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
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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****(Insperity)****
(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):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Paul J. Sarvadi
Chairman of the Board
and Chief Executive Officer
April 12, 2011
Dear Stockholder:
On behalf of your Board of Directors and management, you are cordially invited to attend the Annual
Meeting of Stockholders to be held at Insperitys Corporate Headquarters, Centre I in the
Auditorium, located at 22900 Hwy. 59 N. (Eastex Freeway), Kingwood, Texas 77339, on May 17, 2011,
at 3:00 p.m.
It is important that your shares are represented at the meeting. Whether or not you plan to attend
the meeting, please complete and return the enclosed proxy card in the accompanying envelope or
vote using the telephone or Internet procedures that may be provided to you. Please note that
voting using any of these methods will not prevent you from attending the meeting and voting in
person.
You will find information regarding the matters to be voted on at the meeting in the following
pages. Our 2010 Annual Report to Stockholders is also enclosed with these materials.
Your interest in Insperity is appreciated, and we look forward to seeing you on May 17th.
Sincerely,
Paul J. Sarvadi
Chairman of the Board and Chief Executive Officer
INSPERITY, INC.
A Delaware Corporation
19001 Crescent Springs Drive
Kingwood, Texas 77339-3802
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held May 17, 2011
Kingwood, Texas
The Annual Meeting of the Stockholders of Insperity, Inc., a Delaware corporation (the
Company), will be held at the Companys Corporate Headquarters in Centre I in the Auditorium,
located at 22900 Hwy. 59 N. (Eastex Freeway), Kingwood, Texas 77339, on May 17, 2011 at 3:00 p.m.
(Central Daylight Time), for the following purposes:
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To elect three Class I directors to serve until the 2014 Annual Meeting of
Stockholders or until their successors have been elected and qualified.
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2.
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To ratify the appointment of Ernst & Young LLP as the Companys independent
registered public accounting firm for the year ending December 31, 2011.
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3.
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To cast a non-binding advisory vote on the Companys executive compensation
(say-on-pay vote).
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4.
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To cast a non-binding advisory vote on the frequency of stockholder
say-on-pay votes.
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to
Be Held on May 17, 2011
:
A full set of all proxy materials is enclosed with this Notice.
Additionally, the Companys Proxy Statement, Annual Report and other proxy materials are available at
http://www.insperity.com/AnnualMeeting
.
Only stockholders of record at the close of business on March 18, 2011, are entitled to notice
of, and to vote at, the meeting.
It is important that your shares be represented at the Annual Meeting of Stockholders
regardless of whether you plan to attend. Therefore, please mark, sign, date and return the
enclosed proxy. If you are present at the meeting, and wish to do so, you may revoke the proxy and
vote in person.
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By Order of the Board of Directors
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Daniel D. Herink
Senior Vice President of Legal,
General Counsel and Secretary
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April 12, 2011
Kingwood, Texas
TABLE OF CONTENTS
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INSPERITY, INC.
A Delaware Corporation
19001 Crescent Springs Drive
Kingwood, Texas 77339-3802
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS OF
INSPERITY, INC.
TO BE HELD ON TUESDAY, MAY 17, 2011
Solicitation
The accompanying proxy is solicited by the Board of Directors of Insperity, Inc., a Delaware
corporation (the Company or Insperity), for use at the 2011 Annual Meeting of Stockholders to
be held on May 17, 2011, and at any reconvened meeting after an adjournment thereof. The Annual
Meeting of Stockholders will be held at 3:00 p.m. (Central Daylight Time), at the Companys
Corporate Headquarters, Centre I in the Auditorium located at 22900 Hwy. 59 N. (Eastex Freeway),
Kingwood, Texas 77339.
Voting Information
You may vote in one of four ways:
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by attending the meeting and voting in person;
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by signing, dating and returning your proxy in the envelope provided;
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by submitting your proxy on the Internet at the address listed on your
proxy card; or
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by submitting your proxy using the toll-free number listed on your proxy
card.
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If your shares are held in an account at a brokerage firm or bank, you may submit your voting
instructions by signing and timely returning the enclosed voting instruction form, by Internet at
the address shown on your voting instruction form, by telephone using the toll-free number shown on
that form, or by providing other proper voting instructions to the registered owner of your shares.
If shares are held in street name through a broker and the broker is not given direction on how to
vote, the broker will not have discretion to vote such shares on non-routine matters, including the
election of directors.
If you either return your signed proxy or submit your proxy using the Internet or telephone
procedures that may be available to you, your shares will be voted as you direct.
If the
accompanying proxy is properly executed and returned, but no voting directions are indicated
thereon, the shares represented thereby will be voted FOR the election as directors of the nominees
listed herein, FOR proposals 2 and 3, and FOR a vote for stockholder approval every 3 years on
proposal 4.
In addition, the proxy confers discretionary authority to the persons named in the
proxy authorizing those persons to vote, in their discretion, on any other matters properly
presented at the Annual Meeting of Stockholders. The Board of Directors is not currently aware of
any such other matters. Any stockholder of record giving a proxy has the power to revoke it at any
time before it is voted by: (i) submitting written notice of revocation to the Secretary of the
Company at the address listed above; (ii) submitting another proxy that is properly signed and
later dated; (iii) submitting a proxy again on the Internet or by telephone; or (iv) voting in
person at the Annual Meeting.
Stockholders who hold their shares through a nominee or broker are
invited to attend the meeting but must obtain a signed proxy from the broker in order to vote in
person.
The Company pays the expense of preparing, printing and mailing proxy materials to our
stockholders. Our transfer agent, BNY Mellon Shareowner Services, will assist in the solicitation
of proxies from stockholders at a fee of approximately $500 plus reimbursement of reasonable
out-of-pocket expenses. In addition, proxies may be solicited personally or by telephone by
officers or employees of the Company, none of whom will receive additional compensation. We will
also reimburse brokerage houses and other nominees for their reasonable expenses in forwarding
proxy materials to beneficial owners of our Common Stock.
1
The approximate date on which this proxy statement and the accompanying proxy card will first
be sent to stockholders is April 12, 2011.
At the close of business on March 18, 2011, the record date for the determination of
stockholders of the Company entitled to receive notice of, and to vote at, the 2011 Annual Meeting
of Stockholders or any reconvened meeting after an adjournment thereof, 26,470,039 shares of the
Companys Common Stock, par value $0.01 per share (the Common Stock), were outstanding. Each
share of Common Stock is entitled to one vote upon each of the matters to be voted on at the
meeting. The presence, in person or by proxy, of a majority of the outstanding shares of Common
Stock is required for a quorum. If a quorum is present at the meeting, under the Companys Bylaws,
action on a matter (other than the election of directors) shall be approved if the votes cast in
favor of the matter exceed the votes cast opposing the matter. Directors of the Company shall be
elected by a plurality of the votes cast. In determining the number of votes cast, shares
abstaining from voting or not voted on a matter will not be treated as votes cast. Accordingly,
although proxies containing broker non-votes (which result when a broker holding shares for a
beneficial owner has not received timely voting instructions on certain matters from such
beneficial owner and when the broker does not otherwise have discretionary power to vote on a
particular matter) are considered shares present in determining whether there is a quorum present
at the Annual Meeting, they are not treated as votes cast with respect to the election of
directors, and thus will not affect the outcome of the voting on the election of directors or any
of the other proposals to be voted on at the annual meeting. However, a broker holding shares for
a beneficial owner will have the discretion to vote such shares for a beneficial owner with respect
to routine matters, including the ratification of the appointment of the Companys independent
registered public accounting firm.
SECURITY OWNERSHIP
The table below sets forth, as of March 18, 2011, certain information with respect to the
shares of Common Stock beneficially owned by: (i) each person known by the Company to beneficially
own 5% or more of the Common Stock; (ii) each director and director nominee of the Company; (iii)
each of the executive officers of the Company identified in the Summary Compensation Table on page
23 of this proxy statement; and (iv) all directors, director nominees and executive officers of the
Company as a group.
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Amount and
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Nature of
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Beneficial
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Name of Beneficial Owner
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Ownership
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Percent of Class
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Michael W. Brown
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18,520
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*
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Jack M. Fields, Jr.
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6,517
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*
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Eli Jones
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22,438
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*
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Paul S. Lattanzio
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32,896
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*
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Gregory E. Petsch
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6,438
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*
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Richard G. Rawson
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926,968
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2
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3.50
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Paul J. Sarvadi
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2,040,451
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3
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7.69
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Austin P. Young
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39,609
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A. Steve Arizpe
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259,125
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4
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*
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Jay E. Mincks
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89,924
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*
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Douglas S. Sharp
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82,024
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*
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BlackRock, Inc.
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1,679,165
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5
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6.34
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Executive Officers and Directors as a group (12 persons)
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3,593,907
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13.42
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Represents less than 1%.
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1
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Except as otherwise indicated, each of the stockholders has sole voting and investment power
with respect to the securities shown to be owned by such stockholder. The address for each
officer and director is in care of Insperity, Inc., 19001 Crescent Springs Drive, Kingwood,
Texas 77339-3802.
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The number of shares of Common Stock beneficially owned by each person includes options
exercisable on March 18, 2011, or within 60 days after March 18, 2011, and excludes options not
exercisable within 60 days after March 18, 2011 (currently there are no unvested stock options).
The number of shares of Common Stock beneficially owned by each person also includes unvested
shares of restricted stock as of March 18, 2011. Each owner of restricted stock has the right to
vote his or her shares but may not transfer them until they have vested.
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Options
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Name of Beneficial
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Unvested Restricted
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Owner
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Exercisable
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Not Exercisable
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Stock
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Michael W. Brown
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12,700
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Jack M. Fields, Jr.
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6,517
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Eli Jones
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15,512
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Paul S. Lattanzio
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15,000
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Gregory E. Petsch
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5,000
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Austin P. Young
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22,500
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Richard G. Rawson
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33,544
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31,668
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Paul J. Sarvadi
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64,093
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82,001
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A. Steve Arizpe
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114,198
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58,668
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Jay E. Mincks
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15,102
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58,668
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Douglas S. Sharp
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9,001
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43,334
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2
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Includes 370,409 shares owned by the RDKB Rawson LP, 336,246 shares owned by the R&D Rawson
LP, 350 shares owned by Dawn M. Rawson (spouse), 50 shares owned by Kimberly Rawson (daughter)
and 50 shares owned by Barbie Rawson Holman (daughter). Mr. Rawson shares voting and
investment power with respect to 450 shares owned by his wife and daughters.
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3
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Includes 1,175,273 shares owned by Our Ship Limited Partnership, Ltd., 569,506 shares owned
by the Sarvadi Childrens Limited Partnership, 129,934 shares owned by Paul J. Sarvadi and
Vicki D. Sarvadi, JT WROS and 19,644 shares owned by six education trusts established for the
benefit of the children of Paul J. Sarvadi. Mr. Sarvadi shares voting and investment power
over all such shares with his wife, Vicki D. Sarvadi. Also includes 230,000 shares pledged to
banks as collateral for loans.
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4
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Includes 13,139 shares owned by A. Steve Arizpe and Charissa Arizpe (spouse). Mr. Arizpe
shares voting and investment power over 86,259 shares with his wife.
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5
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Based on a Schedule 13G filed with the Securities and Exchange Commission on February 3,
2011. BlackRock, Inc. reported sole voting and dispositive power with respect to 1,679,165
shares. The address of BlackRock, Inc. is 40 East 52
nd
Street, New York, NY 10022.
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3
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
General
The Companys Certificate of Incorporation and Bylaws provide that the number of directors on
the Board of Directors shall be fixed from time to time by the Board of Directors but shall not be
less than three nor more than 15 persons. The number of members constituting the Board of
Directors is currently fixed at eight.
In accordance with the Certificate of Incorporation of the Company, the members of the Board
of Directors are divided into three classes and are elected for a term of office expiring at the
third succeeding annual stockholders meeting following their election to office, or until a
successor is duly elected and qualified. The Certificate of Incorporation also provides that such
classes shall be as nearly equal in number as possible. The terms of office of the Class I, Class
II and Class III directors expire at the Annual Meeting of Stockholders in 2011, 2012 and 2013,
respectively.
The term of office of each of the current Class I directors expires at the time of the 2011
Annual Meeting of Stockholders, or as soon thereafter as their successors are elected and
qualified. Mr. Brown, Dr. Jones and Mr. Petsch have been nominated to serve additional three-year
terms as Class I directors. All nominees have consented to be named in this proxy statement and to
serve as a director if elected.
It is the intention of the person or persons named in the accompanying proxy card to vote for
the election of all nominees named below unless a stockholder has withheld such authority. The
affirmative vote of a plurality of the votes cast by holders of the Common Stock present in person
or by proxy at the 2011 Annual Meeting of Stockholders is required for election of the nominees.
Abstentions and broker non-votes will be deemed votes not cast.
If, at the time of or prior to the 2011 Annual Meeting of Stockholders, any of the nominees
should be unable or decline to serve, the discretionary authority provided in the proxy may be used
to vote for a substitute or substitutes designated by the Board of Directors. The Board of
Directors has no reason to believe that any substitute nominee or nominees will be required. No
proxy will be voted for a greater number of persons than the number of nominees named herein.
Nominees Class I Directors (For Terms Expiring at the 2014 Annual Meeting)
Michael W. Brown.
Mr. Brown, age 65, joined the Company as a Class I director in November
1997. He is a member of the Companys Finance, Risk Management and Audit Committee and the
Nominating and Corporate Governance Committee. Mr. Brown is the past Chairman of the Nasdaq Stock
Market Board of Directors and a past governor of the National Association of Securities Dealers.
Mr. Brown joined Microsoft Corporation in 1989 as its Treasurer and became its Chief Financial
Officer in 1993, in which capacity he served until his retirement in July 1997. Prior to joining
Microsoft, Mr. Brown spent 18 years with Deloitte & Touche LLP. Mr. Brown is also a director of
EMC Corporation, Stifel Financial Corporation and VMware, Inc. and formerly served as a director of
Thomas Weisel Partners, and serves on the audit committees of EMC Corporation and VMware, Inc.
Mr. Brown also serves or has served as a director, trustee or advisor of several private business,
civic or charitable organizations. Mr. Brown holds a Bachelor of Science in Economics from the
University of Washington in Seattle.
Mr. Brown brings to the Board of Directors substantial financial expertise that includes an
extensive knowledge of the complex financial and operational issues affecting large companies, and
a deep understanding of accounting principles and financial reporting rules and regulations. His
prior experience in public accounting and as a chief financial officer of a global technology
company brings an important perspective to the Board of Directors. Mr. Brown also serves on the
boards and audit committees of multiple publicly traded companies in both the technology and
financial services sectors, which provides us with valuable insight on technological and strategic
issues affecting the Company. Mr. Browns prior service as Chairman of the NASDAQ Stock Market
Board of Directors and as a past governor of the National Association of Securities Dealers
provides experience with issues affecting a publicly traded company as well as demonstrating Mr.
Browns leadership and business acumen.
Eli Jones.
Dr. Jones, age 49, joined the Company as a Class I director in April 2004. He is
Chairman of the Companys Compensation Committee and a member of the Nominating and Corporate
Governance Committee. Dr. Jones is Dean of the E. J. Ourso College of Business and Ourso
Distinguished Professor of Business at Louisiana State
4
University. Prior to joining the faculty at Louisiana State University, he was Professor of
Marketing and Associate Dean at the C.T. Bauer College of Business at the University of Houston
from 2007 to 2008; an Associate Professor of Marketing from 2002 to 2007; and an Assistant
Professor from 1997 until 2002. He taught at Texas A&M University for several years before joining
the faculty of the University of Houston. Before becoming a professor, Dr. Jones worked in sales
and sales management for three Fortune 100 companies: Quaker Oats, Nabisco, and Frito-Lay. He
received his Bachelor of Science degree in journalism in 1982, his MBA in 1986, and his Ph.D. in
1997 from Texas A&M University.
Dr. Jones brings to the Board of Directors significant experience and cutting-edge knowledge
and expertise. Dr. Jones is considered a sales scientist in that he conducts and publishes
cutting-edge research in sales, sales management, marketing strategy, leadership and customer
relationship management based on data from organizations world-wide, which are areas critical to
the Company. Dr. Jones is able to draw upon his research to provide the Board of Directors with
knowledge with respect to the Insperity sales force. Dr. Joness service as Dean of the E. J.
Ourso College of Business and Ourso Distinguished Professor of Business at Louisiana State
University demonstrates his leadership and broad-based business acumen.
Gregory E. Petsch
. Mr. Petsch, age 60, joined the Company as a Class I director in October
2002. He is Chairman of the Companys Nominating and Corporate Governance Committee and a member
of the Compensation Committee. Mr. Petsch retired from Compaq Computer Corporation in 1999 where
he had held various positions since 1983, most recently as Senior Vice President of Worldwide
Manufacturing and Quality beginning in 1991. Prior to joining Compaq, he worked for 10 years for
Texas Instruments. Mr. Petsch serves or has served as a director, trustee or advisor of several
private business, civic or charitable organizations. In 1992, Mr. Petsch was voted Manufacturing
Executive of the Year by Upside Magazine, and from 1993 to 1995, he was nominated Whos Who of
Global Business Leaders. He is founder and President of Petsch Foundation, Inc. He earned a
Bachelor of Business Technology degree from the University of Houston in 1978.
Mr. Petsch brings to the Board of Directors extensive operational expertise and business
experience. His prior experience as a Senior Vice President of Worldwide Manufacturing and Quality,
as well as his other positions with Compaq and Texas Instruments, provides the Board of Directors
with additional insight into technology and business issues affecting the Company.
The Board of Directors recommends that stockholders vote For all three of the
nominees listed above, and proxies executed and returned will be so voted unless
contrary instructions are indicated thereon.
Directors Remaining in Office
Jack M. Fields, Jr
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Mr. Fields, age 59, joined the Company as a Class III director in January
1997 following his retirement from the United States House of Representatives, where he served for
16 years. Mr. Fields is a member of the Companys Compensation Committee and the Nominating and
Corporate Governance Committee. During 1995 and 1996, Mr. Fields served as Chairman of the House
Telecommunications and Finance Subcommittee, which has jurisdiction and oversight of the Federal
Communications Commission and the Securities and Exchange Commission. Mr. Fields has been Chief
Executive Officer of the Twenty-First Century Group in Washington, D.C. since January 1997. Mr.
Fields serves on the Board of Directors for AIM Mutual Funds, and also serves or has served as a
director, trustee or advisor of several private business, civic or charitable organizations. Mr.
Fields earned a Bachelor of Arts in 1974 from Baylor University and graduated from Baylor Law
School in 1977.
Mr. Fields brings extensive governmental affairs and regulatory experience and expertise to
the Board of Directors. His prior experience in the U.S. House of Representatives, including his
role as chairman of the committee that had oversight of the Securities and Exchange Commission, and
his service as Chief Executive Officer with a Washington, D.C. based political consulting firm
bring important governmental affairs and regulatory perspectives to the Board of Directors.
Additionally, Mr. Fields background and accomplishments demonstrate his leadership, and his
service as a director of the AIM Mutual Funds provides us with additional valuable perspective on
issues affecting the Company.
Paul S. Lattanzio
.
Mr. Lattanzio, age 47, has been a Class III director of the Company since
1995. He is a member of the Companys Finance, Risk Management and Audit Committee and the
Nominating and Corporate Governance Committee. Mr. Lattanzio has been President of Star Avenue
Capital, LLC since May 2010. Prior to that, he most recently served as a Senior Managing Director
and head of Bear Growth Capital Partners, a private equity group, from
5
July 2003 to January 2009.
He served as a Managing Director for TD Capital Communications Partners (f/k/a Toronto Dominion
Capital), a venture capital investment firm, from July 1999 until July 2002. From February 1998 to
March 1999, he was a co-founder and Senior Managing Director of NMS Capital Management, LLC, a $600
million private equity fund affiliated with NationsBanc Montgomery Securities. Prior to NMS
Capital, Mr. Lattanzio served in several positions with
various affiliates of Bankers Trust New York Corporation for over 13 years, most recently as a
Managing Director of BT Capital Partners, Inc. Mr. Lattanzio has experience in a variety of
investment banking disciplines, including mergers and acquisitions, private placements and
restructuring. Mr. Lattanzio received his Bachelor of Science in economics with honors from the
University of Pennsylvanias Wharton School of Business in 1984.
Mr. Lattanzio brings extensive financial and investment banking experience and business acumen
to the Board of Directors. His broad experience with several investment firms and private equity
groups, including his current experience as the president of Star Avenue Capital, LLC, brings an
important perspective to the Board of Directors on issues concerning the Companys strategic
initiatives.
Richard G. Rawson.
Mr. Rawson, age 62, President of the Company and most of its subsidiaries,
is a Class III director and has been a director of the Company since 1989. He has been President
since August 2003. Before being elected President, he served as Executive Vice President of
Administration, Chief Financial Officer and Treasurer of the Company from February 1997 until
August 2003. Prior to that, he served as Senior Vice President, Chief Financial Officer and
Treasurer of the Company since 1989. Prior to joining the Company in 1989, Mr. Rawson served as a
Senior Financial Officer and Controller for several companies in the manufacturing and seismic data
processing industries. Mr. Rawson has served the National Association of Professional Employer
Organizations (NAPEO) as President, First Vice President, Second Vice President, and Treasurer,
as well as Chairman of the Accounting Practices Committee. Mr. Rawson has a Bachelor of Business
Administration in finance from the University of Houston.
Mr. Rawson brings financial and operational experience to the Board of Directors. Mr.
Rawsons lengthy service as president of the Company, as well as his prior service as chief
financial officer and treasurer of the Company, provide in-depth knowledge and insight of Company
operations and financial matters to the Board of Directors.
Paul J. Sarvadi.
Mr. Sarvadi, age 54, Chairman of the Board and Chief Executive Officer and
co-founder of the Company and its subsidiaries, is a Class II director and has been a director
since the Companys inception in 1986. He has also served as the Chairman of the Board and Chief
Executive Officer of the Company since 1989 and as President of the Company from 1989 until August
2003. He attended Rice University and the University of Houston prior to starting and operating
several small companies. Mr. Sarvadi has served as President of NAPEO and was a member of its
Board of Directors for five years. In 2001, Mr. Sarvadi was selected as the 2001 National Ernst &
Young Entrepreneur of the Year for service industries. In 2004, he received the Conn Family
Distinguished New Venture Leader Award from Mays Business School at Texas A&M University. In 2007,
he was inducted into the Texas Business Hall of Fame.
Mr. Sarvadi brings substantial business and operational experience to the Board of Directors,
including an extensive knowledge of sales, customer relationships, and issues affecting small to
medium-sized businesses. Mr. Sarvadis role as a co-founder of the Company and lengthy service as
chief executive officer of the Company provide to the Board of Directors extensive knowledge and
insight of our operations and issues affecting the Company as well as the broader PEO industry.
Mr. Sarvadis previous experience starting and operating several small businesses, as well as his
frequent interaction with the Companys clients, provide valuable insight to the challenges facing
small to medium-sized businesses, which is a principal focus of the Company.
Austin P. Young.
Mr. Young, age 70, joined the Company as a Class II director in January
2003. He is Chairman of the Companys Finance, Risk Management and Audit Committee and a member of
the Nominating and Corporate Governance Committee. Mr. Young served as Senior Vice President,
Chief Financial Officer and Treasurer of CellStar Corporation from 1999 to December 2001 when he
retired. From 1996 to 1999, he served as Executive Vice President Finance and Administration of
Metamor Worldwide, Inc. Mr. Young also held the position of Senior Vice President and Chief
Financial Officer of American General Corporation for over eight years and was a partner in the
Houston and New York offices of KPMG before joining American General. Mr. Young currently serves
as a Director and Chairman of the Audit Committees of Tower Group, Inc. and Amerisafe, Inc. He
holds an accounting degree from the University of Texas.
Mr. Young brings extensive financial and accounting experience to the Board of Directors. His
prior experience as a partner in an international accounting firm, as a senior financial officer of
large companies, and his service on the audit committees of publicly traded companies provide Mr.
Young with a thorough understanding of generally accepted accounting principles and financial
statements. Additionally, Mr. Youngs prior experience provides a solid background for him to
advise and consult with the Board of Directors on financial and audit-related matters as chair of
the Finance, Risk
6
Management and Audit Committee, and to serve as the designated audit committee
financial expert of the Finance, Risk Management and Audit Committee. Mr. Youngs service on other
boards as well as his extensive knowledge of the Company and its business also provide us with
additional valuable perspective on issues affecting the Company.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
Insperity has adopted Corporate Governance Guidelines, which include guidelines for, among
other things, director responsibilities, qualifications and independence. The Board of Directors
continually monitors developments in corporate governance practices and regulatory changes and
periodically assesses the adequacy of and modifies its Corporate Governance Guidelines and
committee charters as warranted in light of such developments. You can access the Companys
Corporate Governance Guidelines in their entirety on the Companys website at
www.insperity.com
in
the
Corporate Governance
section under the
Investor Relations
tab.
On an annual basis, each director and executive officer is obligated to complete a
questionnaire that requires disclosure of any transactions with the Company in which the director
or executive officer, or any member of his or her immediate family, has a direct or indirect
material interest.
Determinations of Director Independence
Under rules of the New York Stock Exchange, the Company must have a majority of independent
directors. No board member qualifies as independent unless the Board of Directors affirmatively
determines that the director has no material relationship with the Company (either directly or as a
partner, stockholder or officer of an organization that has a relationship with the Company). In
evaluating each directors independence, the Board of Directors considered all relevant facts and
circumstances, and relationships and transactions between each director, her or his family members
or any business, charity or other entity in which the director has an interest on the one hand, and
the Company, its affiliates, or the Companys senior management on the other. As a result of this
review, at its meeting held on February 17, 2011, the Board of Directors affirmatively determined
that all of the Companys directors are independent from the Company and its management, with the
exception of Messrs. Sarvadi and Rawson, both of whom are members of the senior management of the
Company.
The Board of Directors has considered what types of disclosure should be made relating to the
process of determining director independence. To assist the Board of Directors in making
disclosures regarding its determinations of independence, in 2004, the Board of Directors adopted
categorical standards as contemplated under the listing standards of the New York Stock Exchange
then in effect. Under the rules then in effect, relationships that were within the categorical
standards were not required to be disclosed in the proxy statement and their impact on independence
was not required to be separately discussed, although the categorical standards, by themselves, did
not determine the independence of a particular director. The Board of Directors considers all
relevant facts and circumstances in determining whether a director is independent. A relationship
satisfies the categorical standards adopted by the Board of Directors if it:
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is not a relationship that would preclude a determination of independence under Section
303A.02(b) of the New York Stock Exchange Listed Company Manual;
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consists of charitable contributions made by Insperity to an organization where a
director is an executive officer and does not exceed the greater of $1 million or 2% of the
organizations gross revenue in any of the last three years; and
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is not required to be, and it is not otherwise, disclosed in Insperitys annual proxy
statement.
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In the course of the Boards determination regarding the independence of directors other than
Messrs. Sarvadi and Rawson, it considered all transactions, relationships and arrangements in which
such directors and Insperity were participants. In particular, with respect to each of the most
recent three fiscal years, the Board of Directors evaluated, with respect to Mr. Fields,
Insperitys provision of PEO-related services to companies owned by Mr. Fields and, with respect to
Dr. Jones, its employment of Dr. Joness daughter. The Board of Directors has determined that
these relationships are not material. In making this determination with respect to Mr. Fields, the
Board of Directors considered the facts that his companies pay Insperity comprehensive service fees
on the same basis as all other clients, and payments net of payroll costs
7
made by his companies
were less than 0.1% of Insperitys revenues in each of the last three fiscal years. In making this
determination with respect to Dr. Jones, the Board of Directors considered the position and salary
of Dr. Joness daughter within the Company.
Selection of Nominees for the Board of Directors
Identifying Candidates
The Nominating and Corporate Governance Committee solicits ideas for potential candidates for
membership on the Board of Directors from a number of sources including members of the Board of
Directors, executive officers of the
Company, individuals personally known to the members of the Board of Directors, and research.
The Nominating and Corporate Governance Committee also has sole authority to select and compensate
a third-party executive search firm to help identify candidates, if it deems advisable. In
addition, the Nominating and Corporate Governance Committee will consider candidates for the Board
of Directors submitted by stockholders. Any such submissions should include the candidates name
and qualifications for Board of Directors membership and should be directed to the Corporate
Secretary of Insperity at 19001 Crescent Springs Drive, Kingwood, Texas 77339. Although the
Nominating and Corporate Governance Committee does not require the stockholder to submit any
particular information regarding the qualifications of the stockholders candidate, the level of
consideration that the Nominating and Corporate Governance Committee will give to the stockholders
candidate will be commensurate with the quality and quantity of information about the candidate
that the stockholder makes available to the Committee. The Nominating and Corporate Governance
Committee will consider all candidates identified through the processes described above, and will
evaluate each of them on the same basis.
In addition, the Bylaws of the Company permit stockholders to nominate directors for election
at an annual stockholders meeting whether or not such nominee is submitted to and evaluated by the
Nominating and Corporate Governance Committee. To nominate a director using this process, the
stockholder must follow the procedures described under Additional Information Advance Notice
Required for Stockholder Nominations and Proposals on page 34 of this proxy statement.
Evaluating Candidates
Each candidate must meet certain minimum qualifications, including:
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the ability to represent the interests of all stockholders of the Company and not
just one particular constituency;
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independence of thought and judgment;
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the ability to dedicate sufficient time, energy and attention to the performance of
her or his duties, taking into consideration the prospective nominees service on other
public company boards; and
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skills and expertise that are complementary to the existing Board of Directors
members skills; in this regard, the Board of Directors will consider the Boards need
for operational, sales, management, financial, governmental or other relevant
expertise.
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In addition, the Nominating and Corporate Governance Committee considers other qualities
that it may deem to be desirable from time to time, such as the extent to which the prospective
nominee contributes to the diversity of the Board of Directorswith diversity being construed
broadly to include a variety of perspectives, opinions, experiences and backgrounds. However,
diversity is just one factor that the Nominating and Corporate Governance Committee may consider,
and the Board does not have any particular policy with regard to diversity. The Nominating and
Corporate Governance Committee may also consider the ability of the prospective nominee to work
with the then-existing interpersonal dynamics of the Board of Directors and her or his ability to
contribute to the collaborative culture among Board of Directors members.
Based on this initial evaluation, the Chairman of the Nominating and Corporate Governance
Committee will determine whether to interview the nominee, and if warranted, will recommend that
one or more members of the Committee, other members of the Board of Directors and senior
management, as appropriate, interview the nominee in person or by telephone. After completing this
evaluation and interview process, the Committee makes a recommendation to the full Board of
Directors as to the persons who should be nominated by the Board of Directors, and the Board of
Directors determines the nominees after considering the recommendation of the Nominating and
Corporate Governance Committee.
8
Board of Directors Leadership
The Company does not have a policy with respect to whether the positions of Chairman of the
Board and Chief Executive Officer should be held by the same person or two separate individuals,
and believes that it is in the best interest of the Company to consider that question from time to
time in the context of succession planning. At this time, the Board believes that it is in the
best interest of the Company and an appropriate leadership structure to have the CEO also serve as
Chairman of the Board. Combining the CEO and Chairman roles provides an efficient and effective
leadership model that promotes unambiguous accountability and alignment on corporate strategy. Mr.
Sarvadi co-founded the Company in 1986 and has served as Chairman of the Board and CEO since 1989.
The Board of Directors believes that Mr. Sarvadis intimate knowledge of the daily operations of
and familiarity with the Company and industry put him in the best position to provide leadership to
the Board on setting the agenda, emerging issues facing the Company and the PEO industry and
strategic opportunities. Additionally, Mr. Sarvadis substantial financial stake in the Company
creates a strong alignment of interests
with the other stockholders. Mr. Sarvadis combined roles also ensure that a unified message
is conveyed to stockholders, employees and clients.
Board of Directors Role in Risk Oversight
The Board of Directors is responsible for overseeing the Companys overall risk profile and
assisting management in addressing specific risks. The Companys management has historically
reviewed key risks with the Board of Directors and its committees. During 2010, at the direction
of the Finance, Risk Management and Audit Committee, we engaged in an initiative to enhance the
Companys existing risk management processes by formally identifying and evaluating risks that may
affect the Companys ability to execute its corporate strategy and fulfill its business objectives.
This effort was spearheaded by establishment of an Enterprise Risk Management Steering Committee
(ERM Steering Committee), which implemented a disciplined approach to identifying, documenting,
evaluating, communicating, and monitoring enterprise risk management within the Company. The ERM
Steering Committee is chaired by the Companys chief financial officer and includes the Companys
general counsel, internal audit and other members of management. The ERM Steering Committee
reports to the Board of Directors as well as the Companys Chief Executive Officer. During 2010,
the ERM Steering Committee completed a comprehensive identification and definition of the Companys
risks, including strategic, operational, financial, legal, regulatory and reputational risks. The
ERM Steering Committee further indentified mitigating factors associated with such risks, and
prioritized the identified risks based upon the subjectively determined likelihood of the
occurrence and the estimated resulting impact on the Company if the risk occurred. The ERM
Steering Committee is charged with periodically reviewing with both the Finance, Risk Management
and Audit Committee and the Board of Directors the Companys overall risk profile, as well as any
significant identified risks.
The Board of Directors executes its risk oversight function both directly and through its
standing committees, each of which assists the Board of Directors in overseeing a part of the
Companys overall risk management. Throughout the year, the Board of Directors and each such
committee spend a portion of their time reviewing and discussing specific risk factors, and risk
assessments are part of all major decision-making. The Board of Directors is kept informed of each
committees risk oversight and related activities through regular reports from such committees.
The Finance, Risk Management and Audit Committee is assigned primary responsibility for oversight
of risk assessment with financial implications. In its periodic meetings with management, internal
auditors and independent auditors, the Finance, Risk Management and Audit Committee reviews and
monitors many factors relating to enterprise risk, including:
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the financial affairs of the Company;
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the integrity of the Companys financial statements;
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the independent auditors qualifications, independence and performance;
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the performance of the personnel responsible for the Companys internal audit
function; and
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the Companys policies and procedures with respect to risk management.
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The Compensation Committee has the primary responsibility to consider material risk factors
relating to the Companys compensation policies and practices. The Nominating & Corporate
Governance Committee monitors governance and succession risks. As part of its review and approval
of the Companys capital budget, major acquisitions, material contracts, compensation and other
similar matters, the Board of Directors retains ultimate authority over assessing the risks and
their impacts on the Companys business.
9
Code of Business Conduct and Ethics
The Board of Directors has adopted a Code of Business Conduct and Ethics (the Code),
governing the conduct of the Companys directors, officers and employees. The Code, which meets
the requirements of Rule 303A.10 of the New York Stock Exchange Listed Company Manual and Item 406
of Regulation S-K, is intended to promote honest and ethical conduct, full, fair, accurate, timely
and understandable disclosure in the Companys public filings, compliance with laws and the prompt
internal reporting of violations of the Code. You can access the Code on the Companys website at
www.insperity.com
in the
Corporate Governance
section under the
Investor Relations
tab. Changes in
and waivers to the Code for the Companys directors, executive officers and certain senior
financial officers will be posted on the Companys Internet website within four business days and
maintained for at least 12 months. If you wish to raise a question or concern or report a
violation to the Finance, Risk Management and Audit Committee, you should go to
www.ethicspoint.com
or call the Ethicspoint toll-free hotline at 1-866-384-4277.
Stockholder Communications
Stockholders and other interested parties may communicate directly with the entire Board of
Directors or the non-management directors as a group by sending an email to
directors@insperity.com
. In the subject line of the email, please specify whether the
communication is addressed to the entire Board of Directors or to the non-management directors.
Alternatively, you may mail your correspondence to the Board of Directors in care of the Corporate
Secretary, 19001 Crescent Springs Drive, Kingwood, Texas 77339.
Unless any director directs otherwise, communications received (via U.S. mail or email) will
be reviewed by the Corporate Secretary who will exercise his discretion not to forward to the Board
of Directors correspondence that is inappropriate such as business solicitations, frivolous
communications and advertising, routine business matters (i.e., business inquiries, complaints, or
suggestions), and personal grievances.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors
Directors are expected to attend all or substantially all Board of Directors meetings and
meetings of the Committees of the Board of Directors on which they serve. Directors are also
expected to spend the necessary time to discharge their responsibilities appropriately (including
advance review of meeting materials) and to ensure that other existing or future commitments do not
materially interfere with their responsibilities as members of the Board. The Board of Directors
met five times in 2010. All of the members of the Board of Directors participated in more than 75%
of the meetings of the Board of Directors and Committees of which they were members during the
fiscal year ended December 31, 2010. The Board of Directors expects its members to attend the
Annual Meeting of the Stockholders. Due to a change in the schedule for the annual meeting in
2010, only two of the Companys eight directors attended the Annual Meeting of the Stockholders
However, in the five years prior to 2010, the Companys directors average attendance rate at the
annual meetings was 85%.
Executive Sessions of the Board of Directors and the Presiding Director
The Companys non-management directors, all of whom are also independent, hold executive
sessions at which the Companys management is not in attendance at regularly scheduled Board of
Directors meetings. The Chairman of the Nominating and Corporate Governance Committee, currently
Mr. Petsch, serves as presiding director at the executive sessions. In the absence of the
Chairman, a majority of the members present at the executive session will appoint a member to
preside at the meeting.
Committees of the Board of Directors
The Board of Directors has appointed three committees: the Finance, Risk Management and Audit
Committee; the Compensation Committee; and the Nominating and Corporate Governance Committee. The
charters for each of the three committees, which have been adopted by the Board of Directors,
contain a detailed description of the respective committees duties and responsibilities and are
available in the
Corporate Governance
section under the
Investor Relations
tab on the Companys
website at
www.insperity.com
.
10
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee met three times in 2010. The members of the
Nominating and Corporate Governance Committee are all of the non-management directors:
Mr. Petsch, who serves as Chairman, and Messrs. Brown, Fields, Lattanzio, and Young, and Dr. Jones.
All members of the Nominating and Corporate Governance Committee are independent under the
standards of the New York Stock Exchange. The Nominating and Corporate Governance Committee: (i)
identifies individuals qualified to become Board of Directors members, consistent with the criteria
for selection approved by the Board; (ii) recommends to the Board of Directors a slate of director
nominees to be elected by the stockholders at the next annual meeting of stockholders and, when
appropriate, director appointees to take office between annual meetings; (iii) develops and
recommends to the Board of Directors a set of corporate governance guidelines for the Company; and
(iv) oversees the evaluation of the Board of Directors.
Finance, Risk Management and Audit Committee
The Finance, Risk Management and Audit Committee met nine times in 2010. The members of this
Committee are Mr. Young, who serves as Chairman, and Messrs. Lattanzio and Brown. All three
members are independent under the standards of the New York Stock Exchange and Securities and
Exchange Commission Regulations. In addition, the Board of Directors has determined that Mr. Young
is an audit committee financial expert as such term is defined in Item 401(h) of Regulation S-K
promulgated by the Securities and Exchange Commission. The Finance, Risk Management and Audit
Committee assists the Board of Directors in fulfilling its responsibility to oversee the financial
affairs, risk management, accounting and financial reporting processes, and audits of financial
statements of the Company by reviewing and monitoring: (i) the financial affairs of the Company;
(ii) the integrity of the Companys financial statements and internal controls; (iii) the Companys
compliance with legal and regulatory requirements; (iv) the independent auditors qualifications
and independence; (v) the performance of the personnel responsible for the Companys internal audit
function and the independent auditors; and (vi) the Companys policies and procedures with respect
to risk management, as well as other matters that may come before it as directed by the Board of
Directors.
Compensation Committee
The Compensation Committee met five times in 2010. The members of the Compensation Committee
are Dr. Jones, who serves as Chairman, and Messrs. Fields and Petsch. All three members are
independent under the standards of the New York Stock Exchange. The Compensation Committee: (i)
oversees and administers the Companys compensation policies, plans and practices; (ii) reviews and
discusses with management the Compensation Discussion and Analysis required by Securities and
Exchange Commission Regulation S-K, Item 402; and (iii) prepares the annual report required by the
rules of the Securities and Exchange Commission on executive compensation for inclusion in the
Companys annual report or proxy statement for the annual meeting of stockholders. To carry out
these purposes, the Compensation Committee: (i) evaluates the performance of and determines the
compensation for senior management, taking into consideration recommendations made by the Chief
Executive Officer; (ii) administers the Companys compensation programs; and (iii) performs such
other duties as may from time to time be directed by the Board of Directors.
The Compensation Committee may form and delegate authority to subcommittees as it deems
appropriate. Pursuant to the terms of the Insperity, Inc. 2001 Incentive Plan (the Incentive
Plan), the Board of Directors or the Compensation Committee may delegate the Compensation
Committees authority under the Incentive Plan to the Chairman of the Board, pursuant to such
conditions and limitations as each may establish, except that neither may delegate to any person
the authority to make awards, or take other action, under the Incentive Plan with respect to
participants who may be subject to Section 16 of the Securities Exchange Act of 1934, as amended.
11
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Summary
In this section we describe our compensation philosophy, objectives and strategies and the
underlying elements of our compensation programs. Insperity has had a long-standing objective of
linking executive compensation to performance and our 2010 compensation packages for executives
continued in this spirit, reflecting changes in economic conditions both within and outside of the
Company. We continually review our executive compensation practices for alignment with Company
values, long-term stockholder interests and continued growth of the Company.
Compensation Philosophy
Insperitys overall compensation philosophy is pay-for-performance. A majority of each
executive officers total compensation package consists of a long-term incentive component and a
variable compensation component, with a goal of aligning the interests of the executive officers
with those of the stockholders by tying executive compensation to our performance and stock price.
In order to remain competitive with the market, total compensation also includes a stable base
salary, as well as an element of supplemental benefits and perquisites. We believe this combination
of compensation elements supports our pay-for-performance philosophy.
Compensation Objectives
We are committed to attracting, motivating, retaining and encouraging long-term employment of
individuals with a demonstrated commitment to integrity and exemplary personal standards of
performance. Our culture is based upon the value of and respect for each individual, encouraging
personal and professional growth, rewarding outstanding individual and corporate performance and
achieving excellence through a high-energy, fun work environment. We are convinced these elements
contribute to our vision of being an employer of choice, which increases our value and potential
for clients, employees, stockholders, and the communities where we live and work.
Our compensation objectives for executives are based on the same principles that we employ in
establishing all of our compensation programs. For executives, our compensation programs are
designed to:
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attract and retain key executive officers responsible for our success; and
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motivate management both to achieve short-term business goals and to enhance long-term
stockholder value through our pay-for-performance philosophy.
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To accomplish these goals, we adhere to the compensation strategies discussed below.
Compensation Strategies & Risk
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We have established and strive to maintain a performance-driven culture that generates
growth by recognizing and rewarding employees who believe in their own ability to reach
and exceed the Companys business objectives.
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As part of our competitive compensation program, our base salary system compensates
employees based upon job responsibilities, level of experience, individual performance,
comparisons to the market, internal comparisons and other relevant factors.
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We provide incentive compensation to recognize and reward individual, departmental and
corporate performance through a variable pay component that is equitable to both employees
and stockholders, encourages leadership of departmental units and directly supports our
business objectives. As employees progress to higher levels in our Company, an increasing
proportion of their compensation is linked to Company-wide and departmental performance.
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We have created a strong alignment of interest among executive officers, employees and
stockholders through the use of long-term equity incentive compensation opportunities.
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We provide a competitive benefits package at the best achievable value to the Company
that recognizes and encourages work-life balance and fosters a career commitment to
Insperity.
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The Company conducted an assessment of our compensation programs and determined that
there are no risks arising from our compensation programs that are reasonably likely to
have a material adverse affect on the Company.
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Elements of Compensation
The annual compensation package for executive officers consists of:
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an annual base salary payable in cash;
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variable cash compensation, which is targeted as a percentage of base pay;
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long-term equity incentive compensation; and
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supplemental and special benefits, including management perquisites.
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Each of these elements is described below.
Role of Executive Officers and Outside Consultants in Compensation Decisions
The recommendations of the Chief Executive Officer play a significant role in the
compensation-setting process. On an annual basis, our Chief Executive Officer reviews the
performance of each of our other executive officers and presents to the Compensation Committee his
recommendations for each executives compensation, including salary adjustments, incentive awards
and equity award amounts. The Compensation Committee, however, has discretion to modify
recommended adjustments or awards to executives. Compensation Committee meetings typically have
included, for all or a portion of each meeting, not only the Committee members but also our Chief
Executive Officer. The Compensation Committee meets in executive session without management
present when discussing and determining the compensation of the Chief Executive Officer. In
addition, the Compensation Committee evaluates the performance of the Chief Executive Officer at
least annually. The Compensation Committee makes all final compensation decisions for each of our
executive officers, including the Chief Executive Officer.
At the direction of the Compensation Committee, we periodically conduct an executive
compensation study that compares each executive officers compensation to market data for similar
positions. The Compensation Committee determines whether the study is to be performed internally
by Insperity or by an outside consulting firm that is directly engaged by the Compensation
Committee. The Compensation Committees charter provides that it has the sole authority to retain
and terminate any compensation consultant to assist in maintaining compensation practices in
alignment with our compensation goals. While we believe that using outside consultants is an
efficient way to keep current regarding competitive compensation practices, we do not believe that
we should accord undue weight to the advice of such consultants. Accordingly, the Compensation
Committee does not target our executives pay to any particular level (such as a target
percentile) of comparative market data contained in executive compensation studies. However,
such data are considered by the Compensation Committee in meeting our compensation program
objectives as described above.
Determination of Compensation Amounts and Formulas
Since 2007, the Compensation Committee has periodically engaged Pearl Meyer & Partners (Pearl
Meyer) to conduct an executive compensation study. Pearl Meyer does not receive remuneration from
the Company, directly or indirectly, other than for advisory services rendered to, or at the
direction of, the Compensation Committee or the Board of Directors.
In January 2011, Pearl Meyer was engaged to conduct an executive compensation study as part of
the process of determining 2011 compensation. Prior to the 2011 engagement, Pearl Meyer last
presented a study to the Compensation Committee in January 2009. Pearl Meyers 2009 study examined
market compensation data for executive positions based on a combination of proxy data of an
identified Compensation Peer Group, benchmark position compensation survey data and the results of
an internal evaluation and ranking process. Survey sources include Pearl Meyers proprietary general
13
executive compensation databases and other independent surveys. In addition to proxy and
survey data, Pearl Meyer employs an executive ranking process to align jobs based upon internal
equity or the value of positions.
In connection with the 2009 study, Pearl Meyer identified a peer group consisting of publicly
traded companies that provide human resources and other business products and services and whose
average revenues equated to $2.1 billion (the Compensation Peer Group). The selection process for
the Compensation Peer Group took into account multiple factors, including: industry (with an
emphasis on outsourced human resources services), comparable revenue range, comparability in
terms of complexity and business risk, and the extent to which each company may compete with
Insperity for executive talent. The Compensation Peer Group is periodically reviewed and may be
modified based on these and other relevant criteria. The Compensation Peer Group utilized in the
2009 study included: Automatic Data Processing, Inc., CBIZ, Inc., Convergys Corporation, First
Advantage Corporation, Gevity HR, Inc., Hewitt Associates, Inc., Korn/Ferry International, MPS
Group, Inc., Paychex, Inc., Resources Connection, Inc., The Ultimate Software Group, Inc. and
Watson Wyatt Worldwide, Inc.
In addition to comparative market data, internal factors are also an important consideration
when determining each executive officers compensation. These factors include:
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the executive officers performance review conducted by either the Compensation
Committee (for the Chief Executive Officer) or the Chief Executive Officer (for all other
executive officers);
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|
the Chief Executive Officers recommendations;
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|
the executive officers tenure with the Company, industry experience and ability to
influence stockholder value; and
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|
the importance of the executive officers position to the Company in relation to the
other executive officer positions within the Company.
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Compensation History and Mix
When reviewing and setting compensation for executive officers, the Compensation Committee
also reviewed tally sheets setting forth all components of compensation for each executive officer
for the previous two years. The tally sheets included dollar values for the two previous years
salary, cash incentive awards, perquisites (cash and in-kind), long-term stock-based awards,
benefits and dividends paid on unvested long-term stock-based awards. Tally sheets were used to
assist the Committee in determining current compensation decisions in view of executives
historical and cumulative pay.
Base Salary
1
Base salary is intended to provide stable annual compensation to attract and retain talented
executive officers. Typically, changes in base salary for each executive officer are determined
based upon external market comparisons in the Compensation Study and the internal factors described
above. Annual performance appraisals are completed through our talent management system, which
evaluates the executive officers annual performance based on pre-established competencies and the
achievement of specific individual performance goals that were established during the first quarter
of the year. Competencies for executive officers included generating revenue, mobilizing talent,
personal and professional development, effectiveness in running the business, servant leadership
and setting the course of the business.
During the first quarter of 2010, the Company implemented a five percent (5%) reduction in
force and decided to defer salary merit increases for all employees in order to continue to
responsibly manage operating expenses during challenging economic conditions.
2
During
the second quarter of 2010, a 2% salary increase was provided to all employees, other than
executive officers, the other members of the management team, and certain other senior level
employees. Accordingly, even though merit raises were also deferred in 2009 and internal factors
and annual performance reviews warranted upward salary adjustments for each executive officer, none
of the executive officers received a base salary increase during 2010.
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1
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|
See Salary included in the Summary Compensation Table on page 23 of this proxy statement.
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2
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Salary merit increases were also deferred for all employees in 2009.
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14
Variable Compensation
1
We believe that variable cash compensation is a key element of the total compensation of each
executive officer. Such compensation embodies our pay-for-performance philosophy whereby a
significant portion of executive compensation is at risk and tied to corporate, departmental and
individual performance. Variable compensation for all executive officers, as well as most other
employees, is paid through the Insperity Annual Incentive Plan (IAIP), a non-equity incentive
program under the stockholder approved Insperity, Inc. 2001 Incentive Plan, as amended (see page
19). The IAIP is intended to link executive officers compensation to the Companys overall
performance, as well as to each of their individual performance and the performance of the
departments under each of their supervision. During the first quarter of 2010, the Compensation
Committee established a target bonus, stated as a percentage of base salary, for each executive
officer. The ultimate IAIP bonus awarded to each executive officer was based upon the
formulas, factors and components discussed below.
Target Bonus Percentage
The Compensation Committee approved the target bonus percentage for each executive officer
based on the Chief Executive Officers recommendations. His recommendations took into account the
executive officers level of responsibility, market conditions and internal equity considerations.
Because executive officers are in a position to directly influence the overall performance of the
Company, and in alignment with our highly-leveraged pay-for-performance philosophy, we believe that
a significant portion of their total cash compensation should be at risk. Therefore, most
executive officers were granted a target bonus percentage equal to their base salary. The Chief
Executive Officer, the individual with the greatest overall responsibility for Company performance,
was granted a larger incentive opportunity in comparison to his base salary in order to weight his
overall pay mix even more heavily towards performance-based compensation. The Chief Financial
Officer, who had less responsibility for overall Company operating performance relative to other
executive officers, was granted a smaller incentive opportunity in comparison to his base salary in
order to weight his overall pay mix less heavily towards performance-based compensation. For 2010,
the Compensation Committee set a target for variable compensation that was computed as a percentage
of each executive officers base salary as follows:
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|
Target Bonus Percentage
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under IAIP
|
Chief Executive Officer and Chairman of the Board
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120
|
%
|
Chief Financial Officer, SVP of Finance and Treasurer
|
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|
80
|
%
|
President
|
|
|
100
|
%
|
Chief Operating Officer and EVP of Client Services
|
|
|
100
|
%
|
EVP of Sales & Marketing
|
|
|
100
|
%
|
Calculation and Weighting of Performance Components
For 2010, the targeted variable compensation under the IAIP for the Chief Executive Officer
was based on corporate and individual performance components and for all other executive officers
was based on corporate, departmental and individual performance components. As described in
further detail below, corporate performance goals for 2010 were based on operating income per
worksite employee per month (OIPE), operating expenses management (OEM), and number of paid
worksite employees (NPWE). For the Chief Executive Officer, variable compensation was heavily
weighted toward corporate performance to align his IAIP bonus with Company-wide performance. For
all executive officers, 20% was weighted toward individual performance to reflect their individual
performance during the year, as determined through the annual performance appraisal process as
discussed above. A departmental component was included in the IAIP bonus of each executive officer
(other than the Chief Executive Officer) to encourage him to provide effective leadership to the
departments under his supervision, as well as to align the interests of the executive with those of
the employees that he supervises. Each performance component is determined separately and is not
dependent on the other components, except that if an executive officers individual performance
rating is below the threshold, then he receives no IAIP bonus, regardless of corporate and
departmental performance. Each executive officers IAIP bonus is the sum of the result of each
performance component.
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1
|
|
See Bonus and Non-Equity Incentive
Plan Compensation included in the Summary Compensation Table on page 23.
In addition, see Estimated Possible Payouts Under Non-Equity Incentive
Plan Awards in the Grants of Plan-Based Awards Table on page 24.
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15
Each performance component was designated a weighting for each executive officer as follows:
Corporate
Performance
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|
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|
OIPE
|
|
OEM
|
|
NPWE
|
|
Departmental
|
|
Individual
|
Chief Executive Officer
and Chairman
of the Board
|
|
|
28
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%
|
|
|
20
|
%
|
|
|
32
|
%
|
|
|
0
|
%
|
|
|
20
|
%
|
Chief Financial
Officer, SVP of Finance
and Treasurer
|
|
|
17.5
|
%
|
|
|
12.5
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
|
|
20
|
%
|
President
|
|
|
21
|
%
|
|
|
15
|
%
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|
|
24
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
Chief Operating Officer
and EVP of Client
Services
|
|
|
21
|
%
|
|
|
15
|
%
|
|
|
24
|
%
|
|
|
20
|
%
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|
|
20
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%
|
EVP of Sales & Marketing
|
|
|
21
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%
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|
|
15
|
%
|
|
|
24
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
OIPE Corporate Component
For the last several years, we have chosen operating income per worksite employee as one of
the metrics for measuring corporate performance because we believe it is a key indicator of our
overall productivity; effective management of pricing, direct costs and operating expenses; and
ability to grow the business while favorably balancing profitability. We also believe that this
metric reflects the combined contribution of all departments and encourages collaboration across
the organization because each department within the Company can have a direct impact on corporate
performance as measured according to this metric.
The formula for measuring the OIPE corporate performance component of the IAIP bonus for each
executive officer was determined as follows:
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|
|
|
|
|
|
|
|
|
|
Annual
Salary
($)
|
|
X
|
|
Target
Bonus
(%)
|
|
X
|
|
Individual
Weighting of
OIPE Corporate
Component (%)
|
|
X
|
|
OIPE Corporate
Performance
Modifier
(50%-200%)
|
|
=
|
|
OIPE
Corporate
Component
Payout($)
|
The OIPE Corporate Performance Modifier was determined as follows:
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|
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|
|
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|
OIPE Corporate
|
Performance Level
|
|
2010 OIPE
|
|
Performance Modifier
|
Threshold
|
|
$
|
22
|
|
|
|
50
|
%
|
Target
|
|
$
|
28
|
|
|
|
100
|
%
|
Stretch Goal
|
|
$
|
34
|
|
|
|
150
|
%
|
Maximum
|
|
$
|
40
|
|
|
|
200
|
%
|
If 2010 OIPE (excluding total incentive compensation expense) was below the threshold, the
OIPE Corporate Performance Modifier was 0%, resulting in an OIPE corporate component payout of $0.
The OIPE Corporate Performance Modifier would be interpolated if actual performance fell in between
the threshold, target, stretch goal or maximum performance level.
The Companys 2010 OIPE, less incentive compensation expense, was $40. Based on this
performance, the Compensation Committee approved an OIPE Corporate Performance Modifier of 200%.
OEM Corporate Component
In 2010, we chose operating expense management as a separate corporate performance goal for
targeted variable compensation under the IAIP. While effective operating expense management is
also a factor in the calculation of operating income per worksite employee (OIPE Corporate
Component), we believed that the challenging economic conditions warranted a continued heightened
focus on financial stewardship throughout the entire Company and that successful achievement of
this goal would require the combined contribution and sacrifice of employees across all
departments. The
16
Company further believed that providing appropriate incentives and rewards in
this regard would foster creative thinking, assist in maintaining employee morale during difficult
economic times, and help create value for our stockholders.
The formula for measuring the OEM corporate performance component of the IAIP bonus for each
executive officer was determined as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Annual
Salary
($)
|
|
X
|
|
Target
Bonus
(%)
|
|
X
|
|
Individual
Weighting of OEM
Corporate Component
(%)
|
|
X
|
|
OEM
Corporate
Performance
Modifier
(50%-200%)
|
|
=
|
|
OEM
Corporate
Component
Payout ($)
|
The OEM Corporate Performance Modifier was determined as follows:
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|
|
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|
OEM
|
|
|
|
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|
Corporate
|
Performance Level
|
|
Operating Expenses
|
|
Performance Modifier
|
Threshold
|
|
$
|
244,500,000
|
|
|
|
50
|
%
|
Target
|
|
$
|
243,250,000
|
|
|
|
100
|
%
|
Stretch Goal
|
|
$
|
242,000,000
|
|
|
|
150
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%
|
Maximum
|
|
$
|
240,750,000
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|
|
|
200
|
%
|
If 2010 Operating Expenses (excluding total incentive compensation expense) exceeded the
threshold, the OEM Corporate Performance Modifier was 0%, resulting in an OEM Corporate Component
payout of $0. The OEM Corporate Performance Modifier would be interpolated if actual performance
fell in between the threshold, target, stretch target or maximum performance levels.
For purposes of determining the OEM corporate performance goal, total incentive compensation
expense was excluded from operating expenses. In addition, the Compensation Committee determined
that certain acquisition related expenses in the amount of $4 million, should also be eliminated
from operating expenses because such amounts were not a component of the original 2010 operating
plan and resulted from specific long-term strategic planning events subsequently approved by the
Board.
The Companys 2010 Operating Expenses, less excluded amounts, were $242 million. Based on
this performance, the Compensation Committee approved an OEM Corporate Performance Modifier of 150%
for each executive officer.
NPWE Corporate Component
We also chose the number of paid worksite employees (in addition to OIPE and OEM) as a measure
of corporate performance in order to focus all of our employees on re-establishing growth in our
business. Given the severe economic conditions since the fall of 2008, we believed it was critical
to focus our energies on returning to growth. The number of paid worksite employees is a key
metric for measuring the success of our sales operations and client retention efforts and is a
significant driver in our Companys overall growth and performance. This performance goal also
encouraged collaboration among all employees Company-wide to increase the number of paid worksite
employees.
The formula for measuring the NPWE corporate performance component of the IAIP bonus for each
executive officer was determined as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Salary
($)
|
|
X
|
|
Target
Bonus
(%)
|
|
X
|
|
Individual
Weighting of NPWE
Corporate
Component (%)
|
|
X
|
|
NPWE Corporate
Performance
Modifier
(50%-200%)
|
|
=
|
|
NPWE
Corporate
Component
Payout ($)
|
The Company paid 103,143 worksite employees in January 2010. The NPWE corporate component of
IAIP bonuses was based on increasing the number of paid worksite employees in January 2011, which
would reflect the net impact of sales and client retention during 2010, including the results of
our annual Fall Sales Campaign and significant year-end client renewal period.
17
The NPWE Corporate Performance Modifier was determined as follows:
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|
|
|
|
|
|
|
|
Worksite Employees
|
|
NPWE Corporate
|
Performance Level
|
|
Paid in January 2011
|
|
Performance Modifier
|
Threshold
|
|
|
109,000
|
|
|
|
50
|
%
|
Target
|
|
|
111,000
|
|
|
|
100
|
%
|
Stretch Goal
|
|
|
113,000
|
|
|
|
150
|
%
|
Maximum
|
|
|
115,000
|
|
|
|
200
|
%
|
If the number of worksite employees paid in January 2011 was below the threshold, the NPWE
Corporate Performance Modifier was 0%, resulting in a NPWE corporate component payout of $0. The
NPWE Corporate Performance Modifier would be interpolated if actual performance fell in between the
threshold, target, stretch goal or maximum performance level.
The number of worksite employees paid in January 2011 was 112,500. Based on this performance,
the Compensation Committee approved a NPWE Corporate Performance Modifier of 137.5%.
Departmental Component
The formula for measuring the departmental performance component of the IAIP bonus for each
executive officer (other than the Chief Executive Officer who has no departmental component
included in his IAIP bonus) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Salary
($)
|
|
X
|
|
Target
Bonus
(%)
|
|
X
|
|
Individual
Weighting of
Departmental
Component (%)
|
|
X
|
|
Departmental
Performance
Modifier
(50%-100%)
|
|
=
|
|
Departmental
Component
Payout ($)
|
The Departmental Performance Modifier for all executive officers ranged from 50% (threshold)
to 100% (target) based on the achievement of departmental goals. As part of our heightened focus
on managing operating expenses, we did not include a stretch target or maximum performance level
for 2010; therefore, the target level also constituted the maximum level achievable for bonus IAIP
purposes. If departmental performance was below the threshold, the Departmental Performance
Modifier was 0%, resulting in a departmental component payout of $0. The goals were developed by
each department and were designed to encourage employees to work together to continue making
business improvements and to increase efficiency, productivity and collaboration across the
organization. Additionally, all departments were required to include a goal related to effective
operating expense management. All departmental goals were approved by the Chief Executive Officer
during the first quarter of 2010. The nature of the departmental goals and objectives for each
executive officer was as follows:
|
|
|
|
|
Nature of Goals and Objectives
|
Chief Financial Officer,
SVP of Finance and Treasurer
|
|
Implementation of operating expense
controls measures and tax software;
quality of internal controls; and
successful credit management efforts.
|
|
|
|
President
|
|
Effective client pricing and renewal
activities; effective operating
expense management; successful
negotiation of a health insurance
contract; successful implementation
of certain pricing initiatives; and
development of new strategic tools to
improve operating efficiencies.
|
|
|
|
Chief Operating Officer and
EVP of Client Services
|
|
Effective client satisfaction and
retention; effective operating
expense management; successful
implementation of organizational
restructuring; and implementation of
information technology initiatives.
|
|
|
|
EVP of Sales & Marketing
|
|
Effective marketing initiatives;
successful new sales results;
effective client satisfaction and
effective operating expense
management.
|
18
In light of the Chief Executive Officers assessment of the executive officers performance
against the achievement of their departmental goals, the average Departmental Performance Modifier
for the executive officers was 89%.
Individual Component
The formula for measuring the individual performance component of the IAIP bonus for each
executive officer was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Salary ($)
|
|
X
|
|
Target
Bonus (%)
|
|
X
|
|
Weighting of
Individual
Component (%)
|
|
X
|
|
Individual
Performance
Modifier
(50%-150%)
|
|
=
|
|
Individual
Component
Payout ($)
|
The Individual Performance Modifier for all executive officers ranged from 50% to 150% based
on the executive officers individual performance rating resulting from the annual performance
appraisal process, as described above under Base Salary. Based on the executives individual
performance ratings, the average Individual Performance Modifier for the executive officers was
142%.
The Compensation Committee reserves the right to pay discretionary bonuses to executive
officers outside of the IAIP. While the Committee may exercise such discretion in appropriate
circumstances, no executive officer has a guaranteed right to a discretionary bonus as a substitute
for a performance-based bonus under the IAIP in the event that performance targets are not met.
During 2010, no discretionary bonuses were awarded to executive officers.
Long-term Incentive Compensation
Long-term equity incentives align the interests of the executive officers with those of the
stockholders. We believe that long-term incentives enhance retention while rewarding executive
officers for their service. Long-term incentive compensation is awarded under the
stockholder-approved Insperity, Inc. 2001 Incentive Plan, as amended (Incentive Plan). The
objectives of the Incentive Plan are:
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|
|
to provide incentives to attract and retain persons with training, experience and
ability to serve as our employees;
|
|
|
|
|
to promote the interests of the Company by encouraging employees to acquire or
increase their equity interest in the Company;
|
|
|
|
|
to provide a means whereby employees may develop a sense of proprietorship and
personal involvement in the development and financial success of the Company; and
|
|
|
|
|
to encourage employees to remain with and devote their best efforts to the business
of the Company, thereby advancing the interests of the Company and its stockholders.
|
Awards granted under the Incentive Plan have historically been made in the form of stock
options or restricted stock. The Incentive Plan does not require a holding period for stock
options, restricted stock or other awards, beyond the vesting date provided for in the award
agreement. Pursuant to the terms of the Incentive Plan, future awards may include phantom shares,
performance units, bonus stock or other incentive awards. We may periodically grant new stock
options, restricted stock, or other long-term incentives to provide continuing incentive for future
performance. The award size and recipients of awards are determined by the degree to which a
particular position in the Company has the ability to influence stockholder value.
In recent years, we have awarded restricted stock rather than stock options. We believe the
current accounting treatment of restricted stock more closely reflects the economic value of the
award to the employees as compared to that of stock options. We anticipate continuing to utilize
restricted stock with a three-year vesting schedule with no additional holding period required
beyond the vesting date. The awards are valued using the closing price of the Companys stock on
the grant date.
In February 2010, the Chief Executive Officer presented to the Compensation Committee his
recommendations for awards of restricted stock for the other executive officers. His
recommendations as to the amount of awards to be granted
19
were based on a number of factors, including the performance of each executive officer, the importance of each executive officers
role in the Companys future business operations, equity pay practices of competitor companies,
annual expense to the Company of equity awards and the Companys own past practices in granting
equity awards. The Compensation Committee then determined and approved the awards for the executive
officers, including the Chief Executive Officer, based upon the above noted factors.
1
Under the terms of the Incentive Plan, all conditions and/or restrictions that must be met
with respect to vesting or exercisability of an award immediately lapse upon a change in control
of the Company as defined under the Incentive Plan.
We have no program, plan or practice to time the grant of stock-based awards in coordination
with the release of material non-public information. All equity grants to executive officers are
approved solely by the Compensation Committee or the independent directors at regularly scheduled
meetings, or in limited cases involving key recruits or promotions, by a special meeting or
unanimous written consent. If an award is made at a meeting, the grant date is the meeting date or
a fixed, future date specified at the time of the grant, such as the first business day of a
subsequent calendar month or the date that the grant recipient commences employment. If an award is approved by
unanimous written consent, the grant date is a fixed, future date on or after the date the consent
is effective under applicable corporate law (or, if later, the date the grant recipient starts
employment), and the exercise price, in the case of a stock option, is the closing price of Company
stock on such date. Under the terms of the Companys stock incentive plan, the exercise price of
stock options cannot be less than the closing price of Company stock on the date of grant.
Supplemental and Special Benefits, Including Management Perquisites
2
Executive compensation also includes supplemental benefits and a limited number of perquisites
that enhance our ability to attract and retain talented executive officers in todays market. We
believe that perquisites assist in the operation of business, allowing executive officers more time
to focus on business objectives. Supplemental benefits and perquisites include the following:
401(k) Benefits
We do not provide pension arrangements, post-retirement health coverage or nonqualified
defined contribution or other deferred compensation plans for our executive officers. Our executive
officers are eligible to participate in Insperitys corporate 401(k) plan. As part of our
continuing efforts to responsibly manage operating expenses, in 2009 we reduced our matching
contribution from 100% to 50% of the first 6% of compensation contributed by the participant to the
plan as elective deferrals (subject to applicable limitations under the Internal Revenue Code).
During 2010, we maintained our matching contributions at this reduced level. All of our executive
officers participated in the Insperity 401(k) plan during 2010 and received matching contributions,
which are included under the caption All Other Compensation in the Summary Compensation Table on
page 23.
Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (ESPP) which is intended to qualify
for favorable tax treatment under Section 423 of the Internal Revenue Code. All employees,
including executive officers (other than 5% owners of the Company), are eligible to participate in
the ESPP. Under the ESPP, employees may purchase shares of Company stock through payroll
deductions at a discount currently set at 5% of market value. The offering periods under the ESPP
are limited to six or three months in duration. Employees are limited to a maximum payroll
deduction of up to a specified percentage of eligible compensation and may not purchase more than
$25,000 in shares each calendar year under the ESPP.
Automobile
We provide automobiles to executive officers for both business and personal use. The
executive officers are taxed for their personal use of the automobile.
|
|
|
1
|
|
See Stock Awards included in the Summary Compensation Table on page 23. In addition, see All Other Stock Awards
included in the Grants of Plan-Based Awards Table on page 24.
|
|
2
|
|
See All Other Compensation included in the Summary Compensation Table on page 23.
|
20
Supplemental Executive Disability Income Plan
We maintain a supplemental executive disability income plan for executive officers and a small
group of upper management employees. The supplemental executive disability income plan targets
replacement of 80% of total cash compensation up to $20,000 per month. The plan recognizes the
significant variable pay at the senior levels in the Company and the benefit limitations of our
basic long-term disability plan, which provides replacement of 60% of base salary only up to
$10,000 per month.
Executive Wellness Plan
We offer an Executive Wellness Plan to the executive officers to assist them in maintaining
their health. The plan pays up to $2,000 each year for wellness services, which allow the
executive officers an opportunity to have a clear understanding of their current physical
condition, risk factors, and ways to improve their health.
Chairmans Trip
An annual Chairmans Trip is held for employees recognized during the year for their
outstanding service, and for sales representatives meeting a certain sales target. We believe
executive officers should be part of the trip to recognize these outstanding employees of the
Company. Therefore, we provide the opportunity for all executive officers and their spouses to
attend the Chairmans Trip. We also pay the associated income taxes related to the trip on behalf
of the employees and the executive officers.
Club Membership
We pay country club memberships for executive officers. We believe club memberships provide
an opportunity to build business and client relationships while also promoting a healthy lifestyle
for each executive officer. Executive officers are taxed on membership dues.
Aircraft
We provide access to the Company-owned aircraft to the Chief Executive Officer, the President,
the Chief Operating Officer, and the Executive Vice President of Sales and Marketing for personal
use. These individuals are required to reimburse the Company for the incremental cost associated
with their personal use of the aircraft. The incremental cost is calculated by multiplying the
number of hours of personal use by the average incremental cost per hour. The Chief Executive
Officer is not required to reimburse the Company for commuting between his residence in north Texas
and the Companys headquarters in Houston, Texas and certain other travel.
1
The Company
pays the taxes on such travel on behalf of the Chief Executive Officer. We think that the Chief
Executive Officers access to Company-owned aircraft under these circumstances greatly enhances his
productivity and work-life balance given the demands of his position and outweighs the expense of
such travel to the Company.
Post-Employment and Change in Control Compensation
Insperitys executive officers are employed at will. In 2010, no executive officers departed
from the Company. We do not have any special employment agreements with any of our executive
officers, and we do not provide them with any kind of contractual severance or change in control
benefits other than vesting of long-term equity awards upon a change in control, which is a
standard feature in all of our long-term equity awards granted under the Incentive Plan.
Other Personal Benefits
Periodically, executive officers attend Company-related activities, such as professional
sporting events or out-of-town business meetings and events, for which the Company incurs travel
and other event-related expenses. Such events may include the spouses of the executives. We pay the
associated income taxes related to these Company-related activities on behalf of executive
officers.
|
|
|
1
|
|
The associated incremental cost of
personal travel is reflected in All Other Compensation included in the
Summary Compensation Table on 23.
|
21
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986 imposes a $1 million limit on the amount
that a public company may deduct for compensation paid to the companys principal executive officer
or any of the companys three other most highly compensated executive officers employed as of the
end of the year (other than the principal executive officer or the principal financial officer).
This limitation does not apply to compensation that is paid only if the executives performance
meets pre-established objective goals based on performance criteria approved by stockholders. We
strive to take action, where possible and considered appropriate, to preserve the deductibility of
compensation paid to the Companys executive officers. We have also awarded compensation that
might not be fully tax deductible when such grants were nonetheless in the best interest of the
Company and its stockholders. Subject to the requirements of Section 162(m), the Company generally
will be entitled to take tax deductions relating to compensation that is performance-based, which
may include cash incentives, stock options and other performance-based awards.
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis contained in this
proxy statement with management. Based on such review, we recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in this proxy statement for filing with
the Securities and Exchange Commission.
The foregoing report is provided by the following directors, who constitute the Compensation
Committee:
|
|
|
|
|
|
COMPENSATION COMMITTEE
Eli Jones, Chairman
Jack M. Fields, Jr.
Gregory E. Petsch
|
|
22
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation paid or earned by the Companys Chief
Executive Officer, Chief Financial Officer and each of the three other most highly compensated
executive officers of the Company (collectively the Named Executive Officers or NEOs) for
services rendered in all capacities to the Company during 2010, 2009 and 2008. The Company has not
entered into any employment agreements with any of the NEOs.
The compensation plans under which the grants in the following tables were made are generally
described in the Compensation Discussion and Analysis beginning on page 12 of this proxy statement,
and include the IAIP, a non-equity incentive plan, and the Incentive Plan, which provides for,
among other things, restricted stock grants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Compen-
|
|
|
Compen-
|
|
|
|
|
Name and
|
|
|
|
|
|
Salary
|
|
|
Stock Awards
|
|
|
sation
|
|
|
sation
|
|
|
Total
|
|
Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
1
|
|
|
($)
2
|
|
|
($)
3
|
|
|
($)
|
|
Paul J. Sarvadi,
|
|
|
2010
|
|
|
|
683,800
|
|
|
|
782,000
|
|
|
|
1,312,896
|
|
|
|
435,017
|
|
|
|
3,213,713
|
|
CEO and
Chairman of the
Board
|
|
|
2009
|
|
|
|
683,800
|
|
|
|
580,160
|
|
|
|
557,981
|
|
|
|
421,637
|
|
|
|
2,243,578
|
|
|
|
|
2008
|
|
|
|
677,300
|
|
|
|
980,000
|
|
|
|
887,609
|
|
|
|
269,474
|
|
|
|
2,814,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas S. Sharp
|
|
|
2010
|
|
|
|
300,000
|
|
|
|
476,000
|
|
|
|
331,800
|
|
|
|
51,377
|
|
|
|
1,159,177
|
|
Chief Financial Officer,
|
|
|
2009
|
|
|
|
300,000
|
|
|
|
414,400
|
|
|
|
189,600
|
|
|
|
76,111
|
|
|
|
980,111
|
|
SVP of
Finance and
Treasurer
|
|
|
2008
|
|
|
|
297,500
|
|
|
|
539,000
|
|
|
|
283,040
|
|
|
|
81,763
|
|
|
|
1,201,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard G. Rawson
|
|
|
2010
|
|
|
|
398,000
|
|
|
|
595,000
|
|
|
|
583,070
|
|
|
|
160,192
|
|
|
|
1,736,262
|
|
President
|
|
|
2009
|
|
|
|
398,000
|
|
|
|
518,000
|
|
|
|
290,540
|
|
|
|
174,563
|
|
|
|
1,381,103
|
|
|
|
|
2008
|
|
|
|
394,538
|
|
|
|
857,500
|
|
|
|
469,336
|
|
|
|
98,917
|
|
|
|
1,820,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. Steve Arizpe
|
|
|
2010
|
|
|
|
398,000
|
|
|
|
595,000
|
|
|
|
579,886
|
|
|
|
111,039
|
|
|
|
1,683,925
|
|
Chief Operating Officer,
|
|
|
2009
|
|
|
|
398,000
|
|
|
|
518,000
|
|
|
|
296,908
|
|
|
|
166,566
|
|
|
|
1,379,474
|
|
EVP of Client Services
|
|
|
2008
|
|
|
|
394,538
|
|
|
|
686,000
|
|
|
|
471,118
|
|
|
|
91,302
|
|
|
|
1,642,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay E. Mincks
|
|
|
2010
|
|
|
|
363,000
|
|
|
|
595,000
|
|
|
|
494,769
|
|
|
|
99,556
|
|
|
|
1,552,325
|
|
EVP of Sales & Marketing
|
|
|
2009
|
|
|
|
363,000
|
|
|
|
518,000
|
|
|
|
225,786
|
|
|
|
116,727
|
|
|
|
1,223,513
|
|
|
|
|
2008
|
|
|
|
359,538
|
|
|
|
686,000
|
|
|
|
324,028
|
|
|
|
106,410
|
|
|
|
1,475,976
|
|
|
|
|
1
|
|
The amounts in this column represent the
aggregate grant date fair value of restricted stock granted in the year
indicated. For additional information, refer to Note 8, Incentive Plans, in
the Notes to Consolidated Financial Statements included in Insperitys Annual
Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on
February 14, 2011. See the Grants of Plan-Based Awards Table on page 24 for
information on awards made in 2010. These amounts do not correspond to the
actual value that will be realized by the NEO.
|
|
2
|
|
Represents variable compensation earned and
awarded by the Compensation Committee under the IAIP.
|
|
3
|
|
All other compensation in 2010 includes the
following: Company-provided automobiles; country club memberships; 401(k)
matching contributions; dividends on restricted stock grants; premiums for
executive disability insurance; costs associated with the Chairmans Trip
and other travel and associated federal income taxes. The federal income
taxes associated with the Chairmans Trip and other travel paid by the
Company on behalf of the executives were as follows: Mr. Sarvadi -
$29,298; Mr. Arizpe $7,162; Mr. Mincks $5,868; and Mr. Rawson -
$8,847. The 401(k) matching contributions made by the Company during 2010
for the NEOs totaled $7,350 each. Dividends paid to Messrs. Sarvadi,
Sharp, Rawson, Arizpe and Mincks on restricted stock holdings totaled
$40,561, $25,307, $32,933; $31,720 and $31,720, respectively. The
incremental cost of Mr. Rawsons use of a Company-leased vehicle was
$27,739. The Company owns an aircraft that is used by its executives for
business and, on occasion, personal travel. In addition, Mr. Sarvadi uses
the Companys aircraft to commute to his residence in northern Texas and
certain other business related entertainment travel for which he is not
required to reimburse the Company. The total incremental cost of such
travel, including lost income tax deductions, was $297,913. In the
instances where the aircraft is used for personal travel, the executive is
required to reimburse the Company for the associated incremental costs.
The incremental cost for personal use of Company aircraft is calculated at
an hourly rate that takes into account variable costs incurred as a result
of the personal flight activity, including fuel, communications and travel
expenses for the flight crew. It excludes non-variable costs, such as
regularly scheduled inspections and maintenance that would have been
incurred regardless of whether there was any personal use of the aircraft.
During 2010, Messrs. Sarvadi and Rawson reimbursed the Company $153,294
and $11,515, respectively, for personal travel costs.
|
23
GRANTS OF PLAN-BASED AWARDS
The following table provides information about equity and non-equity awards granted to the
NEOs in 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Fair
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
|
Stock Awards:
|
|
|
Value of
|
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Number of
|
|
|
Stock and
|
|
|
|
|
|
|
|
Plan Awards
1
|
|
|
Shares of Stock
|
|
|
Option
|
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Awards
|
|
Name
|
|
Grant Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
2
|
|
|
($)
3
|
|
Paul J. Sarvadi
|
|
|
N/A
|
|
|
|
410,280
|
|
|
|
820,560
|
|
|
|
1,559,064
|
|
|
|
|
|
|
|
|
|
|
|
|
2/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,000
|
|
|
|
782,000
|
|
Douglas S. Sharp
|
|
|
N/A
|
|
|
|
120,000
|
|
|
|
240,000
|
|
|
|
384,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
|
|
|
476,000
|
|
Richard G. Rawson
|
|
|
N/A
|
|
|
|
199,000
|
|
|
|
398,000
|
|
|
|
676,600
|
|
|
|
|
|
|
|
|
|
|
|
|
2/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
595,000
|
|
A. Steve Arizpe
|
|
|
N/A
|
|
|
|
199,000
|
|
|
|
398,000
|
|
|
|
676,600
|
|
|
|
|
|
|
|
|
|
|
|
|
2/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
595,000
|
|
Jay E. Mincks
|
|
|
N/A
|
|
|
|
181,500
|
|
|
|
363,000
|
|
|
|
617,100
|
|
|
|
|
|
|
|
|
|
|
|
|
2/16/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
595,000
|
|
|
|
|
1
|
|
These amounts represent the
threshold, target and maximum amounts payable to each executive under the IAIP
for 2010.
|
|
2
|
|
These amounts represent the number of
shares of restricted stock granted to each executive under the Incentive Plan
during 2010.
|
|
3
|
|
These amounts represent the full
grant date fair value of restricted stock granted to each executive during
2010. For restricted stock, fair value is calculated using the closing price
of Insperitys Common Stock on the date of grant. For the relevant assumptions
used to determine the valuation of our stock awards, refer to Note 8,
Incentive Plans, in the Notes to Consolidated Financial Statements included
in our 2010 Annual Report on Form 10-K for the year ended December 31, 2010,
filed with the Securities and Exchange Commission on February 14, 2011. The
terms of the stock awards provide for three-year vesting and the payment of
dividends on all unvested shares. Executives are required to pay the par value
($0.01) of each share at or near the date of grant.
|
24
OUTSTANDING EQUITY AWARDS FOR FISCAL YEAR 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of
|
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
|
|
Number of Shares or
|
|
|
Shares or Units of
|
|
|
|
Options
|
|
|
Option Exercise
|
|
|
|
|
|
|
Units of Stock That
|
|
|
Stock That Have
|
|
|
|
(#)
|
|
|
Price
|
|
|
|
|
|
|
Have Not Vested
|
|
|
Not Vested
|
|
Name
|
|
Exercisable
|
|
|
($)
|
|
|
Option Expiration Date
|
|
|
(#)
|
|
|
($)
1
|
|
Paul J. Sarvadi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,001
|
2
|
|
|
2,285,429
|
|
|
|
|
2
|
|
|
|
14.69
|
|
|
|
5/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
34,091
|
|
|
|
17.17
|
|
|
|
4/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
23.48
|
|
|
|
10/02/2011
|
|
|
|
|
|
|
|
|
|
Douglas S. Sharp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,668
|
3
|
|
|
1,425,972
|
|
|
|
|
1
|
|
|
|
14.69
|
|
|
|
5/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
23.48
|
|
|
|
10/02/2011
|
|
|
|
|
|
|
|
|
|
Richard G. Rawson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,334
|
4
|
|
|
1,855,686
|
|
|
|
|
2
|
|
|
|
14.69
|
|
|
|
5/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
17,800
|
|
|
|
17.17
|
|
|
|
4/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
18.00
|
|
|
|
3/15/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
23.48
|
|
|
|
10/02/2011
|
|
|
|
|
|
|
|
|
|
A. Steve Arizpe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,001
|
5
|
|
|
1,787,329
|
|
|
|
|
10,000
|
|
|
|
9.03
|
|
|
|
10/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
46,700
|
|
|
|
11.79
|
|
|
|
10/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
19,998
|
|
|
|
14.69
|
|
|
|
5/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
17.17
|
|
|
|
4/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
23.48
|
|
|
|
10/02/2011
|
|
|
|
|
|
|
|
|
|
Jay E. Mincks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,001
|
5
|
|
|
1,787,329
|
|
|
|
|
2
|
|
|
|
14.69
|
|
|
|
5/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
15,100
|
|
|
|
17.17
|
|
|
|
4/01/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
23.48
|
|
|
|
10/02/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Based on the closing price of $29.30 of
Insperitys Common Stock on December 31, 2010.
|
|
2
|
|
Stock awards vest as follows 13,334 on
February 8, 2011; 9,333 on February 12, 2011; 9,334 on February 12, 2012;
15,333 on February 16, 2011; 15,333 on February 16, 2012; and 15,334 on
February 16, 2013.
|
|
3
|
|
Stock awards vest as follows 7,334 on
February 8, 2011; 6,667 on February 12, 2011; 6,667 on February 12, 2012; 9,333
on February 16, 2011; 9,333 on February 16, 2012; and 9,334 on February 16,
2013.
|
|
4
|
|
Stock awards vest as follows 11,667 on
February 8, 2011; 8,333 on February 12, 2011; 8,334 on February 12, 2012;
11,666 on February 16, 2011; 11,667 on February 16, 2012; and 11,667 on
February 16, 2013.
|
|
5
|
|
Stock awards vest as follows 9,334 on
February 8, 2011; 8,333 on February 12, 2011; 8,334 on February 12,
2012; 11,666 on February 16, 2011; 11,667 on February 16, 2012;
and 11,667 on February 16, 2013.
|
25
OPTION EXERCISES AND STOCK VESTED TABLE FOR FISCAL YEAR 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Number of
|
|
|
Value Realized
|
|
|
Shares
|
|
|
Value Realized
|
|
|
|
Shares Acquired
|
|
|
on
|
|
|
Acquired on
|
|
|
on
|
|
|
|
on Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)
|
|
|
($)
1
|
|
|
(#)
|
|
|
($)
2
|
|
Paul J. Sarvadi
|
|
|
80,000
|
|
|
|
434,523
|
|
|
|
30,333
|
|
|
|
600,683
|
|
Douglas S. Sharp
|
|
|
8,000
|
|
|
|
44,210
|
|
|
|
18,999
|
|
|
|
370,811
|
|
Richard G. Rawson
|
|
|
30,000
|
|
|
|
56,736
|
|
|
|
27,667
|
|
|
|
545,735
|
|
A. Steve Arizpe
|
|
|
60,000
|
|
|
|
382,400
|
|
|
|
24,666
|
|
|
|
480,810
|
|
Jay E. Mincks
|
|
|
44,444
|
|
|
|
198,887
|
|
|
|
24,666
|
|
|
|
480,810
|
|
|
|
|
1
|
|
Represents the difference between the market price of the Companys Common Stock
at the time of exercise and the exercise price of the options, multiplied by the number of
options exercised.
|
|
2
|
|
Represents the value of the shares on the vesting date based on the prior days
closing price of the Companys Common Stock.
|
SECURITIES RESERVED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information about Insperitys Common Stock that may be issued
under all of the Companys existing equity compensation plans as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Number of
|
|
|
to be
|
|
Weighted Average
|
|
Securities
|
|
|
Issued upon Exercise of
|
|
Exercise Price of
|
|
Remaining
|
|
|
Outstanding Options,
|
|
Outstanding Options,
|
|
Available for Future
|
|
|
Warrants and Rights
|
|
Warrants and Rights
|
|
Issuance
|
Plan Category
|
|
(# in thousands)
|
|
($)
|
|
(# in thousands)
|
Equity compensation
plans approved by
security
holders
1
|
|
|
420
|
|
|
|
18.08
|
|
|
|
2,470
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plan not approved
by security holders
3
|
|
|
183
|
|
|
|
18.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
603
|
|
|
|
18.20
|
|
|
|
2,470
|
|
|
|
|
1
|
|
The 1997 Incentive Plan (which
expired on April 24, 2005), the Incentive Plan, and the Insperity, Inc. 2008
Employee Stock Purchase Plan (the ESPP) have been approved by the Companys
stockholders. As more fully described on page 21 of this proxy statement, the
ESPP is intended to qualify for favorable tax treatment under Section 423 of
the Internal Revenue Code.
|
|
2
|
|
This includes 1,427,899 shares
available under the ESPP and 1,041,716 shares available under the Incentive
Plan. As of March 18, 2011, 1,427,899 shares and 765,202 shares were available
for issuance under the ESPP and the Incentive Plan, respectively. The
securities remaining available for issuance under the Incentive Plan may be
issued in the form of stock options, performance awards, stock awards
(including restricted stock), phantom stock awards, stock appreciation rights,
and other stock-based awards.
|
|
3
|
|
The Insperity Nonqualified Stock
Option Plan was not approved by stockholders. For a description of the
material features of the Nonqualified Stock Option Plan, see Note 8 in the
Notes to Consolidated Financial Statements included in the Companys Form 10-K
for the year ended December 31, 2010. Although there are approximately 640,000
unissued shares in the Nonqualified Stock Option Plan, no new shares will be
issued under the Nonqualified Stock Option Plan pursuant to stockholder
approval of an amendment to the Incentive Plan during 2006.
|
26
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
We have no employment agreements or severance policies in place for our executive officers.
In 2005, the Company accelerated the vesting of all stock options and none have been granted to
executive officers since that time; therefore, there are no unvested outstanding stock options.
Our incentive plans provide that all restricted stock becomes immediately fully vested upon a
change in control or upon termination due to disability or death, provided the holder has been in
continuous employment since the award date. Unvested shares of restricted stock are forfeited
upon termination for any reason other than disability or death. The number of shares and market
value of the restricted stock that would automatically vest for each NEO upon a change in control
or termination due to death or disability, based on the closing price of our Common Stock on
December 31, 2010, is set forth in the Outstanding Equity Awards for Fiscal Year 2010 table on
page 25 of this proxy statement, under the captions Number of Shares or Units of Stock That Have
Not Vested and Market Value of Shares or Units of Stock That Have Not Vested.
DIRECTOR COMPENSATION
The Company uses a combination of cash and stock-based compensation to attract and retain
qualified candidates to serve on the Board of Directors. Non-employee directors of the Company
were compensated for 2010 as shown in the table below and are also reimbursed for reasonable
expenses incurred in serving as a director. All compensation, except for reimbursement of actual
expenses, can be taken in cash or Common Stock, at the directors option. Directors who are
employees of the Company receive no additional compensation for serving on the Board of Directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating
|
|
|
|
|
|
|
|
|
|
|
Finance, Risk
|
|
and Corporate
|
|
|
|
|
|
|
Compensation
|
|
Management and
|
|
Governance
|
|
|
Board
|
|
Committee
|
|
Audit Committee
|
|
Committee
|
Annual retainers
|
|
$
|
40,000
|
|
|
$
|
3,000
|
|
|
$
|
5,000
|
|
|
None
|
|
Annual Committee
Chair Fees
|
|
|
N/A
|
|
|
$
|
8,000
|
|
|
$
|
10,000
|
|
|
$
|
3,000
|
|
|
Meeting Fees
|
|
$2,000 in person
|
|
$1,500 in person
1
|
|
$1,500 in person
1
|
|
|
|
|
$1,000 telephonically
|
|
$750 telephonically
|
|
$750 telephonically
|
|
|
None
|
|
|
|
|
1
|
|
These fees are also paid to the Chairman for meetings attended with the Companys
management or auditors between regular meetings.
|
Pursuant to the Incentive Plan, each person who is initially appointed or elected as a
director of the Company receives a grant of shares of restricted Common Stock on the date of
election or appointment with an aggregate fair market value, determined based on the closing price
of the Common Stock on the date prior to the date of grant, of $75,000, rounded up to the next
higher whole share amount in the case of a fractional share amount, and such restricted Common
Stock vests as to one-third of the shares on each anniversary of its grant date. If a director
terminates his or her service as a member of the Board, his or her unvested portion of such
restricted stock award, if any, shall terminate immediately on such termination date, unless such
termination of service is due to death or disability, in which event the unvested portion of such
restricted stock award shall become 100% vested on such termination date.
In addition, on the date of each annual meeting of stockholders, each non-employee director
receives either a grant of unrestricted shares of Common Stock with an aggregate fair market value
determined based on the closing price of the Common Stock on the date prior to the date of grant,
of $75,000, or an immediately vested and exercisable option to purchase a number of shares of
Common Stock that had an aggregate value, determined the date prior to the date of grant, of
$75,000, calculated using the valuation methodology most recently utilized by the Company for
purposes of financial statement reporting. In 2010, five non-employee directors elected to
receive unrestricted shares of Common Stock and one non-employee director elected to receive an
immediately vested and exercisable option to purchase shares of Common Stock. The awards were
rounded up to the next higher whole share amount in the case of a fractional share amount.
27
DIRECTOR COMPENSATION TABLE
The table below summarizes the compensation paid by the Company to non-employee directors
during the fiscal year ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
1
|
|
|
($)
2
|
|
|
($)
3
|
|
|
($)
|
|
Michael W. Brown
|
|
|
56,000
|
|
|
|
76,421
|
|
|
|
|
|
|
|
1,285
|
|
|
|
133,706
|
|
Jack M. Fields, Jr.
|
|
|
52,643
|
|
|
|
76,421
|
|
|
|
|
|
|
|
1,285
|
|
|
|
130,349
|
|
Eli Jones
|
|
|
61,750
|
|
|
|
|
|
|
|
75,005
|
|
|
|
|
|
|
|
136,755
|
|
Paul S. Lattanzio
|
|
|
56,750
|
|
|
|
76,421
|
|
|
|
|
|
|
|
1,285
|
|
|
|
134,456
|
|
Gregory E. Petsch
|
|
|
56,750
|
|
|
|
76,421
|
|
|
|
|
|
|
|
1,285
|
|
|
|
134,456
|
|
Austin P. Young
|
|
|
72,750
|
|
|
|
76,421
|
|
|
|
|
|
|
|
1,285
|
|
|
|
150,456
|
|
|
|
|
1
|
|
Represents the dollar amount recognized for financial statement reporting purposes
with respect to 2010 for the fair value of stock awards made to directors during 2010, based
on the closing price of Insperitys Common Stock on the date of grant. In the case of annual
director equity awards that do not contain vesting or other restrictions, Insperity recognizes
the entire fair value for financial statement reporting purposes in the year that the grant is
made.
|
|
2
|
|
Represents the fair value of option awards made to directors during 2010, in
accordance with SFAS 123(R).
|
|
3
|
|
All Other Compensation represents dividends paid on stock awards granted in 2010.
|
REPORT OF THE FINANCE, RISK MANAGEMENT AND AUDIT COMMITTEE
The Finance, Risk Management and Audit Committee has been appointed by the Board of Directors
to assist the Board in fulfilling its responsibility to oversee the financial affairs, risk
management, accounting and financial reporting processes, and audits of the financial statements of
the Company. We operate under a written charter adopted by the Board of Directors and reviewed
annually by us. We have furnished the following report for 2010.
We have reviewed and discussed the Companys consolidated audited financial statements as of
and for the year ended December 31, 2010, with management and the independent auditor. We
discussed with the independent auditor the matters required to be discussed by Statement on
Auditing Standards No. 114,
(Communication with Audit Committees)
, as currently in effect.
We received from the independent auditor the written disclosures and letter required by the
Public Company Accounting Oversight Board Ethics and Independence Rule 3526, as currently in
effect, and we discussed with the independent auditor its independence. We also considered the
compatibility of the provision of non-audit services with the independent auditors independence.
Based on our reviews and discussions referred to above, we recommended that the Board of
Directors include the audited consolidated financial statements in the Companys annual report on
Form 10-K for the year ended December 31, 2010, for filing with the Securities and Exchange
Commission.
|
|
|
|
|
|
THE FINANCE, RISK MANAGEMENT AND AUDIT COMMITTEE
Austin P. Young, Chairman
Michael W. Brown
Paul S. Lattanzio
|
28
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act),
requires the Companys directors and officers, and persons who own more than 10% of the Common
Stock, to file initial reports of ownership and reports of changes in ownership (Forms 3, 4, and 5)
of Common Stock with the Securities and Exchange Commission and the New York Stock Exchange.
Officers, directors and greater than 10% stockholders are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all such forms that they file.
Based solely on review of the copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes that all Section 16(a)
reports with respect to the year ended December 31, 2010, applicable to its officers, directors and
greater than 10% beneficial owners, were timely filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Finance, Risk Management and Audit Committee has adopted a statement of policy and
procedures with respect to related party transactions covering the review, approval or ratification
of transactions involving the Company and Related Parties (generally, directors and executive
officers and their immediate family members and 5% stockholders). The policy currently covers
transactions in which the Company and any Related Party are participants and in which the Related
Party has a material interest, other than transactions involving an amount equal to or less than
$50,000 (individually or when aggregated with all similar transactions) and not involving
non-employee directors. The policy generally requires that such transactions be approved by the
Finance, Risk Management and Audit Committee in advance of the consummation or material amendment
of the transaction. Under the policy, prior to entering into a related party transaction, full
disclosure of all of the facts and circumstances relating to the transaction must be made to the
Finance, Risk Management and Audit Committee, which will approve such transaction only if it is in,
or is not inconsistent with, the best interests of the Company and its stockholders. In the event
a transaction is not identified as a related party transaction in advance, it will be submitted
promptly to the Finance, Risk Management and Audit Committee or the Chairman thereof, and such
committee or Chairman, as the case may be, will evaluate the transaction and evaluate all options,
including but not limited to ratification, amendment or termination of the transaction.
A significant component of our marketing strategy is the title sponsorship of the Insperity
Championship, a Champions PGA tour event held annually in Houston, Texas. Consistent with other
PGA golf tournaments, the Insperity Championship benefits and is managed by a non-profit
organization, Augusta Pines Charity (Augusta). In connection with the Companys sponsorship, Mr.
Jay E. Mincks, Executive Vice President of Sales and Marketing, was elected Chairman of Augusta.
During 2010, the Company paid Augusta $2.6 million in sponsorship and tournament related expenses,
as well as an additional $684,750 in other event sponsorships and charitable contributions.
We provide PEO-related services to certain entities that are owned by, or have board members
that are, Related Parties. These Related Parties include Mr. Paul J. Sarvadi, Mr. Richard G.
Rawson, Mr. Jay E. Mincks, and Mr. Jack M. Fields, Jr. or members of their families. The PEO
service fees paid by such entities are at amounts that are within the pricing range of other
unrelated clients of ours. During 2010, such client companies paid the Company the following
service fees, which are presented net of the associated payroll costs:
|
|
|
Related Party
|
|
Net Service Fees / (Payroll Costs)
|
Mr. Sarvadi (3 client companies)
|
|
$187,184 / ($359,312)
|
Mr. Rawson (3 client companies)
|
|
$378,575 / ($1,244,479)
|
Mr. Mincks (1 client company)
|
|
$81,602 / ($97,315)
|
Mr. Fields (1 client company)
|
|
$142,635 / $531,759)
|
We made charitable contributions to non-profit organizations for which certain Related Parties
serve as members of their Board of Directors. These Related Parties include: Messrs. Sarvadi,
Rawson and Mincks. In addition, during 2010, certain corporate employees were family members of
certain Related Parties, including Messrs. Sarvadi, Rawson and Arizpe.
29
PROPOSAL NUMBER 2:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
The Finance, Risk Management and Audit Committee has appointed the firm of Ernst & Young LLP
as the Companys independent registered public accounting firm for the year ending December 31,
2011, subject to ratification by the Companys stockholders. Ernst & Young has served as the
Companys independent registered public accounting firm since 1991. Representatives of Ernst &
Young are expected to be present at the Annual Meeting of Stockholders and will have an opportunity
to make a statement, if they desire to do so, and to respond to appropriate questions from those
attending the meeting.
Fees of Ernst & Young LLP
Ernst & Youngs fees for professional services totaled $918,771 in 2010 and $832,065 in 2009.
During 2010 and 2009, Ernst & Youngs fees for professional services included the following:
|
|
|
Audit Fees fees for audit services, which relate to the consolidated audit,
internal control audit in compliance with Sarbanes-Oxley Section 404, quarterly
reviews, subsidiary audits and related matters were $727,138 in 2010 and $637,988 in
2009.
|
|
|
|
|
Audit-Related Fees fees for audit-related services, which consisted primarily
of the SAS 70 Report, the retirement plan audits, and quarterly agreed-upon procedures
were $189,233 in 2010 and $191,677 in 2009.
|
|
|
|
|
Tax Fees there were no fees for tax services in 2010 or in 2009.
|
|
|
|
|
All Other Fees there were fees of $2,400 in both 2010 and 2009, which were
annual subscription fees for Insperitys use of Ernst and Youngs online research
databases and other research tools.
|
The Finance, Risk Management and Audit Committee reviewed the non-audit services provided to
the Company and considered whether Ernst & Youngs provision of such services was compatible with
maintaining its independence.
Finance, Risk Management and Audit Committee Pre-Approval Policy for Audit and Non-Audit Services
The Finance, Risk Management and Audit Committee has established a policy that requires
pre-approval of the audit and non-audit services performed by the independent auditor. Unless a
service proposed to be provided by the independent auditors has been pre-approved by the Finance,
Risk Management and Audit Committee under its pre-approval policies and procedures, it will require
specific pre-approval of the engagement terms by the Finance, Risk Management and Audit Committee.
Under the policy, pre-approved service categories are generally provided for up to 12 months and
must be detailed as to the particular services provided and sufficiently specific and objective so
that no judgments by management are required to determine whether a specific service falls within
the scope of what has been pre-approved. In connection with any pre-approval of services, the
independent auditor is required to provide detailed back-up documentation concerning the specific
services to be provided.
The Finance, Risk Management and Audit Committee may delegate pre-approval authority to one or
more of its members, including a subcommittee of the Finance, Risk Management and Audit Committee.
The member or members to whom such authority is delegated shall report any pre-approval actions
taken by them to the Finance, Risk Management and Audit Committee at its next scheduled meeting.
The Finance, Risk Management and Audit Committee does not delegate to management any of its
responsibilities to pre-approve services performed by the independent auditor.
None of the services related to the Audit-Related Fees or Other Fees described above were
approved by the Finance, Risk Management and Audit Committee pursuant to the waiver of pre-approval
provisions set forth in applicable rules of the Securities and Exchange Commission.
30
Required Affirmative Vote
If the votes cast in person or by proxy at the 2011 Annual Meeting of Stockholders in favor of
this proposal exceed the votes cast opposing the proposal, the appointment of Ernst & Young LLP as
the Companys independent
registered public accounting firm for the year ending December 31, 2011, will be ratified. If the
appointment of Ernst & Young is not ratified, the Finance, Risk Management and Audit Committee will
reconsider the appointment.
|
|
The Board of Directors and the Finance, Risk Management and Audit Committee recommend
that stockholders vote For the ratification of appointment of Ernst & Young LLP as
the Companys independent registered public accounting firm, and proxies executed and
returned will be so voted unless contrary instructions are indicated thereon.
|
31
PROPOSAL NUMBER 3:
Non-Binding Vote on Executive Compensation
In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank Act) and related rules under Section 14A of the Exchange Act, we are providing
stockholders with an opportunity to make a non-binding recommendation on the compensation of our
Named Executive Officers (NEOs). This Proposal, commonly referred to as say-on-pay, provides
stockholders an opportunity to express their views and sentiment on our executive compensation
philosophy, policies and practices. The advisory vote is a non-binding vote on the compensation of
the NEOs, as described in the Compensation Discussion and Analysis section, the tabular
disclosure regarding such compensation, and the accompanying narrative disclosure, set forth in
this proxy statement. Although the results of the voting on this Proposal are not binding on the
Board of Directors, the Board values stockholders opinions and will take the results into account
when making a determination concerning the compensation of our NEOs.
As set forth in the Compensation Discussion and Analysis section of this proxy, our
Compensation Committee structured the compensation of the NEOs to emphasize the Companys
pay-for-performance philosophy and to reflect the change in economic conditions both within and
outside of the Company. Our compensation program is designed to attract and retain key executives
responsible for our Companys success and to provide motivation for both achieving short-term
business goals and enhancing long-term stockholder value. Please read the Compensation Discussion
and Analysis section of the proxy beginning on page 12 for additional details.
The Compensation Committee regularly reviews best practices in corporate governance and
executive compensation. In observance of those best practices, the Company:
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Maintains a pay-for-performance philosophy;
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Does not maintain employment agreements with the NEOs;
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Does not provide any supplemental executive pension benefits;
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Does not provide excess parachute payments in the event of a change in control;
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Does not provide any tax gross-ups in the event of a change in control; and
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Does not provide post-retiree medical coverage.
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Stockholders are being asked to vote on the following resolution:
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RESOLVED,
that the stockholders of Insperity, Inc. approve, on an advisory
basis, the compensation of the Companys Named Executive Officers, as described
in the Compensation Discussion and Analysis section, the tabular disclosure
regarding such compensation, and the accompanying narrative disclosure, set
forth in the Companys proxy statement for its 2011 Annual Meeting of
Stockholders.
The Board recommends that stockholders indicate their support by selecting For when voting
on our executive compensation program. While the results of the advisory vote are non-binding, the
Board will consider the outcome of the vote when evaluating whether any actions are necessary when
considering future executive compensation decisions.
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The Board of Directors unanimously recommends that you select For the adoption of
the resolution approving the compensation of the Companys NEOs. Properly dated and
signed proxies will be so voted unless stockholders specify otherwise.
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32
PROPOSAL NUMBER 4:
Non-Binding Vote on the Frequency of Stockholder Advisory Votes on Executive Compensation
In accordance with Section 951 of the Dodd-Frank Act and related rules under Section 14A of
the Exchange Act, we are providing stockholders with an opportunity to make a non-binding
recommendation on the preference to take an advisory vote on Named Executive Officer compensation
once every one, two or three years. You will also have the choice of abstaining from voting on
this Proposal. Although the results of the voting on this Proposal are not binding on the Board of
Directors, the Board values stockholders opinions and will take the results into account when
making a determination concerning the frequency of advisory votes on executive officer
compensation.
After careful consideration, the Board believes that an advisory vote on executive
compensation that occurs every three years is the most appropriate for the Company. Consistent
with the Companys pay-for-performance compensation philosophy, long-term equity awards for
executive officers are designed to attract and retain highly qualified executives and typically
vest over a three year period. Equity awards comprise a significant component of an executive
officers compensation, and triennial voting will allow stockholders to evaluate the effectiveness
of the program design over a similar time-frame.
Holding an advisory vote on executive compensation every three years will also give the Board
sufficient time to conduct a meaningful review of pay practices, engage with stockholders and
respond in a more effective manner. The Board is concerned that anything less than triennial
voting reinforces a short-term mindset and will detract from the long-term goals and interests of
the Company. In order to maintain consistency and to retain and motivate our employees, we do not
make frequent changes to our compensation programs. Moreover, stockholders have the opportunity to
provide input on executive compensation matters even in years where an advisory vote on executive
compensation does not occur, both by communicating directly with the Board as described in the
Stockholder Communications section on page 10 or individual directors by mail or in person at our
annual stockholders meeting, and by voting on new or materially revised equity compensation plans,
as required by the rules of The New York Stock Exchange. This provides an opportunity for
stockholders to provide additional feedback, even in years when there is no advisory vote on
executive officer compensation.
For the reasons discussed above, the Board recommends that stockholders select Three Years
when voting on the frequency of the advisory vote on executive compensation. While the results of
the advisory vote are non-binding, the Board will consider the outcome of the vote when deciding
how frequently to conduct the advisory vote on executive compensation.
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The Board of Directors unanimously recommends that you select Three Years on the Proposal
addressing the frequency of the advisory vote on executive compensation. Properly dated and
signed proxies will be so voted unless stockholders specify otherwise.
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33
ADDITIONAL INFORMATION
Delivery of Proxy Statement
The Securities and Exchange Commission has adopted rules that permit companies and
intermediaries (
e.g.,
brokers) to satisfy the delivery requirements for proxy statements with
respect to two or more security holders sharing the same address by delivering a single proxy
statement addressed to those security holders. This process, which is commonly referred to as
householding, potentially means extra convenience for securityholders and cost savings for
companies. This year, a number of brokers with accountholders who are Insperity stockholders will
be householding the Companys proxy materials. A single proxy statement will be delivered to
multiple stockholders sharing an address unless contrary instructions have been received from the
affected stockholder. Once you have received notice from your broker that they will be
householding communications to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate proxy statement, please notify your broker and
direct your written request to Insperity, Inc., Attention: Ruth Saler, Investor Relations
Administrator, 19001 Crescent Springs Drive, Kingwood, Texas 77339 or contact Ruth Saler at
800-237-3170. The Company will promptly deliver a separate copy to you upon request.
Stockholder Proposals for 2011 Annual Meeting
In order for director nominations and stockholder proposals to have been properly submitted
for presentation at the 2011 Annual Meeting of Stockholders, notice must have been received by the
Company between the dates of December 20, 2010, and January 19, 2011. The Company received no such
notice, and no stockholder director nominations or proposals will be presented at the Annual
Meeting of Stockholders.
Stockholder Proposals for 2012 Proxy Statement
Any proposal of a stockholder intended to be considered for inclusion in the Companys proxy
statement for the 2012 Annual Meeting of Stockholders must be received at the Companys principal
executive offices no later than the close of business on December 14, 2011.
Advance Notice Required for Stockholder Nominations and Proposals
The Bylaws of the Company require timely advance written notice of stockholder nominations of
director candidates and of any other proposals to be presented at an annual meeting of
stockholders. Notice will be considered timely for the Annual Meeting of Stockholders to be held
in 2012 if it is received not later than the close of business on February 17, 2012, and not
earlier than the close of business on January 18, 2012. In addition, the Bylaws require that such
written notice set forth: (a) for each person whom the stockholder proposes to nominate for
election, all information relating to such person that is required to be disclosed in solicitations
of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation
14A under the Exchange Act, including, without limitation, such persons written consent to be
named in the proxy statement as a nominee and to serve as a director if elected; and (b) as to such
stockholder: (i) the name and address, as they appear on the Companys books, of such stockholder;
(ii) the class and number of shares of the Companys capital stock that are beneficially owned by
such stockholder; and (iii) a description of all agreements, arrangements or understandings between
such stockholder and each such person that such stockholder proposes to nominate as a director and
any other person or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
In the case of other proposals by stockholders at an annual meeting, the Bylaws require that
such written notice set forth as to each matter such stockholder proposes to bring before the
annual meeting: (a) a brief description of the business desired to be brought before the annual
meeting; (b) the reasons for conducting such business at the annual meeting; (c) the name and
address, as they appear on the Companys books, of such stockholder; (d) the class and number of
shares of the Companys stock that is beneficially owned by such stockholder; and (e) any material
interest of such stockholder in such business.
34
FINANCIAL INFORMATION
A copy of the Companys Annual Report on Form 10-K for the Year Ended December 31, 2010, as
filed with the Securities Exchange Commission, including any financial statements and schedules and
exhibits thereto,
may be obtained without charge by written request to Ruth Saler, Investor Relations Administrator,
Insperity, Inc., 19001 Crescent Springs Drive, Kingwood, Texas 77339-3802.
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By Order of the Board of Directors
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Daniel D. Herink
Senior Vice President of Legal,
General Counsel and Secretary
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April 12, 2011
Kingwood, Texas
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YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to the shareholder meeting date.
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INTERNET
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http://www.proxyvoting.com/nsp
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Use the Internet to vote your proxy.
Have your proxy card in hand when you
access the web site.
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OR
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TELEPHONE
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1-866-540-5760
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Use any touch-tone telephone to vote
your proxy. Have your proxy card in
hand when you call.
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If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
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To vote by mail, mark, sign and date your proxy card
and return it in the enclosed postage-paid envelope.
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Your Internet or telephone vote authorizes the named
proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card.
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96929
▼
FOLD AND DETACH HERE
▼
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Please mark your votes as
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x
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indicated in this example
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The Board of Directors recommends a vote FOR all Nominees.
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The Board of Directors recommends a vote FOR the following proposal:
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1.
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Vote on Directors
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FOR
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WITHHOLD
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*EXCEPTIONS
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FOR
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AGAINST
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ABSTAIN
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Nominees:
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ALL
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FOR ALL
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01 Michael W. Brown
02 Eli Jones
03 Gregory E. Petsch
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Ratification of the appointment of Ernst & Young LLP as the
Companys independent registered public accounting firm for the
year ending December 31, 2011
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The Board of Directors recommends a vote FOR
the following proposal:
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(INSTRUCTIONS: To
withhold authority to vote for any individual nominee, mark the
Exceptions
box above and write that nominees name in the space provided below.)
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3.
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Non-binding advisory vote on executive compensation (say-on-pay)
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*Exceptions
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The Board of Directors recommends a vote FOR stockholder approval every 3 years
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3 YEAR
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2
YEARS
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1
YEAR
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Abstain
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4.
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Non-binding advisory vote on the frequency of stockholder say-on-pay votes
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Mark Here for
Address Change
or Comments
SEE REVERSE
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RESTRICTED
AREA - SCAN LINE
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NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
You can now access your Insperity, Inc. account online.
Access your Insperity, Inc. account online via Investor ServiceDirect
®
(ISD).
BNY Mellon Shareowner Services, the transfer agent for Insperity, Inc., now makes it easy and convenient to get
current information on your shareholder account.
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View account status
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View payment history for dividends
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View certificate history
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Make address changes
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View book-entry information
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Obtain a duplicate 1099 tax form
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Visit
us on the web at http://www.bnymellon.com/shareowner/equityaccess
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect
®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose
MLink
SM
for fast, easy and secure 24/7
online access to your
future proxy materials, investment plan statements, tax documents and more.
Simply log on to
Investor ServiceDirect
®
at
www.bnymellon.com/shareowner/equityaccess
where step-by-step instructions will
prompt you through enrollment.
▼
FOLD AND DETACH HERE
▼
This Proxy is Solicited on Behalf of the Board of Directors
For the Annual Meeting of Stockholders of
INSPERITY, INC.
To be Held on May 17, 2011
The undersigned
hereby appoints Paul J. Sarvadi and Daniel D. Herink, or either of them, as the lawful agents and proxies of
the undersigned (with all the powers the undersigned would possess if personally present, including full power
of substitution), and hereby authorizes them to represent and to vote, as designated on the reverse side, all
the shares of Common Stock of Insperity, Inc. held of record by the undersigned on March 18, 2011, at the Annual
Meeting of Stockholders of Insperity, Inc., to be held at the Companys Corporate Headquarters, Centre I in the
Auditorium, located at 22900 Hwy. 59 N. (Eastex Freeway), Kingwood, Texas on May 17, 2011, at 3:00 p.m., Central
Daylight Saving Time, or any reconvened meeting after an adjournment thereof.
It is understood that when properly executed, this proxy will be voted in the manner directed herein by
the undersigned Stockholder.
Where no choice is specified by the stockholder, the proxy will be
voted for the election of directors, for proposals 2 and 3, and for
a vote for stockholder approval every 3 years on proposal 4, and in the discretion of the persons named
herein on all other matters that may properly come before the annual meeting.
To vote in accordance with the Board of Directors recommendations, just sign and date; no boxes need to be checked.
Address Change/Comments
(Mark the corresponding box on the reverse side)
BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
RESTRICTED AREA SCAN LINE
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(Continued and to be marked, dated and signed, on the other side)
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96929
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RESTRICTED AREA SIGNATURE LINES
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