DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

 

Filed by the Registrant  ☒

  

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

NCR CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

March 12, 2020

NCR Stockholders,

NCR had a great year in 2019! We established a clear priority for the year:  return to profitable growth, with a very simple goal to keep our customers happy and satisfied so that they come back and buy more.  Our 2019 results show you that we executed well to meet this priority with improvements in revenue and a deep strengthening of our customer-first culture.

We also launched 2019 with a plan for creating long-term stockholder value driven by three components.  First, invest in top-line revenue growth.  Second, shift our business mix to recurring revenue streams and software and services-led offerings.  Third, optimize NCR’s spend to improve operating margins.  As 2019 progressed, we also focused our energy on transforming NCR to an as-a-Service company.

We made tremendous progress in 2019 toward executing our strategy for a successful future.  I am proud of our team and their commitment to our customers, as well as the energy and excitement they continue to show in reshaping NCR.  This focused strategy resulted in a year in which we strengthened our recurring revenue capabilities through the prioritization of strategic growth platforms, began integrating our payments processing solution, returned Digital Banking to growth, generated year-over-year sales growth in each of our segments and created a culture of accountability through our organizational structure.

We also made several complementary acquisitions to enrich or extend our presence in the industries we serve.  These include expanding our market reach and presence in Latin America by repurchasing the minority interest in our Manaus, Brazil joint venture and entering into an agreement to acquire select software and services assets from OKI Brazil, enhancing our market reach in Digital Banking with D3, strengthening our local office presence in Hospitality through acquiring three of our local resellers and acquiring a foundational building block of our next-generation retail architecture with virtualization technology provider Zynstra.

As a result, we enter 2020 with strong momentum to further accelerate our transition to a software and services-led enterprise and an as-a-Service company.  These steps will further position NCR for sustainable long-term growth as we deliver increased value to customers and help provide them the solutions they need to run their stores, restaurants and self-service banking channels.

Thank you for your confidence in NCR, your continued feedback and for sharing our vision of NCR’s future.

Sincerely,

 

 

 

LOGO

 

Michael D. Hayford

President and Chief Executive Officer


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LOGO

NOTICE OF 2020 ANNUAL MEETING

AND PROXY STATEMENT

March 12, 2020

Dear Fellow NCR Stockholder:

I am pleased to invite you to attend the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) for NCR Corporation, a Maryland corporation (“NCR” or the “Company”), that will be held on April 21, 2020, at 12:30 p.m. Eastern Time.  This year’s Annual Meeting will again be a virtual meeting of stockholders.  You will be able to attend the Annual Meeting and vote and submit questions during the Annual Meeting via a live webcast by visiting www.virtualshareholdermeeting.com/NCR2020.  As in the past, prior to the Annual Meeting you will be able to authorize a proxy to vote your shares at www.proxyvote.com on the matters submitted for stockholder approval at the Annual Meeting, and we encourage you to do so.

The accompanying notice of the Annual Meeting and proxy statement tell you more about the agenda and procedures for the Annual Meeting.  The proxy statement also describes how the Board of Directors of the Company operates and provides information about our director candidates, director and executive officer compensation and certain corporate governance matters.  I look forward to sharing more information with you about NCR at the Annual Meeting.

As in prior years, we are offering our stockholders the option to receive NCR’s proxy materials via the Internet.  We believe this option allows us to provide our stockholders with the information they need in an environmentally conscious form and at a reduced cost.

Your vote is important.  Whether or not you plan to virtually attend the Annual Meeting, I urge you to authorize a proxy to vote your shares as soon as possible.  You may authorize a proxy to vote your shares on the Internet or by telephone, or, if you received the proxy materials by mail, you may also authorize a proxy to vote your shares by mail.  Your vote will ensure your representation at the Annual Meeting regardless of whether you attend via webcast on April 21, 2020.

Sincerely,

 

 

LOGO

Frank R. Martire

Executive Chairman

 


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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF NCR CORPORATION

 

 

Time:

    

12:30 p.m. Eastern Time

Date:

    

Wednesday, April 21, 2020

Place:

 

    

Virtual Meeting via webcast at www.virtualshareholdermeeting.com/NCR2020

Purpose:

    

The holders of shares of common stock, par value $0.01 per share (the “common stock”), and shares of Series A Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference $1,000 per share (the “Series A Convertible Preferred Stock”), of NCR Corporation, a Maryland corporation (“NCR” or the “Company”) will, voting together as a single class, be asked to:

 

   

Consider and vote upon the election of ten directors identified in this proxy statement to serve until the next annual meeting of stockholders following their election and until their respective successors are duly elected and qualify;

 

   

Consider and vote to approve, on an advisory basis, the compensation of the named executive officers (Say On Pay), as described in these proxy materials;

 

   

Consider and vote upon the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020;

 

   

Consider and vote upon a proposal to amend the NCR Corporation 2017 Stock Incentive Plan;

 

   

Consider and vote upon a directors’ proposal to amend and restate the charter of the Company to eliminate the supermajority provisions contemplated by the Company’s charter and make certain conforming changes thereto; and

 

   

Transact such other business as may properly come before the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) and any postponement or adjournment of the Annual Meeting.

Other Important Information:

   

Record holders of NCR’s common stock and Series A Convertible Preferred Stock at the close of business on February 28, 2020 may vote at the meeting.

 

   

Your shares cannot be voted unless they are represented by proxy or in person by the record holder attending the meeting via webcast.  Even if you plan to attend the Annual Meeting via webcast, please authorize a proxy to vote your shares.

 

   

If you wish to attend the webcast at a location provided by the Company, the Company’s Maryland counsel, Venable LLP, will air the webcast at its offices located at 750 E.  Pratt Street, Suite 900, Baltimore, MD 21202.  Please note that no members of management or the Board of Directors will be in attendance at this location.  If you wish to attend the meeting webcast at Venable LLP’s office, please follow the directions for doing so set forth on the “2020 Annual Meeting of Stockholders Reservation Request Form” found at the end of this proxy statement.

By order of the Board of Directors,

 

 

LOGO

James M. Bedore

Executive Vice President, General Counsel and Secretary

March 12, 2020

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to Be Held on April 21, 2020

This proxy statement and NCR’s 2019 Annual Report on Form 10-K are available at www.proxyvote.com.

NCR Corporation

864 Spring Street NW

Atlanta, Georgia 30308-1007

 


Table of Contents
 
NCR  CORPORATION

2020 ANNUAL MEETING PROXY STATEMENT

 

TABLE OF CONTENTS

 

  Proxy Statement – General Information

   1
           

 NCR Stock Ownership

   7

Officers and Directors

   7

Other Beneficial Owners

   8
           

  Proposal 1 – Election of Directors

   10

Proposal Details

   10

How Does the Board Recommend that I Vote on this Proposal?

   15
           

  More Information About Our Board of Directors

   16

Corporate Governance

   16

Board Leadership Structure and Risk Oversight

   19

Compensation Risk Assessment

   22

Committees of the Board

   22

Audit Committee

   23

Compensation and Human Resource Committee

   24

Committee on Directors and Governance

   25

Selection of Nominees for Directors

   25

Communications with Directors

   27

Code of Conduct

   27
           

 Director Compensation

   28

Director Compensation Program

   28

Director Compensation Tables

   30
           

  Proposal 2 – Say On Pay: Advisory Vote On the Compensation of the Named Executive Officers

   32

Proposal Details

   32

How Does the Board Recommend that I Vote on This Proposal?

   32
           

  Executive Compensation - Compensation Discussion & Analysis

   33

Our Named Executive Officers

   33

Executive Summary

   33

Business Overview

   33

NCR Strategic Priorities

   34

2019 Focus Areas

   34

2019 Business Transformation

   34

Company 2019 Financial Performance

   35

Stockholder Engagement and Responsiveness to 2019 Say On Pay Vote

   36

2020 Executive Compensation Program Changes

   37

2019 Compensation Program Design

   38
           

Compensation Program Discussion

   41

Summary of 2019 & 2020 Compensation Program Actions by Our Committee

   41

Our Executive Compensation Philosophy

   42

Key Elements of 2019 Executive Compensation

   43

2019 Compensation Pay Mix

   44

Our Process for Establishing 2019 Compensation

   44

2019 Executive Compensation Program Details

   47

Base Salaries for 2019

   47

Annual Incentives for 2019

   47

2020 Annual Incentive Plan

   53

2019 Long Term Incentives

   53

Update on the 2018 LTI Equity Awards

   56

2020 LTI Program – Performance-Based RSUs and Premium-Priced Options

   57

Other Employee Benefits

   59

Change in Control and Post-Termination Benefits

   59

Robust Stock Ownership Requirements

   60

Compensation Clawback Policy

   60

Hedging and Pledging Policy

   60

Tax Considerations in Setting Compensation

   61
 


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  Board and Compensation and Human Resource Committee Report on Executive Compensation

     62  
               

 Executive Compensation Tables

     63  

Summary Compensation Table

     63  

All Other Compensation Table

     64  

Perquisites Table

     64  

Agreements with Our Named Executives

     65  

Grants of Plan-Based Awards Table

     67  

Outstanding Equity Awards at Fiscal Year-End 2019 Table

     68  

2019 Option Exercises and Stock Vested Table

     69  
               

  Potential Payments Upon Termination Or Change in Control

     69  

Termination Connected With Change in Control

     69  

Termination Not Connected With Change in Control

     72  

Potential Payments Upon Termination or Change in Control Table

     73  

Equity Compensation Plan Information Table

     75  
               

 CEO Pay Ratio Disclosure

     75  
               

 Related Person Transactions

     76  
  

  Fees Paid to Independent Registered Public Accounting Firm

     79  
               

 Board Audit Committee Report

     81  
               

  Proposal 3 – Ratification of the Appointment of Independent Registered Public Accounting Firm for 2020

     83  

Proposal Details

     83  

How Does the Board Recommend that I Vote on this Proposal

   83
           

  Proposal 4 – Approval of Proposed Amendment to 2017 Stock Incentive Plan

   85

The Proposal: Approve the Proposed Amendment to the 2017 Stock Incentive Plan

   85

Proposal Details

   86

Key Data Supporting the Proposal

   91

Principal Features of the 2017 Stock Plan as Amended by the Proposed Amendment

   91

Additional Terms of the 2017 Stock Plan as Amended by the Proposed Amendment

   93

New Plan Benefits

   99

How Does the Board Recommend that I Vote on the Proposed Amendment to the 2017 Stock Plan?

   99
           

  Proposal 5 – Directors’ Proposal to Amend and Restate the Charter of the Company to Eliminate the Supermajority Provisions

   100

Proposal Details

   100

How Does the Board Recommend that I Vote on this Proposal?

   101
           

 Other Matters

   102
           

 Additional Information

   102
           

 Appendices

  

Appendix A – Proposed Amendment to the NCR Corporation 2017 Stock Incentive Plan

   A-1

Appendix B – NCR Corporation 2017 Stock Incentive Plan

   B-1

Appendix C – Articles of Amendment and Restatement of NCR Corporation

   C-1
 


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 Proxy Statement – General Information

 

 

What is the purpose of these proxy materials?

We are making this proxy statement, notice of annual meeting and our 2019 annual report available to stockholders beginning on or about March 12, 2020 in connection with the solicitation by the Board of Directors (the “Board”) of NCR Corporation, a Maryland corporation (“NCR,” the “Company,” “we” or “us”), of proxies for the 2020 Annual Meeting of Stockholders, and any postponements or adjournments thereof (the “Annual Meeting”), to be held via a live webcast at. 12:30 p.m. Eastern Time, on April 21, 2020, for the purposes set forth in these proxy materials.

 

 

How do I attend the Annual Meeting?

The Annual Meeting will be a virtual meeting of stockholders, which allows stockholders the ability to more easily attend the Annual Meeting without incurring travel costs or other inconveniences.  If you are a record stockholder, a proxy for a record stockholder or a beneficial owner of either (i) NCR’s common stock, par value $0.01 per share (the “common stock”), or (ii) NCR’s Series A Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference $1,000 per share (the “Series A Convertible Preferred Stock”), in either case with evidence of ownership, you will be able to attend the Annual Meeting and vote and submit questions during the Annual Meeting via a live webcast by visiting www.virtualshareholdermeeting.com/NCR2020, which provides our stockholders rights and opportunities to vote and ask questions equivalent to in-person meetings of stockholders.  The Annual Meeting will convene at 12:30 p.m. Eastern Time, on April 21, 2020.

If you wish to attend the webcast at a location provided by the Company, our Maryland counsel, Venable LLP, will air the webcast at its offices located at 750 E. Pratt Street, Suite 900, Baltimore,

MD 21202.  Please note that no members of management or the Board will be in attendance at this location.  If you wish to attend the Annual Meeting via webcast at Venable LLP’s office, please complete and return the 2020 Annual Meeting of Stockholders Reservation Request Form found at the end of this proxy statement.

 

 

How do I access the proxy materials?

We are providing access to our proxy materials (including this proxy statement, notice of annual meeting and our 2019 annual report) over the Internet pursuant to rules adopted by the Securities and Exchange Commission (“SEC”).  Beginning on or about March 12, 2020, we will send Notices of Internet Availability of Proxy Materials (each, a “Notice”) by mail to stockholders entitled to notice of or vote at the Annual Meeting.  The Notice includes instructions on how to view the electronic proxy materials on the Internet, which will be available to all stockholders beginning on or about March 12, 2020.  The Notice also includes instructions on how to elect to receive future proxy materials by email.  If you choose to receive future proxy materials by email, next year you will receive an email with a link to the proxy materials and proxy voting site, and will continue to receive proxy materials in this manner until you terminate your election.  We encourage you to take advantage of the availability of our proxy materials on the Internet.

 

 

Will I receive a printed copy of the proxy materials?

You will not receive a printed copy of the proxy materials unless you specifically request one.  Each Notice includes instructions on how to request a printed copy of the proxy materials, including the applicable proxy card, or cards, for the Annual Meeting if you are a record holder, or the applicable voting instruction form, or forms, if you are a

 

 

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beneficial owner, at no cost to you.  In addition, by following the instructions on the Notice, you can elect to receive future proxy materials in printed form by mail.  If you choose to receive future proxy materials in printed form by mail, we will continue to send you printed materials pursuant to that election until you notify us otherwise.

 

 

What does it mean if I receive more than one Notice?

We are taking advantage of the householding rules adopted by the SEC that permit us to deliver only one Notice to stockholders who share an address, unless otherwise requested.  This allows us to reduce the expense of delivering duplicate Notices to our stockholders who may have more than one stock account or who share an address with another NCR stockholder.

If you have multiple common stock record accounts or multiple Series A Convertible Preferred Stock record accounts and you have received only one Notice with respect to your common stock or Series A Convertible Preferred Stock, and/or if you share an address with a family member who is an NCR stockholder and you have received only one Notice:

 

  ·  

you may write us at 864 Spring Street NW, Atlanta, Georgia 30308-1007, Attn: Investor Relations, or call us at 1-800-225-5627, to request separate copies of the proxy materials at no cost to you; and

 

  ·  

if you no longer wish to participate in the householding program, please call 1-866-540-7095 to “opt-out” or revoke your consent.

If you have multiple NCR common stock record accounts or multiple Series A Convertible Preferred Stock record accounts and you have received multiple copies of the Notice with respect to either your common stock or Series A Convertible Preferred Stock, and/or if you share an address with a family member who is an NCR stockholder and you

have received multiple copies of the Notice, and you wish to participate in the householding program, please call 1-866-540-7095 to “opt-in.”

Please note that if you hold both common stock and Series A Convertible Preferred Stock, you can expect to receive a separate Notice for each class of stock.  These notices are separate, and will not be combined even if you have opted in or consented to householding.  See “What if I hold both common stock and Series A Convertible Preferred Stock” below.

 

 

What am I being asked to vote on?

The holders of shares of common stock and shares of Series A Convertible Preferred Stock, voting together as a single class, are being asked to consider and vote upon the following items:

 

  ·  

Election of ten directors to serve until the next annual meeting of stockholders following their election and until their respective successors are duly elected and qualify;

 

  ·  

An advisory vote to approve the compensation of the named executive officers (Say on Pay), as described in these proxy materials;

 

  ·  

Ratification of the appointment of PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as our independent registered public accounting firm for the fiscal year ending December 31, 2020;

 

  ·  

A proposal to amend the NCR Corporation 2017 Stock Incentive Plan; and

 

  ·  

A directors’ proposal to amend and restate the charter of the Company to eliminate the supermajority provisions contemplated by the Company’s charter and make certain conforming changes thereto.

 

 

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Why are the common stockholders being asked to vote on the election of a Director previously voted on by only the holders of Series A Preferred Stock?

The holders of shares of common stock and shares of Series A Convertible Preferred Stock, voting together as a single class, are being asked to vote on ten director nominees to serve until the next annual meeting of stockholders following their election and until their respective successors are duly elected and qualify:  Mark W. Begor, Catherine L. Burke, Chinh E. Chu, Gregory R. Blank, Deborah A. Farrington, Michael D. Hayford, Georgette D. Kiser, Kirk T. Larsen, Frank R. Martire and Matthew A. Thompson.

Our outstanding shares of Series A Convertible Preferred Stock were originally issued to certain entities affiliated with The Blackstone Group L.P. (“Blackstone”) under an Investment Agreement dated November 11, 2015, and amended as of March 13, 2017 (the “Investment Agreement”).  The Investment Agreement and the terms of the Series A Convertible Preferred Stock provided that Blackstone was entitled, as long as it beneficially owned at least 50% of the common stock that it beneficially owned, on an as-converted basis, at the time of its initial investment, to separately designate two nominees for election as a director, whom the Board would include in its nominees for election, and that only holders of the Series A Convertible Preferred Stock had the right to vote for these nominees.  In 2019, the Company entered into an agreement with Blackstone to repurchase and convert the Series A Convertible Preferred Stock held by Blackstone, in connection with which all of the shares of Series A Convertible Preferred Stock held by Blackstone were retired.  Although Blackstone no longer has the right to designate any nominees for election as a director, Mr. Blank and Mr. Chu, the directors previously designated by Blackstone when it had the right to designate directors, agreed to continue serving as directors through the end of their current term. Mr. Blank and

Mr. Chu subsequently agreed to serve as director nominees of the Board at the Annual Meeting, to be voted upon by the holders of shares of common stock and shares of Series A Convertible Preferred Stock, voting together as a single class.

 

 

How does the Board recommend that I vote my shares?

The Board recommends a vote:

 

  ·  

FOR the election of each of the ten director nominees to be elected by holders of shares of common stock and shares of Series A Convertible Preferred Stock, voting together as a single class;

 

  ·  

FOR the advisory vote to approve the compensation of the named executive officers (Say On Pay), as described in these proxy materials;

 

  ·  

FOR ratification of the appointment of PricewaterhouseCoopers as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020;

 

  ·  

FOR the proposal to amend the NCR Corporation 2017 Stock Incentive Plan; and

 

  ·  

FOR the directors’ proposal to amend and restate the charter of the Company to eliminate the supermajority provisions contemplated by the Company’s charter and make certain conforming changes thereto.

 

 

Who is entitled to vote at the Annual Meeting?

Record holders of our common stock and/or Series A Convertible Preferred Stock at the close of business on the record date for the Annual Meeting, February 28, 2020 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting.

 

 

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How many votes do I have?

Each record holder of common stock will have one vote for each share of common stock held on the Record Date on each matter that is properly brought before the Annual Meeting and on which holders of common stock are entitled to vote.  There were 129,207,945 shares of common stock outstanding on the Record Date.

Each record holder of Series A Convertible Preferred Stock will have a number of votes equal to the largest number of whole shares of common stock into which such shares are convertible on the Record Date on each matter that is properly brought before the Annual Meeting and on which holders of Series A Convertible Preferred Stock are entitled to vote together with common stock as a single class.  As of the Record Date, there were 397,272 shares of Series A Convertible Preferred Stock outstanding, which as of such date were convertible into 13,242,268 shares of common stock.

 

 

Are there any requirements on how the holders of Series A Convertible Preferred Stock must vote?

Each record holder of Series A Convertible Preferred Stock is entitled to vote in his, her or its discretion on all matters described in this proxy statement.

 

 

How do I vote my shares?

Your vote is important.  Your shares can be voted at the Annual Meeting only if you are present (via attendance at the Annual Meeting by webcast) or if your shares are represented by proxy.  Even if you plan to attend the Annual Meeting webcast, we urge you to authorize a proxy to vote your shares in advance.

If you hold both common stock and Series A Convertible Preferred Stock, you will need to vote, or authorize a proxy to vote, each class of stock

separately.  Please be sure to vote or authorize a proxy to vote for each class of stock separately so that all of your votes can be counted.  For more information, see “What if I hold both common stock and Series A Convertible Preferred Stock” below.

You can authorize a proxy to vote your shares of common stock or Series A Convertible Preferred Stock electronically by going to www.proxyvote.com, or by calling the toll-free number (for residents of the United States and Canada) listed on the applicable proxy card.  Please have your proxy card (or cards) in hand when going online or calling.  If you authorize a proxy to vote your shares electronically, you do not need to return the applicable proxy card.  If you received proxy materials by mail and want to authorize your proxy by mail, simply mark the applicable proxy card, and then date, sign and return it in the applicable postage-paid envelope provided so it is received no later than April 20, 2020.

Your shares of common stock or Series A Convertible Preferred Stock will be voted at the Annual Meeting as directed by your electronic proxy, the instructions on your proxy card or voting instructions if (i) you are entitled to vote those shares;  (ii) your proxy for those shares was properly executed or properly authorized electronically; (iii) we received your proxy for those shares prior to the Annual Meeting;  and (iv) you did not revoke your proxy for those shares prior to or at the Annual Meeting.  The method by which you vote or authorize a proxy to vote your shares will in no way limit your right to attend and vote at the Annual Meeting webcast if you later decide to do so.

Please note that if you hold any of your shares through a bank, broker or other nominee (i.e., in street name), you may be able to authorize your proxy for those shares by telephone, the Internet or mail.  You should follow the instructions you receive from your bank, broker or other nominee to vote these shares.  Also, if you hold any of your shares in street name, you must obtain a legal proxy executed in your favor from your bank, broker or nominee to be able to vote those shares in person at the Annual Meeting.  Obtaining a legal proxy may take several days.

 

 

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What if I hold both common stock and Series A Convertible Preferred Stock?

Some of our stockholders may hold both common stock and Series A Convertible Preferred Stock.  If you are a holder of both common stock and Series A Convertible Preferred Stock, you can expect to receive a separate Notice for each class of stock (or a separate set of printed proxy materials if you previously elected to receive proxy materials in printed form).

You will need to vote, or authorize a proxy to vote, each class of stock separately in accordance with the instructions set forth herein and on the applicable proxy cards or voting instruction forms.  Voting, or authorizing a proxy to vote, only your common stock will not also cause your shares of Series A Convertible Preferred Stock to be voted, and, similarly, voting, or authorizing a proxy to vote, only your Series A Convertible Preferred Stock will not also cause your shares of common stock to be voted.

If you hold both common stock and Series A Convertible Preferred Stock, please be sure to vote or authorize a proxy to vote for each class of stock separately so that all of your votes can be counted.

 

 

How do I vote shares held under the NCR Direct Stock Purchase and Sale Plan?

If you are a participant in the Direct Stock Purchase and Sale Plan (the “DSPP”) administered by our transfer agent, Equiniti Trust Company, for NCR, any proxy you authorize will also have the authority to vote the shares of NCR common stock held in your DSPP account.  Equiniti Trust Company, as the DSPP administrator, is the stockholder of record of that plan and will not vote those shares unless you provide it with instructions, which you may do by telephone, the Internet or mail.

 

If I authorized a proxy, can I revoke it and change my vote?

Yes, you may revoke a proxy at any time before it is exercised at the Annual Meeting by:

 

  ·  

authorizing a new proxy on the Internet or by telephone;

 

  ·  

properly executing and delivering a later-dated (i.e., subsequent to the date of the original proxy) proxy card so that it is received no later than April 20, 2020;

 

  ·  

voting by ballot at the Annual Meeting; or

 

  ·  

sending a written notice of revocation to the inspector of election in care of the Corporate Secretary of the Company at 864 Spring Street NW, Atlanta, Georgia 30308-1007 so that it is received no later than April 20, 2020.

Only the most recent proxy will be exercised and all others will be disregarded regardless of the method by which the proxies were authorized.

If shares of NCR’s voting securities are held on your behalf by a broker, bank or other nominee, you must contact it to receive instructions as to how you may revoke your proxy instructions for those shares.

 

 

What constitutes a quorum at the Annual Meeting?

The presence at the Annual Meeting (in person via attendance at the virtual Annual Meeting by proxy) of stockholders entitled to cast a majority of all the votes entitled to be cast at the Annual Meeting constitutes a quorum.

 

 

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What vote is required to approve each proposal?

A majority of all the votes cast by holders of our common stock and Series A Convertible Preferred Stock voting together as a single class (in person via attendance at the virtual Annual Meeting or by proxy), with the holders of Series A Convertible Preferred Stock voting on an as-converted basis, is required to elect each of the director nominees (Mark W. Begor, Gregory R. Blank, Catherine L. Burke, Chinh E. Chu, Deborah A. Farrington, Michael D. Hayford, Georgette D. Kiser, Kirk T. Larsen, Frank R. Martire, and Matthew A. Thompson), to approve the Say on Pay proposal, to ratify the appointment of our independent registered public accounting firm, and to approve the amendment to the NCR Corporation 2017 Stock Incentive Plan.  Under Maryland law, abstentions and broker “non-votes” will not be counted as votes cast and will have no effect on the votes the election of directors, the Say on Pay proposal or the ratification of the appointment of our independent registered accounting firm proposals.  For purposes of the vote on the amendment to the NCR Corporation 2017 Stock Incentive Plan, abstentions will have the same effect as votes against the proposal and broker-non votes will not have any effect on the result of the vote.

With respect to the directors’ proposal to amend and restate the Company’s charter to eliminate the supermajority provisions contemplated by the Company’s charter and make certain conforming changes thereto, the amendments to the Company’s charter must be approved by the affirmative vote of holders entitled to cast not less than eighty percent of the voting power of all shares of outstanding

stock of NCR entitled to vote generally in the election of directors (currently, the common stock and the Series A Convertible Preferred Stock voting on an as-converted basis, together as a single class).  Abstentions and broker non-votes will have the effect of votes against this proposal.  If this proposal is approved by the affirmative vote of holders representing eighty percent or more of the voting power of all shares of outstanding stock of NCR entitled to vote generally in the election of directors, the Company will cause to be filed with the State Department of Assessments and Taxation of Maryland the Articles of Amendment and Restatement attached as Appendix C to this proxy statement.

A broker “non-vote” occurs when a broker returns a properly executed proxy but does not vote on a particular proposal because the broker does not have the discretionary authority to vote on the proposal and has not received voting instructions from the beneficial owner regarding the proposal.  Under the rules of the New York Stock Exchange (“NYSE”), brokers have the discretionary authority to vote on the ratification of our independent registered public accounting firm, but not for the election of our directors, the Say on Pay proposal, the amendment to the NCR Corporation 2017 Stock Incentive Plan or the directors’ proposal regarding amendments to our charter.

 

 

When will you publish the results of the Annual Meeting?

We will include the results of the votes taken at the Annual Meeting in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.

 

 

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NCR Stock Ownership

 

 Officers and Directors

The following table reflects the NCR common stock beneficially owned, as determined under applicable SEC rules, as of the close of business on February 15, 2020 (the “Table Date”) by:  (i) each individual named in our Summary Compensation Table (the “named executives”), (ii) each non-employee director and nominee, and (iii) all current directors and executive officers as a group.  Except to the extent indicated in the footnotes below, to NCR’s knowledge each person named in the table below has sole voting and investment power over the shares reported.  As of the Table Date, 128,651,400 shares of the Company’s common stock were issued and outstanding, and none of the persons named in the table below owned, beneficially or of record, any shares of NCR’s Series A Convertible Preferred Stock.  Unless otherwise noted below, the address of each beneficial owner listed in the table is: c/o NCR Corporation, 864 Spring Street NW, Atlanta, Georgia, 30308.

 

NCR Stock Ownership By Officers and Directors
   Beneficial Owners

Total Shares

Beneficially

Owned(1)(2)

Percent

 

Number of Shares

Subject to Options

Exercisable

Within 60 Days of

February 15, 2020

 

Number of RSUs That

Vest Within 60 Days of

February 15, 2020(3)

 

Non-Employee Directors

 

Gregory R. Blank, Director(4)

    *    

 

Catherine (Katie) L. Burke

  2,452   *    

 

Chinh E. Chu, independent Lead Director

  34,961   *    

 

Richard L. Clemmer, Director

  181,767   *   34,881  

 

Robert P. DeRodes, Director

  155,363   *   34,881  

 

Deborah A. Farrington, Director

  15,877   *    

 

Kurt P. Kuehn, Director

  60,821   *   10,039  

 

Kirk T. Larsen, Director

  2,452   *    

 

Linda Fayne Levinson, Director

  214,276   *   21,051  

 

Matthew A. Thompson, Director

  16,513   *    

Named Executive Officers

 

Michael D. Hayford, Director and Officer

  448,694   *   308,535  

 

Frank R. Martire, Director and Officer

  234,491   *   152,224  

 

Owen J. Sullivan, Officer

  250,193   *   176,876  

 

Andre J. Fernandez, Officer

  131,473   *   71,962  

 

Paul Langenbahn, Officer(5)

  264,981   *   82,104   95,952

 

Current Directors and Executive Officers as a Group (22 persons)

  2,497,128     1.9%   1,138,933   205,681

* Less than 1%.

(1) Includes shares that each person had the right to acquire on or within 60 days after the Table Date, including, but not limited to, upon the exercise of options and vesting and payment of restricted stock units.  Excludes these restricted stock units granted as of the Table Date that vest more than 60 days after the Table Date: Mr. Hayford 528,131; Mr. Martire 208,255; Mr. Sullivan 307,839; Mr. Fernandez 234,638; and Mr. Langenbahn 118,687.

(2) All fractional shares have been rounded to the nearest whole number.  The total includes these shares deferred under our Director Compensation Program: 115,600 shares granted to Mr. Clemmer; 50,029 shares granted to Mr. DeRodes; 48,902 shares granted to Mr.  Kuehn; and 8,077 shares granted to Ms. Levinson.

 

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(3) Reflects shares that the officers and directors have the right to acquire through vesting of restricted stock units within 60 days after the Table Date (without taking into account share withholding to cover taxes).  These shares are also included in the Total Shares Beneficially Owned column.

(4) Mr. Blank received no compensation under our Director Compensation Program for the portion of 2019 and earlier years that he was the Board designee of The Blackstone Group L.P. (“Blackstone”), due to Blackstone’s ownership of certain NCR Series A Convertible Preferred Stock (“Preferred Stock”). Mr. Blank began receiving standard director compensation under the Program (on a prorated basis) on substantially the same terms as other NCR directors for his continued director service following the retirement of such Preferred Stock effective September 20, 2019, Mr. Blank’s prorated annual equity grant under the Program was not made until 2020, and does not vest until April 24, 2020, and as such is not shown on the Table.

(5) For SEC reporting purposes, Mr. Langenbahn uses the following address: 14770 Trinity, Fort Worth, TX 76155.

 

 Other Beneficial Owners of NCR Common Stock

To the Company’s knowledge, and as reported as of the close of business on February 18, 2020 (except as otherwise specified), the following stockholders beneficially own more than 5% of the Company’s outstanding stock.

 

   
     Common Stock  
   Name and Address of Beneficial Owner   

Total Number of

Shares

    

Percent

of Class

 

  The Vanguard Group(1)

     12,896,662        10.10

  100 Vanguard Boulevard

     

  Malvern, PA 19355

     

  BlackRock, Inc.(2)

     11,764,117        9.20

  55 East 52nd Street

     

  New York, NY 10055

     

  Wells Fargo & Company(3)

     8,827,820        6.92

  420 Montgomery Street

     

  San Francisco, CA 94163

     

  Janus Henderson Group plc(4)

     6,420,957        5.00

  201 Bishopsgate EC2M 3AE

     

  United Kingdom

                 

(1) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on February 12, 2020 by The Vanguard Group (“Vanguard”), reporting beneficial ownership of 12,896,662 shares of the Company’s stock as of December 31, 2019.  In this filing, Vanguard reported sole dispositive power with respect to 12,808,670 of such shares, sole voting power with respect to 72,065 of such shares, shared dispositive power with respect to 87,992 of such shares and shared voting power with respect to 31,990 of such shares.  Vanguard also reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 56,002 of such shares as investment manager of collective trust accounts, and that Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 48,053 of such shares as a result of serving as investment manager of Australian investment offerings.

(2) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on February 5, 2020 by BlackRock, Inc. (“BlackRock”), reporting beneficial ownership of 11,764,117 shares of the Company’s stock as of December 31, 2019, as a parent holding company or control person for its subsidiaries, BlackRock Life Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland, Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited and BlackRock Advisors (UK) Limited.  In this filing, BlackRock reported sole voting power with respect to 11,276,897 of such shares, and sole dispositive power with respect to all 11,764,117 of such shares.

(3) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on February 4, 2020 by Wells Fargo & Company (“Wells Fargo”), reporting beneficial ownership of 8,827,820 shares of the Company’s stock as of December 31, 2019, on behalf of itself and its subsidiaries, Wells Fargo Funds Management, LLC, Wells Fargo Bank, National Association, Wells Capital Management Incorporated, Wells Fargo Clearing Services, LLC, and Wells Fargo Advisors Financial Network, LLC.  In this filing, Wells Fargo reported sole dispositive power with respect to 184,262 of such shares, sole voting power with respect to 184,262 of such shares, shared dispositive power with respect to 8,643,558 of such shares and shared voting power with respect to 1,299,011 of such shares; Wells Capital Management Incorporated reported shared dispositive

 

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power with respect to 8,491,651 of such shares, and shared voting power with respect to 8,180,788 of such shares; and Wells Fargo Funds Management, LLC reported shared dispositive power with respect to 6,890,681 of such shares, and shared voting power with respect to 6,882,309 of such shares.

(4) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on February 14, 2020 by Janus Henderson Group plc (“Janus Henderson”), reporting beneficial ownership of 6,420,957 shares of the Company’s stock as of December 31, 2019.  In this filing, Janus Henderson reported shared dispositive power with respect to 6,420,957 of such shares and shared voting power with respect to 6,420,957 of such shares.  Janus Henderson also reported that Janus Henderson has an indirect 97% ownership stake in Intech Investment Management LLC and a 100% ownership stake in Janus Capital Management LLC (“JCM”), Perkins Investment Management LLC, Geneva Capital Management LLC, Henderson Global Investors Limited and Janus Henderson Global Investors Australia Institutional Funds Management Limited (each an “Asset Manager” and collectively as the “Asset Managers”).  Due to the above ownership structure, holdings for the Asset Managers are aggregated for purposes of this filing.  Each Asset Manager is an investment adviser registered or authorized in its relevant jurisdiction and each furnishing investment advice to various fund, individual and/or institutional clients (collectively referred to herein as “Managed Portfolios”).  As a result of its role as investment adviser or sub-adviser to the Managed Portfolios, JCM may be deemed to be the beneficial owner of 6,420,957 shares or 5.0% of the shares outstanding of NCR Common Stock held by such Managed Portfolios.  However, JCM does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights.

 

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 Proposal 1 – Election of Directors
FOR   

The Board of Directors recommends that you vote FOR Mark W. Begor, Gregory R. Blank, Catherine L. Burke, Chinh E. Chu, Deborah A. Farrington, Michael D. Hayford, Georgette D. Kiser, Kirk T. Larsen, Frank R. Martire and Matthew A. Thompson.

 

 Proposal Details

The holders of shares of common stock and Series A Convertible Preferred Stock, voting together as a single class, are being asked to vote on the ten director nominees up for election, each to serve until the 2021 Annual Meeting and until their successors are duly elected and qualify.  Proxies solicited by the Board and properly authorized will be exercised for the election of each of the ten nominees: Mark W. Begor, Gregory R. Blank, Catherine L. Burke, Chinh E. Chu, Deborah A. Farrington, Michael D. Hayford, Georgette D. Kiser, Kirk T. Larsen, Frank R. Martire and Matthew A. Thompson, unless you elect to withhold your vote on your proxy.  The Board has no reason to believe that any of these nominees will be unable to serve. However, if one of them should become unable to serve prior to the Annual Meeting, the Board may reduce the size of the Board or designate a substitute nominee.  If the Board designates a substitute nominee, shares represented by proxies will be voted FOR the substitute nominee.

Richard L. Clemmer, Robert P. DeRodes, Kurt P. Kuehn and Linda Fayne Levinson, who are currently serving on the Board of Directors and whose terms are expiring on the date of the Annual Meeting, are not standing for re-election at the Annual Meeting.  It is expected that effective upon the expiration of the current terms of Mr. Clemmer, Mr. DeRodes, Mr. Kuehn and Ms. Levinson, the size of the board will be reduced.

The name, age, principal occupation, other business affiliations and certain other information regarding each nominee for election as a director are set forth below, along with a description of the qualifications that led the Committee on Directors and Governance to conclude that he or she meets the needs of the Board and supports the advancement of the Company’s long-term strategy.  The age reported for each director is as of the filing date of this proxy statement.

Mark W.  Begor, 61, is Chief Executive Officer and a member of the Board of Directors of Equifax, Inc., a consumer credit reporting agency, a position he has held since April 2018.  Prior to that he served as a Managing Director in the Industrial and Business services group at Warburg Pincus LLC (Warburg Pincus), a private equity firm, from 2016 to 2018.  Prior to joining Warburg Pincus, Mr. Begor spent 35 years at General Electric Co.  (GE), most recently as President and Chief Executive Officer of GE’s energy management business from 2014 to 2016.  Mr. Begor also served as Senior Vice President and a member of GE’s 30 person Corporate Executive Council and the GE Capital Board, and as a GE Officer for 19 years.  He also served as a member of the Board of Directors of Fair Isaac Corporation (FICO) from 2016 to 2018.

Qualifications.  Mr. Begor’s qualifications include his extensive leadership roles; his industry expertise; and his current and prior experience as a director and committee member of other public companies.

Gregory R. Blank, 39, is a Senior Managing Director of The Blackstone Group, Inc. (Blackstone), an American multi-national private equity, alternative asset management and financial services firm based in New York where he focuses on investments in the technology, media and telecommunications sectors. Since joining Blackstone in 2009, Mr. Blank has been involved in the execution of many of Blackstone’s investments, includinsg most recently in Kronos, JDA, Paysafe, Ipreo and Optiv. Prior to joining

 

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Blackstone, Mr. Blank was an associate at Texas Pacific Group (TPG) where he was involved in the evaluation and execution of private equity transactions. Before joining TPG, Mr. Blank worked in investment banking at Goldman, Sachs & Co. (Goldman Sachs) focused on technology, media and telecommunications clients. He currently serves as a director of Kronos, and previously served as a director of Travelport Worldwide Limited, Ipreo, Optiv and The Weather Company. Mr. Blank became a director of NCR on December 4, 2015.

Qualifications. Mr. Blank’s qualifications include his significant private equity and mergers and acquisitions experience with Blackstone and Goldman Sachs; his experience evaluating and managing acquisitions and investments in the technology and telecommunications industries; his experience as a director of other public and private companies; his financial expertise and literacy; his prior service on Tavelport’s Audit Committee; and his independence.

Catherine (Katie) L. Burke, 44, is Chief Strategy Officer at Daniel J. Edelman Holdings Inc. (Edelman), a global communications firm, a position she has held since January 6, 2019.  In addition, she is the head of Practices, Sectors and Intellectual Property at Edelman and is a member of Edelman’s Executive and Operations Committees. From 2008 to 2015, Mrs. Burke served in a variety of executive roles at Edelman including Global Chair of Public Affairs. In 2015, she founded and managed a communications firm, Katie Burke Communications, until she returned to Edelman in 2017.  Previously, Mrs. Burke served as Executive Vice President of Marketing and Communications at Nielsen Holdings plc.   Mrs. Burke became a director of NCR on September 23, 2019.

Qualifications. Mrs. Burke’s qualifications include her extensive experience and senior leadership roles in marketing, communications strategy and execution, and operations; her domestic and international experience in these areas; her financial literacy; and her independence.

Chinh E. Chu, 53, is the Founder and Managing Director at CC Capital Partners, LLC (CC Capital), a private equity firm he founded in 2015.  Mr. Chu is the co-founder of two special purpose acquisition companies, CF Corp. that was acquired by Fidelity & Guaranty Life, a life insurance company where Mr. Chu currently serves as Co-Executive Chairman, and Collier Creek Holdings, a special purpose acquisition company. Before forming CC Capital, Mr. Chu was Senior Managing Director at The Blackstone Group, Inc. (Blackstone), where he worked from 1990 to 2015 and served as Co-Chair of Blackstone’s Private Equity Executive Committee, as a member of the Investment Committee and on the firm’s Executive Committee. Mr. Chu previously served as a director of Catalent, Inc., Kronos Incorporated, SunGuard Data Systems, Inc., Freescale Semiconductor, Ltd., Biomet, Inc., Alliant, Celanese Corporation, Nalco Company, Nycomed, Alliant Services, Inc., the London International Financial Futures and Options Exchange, or LIFE, Graham Packaging, and AlliedBarton Security Services.  Mr. Chu is a member of the Board of Directors of Stearns Holdings, LLC, a holding company.  Mr. Chu became a director of NCR on December 4, 2015 and was appointed independent Lead Director effective February 22, 2016.

Qualifications.  Mr. Chu’s qualifications include his experience as a director of other public and private companies; his private equity experience; his extensive experience evaluating and managing acquisitions and investments in multiple industries with Blackstone and Salomon Brothers; and his independence.

Deborah A. Farrington, 69, is a founder and President of StarVest Management, Inc. (StarVest Management) and since 1999 has been a general partner of StarVest Partners, L.P.  (StarVest Partners), a venture capital fund that invests primarily in technology enabled business services and emerging software companies.  From 1993 to 1997, Ms. Farrington was President and Chief Executive Officer of Victory Ventures, LLC (Victory Ventures), a New York-based private equity investment firm.  Also during that period, she was a founding investor and Chairman of the Board of Staffing Resources, Inc., a diversified

 

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staffing company.  Prior to 1993, Ms. Farrington held management positions with Asian Oceanic Group in Hong Kong and New York, Merrill Lynch & Co. Inc. in Hong Kong and New York, and the Chase Manhattan Bank.  Ms. Farrington was Lead Director and Chairman of the Compensation Committee of NetSuite, Inc. (NetSuite), a NYSE-listed company, until its sale to Oracle Corporation in November 2016 for $9.4 billion.  Ms. Farrington is a member of the board of directors of Ceridian HCM Holdings. Inc., where she is Chairperson of the Nominating and Governance Committee and a member of the Audit Committee;  and Collectors Universe, Inc., where she is Chairperson of the Compensation Committee and a member of the Audit Committee and Nominating and Governance Committee.  Ms. Farrington became a director of NCR on November 27, 2017.

Qualifications.  Ms. Farrington’s qualifications include her significant software industry and entrepreneurial experience as a long-time investor in emerging software and business services companies as a founder and general partner of StarVest Partners;  her management experience as President of StarVest Management, as President and Chief Executive Officer of Victory Ventures, and her prior management roles;  her leadership experience, including as Lead Director of NetSuite;  her current and prior public company board and board committee experience;  her financial literacy and expertise; and her independence.

Michael D. Hayford, 60, is President and Chief Executive Officer of NCR, a position he has held since April 2018.  Mr. Hayford was most recently Founding Partner of Motive Partners, an investment firm focused on technology-enabled companies that power the financial services industry.  From 2009 until his retirement in 2013, Mr. Hayford served as the Executive Vice President and Chief Financial Officer at Fidelity National Information Services Inc. (FIS), a financial services technology company.  Prior to joining FIS, Mr. Hayford was with Metavante Technologies, Inc. (Metavante), a bank technology processing company, from 1992 to 2009. He served as the Chief Operating Officer at Metavante from 2006 to 2009 and as the President from 2008 to 2009.  From 2007 to 2009, Mr. Hayford also served on the Board of Directors of Metavante.   Mr. Hayford was a member of the Board of Directors and the Audit Committee of Endurance International Group Holdings, Inc. from 2013 to 2019, and was a member of the Board of Directors and Chairman of the Audit Committee of West Bend Mutual Insurance Company from 2007 to 2018.  Mr. Hayford became a director of NCR on April 30, 2018.

Qualifications.  Mr. Hayford’s qualifications include his significant leadership and management experience in his previous roles at FIS and Metavante, as well as his current role at NCR;  his industry expertise including in the financial services industry and bank technology processing; and his current and prior experience as a director and committee member of other public companies.

Georgette D. Kiser, 52, is an Operating Executive at The Carlyle Group (Carlyle), an American multinational private equity, alternative asset management and financial services corporation, a position she has held since May 2019.  From January 2015 to May 2019, Ms. Kiser served as a Managing Director and the Chief Information Officer for Carlyle.  From 1996 to 2015, Ms. Kiser served as Vice President of T. Rowe Price Associates, Inc. (T. Rowe Price), an American publicly owned global asset management firm that offers funds, advisory services, account management, and retirement plans and services for individuals, institutions, and financial intermediaries.  Prior to T. Rowe Price, Ms. Kiser worked for General Electric Company (GE) within their Aerospace Unit.  Ms. Kiser is a member of the Board of Directors of Aflac Incorporated, Adtalem Global Education Inc. and Jacobs Engineering Group Inc. Ms. Kiser became a director of NCR on February 7, 2020.

 

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Qualifications.  Ms. Kiser’s qualifications include her extensive experience and senior leadership and management experience in her position at Carlyle, and her former positions with T. Rowe Price and GE; her current and prior public company board and board committee experience; her technology, data security and digital platform expertise; her financial literacy and expertise; and her independence.

Kirk T.  Larsen, 48, is the Executive Vice President and Chief Financial Officer of Black Knight, Inc. (BKI), a provider of software, data and analytics to the mortgage and consumer loan, real estate and capital markets verticals, a position he has held since January 2014.  From January 2014 to April 2015, Mr. Larsen also served as the Executive Vice President and Chief Financial Officer of ServiceLink, a national provider of loan transaction services to the mortgage industry.  From July 2013 to December 2013, Mr. Larsen served as Corporate Executive Vice President, Finance and Treasurer, and from October 2009 to July 2013, served as Senior Vice President and Treasurer of Fidelity National Information Services Inc. (FIS), a financial services technology company.  He has also held senior leadership positions in finance, investor relations and financial planning and analysis in the fintech, payments and information technology industries at FIS as well as with companies like Rockwell Automation, Inc. and Ernst & Young Global Limited.  Mr. Larsen became a director of NCR on September 23, 2019.

Qualifications.  Mr. Larsen’s qualifications include his significant experience in leadership roles in publicly held technology companies including BKI and FIS;  his expertise in mergers and acquisitions, technology and software;  his financial literacy and expertise;  and his independence.

Frank R. Martire, 72, is Executive Chairman of NCR, a position he has held since May 2018.  Prior to that, Mr. Martire served as non-executive Chairman of Fidelity National Information Services Inc. (FIS).  From 2015 to 2017, he served as Executive Chairman of FIS, and from 2009 to 2015 was President and Chief Executive Officer of FIS after its acquisition of Metavante Technologies, Inc. (Metavante), a bank technology processing company.  Mr. Martire previously served as Chief Executive Officer of Metavante from 2003 to 2009 and President from 2003 to 2008.  Prior to that, he was President and Chief Operating Officer of Call Solutions Inc. from 2001 to 2003, and President and Chief Operating Officer, Financial Institution Systems and Services Group, of Fiserv, Inc. (Fiserv), from 1991 to 2001.  Mr. Martire serves as Chairman of the Board of Directors of J. Alexander’s Holdings, Inc. and is a member of the Board of Directors of Cannae Holdings, Inc.  Mr. Martire became a director of NCR on May 31, 2018.

Qualifications.  Mr. Martire’s qualifications include his current and prior experience as a director, including Executive Chairman and non-executive Chairman roles, of other public companies; his significant leadership and management experience in his previous roles at FIS, Metavante and Fiserv;  and his broad industry expertise including in the financial services industry and bank technology processing.

Matthew A. Thompson, 61, currently serves as Executive Vice President, Worldwide Field Operations, for Adobe Inc. (Adobe), a multinational computer software company.  Mr. Thompson joined Adobe in January 2007 as Senior Vice President, Worldwide Field Operations.  In January 2013, he was promoted to Executive Vice President, Worldwide Field Operations.  Prior to joining Adobe, Mr. Thompson served as Senior Vice President of Worldwide Sales at Borland Software Corporation (Borland), a software delivery optimization solutions provider, from October 2003 to December 2006.  Prior to joining Borland, Mr. Thompson was Vice President of Worldwide Sales and Field Operations for Marimba, Inc., a provider of products and services for software change and configuration management, from February 2001 to

 

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January 2003.  From July 2000 to January 2001, Mr. Thompson was Vice President of Worldwide Sales for Calico Commerce, Inc., a provider of eBusiness applications.  Prior to joining Calico, Mr. Thompson spent six years at Cadence Design Systems, Inc., a provider of electronic design technologies.  While at Cadence, from January 1998 to June 2000, Mr. Thompson served as Senior Vice President, Worldwide Sales and Field Operations and from April 1994 to January 1998 as Vice President, Worldwide Professional Services.  Mr. Thompson became a director of NCR on October 24, 2017.

Qualifications.  Mr. Thompson’s qualifications include his experience in and knowledge of the software industry, particularly with respect to SaaS-based software solutions and digital transformation;  his skills and experience in domestic and international software sales and sales strategy, including leading Adobe’s global sales organization;  his experience with software customers and customer-facing roles;  his financial literacy and expertise;  his leadership experience;  and his independence.

 

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 How Does the Board Recommend that I Vote on this Proposal?

 

 

Board Recommendation

The Board of Directors recommends that you vote FOR Mark W. Begor, Gregory R. Blank, Catherine L. Burke, Chinh E. Chu, Deborah A. Farrington, Michael D. Hayford, Georgette D. Kiser, Kirk T. Larsen, Frank R. Martire and Matthew A. Thompson as directors to serve until the next annual meeting of stockholders following their election and until their respective successors are duly elected and qualify.  Proxies received by the Board will be voted FOR all nominees for which the stockholder may vote unless they specify otherwise.

 

 

Vote Required for Approval

A majority of all the votes cast by holders of our common stock and Series A Convertible Preferred Stock, voting together as a single class (in person via attendance at the virtual Annual Meeting or by proxy), with the holders of Series A Convertible Preferred Stock voting on an as-converted basis, is required to elect Mark W. Begor, Gregory R. Blank, Catherine L. Burke, Chinh E. Chu, Deborah A. Farrington, Michael D. Hayford, Georgette D. Kiser, Kirk T. Larsen, Frank R. Martire and Matthew A. Thompson (all of the director nominees).  Abstentions and broker “non-votes” will not be counted as votes cast and will have no effect on the vote required to elect each of these director nominees.

 

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More Information About Our Board of Directors

The Board oversees the overall performance of the Company on behalf of the stockholders of the Company.  Members of the Board stay informed of the Company’s business by participating in Board and committee meetings (including regular executive sessions of the Board), by reviewing materials provided to them prior to meetings and otherwise, and through discussions with the Chief Executive Officer and other members of management and staff.

 

 Corporate Governance

 

 

General

The Board is elected by the stockholders of the Company to oversee and direct the management of the Company.  The Board selects the senior management team, also currently known as the Executive Leadership Team, which is charged with managing the Company’s business and affairs.  Having selected the senior management team, the Board acts as an advisor to senior management and monitors its performance.  The Board reviews the Company’s strategies, financial objectives and operating plans.  It also plans for management succession of the Chief Executive Officer, as well as other senior management positions, and oversees the Company’s compliance efforts.

To help discharge its responsibilities, the Board has adopted the NCR Corporation Board of Directors Corporate Governance Guidelines (the “Corporate Governance Guidelines”) that address significant corporate governance issues, including, among other things: the size and composition of the Board;  director independence; Board leadership; roles and responsibilities of the Board;  risk oversight; director compensation and stock ownership; committee membership and structure, meetings and executive sessions; and director selection, training and retirement.  The Corporate Governance Guidelines, as well as the Board’s committee charters, are found under “Corporate Governance” on the “Company” page of NCR’s website at https://www.ncr.com/about/corporate-governance.  You also may obtain a written copy of the Corporate Governance Guidelines, or any of the Board’s committee charters, by writing to NCR’s Corporate Secretary at the address listed on page 27 of this proxy statement.

 

 

Independence

In keeping with the policy contemplated in our Corporate Governance Guidelines, a substantial majority of our Board is independent, which exceeds the NYSE listing standards.  Under the standards of independence set forth in Exhibit B to the Corporate Governance Guidelines, which reflect the independence standards provided in the NYSE listing standards, a Board member may not be independent unless the Board affirmatively determines that the Board member has no material relationship with the Company (whether directly or indirectly), taking into account, in addition to those other factors it may deem relevant, whether the director:

 

  ·  

has not been an employee of the Company or any of its affiliates, or otherwise affiliated with the Company or any of its affiliates, within the past five years;

 

  ·  

has not been affiliated with or an employee of the Company’s present or former independent auditors or its affiliates for at least five years after the end of such affiliation or auditing relationship;

 

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  ·  

has not for the past five years been a paid advisor, service provider or consultant to the Company or any of its affiliates or to an executive officer of the Company, or an employee or owner of a firm that is such a paid advisor, service provider or consultant;

 

  ·  

does not, directly or indirectly, have a material relationship (such as being an executive officer, director, partner, employee or significant stockholder) with a company that has made payments to or received payments from the Company that exceed, in any of the previous three fiscal years, the greater of $1 million or 2% of the other company’s consolidated gross revenues;

 

  ·  

is not an executive officer or director of a foundation, university or other non-profit entity receiving significant contributions from the Company, including contributions in the previous three years that, in any single fiscal year, exceeded the greater of $1 million or 2% of such charitable organization’s consolidated gross revenues;

 

  ·  

has not been employed by another corporation that has (or had) an executive officer of the Company on its board of directors during the past five years;

 

  ·  

has not received compensation, consulting, advisory or other fees from the Company, other than director compensation and expense reimbursement or compensation for prior service that is not contingent on continued service for the past five years; and

 

  ·  

is not and has not been for the past five years a member of the immediate family of:  (i) an officer of the Company;  (ii) an individual who receives or has received during any twelve-month period more than $120,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service that is not contingent on continued service;  (iii) an individual who, with respect to the Company’s independent auditors or their affiliates, is a current partner or a current employee personally working on the Company’s audit or was a partner or employee and personally worked on the Company’s audit;  (iv) an individual who is an executive officer of another corporation that has (or had) an executive officer of the Company on its board of directors;  (v) an executive officer of a company that has made payments to, or received payments from, the Company in a fiscal year that exceeded the greater of $1 million or 2% of the other company’s consolidated gross revenues;  or (vi) any director who is not considered an independent director.

Consistent with the Corporate Governance Guidelines and the NYSE listing standards, on an annual basis the Board, with input from the Committee on Directors and Governance, determines whether each non-employee Board member is considered independent.  In doing so, the Board takes into account the factors listed above and such other factors as it may deem relevant.

The Board has determined that all of the Company’s non-employee directors and nominees, namely Mark W. Begor, Gregory R. Blank, Catherine L. Burke, Chinh E. Chu, Deborah A. Farrington, Georgette D. Kiser, Kirk T. Larsen and Matthew A. Thompson, are independent in accordance with the NYSE listing standards and the Company’s Corporate Governance Guidelines.

 

 

Key Governance Developments

NCR continues to demonstrate a strong commitment to corporate governance practices and policies that reinforce the Board’s alignment with, and accountability to, our stockholders.  In 2016 we eliminated

 

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classification of the Board, twice adjourning our annual meeting of stockholders to solicit votes to obtain the requisite stockholder approval.  Also in 2016, the Board adopted and implemented a comprehensive, robust and fair proxy access bylaw.  We continue to actively engage with our stockholders on a regular basis, our stockholders have the ability to directly nominate director candidates, and we have established processes and procedures for stockholders to communicate with the Board, the independent Lead Director, the Chairman of the Board, any other individual director or NCR’s independent directors as a group.

We have also reduced the ownership threshold necessary for stockholders to directly call a special meeting, and in furtherance of our continuing commitment to strong corporate governance policies, on February 20, 2018, the Board authorized and approved amendments to the Company’s bylaws to reduce the percent ownership requirement necessary to allow stockholders to call a special meeting of stockholders from a majority of the votes entitled to be cast at the meeting to 25% of the votes entitled to be cast at the meeting; provided, that unless requested by the stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, a special meeting need not be called to consider any matter that is substantially the same as a matter voted on at any special meeting of stockholders held in the preceding twelve months.

Since being spun off by AT&T Corp.  in 1996, NCR’s stockholders have had the right to call a special meeting.  Reducing the ownership threshold for calling a special meeting from a majority of the votes entitled to be cast at the meeting to 25% puts the terms of this stockholder right well within market practice for those companies that permit stockholders to call a special meeting.  We believe that our revised special meeting right strikes a reasonable and appropriate balance – meaningfully enhancing the right of stockholders to call a special meeting on the one hand, while on the other hand safeguarding against the risk that substantial administrative and financial burdens could be imposed on our Company, contrary to the interests of our Board and stockholders, by a special meeting being called that does not have meaningful stockholder interest behind it.

In addition, the Board has included in this proxy statement a proposal to amend and restate the Company charter to eliminate the supermajority voting provisions contemplated thereby and require the affirmative vote of a majority of all the votes entitled to be cast to approve each such matter. NCR also received a stockholder proposal on this matter. While a supermajority vote requirement protects against amendments to key provisions of a charter or bylaws, the removal and subsequent replacement of a director, or the entering into of extraordinary transactions without broad stockholder support, the Board has determined, following its deliberation and consideration regarding the rationale for such provisions in light of current corporate governance standards and practices and as permitted by Maryland law, that requiring only a majority of all the votes entitled to be cast on the matter to amend all provisions of the Company’s charter and to approve the extraordinary transactions described in more detail in the applicable proposal in this proxy statement is advisable and in the best interests of NCR.  Similarly, after deliberation and consideration, the Board has determined, also as permitted by Maryland law, that requiring only a majority of all the votes entitled to be cast on the matter to amend all provisions of the Bylaws, to remove a director, and to replace a director after removal, is advisable and in the best interests of NCR, and has included such amendment in the applicable proposal in this proxy statement.  The Board believes the proposal including the amendments to the Company charter described in this paragraph strike the proper balance of protecting against the actions of a few large stockholders while recognizing that broad supermajority provisions are no longer viewed by many parties as consistent with current best practices for corporate governance at U.S. public companies.

The Board included a substantially similar proposal in the Company’s proxy statement in 2019, also following the receipt of a stockholder proposal on the matter, except that it also included a proposed amendment to Section 6.2 of the Company charter to provide that, notwithstanding any provision of law requiring any action to be taken or approved by the affirmative vote of stockholders entitled to cast a greater number of votes, and

 

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except as may otherwise be specifically provided, any such action shall be effective and valid if declared advisable by the Board and taken or approved by the affirmative vote of stockholders entitled to cast a majority of all the votes entitled to be cast on the matter.  Approval of the amendment to Section 6.2 of the Company charter required the affirmative vote of a majority of the voting power of shares of outstanding stock of NCR entitled to vote thereon, and this amendment was approved by our stockholders.  Despite twice adjourning our annual meeting of stockholders to solicit votes, the Company did not obtain the requisite stockholder approval necessary to approve the balance of the proposal.

 

 

New Director Orientation

Using the director selection process described in the Selection of Nominees for Directors section of this proxy statement, in late 2019 and early 2020, the Board elected four directors, Mark W. Begor, Catherine L. Burke, Georgette D. Kiser and Kirk T. Larsen, to the Board.  Each of these directors is included in this proxy statement as a director nominee.

As provided in the Corporate Governance Guidelines, the Company has an orientation process for new directors that includes background material, visits to Company facilities, and meetings with senior management to familiarize the Directors with the Company’s strategic and operating plans, key issues, corporate governance, Code of Conduct, and the senior management team.  NCR created an extensive director orientation program for its recently elected directors designed to meet the objectives above and comprehensively brief new board members.  This program includes the provision of written materials to the new directors and onsite meetings and training with members of the Company’s Executive Leadership Team including, among others, the President and Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel and Secretary, Chief Information Officer, Chief Audit Executive and various business leaders, as well as other key senior management employees.  The program enables the new directors to thoroughly understand the Company’s business, strategic initiatives and strategy activation plans, as well as overall governance and processes, including, among other things, the Company’s organization, the Company charter, bylaws, Board committee charters, the Company Code of Conduct, and Corporate Governance Guidelines.  The design of the program also ensures directors have a direct line of communication to the Company’s key management leaders.  The two directors who joined our Board in 2019 have completed this orientation process and the two directors who joined our Board shortly before the date of this proxy statement are in the process of completing it.

 

 Board Leadership Structure and Risk Oversight

 

 

Leadership Structure

As set out in the Corporate Governance Guidelines, the Board does not have a guideline on whether the role of Chairman should be held by a non-employee director. Instead, our Board has the flexibility to select a Chairman as it deems best for the Company from time to time. Under the Corporate Governance Guidelines the independent directors of the Board will select a Lead Director from the independent directors. Additionally, if the positions of Chairman of the Board and Chief Executive Officer are held by the same person or if the Chairman is a management employee or a non-independent director, the Board has set out the roles of both Chairman and the independent Lead Director, which are included in Exhibit C to the Corporate Governance Guidelines.

 

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Currently the roles of Chairman and CEO are separated, with Frank R. Martire serving as Executive Chairman, Michael D. Hayford serving as Chief Executive Officer and Chinh E. Chu serving as the Board’s independent Lead Director.

During the transition of the Company’s Chief Executive Officer role to Mr. Hayford, the Board determined it would be appropriate to separate the roles of Chief Executive Officer and Chairman. As a result, simultaneous to the hiring of Mr. Hayford, the Board recruited Mr. Martire to the role of Executive Chairman. Mr. Martire’s leadership during this transition period has been a success, and by all accounts Mr. Hayford has proven to be a talented leader as demonstrated in the current operational and financial strength of the Company.

In light of Mr. Hayford’s demonstrated success and the Board’s confidence in his leadership, Mr. Martire will reduce the amount of time he spends as Executive Chairman and his compensation will be adjusted accordingly. Mr. Martire has agreed to remain Executive Chairman for one year at which point the Board will make a determination on the most effective leadership structure moving forward.

Consistent with the Corporate Governance Guidelines, our independent Lead Director has broad authority, as follows. The independent Lead Director, among other things, presides at all Board meetings at which the Chairman is not present. The independent Lead Director leads executive sessions of the independent directors, normally at every meeting. He or she may ask the Chairman and CEO to join portions of the executive sessions. The independent Lead Director serves as liaison between the Chairman and the independent directors; frequently communicates with the Chairman and Chief Executive Officer; is authorized to call meetings of the independent directors; obtains Board member and management input and, with the Chief Executive Officer, sets the agenda for the Board; approves meeting schedules to assure that there is sufficient time for discussion of all agenda items; works with the Chief Executive Officer to ensure that Board members receive the right information on a timely basis; stays current on major risks and focuses the Board members on such risks; molds a cohesive Board to support the success of the Chief Executive Officer; works closely with the Committee on Directors and Governance to evaluate Board and committee performance; facilitates communications among directors; assists in the recruiting and retention of new Board members (with the Committee on Directors and Governance, the Chairman and the Chief Executive Officer); in conjunction with the Chairman, the Chief Executive Officer and the Committee on Directors and Governance, ensures that committee structure and committee assignments are appropriate and effective; works with the Committee on Directors and Governance to ensure outstanding governance processes; leads discussions, along with the chair of the Compensation and Human Resource Committee, regarding Chief Executive Officer performance, personal development and compensation; and, if requested by major stockholders of the Company, is available for consultation and direct communication with such stockholders. Additionally, the leadership and oversight of the Board’s other independent directors continues to be strong, and further structural balance is provided by the Company’s well-established corporate governance policies and practices, including its Corporate Governance Guidelines. Independent directors currently account for eight out of ten of the Board’s members, and make up all of the members of the Board’s Compensation and Human Resource Committee (the “CHRC”), Audit Committee and Committee on Directors and Governance.

 

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Risk Oversight

As a part of its oversight responsibilities, the Board regularly monitors management’s processes for identifying and addressing areas of material risk to the Company, including operational, financial, cybersecurity, legal, regulatory, strategic and reputational risks.  In doing so, the Board receives regular assistance and input from its committees, as well as regular reports from members of the Executive Leadership Team and other senior management.  While the Board and its committees provide oversight, management is responsible for implementing risk management programs, supervising day-to-day risk management and reporting to the Board and its committees on these matters.

The Audit Committee of the Board has primary responsibility for overseeing the assessment of financial, strategic, cybersecurity and other risks and the Company’s general risk management programs.  In carrying out this responsibility, the Audit Committee regularly evaluates the Company’s risk identification, risk management and risk mitigation strategies and practices.  The Company has established an Enterprise Risk Management team that is sponsored by the Company’s Chief Operating Officer and is co-led by the Company’s Chief Audit Executive and Chief Ethics & Compliance Officer.  The Audit Committee and the full Board receive and review periodic reports prepared by this team.  In general, the reports identify, analyze and provide the status of major risks to the Company.  In addition, the Audit Committee regularly receives management reports on information security and enhancements to cybersecurity protections, including benchmarking assessments, which it then shares with the Board.  The full Board receives at least annual reports on this topic directly from management.  Included among the members of both the Board and the Audit Committee are directors with substantial expertise in cybersecurity matters, and Board members actively engage in dialogue on the Company’s information security plans, and in discussions of improvements to the Company’s cybersecurity defenses.  When, in management’s judgment, a threatened cybersecurity incident has the potential for material impacts, the Audit Committee is advised and management makes regular reports to the committee.

The CHRC regularly considers potential risks related to the Company’s compensation programs, as discussed below, and the Committee on Directors and Governance also considers risks within the context of its responsibilities (as such responsibilities are defined in the committee charter), including legal and regulatory compliance risks.  The Committee on Directors and Governance also receives periodic updates on compliance and regulatory risk items from the Company’s Chief Compliance Officer.

After each committee meeting, the Audit Committee, CHRC and Committee on Directors and Governance each report at the next meeting of the Board all significant items discussed at each committee meeting, which includes a discussion of items relating to risk oversight where applicable.

We believe the leadership structure of the Board also contributes to the effective facilitation of risk oversight as a result of: (i) the role of the Board committees in risk identification and mitigation; (ii) the direct link between management and the Board achieved by having our two management directors serve as Executive Chairman and Chief Executive Officer; and (iii) the role of our active independent Lead Director whose duties include ensuring the Board reviews and evaluates major risks to the Company, as well as measures proposed by management to mitigate such risks.

All of the above elements work together to ensure an appropriate focus on risk oversight.

 

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 Compensation Risk Assessment

The Company takes a prudent and appropriately risk-balanced approach to its incentive compensation programs to ensure that these programs promote the long-term interests of our stockholders and do not contribute to unnecessary risk-taking.  The CHRC regularly evaluates the Company’s executive and broad-based compensation programs, including the mix of cash and equity, balance of short-term and longer-term performance focus, balance of revenue and profit-based measures, stock ownership guidelines, clawback policies and other risk mitigators.  The CHRC directly engages its independent compensation consultant, Frederic W. Cook & Co., Inc. (“FWC”), to assist in this process.  Based on this evaluation, the CHRC concluded that none of the Company’s compensation policies and plans are reasonably likely to have a material adverse effect on the Company.

 

 Committees of the Board

The Board has three standing committees:  the Audit Committee, the Compensation and Human Resource Committee and the Committee on Directors and Governance.

The Board has adopted a written charter for each such committee that sets forth the committee’s mission, composition and responsibilities.  Each charter can be found under “Corporate Governance” on the “Company” page of NCR’s website at https://www.ncr.com/about/corporate-governance.

The Board met eight times in 2019 and each incumbent member of the Board attended 75% or more of the aggregate of:  (i) the total number of meetings of the Board (held during the period for which such person was a director), and (ii) the total number of meetings held by all committees of the Board on which such person served (during the periods that such person served).  The Company has no formal policy regarding director attendance at its annual meeting of stockholders.  All of the Company’s directors then in office were in attendance at the Company’s 2019 Annual Meeting of Stockholders, which was a virtual, and not an in-person, meeting.

The members of each committee as of the end of fiscal 2019 and the number of meetings held in fiscal 2019 are shown below:

 

Name

  

Audit

Committee

  

Compensation

and

Human

Resource

Committee

  

Committee

on

Directors

and

Governance

Catherine L. Burke(1)

   X       X

Gregory R. Blank

   X      

Chinh E. Chu

      X    X

Richard L. Clemmer

      X    Chair

Robert P. DeRodes

   X      

Deborah A. Farrington

   X      

Kurt P. Kuehn

   Chair      

Kirk T. Larsen(2)

   X    X   

Linda Fayne Levinson

      Chair    X

Matthew A. Thompson

   X      

Number of meetings in 2019

   9    6    8

(1) Effective November 5, 2019, Mrs. Burke was elected to serve on the Audit Committee and the Committee on Directors and Governance.

(2) Effective November 5, 2019, Mr. Larsen was elected to serve on the Audit Committee and the Compensation and Human Resource Committee.

 

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 Audit Committee

The Audit Committee is the principal agent of the Board in overseeing:  (i) the quality and integrity of the Company’s financial statements;  (ii) the assessment of financial, strategic, cybersecurity and other risk and risk management programs;  (iii) the independence, qualifications, engagement and performance of the Company’s independent registered public accounting firm;  (iv) the performance of the Company’s internal auditors;  (v) the integrity and adequacy of internal controls;  and (vi) the quality and adequacy of disclosures to stockholders.  Among other things, the Audit Committee also:

 

  ·  

selects, evaluates, sets compensation for and, where appropriate, replaces the Company’s independent registered public accounting firm;

 

  ·  

pre-approves all audit and non-audit services to be performed by the Company’s independent registered public accounting firm;

 

  ·  

reviews and discusses with the Company’s independent registered public accounting firm its services and quality control procedures and the Company’s critical accounting policies and practices;

 

  ·  

regularly reviews the scope and results of audits performed by the Company’s independent registered public accounting firm and internal auditors;

 

  ·  

prepares the report required by the SEC to be included in the Company’s annual proxy statement;

 

  ·  

meets with management to review the adequacy of the Company’s internal control framework and its financial, accounting, reporting and disclosure control processes;

 

  ·  

reviews the Company’s periodic SEC filings and quarterly earnings releases;

 

  ·  

discusses with the Company’s Chief Executive Officer and Chief Financial Officer the procedures they follow to complete their certifications in connection with NCR’s periodic filings with the SEC;

 

  ·  

discusses management’s plans with respect to the Company’s major financial, strategic, cybersecurity and other risk exposures and the steps management has taken to monitor and control such exposures;

 

  ·  

reviews the Company’s compliance with legal and regulatory requirements; and

 

  ·  

reviews the effectiveness of the Internal Audit function, including compliance with the Institute of Internal Auditors’ International Professional Practices Framework for Internal Auditing consisting of the Definition of Internal Auditing, Code of Ethics and the Standards.

All members of the Audit Committee during 2019 were, and the current members are, independent and financially literate as determined by the Board under applicable SEC rules and NYSE listing standards.  In addition, the Board has determined that Mr. Blank, Mr. DeRodes, Ms. Farrington, Mr. Kuehn, Mr. Larsen and Mr. Thompson are each an “audit committee financial expert,” as defined under SEC regulations.  The Board has also determined that each member of the Audit Committee is independent based on independence standards set forth in the Board’s Corporate Governance Guidelines, which reflect the listing standards of the NYSE and the applicable rules of the SEC.  No member of the Audit Committee may receive any compensation, consulting, advisory or other fees from the Company, other than the Board compensation described below

 

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under the Director Compensation section in this proxy statement, starting on page 28 as determined in accordance with applicable SEC rules and NYSE listing standards.  Members serving on the Audit Committee are limited to serving on no more than two other audit committees of public company boards of directors, unless the Board evaluates and determines that these other commitments would not impair the member’s effective service to the Company.

 

 Compensation and Human Resource Committee

The Compensation and Human Resource Committee (“CHRC”) provides general oversight of the Company’s management compensation philosophy and practices, benefit programs and strategic workforce initiatives, and leadership development plans.  In doing so, the CHRC reviews and approves executive officer total compensation objectives and programs, and the competitiveness of total compensation practices.  Among other things, the CHRC also:

 

  ·  

evaluates executive officer performance levels and determines their base salaries, incentive awards and other compensation;

 

  ·  

discusses its evaluation and compensation determinations for the Chief Executive Officer at Board executive sessions;

 

  ·  

reviews executive compensation plans and recommends them for Board approval;

 

  ·  

oversees our compliance with SEC and NYSE compensation-related rules;

 

  ·  

reviews and approves executive officer employment, severance, change in control and similar agreements/plans;

 

  ·  

reviews management proposals for significant organizational changes;

 

  ·  

annually assesses compensation program risks; and

 

  ·  

oversees management succession and development.

The CHRC may delegate its authority to the Company’s Chief Executive Officer and/or other appropriate delegates to make equity awards to individuals (other than executive officers) in limited instances.

The CHRC retains and is advised by an independent compensation consultant, Frederic W. Cook & Co., Inc.  The CHRC has directly engaged FWC to review the Company’s long-term incentive program, Stock Incentive Plan (the “Stock Plan”), Annual Incentive Plan (which includes the Management Incentive Plan and the Customer Success Bonus), and other key programs related to the compensation of executive officers.  As directed by the CHRC, FWC provides a competitive assessment of our executive compensation programs relative to our compensation philosophy;  reviews our compensation peer group companies;  provides expert advice and competitive market rate information relating to executive officer compensation;  assists in designing variable incentive, perquisite and other compensation programs, including advice regarding performance goals;  assists with compliance with applicable tax laws, disclosure matters and other technical matters;  conducts an annual risk assessment of our compensation programs;  and regularly consults with the CHRC regarding such matters.  FWC did not perform any additional work for the Company or its management

 

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in 2019.  The CHRC retained FWC after reviewing all factors relevant to its independence from management under applicable SEC rules and NYSE listing standards, and concluding that FWC was independent and its work for the CHRC did not raise any conflict of interest.

The Board has determined that each member of the CHRC is independent based on independence standards set forth in the Board’s Corporate Governance Guidelines which reflect NYSE listing standards and satisfy the additional provisions specific to compensation committee membership set forth in the NYSE listing standards.

 

 Committee on Directors and Governance

The Committee on Directors and Governance (the “CODG”) is responsible for reviewing the Board’s corporate governance practices and procedures, including the review and approval of each related party transaction under the Company’s Related Person Transaction Policy (unless the CODG determines that the approval or ratification of such transaction should be considered by all of the disinterested members of the Board), and the Company’s ethics and compliance program.  Among other things, the CODG also:

 

  ·  

recommends to the Board the principles of director compensation, including compensation to be paid to directors, and reviews and makes recommendations to the Board concerning director compensation;

 

  ·  

reviews the composition of the Board and the qualifications of persons identified as prospective directors, recommends the candidates to be nominated for election as directors, and, in the event of a vacancy on the Board, recommends any successors;

 

  ·  

recommends to the Board the assignment of directors to various committees;

 

  ·  

establishes procedures for evaluating the performance of the Board and oversees such evaluation;

 

  ·  

reviews the Company’s charter, bylaws and Corporate Governance Guidelines and makes any recommendations for changes, as appropriate; and

 

  ·  

monitors compliance with independence standards established by the Board.

The CODG is authorized to engage consultants to review the Company’s director compensation program.

The Board has determined that each member of the CODG is independent based on independence standards set forth in the Board’s Corporate Governance Guidelines, which reflect the listing standards of the NYSE.

 

 Selection of Nominees for Directors

The CODG and our other directors are responsible for recommending nominees for membership to the Board.  The director selection process is described in detail in the Corporate Governance Guidelines. In determining candidates for nomination, the CODG will seek the input of the Chairman of the Board and the Chief Executive Officer, and, in the event the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the independent Lead Director, and will consider individuals recommended for Board membership by the Company’s stockholders in accordance with the Company’s bylaws and applicable

 

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law.  In addition, periodically the Board engages an outside search firm, including most recently Ridgeway Partners, to assist to identify candidates who have desired experience and expertise, and meet the qualification guidelines described below.

Exhibit A to the Corporate Governance Guidelines include qualification guidelines for directors standing for re-election and new candidates for membership on the Board.  All candidates are evaluated by the CODG using these qualification guidelines.  In accordance with the guidelines, as part of the selection process, in addition to such other factors as it may deem relevant, the CODG will consider a candidate’s:

 

  ·  

management experience (including with major public companies with multinational operations);

 

  ·  

other areas of expertise or experience that are desirable given the Company’s business and the current make-up of the Board (such as expertise or experience in information technology businesses, manufacturing, international, financial or investment banking or scientific research and development);

 

  ·  

desirability of range in age to allow staggered replacement of directors of desired skills and experience to permit appropriate Board continuity;

 

  ·  

independence, as defined by the Board;

 

  ·  

diversity of thought and perspectives, such as on the basis of age, race, gender, and ethnicity, or on the basis of geographic knowledge, industry experience, board tenure, or culture;

 

  ·  

knowledge and skills in accounting and finance, business judgment, general management practices, crisis response and management, industry knowledge, international markets, leadership, and strategic planning;

 

  ·  

personal characteristics such as integrity, accountability, financial literacy and high performance standards;

 

  ·  

willingness to devote the appropriate amount of time and energy to serving the best interests of the Company; and

 

  ·  

commitments to other entities, including the number of other public-company boards on which the candidate serves.

The Board and the CODG are committed to finding proven leaders who are qualified to serve as NCR directors and may from time to time engage outside search firms to assist in identifying and contacting qualified candidates.

All of the candidates for election are currently serving as directors of the Company and, other than Frank R. Martire, NCR’s Executive Chairman, and Michael D. Hayford, NCR’s Chief Executive Officer, have been determined by the Board to be independent.

Stockholders wishing to recommend individuals for consideration as directors should contact the CODG by writing to the Company’s Corporate Secretary at NCR Corporation 864 Spring Street NW, Atlanta, Georgia 30308-1007.  Recommendations by stockholders that are made in this manner will be evaluated in the same manner as other candidates.

 

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Stockholders who wish to nominate directors for inclusion in NCR’s proxy statement pursuant to the proxy access provisions in the Company’s bylaws, or to otherwise nominate directors for election at NCR’s next annual meeting of stockholders, must follow the procedures described in the Company’s bylaws, the current form of which is available under “Corporate Governance” on the “Company” page of NCR’s website at https://www.ncr.com/about/corporate-governance.  See Procedures for Nominations Using Proxy Access, Procedures for Stockholder Proposals and Nominations for 2021 Annual Meeting Outside of SEC Rule 14a-8 and Procedures for Stockholder Proposals and Nominations for 2021 Annual Meeting Pursuant to SEC Rule 14a-8 beginning on page 102 of this proxy statement for further details regarding how to nominate directors.

 

 Communications with Directors

Stockholders or interested parties wishing to communicate directly with the Board, the independent Lead Director or any other individual director, the Chairman of the Board, or NCR’s independent directors as a group are welcome to do so by writing to the Company’s Corporate Secretary at NCR Corporation, 864 Spring Street NW, Atlanta, Georgia 30308-1007.  The Corporate Secretary will forward appropriate communications.  Any matters reported by stockholders relating to NCR’s accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee as appropriate.  Anonymous and/or confidential communications with the Board may also be made by writing to this address.  For more information on how to contact the Board, please see the Company’s Corporate Governance website at https://www.ncr.com/about/corporate-governance.

 

 Code of Conduct

The Company has a Code of Conduct that sets the standard for ethics and compliance for all of its directors and employees.  The Code of Conduct is available on the Company’s Corporate Governance website at http://www.ncr.com/company/corporate-governance/code-of-conduct.  To receive a copy of the Code of Conduct, please send a written request to the Corporate Secretary at the address provided above.

 

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 Director Compensation

 

 Director Compensation Program

The Committee on Directors and Governance adopted the 2017 NCR Director Compensation Program (the “Program”) pursuant to authority granted by our Board.  In adopting the Program, the Committee considered peer group director pay practices and other relevant data and considerations, including material provided by Frederic W. Cook & Co., Inc., the independent compensation consultant for the Compensation and Human Resource Committee.  The Program provides for the payment of annual retainers and annual equity grants to non-employee Board members in accordance with our Stock Plan.  Our Stock Plan generally caps non-employee director pay at $1 million per calendar year (including cash and grant date fair value of equity).

Mr. Martire does not receive compensation under the Program for his service as Executive Chairman of the Board.  Mr. Blank received no compensation under the Program for the portion of 2019 that he was the Board designee of The Blackstone Group L.P. (“Blackstone”), due to Blackstone’s ownership of certain NCR Series A Convertible Preferred Stock (“Preferred Stock”).  Mr. Blank began receiving standard compensation under the Program (on a prorated basis) on substantially the same terms as other NCR directors for his continued director service following the retirement of such Preferred Stock effective September 20, 2019.

 

 

Annual Retainer

In 2019, the Committee on Directors and Governance and the Board determined that the value of the annual retainer for each non-employee director would remain unchanged at $80,000, and the additional annual retainer for independent Lead Director service would remain unchanged at $40,000.  Also remaining unchanged in 2019 were the additional annual retainers under the Program for Committee Chair and Committee member services:

 

Additional Annual Retainers

for Board Committee Service ($)

 
Committee   

Committee

Chair

    

Committee

Members

 

  Audit

     34,000        15,000  

  Compensation and Human Resource Committee

     27,000        11,000  

  Committee on Directors and Governance

     18,000        8,000  

The Committee and the Board determined that the foregoing amounts continued to be appropriate

based on, among other things, a desire to retain and attract highly qualified and experienced directors, and the findings of its review of competitive board pay practices.

The Program also provides for Board grants of prorated annual cash retainers to directors who join the Board mid-year or in other appropriate circumstances.  Mrs. Burke and Mr. Larsen, who joined our Board on September 23, 2019, were granted these prorated annual cash retainers for their Board Service commencing September 23, 2019, and their Committee service commencing November 5, 2019:  Mrs. Burke ($46,400 for Board service, $6,900 for Audit Committee service and $3,680 for Committee on Directors and Governance service), and Mr. Larsen ($46,400 for Board service, $6,900 for Audit Committee service and $5,060 for Compensation and Human Resource Committee service).  Mr. Blank, who began receiving NCR director compensation effective as of September 20, 2019, was granted these prorated annual cash retainers:  $47,200 for Board service; and $8,850 for Audit Committee service, which amounts will be paid in full on March 31, 2020.

 

 

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Annual retainers are generally paid in four equal installments on June 30, September 30, December 31 and March 31.  They may be received at the director’s election in:  (i) cash, (ii) NCR common shares, (iii) one-half cash and one-half NCR common shares, or (iv) deferred NCR common shares distributable after director service ends.  For annual retainers earned in 2019, Mr. Blank, Mrs. Burke, Ms. Farrington, Mr. Kuehn, Mr. Larsen and Mr. Thompson elected to receive cash retainers; Mr. Chu and Ms. Levinson elected to receive one-half of their retainers in cash and one-half in NCR common shares; and Mr. Clemmer and Mr. DeRodes elected to receive their retainers in deferred NCR common shares.

 

 

Annual Equity Grant

Under the Program, the Committee on Directors and Governance and the Board determine the value of the annual equity grant made to continuing non-employee directors at the annual meeting of NCR stockholders.  In 2019, the Committee recommended, and the Board agreed, that the annual equity grant value should remain unchanged at $225,000 for the same reasons noted above for continuing the annual retainers unchanged.  Accordingly, on the April 24, 2019 Annual Meeting date, each eligible director received an annual equity grant of restricted stock units (RSUs) valued at $225,000, except for Mrs. Burke and Mr. Larsen who had not yet joined our Board, and Mr. Blank who was not receiving NCR director compensation as of that date.  Ms. Levinson’s additional RSU grant in connection with her service until October 28, 2019 as a member of the Board of Directors of our subsidiary, NCR Brasil – Indústria de Equipamentos Para Automação Ltda., also remained unchanged at a value of $40,000.  She ceased serving on the Board of Directors of this subsidiary effective October 28, 2019.

The Program also permits prorated mid-year equity grants for non-employee directors who join our Board mid-year and in other appropriate circumstances. Mrs. Burke and Mr. Larsen, who joined our Board mid-year as noted above, were each awarded prorated mid-year equity grants under the Program valued at $130,500.  Mr. Blank was awarded a prorated mid-year equity grant valued at $132,750 on February 1, 2020.

Annual equity grants made to directors on the Annual Meeting date vest in four equal quarterly installments beginning three months after the grant date, and may be deferred at the director’s election.  Mid-year equity grants generally vest on the same quarterly vesting dates that apply to full year directors (as applicable).  For 2019, Mr. Clemmer, Mr. DeRodes and Mr. Kuehn elected to defer receipt of their 2019 annual equity grant shares until director service ends.

 

 

Director Stock Ownership Guidelines

The Board’s Corporate Governance Guidelines include stock ownership guidelines promoting commonality of interest with our stockholders by encouraging non-employee directors to accumulate a substantial stake in NCR common stock.  Under these guidelines, non-employee directors are encouraged to accumulate NCR stock ownership equal to five times the annual retainer amount.  Newly elected directors have five years to attain this ownership level.  Ownership includes shares owned outright, and interests in restricted stock, RSUs or deferred shares, and excludes stock options.  As of December 31, 2019, all of our non-employee directors exceeded the guidelines, except for Mrs. Burke and Mr. Larsen who joined our Board in 2019, and Mr. Blank who began receiving NCR director compensation effective September 20, 2019.

 

 

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 Director Compensation Tables

 

Director Compensation for 2019 ($)  
   Director Name   

Fees

(Annual Retainers)

Earned in Cash

     Stock Awards(1)      Total  

 

  Gregory R. Blank

 

  

 

 

 

 

26,904

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

26,904

 

 

 

 

 

  Catherine (Katie) L. Burke

 

  

 

 

 

 

31,230

 

 

 

 

  

 

 

 

 

130,523

 

 

 

 

  

 

 

 

 

161,753

 

 

 

 

 

  Chinh E. Chu

 

  

 

 

 

 

69,500

 

 

 

 

  

 

 

 

 

294,577

 

 

 

 

  

 

 

 

 

364,077

 

 

 

 

 

  Richard L. Clemmer

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

334,104

 

 

 

 

  

 

 

 

 

334,104

 

 

 

 

 

  Robert P. DeRodes

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

320,078

 

 

 

 

  

 

 

 

 

320,078

 

 

 

 

 

  Deborah A. Farrington

 

  

 

 

 

 

95,000

 

 

 

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

320,015

 

 

 

 

 

  Kurt P. Kuehn

 

  

 

 

 

 

114,000

 

 

 

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

339,015

 

 

 

 

 

  Kirk T. Larsen

 

  

 

 

 

 

31,860

 

 

 

 

  

 

 

 

 

130,523

 

 

 

 

  

 

 

 

 

162,383

 

 

 

 

 

  Linda Fayne Levinson

 

  

 

 

 

 

57,500

 

 

 

 

  

 

 

 

 

322,556

 

 

 

 

  

 

 

 

 

380,056

 

 

 

 

 

  Matthew A. Thompson

 

  

 

 

 

 

95,000

 

 

 

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

320,015

 

 

 

 

(1) Aggregate grant date fair value, as determined in accordance with FASB ASC Topic 718, of annual equity grants (including deferred grants), and annual cash retainers received as current or deferred shares (also referred to as “phantom stock units”).  See Note 9 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, where we explain assumptions made in valuing equity awards.  Excludes Mr. Blank’s prorated annual equity grant, which was not made until 2020.

 

Grant Date Fair Value(1) of Director 2019 Retainer and Equity Grant Shares ($)  
   Director Name   

Annual Equity

RSU Grant

    

Current Stock

in lieu of cash

    

Deferred

Stock in lieu

of cash

 

 

  Gregory R. Blank

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Catherine (Katie) L. Burke

 

  

 

 

 

 

130,523

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Chinh E. Chu

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

69,562

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Richard L. Clemmer

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

109,089

 

 

 

 

 

  Robert P. DeRodes

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

95,063

 

 

 

 

 

  Deborah A. Farrington

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Kurt P. Kuehn

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Kirk T. Larsen

 

  

 

 

 

 

130,523

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Linda Fayne Levinson

 

  

 

 

 

 

265,003

 

 

 

 

  

 

 

 

 

57,553

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Matthew A. Thompson

 

  

 

 

 

 

225,015

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

(1) Grant date fair value, as determined in accordance with FASB ASC Topic 718, of annual equity grants (including deferred grants), and annual cash retainers received in the form of current shares or deferred shares (also referred to as “phantom stock units”).  See Note 9 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for an explanation of the assumptions we make in the valuation of our equity awards.  Excludes Mr. Blank’s prorated annual equity grant which was not made until 2020.

 

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Shares of NCR Common Stock Underlying Director Equity Awards

as of December 31, 2019 (#)

 
  Director Name   

Options

Outstanding

as of

12/31/19

    

RSUs

Outstanding

as of

12/31/19

    

Deferred

Shares

Outstanding

as of

12/31/19

 

 

  Gregory R. Blank(1)

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Catherine (Katie) L. Burke

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,700

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Chinh E. Chu

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,832

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Richard L. Clemmer

 

  

 

 

 

 

34,881

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

117,516

 

 

 

 

 

  Robert P. DeRodes

 

  

 

 

 

 

34,881

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

51,945

 

 

 

 

 

  Deborah A. Farrington

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,832

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Kurt P. Kuehn

 

  

 

 

 

 

10,039

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

50,818

 

 

 

 

 

  Kirk T. Larsen

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,700

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Linda Fayne Levinson

 

  

 

 

 

 

34,881

 

 

 

 

  

 

 

 

 

4,513

 

 

 

 

  

 

 

 

 

8,077

 

 

 

 

 

  Matthew A. Thompson

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,832

 

 

 

 

  

 

 

 

 

 

 

 

 

(1) Excludes Mr. Blank’s prorated annual equity grant which was not made until 2020.

 

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 Proposal 2 – Say On Pay:  Advisory Vote on the
 Compensation of the Named Executive Officers

 

 FOR 

 

  

The Board of Directors recommends that

     

Robust oversight by the Compensation Committee

  

 

you vote FOR the proposal to approve

     

Excellent pay for performance alignment

  

 

the compensation of the named executive officers.

     

Strong link between management and stockholder interests

 

 

 Proposal Details

We currently conduct a Say On Pay vote every year at our annual meeting of stockholders as required by Section 14A of the Exchange Act.  Unless our Board changes its policy, our next Say On Pay vote following the 2020 Annual Meeting of Stockholders will be held at our 2021 Annual Meeting of Stockholders.  While this vote is non-binding, the Board and the Compensation and Human Resource Committee (the “Committee” as referenced throughout the various sections of this Proposal 2, including the Executive Compensation – Compensation Discussion & Analysis section) value the opinions of our stockholders.  The Committee will consider the outcome of the Say On Pay vote as part of its annual evaluation of our executive compensation program.

Please read the following Executive Compensation – Compensation Discussion & Analysis section and our Executive Compensation Tables for information necessary to inform your vote on this proposal.

 

How Does the Board Recommend that I Vote on this Proposal?

 

 

 Board Recommendation

The Board of Directors recommends that you vote to approve, on a non-binding and advisory basis, the compensation of the named executive officers as disclosed in these proxy materials.  Proxies received by the Board will be voted FOR this proposal unless they specify otherwise.

 

 

 Vote Required for Approval

Under applicable Maryland law and the Company’s Charter and Bylaws, majority of all the votes cast by holders of our common stock and Series A Convertible Preferred Stock voting together as a single class (in person via attendance at the virtual meeting or by proxy), with the Series A Convertible Preferred Stock voting on an as-converted basis, is required to approve the non-binding advisory vote on the compensation of the named executive officers.  Under Maryland law, abstentions and broker “non-votes” will not be counted as votes cast and will have no effect on the approval of this proposal. Proxies recieved by the Board will be voted FOR this proposal unless they specify otherwise.

 

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 Executive Compensation – Compensation

 Discussion & Analysis

 

 

 Our Named Executive Officers

Our Compensation Discussion & Analysis describes NCR’s 2019 executive compensation program for our named executives, who are listed below.  The Committee has sole authority over the program and makes all compensation decisions for our Named Executive  Officers (the “named executives”). For more about the compensation of our named executives, see the Executive Compensation Tables below.

 

 

Michael Hayford – President and Chief Executive Officer (CEO)

 

Frank Martire – Executive Chairman of the Board

 

Owen Sullivan – Chief Operating Officer (COO)

 

Andre Fernandez – Executive Vice President and Chief Financial Officer (CFO)

 

Paul Langenbahn – Executive Vice President and President, NCR Commerce

 

In light of Mr. Hayford’s demonstrated success and our Board’s confidence in his leadership, following our 2020 Annual meeting Mr. Martire will reduce the amount of time he spends as Executive Chairman as noted in the Leadership Structure section above. His compensation will be reduced accordingly, as described further herein.

 

 Executive Summary

 

 Business Overview

NCR is a leading software- and services-led enterprise provider in the financial, retail, hospitality and telecommunications and technology industries.  NCR is a global company that is headquartered in Atlanta, Georgia.  NCR offers a range of solutions that help businesses of all sizes run the store, run the restaurant and run self-service banking channels.  Our portfolio includes digital first offerings for banking, restaurants and retailers, as well as payments processing, multi-vendor connected device services, automated teller machines (ATMs), point of sale (POS) terminals and self-service technologies.  We also resell third-party networking products and provide related service offerings in the telecommunications and technology sectors.  Our solutions are also designed to support our transition to an as-a-Service company and enable us to be the technology-based service provider of choice to our customers.

 

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 NCR Strategic Priorities

 

Drive top line revenue growth by investing in our strategic platforms

 

Continue to shift business mix to recurring revenue streams and away from hardware towards software and services-led offerings

 

Focus on optimizing our spend to improve our operating margins

 

 2019 Focus Areas

 

  Customer Care

  

Improve the customer experience and execution of new product introductions

  Stockholder Value

  

Accelerate profitable top-line revenue growth by investing in and shifting our revenue mix to recurring software and services revenue streams we identify as strategic growth platforms, while improving the Company’s cost structure

  Strategic Growth Platforms and

Targeted Acquisitions

  

Increase capital expenditures in strategic growth platforms and target acquisitions to gain solutions that drive the highest growth and return on investment

  Reward and Develop Talent

  

Develop, reward and retain talent with competitive recruiting, training and effective incentive-based compensation programs

  Sales Enablement

  

Provide our sales force with top-performing and secure products packaged to target our desired revenue mix and drive customer delight and stockholder value, as well as invest in appropriate training programs to enable success

 

 

2019 Business Transformation

Our industry is experiencing a dramatic shift in which our customers increasingly demand more digital, mobile, software-focused solutions.  In 2018, when the Board initiated a search process for our next CEO, they prioritized selecting a leader who could significantly accelerate the business transformation already underway and drive the company toward profitable growth and stronger returns.  To that end, the Board engaged a search firm to identify top talent within our industry, and identified Michael Hayford as having not only deep experience across software and technology solutions businesses, but also a proven track record of effective leadership in strategic business transformation.  Upon joining the company in April 2018, Mr.  Hayford initiated a significant refreshment of our senior leadership team and in November 2018 initiated a strategic plan to accelerate growth.  In 2019, NCR undertook a strategic transformation to accelerate growth by shifting our business mix from hardware to more software and services, and driving increased recurring revenue through investments in our strategic growth platforms and by shifting to a subscription-based model.  As a result, 2019 was a transformational year as the company embarked on executing against the new strategic priorities set by Michael Hayford.

In planning for 2019, the Compensation and Human Resources Committee (the “Committee”) determined that it was appropriate to structure the 2019 executive compensation program in a way that better aligned with the business and leadership transitions.  In particular, the Committee believed it was appropriate to provide Mr. Hayford the opportunity to first develop a long-term operating plan and strategic priorities, which would then guide the selection of the operating metrics to which management would be held accountable over a

 

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multi-year performance period.  Additionally, given the transition, the newly established business priorities for 2019 required management to focus on near term objectives that would ensure a successful transformation.  However, this created challenges in setting meaningful long-term goals.  As a result, the Committee determined that setting metrics for a one-year period for our performance-based restricted stock unit (RSU) grant was appropriate to incentivize strong performance and set the stage for strong long-term performance.  The Committee also acknowledged that it would be appropriate to evolve the program in subsequent years as the strategic transformation was further advanced and the company was better positioned to set meaningful long-term goals for the business.  In line with this evolution, the Committee has approved changes to our executive compensation program for 2020, as detailed in the Stockholder Engagement and Responsiveness to 2019 Say On Pay Vote section, that both drive continued progress on our strategic transformation and are responsive to feedback received from our stockholders.

 

 Company 2019 Financial Performance

 

    2019 Financial Highlights

 

 

      

  

Our Revenue was $6.92 billion, which increased 8% from prior year, driven by growth in all segments.

 

      

  

Our recurring revenue (recurring revenue is for products and services under contract for which revenue is recognized over time) increased 6% from the prior year and comprised 45% of total revenue.

 

      

  

Completed the amendment and extension of our senior credit facility as well as refinanced the unsecured notes due 2021.

 

      

  

Completed the redemption and conversion of the remaining Series A preferred stock held by Blackstone.

 

      

  

Completed acquisition of D3 Technology, Inc, an online and mobile banking platform for large financial institutions.

 

      

  

Completed acquisition of Zynstra, Ltd., an edge virtualization technology provider, to further enhance our next generation store architecture.

 

      

  

Our strong performance allowed us to exceed our threshold performance objectives for our 2019 Long-Term Incentive Plan and Annual Incentive Plan.

 

 

These charts compare our performance results for 2019 vs. 2018:

 

LOGO  

LOGO

 

LOGO

 

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In addition and as shown in the chart below, a $100 investment in NCR common stock at the beginning of 2019 yielded a better return for our stockholders as compared to competitor groups as reflected in our Form 10-K and the S&P 500. This serves as further evidence that our business transformation is being recognized and rewarded.

 

LOGO

 

 Stockholder Engagement and Responsiveness to 2019 Say On Pay Vote

Our annual Say On Pay vote is one avenue for the Board to receive feedback from stockholders regarding our executive compensation program.  The Board was disappointed with the results of our advisory Say On Pay proposal at our 2019 annual meeting.  In order to understand what motivated stockholders’ votes, NCR actively sought feedback by reaching out to stockholders owning approximately 71% of our outstanding shares and speaking with stockholders owning approximately 45% of our outstanding shares.  Linda Levinson and Kirk Larsen, Chair and member of the Compensation and Human Resource Committee respectively, participated in meetings with stockholders owning 30% of shares outstanding.  All feedback from this engagement initiative was shared with the full Board and helped to inform the changes approved by the Committee for our executive compensation program.

Over the course of engagement, we learned that stockholders were generally supportive of the 2018 compensation program design and even further supportive of our program when taking into account the go-forward commitments the Board made for changes to the 2019 executive compensation program, which included:

 

   

Augmented disclosure of the metrics under the 2019 Annual Incentive Plan: EBITDA (80% weighting) and Net Promoter Score (20% weighting) together with business unit performance modifiers where applicable; and

 

   

Increasing the mix of performance-based compensation by targeting 65% of the total target value granted under the 2019 Long-Term Incentive (LTI) Program in performance-based RSUs.

 

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These changes to the 2019 program design were informed by prior stockholder feedback.  Stockholders agreed that these changes were responsive and were broadly supportive of the executive compensation program design.  Nevertheless, we recognize that stockholders voted holistically on our 2018 executive compensation program, and many were concerned that the April 2018 new hire grant issued to Mr. Hayford in connection with joining NCR as CEO was tied to stock price appreciation rather than to operational metrics.  During engagement, we provided additional color to stockholders to contextualize this decision, highlighting that given Mr. Hayford was coming from outside the Company and was likely to implement strategic changes, setting operational metrics would not have been appropriate as it would have set the operating plan without input from the incoming CEO.  As a result, the Committee believed that stock price appreciation was the appropriate performance metric for his new hire grant.

 

 2020 Executive Compensation Program Changes

While our stockholders were generally supportive of the 2019 executive compensation program we previewed in the 2019 proxy statement, during engagement, stockholders provided additional feedback for the Committee to consider in designing the 2020 program.  The Committee approved changes to the 2020 program design which were directly responsive to stockholder feedback.  The feedback and resulting changes are described below:

 

     

Stockholder Feedback

 

2020 Program Changes Approved

   
Extend the performance measurement period of the Performance-Based RSUs from 1-year to 3-years  

Performance-Based RSUs will have a 3-year performance period and will cliff-vest based on the achievement of the performance metrics for that period.

   
   
Adjust the operational performance metrics for earning Performance-Based RSUs  

Performance for the Performance-Based RSUs will be measured by:

 

•   3-year recurring revenue:  revenue continues to be an important indicator of our strategic execution and foundational to our long-term success.  Stockholders expressed support for continuing to include a revenue metric in the LTI award.

 

•   3-year “LTI EBITDA(as defined below):  Earnings is a key measure of our overall financial performance and profitability.  Stockholders expressed support for the inclusion of an earnings-related goal in the LTI award.

   
   
Increase the percentage of the LTI Program which consists of performance- based equity  

LTI award for 2020 will be 100% performance-based, allocated 35% in Performance-Based RSUs and 65% in Premium-Priced Options with a 115% price premium:

 

•   Premium-Priced Options directly tie the interests of our executives to those of our stockholders and incentivize strong stockholder returns.  115% represents a rigorous premium in the context of our historic stock price trend, but moreover would require achievement of a stock price that has not been reached since July 2017.

   
   
Compensation peer group is too heavily weighted toward peers with larger market capitalizations than NCR  

Modified the peer group to remove three larger peers, Adobe, VMWare and Salesforce, as well as First Data due to acquisition.  Global Payments, PayChex, Black Knight, Sabre and ACI Worldwide will be added to the peer group to achieve a balanced set of peers that will serve as a benchmark for our executive compensation beginning in 2020.

   

 

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 2019 Compensation Program Design

Throughout 2019, NCR has made significant progress on its transition led by our new leadership structure and management team who are focused on the organization’s long-term growth and success.  Through this transformation, the Committee has continued its longstanding practice of linking the total compensation of our named executives to the strategic and financial success of the Company.  Our compensation philosophy requires that a significant portion of total compensation for our named executives be strongly aligned with Company performance.  We accomplish this by placing a large portion of our executives’ total compensation “at risk” and by requiring our executives to stretch to meet very challenging internal financial metrics that, if achieved, translate into shared value creation with our stockholders.

 

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2019 Target Total Direct Compensation Pay Mix

 

 

NCR CEO:

Target Pay Mix

 

 

 

 

NCR Other Named Executives:

Target Pay Mix

 

 

 

LOGO

 

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Best Practices in NCR Executive Compensation

Our executive compensation program features many best practices:

 

    WHAT WE DO                         WHAT WE DON’T DO    

 

 

Pay for Performance.  A significant portion of our named executives’ compensation is “at risk” and delivered only if rigorous performance goals established by the Committee are achieved.

        

×  

 

No Guaranteed Annual Salary Increases or Bonuses.  Salary increases are based on individual performance evaluations and certain competitive considerations, while annual cash incentives are generally tied to corporate and individual performance, as well as customer satisfaction (with limited exceptions in special circumstances, such as negotiated new hire starting bonuses under employment agreements).

 

 

 

Strong Link Between Performance Goals and Strategic Objectives.  We link performance goals for incentive pay to financial objectives and operating priorities designed to create long-term stockholder value.

         ×    

No Compensation Plans that Encourage Excessive Risk Taking.  Based on the Committee’s annual review, none of our pay practices incentivize employees to engage in unnecessary or excessive risk-taking.

 

 

 

Independent Compensation Consultant. The Committee retains an independent compensation consultant to evaluate and advise on our executive compensation programs and practices, as well as named executive pay mix and levels.

        

×  

 

No Hedging or Pledging of NCR Securities.  Our policies prohibit hedging and pledging of the Company’s equity securities as described in the Hedging and Pledging Policy section below.

 

 

 

Benchmark Peers with Similar Business Attributes and Business Complexity.  The Committee benchmarks our executive compensation program and annually reviews peer group membership with its independent compensation consultant.

        

×  

 

No Repricing Stock Options.  Our Stock Plan prohibits repricing of stock options without prior stockholder approval.

 

 

 

Strong Compensation Clawback Policy. Executive awards are subject to clawback in specified circumstances.

        

×  

 

Perquisites.  We offer only perks we believe important to be competitive, to attract and retain highly talented executives, enhance productivity and ensure their safety and focus on critical business activities.

 

 

 

Robust Stock Ownership Guidelines.  We require named executives to meet our guidelines, which range from two to six times base salary, and to maintain the guideline ownership level after any transaction.

        

×  

 

No Dividends or Dividend Equivalents Paid on Unvested Equity Awards.  Equity awards must vest before dividends are payable.

 

 

 

Double Trigger Benefits in the Event of a Change in Control.  Equity awards do not automatically vest in a change in control of NCR unless employment also ends in a qualifying termination.

        

×  

 

No Excise Tax Gross-ups.  Current named executives are not eligible for excise tax gross-ups or tax gross-ups on any perquisites other than standard relocation benefits.

 

 

 

Reasonable Change in Control Severance.  Change in control severance benefits range from one to three times target cash pay depending upon the executive’s position.

        

×  

 

No Special Executive Pension Benefits.  There are no special executive or broad-based pension benefits for any named executives.

 

 

 

Stockholder Outreach.  We regularly engage with our stockholders to better understand and consider their views on our executive compensation programs, corporate governance practices and other strategic initiatives.

         ×    

Compliant Procedures for Trading of NCR Stock.  We permit executive officers to trade in NCR common stock only with appropriately protective pre-clearance procedures, including pursuant to a Rule 10b5-1 trading plan.

   

 

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 Compensation Program Discussion

 

 Summary of 2019 & 2020 Compensation Program Actions by Our  Committee

The Company’s overall 2019 compensation program was consistent with its philosophy and objectives of paying for performance, aligning the interests of executives with the interests of stockholders, attracting and retaining executive talent, and adopting competitive, best-practice compensation programs that are appropriate for our Company.  Specific examples of Committee actions to carry out this philosophy include the following actions taken to establish our 2019 executive compensation program, and certain actions taken this year with respect to our 2020 compensation program:

 

  ·  

2019 Annual Incentive Plan –  To align our strategic financial and customer focus for 2019, we used Adjusted Earnings Before Interest, Tax, Depreciation, and Amortization (Adjusted EBITDA), weighted 80%, and Net Promoter Score, weighted 20%, as our Core Financial Objectives for the plan.  This aligns our performance-based compensation strategy with a key financial metric that our investors monitor when evaluating our Company’s ongoing performance, and an internal metric tied to our overall customer success survey results that reflects the critical impact of customer satisfaction on our business.  This approach also continues to differentiate our Annual Incentive Plan’s financial metrics from the performance goals used in our Long-Term Incentive Program.

 

  ·  

2019 LTI Program – Granted Performance-Based RSUs and Stock Options.  For 2019, the Committee continued its focus on granting compensation that aligns named executive and shareholder interests under our NCR Corporation 2017 Stock Incentive Plan (“Stock Plan”).  Our 2019 annual award mix consisted of 65% performance-based RSUs that vest 1/3 per year over three years subject to achievement of 2019 performance metrics of 2019 Adjusted Operating Income (60% weighting) and NCR Revenue (40% weighting); and 35% stock options with a seven-year term that vest 1/4 each year on the anniversary of the grant date, in each case subject to continued employment through the vesting dates.  These performance metrics and vesting conditions link the compensation earned by our named executives with our key strategic measures and continue to differentiate our LTI Program financial metrics from our Annual Incentive Plan metrics.

 

  ·  

2020 Annual Incentive Plan – Performance-Based Bonus Program.  For 2020, for all named executives with corporate oversight, which includes our CEO, the annual incentive design will remain consistent with 2019.  For executives with specific business unit oversight, the annual incentive will be awarded based 60% on achievement of financial performance metrics related to his or her business unit and 40% based on individual performance on key strategic goals in order to focus those executives on key business initiatives for the year within their purview that ultimately drive shareholder value creation.

 

  ·  

2020 LTI Program –  For 2020, the Committee determined to allocate 100% of the LTI award in performance-based compensation, with the target mix weighted 35% in performance-based RSUs and 65% in premium-priced options with a 115% price premium.  The Performance-Based RSUs will also be earned based on performance over a three-year period using revenue and earnings goals, with cliff-vesting at the end of the three-year performance period.  These changes are directly responsive to stockholder feedback, and are designed to drive strong long-term performance on key goals and tightly link our executives’ pay with our stockholders’ experience.

 

  ·  

2020 Peer Group –  For 2020, in line with our compensation philosophy the Committee determined to modify the Company’s compensation peer group to more closely align with companies of similar market capitalization and account for business developments affecting one peer company.  This resulted in the removal of three peers with higher market capitalizations – Adobe, VMWare and Salesforce, and the removal of First Data due to acquisition.  Global Payments, PayChex, Black Knight, Sabre and ACI Worldwide will be added to rebalance the peer group that will serve as a benchmark for our executive compensation beginning in 2020.  This modification places CEO compensation at approximately the median of the 2020 peer group.

 

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 Our Executive Compensation Philosophy

 

Our executive compensation program rewards executives for achieving and exceeding the Company’s strategic business and financial goals.  We accomplish this by generally linking compensation to Company-wide metrics and operational results for areas that each member of our executive team directly controls.  The Committee regularly evaluates the elements of our program to ensure that they are consistent with

both Company and stockholder short-term and long-term goals, given the dynamic nature of our business and the markets where we compete for talent.  The Committee annually approves the design of our executive compensation program, performance objectives, performance and compensation levels and final compensation for our named executives.

 

 

 

Executive Compensation Program Design – Factors We Consider

When designing our executive compensation program, the Committee considers actions that:

 

 

LOGO

Reward Execution of our Strategic Growth Platforms Attract, Retain, Develop & Motivate Top Talent Provide Competitive Pay & Target Incentives "at risk" Guiding Compensation Design Principles Reward Solution Innovation & Customer Experience Align with Stockholder Interests & Reward Value Creation Reward Achieving our Software & Cloud Growth Goals

 

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Independent Compensation Consultant

The Committee retains and is advised by Frederic W. Cook & Co., Inc.  (“FWC”), a national executive compensation consulting firm, to assist in review and oversight of our executive compensation programs.  The Committee considers FWC’s advice and recommendations when making executive compensation decisions.  FWC is independent of the Company’s management and reports directly to the Committee.  FWC representatives attended all meetings of the Committee in 2019.  Our CEO and our Executive Chairman are not present during Committee and FWC discussions about their respective compensation.  Also, FWC reports on CEO and Executive Chairman compensation are not shared with these officers.  For more about FWC’s role as advisor to the Committee, see the Compensation and Human Resource Committee section above.

 

 Key Elements of 2019 Executive Compensation

The key elements of our 2019 executive compensation program are shown in the chart below.  Each element of the program has a specific purpose in furthering our compensation objectives.

 

    Fixed   Variable
     Base Salary  

Annual

Incentives

 

Long-Term

Incentives

Key

Features &

Payout

Determination

 

 

Competitive fixed level of cash income

Established upon hire, reviewed annually and adjusted when appropriate

   

Variable compensation payable annually in cash if performance goals are achieved

•   Based on Adjusted EBITDA (80%) and Net Promoter Score (20%)

   

Equity-based compensation awarded:

•   65% in Performance-Based RSUs, which vest 1/3 on each anniversary of the grant date based on performance against Adjusted Operating Income (60%) and Revenue (40%)

•   35% in Stock Options which vest 1/4 on each anniversary of the grant date and only provide value to the extent that our stock price appreciates after the grant date

Why We

Pay This

Element

 

 

 

Provides a base level of competitive cash pay for executive talent

Promotes appropriate risk taking

    Motivates and rewards executives for performance on key Company-wide financial metrics and customer satisfaction  

 

 

Aligns executive pay and stockholder interests and serves to retain executive talent

Motivates executive performance on key long-term measures to build multi-year stockholder value

How Our

Performance

Metrics Link to

NCR Strategy

            Adjusted EBITDA supports NCR’s strategic goal of driving profitable growth, while Net Promoter Score supports the critical impact of customer satisfaction on our business     Adjusted Operating Income and NCR Revenue support our strategic initiatives to grow revenue and focus on profitable growth, while stock options align our management with shareholder interests

 

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 2019 Compensation Pay Mix

The portion of performance-based and “at risk” compensation increases directly with an executive’s role and responsibility within the Company, ensuring that our senior executives are held accountable to our stockholders.  Consistent with our pay for performance philosophy, a very significant portion of our CEO’s 2019 target total pay, 92%, is directly linked to the performance of the Company through quantitative performance metrics and qualitative goals that support the strategy of the organization and are approved each year by the Committee. The percentage of target total pay that is directly linked to the performance of the Company for our other named executives averaged 88% for 2019.

 

 

  2019 Target Total Direct Compensation Pay Mix

 

LOGO

 

 Our Process for Establishing 2019 Compensation

Our Committee has the sole authority to establish compensation levels for our named executives.  When making compensation decisions, the Committee carefully examines:

 

   

External Market Analysis – Peer Group and Survey Data – including reports by the Committee’s independent compensation consultant on peer group member pay data and external market surveys;

 

   

Internal Compensation Analysis – Tally Sheets and Internal Equity – including management reports on comparable internal compensation levels and compensation history; and

 

   

Recommendations – from management concerning compensation for named executives, except the Committee does not consider recommendations from management about their own compensation, and the Committee does not consider recommendations by management other than the Executive Chairman when making decisions about CEO compensation.

 

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External Market Analysis – Peer Group and Survey Data

In general, the Committee considers the median of the peer group data described below when establishing base salary, annual incentive and long-term incentive opportunities.  The Committee retains the flexibility to make adjustments to respond to market conditions, promotions, individual performance and internal equity.  The Committee also reviews broad-based survey data prepared by its independent compensation consultant and considers key business decisions that can impact compensation.

Compensation Peer Group Selection.  The Committee reviews the Company’s compensation peer group annually with its independent compensation consultant and makes changes to the group to the extent determined appropriate based on changes in peer business attributes.  The consultant then produces for the Committee’s review an independent analysis of the cash and equity compensation for the five highest compensated executives at each company within the final peer group, and a comparison of our similarly ranked named executives to the 25th, 50th and 75th percentiles of the peer group.  The analysis also includes comprehensive modeling of long-term incentive costs and resulting levels of stockholder value transfer and dilution, which the Committee considers when developing the aggregate annual budget for equity compensation awards.

The unique combination of industries represented by our core business creates challenges in identifying comparable companies for executive compensation analysis.  We select our peer group by examining other companies in terms of industry, size and recruiting in our GICS (Global Industry Classification Standard) industry group that are in the software and services or technology hardware industries, and are of reasonably similar size based on annual revenues, market capitalization, operating income and enterprise value.  In addition, we look at variances to these metrics based on unique circumstances.  We also consider other companies outside our GICS industry group where we compete for talent.

Final 2019 Peer Group.  The Committee carefully reviewed our prior peer group, and with the advice of its independent compensation consultant, determined the peer group used for benchmarking our 2019 executive compensation program would remain the same as our 2018 peer group, except that CA Technologies was removed following their acquisition by Broadcom in 2018.  After this change, our final 2019 peer group consisted of the following companies:

 

Adobe Systems

   Intuit    ServiceNow

Citrix Systems

   Juniper    Symantec

Diebold Nixdorf

   Keysight Technologies    VMware

Fidelity Info Services

   NetApp    Western Digital

Fiserv

   Salesforce    Xerox

First Data (acquired by Fiserv in 2019)

   Seagate     

2020 Peer Group.  For 2020, in line with our compensation philosophy and in response to shareholder feedback, the Committee determined to modify the Company’s compensation peer group to more closely align with companies of similar market capitalization and account for business developments affecting one peer company.  This resulted in the removal of three peers with meaningfully higher market capitalizations – Adobe, VMWare and Salesforce, and the removal of First Data due to acquisition.  Global Payments, PayChex, Black Knight, Sabre and ACI Worldwide were added to the peer group to achieve a balanced set of peers that serve as a benchmark for our executive compensation beginning in 2020.  This modification places CEO compensation at approximately the median of the 2020 peer group.

 

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External Market Surveys.  The Committee reviewed a comprehensive analysis and assessment prepared by its independent compensation consultant, which showed the competitive position of our named executive pay mix and levels compared to the marketplace using a combination of proxy data from our peer group, as well as general market data provided by the Company.  Market survey data includes surveys concentrated on companies in both general and high-tech industries, which encompass the Company’s competitors and non-competitors.  The broad-based surveys give the Committee access to market data for numerous companies under a consistent methodology to assist our understanding of market trends and practices.  The market surveys used were:

 

 

Towers Watson General Industry Executive Compensation Survey – U.S., including data on corporate-wide roles for companies with global corporate revenue of $6-10 billion, and data for other roles for companies with appropriate group/division size based on revenue.

 

Towers Watson High Tech Executive Compensation Survey – U.S., including data for companies with appropriate unit size based on revenue.

 

 

Radford Global Technology Survey – Global, including data for companies with appropriate group/division size based on revenue.

 

 

The Committee considers market median levels when setting compensation, but retains flexibility to set compensation above or below the median based on individual considerations.  When setting 2019 compensation levels for Mr. Hayford and Mr. Martire, the Committee considered our peer group’s executive compensation data.  For Mr. Sullivan, Mr. Fernandez, and Mr. Langenbahn, the Committee considered both our peer group’s executive compensation data and general market survey data for similar positions, weighted at 75% and 25% respectively.

 

 

Internal Compensation Analysis – Tally Sheets and Internal  Equity

 

  ·  

Tally Sheets.  At each regular Committee meeting considering compensation changes, the Committee reviews comprehensive internal tally sheets showing the total compensation opportunity provided to our named executives over a three-year period.  The tally sheets allow the Committee to review the degree to which historic, current and projected compensation, including unvested equity awards, support the Company’s pay for performance philosophy and retention objectives.  The Committee uses the data in the tally sheets to assess actual and projected compensation levels.  The tally sheets are also used to compare year-

   

over-year compensation as part of the process of establishing competitive compensation levels for the following year.

 

  ·  

Internal Equity.  The Committee also reviews internal reports on named executive base salaries and incentive plan targets compared to internal peers.  To maintain a fair balance throughout the executive level at the Company, we strive for a level of consistency in compensation.  Differences in compensation are based on degree of judgment associated with and the strategic nature of particular executive roles, as well as individual performance measured both objectively and subjectively.

 

 

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Recommendations

In 2019, the Committee also considered recommendations from our CEO, Executive Chairman, COO, and CHRO when establishing compensation levels for named executives other than the CEO and the Executive Chairman.  Management does not participate in any Committee discussions about CEO and Executive Chairman compensation, except that the Executive Chairman participates in Committee discussions about CEO compensation.  No member of management provides recommendations regarding his or her own compensation.

 

 2019 Executive Compensation Program Details

 

 Base Salaries for 2019

We endeavor to set base salaries at a level competitive with our peer group.  This helps us attract and retain top quality executive talent, while keeping our overall fixed costs at a reasonable level.

For 2019, the Committee did not approve any changes to named executive base salaries:

 

2019 Base Salary Actions

Named

Executive

 

Effective Date of

Most Recent

Base Salary Action

 

Base Salary on

December 31, 2019

  Rationale for Base Salary Actions

  Michael Hayford

      April 30, 2018     $ 1,000,000   No Change

  Frank Martire

      May 31, 2018     $ 750,000   No Change

  Owen Sullivan

      July 23, 2018     $ 725,000   No Change

  Andre Fernandez

      August 29, 2018     $ 625,000   No Change

  Paul Langenbahn

      March 24, 2018     $ 700,000   No Change

 

Annual Incentives for 2019

 

 

Annual Incentive Plan Opportunity for 2019

In 2019, our named executives participated in the NCR Management Incentive Plan (MIP).  The MIP is an annual short-term cash incentive plan designed to support NCR’s strategic business objectives, promote the attainment of our 2019 NCR Financial Plan, reward achievement of organizational objectives and effective collaboration across teams.

At the beginning of the performance year, the Committee establishes an annual target bonus for each named executive as a percentage of base salary for purposes of the MIP.  Our named executive target opportunities did not change from 2018:

 

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2019 Annual Incentive Plan Target Opportunity

(% of Base Salary)

 

  Named

  Executive

  

MIP

Target

               

 

  Michael Hayford

 

  

 

150%

 

                 

 

  Frank Martire

  

 

150%

 

     

 

 

  Owen Sullivan

 

  

 

150%

 

     

 

  Andre Fernandez

 

  

 

125%

 

     

 

  Paul Langenbahn

 

  

 

125%

 

                 

For all named executives, the maximum potential payout is limited to two times their target annual incentive.

 

 

Calculating Annual Incentive Awards

Awards under our annual plan are determined by the achievement of corporate and strategic goals that tie payouts directly to key measures of our overall business performance:

 

  ·  

Corporate Objectives which are selected based on the key drivers and indicators of our corporate success.  For 2019 these goals were Adjusted EBITDA and Net Promoter Score (the “Corporate Objectives”);

 

  ·  

Business Unit Performance Modifier which is a MIP percentage modifier based on each named executive officer’s achievement of corporate goals and/or business unit performance goals they are responsible for.  For 2019, only Mr. Langenbahn’s compensation was subject to a separate Business Unit Performance Modifier, which was based on results for the Commerce business unit he leads.  For all other named executives, performance was measured solely against corporate objectives given the impact their respective roles have on the achievement of these goals and the importance of such goals to our business.

The calculation of Annual Incentive Plan awards under our MIP includes the Corporate Objectives and the Modifier for Business Unit Performance Modifier (where applicable) as follows:

Calculation of Total Annual Incentive Plan Bonus – 2019

 

 

LOGO

 

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Setting Annual Incentive Targets

Each year the Committee sets rigorous performance targets for the MIP, while providing meaningful value to our executives upon achieving performance goals.  Some of the factors that are considered when setting performance targets include our corporate strategy, our annual financial plan, our performance history, the industry outlook and other factors.

 

MIP Corporate Objectives for 2019

Each year the Committee establishes Corporate Objectives and weightings based on our strategic and business direction for the year as laid out in our annual NCR Financial Plan.  For 2019, the Committee established the MIP Corporate Objectives based on the following two metrics, which the Committee believes are the right metrics because they incentivize strong operational performance and customer satisfaction:

 

    

 

Adjusted EBITDA (80%)

 

  and   Net Promoter Score (20%)

 

 

 

Adjusted EBITDA Objective

For 2019, the Committee established Adjusted EBITDA as 80% of the MIP Corporate Objectives because it is:

 

  ·  

one of our key business objectives–driving profitable growth by increasing revenue and controlling operating costs;

 

  ·  

simple to calculate and easily understood by both employees and stockholders;

  ·  

a measure we can track throughout the year; and

 

  ·  

a critical measure our investors use to assess our annual performance.

 

 

 

 

Net Promoter Score Objective

The Committee established our Net Promoter Score as 20% of the MIP Corporate Objectives for 2019 due to the critical importance of customer retention, customer referrals, customer relationships and driving customer satisfaction in our business.  In the 2018 executive compensation program, objectives relating to customer success were measured as a separate portion of the Annual Incentive Plan calculation for certain named executives;  however, due to the importance of customer success to our business, this objective was incorporated into the core Annual Incentive Plan and measured formulaically using the Net Promoter Score metric.

 

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  MIP Corporate Objectives – Definitions and Impacts

The 2019 MIP Corporate Objectives, including the definitions and impact of each, are shown in this chart:

 

MIP – Corporate Objectives for 2019
Objective   Definition / Calculation       

Impact on

NCR Results

      

Impact on

Our Behavior

   

Adjusted EBITDA(1)

 

EBITDA is defined as earnings before interest, taxes, depreciation and amortization.  NCR determines Adjusted EBITDA for a given period based on its GAAP net income attributable to NCR, plus interest expense, net;  plus income tax expense (benefit);  plus depreciation and amortization;  plus other income (expense);  plus pension mark-to-market adjustments, and other special items, including amortization of acquisition related intangibles and stock compensation expense.

     

Profit (Loss) on our Income Statement (non-GAAP).

     

Management uses this metric to understand and evaluate our performance and make operating decisions that impact our shareholders.

   

Net Promoter Score

 

Net Promoter Score is a key measure of our customers’ overall perception of our brand.  We calculate our Net Promoter Score by determining our average results under a semi-annual survey of customers conducted by an independent third party.

     

Net promoter score is a measurement of customer experience and is an indicator of business growth.

     

Management uses this metric to gauge our customer satisfaction.

(1) Adjusted EBITDA is a non-GAAP measure.  Net income from continuing operations attributable to NCR is the most directly comparable GAAP measure.

As described in the Supplementary Non-GAAP Information (Performance Targets) section, NCR believes that Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) provides useful information to investors because it is an indicator of the strength and performance of the Company’s ongoing business operations, including its ability to fund discretionary spending such as capital expenditures, strategic acquisitions and other investments. NCR determines Adjusted EBITDA for a given period based on its GAAP net income from continuing operations attributable to NCR plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus other income (expense); plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles and stock compensation expense.

We exclude the impact of net interest expense, income taxes, depreciation, amortization, pension mark-to-market adjustments, pension settlement, stock compensation, tax reorganization and other special items, and certain specified special items from our Adjusted EBITDA Corporate Objective because they do not relate directly to a named executive’s performance or the Company’s operational success.

 

 

MIP Corporate Objectives – 2019 Funding

The Committee approves threshold, target, and maximum funding levels for the Corporate Objectives which, if achieved, would result in preliminary funding of the MIP bonus at 50%, 100%, and 200%, respectively.  Awards are interpolated between these points.  The threshold for a particular Corporate Objective must be achieved before any MIP payment will be made with respect to it, and no MIP payment will be made if the Adjusted EBITDA threshold objective is not met.

In no event can the 2019 MIP funding exceed 200%.  The maximum 2019 MIP funding for achievement of the Corporate Objectives is 200%, which consists of Adjusted EBITDA maximum funding at 180% (80% weighting x 225%) plus Net Promoter Score maximum funding at 20% (20% weighting x 100%).  The MIP terms approved by the Committee limited funding for the Net Promoter Score objective to 100% of target, with no additional funding opportunity in excess of 100%.

 

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Performance results are determined on a constant currency basis to eliminate the impact of foreign currency fluctuations during the performance period, based on the same foreign exchange rates used to establish the Company’s 2019 financial plan.

 

  ·  

Adjusted EBITDA Performance Target:  The Committee established an Adjusted EBITDA Performance target of $1,051 million for 2019 (after constant currency adjustment and the impact of mergers and acquisitions); this represents a 9.8% increase over the Company’s Adjusted EBITDA results of $957M for 2018.

  ·  

Net Promoter Score Target:  The Committee established a Net Promoter Score target for 2019 that was 21.4% greater than the Net Promoter Score for 2018.

 

 

 

MIP Corporate Objectives – 2019 Funding Results

 

The Adjusted EBITDA achieved for 2019 on a constant currency basis and adjusted for the impact of mergers and acquisitions was $1,058 million which exceeded the target Adjusted EBITDA objective of $1,051 million on a constant currency basis and adjusted for the impact of mergers and acquisitions.  This resulted in 82.7% funding for the Adjusted EBITDA Objective under the MIP.  The Net Promoter Score result for 2019 improved 28.6%, which exceeded the 2019 Net Promoter Score

improvement target of 21.4%.  This resulted in target funding (100%) for the Net Promoter Score objective under the MIP, which is the maximum amount payable for this objective under the MIP.

Performance achieved for these two metrics, taken together, resulted in total earned payout of 102.7% of target with respect to the MIP Corporate Objectives as shown in this chart:

 

 

2019 Annual Incentive Plan Funding
       

 

MIP Performance for Corporate Objectives

 

       

  MIP Corporate

  Objectives

 

 

Weighting

 

 

Threshold

(50% Funded)

 

 

Target

(100% Funded)

 

 

Maximum(2)

(200% Funded)

 

 

MIP

Performance

Results

 

 

MIP

Funding

 

 

  Adjusted EBITDA(1)

 

 

 

80%

 

 

 

$946M

 

 

 

$1,051M

 

 

 

$1,314M

 

 

 

$1,058M

 

 

 

82.7%

 

 

  Net Promoter Score

 

 

 

20%

 

 

 

14.3% Increase

 

 

 

21.4% Increase

 

 

 

N/A(2)

 

 

 

28.6% Increase

 

 

 

20.0%

 

 

  Payout (% of Target)

 

 

 

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102.7%

 

(1) The Adjusted EBITDA Corporate Objectives are shown on a constant currency basis and neutral to the impact of mergers and acquisitions as determined appropriate by the Committee.

(2) As noted above, maximum funding for the Adjusted EBITDA Corporate Objective is 225%.  The MIP terms approved by the Committee limited funding for the Net Promoter Score objective to a maximum of 100% of target, with no additional funding opportunity in excess of 100%.

 

Annual Incentive Plan – Targets, Results and Payouts for 2019

 

 

2019 Annual Incentive – Corporate Objectives Payouts:

For each named executive, annual incentive payouts are determined partially or fully based on the achievement of rigorous corporate goals.

The Committee’s establishment of challenging MIP performance thresholds requires our named executives to achieve significant Adjusted EBITDA and Net Promoter Scores in order to receive any payout under the MIP.

 

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Absolute Limit on MIP Payouts.  The annual bonus otherwise payable under the MIP is also subject to an absolute limit based on the Company’s performance.  For 2019, the maximum annual bonus payout opportunity was 1.5% of NGOI for our CEO, and 0.75% of NGOI for our other named executives.

Since the individual performance of each of Mr. Hayford, Mr. Martire, Mr. Sullivan, and Mr. Fernandez impacts NCR results at the corporate level given their Company roles, their performance was measured against the results on the 2019 Corporate Objective targets.  Accordingly, based on 2019 performance achieved for the Adjusted EBITDA and Net Promoter Score metrics under the MIP noted above, each of Mr. Hayford, Mr. Martire, Mr. Sullivan and Mr. Fernandez’s bonus payout percentage for 2019 was calculated as follows.  Mr. Langenbahn’s compensation was subject to an additional Business Unit Performance Modifier as detailed further below.

 

         MIP – Corporate Objectives Annual
Incentive Payout
       

  MIP Corporate

  Objectives

   Weighting   

Threshold 

(50% Payout) 

 

Target 

(100% Payout) 

  Maximum(2)   

MIP 

Performance 

Results 

 

MIP 

Annual 
Incentive 
Payout 

 

   Adjusted EBITDA(1)

 

 

 

80%

 

 

 

$946M

 

 

 

$1,051M

 

 

 

$1,314M

 

 

 

$1,058M

 

 

 

82.7%

 

 

   Net Promoter Score

 

 

 

20%

 

 

 

14.3% Increase

 

 

 

21.4% Increase

 

 

 

N/A(2)

 

 

 

28.6% Increase

 

 

 

20.0%

 

 

   Payout (% of Target)

 

 

 

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102.7%

 

(1) The Adjusted EBITDA Corporate Objectives are shown on a constant currency basis as determined appropriate by the Committee.

(2) As noted above, maximum funding for the Adjusted EBITDA Corporate Objective is 225%.  The MIP terms approved by the Committee limited funding for the Net Promoter Score objective to a maximum of 100% of target, with no additional funding opportunity in excess of 100%.

2019 Annual Incentive Payouts for Business Unit Performance Modifier:

In addition to the Corporate Financial Objectives, as noted above we may establish business unit performance objectives for each of our named executives.  These performance objectives are assigned to our named executives based on their areas of influence, and/or on strategic initiatives that are critical for the Company’s achievement of its overall financial goals and stretch internal goals, as applicable.  Based on the extent to which a named executive satisfies his or her performance objectives, the Committee determines a Business Unit Performance Modifier that increases or decreases the preliminary MIP bonus determined by the Corporate Objectives.  The Business Unit Performance Modifier can range from 0% for poor performance to 200% for exceptional performance.

For 2019, Mr. Langenbahn is the only named executive with specific Business Unit oversight.  Therefore, his annual incentive payout is subject to the Business Unit Performance Modifier, calculated on the basis of results for the Commerce business unit which he leads.  Based on performance, Mr. Langenbahn’s Business Unit bonus payout percentage for 2019 was calculated as follows:

 

        

 

MIP Business Unit Performance Modifier

 

       

  MIP Business Unit

  Objectives

   Weighting   

Threshold 

(50% Payout) 

 

Target 

(100% Payout) 

 

Maximum(2) 

(200% Payout) 

 

MIP 

Performance 

Results 

 

MIP 

Performance 
Modifier 

 

   Commerce Operating Income(1)

 

 

 

50%

 

 

 

$263.9M

 

 

 

$293.2M

 

 

 

$439.8M

 

 

 

$205.0M

 

 

 

0.00%

 

 

   Commerce  Revenue(1)

 

 

 

30%

 

 

 

$2,786.0M

 

 

 

$3,095.5M

 

 

 

$4,643.3M

 

 

 

$3,052.7M

 

 

 

28.9%(3)

 

 

   Net Promoter Score(2)

 

 

 

20%

 

 

 

14.3% Inc.

 

 

 

21.4% Inc.

 

 

 

N/A(2)

 

 

 

28.6% Inc.

 

 

 

20.0%

 

 

   TOTAL

 

 

 

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48.9%

 

(1) The Commerce Operating Income and Revenue Objectives are shown on a constant currency basis as determined appropriate by the Committee.

(2) As noted above, maximum funding for the Adjusted EBITDA Corporate Objective is 225%.  The MIP terms approved by the Committee limited funding for the Net Promoter Score objective to a maximum of 100% of target, with no additional funding opportunity in excess of 100%.

(3) The Commerce revenue payout percentage of 28.9% is calculated as follows:  Corporate EBITDA objective funding of 103.3% multiplied by the Commerce revenue performance result of 93.1%, multiplied by 30% weighting.

 

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  Annual Incentive Plan – Final 2019 MIP Total Payouts

The total annual MIP bonus payments approved for each named executive for the 2019 performance year were:

 

  Named

  Executive

Target

Bonus

Funded

Payout for
Corporate
Objective
Results

(% of

Target)

Business Unit

Performance

Modifier

Total Bonus
Payout

(After Modifier)

Michael Hayford

$ 1,500,000   102.7 %   (1)  $ 1,539,962

Frank Martire

$ 1,125,000   102.7 %   (1)  $ 1,154,971

Owen Sullivan

$ 1,087,500   102.7 %   (1)  $ 1,116,472

Andre Fernandez

$ 781,250   102.7 %   (1)  $ 802,064

Paul Langenbahn

$ 875,000     48.9 % $ 427,486

(1) As noted above, the Business Unit Performance Modifiers for all named executives except Mr. Langenbahn are based on results for the MIP Corporate Objectives, such that their respective Corporate Objective payout percentages and their Business Unit Performance Modifiers are identical.

 

2020 Annual Incentive Plan

For 2020, for all named executives with corporate oversight, which includes our CEO, the annual incentive design will remain consistent with 2019, except that due to the reduced amount of time Mr. Martire will spend as Executive Chairman following our 2020 Annual Meeting as described in the Leadership Structure section above, Mr. Martire will not participate in the 2020 MIP. For more details, see the Agreements with our Named Executives section below. For executives with specific business unit oversight, the annual incentive will be awarded based 60% on achievement of financial performance metrics related to his or her business unit and 40% based on individual performance on key strategic goals in order to focus those executives on key business initiatives within their purview for the year that ultimately drive shareholder value creation.

 

2019 Long-Term Incentives

In February 2019, the Committee approved the 2019 annual equity awards under our Stock Plan consisting of 65% performance-based restricted stock units and 35% nonqualified stock options, to further increase management alignment with stockholder long-term interests.  This mix also reflects input from our stockholders that they preferred to see a greater proportion of the long-term incentive be granted in performance-based pay from our 2018 program.

We generally use equity awards in our LTI Program to create commonality of interests with stockholders and to help attract and manage our ability to retain our key executives.  These awards also provide a good balance for our executives and protection for our stockholders, because wealth creation can be realized by an executive only upon achievement of performance goals, service-based milestones and/or long-term Company stock price performance.

 

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  2019 Annual LTI Equity Awards – Key Features

The key features of 2019 LTI equity awards are:

 

  ·  

Performance-Based RSUs (65% of Target 2019 award) have a one-year performance period (2019), due to 2019 being a year of significant transition and leadership refreshment for NCR as described in the Business Transformation section above.  The final earned award can range from 0% to 200% of the target units, based on the Company’s achievement of the 2019 LTI performance metrics of Adjusted Operating Income (60% weighting) and NCR Revenue (40% weighting).  Units earned from achieving these performance goals vest 1/3 on each anniversary of the grant date, so long as the executive continues Company service through the vesting dates.  The maximum share payout is capped at 200% of target.  If performance for both metrics falls below the thresholds noted below, the entire award is forfeited.

  ·  

Stock Options (35% of Target 2019 award) are awarded as nonqualified options with an exercise price equal to the closing price of NCR common stock on the grant date.  They have a four-year restriction period and vest 1/4 on each anniversary of the grant date, so long as the executive continues Company service through the applicable vesting dates.

 

  ·  

Special Vesting Rules provide that early vesting can occur only if employment ends because of death, disability or other limited reasons described in the Potential Payments Upon Termination or Change in Control section below.

 

 

The number of RSUs for an award is determined by converting the Committee approved award value to shares based on the grant date closing price of our common stock.  The number of stock options for an award is determined using the Committee approved award value and the Black-Scholes valuation method.

 

2019 Performance-Based RSUs – Performance Metrics

For 2019, 65% of our annual LTI equity awards for named executives consisted of performance-based RSUs.  The performance metrics for these awards, which are independently weighted, were:

Adjusted Operating Income (60% weighting):

 

  How we define this metric  

The Adjusted Operating Income metric is our income (loss) from operations as reported under generally accepted accounting principles in the United States, excluding certain items, as well as adjusted to eliminate the impact of foreign currency and the impact of mergers and acquisitions.

 

 

   
  Why we use this metric  

Adjusted Operating Income helps incentivize the behavior of driving profitable growth by increasing revenue and controlling operating costs.

 

   

 

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NCR Revenue Metric (40% weighting):

 

  How we define this metric  

The Revenue metric is to be adjusted to eliminate the impact of foreign currency and the impact of mergers and acquisitions.

 

   
  Why we use this metric  

Revenue is a key driver of long-term stockholder return and reward for outstanding results.

 

   

Setting Long-Term Incentive Targets

At the time we set targets for the 2019 LTI Program metrics, a key component of NCR’s long-term strategy and Company transformation was the shift from selling perpetual software licenses, for which we were record revenue and margin upfront, to term and subscription licenses with respect to which we record revenue and margin over time.  In implementing this shift, NCR’s leadership team and Board understood that, while we expected that in the longer-term this would significantly accelerate our growth, in the near-term this would have a dampening effect on our revenue and margins.  The Company has reflected this expectation in our public guidance and messaging to our investors.

Therefore, in setting targets for the 2019 Long-Term Incentive metrics, the Committee determined to set targets that were in-line with our expectations for business performance for 2019 within the context of this expected near-term dampening effect of our strategic shift on our results.  The Committee thus set targets for our metrics in line with our 2018 results, as this would require underlying growth of our business to offset the dampening effect from shifting to subscription-based revenue.

For 2019 the Committee set the following targets for our LTI Program metrics:

 

  Adjusted Operating Income  

$688 million ($656 million on a constant currency basis and adjusted for the impact of mergers and acquisitions)

 

   
  NCR Revenue  

$6,405 million ($6,286 million on a constant currency basis and adjusted for the impact of mergers and acquisitions.)

 

   

 

 

 

2019 Performance-Based RSU Results

The Company achieved these results for the 2019 performance - based RSUs:

 

  ·  

2019 Adjusted Operating Income Achieved:  $759 million.

 

  ·  

2019 NCR Revenue Achieved:  $6,897 million (adjusted as described below).

 

 

Impact of Performance Results on 2019 Performance-Based RSU Awards

The 2019 Adjusted Operating Income of $759 million achieved exceeded the target for this performance metric of $656 million, both determined on a constant currency basis and adjusted to eliminate the impact of mergers and acquisitions, resulting in an earned award of 107.3% with respect to this metric.  The 2019 NCR Revenue of $6,897 million exceeded the target for this performance metric of NCR Revenue of $6,286 million, both determined on a constant currency basis and adjusted to eliminate the impact of mergers and acquisitions, resulting in an earned award of 78.9% with respect to this metric.  Taken together, performance

 

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achieved on these metrics resulted in a total earned payout of 186.2% for our 2019 performance - based RSUs as shown in this chart:

 

        

 

2019 Performance - Based RSU Performance Goals,
Results and Earned Payout ($M)(1)

  2019 Performance
  Metrics
  Weighting  

Threshold

(50% Earned
Payout)

 

Target

(100% Earned
Payout)

 

Maximum

(200% Earned
Payout)

 

Performance

Results

 

2019

Earned

Payout

Percent

 

  Adjusted Operating Income

 

 

 

60%

 

 

 

$590

 

 

 

$656

 

 

 

$787

 

 

 

$759

 

 

 

107.3%

 

 

  NCR Revenue

 

 

 

40%

 

 

 

$5,971

 

 

 

$6,286

 

 

 

$6,914

 

 

 

$6,897

 

 

 

78.9%

 

 

  Total Payout (% of Target)

 

 

 

100%

 

 

 

50%

 

 

 

100%

 

 

 

200%

 

 

 

 

 

 

186.2%

 

(1) The Adjusted Operating Income and NCR Revenue objectives are shown on a constant currency basis and adjusted to eliminate the impact of mergers and acquisitions as determined appropriate by the Committee.

 

2019 Total LTI Equity Award Values

This Chart shows the 2019 total LTI equity award values(1) approved by the Committee for our named executives:(1)

 

  Named Executive   Stock
Options
   

Performance-

Based RSUs

   

Total 2019

LTI Award

Value

 

Michael Hayford

  $ 3,499,999       6,500,007     $ 10,000,006  

Frank Martire

  $ 1,574,997       2,925,011     $ 4,500,008  

Owen Sullivan

  $ 2,100,001       3,899,988     $ 5,999,989  

Andre Fernandez

  $ 1,399,998       2,599,992     $ 3,999,990  

Paul Langenbahn

  $ 875,002     $ 1,624,989     $ 2,499,991  

 

(1) Represents the grant date fair value of RSUs and stock options, as shown in the Grants of Plan-Based Awards – 2019 Table.

 

Update on the 2018 LTI Equity Awards

 

 

2018 LTI Awards – Mr. Langenbahn Only

 

On February 23, 2018, the Committee granted annual LTI awards to Mr. Langenbahn, the only named executive employed on that date, consisting of performance-based RSUs and performance-vesting RSUs.  On May 1, 2018, the Committee also granted performance-vesting RSUs to Mr. Langenbahn only.  The 2018 performance-based RSUs granted to Mr. Langenbahn had a three-year performance period that began on January 1, 2018 and ended on December 31, 2020.  In 2018, the Committee certified that the required minimum 2018 Non-GAAP

Diluted Earnings Per Share (NGDEPS) and Software Related Margin Dollars (SRMD) performance for these awards was not achieved, and these awards were forfeited.  The 2018 performance-vesting RSUs granted to Mr. Langenbahn were subject to a 2018 SRMD goal.  In February 2019, the Committee certified that performance for these awards was achieved, with 1/3 of these awards vesting on each anniversary of the grant date subject to continued Company service through the vesting dates.

 

 

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Economic Profit Plan Awards
Before 2017 – Mr. Langenbahn Only

Mr. Langenbahn is the only named executive who participated in and had a “Bonus Bank” balance under the NCR Corporation Economic Profit Plan (EPP). On February 27, 2019, the Committee terminated the EPP, a long-term incentive plan that allowed participants to share in a portion of the “Economic Profit” that they helped create.  No new EPP awards have been granted since 2016; however, 33% of remaining previously earned EPP Bonus Bank balances (which held previously earned EPP awards) were subject to annual payout so long as the Company passed an annual cash flow test.  In connection with the termination of the EPP, the Committee determined that participants who were actively employed on the EPP termination date would receive any remaining portion of their Bonus Bank balances in a single lump sum distribution after February 28, 2020.  Until the date these remaining balances were distributed, the EPP was to make distributions in the normal course. For example, the regular distributions scheduled to be made in August 2019 would be paid at that time, subject to EPP terms.

Cash Flow Test.  The EPP cash flow test required that our “Cash Flow from Operations” equal or exceed 1% of total revenue.  Under the EPP, Cash Flow from Operations means net cash provided by (used in) operating activities, adjusted to exclude any extraordinary cash payments made to or under the Company’s global defined benefit pension and retirement plans.  Cash Flow from Operations, as defined by the EPP, is a non-GAAP measure.  Net cash provided by operating activities is the most directly comparable GAAP measure.

2019 Payout of Amounts Attributable to Prior Year Awards.  On February 7, 2019, prior to the EPP termination, the Committee certified that the Company passed the 2018 EPP cash flow test, because in 2018 our total revenues were $6,405 million, and our Cash Flow from Operations of $572 million exceeded 1% of such total revenues (or $64 million).  Accordingly, the Committee authorized pro rata Bonus Bank payments to be made in August 2019.  Of our named executives, only Mr. Langenbahn was an EPP participant, and the Table below details his EPP balance and 2019 payment.  In accordance with the EPP termination rules, Mr. Langenbahn’s Bonus Bank Balance remaining after this payment will be paid to him in cash in a final distribution after February 28, 2020.

 

 

EPP – Payout of Amount Earned in Prior Years for Mr. Langenbahn Only

  Named

  Executive

  Bank Balance
Before 2019
Payment
 

2019

Cash Payment

  Remaining
Bank
Balance

Paul Langenbahn

      $219,148       $72,319       $146,829

 

2020 LTI Program – Performance-Based RSUs and Premium-Priced Options

For 2020, the Committee determined to allocate 100% of the LTI award in performance-based compensation, with the target mix weighted 35% in performance-based RSUs and 65% in premium-priced options with a 115% exercise price premium.  The performance-based RSUs which cliff vest at the end of the three-year performance period can be earned based on performance with respect to recurring revenue and “LTI EBITDA”, generally defined as Adjusted EBITDA as further adjusted to eliminate the impact of the Company’s shift to recurring revenue.  These changes are directly responsive to stockholder feedback, and are designed to drive strong long-term performance on key goals and tightly link our executives’ pay with our stockholders’ experience.

 

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Stockholder Feedback

 

  

 

2020 Program Changes Approved

 

Extend the performance measurement period of the Performance-Based RSUs from 1-year to 3-years

 

  

Performance-Based RSUs will have a 3-year performance period and will cliff-vest based on the achievement of the performance metrics for that period.

Adjust the operational performance metrics for earning performance-based RSUs

  

Performance for the Performance-Based RSUs will be measured by:

 

  3-year recurring revenue:  revenue continues to be an important indicator of our strategic execution and foundational to our long-term success.  Stockholders expressed support for continuing to include a revenue metric in the LTI award.

 

   3-year “LTI EBITDA” (as defined above):  Earnings is a key measure of our overall financial performance and profitability.  Stockholders expressed support for the inclusion of an earnings-related goal in the LTI award.

 

   

 

Increase the percentage of the LTI Program which consists of performance- based equity

  

 

Target LTI award for 2020 will be 100% performance-based, allocated 35% in Performance-Based RSUs and 65% in Premium-Priced Options with a 115% price premium:

 

  Premium-Priced Options directly tie the interests of our executives to those of our stockholders and incentivize strong stockholder returns.  115% represents a rigorous premium in the context of our historic stock price trend, but moreover would require achievement of a stock price that has not been reached since July 2017.

 

 

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  Other Employee Benefits

 

Like our other full-time salaried U.S. employees, the named executives participate in a variety of 401(k) and health and welfare benefit programs designed to attract, retain and motivate our workforce and keep us competitive with other employers.  Our 401(k) plan encourages employees to save and prepare financially for retirement.  Health and welfare and paid time-off benefits help our workforce stay healthy, focused and productive.

The named executives are eligible for other limited benefits that the Committee considers reasonable and appropriate under our executive compensation philosophy.  These benefits, which do not represent a significant portion of our named executives’ total

compensation, are intended to attract and retain highly qualified talent, minimize distractions from critical Company business and ensure the safety and security of our key executives.  These benefits are shown in our Perquisites Table and reported as “All Other Compensation” in our Summary Compensation Table.  They include financial counseling, executive medical exams, relocation benefits, and with respect to Mr. Hayford, Mr. Sullivan and Mr. Martire, certain personal use of corporate aircraft.  The Committee prohibits all tax reimbursements (or tax gross-ups) with the exception of those provided in connection with relocations required by the Company, which are generally also provided to non-executive employees.

 

 

  Change in Control and Post-Termination Benefits

 

 

  Change in Control Severance Benefits

 

If the Company considers potential change in control transactions, we want to ensure that key executives are incentivized to remain with us during this process and evaluate the transactions in an objective and undistracted way in order to support stockholder value.  For these reasons, we maintain the Amended and Restated NCR Change in Control Severance Plan (the “Change in Control Severance Plan”) for our senior executive team.  Under this plan, we pay only “double-trigger” separation

benefits, that is, benefits pay out only if both a change in control occurs and employment ends in a qualifying termination.  “Tier I” level benefits apply to all named executives under our Change in Control Severance Plan.  There are no tax gross-ups under the plan for any named executives.

For more about double-trigger benefits, see the Potential Payments Upon Termination or Change in Control section below.

 

 

 

  Severance Benefits

 

We provide our key executives reasonable severance benefits to ensure that we remain competitive with other employers, and to help us attract and retain top talent.  Our Executive Severance Plan provides certain severance benefits

in the event employment ends in a qualifying termination not connected to a change in control.  For more about these severance benefits, see the Potential Payments Upon Termination or Change In Control section below.

 

 

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  Robust Stock Ownership Requirements

 

The Committee recognizes that executive stock ownership plays a critical role in aligning the interests of management with those of stockholders.  We also believe that our most senior executives should maintain a significant personal financial stake in NCR to promote a long-term perspective in managing our business.  For these reasons, we require that our named executives own NCR common stock worth a guideline multiple of base salary.  Shares that count toward the guideline include shares owned personally, restricted stock and RSUs, and stock acquired through our Employee Stock Purchase Plan.  Stock options do not count toward the guideline.  Newly hired or promoted executives have five years to reach their guideline.  The table below shows our current guidelines.

As of February 28, 2020, all named executives either met or are on track to meet the stock ownership guidelines.

 

Stock Ownership Guideline

as a Multiple of Base Salary

  Named Executive   Guideline  

  Michael Hayford

  6

  Frank Martire

  6

  Owen Sullivan

  5

  Andre Fernandez

  4

  Paul Langenbahn

  3
 

 

  Compensation Clawback Policy

 

We have a policy generally providing that short-term and long-term incentive awards to our executive officers are subject to clawback (forfeiture or repayment), as directed by the Committee, if:

 

  ·  

the payment, grant or vesting of the award was based on achieving financial results that were the subject of a restatement of the Company’s financials within three years; and

 

  ·  

the Committee determines in its sole discretion that the executive officer’s negligence, fraud or misconduct caused or contributed to the need for the restatement, and that forfeiture or repayment is in the best interests of the Company and our stockholders.

If it is determined that the above conditions are met, then to the full extent permitted by law and as directed by the Committee, the executive officer must also forfeit any outstanding equity awards and repay amounts received from time-based equity award vesting and gains from stock option exercises.

Hedging and Pledging Policy

Our Insider Trading Policy incorporates the Company’s prohibitions against hedging, pledging and related transactions.  The Policy applies to all officers, directors, employees (including temporary employees) and contractors of the Company and its subsidiaries, as well as certain family members of, and individuals who live in the same household as, are financially dependent on, or whose transactions (including transactions by an entity) in NCR’s securities are directed by or subject to the influence or control of, any such person.

In order to restrict covered persons from engaging in transactions that hedge or offset, or are designed to hedge or offset, fluctuation in the market value of NCR equity securities, our Insider Trading Policy prohibits covered persons from directly or indirectly engaging in hedging activities or transactions of derivative securities of the Company at any time.  In addition, our directors, executive officers and designated key employees are prohibited from taking margin loans where NCR securities are used, directly or indirectly, as collateral for the loan, and from pledging NCR securities as collateral for a

 

 

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loan.  An exception to the foregoing pledging prohibition may be granted upon advance approval of our General Counsel, subject to a clear demonstration of financial capacity to repay the loan

without resorting to the pledged securities, and satisfaction of the remaining requirements of our Insider Trading Policy.

 

 

  Tax Considerations in Setting Compensation

Under Federal tax rules in effect for tax years beginning on and after January 1, 2018 (which tax rules eliminated a performance-based compensation exception that was previously available), compensation over $1 million paid annually for certain covered employees, including the named executives, generally is not deductible for federal tax purposes.  As has historically been the case, the Committee continues to have the ability to pay compensation to our named executives in appropriate circumstances, even if such compensation is not fully deductible.

 

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Board and Compensation and Human Resource Committee Report on Executive Compensation

The Compensation and Human Resource Committee, comprised of independent directors, reviewed and discussed the above Compensation Discussion & Analysis with management.  Based on that review and those discussions, the Committee recommended to our Board of Directors that the Compensation Discussion & Analysis be included in these proxy materials.

The Compensation and Human Resource Committee

Linda Fayne Levinson (Chair)

Chinh E. Chu

Richard L. Clemmer

Kirk T. Larsen

 

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 Executive Compensation Tables

 

 Summary Compensation Table

Our Summary Compensation Table below shows the total compensation paid to or earned by each of our named executives with respect to the applicable fiscal year.

 

Summary Compensation Table ($)

 

 

Name and Principal Position

(a)

 

Year

(b)

   

Salary

(c)

   

Bonus

(d)(1)

   

Stock

Awards

(e)(2)

   

Option

Awards

(f)(3)

   

Non-Equity

Incentive Plan

Compensation

(g)(4)

   

All Other

Compensation

(h)(5)

   

Total

(i)

 

 

 Michael Hayford

President & Chief Executive Officer

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

1,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,500,007

 

 

 

 

 

 

 

 

 

3,499,999

 

 

 

 

 

 

 

 

 

1,539,962      

 

 

 

 

    240,604       12,780,572  
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

634,615

 

 

 

 

 

 

 

 

 

1,010,959

 

 

 

 

 

 

 

 

 

5,000,011

 

 

 

 

 

 

 

 

 

7,499,881

 

 

 

 

 

 

 

 

 

—      

 

 

 

 

 

 

 

 

 

94,423      

 

 

 

 

 

 

 

 

 

14,239,889 

 

 

 

 

               

 

 Frank Martire(6)

Executive Chairman

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

750,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,925,011

 

 

 

 

 

 

 

 

 

1,574,997

 

 

 

 

 

 

 

 

 

1,154,971      

 

 

 

 

    385,831       6,790,810  
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

409,616

 

 

 

 

 

 

 

 

 

662,671

 

 

 

 

 

 

 

 

 

2,249,988

 

 

 

 

 

 

 

 

 

3,750,354

 

 

 

 

 

 

 

 

 

—      

 

 

 

 

 

 

 

 

 

108,116      

 

 

 

 

 

 

 

 

 

7,180,745 

 

 

 

 

               

 

 Owen Sullivan

Chief Operating Officer

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

725,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,899,988

 

 

 

 

 

 

 

 

 

2,100,001

 

 

 

 

 

 

 

 

 

1,116,472      

 

 

 

 

    237,968       8,079,429  
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

292,789

 

 

 

 

 

 

 

 

 

482,671

 

 

 

 

 

 

 

 

 

2,250,000

 

 

 

 

 

 

 

 

 

3,749,994

 

 

 

 

 

 

 

 

 

—      

 

 

 

 

 

 

 

 

 

74,071      

 

 

 

 

 

 

 

 

 

6,849,525 

 

 

 

 

               

 

 Andre Fernandez

Executive Vice President & Chief Financial Officer

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

625,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,599,992

 

 

 

 

 

 

 

 

 

1,399,998

 

 

 

 

 

 

 

 

 

802,064      

 

 

 

 

    162,873       5,589,927  
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

187,500

 

 

 

 

 

 

 

 

 

267,551

 

 

 

 

 

 

 

 

 

3,000,011

 

 

 

 

 

 

 

 

 

999,998

 

 

 

 

 

 

 

 

 

—      

 

 

 

 

 

 

 

 

 

57,867      

 

 

 

 

 

 

 

 

 

4,512,927 

 

 

 

 

               

 

 Paul Langenbahn

Executive Vice President and President, NCR Commerce

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

700,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,624,989

 

 

 

 

 

 

 

 

 

875,002

 

 

 

 

 

 

 

 

 

574,315      

 

 

 

 

    626,552       4,400,858  
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

673,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,499,991

 

 

 

 

 

 

 

 

 

1,000,002

 

 

 

 

 

 

 

 

 

72,319      

 

 

 

 

 

 

 

 

 

421,719      

 

 

 

 

 

 

 

 

 

5,667,108 

 

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

595,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,499,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107,939      

 

 

 

 

 

 

 

 

 

26,490      

 

 

 

 

 

 

 

 

 

3,229,620 

 

 

 

 

(1) This column represents 2018 bonus commitments paid in early 2019 under negotiated new hire employment agreements.

(2) This column shows the aggregate grant date fair value, as determined in accordance with FASB ASC Topic 718, of stock awards granted to each named executive in the applicable year.  See Note 8 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for an explanation of the assumptions we make in the valuation of our equity awards.  Assuming achievement of the highest level of performance, the aggregate grant date fair values of the performance-based restricted stock units granted in 2019 are:  Mr. Hayford:  $13,000,014;  Mr. Martire:  $5,850,022;  Mr. Sullivan:  $7,799,977;  Mr. Fernandez:  $5,199,984;  and Mr. Langenbahn:  $3,249,977.  For more about 2019 awards, see the Grants of Plan-Based Awards 2019 Table.

(3) Represents the grant date fair value of the option awards granted in the applicable year.  See Note 8 of the Notes to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for an explanation of the assumptions we make in valuing our option awards.

(4) This column represents amounts earned by our named executives under our 2019 Annual Incentive Plan, except that  Mr. Langenbahn’s 2019 amount includes both the amount earned under our 2019 Annual Incentive Plan plus $146,829 earned under the EPP in prior years and to be paid after February 28, 2020 under the final distribution rules relating to the EPP termination.  The entire amount reported for 2018 for Mr. Langenbahn was earned under the EPP in prior years and paid in August 2019.  The entire amount reported for 2017 for Mr. Langenbahn was earned under the EPP in prior years and paid in August 2018.  For more details about the EPP termination, see the 2019 Long-Term Incentives section above.

(5) The amounts in this column consist of the aggregate incremental cost to the Company of the perquisites provided to the named executives, any insurance premiums paid by the Company with respect to life insurance for the benefit of the named executives, contributions made by the Company to the NCR Savings Plan, our 401(k) plan, on behalf of the named executives and certain other payments.  For Mr. Langenbahn, the 2019 and 2018 amounts also include cash retention payments of $600,000 and $400,000, respectively, under his amended letter agreement entered into with the Company in July 2018.  Additional details regarding these amounts are included in the All Other Compensation – 2019 Table and Perquisites – 2019 Table and the Agreements with Our Named Executives section below.

(6) In light of the reduced amount of time Mr. Martire will spend as Executive Chairman following our 2020 Annual Meeting as described in the Leadership Structure section above, during 2020 Mr. Martire will not participate in our Annual Incentive Plan (MIP), and his award under our LTI program has been reduced from $4,000,000 to $2,000,000.

 

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 All Other Compensation Table

This Table shows the value of Company-paid perquisites and other personal benefits, insurance premiums, and Company matching contributions to the NCR Savings Plan, our 401(k) plan, on behalf of our named executives in 2019:

 

All Other Compensation – 2019 ($)

Named

Executive

  

Perquisites

and Other

Personal

Benefits(1)

  

Insurance

Premiums(2)

  

Company

Contributions to

Retirement /

401(k) Plans(3)

   Total  

Michael Hayford

       231,052        52        9,500        240,604

Frank Martire

       376,279        52        9,500        385,831

Owen Sullivan

       227,720        748        9,500        237,968

Andre Fernandez

       152,728        645        9,500        162,873

Paul Langenbahn

       17,000        52        9,500        26,552

(1) This column shows the Company’s aggregate incremental cost for the perquisites and other personal benefits described in the Perquisites - 2019 Table below.

(2) This column shows the value of Company-paid premiums for life insurance for the benefit of our named executives.

(3) This column shows Company matching contributions to our 401(k) plan, which the Company also makes for our non-executive employee participants in that plan.

 

 Perquisites Table

This Table shows the aggregate incremental cost to the Company for perquisites for our named executives in 2019.

 

Perquisites – 2019 ($)

Named

Executive

  

Corporate

Aircraft

Usage(1)

  

Executive

Medical

Program(2)

  

Financial

Planning

Allowance(3)

   Relocation(4)    Total  

Michael Hayford

       193,781        5,000        12,000        20,271        231,052

Frank Martire

       354,279        10,000        12,000               376,279

Owen Sullivan

       174,075        5,000        12,000        36,645        227,720

Andre Fernandez

              5,000        12,000        135,728        152,728

Paul Langenbahn

              5,000        12,000               17,000

(1) This column shows the Company’s incremental cost for personal usage of the corporate aircraft. Personal use of aircraft includes commuting between executives’ principal place of residence and the Company’s headquarters in Atlanta, which the Company believes is an important incentive to attract top-tier talent in the highly competitive technology industry to the Company. The Company provides the use of corporate aircraft both for executives’ business-related and personal travel in order to support the efficiency and productivity of our executives, protect their personal safety and security, and to ensure the confidentiality of our business.  We calculated this incremental cost by determining the variable operating cost to the Company, including items such as fuel, landing and terminal fees, crew travel expenses and operational maintenance.  Expenses determined to be less variable in nature, such as general administration, depreciation and pilot compensation, were not included in this incremental cost.  On occasion, family members and close associates traveled with or at the authorization of our CEO on corporate aircraft;  the Company incurred de minimis incremental costs as a result of such travel, which costs are included in the Table.

(2) This column shows the Company-paid maximum amount available to named executives for medical diagnostic services under our Executive Medical Exam Program.  Though some executives may not use the maximum, for privacy reasons we choose to disclose the maximum benefit (rather than amount actually used) available under the Program ($5,000 for those under age 65 and $10,000 for those age 65 or older).

(3) This column shows the Company-paid amounts for financial planning assistance under our Executive Financial Planning Program.

(4) This column shows relocation expenses related to our named executives.  Included in these relocation figures are the following tax gross-up amounts:  Mr. Hayford:  $9,193;  Mr. Sullivan:  $16,611;  Mr. Fernandez:  $61,870.

 

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 Agreements with Our Named Executives

Our named executives have agreements with the Company that generally describe, among other things, their initial base salaries, bonus opportunities and equity awards, as well as benefit plan participation and applicable restrictive covenants.  These agreements generally are not updated to reflect later compensation changes.

 

 
Agreement with Our President & Chief Executive Officer

Mr. Hayford:  Mr. Hayford’s April 27, 2018 employment agreement describes his initial base salary, incentive opportunities and awards, benefit plan participation and related items including noncompete and other restrictive covenants. For each of 2019 and 2020, NCR agreed that his annual LTI award would have an aggregate grant value of at least $10 million, with $2.5 million more in value for 2019 if our common stock were to trade at $40 per share or more for at least fifteen trading days during the period from May 1, 2018 through February 15, 2019, which share price metric was not achieved.  The agreement also provides for Mr. Hayford’s Executive Severance Plan participation with a separation benefit of one and one-half times (1.5x) base salary plus target bonus, and Change in Control Severance Plan participation with a Tier I separation benefit of three times (3x) base salary plus target bonus.  If his employment is terminated (other than for cause) or if he resigns for good reason, under the agreement Mr. Hayford’s unvested 2018 equity awards vest immediately, and his 2018 options remain exercisable for 1 year (or until earlier expiration).  “Cause” generally means grounds for cause under our Change in Control Severance Plan, felony conviction or material Code of Conduct violation.  “Good reason” generally means assignment of duties inconsistent with position, authority, duties or responsibilities or diminution in such items, relocation over 40 miles or material breach of employment agreement or 2018 equity agreements.

 

Agreement with Our Executive Chairman of the Board

Mr. Martire: Mr. Martire’s April 27, 2018 employment agreement describes his initial base salary, incentive opportunities and awards, benefit plan participation and related items including noncompete and other restrictive covenants.  For each of 2019 and 2020, NCR agreed that his annual LTI award would have an aggregate grant value of at least $4.5 million, with $1.5 million more in value for 2019 if our common stock were to trade at $40 per share or more for at least fifteen trading days during the period from May 1, 2018 through February 15, 2019, which share price metric was not achieved.  The agreement also provides for Mr. Martire’s Executive Severance Plan participation with a separation benefit of one and one-half times (1.5x) base salary plus target bonus, and Change in Control Severance Plan participation with a Tier I separation benefit of three times (3x) base salary plus target bonus.  If his employment is terminated (other than for cause) or if he resigns for good reason, under the agreement Mr. Martire’s unvested 2018 equity awards vest immediately, and his 2018 options remain exercisable for 1 year (or until earlier expiration).  “Cause” and “good reason” generally have meanings similar to those noted for Mr. Hayford above.

In light of the reduced amount of time Mr. Martire will spend as Executive Chairman following our 2020 Annual Meeting as described in the Leadership Structure section above, he will not receive any bonus award under our 2020 Management Incentive Plan as noted above in our 2020 Annual Incentive Plan section.  His 2020 equity award under our 2020 Long-Term Incentive Program, which is described in the 2020 LTI Program – Performance-Based RSUs and Premium-Priced

 

 

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Options section above, will be $2 million. His base salary will continue to be $750,000. Mr. Martire’s employment agreement is expected to be amended to reflect these revised employment terms, together with any related items.

 

 

Agreements with Other Named Executives

Mr. Sullivan:  Mr. Sullivan’s July 18, 2018 employment agreement describes his initial base salary as Chief Operating Officer, incentive opportunities and awards, benefit plan participation and related items including noncompete and other restrictive covenants. For 2019, NCR agreed that his annual LTI award would have an aggregate grant value of at least $4.5 million.  The agreement also provides for Mr. Sullivan’s Executive Severance Plan participation with a separation benefit of one and one-half times (1.5x) base salary plus target bonus, and Change in Control Severance Plan participation with a Tier I separation benefit of three times (3x) base salary plus target bonus.  If his employment is terminated (other than for cause) or if he resigns for good reason, under the Agreement Mr. Sullivan’s unvested 2018 equity awards vest immediately, and his 2018 option awards remain exercisable for 1 year (or until earlier expiration).  “Cause” and “good reason” generally have the same meanings noted for Mr. Hayford above.

Mr. Fernandez:  Mr. Fernandez’s August 27, 2018 employment agreement describes his initial base salary as EVP and Chief Financial Officer, incentive opportunities and awards, benefit plan participation and related items including noncompete and other restrictive covenants.

For 2019, NCR agreed that his annual LTI award would have an aggregate grant value of at least $3 million.  The agreement also provides for Mr. Fernandez’s Executive Severance Plan participation with a separation benefit of one and one-half times (1.5x) base salary plus target bonus,

and Change in Control Severance Plan participation with a Tier I separation benefit of three times (3x) base salary plus target bonus.  If Mr. Fernandez’s employment is terminated (other than for cause) or if he resigns for good reason (i) his unvested 2018 equity awards vest immediately, (ii) his 2018 options remain exercisable for 1 year (or until earlier expiration), (iii) if termination occurs during the period that begins six months after a grant or vesting date for a particular equity grant and that ends 364 days after that same grant or vesting date for a particular equity grant Mr. Fernandez will be entitled to full vesting of the equity tranche for that particular grant that would otherwise vest on the scheduled vesting date next following the date of termination, with any option tranche so vesting remaining exercisable until the earlier of the first anniversary of the employment termination or the option expiration date, (iv) if termination occurs after the end of a fiscal year, he will receive any unpaid bonus for that year based on Company performance, and (v) if termination occurs in the last half of the year, he will receive a prorated bonus for that year, based on his service and Company performance.  “Cause” and “good reason” generally have the same meanings noted for Mr. Hayford above.

Mr. Langenbahn:  Mr. Langenbahn’s July 26, 2018 amended letter agreement with the Company described his initial base salary in his current position, his incentive opportunities and awards, and his benefit plan participation and related items, including noncompete and restrictive covenants.  The agreement included a $1 million retention incentive payable in two installments:  $400,000 in December 2018 and $600,000 in June 2019, in each case subject to continued employment and compliance with certain restrictive covenants.  The agreement also provided for Mr. Langenbahn’s Executive Severance Plan participation with a modified good reason trigger under which he was permitted to claim good reason any time before April 30, 2020 in light of his change in position, authority and responsibilities.

The Company also entered into an agreement with Mr. Langenbahn in December 2019 under which he

 

 

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will serve in his current position until his retirement from Company service effective March 13, 2020.  Under this agreement, Mr. Langenbahn is entitled to the following payments and benefits:  (1) payment of a $1,575,000 gross cash severance amount;  (2) prorated vesting in any outstanding equity incentive awards to the extent set forth in the applicable award

agreements;  (3) payment of COBRA premiums for up to eighteen months;  (4) up to one year of outplacement services;  and (5) reimbursement of up to $10,000 in documented legal fees.  The agreement also includes a general release of claims and certain non-competition, non-recruitment, and non-solicitation covenants.

 

 

 Grants of Plan-Based Awards Table

The Table below shows the Committee’s equity and non-equity incentive plan awards to our named executives in 2019.  Equity awards were made under our Stock Plan.  Non-equity awards were made under our Annual Incentive Plan (MIP) and, for Mr. Langenbahn only, a payout under our EPP earned before 2019.  These plans and related awards are described in the Compensation Discussion & Analysis.

 

    

Grants of Plan-Based Awards – 2019 ($)

 

                      
             

Estimated Future

Payouts Under Non-

Equity Incentive Plan

Awards(1)

   

Estimated Future

Payouts Under Equity

Incentive Plan Awards(2)

    All
Other
Option
Awards:
Number of
Securities
Underlying
Options
   

Exercise
Price of
Option
Awards

($/Sh)

   

Grant

Date
Fair

Value

of Stock

Awards(3)

 
Named Executive   Award Type  

Grant

Date

    Threshold     Target     Max     Threshold     Target     Max  

Michael Hayford

  Management Incentive Plan       750,000       1,500,000       3,000,000                                      
  Stock Options     02/08/19                                           434,243       26.42       3,499,999  
    Performance-Based RSU     02/08/19                         123,013       246,026       492,052                   6,500,007  

Frank Martire

  Management Incentive Plan       562,500       1,125,000       2,250,000                                      
  Stock Options     02/08/19                                           195,409       26.42       1,574,997  
    Performance-Based RSU     02/08/19                         55,356       110,712       221,424                   2,925,011  

Owen Sullivan

  Management Incentive Plan       543,750       1,087,500       2,175,000                                      
  Stock Options     02/08/19                                           260,546       26.42       2,100,001  
    Performance-Based RSU     02/08/19                         73,808       147,615       295,230                   3,899,988  

Andre Fernandez

  Management Incentive Plan       390,625       781,250       1,562,500                                      
  Stock Options     02/08/19                                           173,697       26.42       1,399,998  
    Performance-Based RSU     02/08/19                         49,205       98,410       196,820                   2,599,992  

Paul Langenbahn

  Management Incentive Plan       437,500       875,000       1,750,000                                      
  Economic Profit Plan             146,829