax fees include fees billed in the respective periods for tax compliance and consultations regarding the tax implications of certain transactions.
|
Audit Committee Pre-Approval
All services performed by KPMG for the Company and its subsidiaries pursuant to engagements entered into after our IPO have been pre-approved by the audit committee. The audit committee has adopted a pre-approval policy, which requires that before the independent auditor is engaged for any services, the audit committee must approve these services, including the fees and terms. Services are reviewed taking into account the terms of the policy, and, for types of services not pre-approved in the policy, the rules of the SEC and the Public Company Accounting Oversight Board (United States) (“PCAOB”).
|
32
|
||
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed “soliciting material” or otherwise considered “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and such information shall not be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates such information by reference in such filing.
The audit committee is responsible primarily for assisting the board of directors in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting, internal control and legal compliance functions of the Company and its subsidiaries. The committee assists in the board’s oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the Company’s independent auditors’ qualifications and independence, and the performance of the Company’s independent auditors and the Company’s internal audit function.
The Company’s management is responsible for the preparation and presentation of the Company’s financial statements, the effectiveness of internal control over financial reporting, and procedures that are reasonably designed to assure compliance with accounting standards and applicable laws and regulations. The Company’s independent registered public accounting firm, KPMG, is responsible for performing an independent audit of the Company’s financial statements in accordance with the standards of the PCAOB. The audit committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Company’s financial statements or disclosures.
The audit committee has reviewed and discussed the audited financial statements for the year ended
March 31, 2020
with the Company’s management and KPMG. The audit committee has discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the PCAOB in Rule 3200T.
The audit committee has received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding KPMG’s communications with the audit committee concerning independence, and has discussed with KPMG its independence.
Based on such review and discussions, the audit committee recommended to the Company’s board of directors that the financial statements referred to above be included in the Annual Report on Form 10-K for the fiscal year ended
March 31, 2020
.
|
Audit Committee
|
|
|
Robert A. Schriesheim, Chairman
|
|
|
Dr. Jacqueline B. Kosecoff
|
|
|
Paul A. Zuber
|
|
|
Gillian B. Zucker
|
|
|
33
|
||
ADDITIONAL INFORMATION
Procedures for Submitting Stockholder Proposals
Stockholder proposals intended to be presented at the
2021
Annual Meeting of Stockholders (the “
2021
Meeting”), pursuant to Exchange Act Rule 14a-8 must be delivered to the Corporate Secretary at our principal executive offices no later than April 7,
2021
in order to be included in the proxy materials for that meeting. Such proposals must also comply with all applicable provisions of Exchange Act Rule 14a-8 and our by-laws.
Under our by-laws, for stockholder proposals submitted for consideration at any annual meeting of stockholders, but not submitted for inclusion in our proxy materials pursuant to Exchange Act Rule 14a-8, including nominations of candidates for election as directors, notice must be delivered to our Secretary at our principal executive offices not less than 90 days (
June 26, 2021
) or more than 120 days (
May 27, 2021
) before the first anniversary of the prior annual meeting of stockholders (
September 24, 2021
). However, if the annual meeting occurs more than 30 days before or 60 days after this anniversary date, proposals must be delivered (A) no earlier than the 120
th
day prior to such annual meeting date and (B) on or before the later of (1) the 90
th
day prior to such annual meeting and (2) the tenth day following the first public announcement of the meeting date. Director nominations for consideration at any special meeting of stockholders called for the purpose of electing directors must be delivered (A) no earlier than the 120
th
day prior to such special meeting and (B) on or before the later of (1) the 90
th
day prior to such annual meeting and (2) the tenth day following the first public announcement of the special meeting date.
Stockholder proposals and nominations must include all required information concerning the stockholder and the proposal or nominee set forth in our by-laws.
|
34
|
||
|
35
|
||
|
36
|
||
|
37
|
||
TABLE OF CONTENTS
GENERAL INFORMATIONPROPOSAL 1: ELECTION OF DIRECTORSCORPORATE GOVERNANCEDIRECTOR COMPENSATIONEXECUTIVE COMPENSATIONCOMPENSATION COMMITTEE REPORTSTOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTCERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONSPROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATIONPROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORAUDIT COMMITTEE REPORTADDITIONAL INFORMATIONPROXY CARDNOTICE