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Section 1: DEF 14A (DEF 14A)

DEF 14A
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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.    )

 

 

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

Check the appropriate box:

 

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

 

LOGO

STERICYCLE, INC.

(Name of registrant as specified in its charter)

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 

(1)

 

Title of each class of securities to which transaction applies:

 

     

 

(2)

 

Aggregate number of securities to which transaction applies:

 

     

 

(3)

 

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

 

     

 

(4)

 

Proposed maximum aggregate value of transaction:

 

     

 

(5)

 

Total fee paid:

 

     

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

(1)

 

Amount Previously Paid:

 

     

 

(2)

 

Form, Schedule or Registration Statement No.:

 

     

 

(3)

 

Filing Party:

 

     

 

(4)

 

Date Filed:

 

     

 

 

 


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LOGO

We protect what matters.


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2019 PROXY STATEMENT

 

Our Company

At A Glance

 

Stericycle is a global business-to-business services company. We provide an
array of highly specialized solutions serving healthcare organizations and
commercial businesses of every size. Since our founding in 1989, we have
grown from a small start-up in medical waste management into a leader
across a range of increasingly complex and highly regulated arenas, such
as:

 

 Regulated waste management and compliance solutions

 

 Secure information destruction

 

 Environmental and sustainable solutions

 

 Brand protection solutions

 

 Patient and customer communication solutions

 

Every organization today must comply with increasingly strict regulatory
guidelines and quality controls in the delivery of their core businesses.
Large or small, businesses can’t always do it on their own. They seek out
Stericycle to help them. We have the expertise and passion to take on
many complicated and often behind-the-scenes services our clients don’t
always know how to do well but that ultimately make their businesses
better.

 

OUR PURPOSE:

 

To help our customers fulfill their
promises by providing solutions
that protect people and brands,
promote health and safeguard
the environment.

 

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

FOUNDED IN 1989 HEADQUARTERS LAKE FOREST, IL 2017 REVENUE OF $3.6 BILLION 680+ locations IN 21 COUNTRIES MORE THAN ONE MILLION CUSTOMERS WORLDWIDE 23,200+TEAM MEMBERS

 

 


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Letter from the Chairman

DEAR SHAREHOLDERS –

At the beginning of 2018, Stericycle announced a comprehensive, multi-year program to transform the Company for long-term sustainability and to drive profitable growth and long-term shareholder returns. As part of this Business Transformation, we are rationalizing our business portfolio and monetizing non-strategic assets, standardizing business processes around the globe and driving a metrics-driven culture. The backbone of this Transformation is an enterprise resource planning (ERP) platform which we expect will achieve efficiencies by reducing the number of information technology platforms, automating workflows, streamlining operations, and providing real-time, actionable data to all levels of the organization.

A similar transformation is underway regarding Stericycle’s governance. Over the past several years, the Board of Directors has been executing on a series of purposeful steps to evolve our governance, executive leadership, and financial controls. I’d like to take this opportunity to share this progress with you.

Governance Enhancements Aligned with Best Practices

The Board is focused on ensuring that we have the right skills and experience and fresh perspective on the Board to support the Company and provide effective oversight during the Business Transformation. To that end, we have added seven new Directors since the beginning of 2017.

 

 

With this continued refreshment and our two recently appointed directors, our Board will have an average tenure of approximately two and half years with no members (excluding the Chief Executive Officer, who has announced his retirement) having served as a director of Stericycle for more than seven years. In comparison, the average tenure for the S&P 500 and Russell 3000 is nine years.

 

 

I was appointed as Independent Chairman in 2018 after joining the Board in 2017, and we have refreshed the composition and leadership of all of our Board committees during this time.

 

 

Our skills matrix (included with the enclosed proxy statement) highlights the depth and breadth of our Board’s diverse skills, experiences and attributes, including significant experience with business transformation and financial controls.

Expanded Stericycle’s Leadership Team Breadth of Expertise

In addition to these significant changes to the Board, we have reconstituted the executive leadership team to ensure we have the right expertise and operational experience necessary to successfully drive the Company forward. Earlier this year we announced that Cindy J. Miller, who joined Stericycle as President and Chief Operating Officer in October 2018, will succeed Charlie A. Alutto as Chief Executive Officer, following Charlie’s retirement in May 2019. Cindy’s appointment as CEO was the culmination of a thoughtful executive leadership development and succession planning process designed to ensure the Company is strongly positioned to execute its Business Transformation and enhance financial and operational performance.

In addition to Cindy’s appointment as CEO, since 2017, we have appointed six new, highly-experienced executives to our senior leadership team:

 

 

William J. Seward as Executive Vice President and Chief Commercial Officer;

 

 

Richard M. Moore as Executive Vice President of North American Operations;

 

 

Joseph A. Reuter as Executive Vice President and Chief People Officer;

 

 

Michael Weisman as Executive Vice President and Chief Ethics and Compliance Officer;

 

 

Kurt M. Rogers as Executive Vice President and General Counsel; and

 

 

David W. Stahl as Executive Vice President and Chief Information Officer.

Additionally, Daniel Ginnetti, currently Executive Vice President and Chief Financial Officer, will transition to the position of Executive Vice President of International upon the appointment of a new Chief Financial Officer.


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Strengthening Internal Controls

The Board, and particularly the Audit Committee, has been deeply engaged in overseeing the Company’s efforts to improve financial reporting, controls and disclosures, and we’ve made substantial progress since 2016. Moreover, following the implementation of the new ERP system (targeted to begin in the U.S. and Canada during 2020 and internationally in 2021), Stericycle expects to benefit from significantly enhanced systems and processes that will streamline and automate financial controls and reporting. Some highlights of this progress include:

 

 

Stericycle has upgraded and expanded corporate and business unit finance, accounting and reporting, and information technology teams, and aligned incentive plans with effective internal controls.

 

 

With the guidance of industry-leading experts, we’ve been working diligently to mitigate material weaknesses and have made significant progress expanding policies, standardizing control processes, segregating duties, formalizing routine financial reviews, and training team members.

 

 

We’ve expanded our technical accounting team and the use of specialist involvement for non-routine transactions, highly complex areas of accounting, and adoption of new accounting standards to ensure appropriate accounting.

 

 

We are leveraging advanced technology to monitor revenue recognition activities and implemented continuous monitoring of global financial reporting controls.

 

 

We’ve created a robust Disclosure Committee Process led by the General Counsel and Chief Accounting Officer.

The Board of Directors believes strongly that Stericycle is an excellent company and we are excited about its future. We enjoy a leadership position in our large and growing core markets. Our business model focused on compliance-based, recurring service needs remains sound. Our customers are loyal and respond with strong satisfaction scores. Our team members are talented industry experts who have a passion for the work they do.

While the Company’s growth has been stagnant for the past two years, we believe it is a temporary and transitional phase. Stericycle is in the process of reinventing itself and reimagining its future and the changes are apparent in almost everything we do, from servicing our customers, to leading our teams, to advancing the technology we use, and to oversight and engagement from the Board.

On behalf of the Board of Directors, thank you for your investment in Stericycle. We ask for your voting support of our recommended actions on the items described in this proxy statement and will continue to work diligently to earn and keep your trust.

Sincerely,

 

 

LOGO

Robert S. Murley

Chairman


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LOGO

Notice of 2019 Annual Meeting of Stockholders

Wednesday, May 22, 2019

8:30 a.m. Central Daylight Time

Loews Chicago O’Hare Hotel

5300 N. River Road

Rosemont, IL 60018

DEAR STOCKHOLDER:

You are cordially invited to attend our 2019 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, May 22, 2019 at 8:30 a.m. Central Daylight Time at the Loews Chicago O’Hare Hotel, 5300 N. River Road, Rosemont, IL 60018.

At the Annual Meeting, you will be asked to consider and vote on the following matters:

 

1.

the election to the Board of Directors (the “Board”) of the ten nominees for director named in this proxy statement;

 

2.

an advisory vote to approve executive compensation (the “say-on-pay” vote);

 

3.

ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019;

 

4.

a stockholder proposal entitled Special Shareholder Meeting Improvement, if it is properly presented at our Annual Meeting; and

 

5.

any other matter that properly comes before the Annual Meeting.

Only stockholders of record at the close of business on the record date of March 28, 2019 are entitled to vote at the Annual Meeting.

If you plan to attend the meeting in person, please email your request to [email protected] If you are the beneficial owner of shares held in street name, you must also provide confirmation of your stock ownership. All requests for admission must be received by May 15, 2019. Admission is not transferable.

If you do not plan to attend the Annual Meeting, please promptly vote your shares by telephone, via the internet at www.proxyvote.com, or, if you received a paper copy of the materials, by signing, dating and returning the accompanying proxy card or voting instruction card. If you return your proxy card and later decide to attend the Annual Meeting and then vote in person, your earlier proxy (or earlier vote by telephone or Internet) will be revoked. Your attendance at the Annual Meeting, by itself, does not revoke an earlier proxy. If for any other reason you want to revoke your proxy, you may do so at any time before your proxy is voted.

For the Board of Directors

Dated: April 10, 2019

Lake Forest, Illinois

 

LOGO   LOGO
Robert S. Murley   Cindy J. Miller
Chairman of the Board  

President and Chief Operating Officer

Chief Executive Officer Elect

Important Notice Regarding the Availability of Proxy Materials for the 2019

Annual Meeting of Stockholders to be Held on May 22, 2019:

The Proxy Statement, Notice of Annual Meeting and 2018 Annual Report to

Stockholders are available at www.proxyvote.com

 

Stericycle, Inc. - 2019 Proxy Statement     1  


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Table of Contents

 

SUMMARY INFORMATION     4  
GENERAL INFORMATION     6  
STOCK OWNERSHIP     10  
Stock Ownership by Directors and Officers     10  
Stock Ownership of Certain Stockholders     11  

ITEM  1   ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

    12  
Voting in Uncontested Director Elections     12  
Board Refreshment     12  
Nominees for Director     14  
Director Qualifications     16  
Committees of the Board     18  
Board Leadership     20  
Corporate Governance     21  
Code of Conduct     25  
Section 16(a) Beneficial Ownership Reporting Compliance     25  
Additional Information     25  
Communications with the Board     25  
Director Compensation     26  

ITEM  2   ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

    28  
COMPENSATION DISCUSSION AND ANALYSIS     29  
Executive Summary     29  
Our Compensation-Setting Process     32  
2018 Compensation Program Highlights     33  
Our Executive Compensation Program for 2019     38  
Other Compensation Matters     40  
COMPENSATION COMMITTEE REPORT     42  
2018 SUMMARY COMPENSATION TABLE     43  
2018 GRANTS OF PLAN-BASED AWARDS     45  
2018 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END     47  

 

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2018 OPTION EXERCISES AND STOCK VESTED     50  

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN-CONTROL

    51  
Nonqualified Deferred Compensation     52  

ITEM  3   RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019

    55  
AUDIT COMMITTEE REPORT     57  

ITEM  4   STOCKHOLDER PROPOSAL ENTITLED SPECIAL SHAREHOLDER MEETING IMPROVEMENT

    58  
OTHER MATTERS     60  
STOCKHOLDER PROPOSALS FOR THE 2020 ANNUAL MEETING     60  
APPENDIX A DEFINITION AND RECONCILIATION OF NON-GAAP MEASURES     61  

 

Stericycle, Inc. - 2019 Proxy Statement     3  


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SUMMARY INFORMATION

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

Annual Meeting of Stockholders

 

 

 Time and Date:

  

8:30 a.m. central daylight time on Wednesday, May 22, 2019

 Place:

  

Loews Chicago O’Hare Hotel

5300 N. River Road

Rosemont, IL 60018

 Record Date:

  

March 28, 2019

 Voting:

  

Stockholders as of the record date are entitled to vote

 Attendance:

  

Stockholders who wish to attend the meeting in person should email their request to [email protected] by May 15, 2019.

 Proxy Materials:

  

This proxy statement and our annual report to stockholders (which includes a copy of our Annual Report on Form 10-K for the year ended December 31, 2018) are first being made available to stockholders on or about April 10, 2019.

Meeting Agenda and Voting Recommendations

 

 

  Agenda Item   

Board

Recommendation

     Page 

Election of ten directors

  

FOR each Nominee

    

12 

Advisory vote to approve executive compensation (the “say-on-pay” vote)

  

FOR

    

28 

Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019

  

FOR

    

55 

Stockholder proposal entitled Special Shareholder Meeting Improvement

  

AGAINST

    

58 



 

4    Stericycle, Inc. - 2018 Proxy Statement


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Board Nominees

 

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

 

  Nominee   Age   

Director

Since

   Principal Occupation   Current Committees

Robert S. Murley

  69    2017   

Chairman of the Board, Stericycle, Inc.;

Senior advisor, Credit Suisse, LLC

 

None

Cindy J. Miller(1)

  56    2019   

President and Chief Operating Officer, Stericycle Inc.

Chief Executive Officer Elect

  None

Brian P. Anderson

  68    2017    Former executive vice president of OfficeMax Incorporated  

   Audit (Chair)

Lynn D. Bleil

  55    2015    Former senior partner McKinsey & Company  

   Compensation

 

   Nominating and Governance (Chair)

Thomas F. Chen

  69    2014    Former senior vice president and president of international nutrition, Abbott Laboratories  

   Compensation

 

   Nominating and Governance

J. Joel Hackney, Jr.

  49    2019    Chief Executive Officer of nThrive, Inc.  

   Nominating and Governance

Veronica M. Hagen

  73    2018    Former President and Chief Executive Officer of Polymer Group Inc.  

   Audit

Stephen C. Hooley

  56    2019    Former Chairman and Chief Executive Officer of DST Systems, Inc.  

   Compensation

Kay G. Priestly

  63    2018    Former Chief Executive Officer of Turquoise Hill Resources Ltd.  

   Audit

Mike S. Zafirovski(2)

  65    2012    Former director, president and chief executive officer of Nortel Networks Corporation.  

   Compensation

 

   Nominating and Governance

(1)

Ms. Miller was appointed as President and Chief Executive Officer effective May 2, 2019.

 

(2)

Mr. Zafirovski is expected to be named as Chair of the Compensation Committee at the Board Meeting to be held in May 2019. He will succeed the current committee Chair, Thomas D. Brown, who is not standing for re-election at the Annual Meeting.

Compensation Highlights

 

Our compensation program is performance oriented and designed to incent our executive officers to improve our operating performance and thereby create value for all of our stockholders. The following table sets forth the 2018 compensation for each named executive officer as determined under the rules of the U.S. Securities and Exchange Commission (“SEC”). See the notes accompanying the Summary Compensation Table herein for more information.

 

  Named Executive Officer   Salary     Bonus     Option
Awards
    Stock
Awards
    Non-Equity
Incentive Plan
Compensation
    All Other
Compensation
   

Total 

Compensation 

 

Charles A. Alutto

  $ 1,000,000           $ 1,289,942     $  1,582,185     $  241,800     $ 5,693     $   4,119,620   

Cindy J. Miller

    156,250             894,995       822,209             33,526       1,906,980   

Daniel V. Ginnetti

    550,000             482,280       591,531     $ 99,743       3,000       1,726,554   

Kurt M. Rogers

    400,000             244,217       299,529     $ 58,032       3,000       1,004,778   

Ruth-Ellen Abdulmassih

    370,000     $ 327,541       234,438       287,535     $ 58,153       26,681       1,304,348   

Joseph B. Arnold

    550,000             482,280       591,531     $ 99,743       1,012,005       2,735,559   

Brenda R. Frank

    367,692     $ 198,616       252,546       309,704             19,571       1,148,129   


 

Stericycle, Inc. - 2019 Proxy Statement     5  


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GENERAL INFORMATION

Why Did I Receive This Proxy Statement and Other Materials?

 

 

The Board of Directors (the “Board”) of Stericycle, Inc. is soliciting proxies to vote shares of our common stock at the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, May 22, 2019 at 8:30 a.m. central daylight time, at the Loews Chicago O’Hare Hotel, 5300 N. River Road, Rosemont, IL 60018.

This proxy statement and our annual report to stockholders (which includes a copy of our Annual Report on Form 10-K for the year ended December 31, 2018), are first being made available to stockholders on or about April 10, 2019. Although both are made available together, our annual report to stockholders is not part of this proxy statement.

 

 

What Will Stockholders Vote on at the Annual Meeting?

 

 

Stockholders will vote on following matters at the Annual Meeting:

 

  the election to the Board of the ten nominees for director named in this proxy statement (Item 1);

 

  an advisory vote to approve executive compensation (the “say-on-pay” vote) (Item 2);

 

  ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019 (Item 3);
  a stockholder proposal entitled Special Shareholder Meeting Improvement, if properly presented at the Annual Meeting (Item 4); and

 

  any other matter that properly comes before the Annual Meeting.
 

 

What Are the Board’s Voting Recommendations?

 

 

The Board recommends that you vote your shares:

 

    FOR each of the ten nominees for election to the Board (Item 1);

 

    FOR the advisory vote to approve executive compensation (Item 2);
    FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019 (Item 3); and

 

    AGAINST the stockholder proposal (Item 4).
 

 

Who May Vote at the Annual Meeting?

 

 

Only stockholders of record as of the close of business on March 28, 2019 are entitled to vote at the Annual Meeting. Each outstanding share of common stock as of the record date is entitled to one vote on all matters that come before the meeting. There is no cumulative voting.

 

As of the close of business on the record date of March 28, 2019, there were 90,771,802 shares of our common stock issued and outstanding.

 

 

Why Did I Receive Only a One-Page Notice in the Mail Regarding the Internet Availability of Proxy Materials Instead of Receiving a Full Set of Printed Proxy Materials?

 

 

In accordance with the “notice and access” rules of the SEC, we have elected to provide access to our proxy materials, including this proxy statement and our annual report to stockholders, over the internet, and accordingly, we mailed our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about April 10, 2019. This Notice contains instructions on how to access our proxy materials over the internet, how to request a printed or

electronic copy of these materials and how to vote by internet, telephone or mail. The voting facilities over the internet or by telephone will remain open until 11:59 p.m. eastern daylight time on May 21, 2019.

The Notice is not a proxy card and cannot be used to vote your shares.

 

 

6    Stericycle, Inc. - 2019 Proxy Statement


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GENERAL INFORMATION

 

What Is the Difference Between a Stockholder of Record and a Beneficial Owner of Shares Held in Street Name?

 

 

If your shares are registered directly in your name with our stock registrar and transfer agent, EQ Shareowner Services, you are considered the stockholder of record for those shares and have the right to vote those shares directly. You may vote in person at the Annual Meeting or by proxy.

If your shares are held in an account at a brokerage firm, bank or other nominee (for convenient reference, a “broker”), you are considered the beneficial owner of those shares, which are said to be held in “street name,” and the broker is considered the stockholder of record for voting

purposes. As the beneficial owner you cannot vote the shares in your account directly, but you have the right to instruct the broker how to vote them.

As a beneficial owner, you are invited to attend the Annual Meeting, but because you are not a stockholder of record, you may not vote your shares at the Annual Meeting unless you obtain a valid proxy from your broker.

See “How Can I Attend the Annual Meeting?” below for further information and instructions.

 

 

If I Am a Stockholder of Record, How Do I Vote?

 

 

You may vote in several ways. You may vote in person at the Annual Meeting, or you may vote by proxy over the internet or by telephone by following the instructions provided in the Notice.

In addition, if you request copies of our proxy materials in printed form, you may vote by completing and signing the proxy card included in the materials and returning it in the postage-paid envelope provided.

 

 

If I Am a Beneficial Owner of Shares Held in Street Name, How Do I Instruct My Broker How to Vote?

 

 

If you are a beneficial owner of our common stock, the Notice was forwarded to you by your broker. You may instruct your broker how to vote over the internet or by telephone by following the instructions provided by your broker.

In addition, if you request copies of our proxy materials in printed form, you may instruct your broker how to vote by completing and signing the voting instruction card included in the materials and returning it in the postage-paid envelope provided.

 

 

What Happens if I Am a Stockholder of Record and Sign and Return the Proxy Card But Do Not Make Any Voting Choices?

 

 

The proxy holders (the persons named as proxies) will vote your shares in accordance with the Board’s voting recommendations for Items 1 through 4 described in this proxy statement. See “What Are the Board’s Voting Recommendations?” above.

 

We do not expect that any other matters will properly come before the Annual Meeting. If, however, any other matters do come before the meeting, the proxy holders will vote your shares in accordance with their judgment.

 

 

What Happens if I Am a Beneficial Owner of Shares Held in Street Name and Do Not Give Voting Instructions to My Broker?

 

 

Under the stock exchange and other rules governing brokers who are voting shares held in street name, brokers have authority to vote those shares at their discretion on “routine” matters but may not vote those shares on “non-routine” matters. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019 (Item 3) is considered a routine matter under the relevant rules. All of the other items to be voted on (Items 1, 2 and 4) are considered non-routine matters.

A “broker non-vote” occurs when your broker returns a proxy card for your shares held in street name but does not vote on

a particular matter because (i) the broker has not received voting instructions from you and (ii) the broker does not have authority to vote on the matter without instructions because the matter is of a non-routine nature. Broker non-votes will not have any effect on the result of the vote when they occur. There will not be any broker non-votes on the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019 (Item 3) because brokers will have discretionary authority to vote on this matter.

 

 

Stericycle, Inc. - 2019 Proxy Statement     7  


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GENERAL INFORMATION

 

What Is the Quorum Required for the Annual Meeting?

 

 

Holders of a majority of our outstanding shares entitled to vote at the Annual Meeting who are present in person or represented by proxy will constitute a quorum to conduct business at the Annual Meeting.

If you are a stockholder of record and vote your shares by proxy, your shares will be counted for purposes of

determining whether a quorum is present even if your voting choice is to abstain. Similarly, if you are a beneficial owner of shares held in street name and do not give voting instructions to your broker, your shares will be counted for purposes of determining whether a quorum is present if your broker votes your shares on any routine matter.

 

 

What Are My Choices in Voting on the Matters to Be Voted on at the Annual Meeting?

 

 

On Item 1 (the election of directors), you may vote “For” or “Against” each individual nominee or “Abstain” from voting on the nominee’s election.

On Item 2 (the say-on-pay vote), Item 3 (ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019), and Item 4 (the stockholder proposal), you may vote “For” or “Against” the proposal or “Abstain” from voting on the proposal.

 

 

What Are the Voting Requirements to Approve the Matters to Be Voted on at the Annual Meeting?

 

 

  Item 1 (election of directors): Each nominee for election as a director will be elected by the vote of a majority of the votes cast and therefore must receive more “For” votes than “Against” votes in order to be elected as a director. Abstentions and broker non-votes will not have any effect on the result of the vote.

 

  Item 2 (the say-on-pay vote): This proposal requires for approval the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote. Abstentions will have the same effect as a vote “Against.” Broker non-votes will not have any effect on the result of the vote.

 

  Item 3 (ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm
   

for 2019): This proposal requires for approval the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote. Abstentions will have the same effect as a vote “Against.” Brokers will have discretionary authority to vote on Item 3, and therefore, there will not be any broker non-votes on this matter.

 

  Item 4 (the stockholder proposal): This proposal requires for approval the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote. Abstentions will have the same effect as a vote “Against.” Broker non-votes will not have any effect on the result of the vote.
 

 

Can I Change My Vote after I Have Voted?

 

 

If you are a stockholder of record, you may change your vote by voting again over the internet or by telephone (before those voting facilities are closed at 11:59 p.m. eastern daylight time on May 21, 2019) or by returning a new, properly completed proxy card bearing a later date than the date of your original proxy card. In addition, you may revoke your proxy by attending the Annual Meeting in person and requesting to vote. Attendance at the meeting in person will

not, by itself, revoke your proxy. You may also revoke your proxy any time before the final vote at the Annual Meeting by filing a signed notice of revocation with the Secretary of the Company at 28161 North Keith Drive, Lake Forest, Illinois 60045.

If you are a beneficial owner of shares held in street name, you may revoke your proxy by following the instructions provided by your broker.

 

 

How Can I Find Out the Voting Results of the Annual Meeting?

 

 

The preliminary voting results will be announced at the Annual Meeting, if available. The final voting results will be tallied by the inspector of elections and reported in a Current

Report on Form 8-K which we will file with the SEC within four business days following the Annual Meeting.

 

 

8    Stericycle, Inc. - 2019 Proxy Statement


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GENERAL INFORMATION

 

Who Is Paying for the Cost of This Proxy Solicitation?

 

 

We will bear the cost of this proxy solicitation. We have retained Georgeson, Inc. to help us solicit proxies. We will pay Georgeson Inc. a base fee of $20,000 plus reasonable expenses for its services. Some of our officers and employees may solicit proxies by personal conversations,

telephone, regular mail or email, but they will not receive any additional compensation for doing so. We will reimburse brokers and others for their reasonable charges and expenses in forwarding our proxy materials to stockholders who are beneficial owners of shares of our common stock.

 

 

Multiple Individuals Residing in My Home Are Beneficial Owners of Stericycle Common Stock. Why Did We Receive Only One Mailing?

 

 

We are sending only one envelope with multiple Notices to you if you share a single address with another stockholder, unless we have received instructions to the contrary from you. This practice, known as “householding,” is designed to eliminate duplicate mailings, conserve natural resources and reduce our printing and mailing costs. We will promptly deliver a separate Notice to you upon written or verbal request. If you

wish to receive duplicate mailings in the future, you may contact Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. If you currently receive multiple Notices, you can request householding by contacting our Investor Relations as described above. If you own your shares through a broker, you can request householding by contacting the holder of record.

 

 

How Can I Attend the Annual Meeting?

 

 

We encourage our stockholders to attend the Annual Meeting. If you plan to attend the meeting in person, please email your request to [email protected]. If you are the beneficial owner of shares held in street name, you must also provide confirmation of your stock ownership (for example, by providing a copy of a brokerage firm statement).

All requests for admission must be received by May 15, 2019. Admission is not transferable and will admit only the stockholder or stockholders to whom it was issued.

 

 

Stericycle, Inc. - 2019 Proxy Statement     9  


Table of Contents

STOCK OWNERSHIP

Stock Ownership by Directors and Officers

The following table provides information about the beneficial ownership of shares of our common stock as of March 28, 2019 by (i) each of our directors, (ii) each of our named executive officers listed in the Summary Compensation Table herein, and (iii) all of our directors and executive officers as a group:

 

      Amount and Nature of
Beneficial  Ownership(1)
     Percent of
Class(2)
 

Directors

     

Charles A. Alutto(3)

     568,935        *  

Brian P. Anderson

     6,752        *  

Lynn D. Bleil

     17,520        *  

Thomas D. Brown

     56,827        *  

Thomas F. Chen

     30,094        *  

J. Joel Hackney, Jr.

            *  

Veronica M. Hagen

            *  

Stephen C. Hooley

            *  

Cindy J. Miller(3)

            *  

Mark C. Miller

     946,620        1.0%  

Robert S. Murley

     8,500        *  

Kay G. Priestly

            *  

Mike S. Zafirovski

     39,493        *  

Named Executive Officers

     

Daniel V. Ginnetti

     155,231        *  

Kurt M. Rogers

     5,634        *  

Ruth-Ellen Abdulmassih(4)

     69,458        *  

Joseph B. Arnold(5)

     157,011        *  

Brenda R. Frank(6)

     784        *  

All directors, named executive officers and executive officers as a group (23 persons)

  

 

2,067,396

 

  

 

2.3%

 

*

Less than 1%.

 

(1)

This column includes shares of common stock issuable upon the exercise of stock options exercisable as of or within 60 days after March 28, 2019. These shares are held as follows: Mr. Alutto 564,659 shares; Mr. Anderson, 2,933 shares; Ms. Bleil, 14,947 shares; Mr. Brown, 47,279 shares; Mr. Chen, 21,720 shares; Mr. Miller, 753,683 shares; Mr. Murley, 2,933 shares; Mr. Zafirovski, 32,602 shares; Ms. Abdulmassih, 67,339 shares, Mr. Arnold, 152,998 shares; Mr. Ginnetti, 148,581 shares and; Mr. Rogers, 5,296 shares. Also includes deferred stock units (“DSUs”) allocated to certain of our directors pursuant to our director compensation plan. Such DSUs are as follows: Mr. Anderson, 3,467 units; Ms. Bleil, 2,078 units; Mr. Brown, 4,933 units; Mr. Chen, 3,476 units; Mr. Murley, 4,264 units; and Mr. Zafirovski, 3,476 units.

 

(2)

Shares of common stock issuable under a stock option exercisable as of or within 60 days after March 28, 2019 are considered outstanding for purposes of computing the percentage of the person holding the option but are not considered outstanding for purposes of computing the percentage of any other person.

 

(3)

Mr. Alutto and Ms. Miller are also named executive officers. Mr. Alutto will retire as Chief Executive Officer and as a director effective May 2, 2019. Ms. Miller has been appointed Chief Executive Officer effective as of that date.

 

(4)

Ms. Abdulmassih ceased employment with the Company in January 2019.

 

(5)

Mr. Arnold ceased to be an executive officer of the Company in September 2018.

 

(6)

Ms. Frank ceased employment with the Company in November 2018.

 

10    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

STOCK OWNERSHIP

Stock Ownership of Certain Stockholders

 

Stock Ownership of Certain Stockholders

The following table provides information about the beneficial ownership of our common stock by each person who was known to us to be the beneficial owner as of the record date (March 28, 2019) of more than 5% of our outstanding common stock:

 

Name and Address of Beneficial Owner

   Amount and Nature of
Beneficial Ownership
     Percent of
Class
 

 

The Vanguard Group, Inc.(1)
100 Vanguard Boulevard
Malvern, Pennsylvania 19355

     8,172,270        9.02

 

T. Rowe Price Associates, Inc.(2)
100 E. Pratt Street
Baltimore, Maryland 21202

     9,181,105        10.1

 

BlackRock, Inc.(3)
55 East 52nd Street
New York, New York 10055

     7,616,828        8.4

 

Baillie Gifford & Co.(4)
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
Scotland

 

    

 

5,393,108

 

 

 

    

 

5.95

 

 

 

(1)

Based on a Schedule 13G/A filed with the SEC on February 11, 2019, the Vanguard Group has sole voting power with respect to 41,023 shares, shared voting power with respect to 10,221 shares, sole dispositive power with respect to 8,129,059 shares and shared dispositive power with respect to 43,211 shares.

 

(2)

Based on a Schedule 13G/A filed with the SEC on February 11, 2019, T Rowe Price Associates, Inc. has sole voting power with respect to 3,711,270 shares and sole dispositive power with respect to 9,161,119 shares.

 

(3)

Based on a Schedule 13G/A filed with the SEC on February 6, 2019, BlackRock, Inc. has sole voting power with respect to 7,204,157 shares, and sole dispositive power with respect to 7,616,828 shares.

 

(4)

Based on a Schedule 13G filed with the SEC on February 8, 2019, Baillie Gifford & Co. has sole voting power with respect to 4,610,118 shares, and sole dispositive power with respect to 5,393,108 shares.

 

Stericycle, Inc. - 2019 Proxy Statement     11  


Table of Contents

ITEM 1    Election of Directors for a One-Year Term

 

Our Board is currently composed of thirteen directors. Mr. Alutto, Mr. Brown and Mr. Miller are not standing for re-election at the Annual Meeting. Therefore, effective as of the annual meeting of shareholders, our board of directors has fixed the size of the board at ten. With the exception of Ms. Miller, our current President and Chief Operating Officer and our Chief Executive Officer Elect, all of our director nominees are outside directors (i.e., directors who are neither an officer nor an employee of ours). Mr. Murley, one of our independent directors, was elected as Chairman of the Board in March 2018. The Board has determined that all of our outside directors are independent under the applicable rules of the SEC and listing standards of the Nasdaq Global Select Market (“Nasdaq”).

Although all of the nominees proposed for election to our board of directors are currently members of our Board, Ms. Miller, Mr. Hackney, Ms. Hagen, Mr. Hooley and Ms. Priestly have not previously been elected by our stockholders. Ms. Miller was elected to our board in connection with her appointment as Chief Executive Officer. Mr. Hackney, Ms. Hagen, Mr. Hooley and Ms. Priestly were identified by the Nominating and Governance Committee as potential directors and were recommended by the Nominating and Governance Committee after it completed its interview and vetting process.

Each director elected at the Annual Meeting will hold office until our 2020 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified.

 

 

Voting in Uncontested Director Elections

 

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

If a nominee for election as a director is an incumbent director and the nominee is not re-elected, Delaware law provides that the director continues to serve as a “holdover”

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

 

 

Board Refreshment

 

A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that our Board has the right skills and experience to best oversee management and the execution of our strategy and the associated risks.

Since the beginning of 2017, Ms. Miller, Mr. Murley, Mr. Anderson, Mr. Hackney, Ms. Hagen, Mr. Hooley and Ms. Priestly have all joined the Board. Mr. Murley, Mr. Anderson and Ms. Priestly all bring substantial experience in finance, accounting and financial reporting.

Ms. Priestly, Mr. Hackney, Ms. Hagen and Mr. Hooley each have broad experience in business transformation. In addition, since the beginning of 2017, several long-tenured directors have stepped down from the Board. The average tenure of the independent nominees for election as a director is less than 3 years. Further, with respect to Board leadership succession, Mr. Murley was elected as independent Chairman of the Board in March 2018 and new Chairs of the Audit, Compensation and Nominating and Governance Committees were elected in 2016 and 2017.

 

 

12    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Board Refreshment

 

A snapshot of our 2019 director nominees is set forth below.

Snapshot of 2019 Director Nominees

 

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

 

Board Independence

   Board Tenure   

Diversity of Director

Nominees

10

Directors  

 

All Director nominees

are independent

except the CEO Elect

  

Tenure of independent

Director nominees

(years of consecutive service)

   60%    

Gender, ethnic or

other minority

representation

LOGO

   2.5 years    

Average

Tenure

   LOGO
   LOGO

 

Stericycle, Inc. - 2019 Proxy Statement     13  


Table of Contents

ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Nominees for Director

 

Nominees for Director

 

ROBERT S. MURLEY

 

 

LOGO

Director since January 2017

Age 69

    

Experience: Robert S. Murley has served as our Chairman since March 2018. Mr. Murley is a Senior Adviser to Credit Suisse, LLC, a financial services company. From 1975 to April 2012, Mr. Murley was employed by Credit Suisse, LLC and its predecessors. In 2005, he was appointed Chairman of Investment Banking in the Americas. Prior to that time, Mr. Murley headed the Global Industrial and Services Group within the Investment Banking Division, as well as the Chicago investment banking office. He was named a Managing Director in 1984 and appointed a Vice Chairman in 1998. Mr. Murley is a member of the board of directors of Health Insurance Innovations Inc., of privately held Brown Advisory Incorporated, and of the board of advisors of Harbour Group. He was formerly on the board of directors of Stone Energy Corporation and Apollo Education Group, Inc. Mr. Murley is an Emeritus Charter Trustee of Princeton University, a Trustee and the former Chairman of the Board of the Educational Testing Service in Princeton, New Jersey, is Vice Chairman of the Board of the Ann & Robert Lurie Children’s Hospital of Chicago and Chair of the Board of the Lurie Children’s Foundation, is a Trustee of the Museum of Science & Industry in Chicago, Illinois, is Chairman of the Board of the UCLA Anderson Board of Advisors.

Skills & Qualifications: Mr. Murley’s existing public company board experience, his deep knowledge of the capital markets and the economy, and his extensive experience leading and advising a range of businesses across multiple industries make him a valuable member of the Board.

CINDY J. MILLER

 

 

LOGO

Director since February 2019

Age 56

Experience: Ms. Miller joined Stericycle as President and Chief Operating Officer in October 2018. She was named President and Chief Executive Officer effective May 2019. Ms. Miller previously served as President, Global Freight Forwarding for United Parcel Service (UPS) from April 2016 to September 2018 and as President of UPS’s European region from March 2013 to March 2016.

Skills & Qualifications: Ms. Miller brings to the Board deep knowledge and experience in business transformation and change management, operations management, strategy, logistics, and international business.

BRIAN P. ANDERSON

 

 

LOGO

Director since January 2017

Age 68

Experience: Mr. Anderson served as Senior Vice-President and Chief Financial Officer of OfficeMax Incorporated from 2004 to 2005 and as Senior Vice President and Chief Financial Officer of Baxter International from 1997 to 2004. He joined Baxter in 1991, as Vice President, Corporate Audit, became Corporate Controller in 1993 and then Vice President, Finance in 1997. Before joining Baxter, he spent 15 years with Deloitte in the Chicago office and the Washington, D.C. office as an Audit Partner. He is a member of the Board of Directors of W. W. Grainger, Inc., PulteGroup, Inc., and James Hardie Industries plc. He currently serves as Chairman of the Audit Committee of James Hardie Industries plc, and is the former Chairman of the Nemours Foundation, Chairman of the Audit Committee of the Pulte Group and Lead Director and Audit Committee Chairman of W. W. Grainger, Inc. Mr. Anderson serves on The Governing Board of the Center for Audit Quality and served on the Board of A.M. Castle & Co. from 2005 to 2016, as Audit Committee Chairman (2005-2010) and Chairman of the Board 2010-2016.

Skills & Qualifications: Mr. Anderson brings to our Board his significant experience as a chief financial officer of two large multinational companies, in-depth knowledge with respect to the preparation and review of complex financial reporting statements, and experience in risk management and risk assessment.

LYNN D. BLEIL

 

 

LOGO

Director Since May 2015

Age 55

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

Skills & Qualifications: Ms. Bleil brings to the Board significant experience in the healthcare industry, as well as commercial expertise and expertise in corporate strategy, mergers and acquisitions, and financial reporting, compliance and risk management.

 

 

14    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Nominees for Director

 

THOMAS F. CHEN

 

 

LOGO

Director Since May 2014

Age 69

Experience: Mr. Chen served as senior vice president and president of international nutrition of Abbott Laboratories before retiring in 2010. During his 22-year career at Abbott, Mr. Chen served in a number of roles with expanding responsibilities, primarily in Pacific/Asia/Africa where he oversaw expansion into emerging markets. Prior to Abbott, he held several management positions at American Cyanamid Company, which later merged with Pfizer, Inc. Mr. Chen currently serves as a director of Baxter International Inc. and an advisor to Cooperation Fund, a partnership between Goldman Sachs and the sovereign fund, China Investment Corporation, to bolster U.S. manufacturers’ market presence in China. Mr. Chen previously served as a director of Cyanotech Corporation.

Skills & Qualifications: With his extensive international business experience in pharmaceutical, hospital products and nutritionals through his 22-year career at Abbott, Mr. Chen provides our Board with a distinct global perspective resulting from his experience with diverse geographies and healthcare products. He also provides our Board with significant operational, strategy, mergers and acquisitions, healthcare industry, governmental and regulatory, and commercial expertise.

J. JOEL HACKNEY, JR.

 

 

LOGO

Director Since March 2019

Age 49

Experience: Mr. Hackney has been the Chief Executive Officer and a director of nThrive, Inc., a revenue cycle management company providing medical billing and coding, business analytics and advisory services, since January 2016. Previously, he was the Chief Executive Officer and a director of AVINTV from June 2013 to November 2016.

Skills & Qualifications: With more than 25 years of experience leading both private and public companies domestically and abroad, Mr. Hackney brings to our Board deep expertise in driving business transformation and profitable growth.

VERONICA M. HAGEN

 

 

LOGO

Director Since June 2018

Age 73

Experience: From 2007 until her retirement in 2013, Ms. Hagen served as Chief Executive Officer of Polymer Group, Inc. and served from 2007 to 2015 as a Director. She also served as President of Polymer Group, Inc. from January 2011 until her retirement in 2013. Prior to joining Polymer Group, Inc., Ms. Hagen was the President and Chief Executive Officer of Sappi Fine Paper, a division of Sappi Limited. She has served as Vice President and Chief Customer Officer at Alcoa Inc. and owned and operated Metal Sales Associates. She is a Director of American Water Works Company, Inc., Newmont Mining Corporation and The Southern Company.

Skills & Qualifications: Ms. Hagen brings business transformation expertise, senior leadership experience, corporate governance knowledge and experience, environmental matters experience and risk management experience. Ms. Hagen’s experience as chief executive officer of two global companies allows her to contribute key valuable insights to our Board regarding operations management, customer service and strategic planning.

STEPHEN C. HOOLEY

 

 

LOGO

Director Since March 2019

Age 56

Experience: Mr. Hooley served as Chairman, Chief Executive Officer and President of DST Systems, Inc. from July 2014 to April 2018. He was Chief Executive Officer and President of DST Systems from September 2012 to July 2014 and President and Chief Operating Officer from July 2009 to September 2012. He was previously the President and Chief Executive Officer of Boston Financial Data Services.

Skills & Qualifications: Mr. Hooley brings previous service as a public company chief executive officer and director, deep experience in the financial services and healthcare industries and extensive business transformation and strategy expertise.

 

 

Stericycle, Inc. - 2019 Proxy Statement     15  


Table of Contents

ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Nominees for Director

 

KAY G. PRIESTLY

 

 

LOGO

Director Since June 2018

Age 62

Experience: Ms. Priestly served as Chief Executive Officer of Turquoise Hill Resources Ltd. from May 2012 until her retirement in December 2014. She previously served as Chief Financial Officer of Rio Tinto Copper, a division of the Rio Tinto Group, from 2008 until her appointment as Chief Executive Officer of Turquoise Hill Resources in 2012. From 2006 to 2008, she was Vice President, Finance and Chief Financial Officer of Rio Tinto’s Kennecott Utah Copper operations. She previously spent over 24 years with global professional services firm Arthur Anderson, where she provided tax, consulting and M&A services to global companies across many industries. She is a director of TechnipFMC plc and formerly served as a director of New Gold Inc., FMC Technologies, Inc. SouthGobi Resources Ltd., Turquoise Hill Resources and Stone Energy Corporation(1).

Skills & Qualifications: Ms. Priestly brings to our Board extensive executive management experience as a chief executive offer and senior officer of major organizations with international operations. She also brings substantial business transformation, accounting, financial, risk management, M&A and consulting expertise.

 

(1) 

When the Board appointed Ms. Priestly as a director in June 2018, it was aware that Stone Energy Corporation had filed for bankruptcy protection in 2016 while Ms. Priestly was serving as a director. The Board concluded that this event did not impair Ms. Priestley’s ability to serve as one of our directors.

MIKE S. ZAFIROVSKI

 

 

LOGO

Director Since November 2012

Age 65

Experience: Mr. Zafirovski is the founder and President of The Zaf Group LLC, a management consulting and investment firm established in November 2012. Mr. Zafirovski has also served as an executive advisor to The Blackstone Group, a private investment banking company, since October 2011. From November 2005 to August 2009, Mr. Zafirovski served as the President and Chief Executive Officer and a director of Nortel Networks Corporation. Prior to that, he was the President and Chief Operating Officer and a director of Motorola, Inc. from July 2002 to January 2005, and remained a consultant to and a director of Motorola until May 2005. He served as Executive Vice President and President of the personal communications sector of Motorola from June 2000 to July 2002. Prior to joining Motorola, Mr. Zafirovski spent nearly 25 years with General Electric Company, where he served in management positions, including 13 years as President and Chief Executive Officer of five businesses in the consumer, industrial and financial services areas, his most recent being President and Chief Executive Officer of GE Lighting from July 1999 to May 2000. Mr. Zafirovski also serves as a director of The Boeing Company and Apria Healthcare Group Inc.

Skills & Qualifications: Mr. Zafirovski provides guidance to the Board on a wide variety of strategic, operational and business matters based on his substantial experience leading enterprises with significant international operations. He also provides business transformation, information technology, mergers and acquisitions, healthcare industry, and government and regulatory expertise.

 

 

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

Director Qualifications

 

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

The Nominating and Governance Committee seeks to ensure an experienced, exceptionally qualified Board with deep expertise in areas relevant to Stericycle. When evaluating

potential director nominees, the committee considers each individual’s professional expertise and background, in addition to his or her personal characteristics. The committee always conducts this evaluation in the context of the Board as a whole. The committee works with the Board to determine the appropriate mix of backgrounds and experiences that will foster and maintain a Board strong in its collective knowledge and best able to perpetuate our long-term success. To assist in this objective, the Nominating and Governance Committee conducts annual evaluations of the Board and the Board’s committees, assessing the experience, skills, qualifications, diversity, and contributions of each individual and of the group as a whole.

 

 

16    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Director Qualifications

 

The Nominating and Governance Committee regularly communicates with the Board to identify characteristics, professional experience and areas of expertise that will help meet specific Board needs, including:

 

  leadership experience, as directors who have served in significant leadership positions possess strong abilities to motivate and manage others and to identify and develop leadership qualities in others;

 

  business transformation experience, as we are engaged in a multi-year program to transform our company for long-term sustainability and drive profitable growth and long-term shareholder returns;

 

  public company board service and governance expertise, which provides directors with a solid understanding of their extensive and complex oversight responsibilities and
   

furthers our goals of greater transparency, accountability for management and the Board and protection of stockholder interests;

 

  operational expertise, which gives directors specific insight into, and expertise that will foster active participation in the oversight of the development and implementation of our operating plan and business strategy;

 

  financial reporting, compliance and risk management expertise, which enables directors to analyze our financial statements, capital structure and complex financial transactions and oversee our accounting, financial reporting and enterprise risk management; and

 

  healthcare industry expertise, which is vital in understanding and reviewing our strategy.
 

 

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

 

     Anderson   Bleil   Chen   Hackney   Hagen   Hooley   Miller   Murley   Priestly   Zafirovski

Leadership experience (public company CEO/COO)

                   

Public company Board service/governance expertise

                   

Operational expertise (logistics/supply chain or capital intensive industry)

                   

Business transformation/IT expertise

                   

Corporate strategy/M&A capability

                   

Financial reporting, compliance and risk management expertise

                   

Healthcare industry expertise

                   

Government/regulatory experience

                   

Talent management/HR expertise

                   

Commercial/go-to-market expertise

                   

International business expertise

                   

Gender, ethnic or other diversity

                   

Tenure on Board (years, as of May 2019)

 

2

 

4

 

5

 

<1

 

1

 

<1

 

<1

 

2

 

1

 

7

 

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Table of Contents

ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Committees of the Board

 

Committees of the Board

Our Board of Directors has three standing committees: Compensation, Audit, and Nominating and Governance Committees. All of the members of each committee are outside directors who are independent under the applicable SEC rules and Nasdaq listing standards.

Compensation Committee

 

 

The Compensation Committee determines the structure, award and public disclosure of all elements of compensation and benefits paid to our CEO and other executive officers. The committee reviews and approves financial and strategic performance objectives with respect to our annual and long-term incentive plans. The committee reviews and approves the respective salaries of the Company’s executive officers in light of the Company’s goals and objectives relevant to each officer, including, as the committee deems appropriate, consideration of (i) the individual officer’s salary grade, scope of responsibilities and level of experience, (ii) the rate of inflation, (iii) the range of salary increases for the Company’s employees generally, and (iv) the salaries paid to comparable officers in comparable companies. The committee determines appropriate cash bonuses, if any, for the Company’s executive

officers, after consideration of specific individual and Company performance goals and criteria and periodically reviews the aggregate amount of compensation and benefits being paid or potentially payable to the Company’s executive officers. The committee also has responsibility for overseeing the Company’s regulatory compliance with respect to compensation matters. Pursuant to the committee’s charter, the committee has responsibility for facilitating a risk review of incentive compensation programs and assessing if those incentives create risks that are reasonably likely to have a material adverse effect on our company. At the request of the Board, the committee periodically reviews executive leadership development and CEO succession planning and makes recommendations to our Board of Directors.

 

 

Audit Committee

 

 

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

The Audit Committee regularly reviews with the Company’s legal counsel any legal or regulatory matters that may have a material effect on the Company’s financial statements or operations. The Audit Committee also oversees, reviews and evaluates the adequacy and effectiveness of the Company’s compliance program. The Audit Committee reviews and evaluates the qualifications, performance and independence of our independent public accountants. The Audit Committee

also reviews the performance, effectiveness and objectivity of the Company’s internal audit function, including its staffing, audit plan, examinations and related management responses.

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

 

 

Nominating and Governance Committee

 

 

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

As discussed above, the Nominating and Governance Committee considers a variety of factors in evaluating a candidate for selection as a nominee for election as a director. These factors include the candidate’s personal qualities, with a particular emphasis on probity, independence of judgment and analytical skills, and the candidate’s professional experience, educational background, knowledge of our business and healthcare services generally and experience serving on the boards of other public companies. In evaluating a candidate’s qualification for election to the Board, the committee also considers whether and how the candidate would contribute to

 

 

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Table of Contents

ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Committees of the Board

 

the Board’s diversity, which we define broadly to include gender and ethnicity as well as background, experience and other individual qualities and attributes. The committee has not established any minimum qualifications that a candidate must possess. In determining whether to recommend an incumbent director for re-election, the committee also considers the director’s preparation for and participation in meetings of the Board of Directors and the committee or committees of the Board on which the director serves.

In identifying potential candidates for selection in the future as nominees for election as directors, the Nominating and Governance Committee relies on suggestions and recommendations from the other directors, management, stockholders and others and, when appropriate, may retain a search firm for assistance. In February 2019, the Nominating and Governance Committee retained a leading third-party search firm to assist with identifying potential director nominees. The committee will consider candidates proposed by stockholders and will evaluate any candidate proposed by a stockholder on the same basis that it evaluates any other candidate. Any stockholder who wants to propose a candidate should submit a written recommendation to the committee indicating the candidate’s qualifications and other relevant biographical information and providing preliminary confirmation that the candidate would be willing to serve as a director. Any such recommendation should be addressed to the Board of Directors, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045.

In addition to recommending director candidates to the Nominating and Governance Committee, stockholders may

also, pursuant to procedures established in our bylaws, directly nominate one or more director candidates to stand for election at an annual meeting of stockholders. A stockholder wishing to make such a nomination must deliver written notice of the nomination that satisfies the requirements set forth in our bylaws to the secretary of the Company not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting of stockholders. If, however, the date of the annual meeting is more than 30 days before or after the first anniversary, the stockholder’s notice must be received no more than 120 days prior to such annual meeting nor less than the later of (x) 90 days prior to such annual meeting and (y) the close of business on the 10th day following the date on which notice or public disclosure of the date of the meeting was first given or made.

Stockholders may also submit director nominees to the Board to be included in our annual proxy statement, known as “proxy access.” Stockholders who intend to submit director nominees for inclusion in our proxy materials for the 2020 Annual Meeting of Stockholders must comply with the requirements of proxy access as set forth in our bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the Company not less than 120 days nor more than 150 days prior to the one-year anniversary of the date that the Company first mailed its proxy materials for the annual meeting of the previous year.

 

 

Process for Selecting Directors

 

 

 

LOGO

Committee Charters

 

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

 

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ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Committees of the Board

 

Committee Members and Meetings

 

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

 

 Director

   Compensation
Committee
     Audit
Committee
     Nominating and
Governance
Committee
 

Robert S. Murley(1)

        

Charles A. Alutto

        

Brian P. Anderson(2)

     

 

 

 

LOGO

 

 

  

Lynn D. Bleil

  

 

 

 

LOGO

 

 

     

 

 

 

LOGO

 

 

Thomas D. Brown(3)

  

 

 

 

LOGO

 

 

     

 

 

 

LOGO

 

 

Thomas F. Chen

  

 

 

 

LOGO

 

     

 

 

 

LOGO

 

 

J. Joel Hackney, Jr.

        

 

 

 

LOGO

 

 

Veronica M. Hagen

     

 

 

 

LOGO

 

 

  

Stephen C. Hooley

  

 

 

 

LOGO

 

     

Cindy J. Miller

        

Mark C. Miller

        

Kay G. Priestly(2)

     

 

 

 

LOGO

 

 

  

Mike S. Zafirovski(3)

  

 

 

 

LOGO

 

 

           

 

 

 

LOGO

 

 

 

LOGO

Member

 

LOGO

Committee Chair

 

(1)

Mr. Murley serves as the independent Chairman of the Board.

 

(2)

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

 

(3)

Mr. Brown is not standing for re-election at the Annual Meeting, and we expect that Mr. Zafirovski will succeed him as Chair of the Compensation Committee at that time.

Our Board of Directors held 18 meetings in person or by telephone during 2018 and acted without a formal meeting on several occasions by the unanimous written consent of the directors. The Audit Committee held 15 meetings during the year. The Compensation Committee held six meetings during the year. The Nominating and Governance Committee held six meetings during the year. Each director attended 75% or more of the aggregate number of Board meetings and the total number of meetings of all Board committees on which he or she served during his or her term of service.

We encourage our directors to attend the annual meeting of stockholders. Each of the director nominees attended the 2018 Annual Meeting of Stockholders, and we anticipate that all of our director nominees will attend this year’s Annual Meeting.

Board Leadership

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

As part of the evolution of the Board of Directors, in March 2018, Mr. Murley, one of our independent directors, was elected Chairman of the Board, succeeding Mr. Miller. Mr. Miller is not standing for re-election as a director at the Annual Meeting.

The Chairman confers with our CEO on matters of general policy affecting the day-to-day management of our company’s business. The Chairman coordinates the scheduling and agenda of Board meetings and the preparation and distribution of agenda materials. The Chairman presides at all meetings of the Board of Directors and may call special meetings of the Board when he considers it appropriate. In general, the Chairman oversees the scope, quality, and timeliness of the flow of

 

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ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Board Leadership

 

information from our management to the Board and serves as an independent contact for stockholders wishing to communicate with the Board.

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

Corporate Governance

Executive Sessions of the Board

 

 

Our Board of Directors excuses our Chief Executive Officer, as well as any of our other executive officers who may be present by invitation, from a portion of each meeting of the Board in order to allow the Board, with our Chairman

presiding, to review the Chief Executive Officer’s performance and to enable each director to raise any matter of interest or concern without the presence of management.

 

 

Board Evaluation

 

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

 

 

LOGO  

 

 

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ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Corporate Governance

 

Policy on Related Party Transactions

 

 

The Board of Directors has adopted a written policy requiring certain transactions with related parties to be approved in advance by the Audit Committee. For purposes of this policy, a related party includes any director, director nominee or executive officer or an immediate family member of any director, director nominee or executive officer. The transactions subject to review include any transaction, arrangement or relationship (or any series of similar transactions, arrangements and relationships) in which (i) we or one of our subsidiaries will be a participant, (ii) the aggregate amount involved exceeds $100,000 and (iii) a

related party will have a direct or indirect interest. In reviewing proposed transactions with related parties, the Audit Committee considers the benefits to us of the proposed transaction, the potential effect of the proposed transaction on the director’s independence (if the related party is a director), and the terms of the proposed transaction and whether those terms are comparable to the terms available to an unrelated third party or to employees generally. There were no such transactions during the year ended December 31, 2018 that required the Audit Committee’s approval.

 

 

Succession Planning

 

 

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

On an annual basis, the Board devotes time during a dedicated session to discuss talent management and succession planning. Lead by our Chief People Officer, this session includes an overview of senior leaders across the Company’s service lines, global markets, and functional shared services up to and including the executive officers of the company. The Board is also given exposure to emerging, high-potential leaders through formal presentations to the Board and working groups with Board committees.

Beyond the annual succession planning session, the Board is routinely updated on workforce matters including key workforce indicators, team member engagement, recruiting programs, and talent development programs.

During 2018, Stericycle announced the appointment of Ms. Miller as President and Chief Operating Officer. The Board was heavily engaged in the recruitment and selection process for this role and leveraged the appointment of a new Chief Operating Officer to build a succession plan for the Chief Executive Officer role. With the announcement of Mr. Alutto’s retirement in February 2019, Ms. Miller was named Chief Executive Officer, effective May 2, 2019.

 

 

Shareholder Engagement

 

 

During 2018 and under the oversight of our Chairman of the Board, Stericycle expanded its efforts for engaging with shareholders. In addition to our Company’s previous monitoring and routine shareholder engagement practices, we introduced a proactive Board outreach program which focused on building relationships with our top 25 shareholders.

Our expanded engagement program included outreach during the spring of 2018 and again in the fall to gain a broader understanding of shareholder priorities. During these conversations, our Board members reviewed our corporate governance enhancements, the refreshment of our

Board of Directors, our executive compensation philosophy and program, and the expansion of the leadership team, which have all significantly evolved over the past three years. Additionally, we solicited feedback from shareholders on our progress and responded to their questions and concerns.

The outreach program provided our Board with useful input from our shareholders. Transparency and responsiveness is an important component of our governance commitment to shareholders. We expect to continue to expand our engagement practices in order to monitor the insights of our shareholders and proactively solicit ways to evolve our business.

 

 

Risk Oversight

 

 

The Board regularly devotes time during its meetings to review and discuss the most significant risks facing the Company, and management’s responses to those risks. During these discussions, the Chief Executive Officer, Chief Financial Officer, General Counsel and other members of senior management present management’s assessment of risks, a description of the most significant risks facing the

Company and any mitigating factors and plans or practices in place to address and monitor those risks.

Each Board committee addresses relevant risk topics as part of its committee responsibilities. The committees oversee the Company’s risk profile and exposures relating to matters within the scope of their authority and provide periodic

 

 

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Corporate Governance

 

reports to the full Board about their deliberations and recommendations. The Audit Committee reviews with management significant risks and exposures identified by management, our internal audit staff or the independent accountants, and management’s steps to address these risks. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and its overall compensation philosophy.

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

 

 

Required Resignation on Change in Job Responsibilities

 

 

The Board of Directors has adopted a policy that a director must tender his or her resignation if the director’s principal occupation or business association changes substantially from the position that he or she held when originally elected to the Board. The Nominating and Governance Committee

will then review the circumstances of the director’s new position or retirement and recommend to the full Board whether to accept or reject the director’s resignation in light of the contributions that he or she can be expected to continue to make to the Board.

 

 

Director Tenure

 

 

In order to assist with Board refreshment and in bringing fresh ideas and perspectives to the Board, in March 2019, the Board revised our Corporate Governance Guidelines with respect to director tenure. The revised Guidelines generally provide that no non-management Director may be

nominated to serve a new term if he or she has already served on the Board for 15 years at the time of election. The Board of Directors may make exceptions to this policy on a case-by-case basis.

 

 

Anti-Hedging and Anti-Pledging Policy

 

 

Our directors, executive officers and other designated employees are prohibited from engaging in certain transactions with respect to our common stock including hedging transactions, derivative transactions and short sales. In addition, executive officers and other designated employees are prohibited from holding our common stock in

a margin account or otherwise pledging our common stock as collateral for a loan. In March 2019, our Board amended our policy to also prohibit our directors from holding our common stock in a margin account or otherwise pledging our common stock as collateral for a loan.

 

 

Clawback Policy

 

 

In order to encourage sound financial reporting and enhance individual accountability, we have adopted a clawback policy that allows us to recover from our executive officers certain performance-based compensation in the event of certain accounting restatements. If we are required to prepare a restatement of our financial statements due to material noncompliance with any financial reporting requirement

under the securities laws, the Compensation Committee may seek to recover from a covered officer certain performance-based compensation if the covered officer is determined to have engaged in fraud or intentional misconduct that materially contributed to the need for the restatement or if otherwise required by applicable SEC or Nasdaq rules.

 

 

10b5-1 Trading Plan Guidelines

 

 

In March 2019, our Board adopted guidelines with respect to trading plans (“10b5-1 Plans”) adopted by employees or directors pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “10b5-1 Plan Guidelines”). These 10b5-1 Plan Guidelines are in addition to the requirements and conditions of applicable law and other Company policies, including our Securities Trading Policy. The 10b5-1 Plan Guidelines require that 10b5-1 Plans be approved by our General Counsel or his designee and that

they only be adopted or amended while a trading blackout is not in effect. The 10b5-1 Plan Guidelines provide for a “cooling off” period of at least 30 days before trades can occur after adoption or amendment of a 10b5-1 Plan and before adoption of a new plan after early termination of an existing 10b5-1 Plan. Our 10b5-1 Plan Guidelines also set restrictions on the number of 10b5-1 Plans a covered individual may have in effect, trading outside of an existing 10b5-1 Plan and the length of time a plan may be in effect.

 

 

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ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Corporate Governance

 

Internal Controls

 

 

Under the oversight of the Audit Committee, we have implemented an Internal Control Transformation Program to

address historical material weaknesses. We highlight below significant remediation activities undertaken in 2018.

 

 

Financial Reporting Controls:

 

In connection with our Internal Control Transformation Program, we have continued to focus on improving our overall control environment. Our remediation actions related to improving the controls over our financial statement preparation and reporting process included the following:

 

  The Audit Committee and our company’s management have frequent communications regarding our financial reporting and internal control environment.

 

  We expanded our finance, accounting and information technology teams through the addition of experienced and qualified personnel.

 

  We aligned incentive plans with sustained effective internal controls over financial reporting and management continuous control monitoring.

 

  Our company provided additional internal controls training to our employees and standardized policies and controls where feasible.

 

  We re-designed and harmonized our control objectives across all processes and locations.

 

  We re-designed and enhanced our delegation of authority policy and processes, including implementing a systematic enabled work flow.

 

  Our company implemented a central repository for policies and quarterly checklists to confirm adherence with policies.

 

  We instituted monthly legal entity and management reporting reviews of financial statements disaggregated by key business units, regions and functional areas, to evaluate results, observe adherence to policies and agree on necessary actions to be taken before considering the period closed. Management of the respective areas meets with our corporate executives monthly in connection with these reviews.

 

  We expanded our technical accounting group that has responsibility to ensure that the accounting for complex or non-routine transactions is appropriate.

 

  We expanded our use of specialists to assist with highly complex and technical areas of accounting, valuation and new accounting standards adoption.

 

  We enhanced our Disclosure Committee processes and reviews by adding experienced and knowledgeable members to the committee and implementing disclosure surveys to capture input from appropriate areas and levels throughout the organization.
 

 

General Information Technology Controls (GITCs):

 

During the course of 2018, we made progress in advancing foundational elements of our general information technology controls. Our remediation actions related to our GITC environment included the following:

 

  We established policies, trained personnel and implemented policies and procedures over logical access and general information technology controls.

 

  We automated user access reviews.

 

  We implemented policies and mitigating controls over incompatible segregation of duties within our information technology systems.
 

 

Monitoring Activities:

 

Our remediation actions related to monitoring our internal controls over financial reporting included the following:

 

  Enhanced control activities within our process to recognize revenue, including:

 

    Leveraging advanced technology to substantively evaluate and monitor revenue, accounts receivable, cash receipts and other accounts and activities associated with revenue recognition.
    Implementing a monitoring control which leverages advanced analytical processes to evaluate the appropriateness of revenue related transactions across key business units.

 

  Implementing systematic segregation of duties through system enabled work flow.

 

  Developing and implementing continuous monitoring of global financial reporting controls.
 

 

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ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Corporate Governance

 

 

When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiencies that have led to the material

weaknesses we have identified and strengthen our internal controls over financial reporting.

 

 

Code of Conduct

 

The board has adopted a Code of Business Conduct and Ethics that sets forth standards regarding matters such as honest and ethical conduct, compliance with law, and full, fair, accurate, and timely disclosure in reports and documents we file with the SEC and in other public communications. The Code of Business Conduct and Ethics applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer and principal

accounting officer. The Code of Business Conduct and Ethics is available at our website, www.stericycle.com, and is available free of charge on written request to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, IL 60045. Any amendments to certain provisions of the Code of Business Conduct and Ethics or waivers of such provisions granted to certain executive officers will be disclosed promptly on our website.

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended requires our directors, executive officers and persons beneficially owning more than 10% of our outstanding common stock to file periodic reports of stock ownership and stock transactions with the SEC. During 2017 and 2018, due to the failure of an investment advisor with discretionary authority to inform Mr. Anderson of certain transactions in our common stock, Mr. Anderson failed to

timely file eleven forms 4 to report eleven transactions. In addition, due to administrative oversight by the Company, Mr. Brown and Mr. Chen each failed to timely file a form 4 to report the conversion of depositary shares into shares of our common stock and Mr. Richard Hoffman failed to timely file a form 4 to report grants of stock options, time-based restricted stock units (“RSUs”) and performance-based RSUs.

 

 

Additional Information

 

We will provide a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 without charge to each stockholder as of the record date who sends a written request to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. Copies of this

proxy statement and our Form 10-K as filed with the SEC are available in .pdf format on our investor relations website, http://investors.stericycle.com. Copies of this proxy statement and our Annual Report on Form 10-K also may be accessed directly from the SEC’s website, www.sec.gov.

 

 

Communications with the Board

 

Stockholders and other interested parties who would like to communicate with the Board may do so by writing to the Board of Directors, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. Our Investor Relations department will process all communications received. Communications relating to matters within the scope of the Board’s responsibilities will be forwarded to the Chairman of the Board and, at his direction, to the other directors.

Communications relating to ordinary day-to-day business matters that are not within the scope of the Board’s responsibilities will be forwarded to the appropriate officer or executive. Communications addressed to a particular committee of the Board will be forwarded to the chair of that committee and, at his or her direction, to the other members of the committee.

 

 

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ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Director Compensation

 

Director Compensation

 

For 2018, each outside director’s compensation consisted of an annual cash retainer of $80,000 and an annual equity retainer of $125,000. Unless deferred, the annual equity retainer was paid entirely in time-based RSU’s which vest on the first anniversary of the grant date. We also paid the following retainers to directors with additional responsibilities as the Chairman of the Board or the Chair of a committee:

 

  Chairman of the Board – $50,000 cash and $50,000 in RSUs

 

  Chair of the Audit Committee – $20,000

 

  Chair of the Compensation Committee – $15,000

 

  Chair of the Nominating and Governance Committee – $12,500

Under the terms of the Director Compensation Plan, directors may elect to convert all or a portion of the annual cash retainer to time-based RSUs. Directors may also elect to defer receipt of any or a portion of their annual director compensation and convert such compensation to deferred stock units (DSUs). DSUs are generally payable in the form of shares of our common stock within a certain period after a director’s death or other separation from service. We did not pay any other fees or other cash compensation to our directors who served during 2018 or provide them with any perquisites or other personal benefits. Directors are not paid separate fees for attending meetings of the Board or its committees.

 

 

The following table provides information about the compensation paid to our directors in 2018. Neither Mr. Alutto nor Ms. Miller received any additional compensation for his or her services as a director. In addition, Mr. Hackney and Mr. Hooley were not directors during 2018 and did not receive any director compensation during that year.

 

  Name    Fees Earned
or Provided
in
Cash
     Stock
Awards(1)
     Total  

Brian P. Anderson

   $ 75,000      $ 125,000      $ 200,000  

Lynn D. Bleil

     46,250      145,000        191,250  

Thomas D. Brown

            195,000        195,000  

Thomas F. Chen

     60,000        125,000        185,000  

Veronica M. Hagen

     32,500        116,000        148,500  

Mark C. Miller

     40,000        125,000        165,000  

Robert S. Murley

     85,000        175,000        260,000  

Kay G. Priestly

     32,500        116,000        148,500  

Mike Zafirovski

 

    

 

60,000

 

 

 

    

 

125,000

 

 

 

    

 

185,000

 

 

 

 

(1) 

Stock awards are valued in accordance with FASB ASC Topic 718, based on the closing price of our common stock on the date of the grant.

Compensation Plan for 2019

 

 

The Compensation Committee regularly reviews director compensation to ensure it remains competitive with our peer group. During 2018, the Compensation Committee asked its independent compensation consultant to conduct a market

evaluation of our director pay programs relative to the market and to our peer group. After reviewing the results of that analysis, the Compensation Committee recommended no changes to the director pay program for 2019.

 

 

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ITEM 1 ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

Director Compensation

 

Stock Ownership Guidelines

 

 

Under our Director Compensation Plan, all directors are expected to hold a minimum position in our common stock. We established this program to help align the long-term interests of directors with the interests of our stockholders. Each non-employee director is expected to hold four times the annual cash retainer in our common stock.

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

toward that goal. To that end, each non-employee director must retain 75% of his or her stock or option awards until the minimum position requirement has been achieved.

Compliance with these ownership guidelines is measured following the same process as used for confirming stock ownership by executive officers. See “Stock Ownership Guidelines” under the “Other Compensation Matters” section.

 

 

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ITEM 2    Advisory Vote to Approve Executive Compensation

 

Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are asking our stockholders to approve, by means of a non-binding advisory vote, the compensation of our named executive officers as disclosed in this proxy statement.

This proposal, popularly known as “say-on-pay,” enables stockholders to express or withhold their approval of our executive compensation program in general. The vote is intended to provide an assessment by our stockholders of our overall executive compensation program and not of any one or more particular elements of that program. The Compensation Committee and the full Board intend to consider and take into account the outcome of this non-binding advisory vote in making future executive compensation decisions. Because this vote is advisory and non-binding, it will not necessarily affect or otherwise limit any future compensation of any of our named executive officers. This advisory vote to approve executive compensation will be held on an annual basis at least until the next advisory vote to determine the frequency of such vote, which is expected to be in 2023.

Our executive compensation program is described in the “Compensation Discussion and Analysis” section of this proxy statement and the related tables and narrative discussion. Stockholders are strongly urged to read this material in its entirety, and in particular to read the “Executive Summary” section of “Compensation Discussion and Analysis” to obtain an informed understanding of our executive compensation program.

We believe that our executive compensation program is firmly aligned with the long-term interests of our stockholders. Our executive compensation program has as its objectives (i) attracting, motivating and retaining highly qualified executive officers and (ii) structuring most of their compensation, aside from their base salaries, to be dependent on our attainment of measurable Company-wide performance targets and the sustained growth in our stock price, so that they benefit only if our stockholders benefit.

We believe that our executive compensation program satisfies these objectives. Our executive compensation program consists of short-term cash compensation and long-term equity-based incentive compensation. For 2018, cash compensation was paid in the form of a base salary and annual bonus and long-term incentive compensation was paid in the form of stock options, time-based RSUs and performance-based RSUs. Annual cash performance bonuses are dependent on Company-wide performance. Stock options and RSUs are linked to the performance of our common stock, and in the case of performance-based RSUs, achievement of pre-established earnings per share (“EPS”) goals. With respect to 2018, cash compensation represented 30% and equity compensation 70% of our CEO’s total direct compensation and cash compensation represented 37% and equity compensation represented 62% of our other NEO’s total direct compensation, respectively (we excluded separation payments from calculation of these percentages). Based on 2018 fiscal year performance, our executive officers earned 24.2% of their cash incentive target and 43% of their performance-based RSUs which were tied to 2018 performance.

As more fully discussed in the “Compensation Discussion and Analysis” section and the related tables and narrative discussion, the Board of Directors requests stockholders to approve the following resolution:

Resolved, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Compensation Discussion and Analysis section, the compensation tables, and the related narrative disclosure in this Proxy Statement.

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

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Our 2018 Named Executive Officers

 

This Compensation Discussion and Analysis explains our executive compensation program generally and the compensation awarded to our CEO, CFO, our three other most highly compensated executive officers who were serving as executive officers as of the end of 2018, and two additional individuals who would have been included as one of our three most highly compensated executives but for the fact they were not serving as executive officers as of the end of 2018. These executives, referred to as our “named executive officers” or “NEOs”, were:

 

Name

   Title (as of December 31, 2018)

Charles A. Alutto

  

Chief Executive Officer

Cindy J. Miller

  

President and Chief Operating Officer

Daniel V. Ginnetti

  

Executive Vice President and Chief Financial Officer

Kurt M. Rogers

  

Executive Vice President and General Counsel

Ruth-Ellen Abdulmassih

  

Executive Vice President, Communication and Related Services

Joseph B. Arnold

  

Former Executive Vice President and Chief Operating Officer

Brenda R. Frank

  

Former Executive Vice President and Chief People Officer

Stericycle’s Executive Compensation Philosophy

 

 

Our executive compensation program is developed by the Compensation Committee and approved annually by the Board of Directors.

The compensation program for executive officers has two objectives:

 

1.

To attract, motivate and retain highly qualified executive officers; and

 

2.

To structure the bulk of executive compensation to be dependent on Stericycle’s attainment of measurable Company-wide performance targets and sustained growth in our stock price so that executives benefit only if our stockholders benefit.

Our executive compensation program has three components: base salary, short-term incentive awards, and long-term incentive awards. Base salary and annual performance bonuses are paid in cash, and long-term

incentive compensation is paid in the form of stock options, time-based RSUs, and performance-based RSUs. We generally target our executive officers’ total direct compensation to be aligned with the median of our peer group. To ensure appropriate alignment, the Compensation Committee considers experience, individual contribution, and the Company’s performance relative to its peer group when setting pay levels.

The Compensation Committee and the Board work to ensure that our executive compensation program is both market-competitive and performance-oriented. Our executive officers earn base salaries, but the majority of their target compensation comes in annual cash performance bonuses, stock options and time-based and performance-based RSUs. As a result, a substantial portion of our executive officers’ compensation is influenced, either positively or negatively, by Company performance.

 

 

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Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

 

Our Executive Compensation Best Practices

 

The Compensation Committee regularly reviews the executive compensation program to ensure that it is aligned with our compensation philosophy, our Company objectives, and stockholder interests. Highlights of key elements of and exclusions from our program are noted below.

 

  What We Do:      What We Don’t Do:        

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

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

   Maintain an executive compensation clawback policy         No employment contracts for NEOs   

   Cap annual and long-term incentive awards           

   Retain an independent compensation consultant to advise the Compensation Committee           

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

   Regular review of proxy advisor policies and corporate governance best practices           

   Maintain stock ownership and retention guidelines           

  

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

 

                    

Our Executive Compensation Program for 2018

 

 

Historically, our named executive officers received salaries significantly below those of comparable executives in our peer group of companies. Beginning in 2015, the Compensation Committee embarked on a four-year plan to move salaries of our executive officers toward the median of our peer group of companies. Subsequent to our acquisition of Shred-it in 2015, the Compensation Committee determined that this four-year timetable needed to be accelerated to reflect the increased responsibilities of the executives, to preserve internal equity, and to support retention. In 2017, our named executive officer salaries were adjusted upward and annual cash performance targets were adjusted downward moving our named executive officer direct cash compensation toward the median of our peer group companies, which completed the plan approved in 2015. For 2018, no changes were made to the salaries or bonus targets for the named executive officers.

For 2018, our named executive officers’ annual cash performance bonuses were based upon the achievement of Adjusted EBITDA targets developed from our annual operating plan and adjusted return on invested capital (Adjusted ROIC). Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization excluding acquisition-related expenses and other various expenses that do not reflect the ongoing performance of the business. The approach used for Adjusted EBITDA for executive compensation is consistent with that used for communicating the financial performance

of the company and is reviewed quarterly by both the Audit Committee and Compensation Committee.

Adjusted ROIC excludes the impact of acquisitions within the current year. The calculation for Adjusted ROIC is net operating profit after taxes and amortization (NOPATA) excluding acquisition-related expenses and other various expenses that do not reflect the ongoing performance of the business divided by invested capital. In 2018, Adjusted ROIC excluded the impact of acquisition expenses, integration expenses, restructuring and plant conversion expenses, the change in fair value of contingent considerations, contract exit costs, asset impairment charges, litigation expenses, and insurance proceeds. For additional detail and reconciliations, see Appendix A to this proxy statement.

The Board believes these two metrics for the annual cash performance bonus provide strong incentives to our executive officers to improve our operating performance and the return on our capital employed, thereby creating value for our stockholders.

Our executives are also compensated with a long-term incentive program in the form of equity grants. For 2018, the award structure of the long-term incentive plan was equally divided among stock options, time-based RSUs, and performance-based RSUs. These grants of equity were designed to incentivize our named executive officers to focus on long-term value creation.

 

 

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Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

 

The principal elements of our executive compensation program for 2018 are summarized below. These elements are discussed in more detail under “2018 Compensation Program Highlights.”

 

Compensation

Element

  Form of
Compensation
   Performance and
Vesting Criteria
   Purpose

Base Salary

  Cash    N/A   

Provide fixed compensation to attract and retain key executives and to offset external factors that may impact incentive pay

 

 

Annual Cash

Bonus

 

 

 

Cash

  

 

Annual Adjusted EBITDA and Adjusted ROIC objectives

 

  

 

Incentivize executives to achieve annual performance goals and be rewarded commensurately

 

 

Long-term

Incentives

 

 

Stock Options (1/3)
Time-based RSUs (1/3)

 

Performance-based
RSUs (1/3)

  

 

Five year ratable vesting based on continuous service

 

Vest, or not, in three equal annual installments depending on achievement of pre-established performance metrics

 

  

 

Incentivize long-term value creation and align management’s interests with those of our shareholders

For 2018, approximately 82% of our CEO’s target total compensation and approximately 73% of our other NEO’s target total compensation was at risk.

The chart below illustrates how these components were allocated in actual total compensation received by our NEOs in 2018 (we excluded separation payments from calculation of these percentages).

 

LOGO

2018 CEO Compensation Mix 2018 Other NEO Compensation Mix

 

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Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation-Setting Process

 

Our Compensation-Setting Process

Compensation Committee

 

 

Compensation decisions for our executive officers are made by the Compensation Committee of our Board of Directors, subject in some instances to approval by the full Board. All of

the Committee’s members are independent under the applicable SEC rules and Nasdaq listing standards.

 

 

Peer Group

 

 

Our peer group is composed of companies that are similar to us in terms of revenue, number of employees, services offered, and industries served. The Companies in the peer group are also representative of the types of companies we compete with for executive talent. The Compensation

Committee refers to information about our peer group primarily for the purpose of benchmarking the NEOs’ total direct compensation pay levels, pay practices and industry pay trends.

 

 

For 2018, the peer group consisted of the following companies:

 

Company Name

   2017 Revenue
($MM)
     Employees      Industry Focus  

ABM Industries Incorporated

  

 

$  5,986

 

  

 

140,000

 

  

 

Business services

 

Advanced Disposal Services, Inc.

  

 

1,540

 

  

 

5,939

 

  

 

Environmental and facilities services

 

Charles River Laboratories International, Inc.

  

 

2,022

 

  

 

11,800

 

  

 

Medical laboratories & research

 

Cintas Corporation

  

 

6,477

 

  

 

41,000

 

  

 

Business services

 

Clean Harbors, Inc.

  

 

3,102

 

  

 

12,700

 

  

 

Waste management

 

CoreCivic, Inc.

  

 

1,774

 

  

 

12,875

 

  

 

REIT – Diversified

 

Covanta Holding Corporation

  

 

1,836

 

  

 

3,700

 

  

 

Waste management

 

Ecolab Inc.

  

 

14,376

 

  

 

48,400

 

  

 

Cleaning products

 

Equifax, Inc.

  

 

3,416

 

  

 

10,300

 

  

 

Credit services

 

Healthcare Services Group, Inc.

  

 

1,996

 

  

 

55,000

 

  

 

Business services

 

Iron Mountain Incorporated

  

 

4,060

 

  

 

24,000

 

  

 

Specialized REIT

 

J.B. Hunt Transportation Services, Inc.

  

 

7,921

 

  

 

24,681

 

  

 

Transportation services

 

Pitney Bowes, Inc.

  

 

3,819

 

  

 

14,700

 

  

 

Business equipment

 

Republic Services, Inc.

  

 

10,067

 

  

 

35,000

 

  

 

Waste management

 

Rollins, Inc.

  

 

1,754

 

  

 

13,126

 

  

 

Business services

 

Tetra Tech, Inc.

  

 

2,182

 

  

 

16,000

 

  

 

Technical services

 

The Brink’s Company

  

 

3,482

 

  

 

62,150

 

  

 

Security and alarm services

 

UniFirst Corporation

  

 

1,666

 

  

 

14,000

 

  

 

Diversified support services

 

Waste Connections, Inc.

  

 

4,744

 

  

 

15,283

 

  

 

Waste management

 

Stericycle, Inc.

  

 

3,549

 

  

 

25,000

 

  

 

 

 

Environmental and facility
services

 

 
 

Median

  

 

3,416

 

  

 

15,283

 

        

The Compensation Committee reviews the peer group annually and makes adjustments if necessary (for example, to remove companies in the case of an acquisition).

 

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COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation-Setting Process

 

Decision-Making Processes

 

 

The Compensation Committee takes into account a number of factors in setting compensation and incentive award opportunities for our executive officers. These decisions are made with a view to reaching an overall result that the Committee believes is appropriate and fair to each executive officer – both in absolute terms and relative to the compensation of the other executive officers – and fair as well to Stericycle and to our stockholders. The Committee also considers each executive officer’s role, contribution to our performance, and the officer’s compensation history in making compensation decisions.

Compensation decisions are typically made at the regular meeting of the Compensation Committee during the fourth quarter of the prior year based on market study results and year-to-date performance of the Company and the executive officers. The Committee considers these results in determining the executive officers’ annual cash performance bonuses for the current year and their base salaries and annual cash performance bonus targets for the upcoming year.

 

Our Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of our other NEOs, but management generally does not otherwise participate in the Committee’s decisions. The Committee provides a recommendation for the salary of our NEOs, but the Board must provide final approval.

Decisions regarding the annual stock option and RSU grants to our executive officers and to our employees generally are made during the first Compensation Committee meeting of the year, subject to approval by the Board of Directors. The Committee determines the annual stock option and RSU grants to our executive officers taking into account (i) our overall operating performance, (ii) each executive officer’s individual responsibilities and performance, (iii) competitive market data, (iv) prior stock option and RSU grants, and (v) the goal of limiting stock option and RSU grants to no more than 10% of our fully-diluted shares over a trailing five-year period, thus averaging dilution of no more than 2% a year.

 

 

Compensation Consultant

 

 

The Compensation Committee has engaged Deloitte Consulting LLP, as its independent compensation consultant, to review our executive compensation philosophy and practices and the composition of our peer

group of companies. After a review of the factors prescribed by SEC and Nasdaq rules and regulations, the Compensation Committee determined that Deloitte Consulting LLP is independent.

 

 

2018 Compensation Program Highlights

Base Salaries

 

The table below illustrates the NEOs’ base salaries over the past three fiscal years.

 

      2018 Salary      2017 Salary     2016 Salary  

Mr. Alutto

  

$

1,000,000

 

  

$

1,000,000

 

 

$

585,000

 

Ms. Miller

  

 

625,000

 

  

 

N/A

 

 

N/A

Mr. Ginnetti

  

 

550,000

 

  

 

550,000

 

 

 

380,000

 

Mr. Rogers

  

 

400,000

 

  

 

N/A

 

 

N/A

Ms. Abdulmassih

  

 

370,000

 

  

 

370,000

 

 

 

N/A

** 

Mr. Arnold

  

 

550,000

 

  

 

550,000

 

 

 

380,000

 

Ms. Frank

  

 

400,000

 

  

 

400,000

 

 

 

325,000

 

 

*

Ms. Miller and Mr. Rogers were not NEOs in 2017 or 2016.

 

**

Ms. Abdulmassih was not an NEO in 2016.

 

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COMPENSATION DISCUSSION AND ANALYSIS

2018 Compensation Program Highlights

 

 

With the increases phased in over the 2015-2017 period, base salaries for the majority of our NEOs are in line with the median for our peer group. For 2019, the Compensation Committee engaged its compensation consultant to conduct an independent review of executive officer salaries, as it had been several years since the last such review. After considering the results of the independent review, the

Compensation Committee approved salary increases for two of our executive officers and a cash incentive target increase for one executive officer, to be effective January 1, 2019. See “Our Executive Compensation Program for 2019”. The remaining executive officers did not receive increases to base compensation or to cash incentive targets for 2019.

 

 

Annual Cash Performance Bonuses

 

 

Our annual cash performance bonus program is intended to reward our executive officers for achieving our annual operating plans and budgets. Each executive officer is eligible for an annual cash performance bonus equal to a specified percentage of base salary.

Our executive officers earn annual cash performance bonuses based upon the achievement of Adjusted EBITDA

targets developed from our annual operating plan and budget and Adjusted ROIC targets.

As a result, 70% of each NEO’s 2018 annual cash performance bonus was tied to achievement of our Adjusted EBITDA goal and 30% was tied to achievement of our Adjusted ROIC goal.

 

 

Performance Goals for 2018

 

Based upon our annual business plans, the Compensation Committee established minimum, target, and maximum achievement levels for the Adjusted EBITDA portion of the annual cash performance bonus.

For 2018, the Adjusted EBITDA target was $800 million. There was no payout for this metric if we failed to attain Adjusted EBITDA of $752 million, and the payout for performance at or above the maximum goal of $840 million was capped at 200%.

 

As with the Adjusted EBITDA portion of the bonus, the Compensation Committee fixed minimum, target, and maximum Adjusted ROIC performance goals and related payout percentages. For 2018, the Adjusted ROIC target was 8.00%. There was no payout for this metric if we failed to attain the minimum Adjusted ROIC of 6.96%, and the payout for performance at or above the maximum goal of 9.04% was capped at 200%.

 

 

The following table shows how different levels of actual Adjusted EBITDA and Adjusted ROIC were designed to affect the payout.

 

    

Adjusted EBITDA

Cash Bonus Program for 2018

70% Total Cash Bonus

    

Adjusted ROIC

Cash Bonus Program for 2018

30% Total Cash Bonus

 
     

Percentage of

Award Payout

    

Percent Adjusted

EBITDA
Attainment

    

Adjusted EBITDA

Target (in $ millions)

    

Percentage of

Award Payout

    

Adjusted

ROIC Target

 

Minimum

  

 

50%

 

  

 

94%

 

  

 

$ 752

 

  

 

50%

 

  

 

6.96%

 

Target

  

 

100%

 

  

 

100%

 

  

 

800

 

  

 

100%

 

  

 

8.00%

 

Maximum

  

 

200%

 

  

 

105% or more

 

  

 

840 or more

 

  

 

200%

 

  

 

9.04% or more

 

 

Both sets of performance targets allow for payout of the annual cash performance bonuses at levels that increase proportionally from the minimum tier (an annual cash

performance bonus equal to the specified percentage of the executive officer’s base salary) to the maximum.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2018 Compensation Program Highlights

 

For 2018, the annual cash performance bonus percentages for our named executive officers were as follows:

 

      Base Salary     

Cash Performance

Bonus Percentage

 

Mr. Alutto

  

$

1,000,000

 

  

 

100%

 

Ms.  Miller(1)

  

 

625,000

 

  

 

 

Mr. Ginnetti

  

 

550,000

 

  

 

75%

 

Mr. Rogers

  

 

400,000

 

  

 

60%

 

Ms. Abdulmassih

  

 

370,000

 

  

 

65%

 

Mr. Arnold

  

 

550,000

 

  

 

75%

 

Ms. Frank(2)

  

 

400,000

 

  

 

60%

 

(1) 

Ms. Miller was not eligible for a 2018 cash performance bonus.

 

(2) 

Ms. Frank did not receive a 2018 cash performance bonus due to her resignation in November, 2018.

Performance Results for 2018

Our Adjusted EBITDA for 2018 for purposes of the annual cash performance bonus program was $727 million and was below threshold. Our Adjusted ROIC performance in 2018 for purposes of the annual cash performance bonus program was 7.59% or 95.1% of target. These performance results resulted in an annual cash bonus payout equal to 24.2% of target, as illustrated below:

 

 

LOGO

0% Adjusted EBITDA Payout x 70% 80.6% Adjusted ROIC Payout x 30% 24.2% Performance Bonus Payout Percentage

Long-Term Equity Incentive Awards

 

 

The Compensation Committee’s first step when making long-term equity incentive awards is to determine the desired total grant date fair value of each NEO’s award in the manner described above under “Our Compensation-Setting Process.” For 2018, 1/3 of that total amount was

awarded in the form of stock options, 1/3 of that total amount was awarded in the form of time-based RSUs and the remaining 1/3 was awarded in the form of performance-based RSUs.

 

 

Stock Option Grants for 2018

 

Until 2016, executive officers’ long-term incentive awards were entirely in the form of stock options. With the addition of time-based RSUs and performance-based RSUs to the long-term incentive program, stock options constituted approximately one third of our NEOs’ long-term compensation in 2018.

The Compensation Committee believes stock options provide strong performance incentives. Our stock options are always granted at the closing price of our common stock on the date of the grant.

Stock options vest over a period of five years and must be exercised within eight or ten years, depending on the terms of the grant. The value of stock options depends entirely on the growth in the value of our common stock in the years after the options are issued. Accordingly, the executive officers’ stock options provide an incentive for sustained levels of superior performance that contribute to our overall success as reflected in the market price of our common stock, which benefits all of our stockholders.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2018 Compensation Program Highlights

 

The 2018 stock option awards for our named executive officers were as follows:

 

     

Number of

Stock
Options

    

Grant Date

Fair Value

 

Mr. Alutto

  

 

76,509

 

  

$

1,289,942

 

Ms. Miller

  

 

60,391

 

  

 

894,995

 

Mr. Ginnetti

  

 

28,605

 

  

 

482,280

 

Mr. Rogers

  

 

14,485

 

  

 

244,217

 

Ms. Abdulmassih

  

 

13,905

 

  

 

234,438

 

Mr. Arnold

  

 

28,605

 

  

 

482,280

 

Ms. Frank

  

 

14,979

 

  

 

252,546

 

Time-based Restricted Stock Units for 2018

 

Time-based RSUs constituted approximately one-third of our NEO’s long-term incentive compensation in 2018, and their use is consistent with the pay practices of our peers. The number of RSUs awarded to an NEO is determined based

on the target grant date fair value of the NEO’s total equity award. The time-based RSUs granted to executive officers in 2018 vest in equal annual installments over five years, beginning on the first anniversary of the grant date.

 

 

During 2018, the Compensation Committee granted time-based RSU awards to our named executive officers as follows:

 

     

Time-based

Restricted

Stock Units

    

Grant Date

Fair Value

 

Mr. Alutto

  

 

19,127

 

  

$

1,186,639

 

Ms. Miller

  

 

11,159

 

  

 

566,654

 

Mr. Ginnetti

  

 

7,151

 

  

 

443,648

 

Mr. Rogers

  

 

3,621

 

  

 

224,647

 

Ms. Abdulmassih

  

 

3,476

 

  

 

215,651

 

Mr. Arnold

  

 

7,151

 

  

 

443,648

 

Ms. Frank

  

 

3,744

 

  

 

232,278

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

2018 Compensation Program Highlights

 

Performance-based Restricted Stock Units for 2018

 

Performance-based RSUs are the final one-third of our NEO’s long-term incentive compensation and are also aligned with our peer group’s long-term incentive pay practices. The number of performance-based RSUs awarded to an NEO is determined based on the target grant date fair

value of the NEO’s total equity award. Performance-based RSUs granted to executive officers vest, if at all, in equal installments over three years, depending on achievement during each year of the applicable annual EPS performance goal.

 

 

During 2018, the Compensation Committee granted performance-based RSU awards to our named executive officers as follows:

 

     

Performance-based

Restricted

Stock Units

    

Grant Date

Fair Value

 

Mr. Alutto

  

 

19,127

 

  

$

395,546

 

Ms. Miller

  

 

15,778

 

  

 

255,555

 

Mr. Ginnetti

  

 

7,151

 

  

 

147,883

 

Mr. Rogers

  

 

3,621

 

  

 

74,882

 

Ms. Abdulmassih

  

 

3,476

 

  

 

71,884

 

Mr. Arnold

  

 

7,151

 

  

 

147,883

 

Ms. Frank

  

 

3,744

 

  

 

77,426

 

 

The Company began the practice of granting performance-based RSUs in 2017. The first performance period ended December 31, 2017 and no performance-based RSUs were earned for that period. The second performance period ended December 31, 2018 and 43% of the first tranche of the performance-based RSUs granted in 2018 and 43% of the second tranche of the performance-based RSUs granted in 2017 were earned.

Similar to 2017, the Compensation Committee established minimum and maximum achievement levels with respect to the 2018 Adjusted EPS goal of $4.42 and $4.65,

respectively. Performance in between these two points is interpolated on a straight-line basis to determine the vesting of shares. No performance-based RSUs vest if we failed to attain a minimum Adjusted EPS of $4.42, and the payout for performance at or above 98% of the target of $4.65 is capped at 100%.

Our Adjusted EPS for 2018 for purposes of the performance-based RSU program was $4.45 or 95.7% of target, resulting in the vesting of 43% for the applicable tranches of the 2017 and 2018 performance-based RSU grants.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Our Executive Compensation Program for 2019

 

Our Executive Compensation Program for 2019

Compensation Program for 2019

 

 

We did not make any changes to the base salaries or cash bonus targets for the NEOs with respect to 2018. After conducting a market analysis with our independent advisor during 2018, we made several changes to our compensation programs for 2019. At an individual level, we made salary adjustments for Mr. Rogers and Mr. Ginnetti and a bonus target change for Mr. Rogers to align their pay more closely with the market. These changes were effective January 1, 2019.

We also redesigned our equity program to better align with market practices, including changes in the vesting schedule and grant amounts and the addition of a retirement provision which extends the option exercise period for

employees who leave the company due to retirement. First, the vesting period for our stock option and RSU grants was changed for 2019 awards to three years (compared to our previous practice of five years). Second, because the grants are now vesting more quickly, grant amounts were reduced in order to align with the vesting period and market norms. Third, beginning with the 2019 awards, we added a retirement provision for stock option grants that allows retirees a period of up to 12 months to exercise any vested options upon termination instead of the usual 90 days. Retirees are defined as team members who leave Stericycle at age 65, or age 55 or greater with at least 10 years of service.

 

 

We believe these changes made in 2019 are consistent with our compensation philosophy, which stresses that compensation for our NEOs (and for all other employees) must be performance-based, but also aligned with the median compensation amounts and pay practices awarded by our peers to ensure we can continue to attract and retain a consistent pipeline of high caliber talent. The equity awards granted in March 2018 and 2019 also provide for “double-trigger” vesting in connection with a change in control. Noted below is a summary of the changes for 2019.

 

Plan Impacted

   Key Changes    Reasons

 

Base salary

  

 

Most NEO salaries were unchanged compared to 2018 (two changes were made effective January 1, 2019)

  

 

To keep base salaries aligned with the median of our peer group

 

Annual cash bonus

  

 

Most NEO cash bonus opportunities were unchanged compared to 2018 (one change was made effective January 1, 2019)

  

 

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

  

 

Maintained metric weightings at 70% Adjusted EBITDA and 30% Adjusted ROIC

  

 

To maintain the emphasis on key metrics that represent Company performance

 

Stock options

  

 

Maintained the stock option component of the total long-term incentive award at one third

  

 

To continue to align management and stockholder interests by providing an incentive, the value of which depends entirely on the growth in the value of our common stock

 

Time-based RSUs

  

 

Maintained the time-based RSU component of the total long-term incentive award at one third

  

 

To allow for a balanced long-term incentive mix that is consistent with market norms

 

Performance-based RSUs

  

 

Maintained the performance-based RSU component of the long-term incentive award at one third.

 

Performance-based RSUs vest, or not, in three equal annual installments based on annual EPS performance goals

  

 

To maintain the rigor and stockholder focus of the long-term equity incentive program by tying a significant portion of the NEOs’ award to EPS

 

Peer group

  

 

No changes were made to the peer group

  

 

Peer group analysis showed that the current peer group, with changes made in 2017, is an appropriate benchmark for the Company

 

Vesting period and grant amounts for stock options and RSUs

  

 

Changed the vesting period for 2019 stock option and RSU grants to three years (compared to a previous practice of five years) and reduced grant amounts accordingly

  

 

To align more closely with market practices and offer an equity program that is competitive with the market without increasing overall expense

 

Retirement provision for stock option exercise period

  

 

Added a retirement provision for stock option grants that allows retirees a period of up to 12 months to exercise any vested options upon termination instead of the usual 90 days

  

 

To align more closely with market practices and offer an equity program that is competitive with the market without increasing overall expense

 

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COMPENSATION DISCUSSION AND ANALYSIS

Our Executive Compensation Program for 2019

 

Currently, performance-based RSUs vest ratably over a three-year period with performance goals for each tranche set annually according to each year’s business plan. Due to the business transformation and portfolio rationalization initiatives that the Company has undertaken, the annual goal-setting process has been necessary to achieve alignment between the performance targets and the annual business plan. Beginning in 2020, the Committee expects to recommend that performance-based RSUs vest at the end of a three year performance period, rather than ratably throughout the three-year period. Further, the Committee intends to change the goal-setting process from an annual

process to an approach which incorporates a three year measurement period for the chosen metric.

The Committee did not implement any changes in executive compensation during 2018 as a direct result of the stockholders’ advisory vote. The most recent vote regarding “say on pay” for our executive compensation program indicated that our stockholders support the Compensation Committee’s strategy of awarding competitive compensation featuring rigorous performance-based incentive opportunities. During the 2018 “say on pay vote,” we received 90.0% support (or 89.8%, including abstentions) “for” the executive compensation program.

 

 

2019 Executive Compensation Plans

 

In order to maintain competitiveness with the market but reflect our company’s overall performance, the Committee approved compensation plans for our NEOs that included increases in base salary for Mr. Ginnetti and Mr. Rogers, an increase in the cash performance incentive for Mr. Rogers, and a three-part equity program. The compensation plans for our named executive officers in 2019 are as follows (no information is given for those executives who are no longer employed by the Company):

 

      Base Salary      Cash Performance
Bonus Percentage
     Granted
Stock Options
     Granted
Performance-Based RSUs
     Granted
Time-based RSUs
 

 

Mr. Alutto

  

 

 

 

$1,000,000

 

 

  

 

 

 

100%

 

 

        

 

Ms. Miller(1)

  

 

 

 

625,000

 

 

  

 

 

 

90%

 

 

  

 

 

 

41,417

 

 

  

 

 

 

12,005

 

 

  

 

 

 

12,005

 

 

 

Mr. Ginnetti

  

 

 

 

575,000

 

 

  

 

 

 

75%

 

 

  

 

 

 

24,654

 

 

  

 

 

 

7,146

 

 

  

 

 

 

7,146

 

 

 

Mr. Rogers

  

 

 

 

500,000

 

 

  

 

 

 

70%

 

 

  

 

 

 

16,567

 

 

  

 

 

 

4,802

 

 

  

 

 

 

4,802

 

 

(1)

Ms. Miller’s compensation as Chief Executive Officer has not yet been determined. When such compensation has been finally determined, the Company will make a public announcement, by means of an amendment to a Current Report on Form 8-K or otherwise.

Executive Severance and Change in Control Plan

 

 

Upon the recommendation of the Compensation Committee, the Board of Directors adopted a plan for executive severance, including following a change in control. The plan, which went into effect on September 1, 2016, applies to all the named executive officers. Stericycle introduced this plan in order to be competitive with the market and enhance retention.

Under the plan, named executive officers are entitled to benefits in the event of a termination of employment by us other than for “Cause”, “Death” or “Disability” (as each is defined in the plan). A covered executive will receive the following benefits so long as the executive executes and honors a full waiver and release of claims against Stericycle, as well as non-competition, non-solicitation, confidentiality and other restrictive covenants that we may deem necessary to protect our interests:

 

  An amount equal to the actual annual incentive the executive would have been paid had the executive remained employed on the payment date applicable to then current employees, prorated based on the executive’s period of service through the executive’s termination date.
  An amount equal to the sum of the executives’ base salary and target annual incentive, each determined as of the termination date, multiplied by the applicable “severance multiple.”

 

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

 

    For all other executives, the severance multiple is one.

 

  Non-qualified deferred compensation benefits and employee welfare benefits pursuant to the terms of the applicable plans and policies.

 

  Payment of or reimbursement for the cost of COBRA premiums in connection with the executive’s medical, vision, prescription and dental coverage in effect as of the date of termination, to the extent such premiums exceed the premiums paid for similar provided coverage by active employees, for up to twenty-four months.

 

  Reimbursement for outplacement benefits up to $25,000.

For involuntary termination (other than for “Cause”) associated with a change in control, which includes voluntary termination for “Good Reason” (as defined in the plan)

 

 

Stericycle, Inc. - 2019 Proxy Statement     39  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Other Compensation Matters

 

within 24 months after a change in control, the benefits above remain in place but the annual incentive payment and the severance multiple changes, as follows:

 

  An amount equal to the executive’s target annual incentive, prorated based on the executive’s period of service through the executive’s termination date.

 

  An amount equal to the sum of the executives’ base salary and target annual incentive, each determined as of the
   

termination date, multiplied by the applicable “severance multiple.”

 

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

 

    For all other executives, the severance multiple is two.

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

 

 

Other Compensation Matters

Retirement Plans and Deferred Compensation Arrangements

 

 

 

Our Board of Directors adopted the Stericycle, Inc. Supplemental Retirement Plan effective for deferrals of compensation on and after April 1, 2017. Our named executive officers are eligible to participate in the plan. The Plan is unfunded and designed to be a nonqualified deferred compensation plan in compliance with Section 409A of the Internal Revenue Code.

Under the Plan, a bookkeeping account will be created for each participant. Each year, we will credit a participant’s account with the designated portion of the participant’s compensation that the participant elected to defer for that year (the “Elective Deferral Contributions”) and may credit the participant’s account with a discretionary amount declared by us for that year (the “Company Discretionary Contributions”). Earnings on the credited amounts will be based on the performance of various investment funds available under the Plan (and as directed by the participant).

The Plan permits participants to elect to receive distributions, which generally become payable upon a

termination of employment or a specified date prior to termination of employment, in either a lump sum or in installments over a period of up to fifteen years. All distributions from the Plan are in cash. The participant will always be fully vested in that portion of the participant’s account attributable to the Elective Deferral Contributions, and will be vested in Company Discretionary Contributions, if any, five years from the date the first Company Discretionary Contribution is credited to the participant’s account, subject to the participant’s continued service. Vesting will be accelerated upon a participant’s termination of service due to death or disability or a change in control while the participant is still in service.

The unvested portion of a participant’s account will generally be forfeited upon termination of employment. A participant’s vested interests under the Plan will be forfeited upon a termination of employment for Cause (as defined in the Plan).

 

 

Perquisites and Personal Benefits

 

 

We provide limited perquisites and personal benefits to our executive officers. See “2018 Summary Compensation Table – All Other Compensation” and the related footnotes.

Stock Ownership Guidelines

 

 

All of our executive officers and non-employee directors are expected to hold a minimum position in our common stock. We established this program to help align the long-term interests of our executive officers and non-employee directors with those of our stockholders.

 

      Stock Ownership Guideline

 

Chief Executive Officer

  

 

Four times his or her annual base salary

 

Other NEOs

  

 

Three times their respective annual base salaries

 

Non-Employee Directors

  

 

Four times their respective annual cash retainers

 

40    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Other Compensation Matters

 

Although there is no specific period of time in which the executive officers and non-employee directors are required to achieve the applicable ownership threshold, they are expected to make continuous progress toward that goal, and to comply with the following retention ratios until such guidelines have been achieved:

 

  The CEO must hold 75% of the net shares acquired upon the vesting or exercise of any equity awards (“Net Profit Shares”) until the minimum position requirement has been achieved; and

 

  The other NEOs must hold 50% of their respective Net Profit Shares until the minimum position requirement has been achieved.

 

  The non-employee directors must retain 75% of their Net Profit Shares until the minimum position requirement has been achieved.

Shares that will count toward achievement of the stock ownership guidelines include:

 

  Shares owned outright (including employee stock purchase plan shares and securities convertible into shares of common stock on an as-converted basis) by the executive officer or director or any of such person’s immediate family members residing in the same household;
  Shares held in trust for the benefit of the executive officer or director or such person’s family;

 

  Shares held in our employee benefit plans, including the 401(k) Savings Plan;

 

  Shares obtained through stock option exercises and the in-the-money value of vested and unvested stock options; and

 

  Shares of unvested restricted stock and RSUs.

Compliance with these stock ownership guidelines is measured periodically by our internal team responsible for handling executive compensation matters, and the results of such measurement are reported to the Compensation Committee at least once per year. On each measurement date, compliance is measured using each executive officer’s base salary then in effect, and the average trailing 180-day trading price per share of our common stock on the Nasdaq Stock Market on such date. Once an executive officer has achieved the applicable ownership threshold, that person will be considered in compliance, regardless of any change in the price of our common stock, so long as such person continues to own at least the number of shares of our common stock and other awards owned at the time of achieving that threshold.

 

 

Anti-Hedging and Anti-Pledging; Clawbacks

 

 

See “Corporate Governance – Anti-Hedging and Anti-Pledging Policy” and “Clawback Policy” for a discussion of Company policies with respect to these matters.

 

Stericycle, Inc. - 2019 Proxy Statement     41  


Table of Contents

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s executive management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee

Thomas D. Brown, Chairman

Lynn D. Bleil

Thomas F. Chen

Stephen C. Hooley

Mike S. Zafirovski

 

42    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

2018 SUMMARY COMPENSATION TABLE

The following table summarizes the compensation paid or earned for the fiscal years noted in the table by our named executive officers:

 

Name and Principal   Position

  Year     Salary
($)
    Bonus
($)
    Option
Awards(1)
($)
    Stock
Awards(2)
($)
    Non-Equity
Incentive Plan
Compensation(3)
($)
    All Other
Compensations(4)
($)
    Total
($)
 

 

Charles A. Alutto

President and Chief
Executive Officer

 

 

 

 

2018

 

 

 

 

$

 

1,000,000

 

 

 

 

$

 

 

 

 

 

$

 

1,289,942

 

 

 

 

$

 

1,582,185

 

 

 

 

$

 

241,800

 

 

 

 

$

 

5,693

 

 

 

 

$

 

4,119,620

 

 

 

 

2017

 

 

$

1,000,000

 

 

$

 

 

$

1,317,342

 

 

$

1,495,299

 

 

$

 

 

$

3,000

 

 

$

3,815,641

 

 

 

2016

 

 

$

585,000

 

 

$

 

 

$

2,136,579

 

 

$

780,840

 

 

$

112,978

 

 

$

2,000

 

 

$

3,617,397

 

 

Cindy J. Miller

President and Chief
Operating Officer

 

 

 

 

2018

 

 

 

 

$

 

156,250

 

 

 

 

$

 

 

 

 

 

$

 

894,995

 

 

 

 

 

 

822,209

 

 

 

 

$

 

 

 

 

 

$

 

33,526

 

 

 

 

$

 

1,906,980

 

 

 

Daniel V. Ginnetti

Executive Vice President
and Chief Financial
Officer

 

 

 

 

2018

 

 

 

 

$

 

550,000

 

 

 

 

$

 

 

 

 

 

$

 

482,280

 

 

 

 

$

 

591,531

 

 

 

 

$

 

99,743

 

 

 

 

$

 

3,000

 

 

 

 

$

 

1,726,554

 

 

 

 

2017

 

 

$

550,000

 

 

$

 

 

$

489,363

 

 

$

555,444

 

 

$

 

 

$

3,000

 

 

$

1,597,807

 

 

 

2016

 

 

$

380,000

 

 

$

 

 

$

903,940

 

 

$

330,249

 

 

$

48,925

 

 

$

2,000

 

 

$

1,665,114

 

                                                               

 

Kurt M. Rogers

Executive Vice President and
General Counsel

 

 

 

 

2018

 

 

 

 

$

 

400,000

 

 

 

 

$

 

 

 

 

 

$

 

244,217

 

 

 

 

$

 

299,529

 

 

 

 

$

 

58,032

 

 

 

 

$

 

3,000

 

 

 

 

$

 

1,004,778

 

 

 

Ruth-Ellen Abdulmassih

 

 

 

 

2018

 

 

 

 

$

 

370,000

 

 

 

 

$

 

327,541

 

(5) 

 

 

$

 

234,438

 

 

 

 

$

 

287,535

 

 

 

 

$

 

58,153

 

 

 

 

$

 

26,681

 

 

 

 

$

 

1,304,348

 

 

Executive Vice President,

Communications and
Related Services

 

 

2017

 

 

$

370,000

 

 

$

 

 

$

234,882

 

 

$

266,608

 

 

$

 

 

$

41,579

 

 

$

913,069

 

               
                                                               

 

Joseph B. Arnold

Former Executive Vice
President and Chief
Operating Officer

 

 

 

 

2018

 

 

 

 

$

 

550,000

 

 

 

 

$

 

 

 

 

 

$

 

482,280

 

 

 

 

$

 

591,531

 

 

 

 

$

 

99,743

 

 

 

 

$

 

1,012,005

 

 

 

 

$

 

2,735,559

 

 

 

 

2017

 

 

$

550,000

 

 

$

 

 

$

489,363

 

 

$

555,444

 

 

$

 

 

$

3,000

 

 

$

1,597,807

 

 

 

2016

 

 

$

380,000

 

 

$

 

 

$

903,940

 

 

$

330,249

 

 

$

48,925

 

 

$

2,000

 

 

$

1,665,114

 

                                                               

 

Brenda R. Frank

Former Executive Vice
President and Chief
People Officer

 

 

 

 

2018

 

 

 

 

$

 

367,692

 

 

 

 

$

 

198,616

 

(6) 

 

 

$

 

252,546

 

 

 

 

$

 

309,704

 

 

 

 

$

 

 

 

 

 

$

 

19,571

 

 

 

 

$

 

1,148,129

 

 

 

 

2017

 

 

$

400,000

 

 

$

 

 

$

254,462

 

 

$

288,835

 

 

$

 

 

$

18,113

 

 

$

961,410

 

 

 

2016

 

 

$

325,000

 

 

$

775,000

(7) 

 

$

279,402

 

 

$

389,908

 

 

$

31,383

 

 

$

 

 

$

1,800,693

 

                                                               
(1)

The amounts shown represent the aggregate grant date fair value of the awards for fiscal years 2018, 2017 and 2016. We calculated these amounts in accordance with the provisions of FASB ASC Topic 718, utilizing the assumptions discussed in Note 13 to our financial statements for the fiscal year ended December 31, 2018, Note 12 to our financial statements for the fiscal year ended December 31, 2017, and in Note 6 to our financial statements for the fiscal year ended December 31, 2016.

 

(2)

The amounts shown represent the aggregate grant date fair value of the awards for fiscal years 2018, 2017 and 2016, determined in accordance with FASB ASC Topic 718, based on the closing price of our common stock on the date of the grant. The grant date fair value of time-based RSUs granted in 2018 and performance-based RSUs granted in 2018 are as follows:

 

  Name    Time-Based RSUs      Performance-Based RSUs      

 

Charles A. Alutto

  

 

 

 

$1,186,639

 

 

  

 

 

 

$395,546

 

 

 

 

Cindy J. Miller

  

 

 

 

566,654

 

 

  

 

 

 

255,555

 

 

 

 

Daniel V. Ginnetti

  

 

 

 

443,648

 

 

  

 

 

 

147,883

 

 

 

 

Kurt M. Rogers

  

 

 

 

224,647

 

 

  

 

 

 

74,882

 

 

 

 

Ruth-Ellen Abdulmassih

  

 

 

 

215,651

 

 

  

 

 

 

71,884

 

 

 

 

Joseph B. Arnold

  

 

 

 

443,648

 

 

  

 

 

 

147,883

 

 

 

 

Brenda R. Frank

  

 

 

 

232,278

 

 

  

 

 

 

77,426

 

 

 

 

  

Because the performance-related component of the performance-based RSUs is based on separate measurements of our performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated with respect to one-third of the total performance-based RSUs in each year of the three-year performance cycle. For 2018, with respect to each of the named executive officers other than Ms. Miller, the grant date fair value of the performance-based RSUs, as measured in accordance with FASB ASC Topic 718, is based on our closing stock price on the grant date of March 1, 2018 of $62.04 and the probable outcome of target performance of the annual performance-related component for 2018. With respect to Ms. Miller, the grant date fair value of the performance-based RSUs is based on our closing stock price on the grant due of March 12, 2019 of $48.59. Such grant relates to Ms. Miller’s hiring in October 2018. With respect to the performance-based RSUs, target performance and maximum performance are the same.

 

(3)

The amounts shown represent the gross amounts of the named executive officer’s annual cash incentive for the applicable fiscal year.

 

Stericycle, Inc. - 2019 Proxy Statement     43  


Table of Contents

2018 SUMMARY COMPENSATION TABLE

 

 

(4)

With respect to Mr. Alutto, represents $3,000 for 401(k) matching contributions and $2,693 spousal travel. With respect to Mr. Ginnetti and Mr. Rogers, represents only our matching 401(k) plan contributions for the fiscal years noted. With respect to Ms. Miller, represents $18,674 relocation expenses and $14,852 tax gross up. With respect to Mr. Arnold, represents $3,000 for 401(k) matching contributions and $1,009,005 payable pursuant to a separation agreement. With respect to Ms. Frank, represents $5,007 spousal travel and $14,564 for commuting and travel expenses reimbursed by the Company. With respect to Ms. Abdulmassih, represents $3,000 for 401(k) matching contributions and $23,681 for commuting and travel expenses reimbursed by the Company. With respect to such relocation, commuting and travel expenses, the aggregate incremental cost to our Company is determined by the amounts paid to third-party providers.

 

(5)

Represents bonuses paid to Ms. Abdulmassih in connection with certain special projects.

 

(6)

Represents a retention bonus and bonuses paid to Ms. Frank in connection with certain special projects.

 

(7)

Represents a bonus paid to Ms. Frank as part of the transition from her former employment agreement with Shred-it.

 

44    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

2018 GRANTS OF PLAN-BASED AWARDS

The following table provides information about the plan-based awards for our named executive officers during 2018.

 

         

Estimated Future Payouts Under 

 Non-Equity Incentive Plan Awards(1) 

   

Estimated Future Payouts Under 

   Equity Incentive Plan  Awards(2) 

    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(3)
(#)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options(4)
(#)
    Exercise
or Base
Price of
Option
Awards
$/Share
    Grant
Date
Fair
Value
of Stock
and
Option
Awards(5)
($)
 

Name

  Grant
Date
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 

Charles A. Alutto

   

 

500,000

 

 

 

1,000,000

 

 

 

2,000,000

 

             
 

 

3/01/2018

 

               

 

76,509

 

 

 

62.04

 

 

 

1,289,942

 

 

 

3/01/2018

 

             

 

19,127

 

     

 

1,186,639

 

 

 

3/01/2018

 

                         

 

4,782

 

 

 

19,127

 

 

 

19,127

 

                         

 

395,546

 

Cindy J. Miller

   

 

281,250

 

 

 

562,500

 

 

 

1,125,000

 

             
 

 

11/01/2018

 

               

 

60,391

 

 

 

50.78

 

 

 

894,995

 

 

 

11/01/2018

 

             

 

11,159

 

     

 

566,654

 

 

 

3/12/2019

 

                         

 

3,945

 

 

 

15,778

 

 

 

15,778

 

                         

 

255,555

 

Daniel V. Ginnetti

   

 

206,250

 

 

 

412,500

 

 

 

825,000

 

             
 

 

3/01/2018

 

               

 

28,605

 

 

 

62.04

 

 

 

482,280

 

 

 

3/01/2018

 

             

 

7,151

 

     

 

443,648

 

 

 

3/01/2018

 

                         

 

1,788

 

 

 

7,151

 

 

 

7,151

 

                         

 

147,883

 

Kurt M. Rogers

   

 

120,000

 

 

 

240,000

 

 

 

480,000

 

             
 

 

3/01/2018

 

               

 

14,485

 

 

 

62.04

 

 

 

244,217

 

 

 

3/01/2018

 

             

 

3,621

 

     

 

224,647

 

 

 

3/01/2018

 

                         

 

905

 

 

 

3,621

 

 

 

3,621

 

                         

 

74,882

 

Ruth-Ellen Abdulmassih

   

 

120,250

 

 

 

240,500

 

 

 

481,000

 

             
 

 

3/01/2018

 

               

 

13,905

 

 

 

62.04

 

 

 

234,438

 

 

 

3/01/2018

 

             

 

3,476

 

     

 

215,651

 

 

 

3/01/2018

 

                         

 

869

 

 

 

3,476

 

 

 

3,476

 

                         

 

71,884

 

Joseph B. Arnold

   

 

206,250

 

 

 

412,500

 

 

 

825,000

 

             
 

 

3/01/2018

 

               

 

28,605

 

 

 

62.04

 

 

 

482,280

 

 

 

3/01/2018

 

             

 

7,151

 

     

 

443,648

 

 

 

3/01/2018

 

                         

 

1,788

 

 

 

7,151

 

 

 

7,151

 

                         

 

147,883

 

Brenda R. Frank

   

 

120,000

 

 

 

240,000

 

 

 

480,000

 

             
 

 

3/01/2018

 

               

 

14,979

 

 

 

62.04

 

 

 

252,546

 

 

 

3/01/2018

 

             

 

3,744

 

     

 

232,278

 

 

 

3/01/2018

 

                         

 

936

 

 

 

3,744

 

 

 

3,744

 

                         

 

77,426

 

(1)

These amounts consist of the threshold, target and maximum cash award levels set in 2018 under the annual cash performance bonus program. Please see “Compensation Discussion and Analysis” for further information regarding the annual cash performance bonus program.

 

(2)

The amounts shown at target represent the aggregate number of performance-based RSUs that may be earned under the long-term incentive plan. The performance-based RSUs vest, if at all, in three annual installments based on annual EPS performance goals. The earnout percentage may range from 0% to 100% of the target performance-based RSUs granted, with a range of 25%-100% earned at threshold to maximum performance. See “Long-Term Equity Incentive Awards – Performance-based Restricted Stock Units for 2018” in “Compensation Discussion and Analysis” above.

 

(3)

The amounts represent the time-based RSUs granted under the long-term incentive plan to the named executive officers. The time-based RSUs vest in equal annual installments over five years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these RSU grants.

 

(4)

These amounts represent stock options granted under the long-term incentive plan to the named executive officers. These options vest in equal annual installments over five years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the applicable vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these stock option awards.

 

(5)

The grant date fair value of each time-based RSU award was computed in accordance with FASB ASC Topic 718 based on the closing stock price on the applicable grant date. Because the performance-related component of the performance-based RSUs is based on separate measurements of our performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated with respect

 

Stericycle, Inc. - 2019 Proxy Statement     45  


Table of Contents

2018 GRANTS OF PLAN-BASED AWARDS

 

  to one-third of the total performance-based RSUs in each year of the three-year performance cycle. For 2018, the grant date fair value of the performance-based RSUs, as measured in accordance with FASB ASC Topic 718, is based on our closing stock price on the grant date and the probable outcome of target performance of the annual performance-related component for 2018. With respect to the performance-based RSUs, target performance and maximum performance are the same. The grant date fair value of each option award was calculated in accordance with the provisions of FASB ASC Topic 718, utilizing the assumptions discussed in Note 13 to our financial statements for the fiscal year ended December 31, 2018.

 

46    Stericycle, Inc. - 2019 Proxy Statement


Table of Contents

2018 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table provides information about the outstanding equity awards held by the named executive officers as of December 31, 2018.

 

Option Awards

           Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
     Option
Exercise
Price ($)
     Option
Expiration
Date(1)
            Number of
Shares or
Units of
Stock That
Have Not
Vested(2)
     Market
Value of
Shares or
Units That
Have Not
Vested(3)
     Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(4)
     Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(3)
 

Charles A. Alutto

  

 

 

  

 

76,509

 

  

 

62.04

 

  

 

3/1/2026

 

             
  

 

6,984

 

  

 

 

  

 

63.00

 

  

 

7/30/2020

 

             
  

 

31,890

 

  

 

 

  

 

85.00

 

  

 

2/8/2021

 

             
  

 

97,073

 

  

 

23,800

 

  

 

115.69

 

  

 

2/11/2022

 

             
  

 

60,000

 

  

 

 

  

 

86.24

 

  

 

2/13/2022

 

             
  

 

66,000

 

  

 

44,000

 

  

 

130.19

 

  

 

2/6/2023

 

             
  

 

147,671

 

  

 

 

  

 

95.87

 

  

 

2/20/2023

 

             
  

 

1,873

 

  

 

 

  

 

115.69

 

  

 

2/11/2024

 

             
  

 

2,435

 

  

 

 

  

 

130.19

 

  

 

2/6/2025

 

             
  

 

42,163

 

  

 

63,243

 

  

 

111.12

 

  

 

2/5/2024

 

             
  

 

1,007

 

  

 

 

  

 

115.54

 

  

 

2/26/2026

 

             
  

 

13,456

 

  

 

53,824

 

  

 

83.35

 

  

 

2/16/2025

 

             
  

 

341

 

  

 

 

  

 

82.93

 

  

 

2/24/2027

 

          

 

34,108

 

  

 

1,251,423

 

  

 

7,024

  

 

257,711

Cindy J. Miller

  

 

 

  

 

60,391

 

  

 

50.78

 

  

 

11/1/2026

 

          

 

11,159

 

  

 

409,423

 

                 

Daniel V. Ginnetti

  

 

 

  

 

28,605

 

  

 

62.04

 

  

 

3/1/2026

 

             
  

 

12,000

 

  

 

 

  

 

51.55

 

  

 

2/9/2020

 

             
  

 

10,700

 

  

 

 

  

 

85.00

 

  

 

2/8/2021

 

             
  

 

12,000

 

  

 

3,000

 

  

 

115.69

 

  

 

2/11/2022

 

             
  

 

11,200

 

  

 

 

  

 

86.24

 

  

 

2/13/2022

 

             
  

 

6,000

 

  

 

1,500

 

  

 

116.81

 

  

 

8/1/2022

 

             
  

 

27,000

 

  

 

18,000

 

  

 

130.19

 

  

 

2/6/2023

 

             
  

 

14,550

 

  

 

 

  

 

95.87

 

  

 

2/20/2023

 

             
  

 

17,838

 

  

 

26,757

 

  

 

111.12

 

  

 

2/5/2024

 

             
  

 

508

 

  

 

 

  

 

115.54

 

  

 

2/26/2026

 

             
  

 

4,999

 

  

 

19,994

 

  

 

83.35

 

  

 

2/16/2025

 

             
  

 

147

 

  

 

 

  

 

82.93

 

  

 

2/24/2027

 

          

 

12,934

 

  

 

474,548

 

  

 

2,621

  

 

96,164

 

Kurt M. Rogers

  

 

2,399

 

  

 

9,596

 

  

 

76.41

 

  

 

7/24/2025

 

             
           

 

14,485

 

  

 

62.04

 

  

 

3/1/2026

 

          

 

5,541

 

  

 

203,299

 

  

 

1,305

 

  

 

47,880

 

 

Stericycle, Inc. - 2019 Proxy Statement     47  


Table of Contents

2018 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

Option Awards

           Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     Number of
Securities
Underlying
Unexercised
Options (#)
UnExercisable
     Option
Exercise
Price ($)
     Option
Expiration
Date(1)
            Number
of
Shares
or Units
of Stock
That
Have
Not
Vested(2)
     Market
Value of
Shares or
Units
That
Have Not
Vested(3)
     Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(4)
     Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(3)
 

Ruth-Ellen Abdulmassih

  

 

554

 

  

 

 

  

 

55.57

 

  

 

3/1/2020

 

             
  

 

8,700

 

  

 

 

  

 

85.00

 

  

 

2/8/2021

 

             
  

 

6,400

 

  

 

3,200

 

  

 

115.69

 

  

 

2/11/2022

 

             
  

 

8,700

 

  

 

 

  

 

86.24

 

  

 

2/13/2022

 

             
  

 

711

 

  

 

 

  

 

86.89

 

  

 

2/28/2022

 

             
  

 

2,000

 

  

 

 

  

 

85.57

 

  

 

4/11/2022

 

             
  

 

756

 

  

 

 

  

 

97.36

 

  

 

3/7/2023

 

             
  

 

7,200

 

  

 

7,200

 

  

 

130.19

 

  

 

2/6/2023

 

             
  

 

9,700

 

  

 

1,939

 

  

 

95.87

 

  

 

2/20/2023

 

             
  

 

2,000

 

  

 

1,000

 

  

 

111.63

 

  

 

4/22/2022

 

             
  

 

1,192

 

  

 

 

  

 

136.285

 

  

 

3/5/2025

 

             
  

 

1,021

 

  

 

 

  

 

116.01

 

  

 

3/11/2026

 

             
  

 

2,400

 

  

 

9,596

 

  

 

83.35

 

  

 

2/16/2025

 

             
  

 

 

  

 

13,905

 

  

 

62.04

 

  

 

3/1/2026

 

             
  

 

4,217

 

  

 

6,324

 

  

 

111.12

 

  

 

2/5/2024

 

          

 

6,268

 

  

 

229,973

 

  

 

1,269

 

  

 

46,560

 

Joseph B. Arnold

  

 

5,061

 

  

 

 

  

 

46.83

 

  

 

2/10/2019

 

             
  

 

404

 

  

 

 

  

 

47.24

 

  

 

3/2/2019

 

             
  

 

11,500

 

  

 

 

  

 

51.55

 

  

 

2/9/2020

 

             
  

 

792

 

  

 

 

  

 

55.57

 

  

 

3/1/2020

 

             
  

 

11,200

 

  

 

 

  

 

85.00

 

  

 

2/8/2021