PRE 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 15, 2019

NCR Stockholders,

Thank you for your support and for welcoming me as I assumed the role of NCR’s President and Chief Executive Officer in April 2018.

Upon joining NCR, one of my first priorities was to meet with many of our employees and customers.  During my travels, I was consistently struck by the power of the NCR brand.  Everywhere we went, the NCR brand preceded us.  NCR has a brand that lets us walk into any bank, any retailer and any restaurant in the world.  I also saw the passion and enthusiasm of our 34,000 employees worldwide and the strength and differentiation of our global sales, service and distribution network.

However, I also found many opportunities for needed improvement, including elevating our focus on the customer, simplifying and streamlining NCR and getting high quality products to market in a timely fashion.  So, we spent a substantial portion of 2018 getting back to the basics to better align NCR for growth.

We focused on taking care of our customers, improving execution around new product introductions and breaking down organizational silos through our Accelerated Customer Activation Teams (ACATs).  ACATs are co-located, cross-functional teams with a single goal – deliver products that are customer referenceable.  We also significantly evolved the composition of the NCR Executive Leadership Team.  Additionally, we entered 2019 organized for success, focus and accountability by forming new Business Units dedicated to Banking, Retail and Hospitality. These initiatives established the foundation to build a stronger, more efficient NCR and elevated the deep connections that we have with our customers.

Our team also focused on our long-term growth strategy, which we unveiled at the New York Stock Exchange in November 2018.  There, we highlighted our plan for creating stockholder value.  This plan is 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.

We will seek to drive top-line revenue growth by investing in six strategic growth platforms.  These platforms are product areas where we believe we have differentiators that we can leverage to achieve our growth objectives.  In addition to these growth areas, we will continue to make acquisitions that expand our product offerings, add value to existing products or give us closer connections to our customers through new sales and services channels.  For example, our acquisition of JetPay gives us an end-to-end payments platform and unlocks incremental recurring revenue streams.

Our priority for 2019 is clear: return to profitable growth.  NCR enters 2019 with improving execution and a very simple goal – keep our customers happy and satisfied so that they come back and buy more.

We have made tremendous progress.  I am proud of our team and their commitment to our customers, as well as the energy and excitement they have shown in support of reshaping the future of NCR.

While there is more work left to be done, I believe we are on the right path to returning NCR to growth and elevating the value we offer to our global customers.  We are well-positioned to help retailers, banks and restaurants compete in an evolving landscape of physical and digital consumers.

Thank you for your confidence in NCR, as well as 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 2019 ANNUAL MEETING

AND PROXY STATEMENT

March 15, 2019

Dear Fellow NCR Stockholder:

I am pleased to invite you to attend the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) for NCR Corporation, a Maryland corporation (“NCR” or the “Company”), that will be held on April 24, 2019, at 9:00 a.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/NCR2019.  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 24, 2019.

Sincerely,

 

LOGO

Frank M. Martire

Executive Chairman

 


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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF NCR CORPORATION

 

Time:

    

9:00 a.m. Eastern Time

Date:

    

Wednesday, April 24, 2019

Place:

 

    

Virtual Meeting via webcast at www.virtualshareholdermeeting.com/NCR2019

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, 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 eight 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, executive compensation (Say On Pay), as described in these proxy materials;

 

   

Consider and vote upon the ratification of the appointment of PricewaterhouseCoopers LLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019;

 

   

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

 

   

Transact such other business as may properly come before the Annual Meeting and any postponement or adjournment of the Annual Meeting.

The holders of the Series A Convertible Preferred Stock will, voting as a separate class, be asked to:

 

   

Consider and vote upon the election of two 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.

Other Important Information:

   

Record holders of NCR’s common stock and Series A Convertible Preferred Stock at the close of business on February 22, 2019 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 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 “2019 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 15, 2019

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to Be Held on April 24, 2019

This proxy statement and NCR’s 2018 Annual Report on Form 10-K are available at www.proxyvote.com.

NCR Corporation

864 Spring Street NW

Atlanta, Georgia 30308-1007

 

 


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NCR  CORPORATION

2019 ANNUAL MEETING PROXY STATEMENT

 

TABLE OF CONTENTS

 

  Proxy Statement – General Information

   1
           

 NCR Stock Ownership

   8

Officers and Directors

   8

Other Beneficial Owners

   9

  Proposal 1 – Election of Directors

   12

Proposal Details

   12

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

   17

  More Information About Our Board of Directors

   18

Corporate Governance

   18

Board Leadership Structure and Risk Oversight

   21

Compensation Risk Assessment

   23

Committees of the Board

   23

Audit Committee

   24

Compensation and Human Resource Committee

   25

Committee on Directors and Governance

   26

Selection of Nominees for Directors

   26

Communications with Directors

   28

Code of Conduct

   28

Section 16(a) Beneficial Ownership Reporting Compliance

   28

 Director Compensation

   29

Director Compensation Program

   29

Director Compensation Tables

   30

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

   32

Proposal Details

   32

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

   32

  Executive Compensation – Compensation Discussion & Analysis

   33

Executive Summary

   33

Company 2018 Financial Performance

   33

Our 2018 and 2017 Performance

   34

Our Named Executive Officers

   34

Leadership Transformation

   34

Our Executive Compensation Philosophy

   36

Summary of 2018 & 2019 Compensation Program Actions by Our Committee

   37

Executive Compensation Program Design – Factors We Consider

   38

Stockholder Outreach and Most Recent Say On Pay Vote

   39

Independent Compensation Consultant

   39

Best Practices in NCR Executive Compensation

   40

Key Elements of 2018 Executive Compensation

   41

Our Process for Establishing 2018 Compensation

   41

External Market Analysis – Peer Group and Survey Data

   42

2018 Executive Compensation Program Details

   44

Base Salaries for 2018

   44

Annual Incentives for 2018

   45

MIP Core Financial Objectives for 2018

   46

Customer Success Bonus for 2018

   48

Annual Incentive Plan – Targets for 2018

   49

Annual Incentive Plan – Objectives, Results and Payouts for 2018

   49

2018 Long-Term Incentives

   50

2018 Performance-Based RSUs – Performance Metrics

   52
 

 


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2018 Performance-Vesting RSUs – Performance Metric

   53

2018 Total LTI Equity Award Values

   53

Update on the 2017 LTI Equity Awards

   54

2019 LTI Program – Performance-Based RSUs and Options

   55

Other Employee Benefits

   56

Change in Control and Post-Termination Benefits

   56

Robust Stock Ownership Requirements

   57

Compensation Clawback Policy

   57

Hedging and Pledging Policy

   57

Tax Considerations in Setting Compensation

   57

  Board and Compensation and Human Resource Committee Report on Executive Compensation

   58
           

 Executive Compensation Tables

   59

Summary Compensation Table

   59

All Other Compensation Table

   60

Perquisites Table

   61

Agreements with Our Named Executives

   61

Grants of Plan-Based Awards Table

   64

Outstanding Equity Awards at Fiscal Year-End 2018 Table

   66

2018 Option Exercises and Stock Vested Table

   67

2018 Pension Benefits Table

   67

  Potential Payments Upon Termination or Change in Control

   68

Termination Connected With Change in Control

   68

Termination Not Connected With Change in Control

   70

Potential Payments Upon Termination or Change in Control Table

   73

Equity Compensation Plan Information Table

   75

 CEO Pay Ratio Disclosure

   76
           

 Related Person Transactions

   77
           

  Fees Paid to Independent Registered Public Accounting Firm

   80
           

 Board Audit Committee Report

   82
           

  Proposal 3 – Ratify the Appointment of Independent Registered Public Accounting Firm for 2019

   84

Proposal Details

   84

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

   84

  Proposal 4 – Directors’ proposal to amend and restate the charter of the Company to eliminate the supermajority provisions contemplated by the Maryland General Corporation Law and the Company’s charter and make certain conforming changes to the charter

   86

Proposal Details

   86

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

   87

 Other Matters

   89
           

 Additional Information

   89
 

 


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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 2018 annual report available to stockholders beginning on or about March 15, 2019 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 2019 Annual Meeting of Stockholders, and any postponements or adjournments thereof (the “Annual Meeting”), to be held via a live webcast at 9:00 a.m. Eastern Time, on April 24, 2019, 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, 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/NCR2019, 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 9:00 a.m. Eastern Time, on April 24, 2019.

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 2019 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 2018 annual report) over the Internet pursuant to rules adopted by the Securities and Exchange Commission (“SEC”).  Beginning on or about March 15, 2019, 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 15, 2019.  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 do 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 on the following items:

 

  ·  

Election of eight 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 executive compensation (Say on Pay), as described in these proxy materials;

 

  ·  

Ratification of the appointment of PricewaterhouseCoopers LLC (“PricewaterhouseCoopers”) as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and

 

  ·  

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

The holders of the Series A Convertible Preferred Stock, voting as a separate class, also will consider and vote on the election of two directors to serve until the next annual meeting of stockholders

 

 

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following his election and until his successor is duly elected and qualifies.

 

 

Why are the common stockholders being asked to vote on the election of only eight Directors?

A total of ten director nominees will be voted upon at the Annual Meeting.  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 eight of the 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:  Richard L. Clemmer, Robert P. DeRodes, Deborah A. Farrington, Michael D. Hayford, Kurt P. Kuehn, Linda Fayne Levinson, Frank R. Martire and Matthew A. Thompson.

The holders of Series A Convertible Preferred Stock, voting separately, as a class, are entitled to elect the two of the ten director nominees.  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 provide that Blackstone is entitled, as long as it beneficially owns 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 shall include in its nominees for election, and that only holders of the Series A Convertible Preferred Stock have the right to vote for either of these nominees.  The term of each of those nominees, Gregory R. Blank and Chinh E. Chu, expires at the Annual Meeting, and Blackstone has designated Mr. Blank and Mr. Chu as its “Purchaser Designees” (as such term is defined in our charter) to be nominated by the Board as a director to serve until the next annual meeting of stockholders following his election and until his successor is duly

elected and qualifies.  The holders of Series A Convertible Preferred Stock will vote separately, as a class, on the election of Messrs. Blank and Chu at the Annual Meeting.

 

 

How does the Board recommend that I vote my shares?

The Board recommends a vote:

 

  ·  

FOR the election of each of the eight 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 election of the director nominees to be elected exclusively by the holders of Series A Convertible Preferred Stock voting separately as a class;

 

  ·  

FOR the advisory vote to approve executive compensation (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, 2019; and

 

  ·  

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

 

 

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 22, 2019 (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 118,942,554 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.  In addition, each record holder of Series A Convertible Preferred Stock will have one vote for each share of Series A Convertible Preferred Stock 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 separately, as a class.  As of the Record Date, there were 867,869 shares of Series A Convertible Preferred Stock outstanding, which as of such date were convertible into 28,928,677 shares of common stock.

 

 

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

Under the Investment Agreement, at the Annual Meeting Blackstone is required to vote its shares of Series A Convertible Preferred Stock in favor of each of the director nominees who are also being voted on by holders of common stock, in favor of the Say On Pay proposal, and for ratification of the appointment of PricewaterhouseCoopers as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019, as described in these proxy materials.  Blackstone is entitled to vote in its

discretion on the other proposals described in this proxy statement, and the other holders of the Series A Convertible Preferred Stock are entitled to vote in their 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 23, 2019.

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

 

 

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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 or the Internet as well as by 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.

 

 

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 vice versa.

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 23, 2019;

 

  ·  

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 23, 2019.

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

 

 

 

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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 or by proxy) of stockholders entitled to cast a majority of all the votes entitled to be cast at the Annual Meeting constitutes a quorum.

 

 

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 Richard L. Clemmer, Robert P. DeRodes, Deborah A. Farrington, Michael D. Hayford, Kurt P. Kuehn, Linda Fayne Levinson, Frank R. Martire, and Matthew A. Thompson (eight of the ten director nominees), to approve the Say on Pay proposal, and to ratify the appointment of our independent registered public accounting firm.  Under Maryland law, abstentions and broker “non-votes” will not be counted as votes cast and will have no effect on the votes for any of the above proposals.

With respect to the directors’ proposal to amend and restate the Company’s charter to eliminate the supermajority provisions contemplated by the Maryland General Corporation Law and the Company’s charter and make certain conforming changes thereto, the amendments to the Company’s charter (other than the amendment to Section 6.2) 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), and the amendment to Section 6.2 requires the affirmative vote of a majority of the voting power of shares of outstanding stock of NCR entitled to vote thereon.  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 Exhibit A to this proxy statement.  If this proposal is approved by the affirmative vote of a majority of the voting power of shares of outstanding stock of NCR and entitled to vote thereon, but less than the affirmative vote of holders entitled to cast eighty percent 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 Articles of Amendment and Restatement including the amendment to Section 6.2 of the Charter included in the Articles of Amendment and Restatement attached as Exhibit A to this proxy statement, but such filed Articles of Amendment and Restatement will not include the amendments relating to the elimination of the supermajority voting provisions in this proposal or the changes to the Charter to conform the language more closely to the MGCL.

The affirmative vote of the holders of a majority of the outstanding shares of our Series A Convertible Preferred Stock, voting separately as a class, is required to elect Messrs. Gregory R. Blank and Chinh E. Chu.  Only the holders of the Series A Convertible Preferred Stock have the right to vote on the election of Messrs. Blank and Chu.  Under Maryland law, abstentions and broker non-votes, if any, by holders of Series A Convertible Preferred

 

 

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Stock will have the effect of a vote against these nominees.

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, 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 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, 2019 (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, 118,941,326 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, 2019

 

   

Number of RSUs That

Vest Within 60 Days of

February 15, 2019(3)

 

 

Non-Employee Directors

       

 

Gregory R. Blank, Director(4)

          *              

 

Chinh E. Chu, independent Lead Director

    25,168       *              

 

Richard L. Clemmer, Director

    163,548       *       54,015        

 

Robert P. DeRodes, Director

    144,748       *       54,015        

 

Deborah A. Farrington, Director

    8,326       *              

 

Kurt P. Kuehn, Director

    53,270       *       10,039        

 

Linda Fayne Levinson, Director

    203,529       *       54,015        

 

Matthew A. Thompson, Director

    8,962       *              

Named Executive Officers

       

 

Michael D. Hayford, Director and Officer

    18,331       *              

 

Frank R. Martire, Director and Officer

    18,331       *              

 

Owen J. Sullivan, Officer

          *              

 

Andre J. Fernandez, Officer

          *              

 

Daniel W. Campbell, Officer

    48,202       *       12,755       35,447  

 

William R. Nuti, former Director and Officer(5)

          *              

 

Robert P. Fishman, former Officer(5)

    209,247       *       17,006       115,182  

 

Current Directors and Executive Officers as a Group (18 persons)

 

 

1,146,721

 

 

 

1.0%

 

    267,745    

 

304,622

 

* 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

 

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more than 60 days after the Table Date:  Mr. Hayford 160,514; Mr. Martire 74,676; Mr. Sullivan 82,751; Mr. Fernandez 105,597; Mr. Campbell 118,351; and Mr. Fishman 208,439.

(2) All fractional shares have been rounded to the nearest whole number.  The total includes these shares deferred under our Director Compensation Program:  104,533 shares granted to Mr. Clemmer; 41,217 shares granted to Mr. DeRodes; 41,351 shares granted to Mr. Kuehn; and 8,077 shares granted to Ms. Levinson.

(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 disclaimed all interest in NCR director compensation payable in 2016 and future years.  Accordingly, he received no restricted stock units or shares in 2018, and will not receive any units or shares in 2019 under the NCR Director Compensation Program.  While Mr. Blank is an officer of an affiliate of Blackstone, he disclaims beneficial ownership of, and the shares reported in the Table exclude, NCR securities beneficially owned by Blackstone.

(5) Mr. Nuti, formerly Chairman of the Board of Directors and Chief Executive Officer, ceased serving in these positions in connection with his retirement effective April 30, 2018, and currently serves as our Chairman Emeritus of the Board and as a consultant. On July 24, 2018, Mr. Fishman, formerly Executive Vice President, Chief Financial Officer and Chief Accounting Officer, announced his decision to retire from NCR effective at an undetermined time in the future.  He ceased serving in these positions as of August 29, 2018, and currently serves as our Senior Advisor.

 

 Other Beneficial Owners

To the Company’s knowledge, and as reported as of the close of business on February 15, 2019 (except as otherwise specified), the following stockholders beneficially own more than 5% of the Company’s outstanding stock.

 

Other Beneficial Owners of NCR Stock  
     Common Stock      Series A Convertible
Preferred Stock
 
   Name and Address of Beneficial Owner   

Total Number of

Shares

    

Percent

of Class

    

Total Number of

Shares

    

Percent

of Class

 

  Entities affiliated with The Blackstone Group(1)

                   498,425        56.65

  345 Park Avenue

           

  New York, NY 10154

           

  The Vanguard Group(2)

     11,125,546        9.41              

  100 Vanguard Boulevard

           

  Malvern, PA 19355

           

  BlackRock, Inc.(3)

     10,318,901        8.7              

  55 East 52nd Street

           

  New York, NY 10055

           

  Wells Fargo & Company(4)

     8,234,886        6.97              

  420 Montgomery Street

           

  San Francisco, CA 94163

           

  AllianceBernstein L.P.(5)

     6,785,038        5.7              

  1345 Avenue of the Americas

           

  New York, NY 10105

           

  Janus Henderson Group plc(6)

     5,927,836        5.0              

  201 Bishopsgate EC2M 3AE

           

  United Kingdom

                                   

 

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(1) Information is based in part on a Schedule 13D/A filed with the SEC on March 17, 2017 by The Blackstone Group L.P. (the “Blackstone Group”) and certain parties affiliated with the Blackstone Group, and on information provided by the Company’s transfer agent, Equiniti Trust Company.  Based on this information, as of February 15, 2019, partnerships affiliated with the Blackstone Group beneficially owned 498,425 shares of Series A Convertible Preferred Stock as follows:  734 shares directly held by Blackstone BCP VI SBS ESC Holdco L.P. (“BCP VI”), 371,315 shares directly held by Blackstone NCR Holdco L.P. (“NCR Holdco”), 435 shares directly held by BTO NCR Holdings – ESC L.P. (“BTO ESC”), and 125,941 shares directly held by BTO NCR Holdings L.P. (“BTO NCR” and, together with BCP VI, NCR Holdco and BTO ESC, the “Partnerships”), which includes dividends-in-kind payable within 60 days after February 15, 2019.

The general partner of NCR Holdco is Blackstone NCR Holdco GP L.L.C.  The managing member of Blackstone NCR Holdco GP L.L.C. is Blackstone Management Associates VI L.L.C.  The sole member of Blackstone Management Associates VI L.L.C. is BMA VI L.L.C.  The general partner of BCP VI is BCP VI Side-by-Side GP L.L.C.  The general partner of each of BTO NCR and BTO ESC is BTO Holdings Manager L.L.C.  The managing member of BTO Holdings Manager L.L.C. is Blackstone Tactical Opportunities Associates L.L.C.  The sole member of Blackstone Tactical Opportunities Associates L.L.C. is BTOA L.L.C.  The sole member of BCP VI Side-by-Side GP L.L.C., and the managing member of BTOA L.L.C. and BMA VI L.L.C., is Blackstone Holdings III L.P.  The general partner of Blackstone Holdings III L.P. is Blackstone Holdings III GP L.P.  The general partner of Blackstone Holdings III GP L.P. is Blackstone Holdings III GP Management L.L.C.  The sole member of Blackstone Holdings III GP Management L.L.C. is The Blackstone Group L.P.  The general partner of The Blackstone Group L.P. is Blackstone Group Management L.L.C.  Blackstone Group Management L.L.C.  is wholly owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman.  Each of such Blackstone entities (other than each of the Partnerships to the extent of their direct holdings) and Mr. Schwarzman may be deemed to beneficially own the shares beneficially owned by the Partnerships directly or indirectly controlled by it or him, but each disclaims beneficial ownership of such shares.

As of the Record Date, the Partnerships held of record 491,666 shares of Series A Convertible Preferred Stock, which were convertible into 16,388,702 shares of common stock.

(2) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on February 11, 2019 by The Vanguard Group (“Vanguard”), reporting beneficial ownership of 11,125,546 shares of the Company’s stock as of December 31, 2018.  In this filing, Vanguard reported sole dispositive power with respect to 11,056,266 of such shares, sole voting power with respect to 63,895 of such shares, shared dispositive power with respect to 69,280 of such shares and shared voting power with respect to 17,508 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 51,772 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 29,631 of such shares as a result of serving as investment manager of certain Australian investment offerings.

(3) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on February 6, 2019 by BlackRock, Inc. (“BlackRock”), reporting beneficial ownership of 10,318,901 shares of the Company’s stock as of December 31, 2018, as a parent holding company or control person for its subsidiaries, BlackRock Life Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland, Limited, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, FutureAdvisor, Inc., BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, and BlackRock Fund Advisors.  In this filing, BlackRock reported sole voting power with respect to 9,843,457 of such shares, and sole dispositive power with respect to all 10,318,901 of such shares.

(4) Information, including ownership percentage, is based on a Schedule 13G/A filed with the SEC on January 22, 2019 by Wells Fargo & Company (“Wells Fargo”), reporting beneficial ownership of 8,234,886 shares of the Company’s stock as of December 31, 2018, on behalf of itself and its subsidiaries, Wells Capital Management Incorporated, Wells Fargo Clearing Services, LLC, Wells Fargo Bank, National Association, Wells Fargo Funds Management, LLC, and Wells Fargo Advisors Financial Network, LLC.  In this filing, Wells Fargo reported sole dispositive power with respect to 48,768 of such shares, sole voting power with respect to 48,768 of such shares, shared dispositive power with respect to 8,186,118 of such shares and shared voting power with respect to 6,585,198 of such shares; Wells Capital Management Incorporated reported shared dispositive power with respect to 8,038,467 of such shares, and shared voting power with respect to none of such shares; and Wells Fargo Funds Management, LLC reported shared dispositive power with respect to 6,432,285 of such shares, and shared voting power with respect to 6,429,738 of such shares.

(5) Information, including ownership percentage, is based on a Schedule 13G filed with the SEC on February 13, 2019 by AllianceBernstein L.P. (“AllianceBernstein”), reporting beneficial ownership of 6,785,038 shares of the Company’s stock as of December 31, 2018.  In this filing, AllianceBernstein reported sole dispositive power with respect to 6,643,868 of such shares, sole voting power with respect to 5,573,312 of such shares and shared dispositive power with respect to 141,170 of such shares.  AllianceBernstein also reported that AllianceBernstein is a majority owned subsidiary of AXA Equitable Holdings, Inc. and an indirect majority owned subsidiary of AXA SA.  AllianceBernstein operates under independent management and makes independent decisions from AXA and AXA Equitable Holdings and their respective subsidiaries and AXA and AXA Equitable Holdings calculate and report beneficial ownership separately from AllianceBernstein pursuant to guidance provided by the Securities and Exchange Commission in Release Number 34-39538 (January 12, 1998).  AllianceBernstein may be deemed to share beneficial ownership with AXA reporting persons by virtue of 141,170 shares of common stock acquired on behalf of the general and special accounts of the affiliated entities for which AllianceBernstein serves as a subadvisor.  Each of AllianceBernstein and the AXA entities reporting herein acquired their shares of common stock for investment purposes in the ordinary course of their investment management and insurance businesses.

(6) Information, including ownership percentage, is based on a Schedule 13G filed with the SEC on February 12, 2019 by Janus Henderson Group plc (“Janus Henderson”), reporting beneficial ownership of 5,927,836 shares of the Company’s stock as of December 31, 2018.  In this filing, Janus Henderson reported shared dispositive power with respect to 5,927,836 of such shares and shared voting power with respect to 5,927,836 of such shares.  Janus Henderson also reported that Janus Henderson has an indirect 97.11% ownership stake in Intech Investment Management LLC (“Intech”) and a 100% ownership stake in Janus Capital Management LLC (“Janus Capital”), Janus Capital International Limited (“JCIL”), Perkins Investment Management LLC (“Perkins”), 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, Janus Capital may be deemed to be the beneficial owner of 5,911,302 shares or 5.0% of the shares outstanding of NCR Common Stock held by such

 

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Managed Portfolios.  However, Janus Capital 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.  As a result of its role as investment adviser or sub-adviser to the Managed Portfolios, JCIL may be deemed to be the beneficial owner of 16,534 shares or 0.0% of the shares outstanding of NCR Common Stock held by such Managed Portfolios.  However, JCIL 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 Gregory R. Blank, Chinh E. Chu, Richard L. Clemmer, Robert P. DeRodes, Deborah A. Farrington, Michael D. Hayford, Kurt P. Kuehn, Linda Fayne Levinson, 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 eight of the ten director nominees up for election, to each serve until the 2020 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 eight nominees:  Richard L. Clemmer, Robert P. DeRodes, Deborah A. Farrington, Michael D. Hayford, Kurt P. Kuehn, Linda Fayne Levinson, 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 unavailable 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.

The holders of Series A Convertible Preferred Stock will vote on two additional director nominees to succeed the other director nominees up for election, to serve until the 2020 Annual Meeting and until their successors are duly elected and qualify.  The nominees, Gregory R. Blank and Chinh E. Chu, are current directors who were designated by Blackstone under the terms of the Investment Agreement.  The holders of Series A Convertible Preferred Stock will vote separately, as a class, on the election of Messrs. Blank and Chu.  Only the holders of Series A Convertible Preferred Stock have the right to vote on the election of Messrs.  Blank and Chu.

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.

Directors to Be Elected by Holders of Common Stock and Series A Convertible Preferred Stock, Voting Together as a Single Class

Richard L. Clemmer, 67, is Chief Executive Officer of NXP Semiconductors N.V., a semiconductor company, a position he has held since January 1, 2009.  Prior to that, he was a senior advisor to Kohlberg Kravis Roberts & Co., a private equity firm, a position he held from May 2007 to December 2008.  He previously served as President and Chief Executive Officer of Agere Systems Inc., an integrated circuits components company that was acquired in 2007 by LSI Logic Corporation, from October 2005 to April 2007.  Mr. Clemmer is a member of the board of directors of RMG Technologies, Inc., a networking software company.   Mr. Clemmer became a director of NCR on April 23, 2008.

Qualifications.  Mr. Clemmer’s qualifications include, among other things, his significant leadership and management experience in his position at NXP and his former positions with Kohlberg Kravis Roberts & Co. and Agere Systems Inc.; his technology industry experience with NXP and Agere; his knowledge of

 

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international operations; his financial literacy and expertise; his mergers and acquisitions experience with NXP and Agere; and his independence.

Robert P. DeRodes, 68, leads DeRodes Enterprises, LLC, an information technology, business operations and management advisory firm.  Most recently, Mr. DeRodes served from April 2014 to April 2015 as the Executive Vice President and Chief Information Officer for Target, Inc., a general merchandising retailer, leading its post-breach information security efforts and developing a long-term technology transformation roadmap.  Previously, Mr. DeRodes served as Executive Vice President, Global Operations & Technology, of First Data Corporation, an electronic commerce and payments company, from October 2008 to July 2010.  Prior to First Data Corporation, Mr. DeRodes served as Executive Vice President and Chief Information Officer of The Home Depot, Inc., a home improvement retailer, from February 2002 to October 2008 and as President and Chief Executive Officer of Delta Technology, Inc. and Chief Information Officer of Delta Air Lines, Inc., from September 1999 until February 2002.  Prior to working at Delta, Mr. DeRodes held various executive positions in the financial services industry with Citibank (1995-99) and with USAA (1983-93).  During the 10 years prior to 1983, Mr. DeRodes held technology positions working for regional Midwestern banks.  Mr. DeRodes became a director of NCR on April 23, 2008.

Qualifications.  Mr. DeRodes’ qualifications include, among other things, his extensive career and experience in the information technology industry, including with Target, First Data and The Home Depot; his expertise on cybersecurity and information security matters; his experience in and understanding of the financial services, retail and transportation industries; his management and leadership experience, particularly in the information technology field; and his independence and financial literacy.

Deborah A. Farrington, 68, is a founder and President of StarVest Management, Inc. and is, and since 1999 has been, a general partner of StarVest Partners, L.P., a venture capital fund that invests primarily in emerging software and business services companies.  From 1993 to 1997, Ms. Farrington was President and Chief Executive Officer of Victory Ventures, LLC, 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 staffing company.  Prior to 1993, Ms. Farrington held management positions with Asian Oceanic Group in Hong Kong and New York, Merrill Lynch & Co. Inc. and the Chase Manhattan Bank.  Ms. Farrington was Lead Director and Chairman of the Compensation Committee of NetSuite, Inc., a New York Stock Exchange-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 Collectors Universe, Inc., where she is Chairperson of the Compensation Committee and a member of the Audit Committee.  Ms. Farrington is also a member of the boards of directors of ConveyIQ, Crowd Twist, Inc., Snag, Inc., and Xignite, Inc., all of which are private companies.  Ms. Farrington holds an Executive Masters Professional Director Certification from the American College of Corporate Directors, a director education and credentialing organization.  She is a graduate of Smith College and earned an MBA from the Harvard Business School.  Ms. Farrington became a director of NCR on November 27, 2017.

Qualifications.  Ms. Farrington’s qualifications include, among other things, 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.

 

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Michael D. Hayford, 59, 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 is a member of the Board of Directors and the Audit Committee of Endurance International Group Holdings, Inc. 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, among other things, 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.

Kurt P. Kuehn, 64, is member of the Board of Directors of Henry Schein, Inc., and was Chief Financial Officer at United Parcel Service, Inc. (UPS), a global leader in logistics, from 2008 until July 2015.  Prior to his appointment as CFO at UPS, Mr. Kuehn was Senior Vice President, Worldwide Sales and Marketing, leading the transformation of the sales organization to improve the global customer experience.  Mr. Kuehn was UPS’s first Vice President of Investor Relations, taking the company public in 1999 in one of the largest IPOs in U.S. history.  Since he joined UPS as a driver in 1977, Mr. Kuehn’s UPS career has included leadership roles in sales and marketing, engineering, operations and strategic cost planning.  Mr. Kuehn became a director of NCR on May 23, 2012.

Qualifications.  Mr. Kuehn’s qualifications include, among other things, his tenure as CFO at UPS, his previous experience at UPS as Senior Vice President, Worldwide Sales and Marketing, and Vice President of Investor Relations, and the management and leadership responsibilities associated with these positions; his international operating experience with UPS; his significant financial literacy, knowledge and expertise; his current public company board experience; and his independence.

Linda Fayne Levinson, 77 is a director of Jacobs Engineering Group where she serves as that company’s Independent Lead Director, and was Chair of the Board of Hertz Global Holdings, Inc. until January 2, 2017, when she resigned.  Ms. Levinson was also a director of IngramMicro Inc. until December 2016 when it was acquired by HNA Group, and a director of The Western Union Company until May 2016 when she retired from that board.  Ms. Levinson became a director of NCR on January 1, 1997 and was appointed the independent Lead Director of the Board on October 1, 2007 and continued to serve in that role through July 24, 2013.  Ms. Levinson is also on the U.S. advisory board of CVC Capital Partners, and a senior advisor to RRE Ventures, a venture capital firm committed to helping founders build category-defining companies.  Ms. Levinson was also a member of The McKinsey New Ventures Advisory Council until it dissolved in 2018.  Ms. Levinson was a Partner at GRP Partners, a private equity investment fund investing in start-up and early-stage retail, technology and e-commerce companies, from 1997 to December 2004.  Prior to that, she was a Partner in Wings Partners, a private equity firm, an executive at American Express running its leisure travel and tour business, and a Partner at McKinsey & Company.  Ms. Levinson was a director of DemandTec, Inc. from June 2005 until February 2012 when it was acquired by International Business Machines Corporation.

 

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Qualifications.  Ms. Levinson’s qualifications include, among other things, her long experience as a public company director and a committee chair, starting in 1991, as well as her general management experience at American Express; her strategic experience at McKinsey & Company and her investment experience at GRP Partners and Wings Partners; her leadership experience, including as a lead independent director and board chair; her broad industry knowledge; her independence; and her in-depth knowledge of corporate governance issues.

Frank R. Martire, 71, is Executive Chairman of NCR.  Mr. Martire most recently 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).  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. He is also Chairman of the Board of Sacred Heart University, a Board member of the Baptist Health System, Inc., Jacksonville University and Cannae, and a member of the Leadership Foundation of the Mayo Clinic.  Mr. Martire holds a Master’s degree in Finance from the University of New Haven, Connecticut, and a Bachelor of Science degree in Economics from Sacred Heart University.  Mr. Martire became a director of NCR on May 31, 2018.

Qualifications.  Mr. Martire’s qualifications include, among other things, 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, 60, currently serves as Executive Vice President, Worldwide Field Operations, for Adobe Systems Incorporated.  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, 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 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, among other things, 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 leadership experience; and his independence.

 

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Directors to Be Elected Separately by Holders of Series A Convertible Preferred Stock

Gregory R. Blank, 38, is a Senior Managing Director of Blackstone 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, including most recently in Kronos, JDA, Paysafe, Ipreo and Optiv.  Prior to joining Blackstone, Mr. Blank was an associate at Texas Pacific Group (TPG) in San Francisco 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. focused on technology, media and telecommunications clients.  Mr. Blank graduated with a bachelor’s degree in economics from Harvard College and received an MBA from the Harvard Business School.  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.  Mr. Blank is one of the Board Members who was designated by Blackstone under the terms of the Investment Agreement.  Only the holders of the Series A Convertible Preferred Stock may vote on the election of Mr. Blank as a director at the Annual Meeting.

Qualifications.  Mr. Blank’s qualifications include, among other things, 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 Travelport’s Audit Committee; and his independence.

Chinh E. Chu, 52, is the Founder and Managing Partner of CC Capital Partners, LLC, a private investment firm.  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.  Before forming CC Capital, Mr. Chu was a Senior Managing Director of The Blackstone Group, 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.  Before joining Blackstone in 1990, Mr. Chu worked at Salomon Brothers in the Mergers & Acquisitions Department.  Mr. Chu led Blackstone’s investments in AlliedBarton, Celanese, Graham Packaging, Interstate Hotels, Kronos, LIFFE, Nalco, Nycomed, and Stiefel Laboratories.  He also currently serves as a director of Stearns Mortgage.  Mr. Chu previously served as a director of Catalent, Inc., Kronos Incorporated, SunGard Data Systems, Inc., Freescale Semiconductor, Ltd., Biomet, Inc., Alliant, Celanese Corporation, Nalco Company, Nycomed, Alliant Insurance Services, Inc., the London International Financial Futures and Options Exchange, or LIFFE, Graham Packaging, and AlliedBarton Security Services.  Mr. Chu graduated with a bachelor’s degree in finance from the University of Buffalo.  Mr. Chu became a director of NCR on December 4, 2015 and was appointed independent Lead Director effective February 22, 2016.

Mr. Chu is one of the Board Members who was designated by Blackstone under the terms of the Investment Agreement.  Only the holders of the Series A Convertible Preferred Stock may vote on the election of Mr. Chu as a director at the Annual Meeting.

Qualifications.  Mr. Chu’s qualifications include, among other things, 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.

 

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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 Richard L. Clemmer, Robert P. DeRodes, Deborah A. Farrington, Michael D. Hayford, Kurt P. Kuehn, Linda Fayne Levinson, Frank R. Martire, Matthew A. Thompson and, solely with respect to the holders of Series A Convertible Preferred Stock, Gregory R. Blank and Chinh E. Chu, 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 Richard L. Clemmer, Robert P. DeRodes, Deborah A. Farrington, Michael D. Hayford, Kurt P. Kuehn, Linda Fayne Levinson, Frank R. Martire and Matthew A. Thompson (eight of the ten 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 Messrs. Clemmer, DeRodes, Hayford, Kuehn, Martire, Thompson or Mses. Farrington and Levinson.

The vote of the holders of a majority of the outstanding shares of our Series A Convertible Preferred Stock, voting separately as a class, is required to elect Messrs. Gregory R. Blank and Chinh E. Chu (the other director nominees).  Only the holders of Series A Convertible Preferred Stock have the right to vote on the election of Messrs. Blank and Chu.  Under Maryland law, abstentions and broker non-votes, if any, by holders of Series A Convertible Preferred Stock will have the effect of votes against Messrs. Blank and Chu.

 

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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 (with certain members of the Board being elected solely by the holders of Series A Convertible Preferred Stock) to oversee and direct the management of the Company.  The Board selects the senior management 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 Corporate Governance Guidelines on 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 http://www.ncr.com/company/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;

 

  ·  

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;

 

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  ·  

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 Gregory R. Blank, Chinh E. Chu, Richard L. Clemmer, Robert P. DeRodes, Deborah A. Farrington, Kurt P. Kuehn, Linda Fayne Levinson and Matthew A. Thompson, are independent in accordance with the NYSE listing standards and the Company’s Corporate Governance Guidelines.

 

 

Recent 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 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

 

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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.   This stands in contrast to the many public companies that continue to afford their stockholders no such rights.  And 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.  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 also determined it advisable, and included in the applicable proposal in this proxy statement, to amend 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 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.  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.

 

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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, the Board has set out the roles of both Chairman and the independent Lead Director in Exhibit C to the Corporate Governance Guidelines.

Currently the Board has an integrated leadership structure in which Frank R. Martire serves as Executive Chairman, Michael D. Hayford services as Chief Executive Officer and Chinh E. Chu serves as the Board’s independent Lead Director.  The Board believes that this structure promotes greater efficiency through more direct communication of critical information between the Company and the Board.  In addition, the Executive Chairman’s extensive knowledge of the Company uniquely qualifies him, in close consultation with the independent Lead Director, to lead the Board in discussing strategic matters and assessing risks, and focuses the Board on the issues that are most material to the Company.

Consistent with the Corporate Governance Guidelines, the 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, including executive sessions of the independent directors; 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.  Additionally, among other things, the Board’s non-management directors meet regularly in executive session with only the non-management directors present.

 

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The Board has had over ten years of successful experience with a leadership structure – in which the roles of Chairman and Chief Executive Officer are held by management employees and an independent Lead Director is selected – and, taking these factors into account, has determined that this leadership structure is the most appropriate and effective for the Company at this time.

 

 

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 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 been designated with primary responsibility for overseeing the assessment of financial, strategic, cybersecurity and other risk, 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 includes representation from the Company’s various infrastructure functions.  The Audit Committee and the full Board receive and review periodic reports prepared by this team.  In general, the reports identify, analyze, prioritize and provide the status of major risks to the Company.  The Audit Committee also receives periodic updates from members of the Enterprise Risk Management team as warranted.  In addition, the Audit Committee regularly receives management reports on information security and the enhancements of the 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 reports 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.

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 these 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 http://www.ncr.com/company/corporate-governance.

The Board met nine times in 2018 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 2018 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 2018 and the number of meetings held in fiscal 2018 are shown below:

 

Name

Audit

Committee

Compensation

and

Human

Resource

Committee

Committee

on

Directors

and

Governance

Gregory R. Blank

X

Chinh E. Chu

X X

Richard L. Clemmer(1)

X Chair

Robert P. DeRodes

X

Deborah A. Farrington

X

Kurt P. Kuehn

Chair

Linda Fayne Levinson

Chair X

Matthew A. Thompson(2)

X

Number of meetings in 2018

10 6 4

(1) Effective April 25, 2018, Mr. Clemmer was elected to serve on the Compensation and Human Resource Committee and the Committee on Directors and Governance as Chair, and ceased to serve on the Audit Committee.

(2) Effective April 25, 2018, Mr. Thompson was elected to serve on the Audit 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.

Each member of the Audit Committee is independent and financially literate as determined by the Board under applicable SEC rules and NYSE listing standards.  In addition, the Board has determined that Messrs. Blank, Kuehn, and Thompson and Ms. Farrington, 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 under the section Director Compensation, starting on page 29 as determined

 

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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 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 in 2018.  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.

 

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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 Board’s 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 law.  With respect to the directors to be elected by the holders of shares of Series A Convertible Preferred Stock, such nominees are required to have been designated by Blackstone pursuant to the Investment Agreement.

Exhibit A to the Board’s 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

 

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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.

The directors nominated by the Board for election at the Annual Meeting were recommended by CODG.  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.

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 http://www.ncr.com/company/corporate-governance.  See Procedures for Nominations Using Proxy Access, Procedures for Stockholder Proposals and Nominations for 2020 Annual Meeting Outside of

 

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SEC Rule 14a-8 and Procedures for Stockholder Proposals and Nominations for 2020 Annual Meeting Pursuant to SEC Rule 14a-8 beginning on page 89 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 http://www.ncr.com/company/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.

 

 Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the Company is required to report in this proxy statement any failure to file or late filing occurring during the fiscal year ended December 31, 2018.  Based solely on a review of filings furnished to the Company from reporting persons, the Company believes that all of these filing requirements were satisfied by its directors, officers and 10% beneficial owners.

 

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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 FW Cook, the independent compensation consultant for the CHRC.  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).

Because he has disclaimed all interest in NCR director compensation payable under the Program or otherwise, Mr. Blank received no NCR director compensation in 2018.  Mr. Martire does not receive compensation under the Program for his service as Executive Chairman of the Board. Mr. Nuti did not receive compensation under the Program for his service as Chairman of the Board, and he does not receive compensation under the Program for his service as Chairman Emeritus.  On April 25, 2018, Gary J. Daichendt retired from Board service, and so became ineligible for further compensation as of that date.

 

 

Annual Retainer

In 2018, 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 2018 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.

Annual retainers are 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 2018, Mr. DeRodes, Ms. Farrington, Mr. Kuehn and Mr. Thompson elected to receive cash retainers; Mr. Chu, Mr. Daichendt and Ms. Levinson elected to receive one-half of their retainers in cash and one-half in NCR common shares; and Mr. Clemmer elected to receive his retainer 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 2018, the Committee recommended, and the Board agreed, that the annual equity grant

 

 

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value should remain unchanged at $225,000 for the same reasons noted above for continuing the annual retainers unchanged.  Accordingly, on the April 25, 2018 Annual Meeting date, each eligible director received an annual equity grant of restricted stock units (RSUs) valued at $225,000 (except for Mr. Blank due to his disclaimer noted above).  Ms. Levinson’s additional RSU grant in connection with her service as a member of the Board of Directors of our subsidiary, NCR Brasil – Indústria de Equipamentos Para Automação S.A., also remained unchanged at a value of $40,000.

These annual equity grants vest in four equal quarterly installments beginning three months after the grant date, and may be deferred at the director’s election.  In 2018 Messrs. Clemmer and Kuehn elected to defer receipt of their 2018 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.  The Board recently increased these guidelines, which now encourage non-management directors to accumulate NCR stock ownership equal to five times (up from four times) the annual retainer amount.  The increased guidelines give newly elected directors 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, 2018, all of our non-management directors exceeded the guidelines, except for Mr. Chu who joined our Board in 2015, Mr. Thompson and Ms. Farrington who joined our Board in 2017, and Mr. Blank due to his compensation disclaimer noted above.

 

 

 Director Compensation Tables

 

Director Compensation for 2018 ($)  
   Director Name   

Fees

(Annual Retainers)

Earned in Cash

     Stock Awards(1)      Total  

 

  Gregory R. Blank

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Chinh E. Chu

 

  

 

 

 

 

69,500

 

 

 

 

  

 

 

 

 

294,578

 

 

 

 

  

 

 

 

 

364,078

 

 

 

 

 

  Richard L. Clemmer

 

  

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

330,573

 

 

 

 

  

 

 

 

 

330,573

 

 

 

 

 

  Gary J. Daichendt(2)

 

  

 

 

 

 

13,625

 

 

 

 

  

 

 

 

 

13,648

 

 

 

 

  

 

 

 

 

27,273

 

 

 

 

 

  Robert P. DeRodes

 

  

 

 

 

 

95,000

 

 

 

 

  

 

 

 

 

225,024

 

 

 

 

  

 

 

 

 

320,024

 

 

 

 

 

  Deborah A. Farrington

 

  

 

 

 

 

95,000

 

 

 

 

  

 

 

 

 

225,024

 

 

 

 

  

 

 

 

 

320,024

 

 

 

 

 

  Kurt P. Kuehn

 

  

 

 

 

 

114,000

 

 

 

 

  

 

 

 

 

225,024

 

 

 

 

  

 

 

 

 

339,024

 

 

 

 

 

  Linda Fayne Levinson

 

  

 

 

 

 

57,500

 

 

 

 

  

 

 

 

 

322,553

 

 

 

 

  

 

 

 

 

380,053

 

 

 

 

 

  Matthew A. Thompson

 

  

 

 

 

 

91,250

 

 

 

 

  

 

 

 

 

225,024

 

 

 

 

  

 

 

 

 

316,274

 

 

 

 

(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 7 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, where we explain assumptions made in valuing equity awards.

(2) Mr. Daichendt retired from NCR Board service effective April 25, 2018.

 

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Grant Date Fair Value(1) of Director 2018 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

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Chinh E. Chu

 

  

 

 

 

 

225,024

 

 

 

 

  

 

 

 

 

69,554

 

 

 

 

    

 

 

 

 

 

  Richard L. Clemmer

 

  

 

 

 

 

225,024

 

 

 

 

    

 

 

 

 

  

 

 

 

 

105,549

 

 

 

 

 

  Gary J. Daichendt(2)

 

    

 

 

 

 

  

 

 

 

 

13,648

 

 

 

 

    

 

 

 

 

 

  Robert P. DeRodes

 

  

 

 

 

 

225,024

 

 

 

 

    

 

 

 

 

    

 

 

 

 

 

  Deborah A. Farrington

 

  

 

 

 

 

225,024

 

 

 

 

    

 

 

 

 

    

 

 

 

 

 

  Kurt P. Kuehn

 

  

 

 

 

 

225,024

 

 

 

 

    

 

 

 

 

    

 

 

 

 

 

  Linda Fayne Levinson

 

  

 

 

 

 

265,004

 

 

 

 

  

 

 

 

 

57,549

 

 

 

 

    

 

 

 

 

 

  Matthew A. Thompson

 

     225,024       

 

 

 

 

    

 

 

 

 

(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 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, 2018 for an explanation of the assumptions we make in the valuation of our equity awards.

(2) Mr. Daichendt retired from NCR Board service effective April 25, 2018.

 

Shares of NCR Common Stock Underlying Director Equity Awards – as of

December 31, 2018 (#)

 
  Director Name   

Options

Outstanding

as of

12/31/18

    

RSUs

Outstanding

as of

12/31/18

    

Deferred

Shares

Outstanding

as of

12/31/18

 

 

  Gregory R. Blank

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Chinh E. Chu

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,605

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Richard L. Clemmer

 

  

 

 

 

 

54,015

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

105,155

 

 

 

 

 

  Gary J. Daichendt(1)

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Robert P. DeRodes

 

  

 

 

 

 

54,015

 

 

 

 

  

 

 

 

 

3,605

 

 

 

 

  

 

 

 

 

41,217

 

 

 

 

 

  Deborah A. Farrington

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,605

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  Kurt P. Kuehn

 

  

 

 

 

 

10,039

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

43,154

 

 

 

 

 

  Linda Fayne Levinson

 

  

 

 

 

 

54,015

 

 

 

 

  

 

 

 

 

4,246

 

 

 

 

  

 

 

 

 

8,077

 

 

 

 

 

  Matthew A. Thompson

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,605

 

 

 

 

  

 

 

 

 

 

 

 

 

(1) Mr. Daichendt retired from NCR Board service effective April 25, 2018.

 

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 Proposal 2 – Say On Pay:  Advisory Vote on the
 Compensation of the 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 Securities Exchange Act of 1934, as amended.  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

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 (via attendance at the virtual meeting or by proxy) 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 votes for this proposal.

 

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 Executive Compensation – Compensation

 Discussion & Analysis

 

 

 Executive Summary

 

In 2018, NCR experienced transformative changes in its leadership structure and its management team that have helped position the Company for long-term growth and success.  Through this transitional period 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 Executive Officers (the “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.

 

 

 Company 2018 Financial Performance

 

    2018 Financial Highlights

 

      

  

Our Revenue was $6.4 billion, which decreased 2% from prior year, driven by lower Hardware revenue.

      

  

Our Software revenue increased 1% to $1,912 million, which was driven by Cloud revenue that grew 7% to
$631 million in 2018.

      

  

Services revenue increased 4% to $2,460 million due to our investment in services transformation initiatives
during 2018.

      

  

Our recurring revenue (e.g., Software maintenance, Cloud, and hardware maintenance revenue) increased 3%
from the prior year and comprised 46% of total revenue.

      

  

We completed the acquisition of JetPay Corporation to expand our offerings to include end-to-end payment
processing.

      

  

We returned value to stockholders by repurchasing 6.1 million shares of our common stock for $210 million during
the twelve months ended December 31, 2018.

      

  

While we saw growth in 2018 in Software revenue and Services revenue, we fell short of reaching our threshold performance objectives for our 2018 Long-
Term Incentive Plan and Annual Incentive Plan.

 

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Our 2018 and 2017 Performance

These charts compare our performance results for 2018 vs. 2017:

 

LOGO

Services Revenue ($Billion)

 

LOGO

Cloud Revenue ($Million)

 

LOGO

Software Revenue ($Billion)

 

LOGO

 

 Our Named Executive Officers

 

Our Compensation Discussion & Analysis describes NCR’s 2018 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 executives.  For more about the compensation of our named executives, see the Executive Compensation Tables below.

 

 

 

Michael Hayford – President and Chief Executive Officer beginning April 30, 2018

 

Frank Martire – Executive Chairman of the Board beginning May 31, 2018

 

Owen Sullivan – Chief Operating Officer beginning July 23, 2018

 

Andre Fernandez – Executive Vice President and Chief Financial Officer beginning August 29, 2018

 

Daniel Campbell – Executive Vice President, NCR Global Sales beginning February 5, 2018

 

William Nuti – Chairman of the Board and Chief Executive Officer until April 30, 2018, currently Chairman Emeritus of the Board and Consultant

 

Robert Fishman – Executive Vice President, Chief Financial Officer and Chief Accounting Officer until August 29, 2018, currently Senior Advisor

 

 

 

 

 Leadership Transformation

The year 2018 was transformative for NCR’s leadership team and organizational structure.  Each of our 2018 named executives was either newly appointed to their role or transitioned out of their role during the year.  In 2018, several one-time, new-hire and transition-related compensation decisions were made in connection with this transformation.  Accordingly, certain compensation decisions for 2018 reflected these unique circumstances rather than ordinary course.

 

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Named Executive Appointments

Mr. Hayford’s Appointment.  On April 30, 2018, the Company announced the appointment of Mr. Hayford as President and CEO effective as of the same date and elected Mr. Hayford to the Board.  Mr. Hayford was selected by the Board for numerous reasons, including his proven leadership and deep experience across a range of transaction-driven software and technology solutions businesses.

Mr. Martire’s Appointment.  On April 30, 2018, the Board announced the appointment of Mr. Martire as Executive Chairman of the Board effective as of May 31st.  Mr. Martire has worked closely with Mr. Hayford at two prior businesses and the Board is confident in the ability of this team to drive the future growth of NCR.

Mr. Sullivan’s Appointment.  On July 26, 2018, the Company announced the appointment of Mr. Sullivan as Chief Operating Officer, effective as of July 23, 2018.

Mr. Fernandez’s Appointment.  On August 29, 2018, the Company announced the appointment of Andre Fernandez as Executive Vice President and Chief Financial Officer, effective as of the same date.

Mr. Campbell’s Appointment.  Mr. Campbell was appointed as Executive Vice President, NCR Global Sales, effective as of February 5, 2018.

The Committee approved the compensation for each newly hired executive under their negotiated employment agreements, taking into consideration competitive pay levels, pay with prior employers, internal equity and the context of the Company’s leadership transformation.  Under these agreements each of Messrs. Hayford, Martire, Sullivan and Fernandez was entitled to a 2018 annual bonus payout of no less than their target bonus, pro-rated for their period of service during 2018, and Mr. Campbell was entitled to a sign-on bonus.  These minimum bonus levels were negotiated as part of total cash since these executives had not participated in establishing either the strategy or the metrics for the 2018 bonus.  These executives do not have any minimum bonuses for 2019.

In addition, beginning with the hire of Mr. Hayford as CEO and Mr. Martire as Executive Chairman, we adjusted our equity grant approach with respect to newly hired executives in 2018 and generally provided the majority of equity grant value for these executives as stock options instead of restricted stock units with performance-based vesting conditions.  While the stock options vest with continued service, the awards will only deliver value if our share price increases.  The Committee determined that this approach appropriately balanced our pay-for-performance philosophy with the exigencies of recruiting new executives who were not employed when our 2018 business plan was approved.  In 2019, we resumed our historical practice of granting the majority of executive officer long-term incentive awards with performance-based vesting conditions.

Named Executive Transitions

Mr. Nutis Retirement.  On March 22, 2018, the Company announced that Mr. Nuti would be retiring due to disability from his positions as Chairman and CEO and as a member of the Board after 13 years of service to the Company.  Upon his retirement, which was effective as of April 30, 2018, Mr. Nuti was appointed to the honorary position of Chairman Emeritus of the Board, and was also retained on a part-time basis as a consultant for transition and continuing advisory services.  In connection with these changes, the Committee approved a retirement and consulting agreement for Mr. Nuti.  In determining to approve this agreement, the Committee took into consideration the circumstances of Mr. Nuti’s departure, his past strong performance as NCR’s CEO for 13 years, a report prepared by the committee’s independent compensation consultant on

 

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treatment of equity upon retirement at our peers and other public companies, NCR’s prior achievement of the applicable performance criteria pertaining to Mr. Nuti’s equity awards and Mr. Nuti’s efforts to support an effective transition in leadership for NCR’s stockholders, employees and customers.

Mr. Fishman’s Retirement.  On July 26, 2018, the Company announced the retirement of Robert Fishman, effective at an undetermined time in the future.  Mr. Fishman became our Senior Advisor and ceased holding the positions of Executive Vice President, Chief Financial Officer and Chief Accounting Officer as of August 29, 2018.

The Board and Committee were intensely involved in each of these appointments and transitions and worked to foster a successful leadership transformation, with NCR’s vision to be the leading software and services-led enterprise provider in the financial services, retail and hospitality industries we serve.  This new leadership team is well-positioned to drive NCR’s business strategy of shifting our business mix to more software, services and recurring revenue.

For more information on the compensation and retirement arrangements that were negotiated with these named executives, see the “Agreements with Our Named Executive Officers” section below.

 

 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.

 

 

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 Summary of 2018 & 2019 Compensation Program Actions by Our
 Committee

The Company’s overall 2018 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 actions taken by the Committee in 2018 and early 2019 to carry out this philosophy include:

 

  ·  

2018 Annual Incentive Plan – Historic Bonus Funding Approach.  Similar to 2017, the bonus funding calculation had threshold (40%), target (100%), and maximum (200%) performance goals that had to be achieved for the executive officers to earn the corresponding bonus plan payout.  We also continued to use Non-GAAP Operating Income (NGOI), with a Free Cash Flow modifier, as our Core Financial Objectives for the plan.  This aligns our performance-based compensation strategy with the key financial metrics that our investors monitor when evaluating our Company’s ongoing performance.  This approach also continues to differentiate our Annual Incentive Plan’s financial metrics from the performance goals used in our Long-Term Incentive Program (“LTI Program”).

 

  ·  

2018 LTI Program – Granted Annual LTI Awards with Performance Conditions and Introduced Stock Options.  In evaluating our 2018 LTI Program, the Committee introduced stock options as part of our annual LTI equity awards to our named executive officers.  Our 2018 annual award mix consisted of 1/3 performance-based RSUs with a three-year performance period, 1/3 performance-vesting RSUs in which no units are earned unless a 2018 performance goal is achieved, and 1/3 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.  For our performance-based RSUs, we continued to use Non-GAAP Diluted Earnings Per Share (NGDEPS) and Software-Related Margin Dollars (SRMD) as the two-performance metrics that will determine the LTI award payout.  For our performance-vesting RSUs, we used SRMD as the performance metric that must be achieved for these RSUs to be eligible to be earned, with vesting subject to continued employment.  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.  New hire awards in 2018 were generally split between RSUs and stock options with performance-based RSUs introduced for 2019.

 

  ·  

2019 Annual Incentive Plan – Performance-Based Bonus Program.  For 2019, the Annual Incentive Plan will continue to use a traditional bonus funding approach.  The bonus funding metrics approved by the Committee are EBITDA (80% weighting) and Customer Success — Net Promoter Score (20% weighting).  These metrics align our compensation strategy with a key financial metric used by investors to evaluate our performance, and an internal metric to align with our overall customer success survey results.  The maximum plan payout is limited to two times the target bonus.

 

  ·  

2019 LTI Program – New LTI Award Mix of Performance-Based RSUs and Stock Options.  For 2019, the Committee simplified our LTI award mix for our named executive officers to consist of 65% performance-based RSUs and 35% stock options.  Our performance-based RSUs will vest based on the achievement of NCR Revenue (40% weighting) and Adjusted Operating Income (60% weighting) performance metrics.  These performance metrics will be measured over a one-year performance period and will vest 1/3 on each anniversary of the grant date subject to the recipient’s continued service through the applicable vesting dates.  Our 2019 LTI award program simplifies our design for both internal and external stakeholders and more directly links stockholder long-term interests with performance goals that reward our named executives for sustainable value creation.

 

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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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Stockholder Outreach and Most Recent Say On Pay Vote

Consistent with our strong commitment to engagement, communication and transparency, we regularly engage with our stockholders to understand their perspectives and views on our Company, including our executive compensation program, corporate governance and other strategic initiatives and issues.  During 2018 and early 2019, we proactively reached out to investors holding a majority of our shares to discuss their thoughts and receive feedback on our compensation philosophy and programs.  Members of our management team conducted meetings with investors that responded to our outreach efforts.

During these conversations, we reviewed our overall business strategy, our strategic offerings, and our forward-looking approach to creating stockholder value.  We reviewed how we use our compensation program to further our strategy and regularly review our compensation practices to ensure that they continue to do so.

At our 2018 Annual Meeting, we were pleased with the very high level of support we received for our Say on Pay vote with 96.4% of votes cast “FOR” our executive compensation program.  These results reflect strong stockholder agreement with our compensation philosophy and pay practices.  Given the very high level of stockholder support, based on the results of the Say on Pay Vote we continued various key features of our executive compensation program rather than making specific changes to address those results.  Based on feedback from our stockholders, however, our compensation programs have evolved over the years, including for example, our selected performance metrics, equity award mix and features, and the introduction in 2018 of stock options as part of our executive LTI program.

The Committee views stockholder engagement and the feedback received as essential to developing and improving our executive compensation program as well as getting general feedback on governance and other matters.  We plan to continue our stockholder outreach annually, so we can continue to gain valuable feedback obtained during these discussions.

 

 
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 substantially all meetings of the Committee in 2018.  Our CEO is not present during Committee and FWC discussions about CEO compensation.  Also, FWC reports on CEO compensation are not shared with our CEO.  For more about FWC’s role as advisor to the Committee, see the Compensation and Human Resource Committee section above.

 

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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 Increase or Bonus.  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.

 

 

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.

      ×    

No Excessive Perquisites.  We offer only limited perks to be competitive, to attract and retain highly talented executives 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 two to three times target cash pay depending upon the executive’s position.

      ×    

No Special Executive Pension Benefits.  There are no special executive pension benefits for any executives, and no broad-based pension benefits except for limited and frozen pension benefits payable to Mr. Fishman.

 

 

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.

      ×    

Trading of NCR Stock.  We require that all executive officers trade in NCR common stock only pursuant to a Rule 10b5-1 trading plan.

 

 

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 Key Elements of 2018 Executive Compensation

The key elements of our annual 2018 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:

Equity

LTI Awards

Key

Features

 

 

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  

 

 

 

Performance-based RSUs vest 42 months after grant based on performance over a three-year period

Performance-vesting RSUs vest 1/3 on each anniversary of the grant date provided a performance condition is met

New for 2018, stock options vest 1/4 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

Executive-specific objectives motivate our team to achieve goals in areas they can influence

 

 

 

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 We

Determine

Amount

    Committee approves based on role, external market and internal comparable salary levels  

 

 

 

NGOI performance threshold must be achieved for any payout

Maximum award as % of NGOI is 1.5% for CEO and 0.75% for other named executives

Award payout ranges:

- Financial Metrics:

0% – 200%

- Individual Goals:

0% – 150%

- Customer Success:

0% or 10%

 

 

 

LTI equity grant mix:

-1/3 Performance-based RSUs (payout range 0% to 200%)

-1/3 Performance-vesting RSUs (payout range 0% or 100%),

-1/3 Options

Performance threshold of 20% Return on Capital must be achieved for any payout of performance-based RSUs

 

 Our Process for Establishing 2018 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 – including reports by the Committee’s independent

   

compensation consultant on peer group member pay data and external market surveys;

 

 

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  ·  

Internal Compensation Analysis – 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.

 

 

 

External Market Analysis – Peer Group and Survey  Data

We use several methods to examine the various elements of our executive compensation program to determine the competitive market and understand current compensation practices.  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 2018 Peer Group.  The Committee carefully reviewed our prior peer group, and with the advice of its independent compensation consultant made these changes to our 2017 peer group for purposes of benchmarking our 2018 executive compensation program:

 

(i)

ServiceNow was added as it is a cloud software company that better aligns with NCR’s business profile relative to software/services.  Xerox was also added as they are similar in size to NCR after splitting off their business processing outsourcing unit.

 

(ii)

Harris Corporation was removed following the sale of its technology services business.  Pitney Bowes was also removed as it has declined in size and the Committee no longer considered it an appropriate comparator.

 

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After these changes, our final 2018 peer group consisted of the following companies:

 

Adobe Systems

   First Data    Seagate

CA Technologies

   Intuit    ServiceNow

Citrix Systems

   Juniper    Symantec

Diebold Nixdorf

   Keysight Technologies    VMware

Fidelity Info Services

   NetApp    Western Digital

Fiserv

   Salesforce    Xerox

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 2018 compensation levels, the Committee considered our peer group’s proxy data with a 100% weighting for Mr. Nuti and Mr. Fishman.  Mr. Hayford, Mr. Martire, Mr. Sullivan, Mr. Fernandez and Mr. Campbell were hired during 2018.  The Committee worked with our independent compensation consultant, FWC, and reviewed market median data from our peer group, and other competitive data, to determine their initial compensation levels.

 

 

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.

 

 

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  ·  

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.

 

 

 

Recommendations

In 2018, 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.

 

 2018 Executive Compensation Program Details

 

 Base Salaries for 2018

We attempt 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 2018, the Committee approved these base salaries for our named executives:

 

Summary of 2018 Base Salary Actions

Named

Executive

 

Effective Date of

Most Recent

Base Salary Action

   

Base Salary on

December 31, 2018

    Rationale for Base Salary Actions

  Michael Hayford

    April 30, 2018     $ 1,000,000     New Hire – Competitive position

  Frank Martire

    May 31, 2018     $ 750,000     New Hire – Competitive position

  Owen Sullivan

    July 23, 2018     $ 725,000     New Hire – Competitive position

  Andre Fernandez

    August 29, 2018      $ 625,000     New Hire – Competitive position

  Daniel Campbell

    February 5, 2018     $ 575,000     New Hire – Competitive position

  William Nuti

    August 8, 2005     $ 1,000,000 (1)     No Change

  Robert Fishman

    March 26, 2016     $ 625,000 (1)     No Change

(1) Annual salary in effect on date of retirement (Mr.Nuti) or position change (Mr.Fishman).

 

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Annual Incentives for 2018

 

 

Annual Incentive Plan Opportunity for 2018

Except as noted below, the 2018 Annual Incentive Plan opportunity for our named executives was comprised of our:

 

 

 

Management Incentive Plan
Bonus

 

  +   

 

Customer Success

Bonus

 

Per the negotiated terms of each of their respective new hire employment agreements, Messrs.  Hayford, Martire, Sullivan and Fernandez each received a 2018 annual bonus payout of no less than target, pro-rated for their period of 2018 service.  Messrs. Hayford’s and Martire’s new hire employment agreements also provided that their full 2018 annual incentives were under the Management Incentive Bonus, without participation in the Customer Success Bonus.  Given the timing of their hiring in 2018, the new hire employment agreements of Messrs. Sullivan and Fernandez provided for guaranteed attainment of the Customer Success Bonus for 2018.  These bonus terms were negotiated as part of total cash since these executives had not participated in establishing either the strategy or the metrics for the 2018 bonus.  These new hire bonus commitments apply only in 2018, the first year of service for these named executives.  They do not reflect a change in our pay-for-performance philosophy with respect to our annual incentive program.  These executives do not have any minimum or guaranteed bonuses for 2019.

 

 

Setting Annual Incentive Targets

At the beginning of the performance year or upon hiring, the Committee generally establishes a total target bonus for each named executive as a percentage of base salary for purposes of both the Management Incentive Plan (“MIP”) and, where applicable, the Customer Success Bonus.  This total target bonus percentage generally has three components:

 

  ·  

MIP—Core Financial Objectives Target Bonus, which is a target bonus percentage that is then multiplied by a Company-wide performance factor generated by achieving a Non-GAAP Operating Income (NGOI) financial goal with a Free Cash Flow (FCF) modifier (the “Core Financial Objectives”);

 

  ·  

MIP—Individual Performance Modifier, which is a MIP percentage modifier based on each named executive’s achievement of individual performance goals (or “MBOs”); and

 

  ·  

Customer Success Target Bonus, which is the target bonus (10%) linked to the Company’s overall customer success survey results.

 

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Calculating Annual Incentive Awards

The calculation of Annual Incentive Plan awards includes our MIP and Customer Success Bonus components (as applicable), as follows:

Total Annual Incentive Plan Bonus Opportunity – 2018

 

         Management Incentive Plan  (MIP)         Customer Success Bonus         
         

MIP Bonus 

Target (%)

 

   

Core Financial

Objectives

   

Individual Performance

Modifier

   

Payout Linked to

Our Customer Success

Survey Results

   

 Actual Bonus

Payout (%)

 

     
    (Range:  0% to 200%)       (Range:  0% to 150%)     (Range:  0% or 10%)    

 

MIP Core Financial Objectives for 2018

The Committee established the MIP Financial Objectives for 2018 based on:

 

  

 

Non-GAAP Operating

Income (NGOI)

 

   and       

 

Free Cash Flow

 

 

 

 

NGOI Objective

For 2018, the Committee retained NGOI as the primary Core Financial Objective.  We use NGOI as the primary MIP bonus funding mechanism because it is:

 

  ·  

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

 

  ·  

balanced with driving a strong focus on asset utilization, working capital and cash flow;

  ·  

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

 

  ·  

a measure we can track throughout the year; and

 

  ·  

a critical measure investors use to assess our annual performance.

 

 

 

 

Free Cash Flow Objective

The Committee retained Free Cash Flow as the other Core Financial Objective, which is used as a modifier to the MIP bonus funding mechanism once a target level of NGOI is achieved.  We use Free Cash Flow because it:

 

  ·  

represents another one of our key business imperatives and critical performance measures;

 

  ·  

tracks the resources available for the Company to invest in new technology and innovation that fuels future growth;

 

  ·  

rewards the leadership team for maximizing our cash flow from operations;  and

 

  ·  

encourages management to focus on working capital.

 

 

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MIP Core Financial Objectives – Definitions and Impacts

The 2018 MIP Core Financial Objectives, including the definitions and impact of each, are shown in this chart:

 

MIP – Core Financial Objectives for 2018

Financial

Objective

  Definition       

Impact on

Our Financials

      

Impact on

Our Behavior

   

NGOI(1)

 

Our income (loss) from operations as reported under generally accepted accounting principles in the United States, excluding certain special items as described in our annual financial report (see reconciliation on page 103 of Form 10-K – referred to as “segment operating income”).

     

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

     

Forces decision-making to produce results aligned to achieving our long-term strategic objectives.  Management can be rewarded only when they drive profitable growth.

   

Free Cash

Flow(1)

 

Our net cash provided by operating activities and discontinued operations, less capital expenditures for property, plant and equipment, less additions to capitalized software, discretionary pension contributions and pension settlements (see reconciliation on page 37 of Form 10-K).

     

Income Statement

and Statement of

Cash Flows (non-GAAP).

     

Forces decision-making to provide available cash for investment in our existing businesses, strategic acquisitions and investments, repurchase of NCR stock, and repayment of debt obligations.

(1) NGOI and Free Cash Flow are non-GAAP measures.  Income from operations and net cash provided by operating activities, respectively, are the most directly comparable GAAP measures.

 

 

MIP Core Financial Objectives – 2018 Performance Hurdles and Payout  Cap

The threshold, target, and maximum funding levels of NGOI, if achieved, would result in preliminary funding of the MIP bonus at 40%, 100%, and 200%, respectively.  Funding levels are interpolated between these points.  No MIP funding occurs if results do not exceed the NGOI threshold.  If NGOI exceeds target, accelerated funding occurs if the Free Cash Flow goal is also achieved.  However, in no event can the 2018 MIP funding exceed 200%.

On February 23, 2018, the Committee decided when establishing our 2018 MIP that performance results would be 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 2018 financial plan.

 

  ·  

NGOI Performance Threshold:  The Committee established an NGOI Performance Threshold of $855 million for 2018 (before constant currency adjustment) before any MIP can be paid; this represents an increase over 2017 actual NGOI of $853 million.

  ·  

Free Cash Flow Hurdle:  The Committee established a Free Cash Flow Target Performance Goal of $480 million for 2018, a 6% increase over 2017 Free Cash Flow, to be used as a modifier to the MIP bonus funding mechanism.

 

 

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The Committee’s establishment of challenging MIP performance hurdles requires our named executives to achieve significant annualized NGOI and Free Cash Flow to receive a payout, other than payouts negotiated under new hire employment agreements as part of our recruitment process.

Absolute Limit on MIP Payouts and Committee Discretion.  The annual bonus otherwise payable under the MIP is also subject to an absolute limit based on the Company’s performance.  For 2018, the maximum annual bonus payout opportunity was 1.5% of NGOI for our CEO, and 0.75% of NGOI for our other named executives.  The Committee retains the discretion to decrease, but not increase, the final Annual Incentive Plan payout earned.

 

 

MIP – Management By Objectives (MBOs)

In addition to the Core Financial Objectives, we establish multiple individual objectives, called MBOs, for each of our named executives.  These individual objectives are assigned to our named executives based on their areas of influence, and on strategic initiatives that are critical for the Company’s achievement of its overall financial goals and stretch internal goals.  Based on the extent to which a named executive satisfies his or her MBOs, the Committee determines an “individual performance modifier” that increases or decreases the preliminary MIP bonus determined by the Core Financial Objectives.  The individual performance modifier can range from 0% for poor performance to 150% for exceptional performance.

The Committee established multiple MBOs for our CEO and Executive Chairman, and in conjunction with the CEO, for each other named executive.  The MBOs selected directly complement our 2018 corporate strategic goals to:

 

  ·  

Continue to shift focus towards Software/Cloud solutions and services as our primary source of annual revenue and margin;

 

  ·  

Deliver revenue growth, margin expansion and our software plan;

 

  ·  

Introduce product and solution innovation that continues to delight our customers;

  ·  

Build enterprise platforms that enable development of disruptive and industry-aligned omni-channel solutions and offerings for our customers;

 

  ·  

Forecast accuracy and operational excellence;  and

 

  ·  

Drive talent, culture and employee engagement.

 

 

Customer Success Bonus for 2018

Because of the critical importance of customer retention, customer referrals and customer relationships, we continued to maintain our Customer Success Bonus as a separate component of our Annual Incentive Plan, with its own separate reward structure for each of our named executives except as noted above.  We link our Customer Success objective to a semi-annual survey of customers conducted by an independent third party.  The actual payout for this component is determined at the discretion of the Committee.

 

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Annual Incentive Plan – Targets for 2018

For 2018, the Committee established MIP annual incentive targets for our named executives based on peer group data and positioning within the senior leadership team.  The 2018 target MIP and Customer Success annual incentive opportunities for our named executives were:

 

2018 Annual Incentive Plan Targets

(% of Base Salary)

Named

Executive

 

MIP

Target

 

Customer

Success

Target

 

Total

Annual Bonus Target

(MIP Target + Customer Success Target)

 

Michael Hayford

 

   

 

 

 

 

150%

 

 

 

   

 

 

 

 

N/A

 

 

 

   

 

 

 

 

150%

 

 

 

 

Frank Martire

 

   

 

 

 

 

150%

 

 

 

   

 

 

 

 

N/A

 

 

 

   

 

 

 

 

150%

 

 

 

 

Owen Sullivan

 

   

 

 

 

 

140%

 

 

 

   

 

 

 

 

10%

 

 

 

   

 

 

 

 

150%

 

 

 

 

Andre Fernandez

 

   

 

 

 

 

115%

 

 

 

   

 

 

 

 

10%

 

 

 

   

 

 

 

 

125%

 

 

 

 

Daniel Campbell

 

   

 

 

 

 

100%

 

 

 

   

 

 

 

 

10%

 

 

 

   

 

 

 

 

110%

 

 

 

 

William Nuti(1)

 

   

 

 

 

 

140%

 

 

 

   

 

 

 

 

10%

 

 

 

   

 

 

 

 

150%

 

 

 

 

Robert Fishman

 

   

 

 

 

 

100%

 

 

 

   

 

 

 

 

10%

 

 

 

   

 

 

 

 

110%

 

 

 

(1) In light of his retirement during 2018, Messr. Nuti became ineligible for his 2018 annual incentive bonus opportunity.

For all named executives, the maximum potential payout is limited to two times their target annual incentive, except that Mr. Nuti, Mr. Fishman and Mr. Campbell’s maximum potential payouts under the MIP were limited to three times their target annual incentives plus a 10% customer success target opportunity. Mr. Nuti became ineligible for his 2018 annual incentive opportunity due to his 2018 retirement.

 

Annual Incentive Plan – Objectives, Results and Payouts for 2018

 

 

MIP Core Financial Objective and Customer Success Results

NGOI for 2018 was $688 million which did not exceed the NGOI Performance Threshold of $855 million on a constant currency basis.  Because NGOI Threshold performance was not met, the Free

Cash Flow Goal did not apply as a modifier for 2018.  These performance results against our internal annual incentive plan financial metrics resulted in an earned payout of 0% of Target.

 

 

The 2018 Annual Incentive Plan objectives, results, earned payout and funded payout are shown in this Chart:

 

2018 Annual Incentive Plan – Performance Objectives, Results and Funding
   

 

MIP Performance Objectives ($M)(1)

 

       

  MIP Discretionary

  Objectives

 

Threshold 

(40% Funded) 

 

Target 

(100% Funded) 

 

Maximum 

(200% Funded) 

 

MIP 

Performance 

Results ($M) 

 

MIP 

Payout 

Funding 

 

   Non-GAAP Operating Income

 

 

 

$855

 

 

 

$915

 

 

 

$995

 

 

 

$688

 

  0%

 

   Free Cash Flow(2)

 

 

 

 

 

 

$480

 

 

 

 

 

 

$223

 

 

   Customer Success Objective

 

 

Payout Linked to Overall Satisfaction of Our Customers

 

 

 

Below
Expectations

 

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

(2) Because the NGOI Target objective was not satisfied, Free Cash Flow did not apply as a modifier.

 

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Individual Performance Modifier Assessment

Although the named executives did achieve and exceed many of their 2018 individual objectives, collectively the Company’s financial performance did not meet expectations, and 2018 results fell short of the MIP’s threshold performance objectives.  Therefore, it was determined that, in keeping with our pay-for-performance philosophy, no MIP awards would be paid to named executives for 2018, other than 2018 annual bonus payout commitments negotiated under new hire agreements as part of our recruitment process.  While individual objectives were established for Mr. Nuti, he was not eligible to receive any 2018 MIP award because of his retirement during 2018.

 

 

Annual Incentive Plan – Final 2018 Payouts for MIP and Customer  Success

The total annual bonus payments approved for each named executive for the 2018 performance year were:

 

Named

Executive

  MIP Target (1)    

Funded

MIP

Payout

(% of

Target)

   

Individual

Performance

Modifier

   

MIP Payout

(After IPM)

   

Customer Success

Payout

(10% of Target)

   

Total

Bonus

Payout

 

Michael Hayford

  $ 1,010,959       100     0   $ 1,010,959       N/A     $ 1,010,959 (2)  

Frank Martire

  $ 662,671       100     0   $ 662,671       N/A     $ 662,671 (2)  

Owen Sullivan

  $ 450,493       100     0   $ 450,493       10   $ 482,671 (2)  

Andre Fernandez

  $ 246,147       100     0   $ 246,147       10   $ 267,551 (2)  

Daniel Campbell

  $ 575,000       0     0   $ 0       0   $ 0 (3)  

William Nuti

  $ 506,155       0     0   $ 0       0   $ 0  

Robert Fishman

  $ 625,000       0     0   $ 0       0   $ 0  

(1) Based on actual salary paid during the year.

(2) As noted above, prorated target bonus amount (based on period of 2018 service) payable pursuant to negotiated new hire employment agreement.

(3) Per his new hire employment agreement, Mr. Campbell was entitled to a $150,000 sign-on bonus during 2018.

Mr. Campbell received a discretionary bonus for 2018 that was recommended by the CEO and approved by the Committee. Mr. Campbell was awarded $350,000 for his leadership on certain company-wide strategic directives and the achievement of various individual management objectives.

 

2018 Long-Term Incentives

Our Long-Term Incentive Program generally aligns a significant portion of the total compensation opportunity of our named executives directly with Company performance and changes in stockholder value.  The use of equity for our LTI Program links our executives and stockholders to a common goal: sustainable stockholder value creation.

In February 2018, the Committee approved the 2018 annual equity awards under our Stock Plan in the form of our 1/3 performance-based restricted stock units, 1/3 performance-vesting restricted stock units, and new for 2018, 1/3 nonqualified stock options to further increase management alignment with stockholder long-term interests.  In addition to these annual grants to executives employed on the February 2018 award date, certain named executives hired during 2018 received ad-hoc LTI awards at the time of hire under their negotiated new hire agreements.  Generally, the majority of these new hire awards were made in the form of stock options.  As noted above, while stock options vest with continued service, the awards will only deliver value if our share

 

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price increases.  The Committee determined that this approach to new hire awards appropriately balanced our pay-for-performance philosophy with the exigencies of recruiting new executives who were not employed by the Company when our 2018 business plan was approved.  For 2019, the majority of named executive long-term incentive awards were granted with performance-based vesting conditions.

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 the long-term Company stock price performance.

 

 

2018 Annual LTI Equity Awards – Key Features

The key features of the various types of 2018 LTI equity awards are:

 

  ·  

Performance-Based RSUs have a three-year performance period (2018-2020).  No units are earned unless we achieve a three-year average return on capital (ROC) performance threshold for the performance period.  Assuming that the ROC threshold is achieved, from 0% to 200% of the target units may be earned based on the Company’s achievement of annual Non-GAAP Diluted Earnings Per Share (NGDEPS) (60% weighting) and Software-Related Margin Dollars (SRMD) (40% weighting) performance metrics.  Further, if the NGDEPS and SRMD performance goals are not achieved in the first year of the performance period, then the entire award is forfeited.  Units earned from achieving these performance goals vest 42 months after the grant date (i.e., on August 23, 2021), so long as the executive continues Company service through the vesting date.  The maximum share payout is 200% of target.

 

  ·  

Performance-Vesting RSUs vest 1/3 on each anniversary of the grant date, provided that NCR achieves a predetermined level of SRMD for the period of January 1, 2018 through December 31,

   

2018, and the executive continues Company service through the applicable vesting dates.  The maximum share payout is 100% of target.

 

  ·  

Stock Options are awarded as nonqualified options with an exercise price equal to the closing price of NCR’s common shares on the grant date.  They have a four-year restriction period and vest 14 on each anniversary of the grant date, so long as the executive continues Company service through the applicable vesting dates.

 

  ·  

Time-Based RSUs have a three-year restriction period and vest 1/3 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.

 

 

Under our Stock Plan, 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.

 

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2018 Performance-Based RSUs – Performance Metrics

One-third of our annual LTI equity award to named executives employed on the February award date consisted of performance-based RSUs.  The performance metrics for these awards were:

 

 

Return On Capital (ROC) – Primary Performance Metric

 

  ·  

ROC Performance Threshold:  No performance-based RSUs are earned unless the Company achieves a three-year average ROC performance threshold of 20% over the 2018-2020 performance period.  At the time the awards were granted, the Committee decided that ROC performance results would be 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 2018 financial plan.

 

  ·  

ROC Defined:  We calculate ROC by dividing NGOI by Controllable Capital, which represents the working capital that our management team has deployed at any given time.

 

  ·  

Why We Use ROC:  This ROC threshold is a significant hurdle that ensures restricted stock units can be earned only if the Company generates enough ROC during the performance period.  Using this ROC performance threshold protects the interests of our stockholders.

 

 

 

Non-GAAP Diluted EPS – Secondary Performance Metric (60% Weighting)

 

  ·  

NGDEPS Performance Threshold – 60% Weighting:  If the ROC performance threshold is met, the number of shares earned depends on our NGDEPS results over each year in the three-year performance period.  The Committee established a NGDEPS performance target of $3.38 per share with a 60% weighting for 2018 awards.

 

  ·  

NGDEPS Defined:  We calculate NGDEPS by excluding pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles, from GAAP diluted earnings per share.

 

  ·  

Why We Use This Metric:  NGDEPS is a good external measure of the Company’s annual performance that investors can compare against our quarterly/annual guidance.  This is also a common financial metric that investors use to evaluate company performance against peer groups and other performance benchmarks.

 

 

Software-Related Margin Dollars – Secondary Performance Metric (40% Weighting)

 

  ·  

SRMD Performance Threshold – 40% Weighting:  If the ROC performance threshold is met, the number of shares earned for each performance-based unit depends on our SRMD results over each year in the three-year performance period. The Committee established a SRMD performance target of $1,055.0 million for 2018 awards, with a 40% weighting.

 

  ·  

SRMD Defined:  We determine SRMD by excluding certain infrastructure costs from the gross margin of our Software segment.

 

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  ·  

Why We Use This Metric:  SRMD is a good internal measure of the Company’s annual performance against one of our core strategic financial goals, the growth for which is essential to achieving our strategy.

 

 

2018 Performance-Based RSU Results

 

  ·  

2018 NGDEPS Achieved:  $2.62 per share.

 

  ·  

2018 SRMD Achieved:  $960 million.

 

 

Impact of Performance Results on 2018 Performance-Based RSU Awards

 

  ·  

The 2018 NGDEPS of $2.62 per share and the SRMD of $960 million resulted in an earned payout of 0% for 2018 with respect to both components of the performance-based RSUs granted on February 23, 2018.  As a result, these awards were forfeited, and no payout can be earned under these awards regardless of future performance.

 

2018 Performance-Vesting RSUs – Performance Metric

One-third of the annual 2018 LTI equity award to named executives employed on the February award date consisted of performance-vesting RSUs.  No performance-vesting RSUs are earned unless the 2018 SRMD (as defined above) is achieved.  The 2018 SRMD of $960 million exceeded the SRMD performance condition of $950 million established for the 2018 performance-vesting RSUs, and 1/3 of these awards will vest on each anniversary of the February 23, 2018 grant date, subject to the executive’s continued service with the Company through the applicable vesting dates.

 

2018 Total LTI Equity Award Values

This Chart shows the 2018 total LTI equity award values(1) approved by the Committee for our named executives, including annual awards to named executives employed on the February annual award date, and new hire and other ad-hoc awards (see the Agreements With Our Named Executives Section):

 

  Named Executive   Stock
Options
   

Performance-

Based RSUs

   

Performance-
Vesting

RSUs

    Time-
Based
RSUs
   

Total 2018

LTI Award

Value

 

Michael Hayford

  $ 7,499,881                 $ 5,000,011     $ 12,499,892  

Frank Martire

  $ 3,750,354                 $ 2,249,988     $ 6,000,342  

Owen Sullivan

  $ 3,749,994                 $ 2,250,000     $ 5,999,994  

Andre Fernandez

  $ 999,998                 $ 3,000,011     $ 4,000,009  

Daniel Campbell

  $ 499,996     $ 500,015     $ 4,499,996           $ 5,500,007  

William Nuti(2)

  $ 2,500,000     $ 2,500,008     $ 2,500,008           $ 7,500,016  

Robert Fishman

  $ 666,665     $ 666,675     $ 666,643           $ 1,999,983  

(1) Represents the grant date fair value of RSUs and stock options, as shown in the Grants of Plan-Based Awards – 2018 Table.

(2) Mr. Nuti’s 2018 LTI equity award was forfeited upon his separation of service from the Company.

 

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Update on the 2017 LTI Equity Awards

 

 

2017 LTI Awards

On February 27, 2017, the Committee granted annual LTI awards to named executives employed on that date consisting of performance-based RSUs and performance-vesting RSUs.  The 2017 performance-based RSUs had a three-year performance period that began on January 1, 2017 and ended on December 31, 2019.  In 2018, the

Committee certified that required minimum 2017 NGDEPS and SRMD performance for these awards was not achieved, and these awards were forfeited. The 2017 performance-vesting RSUs were subject to a 2017 SRMD goal.  In February 2018, the Committee certified that performance for these awards was achieved, with 1/3 of these awards vesting on each anniversary of the grant date so long as the executive continues Company service through the vesting dates.

 

 

 
Economic Profit Plan Awards Before 2017

On February 27, 2019, the Committee terminated the NCR Corporation Economic Profit Plan (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 a cash flow test. In connection with the termination of the EPP, participants who were actively employed on the EPP elimination date, including Mr. Fishman, will 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 are distributed, the EPP will make distributions in the normal course (for example, the regular distributions scheduled to be made in August 2019 will be paid at that time, subject to EPP terms). Mr. Nuti and Mr. Fishman are the only NEOs who participated in the EPP. Information on their Bonus Bank balances can be found in the chart below. Notwithstanding the EPP termination, Mr. Nuti’s Bonus Bank balance will be distributed in accordance with the terms of his retirement agreement as noted in the chart below.  

As described below, in 2018 the Committee authorized Bonus Bank payments attributable to

previously earned EPP awards for Mr. Nuti and Mr. Fishman, the only named executives with EPP Bonus Bank balances.

Cash Flow Test.  The EPP cash flow test requires 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 in connection with the Company’s strategy to reduce pension liability or increase pension funding.  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.

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. Nuti and Mr. Fishman participate in the EPP, and the table below details their EPP balances and 2018 payments.

 

 

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EPP – Payout of Amounts Earned in Prior Years  

  Named

  Executive

  Bank Balance
Before 2018
Payments
   

2018

Cash Payments

    Remaining
Bank
Balance
 

William Nuti(1)

  $ 3,518,132     $ 2,359,583     $ 1,158,549  

Robert Fishman

  $ 975,641     $ 321,962     $ 653,679  

(1) Mr. Nuti retired as of April 30, 2018 due to disability.  In accordance with the EPP terms regarding disability, Mr. Nuti’s retirement agreement provides that he will receive his full Bank Balance under the EPP of $3,518,132, in the following installments:  11/1/2018 – $2,359,583, 4/30/2019 – $386,183, 10/30/2019 – $386,183, 4/30/2020 – $386,183.

 

2019 LTI Program – Performance-Based RSUs and Options

For 2019, we have simplified our annual LTI program for our named executives to include a mix of 65% performance-based RSUs and 35% stock options.  These awards continue to ensure alignment with our stockholders’ long-term interests and also continue our approach requiring all annual LTI equity awards granted to our executive officers to include performance conditions for vesting, or be tied to our stock price performance to create stockholder value.  The 2019 performance-based RSUs require achievement of challenging performance metrics that consist of NCR Revenue* (40% weighting) and Adjusted Operating Income** (60% weighting).  These performance metrics will be measured over a one-year performance period, and will vest 1/3 on each anniversary of the grant date subject to the recipient’s continued service through the applicable vesting dates.  In addition, to align more closely with our peer group LTI practices, these awards have been granted with a payout threshold of 50% of target (up from 40% compared to the 2018 performance-based RSU awards). The awards remain subject to a maximum payout of 200% of target.  Stock options that vest 1/4 on each anniversary of the grant date were also awarded, and these provide value to the executives only to the extent that our share price appreciates.  These 2019 changes to our annual LTI equity award mix reflect the Committee’s decision to simplify our LTI program and more directly link earned incentives to the achievement of performance goals that reward our named executives for creating sustainable value creation in alignment with our stockholders’ long-term interests.  The decision to shift to a one-year performance period for 2019 was made in light of the Company’s current transformation, and related to this, the difficulty in setting accurate multi-year performance goals at this time.  The Committee also took into consideration the forfeiture of the 2017 and 2018 performance-based RSUs due to applicable goals not being satisfied.  As in the past, the Committee expects to review the performance period annually for future equity awards.

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

** 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.

This Chart below shows the 2019 total annual LTI equity award values granted to named executives other than Mr. Nuti who retired during 2018, and Mr. Fishman, who did not receive any 2019 award due to his announced retirement:

 

2019 Total Annual LTI Equity Award Values  

Named Executives

  

Performance-

Based

RSU Award

(65% of
value)

    

Stock Option

Award

(35%
of value)

    

Total Annual

LTI Equity

Award Value(1)

 

Michael Hayford

   $ 6,500,000      $ 3,500,000      $ 10,000,000  

Frank Martire

   $ 2,925,000      $ 1,575,000      $ 4,500,000  

Owen Sullivan

   $ 3,900,000      $ 2,100,000      $ 6,000,000  

Andre Fernandez

   $ 2,600,000      $ 1,400,000      $ 4,000,000  

Daniel Campbell

   $ 1,300,000      $ 700,000      $ 2,000,000  

(1) Represents the 2019 total target long-term incentive program dollar value approved by the Committee for our named executives.

 

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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.

Of our named executives, only Mr. Fishman had a benefit as of December 31, 2018 under our frozen, broad-based U.S. pension plans (the “U.S. Pension Plan”) that we closed over a decade ago. Mr. Fishman’s benefit is shown in and described in more detail with our Pension Benefits Table below.

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’ 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. Martire, and Mr. Nuti, limited 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 have 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.  Our Change in

Control Severance Plan has two benefit levels that apply to our named executives.  Our current President and CEO, Executive Chairman, COO, and CFO’s cash severance benefit is 300% of base salary plus target bonus.  For other current named executives, the cash severance benefit is 200% of base salary plus target bonus.  There are no tax gross-ups under the plan for any currently employed 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 15, 2019, all of the Company’s currently employed named executives either met or are on track to meet the stock ownership guidelines.  Mr. Fishman, in his role as Senior Advisor, is not subject to 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

  Daniel Campbell

  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

We have a policy that prohibits our employees from trading in derivative securities related to Company stock or debt, including publicly traded options, short sales, puts, calls, strips or similar derivative securities.  This policy also generally prohibits pledging NCR securities as collateral for a loan.

 

 

Tax Considerations in Setting Compensation

Under Federal tax rules in effect for tax years beginning prior to January 1, 2018, compensation over $1 million annually for certain named executives could not be deducted unless paid under a performance-based plan satisfying applicable Code section 162(m) requirements (or otherwise meeting certain IRS requirements).  While we generally paid compensation intended to be deductible to the extent permitted by applicable tax laws, the Committee has not adopted a policy requiring all pay to be deductible, so as to preserve the ability to award non-deductible compensation if determined to be in the best interests of our stockholders.  Beginning in 2018, this performance-based compensation exception to the $1 million annual limit on deductions for covered employee compensation, including compensation payable to our named executives, has generally been eliminated (except with regard to certain grandfathered arrangements).  The Company understands that compensation payable to our named executives for 2018 and future years generally will not be fully deductible.  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

 

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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 fiscal year ending December 31, 2018, and for those individuals who were then named executives, with respect to the fiscal years ending December 31, 2017 and 2016.

 

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)

   

Change in

Pension

Value

(h)(5)

   

All Other

Compensation

(i)(6)

   

Total

(k)

 

 

 Michael Hayford

President & Chief Executive Officer

                 
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

634,615

 

 

 

 

 

 

 

 

 

1,010,959

 

 

 

 

 

 

 

 

 

5,000,011

 

 

 

 

 

 

 

 

 

7,499,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94,423

 

 

 

 

 

 

 

 

 

14,239,889

 

 

 

 

                 

 

 Frank Martire

Executive Chairman

                 
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

409,616

 

 

 

 

 

 

 

 

 

662,671

 

 

 

 

 

 

 

 

 

2,249,988

 

 

 

 

 

 

 

 

 

3,750,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108,116

 

 

 

 

 

 

 

 

 

7,180,745

 

 

 

 

                 

 

 Owen Sullivan

Chief Operating Officer

                 
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

292,789

 

 

 

 

 

 

 

 

 

482,671

 

 

 

 

 

 

 

 

 

2,250,000

 

 

 

 

 

 

 

 

 

3,749,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74,071

 

 

 

 

 

 

 

 

 

6,849,525

 

 

 

 

                 

 

 Andre Fernandez

Executive Vice President & Chief Financial Officer

                 
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

187,500

 

 

 

 

 

 

 

 

 

267,551

 

 

 

 

 

 

 

 

 

3,000,011

 

 

 

 

 

 

 

 

 

999,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,867

 

 

 

 

 

 

 

 

 

4,512,927

 

 

 

 

                 

 

 Daniel Campbell

Executive Vice President, Global Sales

                 
 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

497,596

 

 

 

 

 

 

 

 

 

500,000

 

 

 

 

 

 

 

 

 

5,000,011

 

 

 

 

 

 

 

 

 

499,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,970

 

 

 

 

 

 

 

 

 

6,507,573

 

 

 

 

                 

 

 William Nuti

Chairman Emeritus and Consultant; Former Chairman of the Board and

Chief Executive Officer

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

361,539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000,016

 

 

 

 

 

 

 

 

 

2,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,934,051

 

 

 

 

 

 

 

 

 

19,795,606

 

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

1,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,999,991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,160,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

274,043

 

 

 

 

 

 

 

 

 

12,435,018

 

 

 

 

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

1,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,999,995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,756,812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

433,460

 

 

 

 

 

 

 

 

 

19,190,267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Robert Fishman

Senior Advisor; Former Executive Vice President,
Chief Financial Officer and Chief Accounting Officer

    2018       625,000             1,333,318       666,665       215,714       (20,782     26,645       2,846,560  
 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

625,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,499,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

321,962

 

 

 

 

 

 

 

 

 

41,940

 

 

 

 

 

 

 

 

 

26,645

 

 

 

 

 

 

 

 

 

2,515,545

 

 

 

 

    2016       611,539             4,499,995             928,314       21,666       26,645       6,088,159  
                 
                                                                       

(1) This column represents 2018 bonus commitments paid in early 2019 under negotiated new hire employment agreements, except that Mr. Campbell’s amount includes: (i) a negotiated new hire sign-on bonus that he must repay if he resigns during the year after his start date, and (ii) a discretionary bonus recommended by the CEO and approved by the Committee in the amount of $350,000 for his leadership on certain Company-wide strategic directives and the achievement of various individual management objectives.

(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, 2018 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 2018 are:  Campbell:  $5,500,024; Nuti: $7,500,024; Fishman:  $1,999,994.  Mr. Hayford, Mr. Martire, Mr. Sullivan, and Mr. Fernandez were hired in 2018, and did not receive performance-based restricted stock units.  For more about 2018 awards, see the Grants of Plan-Based Awards – 2018 Table.

(3) Represents the grant date fair value of the option awards granted in 2018.  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, 2018 for an explanation of the assumptions we make in valuing our option awards.

(4) Given the $0 payouts under our 2018 Annual Incentive Plan based on performance, the amounts shown for 2018 reflect only Mr. Fishman’s 2018 EPP amount payable in August 2019.  The 2018 negotiated new hire bonus commitments to Messrs.  Hayford, Martire, Sullivan, Fernandez and Campbell are shown in column (1).  The amounts reported for 2017 are comprised of amounts earned in prior years under the EPP that were paid in August 2018.  The amounts reported for 2016 are comprised of amounts earned under our 2016 Annual Incentive Plan, plus amounts for performance under the 2016 EPP that were paid in August 2017. The Committee terminated the EPP on February 27, 2019. Consequently, any remaining Bonus Bank balances of participants who were actively employed on the termination date, such as Mr. Fishman, are expected to be distributed in 2020 (following any normal course distributions due in 2019). Mr. Nuti’s EPP balances will be distributed in accordance with his retirement agreement. For more details, see the 2018 Long-Term Incentives section above.

(5) The aggregate change in actuarial values of the accumulated pension benefit under the Company’s qualified pension benefit plans only applies to Mr. Fishman.  For more about pension benefits, see the 2018 Pension Benefits Table.

 

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(6) 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 Savings Plan, our 401(k) plan, on behalf of the named executives and certain post-termination payments for certain former executives.  Additional details regarding these amounts are included in the All Other Compensation - 2018 Table and Perquisites - 2018 Table, both of which can be found below.  For Mr. Nuti, this column also includes: consulting payments of $100,000; and the amount of $3,518,132 due under the disability provisions of the EPP.  In addition, in connection with Mr. Nuti’s retirement agreement and in accordance with FASB ASC Topic 718, it was necessary to modify certain outstanding stock and awards held by Mr. Nuti as of his April 30, 2018 retirement date.  Thus, for Mr. Nuti, this column also includes the amount of $8,213,418 that reflects the additional incremental fair value of all outstanding stock awards and option awards modified as part of Mr. Nuti’s retirement agreement.  For more details, see the Agreements with Our Named Executives and Potential Payments Upon Termination or Change in Control sections below.

 

 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 2018:

 

All Other Compensation – 2018 ($)

Named

Executive

  

Perquisites

and Other

Personal

Benefits(1)

  

Insurance

Premiums(2)

  

Company

Contributions to

Retirement /

401(k) Plans(3)

   Total

Michael Hayford

       84,710        463        9,250        94,423

Frank Martire

       98,598        268        9,250        108,116

Owen Sullivan

       64,665        156        9,250        74,071

Andre Fernandez

       48,505        112        9,250        57,867

Daniel Campbell

       5,000        412        4,558        9,970

William Nuti

       101,469        1,032               102,501

Robert Fishman

       16,750        645        9,250        26,645

(1) This column shows the Company’s aggregate incremental cost for the perquisites and other personal benefits described in the Perquisites - 2018 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.  Because he separated from Company service before the last pay date of 2018, under the plan terms no such contributions were made for Mr. Nuti.

 

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 Perquisites Table

This Table shows the aggregate incremental cost to the Company for perquisites for our named executives in 2018.

 

Perquisites – 2018 ($)

Named

Executive

 

Corporate

Aircraft

Usage(1)

 

Vehicle

and

Security(2)

 

Executive

Medical

Program(3)

 

Financial

Planning

Allowance(4)

  Relocation(5)   Other(6)   Total

Michael Hayford

      15,980         5,000       12,000   51,730         84,710

Frank Martire

      34,883         10,000       12,000   41,715         98,598

Owen Sullivan

              5,000       12,000   47,665         64,665

Andre Fernandez

              5,000       6,000   37,505         48,505

Daniel Campbell

              5,000                 5,000

William Nuti

      44,953   28,418       5,000       12,000     11,098       101,469

Robert Fishman

              5,000       11,750           16,750

(1) This column shows the Company’s incremental cost for personal usage of the corporate aircraft.  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 Company payments for the Company-provided car and driver that the Company required Mr. Nuti to use for security purposes.

(3) 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).

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

(5) This column shows relocation expenses related to our named executives.  Included in these relocation figures are the following tax gross-up amounts:  Mr. Hayford:  $23,235; Mr. Martire: $16,220; Mr. Sullivan:  $22,170; Mr. Fernandez: $15,320.

(6) This column represents expenses paid on Mr. Nuti’s behalf related to COBRA coverage from the date of his retirement as of April 30, 2018 through December 31, 2018 under the terms of his Medical Benefits Agreement with the Company.

 

 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.  Mr. Nuti has a retirement agreement as described below.

 

 
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.  His 2018 new hire equity awards included options and time-based RSUs shown in the Outstanding Equity

Award at Fiscal Year-End 2018 Table below.  For 2018, NCR agreed that Mr. Hayford’s MIP payout would be at least target (prorated for 2018 service), and for each of 2019 and 2020 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.  The agreement also provides for

 

 

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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’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.  His 2018 new hire equity awards included options and time-based RSUs shown in the Outstanding Equity Awards at Fiscal Year-End 2018 Table below.  For 2018, NCR agreed that Mr. Martire’s MIP payout would be at least target (prorated for 2018 service), and for each of 2019 and 2020 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.  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.

 

 

Agreements with Other Current 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.  His 2018 new hire equity awards included options and time-based RSUs as shown in the Outstanding Equity Awards at Fiscal Year-End 2018 Table below.  For 2018, NCR agreed that his MIP payout would be at least target (prorated for 2018 service), and for 2019 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.  His 2018 new hire equity awards included options and time-based RSUs as shown in the Outstanding Equity Awards at Fiscal Year-End 2018 Table below.  For 2018, NCR agreed

 

 

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that his MIP payout would be at least target (prorated for 2018 service), including payment of the target Customer Success component of the MIP, and for 2019 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. Campbell:  Mr. Campbell’s employment agreement dated December 28, 2017 describes his initial base salary as EVP, NCR Global Sales, incentive opportunities and awards, benefit plan participation and related items including noncompete and other restrictive covenants.  His sign-on award was a March 1, 2018 award of Performance-Vesting RSUs shown in the Outstanding Equity Awards at Fiscal Year-End 2018 Table below. He also received a cash sign-on bonus

of $150,000 (subject to repayment if he resigns during the first year employed).  For 2018, NCR agreed that his annual LTI award would have an aggregate grant value of at least $1.5 million.  The agreement also provides for Mr. Campbell’s Executive Severance Plan participation with a separation benefit of one times (1x) base salary plus target bonus, and Change in Control Severance Plan participation with a Tier II separation benefit of two times (2x) base salary plus target bonus.  If his employment is terminated (other than for cause) or if he resigns for good reason during his first two years of employment, under the agreement Mr. Campbell’s unvested 2018 new hire and 2018 annual equity awards vest immediately (with RSUs subject to performance conditions vesting at “target”).  “Cause” and “good reason” have meanings similar to those noted for Mr. Hayford above.

 

 
Agreements with Former Executives

The executives below no longer served as executive officers as of December 31, 2018.

Mr. Nuti:  Mr. Nuti’s 2005 employment agreement, as amended, described his initial base salary as our former President and Chief Executive Officer, incentive opportunities and awards, benefit plan participation and related items, including noncompete and other restrictive covenants.  The terms of the arrangement, as amended, were determined through negotiation and provided for various severance benefits if NCR terminated his employment (other than for cause) or if he resigned for good reason.  In 2015, in recognition of his leadership role in the Company’s transformation, the Committee approved a Medical Benefits Agreement for Mr. Nuti providing for continued participation in our active employee medical plan until age 65 (on the same basis as active employees), and thereafter in our post-65 retiree Medicare supplement plan providing for a fixed annual subsidy for qualified Medicare supplement or other qualified medical expenses through a retiree reimbursement account.  Mr. Nuti retired from employment and was appointed to the honorary position of Chairman Emeritus of our Board effective April 30, 2018.  He was retained on a part-time basis as a consultant for transition and continuing advisory services.  His

 

 

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retirement agreement including consultant terms are described under Potential Payments Upon Termination or Change in Control below.

Mr. Fishman:  Mr. Fishman’s March 17, 2010 employment agreement describes his initial base salary as Senior Vice President and Chief Financial Officer, his incentive opportunities and awards, his benefit plan participation and related items, including noncompete and restrictive covenants.  The agreement also provides for Mr. Fishman’s Executive Severance Plan participation with a separation benefit of one times

(1x) base salary plus target bonus, and Change in Control Severance Plan participation with a Tier II separation benefit of two times (2x) base salary plus target bonus.  On July 24, 2018, Mr. Fishman announced his decision to retire from NCR effective at an undetermined time in the future.  As of August 29, 2018, he became our Senior Advisor, and ceased holding the positions of Executive Vice President, Chief Financial Officer and Chief Accounting Officer.  He continues to assist with transition and advisory services, and NCR expects to enter into a retirement agreement with him at a later date.

 

 

 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 2018.  Equity awards were made under our Stock Plan.  Non-equity awards were made under our Annual Incentive Plan (MIP and Customer Success Bonus, as applicable) and, for Mr. Fishman only, a payout under our EPP earned before 2018.  These plans and related awards are described in the Compensation Discussion & Analysis.

 

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Grants of Plan-Based Awards – 2018 ($)

 

                           
             

Estimated Future

Payouts Under Non-

Equity Incentive Plan

Awards(1)

   

Estimated Future

Payouts Under Equity

Incentive Plan Awards(2)

 

All Other

Stock

Awards:

Number of

Units

    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       1,010,959       1,010,959       2,021,918                                
  Stock Options     05/01/18                     266,634       31.15       2,499,960  
  Stock Options     05/01/18                                     533,268       31.15       4,999,921  
    Time-Based RSU     05/01/18                               160,514