UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a
Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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DefinitiveProxy Statement
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DefinitiveAdditional Materials
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SolicitingMaterial Pursuant to Rule §240.14a-12
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THE HACKETT GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
March 22, 2012
Dear Shareholder:
You are
cordially invited to attend the 2012 Annual Meeting of Shareholders of The Hackett Group, Inc. (the “Company”) to be held on May 4, 2012 at 11:00 a.m. (local time) at the Company’s headquarters located at 1001 Brickell Bay Drive,
Suite 3000, Miami, Florida.
At this meeting you will be asked to:
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vote for the election of two directors;
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hold an advisory vote on executive compensation; and
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ratify the appointment of BDO USA, LLP as the Company’s independent registered certified public accounting firm for the fiscal year ending
December 28, 2012.
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These matters are discussed in detail in the attached Proxy Statement.
It is important that your shares be represented at the meeting whether or not you plan to attend. Included with these soliciting
materials is a proxy card for voting, an envelope with postage prepaid in which to return your proxy, instructions for voting by telephone or on the Internet and our Annual Report to Shareholders.
On March 23, 2012, we will mail to our shareholders a notice containing instructions on how to access our 2011 Annual Report and
Proxy Statement and vote online. The notice also contains instructions on how you can receive a paper copy of your annual meeting materials, including the notice of annual meeting, Proxy Statement and proxy card.
We look forward to receiving your vote and seeing you at the meeting.
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Sincerely,
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Ted A. Fernandez
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Chairman and Chief Executive Officer
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The date of this Proxy Statement is March 22, 2012, and it is first being made available to
shareholders via the Internet and the U.S. Mail on or about March 23, 2012.
THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2012
The 2012 Annual Meeting of Shareholders of The Hackett Group, Inc. (the “Company”) will be held on May 4, 2012, at 11:00 a.m. (local time) at the Company’s headquarters located at 1001
Brickell Bay Drive, Suite 3000, Miami, Florida, for the following purposes:
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To elect two directors to the Board of Directors;
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To hold an advisory vote on executive compensation;
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To ratify the appointment of BDO USA, LLP as the Company’s independent registered certified public accounting firm for the fiscal year ending December 28,
2012; and
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To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.
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The Board of Directors has fixed the close of business on March 15, 2012 as the record date to determine the shareholders entitled to
notice of and to vote at the annual meeting. Only holders of common stock of record at the close of business on that date will be entitled to notice of and to vote at the annual meeting or any postponement or adjournment thereof. A list of the
Company’s shareholders entitled to vote at the annual meeting will be open to the examination of any shareholder for any purpose related to the meeting during ordinary business hours for ten days prior to the annual meeting at the
Company’s offices and at the location of the annual meeting on May 4, 2012. All shareholders are cordially invited to attend the annual meeting.
On March 23, 2012, we will mail to our shareholders a notice containing instructions on how to access our Annual Report and Proxy Statement and vote online. The notice also contains instructions on
how you can receive a paper copy of your annual meeting materials, including the notice of annual meeting, Proxy Statement and proxy card.
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By Order of the Board of Directors,
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Frank A. Zomerfeld
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Secretary
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Miami, Florida
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March 22, 2012
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held
on May 4, 2012 – this Proxy Statement and The Hackett Group, Inc.’s 2011 Annual Report are available at www.edocumentview.com/hckt.
Whether or not you plan to attend the annual meeting, we ask that you do the following. If you are receiving this document via the U.S. Mail, please complete, date, sign and return the enclosed
proxy card in the postage prepaid envelope or vote by telephone or through the Internet as instructed on the proxy card. If you sign and return your proxy card without specifying a choice, your shares will be voted in accordance with the
recommendations of the Board of Directors. If you are receiving this document via Internet delivery only, please vote by telephone or through the Internet as instructed on the notice you received via the U.S. Mail. You may, if you wish, revoke your
proxy at any time before it is voted by filing with the Secretary of the Company, Frank A. Zomerfeld, a written revocation or a duly executed proxy bearing a later date, or by attending the annual meeting and voting in person. If you submit your
proxy by telephone or through the Internet, you may also revoke it by submitting a new proxy using the same procedures at a later date. The telephone and Internet voting facilities for shareholders of record will close at 1:00 a.m. Central Time on
the day of the meeting.
THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 2012
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement and the accompanying Notice of Annual Meeting and proxy card are being furnished and made available,
on or about March 23, 2012, to the shareholders of The Hackett Group, Inc. (the “Company”), in connection with the solicitation of proxies by the Board of Directors of the Company (the “Board”) to be voted at the 2012 Annual
Meeting of Shareholders to be held on May 4, 2012 at 11:00 a.m. (local time) at the Company’s Headquarters located at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida, and any postponement or adjournment thereof.
If the form of proxy enclosed or provided via the Internet is properly executed and returned to the Company or voted via telephone or the
Internet in time to be voted at the annual meeting, the shares represented thereby will be voted in accordance with the instructions thereon or submitted via the telephone or Internet.
Executed but unmarked proxies will be voted:
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“FOR” Proposal 1 to elect the Board’s nominees for directors;
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FOR” Proposal 2 to approve the advisory vote on executive compensation; and
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“FOR” Proposal 3 to ratify the appointment of BDO USA, LLP as the Company’s independent registered certified public accounting firm
for the fiscal year ending December 28, 2012.
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If any other matters are properly brought before the
annual meeting, proxies will be voted in the discretion of the proxy holders. The Company is not aware of any such matters that are proposed to be presented at the annual meeting.
On March 23, 2012, the Company will mail to its shareholders a notice containing instructions on how to access the Company’s
2011 Annual Report and Proxy Statement and vote online. The notice also contains instructions on how you can receive a paper copy of your annual meeting materials, including the notice of annual meeting, Proxy Statement and proxy card.
Shareholders receiving this document and accompanying proxy card and annual report via the Internet may submit their proxies by telephone
or through the Internet as instructed in the notice delivered via the U.S. Mail. If shareholders choose to receive this document and accompanying proxy card via the U.S. Mail, those shareholders may submit a signed proxy card or they may submit
their proxy by telephone or through the Internet as instructed on the proxy card. Telephone and Internet proxies must be used in conjunction with, and will be subject to, the information and terms contained on the proxy card. These procedures may
not be available to shareholders that hold their shares through a broker, nominee, fiduciary or other custodian. If your shares are held in this manner, please check your proxy card or contact your broker, nominee, fiduciary or other custodian to
determine whether you will be able to vote by telephone or through the Internet.
The cost of soliciting proxies in the form
enclosed herewith will be borne entirely by the Company. In addition to the solicitation of proxies by mail, proxies may be solicited by directors, officers and regular employees of the Company, without extra remuneration, by personal interviews,
telephone or otherwise. The Company will request persons, firms and corporations holding shares in their name or in the names of their
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nominees, which are beneficially owned by others, to send proxy materials to and obtain proxies from the beneficial owners and will reimburse the holders for their reasonable expenses in doing
so.
The securities that may be voted at the annual meeting consist of shares of the Company’s common stock. Each
outstanding share of common stock entitles its owner to one vote on each matter as to which a vote is taken at the annual meeting. The close of business on March 15, 2012 has been fixed by the Board as the record date (the “Record
Date”) for determination of shareholders entitled to vote at the annual meeting. On the Record Date, 41,257,650 shares of common stock were issued and outstanding and entitled to vote. The presence, in person or by proxy, of at least a majority
of the shares of common stock issued and outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the annual meeting. Shares can be voted only if the shareholder is present in person or by proxy. Whether or not you
plan to attend in person, you are encouraged to sign and return the enclosed proxy card or vote by telephone or through the Internet as instructed on the proxy card or in the notice mailed to you.
Assuming the presence of a quorum at the annual meeting, the following voting standards will apply to the various proposals:
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A plurality of the votes cast in person or represented by proxy at the annual meeting is required for election of the directors in Proposal 1.
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The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is
required to approve the proposal on executive compensation in Proposal 2. Proposal 2 is an advisory vote, which means that it is nonbinding on the Company. However, the Compensation Committee of the Board will take into account the outcome of the
vote when considering future executive compensation decisions.
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The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is
required to ratify the appointment of the Company’s independent registered certified public accounting firm for the fiscal year ending December 28, 2012 in Proposal 3.
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Abstentions and broker non-votes will be treated as shares that are present, in person or by proxy, and entitled to vote for purposes of
determining the presence of a quorum at the annual meeting. A “broker non-vote” occurs when a nominee holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because the nominee does not have
discretionary voting power and has not received instructions from the beneficial owner. Abstentions and broker non-votes will not have any effect on the approval of Proposal 1. Because abstentions will be counted for purposes of determining the
shares present or represented at the annual meeting and entitled to vote, abstentions will have the same effect as a vote “against” Proposals 2 and 3. Broker non-votes will not have any effect on the approval of Proposals 2 and 3.
The presence of a shareholder at the annual meeting will not automatically revoke such shareholder’s proxy. Shareholders
may, however, revoke a proxy at any time prior to its exercise by filing with the Secretary of the Company a written notice of revocation, by delivering to the Company a duly executed proxy bearing a later date or by attending the annual meeting and
voting in person. If you submitted your proxy by telephone or through the Internet, you may also revoke it by submitting a new proxy using the same procedures at a later date. The telephone and Internet voting facilities for shareholders of record
will close at 1:00 a.m. Central Time on the day of the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE APPROVAL OF PROPOSALS 1, 2 AND 3.
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PROPOSAL 1
ELECTION OF DIRECTORS
General
The Company’s articles of incorporation provide that the Board shall consist of not fewer than five directors nor more than fifteen
directors. The Company’s bylaws provide that the number of directors, within such limits, shall be determined by resolution of the Board. The Board currently is composed of seven directors. The Board is divided into three classes. One class is
elected each year for a term of three years.
Two directors will be elected at the annual meeting. The Board has nominated
David N. Dungan and Richard N. Hamlin, both existing directors, for the positions. If elected, Messrs. Dungan and Hamlin will each serve a three-year term expiring at the annual meeting in 2015. You can find more information about Messrs. Dungan and
Hamlin below.
Unless otherwise instructed on the proxy, it is the intention of the proxy holders to vote the shares
represented by each properly executed proxy for the election of both nominees. The Board believes that both nominees will stand for election and will serve if elected. However, if either nominee fails to stand for election or is unable to accept
election, proxies will be voted by the proxy holders for the election of such other person as the Board may recommend. Directors are elected by a plurality of the votes cast at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF
MESSRS. DUNGAN AND HAMLIN AS DIRECTORS.
Information as to the Nominees and Continuing Directors
The following
table sets forth certain information regarding the Board’s nominees for election as directors and those directors who will continue to serve as such after the annual meeting.
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Name
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Director
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Position held with the Company
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Term
Expires
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NOMINEES
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David N. Dungan
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58
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2000
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Vice Chairman and Chief Operating Officer
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2012
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Richard N. Hamlin(3)
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64
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2003
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2012
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CONTINUING DIRECTORS
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Ted A. Fernandez
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1997
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Chairman and Chief Executive Officer
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2013
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Terrance M. Graunke
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52
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2009
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2013
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Alan T.G. Wix(3)
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70
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1999
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2013
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John R. Harris(3)
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64
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2006
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2014
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Edwin A. Huston(3)
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73
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2001
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2014
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The ages shown are as of March 15, 2012.
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The dates shown reflect the year in which these persons were first elected as directors of the Company.
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Member of the Audit, Compensation and Nominating and Corporate Governance Committees.
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The principal occupations and other public company directorships for the past five years or more of the two nominees for director and the
five directors whose terms of office will continue after the annual meeting are set forth below.
Nominees
David N. Dungan
is a founder of the Company. He served as a Managing Director from the Company’s inception until March 2000
when he became a director and was named Chief Operating Officer (“COO”). Mr. Dungan was named Vice Chairman in February of 2006. Prior to founding the Company, Mr. Dungan served
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as the National Partner-in-Charge of the World Class Finance Practice of KPMG LLP’s (“KPMG’s”) Strategic Services Consulting Division from May 1994 to February 1997.
Mr. Dungan joined KPMG in 1986 and, until May 1994, held various executive positions with that firm.
Richard N.
Hamlin
is a consultant and investor. He served as the Chief Financial Officer of CommerceQuest, Inc. from July 2002 to August 2003. Mr. Hamlin retired in June 2000 as a partner of KPMG Consulting, a position he held from January 2000.
Mr. Hamlin served as a partner of KPMG from 1979 until January 2000, including service on KPMG’s board of directors from 1994 to 1998. Mr. Hamlin was a member of the board of directors of eTelecare Global Solutions from February 2006
to August 2009. Mr. Hamlin served as the Chairman and Trustee of the Dakota Minnesota Eastern Railroad, a wholly-owned subsidiary of Canadian Pacific Railroad, from October 2007 through November 2008.
Continuing Directors
Ted A. Fernandez
is a founder of the Company. He has served as Chairman of its Board and Chief Executive Officer (“CEO”)
since inception. Mr. Fernandez served as the National Managing Partner of KPMG’s Strategic Services Consulting Division from May 1994 to January 1997. Mr. Fernandez also served as a member of KPMG’s Management Committee from 1995
to 1997. From 1979 to 1994, Mr. Fernandez held several industry, executive and client service positions with KPMG.
Terence M. Graunke
was appointed to the Company’s Board on November 10, 2009, in connection with its acquisition of
Archstone Consulting. Mr. Graunke is the chairman and co-founder of Lake Capital Management LLC (“Lake Capital”), a private investment firm headquartered in Chicago. Mr. Graunke has served as Chairman since 1998. Mr. Graunke
serves on the boards of numerous portfolio companies of Lake Capital Partners LLC, an affiliate of Lake Capital. Mr. Graunke also sits on the board of directors of the Max McGraw Wildlife Foundation.
Alan T.G. Wix
is a Director of BDC Partnership Ltd. Mr. Wix was the Chairman of Fiva Marketing, Ltd. from April 2003 to
December 2008. Mr. Wix served as the Chairman of the Board of Farsight PLC from April 1999 until June 2005. Mr. Wix served as the Chief Executive Officer of Farsight PLC from April 1999 until June 2002. Mr. Wix retired in August 1998
as Managing Director Core IT Development of Lloyds TSB, a position he held from January 1993. From April 1990 to January 1993, Mr. Wix held the position of Head of Development at Lloyds TSB. Prior to being elevated to that position,
Mr. Wix held a variety of positions within the information systems division of Lloyds TSB.
John R. Harris
is an
operating partner with glendonTodd Capital and Chief Executive Officer of Chemical Information Services which provides information services to sourcing professionals. Mr. Harris has served in these roles since January 2011. He is the former
President and Chief Executive Officer of eTelecare Global Solutions, a provider of outsourced customer care services. Mr. Harris served in these roles from February 2006 until October 2009. Mr. Harris served as Chief Executive Officer of
Seven Worldwide Inc., a digital content management company, from December 2003 to January 2005. From July 2002 to December 2003, he served as Chief Executive Officer and President of Delinea Corporation, an application and business process
management company serving the energy industry. From August 2001 to July 2002, Mr. Harris served as Chief Executive Officer and President of Exolink. From September 1999 to September 2001, he served as Chairman and Chief Executive Officer of
Ztango, Inc. Mr. Harris previously spent 25 years with Electronic Data Systems (“EDS”), during which he held a variety of executive leadership positions including Group Executive and President of EDS’s four strategic
business units serving the telecommunications and media industries. He also served as EDS’s Corporate Vice President, Marketing & Strategy. Mr. Harris is a member of the board of directors of Premiere Global Services, Inc.,
BancTec Corporation, DG FastChannel and Startek Corporation.
Edwin A. Huston
served as the Vice Chairman of Ryder
System, Inc. (“Ryder”), an international logistics and transportation solutions company, from March 1999 until retiring on June 30, 2000. Mr. Huston served as Senior Executive Vice President, Finance and Chief Financial Officer
of Ryder from January 1987 until he
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became Vice Chairman. Mr. Huston is a director of Tennenbaum Opportunities Fund V, LLC. During the past five years Mr. Huston also served on the board of directors of Enterasys
Networks, Kaman Corporation and Unisys Corporation.
Other Executive Officer
The principal occupation during the past five years or more of the Company’s other executive officer is set forth below.
Robert A. Ramirez
, 45, is the Company’s Executive Vice President, Finance and Chief Financial Officer (“CFO”), a
position he has held since August 2007. Mr. Ramirez served as Corporate Controller of the Company from July 2006 through July 2007. Mr. Ramirez served as Senior Director, Finance and Practice Controller of the Company from October 2005 to
July 2006 when he was named Corporate Controller. Mr. Ramirez held a variety of other positions within the Company’s business intelligence, finance transformation and retail consulting practices from 1998 to 2005.
Corporate Governance and Other Matters
Board Composition
The Board consists of seven members, a majority of which
are considered “independent directors” under the current listing standards of the NASDAQ Stock Market (“NASDAQ”). The Company’s independent directors are Terence M. Graunke, Richard N. Hamlin, John R. Harris, Edwin A. Huston
and Alan T.G. Wix. The Board currently has three committees, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.
Leadership Structure
The roles of Chairman of the Board and Chief
Executive Officer have been unified since the Company was founded. The Company believes that its Board leadership structure demonstrates to its employees, clients and shareholders that the Company is under strong leadership with a single person
setting the tone and having primary responsibility for managing its operations. It provides an effective connection between management’s role of identifying, assessing and managing risks and the Board’s role of risk oversight.
Mr. Fernandez has an in-depth knowledge of the issues, opportunities and challenges that the Company faces. The Board believes that he is best positioned to develop agendas and highlight issues that ensure that the Board’s time and
attention are focused on the most critical matters impacting the Company. The Board also believes that the unification of the roles of Chairman and Chief Executive Officer is appropriate for the Company at this time. The Board has not appointed a
“lead” director. The Board recognizes that different board leadership structures may be appropriate for companies in different situations and understands that no one structure is appropriate for all companies. While the Board intends to
review the appropriate leadership structure for the Company from time to time, the Board believes that the Company has been, and is currently, well-served by its current leadership structure.
The Board’s Role in Risk Oversight
Through its committees, the Board plays an active role in risk oversight. The Board delegates certain risk oversight functions to its Audit Committee. These functions are to assist the Board in its
responsibility for oversight of (a) the quality and integrity of the Company’s consolidated financial statements and its financial reporting and disclosure practices, (b) the Company’s systems of internal controls regarding
finance and accounting compliance, (c) the independence and performance of the Company’s outside auditor, and (d) the Company’s ethical compliance programs. The Board has delegated compensation program risk oversight to its
Compensation Committee. The Compensation Committee is charged with understanding the Company’s various compensation programs and understanding how the programs are aligned with the Company’s goals and objectives. The Board delegates to its
Nominating and Corporate Governance Committee the authority to develop
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and implement the Company’s director nomination guidelines and to recommend nominees for election, thus ensuring that the Board contains the appropriate mix of experience, qualifications,
attributes and skills necessary to effectively exercise its oversight function. The Nominating and Corporate Governance Committee is also responsible for developing and implementing the Company’s corporate governance guidelines. Finally, the
Board as a whole has the responsibility to review and approve the Company’s annual operating plan. In connection with that process, the Board typically inquires as to the greatest areas of risk associated with the annual operating plan and the
Company’s operating model taken as a whole, and confirms that these risks are appropriately mitigated.
Specific
Experience, Qualifications, Attributes and Skills of Current Board Members Including Director Nominees
Specific
experience, qualifications, attributes and skills that the Board believes qualify each current director for his or her position on the Board are summarized below. This description is not intended as an exclusive description of the types of expertise
or contributions provided by each director.
Ted A. Fernandez
—Mr. Fernandez founded the Company in 1997 based on a
strategy he developed from his extensive history in the professional services industry which included an eighteen year career with KPMG. His career at KPMG culminated in the role of the National Managing Partner of KPMG’s Strategic Services
Consulting Division from May 1994 to January 1997. Mr. Fernandez also served as a member of KPMG’s Management Committee from 1995 to 1997. He brings an in-depth knowledge of the professional services industry, especially business
consulting, and organizational leadership within that industry. He also provides extensive financial and accounting experience to the Board. Mr. Fernandez provides the Board with day to day knowledge of the Company’s business and markets.
He also provides broad and deep experience with strategic plan development and execution.
David N. Dungan
—Along
with Mr. Fernandez, Mr. Dungan founded the Company in 1997. Mr. Dungan joined KPMG in 1986 and, until May 1994, held various executive positions with KPMG. Mr. Dungan served as the National Partner-in-Charge of the World Class
Finance Practice of KPMG, LLP’s Strategic Services Consulting Division from May 1994 to February 1997. Mr. Dungan provides the Board with broad financial and operational experience managing and leading a professional services firm focused
on business consulting.
Terence M. Graunke
—Mr. Graunke is chairman and co-founder of Lake Capital, a private
investment firm that makes investments in mid-sized businesses. He co-founded Lake Capital in 1998 as a vehicle to acquire interests in service-based companies creating significant enterprise value by applying the firm’s capital, as well as
strategic and operating expertise to enhance growth, profitability and market position. Since 1998, Lake Capital has owned and built more than twenty companies, including start-up business consultancy firms. Lake Capital enterprises are located
across the United States and have operations that extend to Canada and Europe. Mr. Graunke brings to the Board an extensive history of evaluating, purchasing and managing professional services firms in the Company’s industry. He also
brings a history of board participation in the Company’s business segment with an emphasis on business services and international experience through the management of Lake Capital’s interests abroad.
Richard N. Hamlin
—Mr. Hamlin provides the Board with extensive financial and accounting experience gained over a more
than thirty-year career as a Certified Public Accountant at KPMG. Mr. Hamlin served as a partner of KPMG for twenty-one years which included service on KPMG’s board of directors from 1994 to 1998 and later became a partner of KPMG
Consulting. Mr. Hamlin’s experience provides additional depth of capability to the Audit Committee. Mr. Hamlin is designated an “audit committee financial expert” as defined by regulations of the Securities and Exchange
Commission (the “SEC”). Mr. Hamlin also possesses a history of board participation on a public company board as a former member of the board of directors and Chairman of the Audit Committee of eTelecare Global Solutions.
Mr. Hamlin also provides operational perspective from outside of the business consulting segment having served as the Chairman and Trustee of the Dakota Minnesota Eastern Railroad, a wholly-owned subsidiary of Canadian Pacific Railroad.
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John R. Harris
—Mr. Harris has an extensive history of senior executive
leadership positions and board participation in the information technology, media, telecommunications and outsourcing industries having spent twenty-five years in various roles with EDS including Group Executive and President of EDS’s four
strategic business units serving the telecommunications and media industries and Corporate Vice President, Marketing & Strategy. He also has in-depth experience in public company operations and management having served as the President and
Chief Executive Officer of eTelecare Global Solutions, a provider of outsourced customer care services. Mr. Harris also provides significant public company board experience through his service as a director of BancTec Corporation and through
his prior service on the boards of Applied Graphic Technologies and Genuity. He continues to provide additional operational perspective through his participation as a director of DG Fast Channel, Startek Corporation and Premiere Global Services,
Inc.
Edwin A. Huston
—Mr. Huston provides the Board with in-depth finance experience from his educational
background in finance to progressively senior roles at Ryder, an international logistics and transportation services provider, over a thirty-year period. Mr. Huston’s experience provides additional depth of capability to the Audit
Committee. Mr. Huston is designated an “audit committee financial expert” as defined by SEC regulations. Mr. Huston has also served on the boards and audit committees of several other companies during the past five years,
including Unisys Corporation, Enterasys Networks, Inc., Kaman Corporation and the Tennenbaum Opportunity Fund on whose board he currently serves. Mr. Huston’s senior-level operational background at Ryder also provides the Board with
additional perspective on strategic planning.
Alan T.G. Wix
—Mr. Wix brings to the Board an extensive history
of senior executive leadership at a major financial institution, having retired in August 1998 as Managing Director Core IT Development of Lloyds TSB. He has in-depth operational experience leading a significant division of an institution with
global reach. He also has extensive experience as a purchaser of technology and business consulting services and as such provides perspective on customer experience. Mr. Wix is a native of the United Kingdom and spent his professional career in
the United Kingdom. He continues to make his home there. His knowledge of the European marketplace provides valuable international perspective to the Board.
Compensation Committee
The Compensation Committee is responsible for
determining the compensation of the Company’s executive officers and approving compensation and human resource programs for the Company. The current members of the Compensation Committee are Messrs. Huston (Chairman), Hamlin, Harris and Wix.
The Compensation Committee is governed by a written charter, which can be found on the Company’s website at
http://www.thehackettgroup.com/about/ir_governance.jsp
. The Compensation Committee sits in executive session to determine the
compensation of the Company’s CEO. Based on the recommendations of Mercer Human Resource Consulting (“Mercer”), an executive compensation consultant, in 2005 the Compensation Committee implemented a cash and equity incentive plan for
its CEO and COO that provided significant incentive opportunities tied to the attainment of specific financial performance goals measured by annual pro-forma earnings per share. In 2006, these programs were expanded to include the Company’s
other executive officer and senior practice leaders of The Hackett Group. The incentives for the practice leaders are tied to the achievement of practice operating plans. These programs were reviewed in 2011 by John Bloedorn, an executive
compensation consultant formerly of Mercer and the person who served as the lead consultant for the 2005 program review. Mercer and Mr. Bloedorn were engaged directly by the Compensation Committee. For further discussion of the Company’s
compensation programs and the role of the external compensation consultant engaged by the Committee, see “Compensation Discussion and Analysis” and “Role of Consultants” on page 12 and 15, respectively, of this Proxy
Statement. In February 2012, the Company completed a review of the policies and practices associated with all of its compensation programs, including its executive compensation programs. As part of this assessment, the Company considered
that rewards are heavily weighted towards profitability, which is based on the delivery of services for which fees are collected in a relatively short period of time. Based on this assessment, the Company does not believe that any of these
policies or practices creates risks that are reasonably likely to have a material adverse effect on the Company.
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Nominating and Corporate Governance Committee
On February 17, 2012, the Company’s Nominating Committee was reconstituted and renamed the Nominating and Corporate Governance
Committee. The Board approved, and the Committee adopted, a new written charter which can be found on the Company’s website at
http://www.thehackettgroup.com/about/ir_governance.jsp.
The Nominating and Corporate Governance Committee is
responsible for identifying individuals qualified to become members of the Board and for recommending candidates for election or re-election to the Board, as well as administering the Board’s annual self-evaluation process. In addition to these
responsibilities, the Nominating and Corporate Governance Committee is now also responsible for the development and implementation of the Company’s corporate governance guidelines. These guidelines were proposed by the Nominating and Corporate
Governance Committee and approved by our Board on February 17, 2012. The Company’s corporate governance guidelines can be found on the Company’s website at
http://www.thehackettgroup.com/about/ir_governance.jsp
. The current
members of the Nominating and Corporate Governance Committee are Messrs. Wix (Chairman), Hamlin, Harris and Huston. The Nominating and Corporate Governance Committee selects and must approve by at least a majority vote all candidates to stand for
election as directors. Pursuant to the Company’s bylaws, other candidates may also be nominated by any shareholder, provided each such other nomination is submitted in writing and received by the Secretary of the Company at the principal
executive offices of the Company not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from such anniversary date, the shareholder must so deliver the notice not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. In the event that the number of directors to be elected to the Board is increased and there is no public
announcement by the Company naming all of the nominees for director or specifying the size of the increased board at least 70 days prior to the first anniversary of the preceding annual meeting, then a shareholder wishing to nominate a director for
the new position must deliver the notice not later than the close of business on the tenth day following the day on which public announcement of the date of the meeting is first made. For a discussion of the requirements for including information
with respect to a shareholder’s nominee in the Company’s Proxy Statement, see “Shareholder Proposals for the Annual Meeting in 2013” on page 34 in this Proxy Statement.
The shareholder’s notice referred to in the preceding paragraph must set forth: (i) as to each person whom the shareholder
proposes to nominate for election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Section 14(a) of the Securities Exchange Act of 1934 and
the rules and regulations thereunder (together with such person’s written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected); and (ii) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination is made, the name and address of the shareholder, as it appears on the Company’s books, and of such beneficial owner, the class and number of shares of the Company that are owned of
record and beneficially by such shareholder and beneficial owner, respectively, and a representation that the shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.
The corporate governance guidelines implemented by the Nominating and Corporate Governance Committee contain criteria which it employs to
identify and recommend candidates to the Board. These criteria include (i) personal and professional integrity; (2) the skills, business experience and industry knowledge useful to the oversight of the Company based on the perceived needs
of the Company and the Board at any given time; (3) the ability and willingness to devote the required amount of time to the Company’s affairs, including attendance at Board and committee meetings; (4) interest, capacity and
willingness, in conjunction with the members of the Board, to serve the long-term interests of the Company and its shareholders; and (5) to the extent considered appropriate by the Board, whether a director candidate may be required to be a
“financial expert” as defined in relevant SEC rules. These qualities would be considered as they relate to any candidate, whether suggested by management or by one or more of the Company’s shareholders. The Company does not have a
specific policy which addresses how diversity should be considered in connection with the identification of
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director nominees. The Committee and the Board have always taken an approach that neither favors nor disfavors any particular color, race, creed, gender or other component of a nominee’s
background such as skills and qualifications. The Board evaluates all candidates equally across all relevant factors and seeks members whose background, qualifications and skills will assist the Company in accomplishing its goals.
The Company’s corporate governance guidelines contain stock ownership guidelines for our CEO and the outside members of our Board of
Directors. These guidelines were adopted when the Company’s corporate governance guidelines were adopted on February 17, 2012. Pursuant to these guidelines, our CEO is required to own a number of shares of the Company common stock equal in
value to six times his annual base salary. Mr. Fernandez’ base salary for 2012 is $750,000. Our outside Board members are required to own a number of shares of the Company common stock equal in value to three times their maximum annual
cash compensation under the current Outside Director Compensation Program. For 2012, the maximum annual cash compensation is $40,000. Our CEO and outside Board members have five years from the date that these guidelines were adopted to achieve these
goals. Our CEO and a majority of our outside Board members already satisfy these requirements. Our CEO and outside Board members are not required to purchase shares in the open market to satisfy these guidelines. Rather, they are expected to retain
shares received upon vesting of restricted stock units grants or upon the vesting of stock options until the guidelines are satisfied. Once the guidelines are achieved, neither the CEO nor any outside Board member will be considered to be out of
compliance with these guidelines due to fluctuations in the Company’s stock price.
Audit Committee
The Audit Committee reviews, acts on, and reports to the Board with respect to various auditing and accounting matters. The Audit
Committee is directly responsible for the appointment, compensation, evaluation, retention and oversight of the Company’s independent auditors. The primary functions of the Audit Committee are to assist the Board in its responsibility for
oversight of (i) the quality and integrity of the Company’s consolidated financial statements and its financial reporting and disclosure practices, (ii) the Company’s system of internal controls regarding finance and accounting
compliance, (iii) the independence and performance of the Company’s independent auditors, and (iv) the Company’s ethical compliance programs. The Audit Committee performs all functions required of audit committees of public
companies under applicable laws, rules and regulations and the requirements of NASDAQ.
The current members of the Audit
Committee are Messrs. Hamlin (Chairman), Harris, Huston and Wix. Rules adopted by NASDAQ and the SEC impose strict independence requirements for members of audit committees. In addition to meeting NASDAQ’s tests for director independence,
directors on audit committees must meet two basic criteria set forth in the SEC’s rules. First, audit committee members are barred from accepting, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or an
affiliate of the issuer, other than in the member’s capacity as a member of the board of directors and any board committee. Second, an audit committee member may not be an affiliated person of the issuer or any subsidiary of the issuer apart
from his or her capacity as a member of the board and any board committee. Each member of the Company’s Audit Committee meets these independence requirements, in addition to the independence criteria established by NASDAQ. The Board has
determined that both Mr. Hamlin and Mr. Huston are audit committee financial experts, as that term is defined under SEC rules.
The Audit Committee is governed by a written charter approved by the Board. A copy of the charter can be found on the Company’s website at
http://www.thehackettgroup.com/about/ir_governance.jsp
. For further information on the Audit Committee, see the “Report of the Audit Committee” on page 29 in this Proxy Statement.
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Other Matters
During the fiscal year ended December 30, 2011, the Board and the Audit Committee each held 6 meetings, the Compensation Committee
held 5 meetings, and the Nominating Committee held 4 meetings. During that period, no director attended fewer than 75% of the total number of all meetings of the Board and any committee on which he served. The Company’s independent directors
regularly meet as a group in executive session outside of the presence of management.
The Company’s shareholders may
communicate with its Board members via written correspondence mailed to the individual addresses found in the “Beneficial Ownership of Common Stock” table on page 32 of this Proxy Statement.
As is the case with all regularly scheduled meetings of the Board and its committees, all of the Company’s directors are expected to
attend the annual meeting of shareholders in person. All of the Company’s directors attended the 2011 Annual Meeting of Shareholders.
The Company has adopted a Code of Conduct and Ethics that is applicable to all directors, officers and employees of the Company. It complies with the requirements of Section 406(c) of the
Sarbanes-Oxley Act. More importantly, it reflects the Company’s policy of dealing with all persons, including its customers, employees, investors, regulators and vendors, with honesty and integrity. A copy of the Company’s Code of Conduct
and Ethics can be found on the Company’s website at
http://www.thehackettgroup.com/about/ir_governance.jsp
. The Company intends to post amendments to or waivers from the Code of Conduct and Ethics that are applicable to our Chief
Executive Officer, Chief Financial Officer or Controller on this website under the circumstances and within the period required under SEC rules.
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COMPENSATION COMMITTEE REPORT
The Compensation Committee met with management to review and discuss the Compensation Discussion and Analysis below. Based on such review
and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Form 10-K for its 2011 fiscal year, and the
Board has approved that recommendation.
Respectfully submitted,
Compensation Committee
Edwin A. Huston, Chairman
Richard N. Hamlin
John R. Harris
Alan T.G. Wix
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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy and Objectives
The Company’s objectives relating to compensation are to attract and retain highly qualified executives at salaries that are competitive with companies of similar or greater size within its industry
and to align the financial interests of those executives with those of its shareholders. The Company achieves these objectives by linking a substantial portion of each executive’s compensation to the achievement of financial and operational
objectives in the executive’s particular business unit or the Company as a whole. The Compensation Committee has adopted a compensation program for the Company’s executive officers that addresses both long-and short-term term business
objectives. By contemplating both long-term and short-term business objectives, executive officers must focus on the future growth and current profitability of the Company. The long-term objectives require executive officers to increase the strength
of the Company’s distinct value proposition through the building of proprietary intellectual property that is delivered in differentiated comprehensive service offerings and to attract and develop a deep and skilled employee base that will
allow the Company to exploit current and future market opportunities. The short-term objectives require executive officers to maintain the Company’s competitive position in a deliberate, thoughtful way that minimizes expenses and maximizes
revenue and profitability. This should lead to increased shareholder value. The Board and the Compensation Committee are focused on operating performance, earnings growth and share price appreciation. This results in a “pay for
performance” philosophy which is reflected throughout the Company’s executive compensation programs.
The main goals
of the Company’s executive compensation programs are as follows:
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To focus executives on critical business issues;
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To ensure that the executive team has clear goals and accountability with respect to our financial performance;
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To attract and retain critical talent;
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To maximize shareholder value; and
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To provide significant incentive opportunities tied to the attainment of specific financial performance goals.
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In order to attract, retain, and commit top executives to the fulfillment of superior performance results, the executive compensation
programs are designed to provide superior pay opportunities in exchange for superior performance.
The Company believes that
its compensation strategy supports its business strategies and provides for differentiated pay in direct concert with performance results. The Company continues to observe what it believes to be its comparative pay market which is other strategic
consulting and business advisory organizations of similar or greater size as well as other professional services firms.
The Elements of
Executive Compensation at the Company
The Company’s executive compensation program applies to its three named
executive officers, as well as senior leaders of the Company’s significant service lines or practices and its functional department leaders. This program is designed to commit the Company’s named executive officers to the fulfillment of
exceptional operating results and provides significant incentive opportunities tied to the attainment of specific financial performance goals. The design of the program has been consistent since it was created by the Compensation Committee in 2005
based on recommendations from Mercer, a human resources consulting firm which performs research and provides benchmarking of public companies of a similar size within the Company’s industry. An update review of the plan was completed in 2011 to
ensure that the program remained consistent with current trends. The program is based on compensation models employed by publicly and privately held peers whose compensation structures primarily consist of cash compensation and retirement
benefit-oriented plans which also
12
were considered in the design of the Company’s program. These companies include strategic consulting and business advisory firms against which the Company regularly competes for
executive-level talent. The program contains cash and equity incentive programs that include base salaries which the Company believes are market competitive for companies of similar size within its industry. Historically, cash and equity bonuses
have been tied to the achievement of pro-forma earnings per share targets based on a Board approved operating plan. If the Company performance falls short of the established goals for business growth, then the bonus compensation paid in connection
with this program is reduced or no bonuses are paid. Further, if share price appreciation does not follow the operating results of the Company, equity awards in the form of restricted stock units are reduced through the application of dilution caps
that are discussed below. Performance-based incentive awards earned are divided by the Company’s share price on the date of grant to calculate the number of restricted stock units to be issued. Therefore, as the share price increases, the
number of restricted stock units issued decreases and vice versa, but subject to the dilution cap.
Historically, the
executive compensation program consisted of two primary elements: (i) annual compensation, consisting of base salaries and employee benefits; and (ii) incentive compensation, in the form of performance-based cash bonus awards and equity
incentive grants issued in the form of restricted stock units. For 2012 through 2015, the compensation programs for our CEO and COO will include a performance based stock option grant. This component will replace one half of the existing restricted
stock unit bonus opportunity contained in the compensation programs for our CEO and COO. The performance based stock option grant vests one-half upon the achievement of 50% growth of pro-forma earnings per share and the remaining half based on 50%
growth of pro-forma earnings before interest, taxes, depreciation and amortization (“EBITDA”) growth based on a trailing twelve month period. The base year for the performance calculation will be fiscal 2011 pro-forma earnings per share
and pro-forma EBITDA. The pro-forma EBITDA measurement component was included in order to insure that a substantial portion of the performance criteria for these option awards did not benefit from the potential accretion which may result from the
modified Dutch auction tender offer initiated by the Company on February 22, 2012. If the performance targets are not met on or before the sixth anniversary of the grant date, the grants will expire. Upon death, disability or change in control,
or in the event of a termination by the Company without cause or by the executive for good reason, these option grants would vest on a pro-rata basis based on the percentage of the targets achieved through the date of such event. After 2015, the
CEO’s and COO’s compensation program will revert to the 2011 structure. (See “Executive Compensation Program Decisions for 2012” on page 16 of this Proxy Statement.)
For 2012, one half of the Goal opportunity for our named executive officers will be based on pro-forma earnings per share and one half
will be based on a pro-forma EBITDA target. The Superior target will be based solely on the achievement of an enhanced pro-forma EBITDA target in addition to the pro-forma EPS target included in the Goal target. The Compensation Committee also
concluded that the inclusion of the pro-forma EBITDA measurement component in the Goal and Superior targets on which cash bonuses and the remaining equity bonus opportunity are based was appropriate in order to insure that a substantial portion of
the performance criteria for these option awards did not benefit from the potential accretion which may result from the modified Dutch auction tender offer initiated by the Company on February 22, 2012.
Since 2005, pro-forma earnings per share has been the measure used for performance targets for its named executive officers. The Company
believes that is the best measure of true operating performance. Pro-forma earnings per share is defined as net income before taxes and income from discontinued operations and does not include restructuring costs, acquisition-related adjustments,
non-cash stock compensation expense or the amortization of intangible assets. Pro-forma earnings per share is based on weighted average common and common equivalent shares outstanding and also includes a normalized tax rate of 40%. The Compensation
Committee retains the right not to include the impact of certain nonrecurring events from this calculation when, in the opinion of the Compensation Committee, their inclusion would not accurately reflect the operating performance of the Company.
Pro-forma EBITDA is defined as income before taxes, interest, depreciation and amortization of intangible assets, and does not include income from discontinued operations, restructuring costs, acquisition-related adjustments or non-cash stock
compensation expense. The annual incentive program for the
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named executive officers includes the following target/threshold levels: “Commence,” “Goal” and “Superior,” which are evaluated and set annually. We believe the
targets established for the executive team, including the named executive officers, are challenging. In the seven years that this program has been in effect, no bonuses were paid to our executive team for two of those years. The “Goal”
target was achieved twice, including in 2011, and the “Superior” target was achieved twice. In one year, a prorated bonus was paid based on the achievement of an amount between the “Commence” target and the “Goal”
target. (See “Executive Compensation Program Decisions for 2012” on page 16 of this Proxy Statement.)
Annual Compensation
Annual compensation consists of base salaries and employee benefits. These elements are intended to provide a degree of
compensation certainty to the named executive officers by providing compensation that, unlike incentive compensation, is not variable based on the achievement of performance criteria.
Base Salaries
The salaries payable to the Company’s named executive officers are generally recommended to the Board by the Compensation Committee during the first quarter of each fiscal year. Each of the named
executive officers is a party to an employment agreement that establishes a minimum salary level for the named executive officer. The Company believes that the base salaries which it currently pays are at market competitive levels for companies of
similar size within its industry. See the “Summary Compensation Table” on page 19 of this Proxy Statement and the related footnotes for additional information about base salaries. Also refer to “Role of Consultants” on page 15 of
this Proxy Statement for additional information regarding the Compensation Committee’s use of external consultants in connection with its review of the Company’s pay practices.
Employee Benefits
The named executive officers, like the rest of the Company’s employees, receive certain employee benefits. For 2011, these benefits included health insurance, dental and vision coverage, prescription
drug plans, life insurance, flexible spending accounts, short-term and long-term disability and a 401(k) plan. The Company covers approximately 60% of the cost of the health benefits for its North American based employees, including its named
executive officers. In other geographies, the Company’s compensation and benefit packages vary by country and are based on market standards, local custom and legal requirements in the jurisdiction. The Company does not provide for any special
retirement-related benefits, such as pensions or 401(k) contribution matches for its senior executives.
Incentive Compensation
Incentive compensation consists of annual cash incentive awards and equity incentive grants. The Compensation Committee
targets an even balance between the cash and equity award opportunities included in the programs. The Company then weights the equity component more heavily in the case of its CEO and COO for two reasons. First, a key feature of the equity grants
for the named executive officers is that shares issued are performance based, meaning they are issued based on the achievement of the Company’s operating plan. All performance grants made under the Company’s executive compensation programs
vest one third per year beginning on the first anniversary of the first day of the month in which the grant occurs. As such, vesting is also contingent on continued employment over time. The Company regards this “at risk” character as a
retention tool. Second, and more importantly, the Company believes that incentive compensation that is paid in the form of equity serves as a meaningful long-term incentive that is directly correlated to the increase in the price of the
Company’s common stock. A heavier weighting on the equity component ties a greater portion of the Company’s executives’ ultimate compensation to their ability to deliver increased shareholder value. For 2012 through 2015, the
compensation programs for our CEO and COO will also include a performance based stock option grant that vests upon the achievement of growth targets for both pro-forma earnings per share and pro-forma EBITDA, as described above. This component will
replace one half of the restricted stock bonus opportunity for the
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Company’s CEO and COO for 2012 through 2015 and will place additional emphasis on earnings growth which the Board believes is the greatest driver of stock price appreciation. For its CFO and
other members of senior management, the Company maintains an even balance between cash and equity award opportunities in the design of their incentive compensation programs. The Company believes that the need to align shareholder value appreciation
with performance incentives based on Company-wide metrics is not as important for persons below its CEO and COO given the limited scope of their responsibilities and their ability to impact overall Company results. Nonetheless, it believes that an
evenly weighted cash to equity incentive opportunity for its other executives and senior management still provides adequate shareholder alignment benefits. An evenly balanced cash to equity incentive component also allows the Company to satisfy the
retention objective referenced above which is of significant value to the Company. Further, the Company believes these programs to be market competitive for senior management in these positions and are essential to retention efforts since the
Company does not provide any special executive retirement-related benefits, such as pensions or 401(k) contributions.
Role of Consultants
As mentioned above, in fiscal year 2005 the Compensation Committee engaged an executive compensation consulting firm to
assist in its evaluation of the then existing executive compensation programs administered by the Company. The consulting firm, Mercer, was engaged directly by the Compensation Committee. The firm was instructed to meet with members of the
Compensation Committee and senior management to obtain their respective views on various matters related to the compensation of the Company’s CEO and other named executive officers and to discuss the Company’s current and future business
strategies. The consulting firm was instructed to make recommendations related to the executive compensation programs of the Company after comparing these programs to market data and practices for a group of peer companies. The consulting firm made
recommendations regarding the Company’s executive compensation programs, including the cash and equity components of these programs. Based on these recommendations, the Compensation Committee implemented an equity incentive plan for its CEO and
COO that provided significant incentive opportunities tied to the attainment of specific financial performance goals – annual pro-forma earnings per share targets—which are tied to an operating plan approved by the Board. In 2006, these
programs were continued and expanded to include the Company’s other executive officer and senior practice leaders and functional department heads. The financial targets of the practice leaders are tied to the performance of the individual
practices they manage.
In 2011, the Compensation Committee engaged John Bloedorn, an executive compensation consultant
formerly of Mercer and the person who served as the lead consultant for the 2005 program review, to review the Company’s executive compensation programs and update the recommendations received by the Compensation Committee in 2005. The
Compensation Committee has concluded that the programs remain competitive and appropriate given the Company’s scale and industry. The Compensation Committee has continued the programs for 2012 with a significant program modification for its CEO
and COO that is described in detail below. (See “Executive Compensation Decisions for 2011” on page 16.) The consultant did not perform any services on behalf of management and did not have any potential business conflicts that would
affect its role as an independent advisor.
Stockholder “Say on Pay” Vote
Beginning with our last annual meeting of shareholders, we are required under the Dodd-Frank Wall Street Reform and Consumer Protection
Act (the “Dodd-Frank Act”) to include a non-binding, advisory “Say on Pay” vote in the annual meeting proxy statement at least once every three years, and, at least once every six years, a non-binding, advisory vote on the
frequency of future Say on Pay votes, with shareholders having the choice of every year, every two years or every three years. At the Company’s last annual meeting of shareholders, its shareholders approved the compensation of the
Company’s executives, as disclosed in the Company’s proxy statement for the meeting, with approximately 95.3% of the votes cast in favor. The Compensation Committee considered the results of this vote in choosing to maintain the
Company’s overall compensation philosophy and objectives, and in the setting the compensation of the Company’s named executive officers, in fiscal year 2012.
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At the Company’s last annual meeting of shareholders, its shareholders also voted on the frequency of future Say on Pay votes, with the most votes cast in favor of an annual frequency. In
light of those results, the Company’s Board determined that the Company’s policy will be to include a Say on Pay vote in its annual meeting proxy materials every year until the next required frequency vote is held. (See “Proposal
2—Advisory Vote on Executive Compensation.”)
Executive Compensation Decisions for 2011
As discussed under “Incentive Compensation” on page 14 of this Proxy Statement, each participant in the Company’s executive
compensation program has target cash and equity incentive opportunities expressed as a percentage of salary. The payout levels are based on target achievement that, when taken in the aggregate, should result in a certain level of operating results
for the Company as a whole that warrants bonus payouts at these levels.
As the annual level of corporate performance
(measured in pro-forma earnings per share) changes, so too will the number of potential restricted stock units that may be awarded in any given year. There are three levels of pro-forma earnings per share performance achievement targets
(“Commence”, “Goal” and “Superior”), each with a dilution cap that limits the number of restricted stock units issued to the senior management team, in the aggregate, to a percentage of annual weighted average shares
outstanding. At the “Commence” level the cap is 1.25%; at the “Goal” level the cap is 2.0%; and at the “Superior” level the cap is 2.5%. If share price appreciation does not occur following positive operating results of
the Company, equity awards are reduced through the application of the dilution caps. Performance-based incentive awards earned are divided by the Company’s share price on the date of grant to calculate the equity incentive grant in the form of
restricted stock units. Therefore, as the share price increases, the number of restricted stock units issued decreases and vice versa, but limited by the dilution caps. If the Company performance falls short of the Board’s goals for the
business, then the bonus compensation paid in connection with these programs is reduced or eliminated. Payouts are interpolated if results fall between performance levels.
The Company continued its strong operating performance from 2010, which totaled revenue and earnings of $225.1 million and $21.8 million, respectively, in 2011. In 2011, the Company achieved revenue
growth of 12% or $23.8 million, with corresponding pro-forma net earnings per share growth of 23% or $0.06 cents. However, for 2011, the compensation for our named executive officers decreased as compared to 2010, due to the targets levels set by
the Compensation Committee resulting in the “Goal” level payout under the Company’s 2011 executive compensation plan.
For 2010, Mr. Fernandez’ equity bonus earned was greater than the awards granted to him due to a feature contained in our equity compensation plan that limits issuances of restricted stock units
in any annual period. At its meeting on February 18, 2011, the Compensation Committee approved adding one half of the cash value of the restricted stock units earned but not awarded to Mr. Fernandez, of $309,300, to the amount that
Mr. Fernandez would otherwise earn if the Company achieved its “Goal” annual operating target for 2011. This amount is included in Mr. Fernandez’ “Cash Bonus” amount for 2011 contained in the “Summary
Compensation Table” on page 19 of this Proxy Statement.
Executive Compensation Program Decisions for 2012
At its meeting held on February 17, 2012, the Compensation Committee reviewed and approved base salaries and cash and equity
incentive plan targets for the Company’s named executive officers, as well as for the Company’s other senior leaders. The Committee specifically approved a program for its named executive officers that would pay annual cash and equity
bonuses related to 2012 performance subject to the achievement of pro-forma earnings per share and pro-forma EBITDA targets reflected in a Board approved annual operating plan consistent with prior years. However, as discussed above, the program for
the Company CEO and COO for
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2012 includes a performance based stock option grant with vesting based on pro-forma earnings per share growth of 50% and pro-forma EBITDA growth of 50%, based on fiscal 2011 results. This new
program feature is described in more detail below.
Since 2005 the compensation programs for our CEO and COO have included
based salary and incentive compensation consisting of cash incentive awards and equity incentive grants in the form of restricted stock units. Cash and equity bonus opportunities were based on annual pro-forma earnings per share performance targets
characterized as “Goal” or “Superior”. When evaluating the Company’s executive compensation programs for 2012, the Compensation Committee carefully considered the report delivered by its compensation consultant John Bloedorn
in 2011. That report noted that many of the companies in the peer group used by Mr. Bloedorn included both a restricted stock and stock option component for their executive officers. The Compensation Committee concluded that the benefits of
including a stock option grant with vesting tied to the achievement of certain growth targets will be twofold. First, the use of pro-forma EBITDA and pro-forma earnings per share growth targets will further enhance the Company’s CEO and
COO’s focus on sustained increases in the Company’s profitability. Second, if the price of the Company’s common stock does not increase after the grant date, the stock options will have no value, further aligning the Company’s
CEO and COO interests with the interests of its shareholders. As such, for 2012 and continuing through 2015, the Company’s CEO and COO have agreed to forgo one half of each of their restricted stock bonus opportunity measured at
“Goal” in exchange for a single option grant issued to each individual which will not vest unless and until the financial targets described below are achieved. The number of options being granted was calculated by taking the Company
CEO’s and COO’s existing equity bonus opportunity at “Goal” multiplied by four (which reflects the fact that this replaces one half of the restricted stock unit opportunity over a four year period), dividing that number by the
fair market value of the Company’s common stock on the grant date then multiplying this number by three to reflect a restricted stock to option multiple consistent with the performance targets set, the volatility or the Company’s stock and
with a previous exchange of stock options for RSU’s used by the Company. This resulted in stock option grants to our CEO and COO of 1,912,500 and 1,004,063, respectively. The exercise price of these options is $4.00, which reflects the price of
the stock at the date of grant.
Fifty percent (50%) of these stock option grants vest in full upon the achievement of a
pro-forma earnings per share growth target. Fifty percent (50%) of the grant vests in full upon the achievement of a pro-forma EBITDA growth target. These targets cannot be reset during the performance period. The vesting associated with each
target is mutually exclusive. One target may be achieved without the other being achieved. If neither target is achieved by February 17, 2018, the stock option grants are forfeited in their entirety. In the event of a change of control, death,
disability or termination of the grantee without cause the grant(s) will vest on a prorated basis based on the achievement against both targets.
Also, in recognition of his efforts in connection with the modified Dutch auction and the closing of the Company’s $50 million credit facility, 100,000 stock options were issued to Mr. Ramirez.
The terms and conditions of this grant are identical to those option grants made to Messrs. Fernandez and Dungan described above.
For purposes of the Institutional Shareholder Services “Burn Rate” calculation, the Company believes that the shares represented by this grant will not be considered “issued” unless
and until the performance targets are achieved. As such, these grants are not expected to affect the Company’s Burn Rate for 2012.
As noted above, for 2012 through 2015, the equity performance bonus components of the programs for the Company’s CEO and COO will include only one half of their historical restricted stock bonus
opportunity components.
The Compensation Committee also concluded that, consistent with the option grants made to Messrs.
Fernandez and Dungan described in detail above, the inclusion of the pro-forma EBITDA measurement component in the Goal and Superior targets on which cash bonuses and the remaining equity bonus opportunity are based was appropriate in order to
insure that a substantial portion of the performance criteria for these option
17
awards did not benefit from the potential accretion which may result from the modified Dutch auction initiated by the Company on February 22, 2012. As such, for 2012 one half of the Goal
opportunity for our named executive officers will be based on pro-forma earnings per share and one half will be based on a pro-forma EBITDA target. The Superior target will be based solely on the achievement of an enhanced pro-forma EBITDA target in
addition to the pro-forma EPS target included in the Goal target.
Timing of Equity Incentive Plan Awards and Discretionary Equity Awards
The Company does not have a program, plan or practice to time equity awards, including option grants, to its named
executive officers or directors in coordination with the release of material non-public information. The Company consistently presents to its Compensation Committee for approval all year-end cash and equity bonus awards based on the previous
year’s results at the first Compensation Committee meeting of the year. However, the timing of this approval could be changed due to extraordinary circumstances.
Chief Executive Officer Compensation
Mr. Fernandez is in his
fifteenth year as Chairman of the Board and CEO, titles he has held since he founded the Company. Mr. Fernandez’s 2011 base salary was $750,000, and his base salary will remain unchanged for 2012. For information about
Mr. Fernandez’s 2011 compensation, see “Executive Compensation Program Decisions for 2011” on page 16 and the “Summary Compensation Table” on page 19.
Tax and Accounting Considerations and Compensation Deductibility Policy
The Company has generally structured its performance-based compensation, including grants of equity and annual bonuses, to named executive
officers who may be subject to Section 162(m) in a manner that satisfies those requirements. Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for any fiscal year for compensation over
$1 million paid to the Company’s CEO and three other most highly compensated executive officers other than the CFO. However, Section 162(m) exempts qualifying performance-based compensation from the deduction limit if specified
requirements are met. The Compensation Committee designed the performance-based cash and equity awards for its CEO and COO to qualify for the “performance-based compensation” exception to Section 162(m) for 2011. To be qualified,
performance-based compensation must meet various requirements, including shareholder approval. The Compensation Committee believes that tax deductibility is an important consideration in determining compensation for the Company’s named
executive officers, but it retains the flexibility to pay compensation to senior executives based on other considerations.
Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations
issued there-under, no assurance can be given that compensation intended by the Company to satisfy the requirements for deductibility under Section 162(m) does in fact do so.
While the accounting treatment for different equity vehicles does not materially impact the Compensation Committee’s decision
regarding the issuance of stock options versus restricted stock units, the Compensation Committee does recognize that the granting of stock options, in most instances, will result in a higher and more volatile expense item on the Company’s
profit and loss statement than would exist if restricted stock units are issued instead.
Compensation Recovery
Under the Sarbanes-Oxley Act, in the event of misconduct that results in a financial restatement that would have reduced a previously paid
incentive amount, we can recoup those improper payments from our CEO and CFO. In addition, we intend to implement a claw-back policy in accordance with the requirements of the Dodd-Frank Act and the related regulations when those regulations are
issued pursuant to that Act.
18
SUMMARY COMPENSATION TABLE
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Cash
Bonus
($)(1)
|
|
|
Equity
(Restricted
Stock)
Incentive
Compensation
Awards
($)(2)
|
|
|
Stock
Option
Awards
($)
|
|
|
All
Other
Compensation
($)(4)
|
|
|
Total
($)
|
|
|
Ted A. Fernandez
(Chairman, Chief
Executive Officer)
|
|
|
2011
|
|
|
|
750,000
|
|
|
|
1,059,300
|
|
|
|
1,275,000
|
|
|
|
—
|
|
|
|
3,265
|
|
|
|
3,087,565
|
|
|
|
|
2010
|
|
|
|
750,000
|
|
|
|
2,091,625
|
|
|
|
1,440,000
|
|
|
|
—
|
|
|
|
2,813
|
|
|
|
4,284,438
|
|
|
|
|
2009
|
|
|
|
750,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,393
|
|
|
|
752,393
|
|
|
|
|
|
|
|
|
|
|
|
David N. Dungan
(Vice Chairman, Chief
Operating Officer)
|
|
|
2011
|
|
|
|
525,000
|
|
|
|
420,000
|
|
|
|
669,375
|
|
|
|
—
|
|
|
|
2,714
|
|
|
|
1,617,089
|
|
|
|
|
2010
|
|
|
|
525,000
|
|
|
|
1,157,390
|
|
|
|
1,080,767
|
|
|
|
—
|
|
|
|
2,374
|
|
|
|
2,765,531
|
|
|
|
|
2009
|
|
|
|
525,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,073
|
|
|
|
527,073
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Ramirez
(Executive Vice President,
Finance and Chief Financial Officer)
|
|
|
2011
|
|
|
|
300,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
3,234
|
|
|
|
603,234
|
|
|
|
|
2010
|
|
|
|
300,000
|
|
|
|
247,950
|
|
|
|
247,950
|
|
|
|
—
|
|
|
|
2,750
|
|
|
|
798,650
|
|
|
|
|
2009
|
|
|
|
275,000
|
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
11,256
|
(3)
|
|
|
406,256
|
|
|
(1)
|
See “Compensation Discussion and Analysis” on page 12 of this Proxy Statement for a discussion of how the cash (non-equity) incentive amounts are
determined. Also see the “Plan-Based Awards” table below for additional detail on cash and equity incentive compensation earned based on fiscal 2011 performance.
|
|
(2)
|
Amounts shown in this column are based on the aggregate grant date fair value computed in accordance FASB ASC Topic 718 for grants of restricted stock units and
performance-based restricted stock units to the named executive officers in the applicable fiscal year.
|
|
(3)
|
Includes $9,222 which represents the payout of vacation time earned during 2009 that Mr. Ramirez could not utilize due to work commitments.
|
|
(4)
|
Each of our named executive officers participates in the Company’s group life, health, dental, vision and disability, flexible spending accounts and prescription
drug benefits that are available to all of the Company’s employees in North America and do not discriminate in scope, terms or operation in favor of the Company’s named executive officers. These amounts represent the amount that the
Company contributes to the cost of these coverages.
|
PLAN-BASED AWARDS
FOR FISCAL YEAR 2011
The following table sets forth information on the equity grant awards issued to the named executive officers under the Company’s executive compensation plan for fiscal 2011. The table also includes
performance-based cash awards issued to the named executive officers for fiscal 2011 under the Company’s executive compensation plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Cash
(Non-Equity)
Incentive
Compensation
Awards
($)
|
|
|
Equity (Restricted
Stock Unit)
Incentive
Compensation (#)
|
|
|
Grant Date
Fair Value of
Stock Awards
($)
|
|
|
Ted A. Fernandez
|
|
|
February 17, 2012
|
|
|
|
1,059,300
|
|
|
|
326,923
|
|
|
|
1,275,000
|
|
|
David N. Dungan
|
|
|
February 17, 2012
|
|
|
|
420,000
|
|
|
|
171,635
|
|
|
|
669,375
|
|
|
Robert A. Ramirez
|
|
|
February 17, 2012
|
|
|
|
150,000
|
|
|
|
38,462
|
|
|
|
150,000
|
|
|
(1)
|
See “Compensation Discussion and Analysis” on page 12 of this Proxy Statement for a discussion of the performance criteria and how awards are determined.
One third of each equity grant vests annually beginning with the first anniversary of the grant date.
|
19
Equity Compensation Plan Information
The Company maintains The Hackett Group, Inc. 1998 Stock Option and Incentive Plan and The Hackett Group, Inc. Employee Stock Purchase
Plan.
The table below sets forth the following information as of December 30, 2011 for (i) all compensation plans
previously approved by the Company’s shareholders and (ii) all compensation plans not previously approved by the Company’s shareholders:
|
|
•
|
|
The number of securities to be issued upon the exercise of outstanding options, warrants, rights and restrict stock units and the vesting of unvested
restricted stock units;
|
|
|
•
|
|
The weighted-average exercise price of such outstanding options, warrants and rights; and
|
|
|
•
|
|
The number of securities remaining available for future issuance under the plans, other than securities to be issued upon the exercise of such
outstanding options, warrants and rights and the vesting of restricted stock units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities
to be
Issued Upon
Exercise of Outstanding
Options and Unvested
Restricted Stock Units,
Warrants and Rights
(#)
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options
and
Unvested
Restricted
Stock Units,
Warrants and Rights
($)
|
|
|
Number of Securities
Remaining Available for
Future Issuance
Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column 1)
(#)
|
|
|
Restricted stock units issued under equity compensation plans approved by shareholders(1)
|
|
|
2,970,830
|
|
|
|
—
|
|
|
|
3,148,377
|
(2)
|
|
Stock options issued under equity compensation plans approved by shareholders(1)
|
|
|
867,375
|
|
|
|
5.53
|
|
|
|
3,323,243
|
|
|
Equity compensation plans not approved by shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,838,205
|
(4)
|
|
|
|
|
|
|
6,471,620
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The equity compensation plans approved by the Company’s shareholders are the Company’s 1998 Stock Option and Incentive Plan (the “Plan”) and the
Company’s Employee Stock Purchase Plan. The Plan authorizes the issuance of compensation equity awards in the form of restricted stock units and stock options. Since fiscal year 2005, the Company’s primary equity compensation plan
component has been restricted stock units. As such, the Company believes it is important to highlight in this table statistical information related to the restricted stock units issued, outstanding and unvested and available for issuance under the
Plan.
|
|
(2)
|
As of the Record Date, the number of shares available for issuances pursuant to awards of restricted stock or restricted stock units was 1,842,772.
|
|
(3)
|
This amount does not include 471,068 shares available for issuance under the Company’s Employee Stock Purchase Plan.
|
|
(4)
|
As of the Record Date, the number of issued and unvested restricted stock units was 3,114,286 and the number of outstanding stock options, both vested and unvested was
3,867,438. These stock options had an average weighted exercise price of $4.33 and an average remaining term of 5.09 years.
|
20
Historical Share Grant and Delivery/Vesting Table
The table below is provided to highlight the timing of both the issuance and delivery of performance-based and non-performance-based
restricted stock and restricted stock units. Generally, all restricted stock and restricted stock units issued to the Company’s employees have time-vesting requirements. Performance-based issuances are granted upon the achievement of annual
performance targets and delivered after the satisfaction of additional time-vesting requirements. The Company believes this additional disclosure is important to evaluate the dilutive impact of its equity compensation programs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Granted (#)
|
|
|
Shares Delivered/Vested (#)
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
Restricted stock issued for acquisitions(1)
|
|
|
940,787
|
|
|
|
73,750
|
|
|
|
—
|
|
|
|
80,927
|
|
|
|
127,579
|
|
|
|
208,417
|
|
|
Performance based restricted stock units(2)
|
|
|
934,391
|
|
|
|
452,633
|
|
|
|
1,593,442
|
|
|
|
385,417
|
|
|
|
647,776
|
|
|
|
741,420
|
|
|
Non performance related restricted stock units(3)
|
|
|
559,636
|
|
|
|
380,763
|
|
|
|
302,780
|
|
|
|
416,749
|
|
|
|
258,698
|
|
|
|
255,585
|
|
|
Stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,434,814
|
|
|
|
907,146
|
|
|
|
1,896,222
|
|
|
|
883,093
|
|
|
|
1,034,053
|
|
|
|
1,205,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average weighted shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,240,460
|
|
|
|
40,348,749
|
|
|
|
39,895,422
|
|
|
(1)
|
Common stock subject to vesting requirements
|
|
(2)
|
Units subject to achievement of performance and delivery subject to vesting requirements
|
|
(3)
|
Units subject to vesting requirements
|
The Company believes that its issuances are within the allowable three year average burn rate level provided by Institutional Shareholder Services for companies in its industry. This is inclusive of the
940,787 restricted shares issued for acquisitions during the period covered by the table.
Narrative Disclosure to Summary Compensation
Table and Plan-Based Awards Table
Mr. Fernandez
Mr. Fernandez entered into an employment agreement with the Company effective as of June 2, 1998, as amended on November 10, 2004 and as further amended on June 10, 2005. It was
further amended as of December 30, 2008 to comply with Section 409A of the Internal Revenue Code. The agreement is for a three-year term (with an automatic renewal for one additional year on the first and each subsequent anniversary
thereafter unless either party gives contrary notice) and currently provides for an annual salary of $750,000 plus a bonus to be determined and paid pursuant to a bonus plan to be adopted by the Board for each fiscal year. The agreement also
contains certain confidentiality, non-competition and non-solicitation provisions. Mr. Fernandez’s employment agreement also includes the following provisions: (i) upon a change of control, regardless of termination,
Mr. Fernandez will receive two hundred percent of his annual salary paid in lump sum and full vesting of all issued and outstanding equity grants, including restricted stock units and stock options and no further payments would be due upon
termination; (ii) upon termination by the Company without cause, or upon termination by Mr. Fernandez for “good reason,” Mr. Fernandez will receive one year’s annual salary paid in lump sum and full vesting of all
issued and outstanding equity grants, including restricted stock units and stock options; (iii) upon termination for disability, Mr. Fernandez will receive one year’s annual salary paid in lump sum and full vesting of all issued and
outstanding equity grants, including restricted stock units and stock options; and (iv) upon termination due to death, Mr. Fernandez will receive full vesting of all issued and outstanding equity grants, including restricted stock units
and stock options. Pursuant to the amended agreement, the term “annual salary,” for all purposes, is defined as Mr. Fernandez’s salary plus bonus for the most recent twelve months.
21
Mr. Dungan
Mr. Dungan entered into an employment agreement with the Company effective as of December 26, 2001, as amended on November 10, 2004 and on March 24, 2006. It was further amended as of
December 30, 2008 to comply with Section 409A of the Internal Revenue Code. Mr. Dungan’s agreement is for a three-year term (with an automatic renewal for one additional year on the first and each subsequent anniversary
thereafter unless either party gives contrary notice) and currently provides for an annual salary of $525,000, plus a bonus to be determined and paid pursuant to a bonus plan to be adopted by the Board for each fiscal year. The agreement contains
certain confidentiality, non-competition and non-solicitation provisions. The agreement also includes the following provisions: (i) upon a change of control, regardless of termination, Mr. Dungan will receive two hundred percent of his
annual salary paid in lump sum and full vesting of all issued and outstanding equity grants, including restricted stock units and stock options and no further payments would be due upon termination; (ii) upon termination by the Company without
cause, or upon termination by Mr. Dungan for “good reason,” Mr. Dungan will receive one year’s annual salary paid in lump sum and full vesting of all issued and outstanding equity grants, including restricted stock units and
stock options; (iii) upon termination for disability, Mr. Dungan will receive one year’s annual salary paid in lump sum and full vesting of any issued and outstanding equity grants, including restricted stock units and stock options;
and (iv) upon termination due to death, Mr. Dungan will receive full vesting of all issued and outstanding equity grants, including restricted stock units and stock options. Pursuant to the amended agreement, the term “annual
salary,” for all purposes, is defined as Mr. Dungan’s salary plus bonus for the most recent twelve months.
Mr. Ramirez
Mr. Ramirez entered into an employment agreement with the Company effective as of August 1, 2007.
Mr. Ramirez’s employment agreement has a three-year term (with an automatic renewal for one additional year thereafter on each subsequent anniversary unless either party gives contrary notice) and provides for a current annual salary of
$300,000, plus a bonus pursuant to a bonus plan to be adopted by the Board for each fiscal year. In the event Mr. Ramirez is terminated by the Company without cause, or Mr. Ramirez terminates his employment with “good reason,”
Mr. Ramirez will be entitled to a severance payment at the rate of his annual salary and benefits for a six-month period from the date of termination. In the event Mr. Ramirez finds new employment after termination, the Company may
eliminate or reduce such severance payments and benefits. In addition, the Company’s employment agreement with Mr. Ramirez contains provisions regarding confidentiality, proprietary information and work product, non-competition and
non-solicitation. If Mr. Ramirez’s employment is terminated by the Company without cause or by Mr. Ramirez with “good reason,” in either case in anticipation of, in connection with or within one year after a “change of
control” (as defined), his salary will be continued for one year, his benefits will be continued for one year (subject to cessation if Mr. Ramirez is entitled to similar benefits from a new employer) and restricted stock, restricted stock
units and stock options then held by him will become fully vested.
22
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
(Does not include equity awards granted after fiscal year-end. See the “Plan-Based Awards” table on page 19 of this
Proxy Statement for information on post-year-end 2011 payments and grants and “Executive Compensation Decisions for 2012” on page 16 of this Proxy Statement.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Option Awards
|
|
|
Outstanding Restricted
Stock
Awards
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration Date
|
|
|
Number of
Shares or
Units of Stock
That Have
Not Vested
(#)
|
|
|
Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)
|
|
|
Ted A. Fernandez(1)
|
|
|
300,000
|
|
|
|
—
|
|
|
|
6.25
|
|
|
|
February 4, 2014
|
|
|
|
533,333
|
|
|
|
1,994,665
|
|
|
David N. Dungan(2)
|
|
|
150,000
|
|
|
|
—
|
|
|
|
6.25
|
|
|
|
February 4, 2014
|
|
|
|
377,997
|
|
|
|
1,413,709
|
|
|
Robert A. Ramirez(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
99,971
|
|
|
|
373,892
|
|
|
(1)
|
Represents 533,333 performance-based restricted stock units granted in 2009 and 2011 for 2008 and 2010 fiscal year performance. Excludes 326,923 restricted stock units
granted on February 17, 2012 for 2011 fiscal year performance, one third of which vest annually on the anniversary of the date of grant. 266,667 of these stock units will vest in 2012. Does not include 1,912,500 unvested performance-based stock
options granted on February 8, 2012. See “Executive Compensation Decisions for 2012” on page 16 of this Proxy Statement.
|
|
(2)
|
Represents 377,997 performance-based restricted stock units granted in 2009 and 2011 for 2008 and 2010 fiscal year performance. Excludes 171,635 restricted stock units
granted on February 17, 2012 for 2011 fiscal year performance, one third of which vest annually on the anniversary of the date of grant. 177,855 of these stock units will vest in 2012. Does not include 1,004,063 unvested performance-based stock
options granted on February 8, 2012. See “Executive Compensation Decisions for 2012” on page 16 of this Proxy Statement.
|
|
(3)
|
Represents 85,319 performance-based restricted stock units granted in 2009 and 2011 for 2008 and 2010 fiscal year performance. Also includes 14,652 restricted stock
units granted in 2010 at the discretion of the Compensation Committee. Excludes 38,462 restricted stock units granted on February 17, 2012 for 2011 fiscal year performance, one third of which vest annually on the anniversary of the date of
grant. 39,403 of these stock units will vest in 2012. Does not include 100,000 unvested performance-based stock options on granted February 17, 2012. See “Executive Compensation Decisions for 2012” on page 16 of this Proxy Statement.
|
OPTION EXERCISES AND STOCK VESTED
(During fiscal year-ended December 30, 2011)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Outstanding Restricted Stock Awards
|
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on
Exercise
($)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized
on
Vesting
($)
|
|
|
Ted A. Fernandez
|
|
|
—
|
|
|
|
—
|
|
|
|
249,771
|
|
|
|
894,349
|
|
|
David N. Dungan
|
|
|
—
|
|
|
|
—
|
|
|
|
138,913
|
|
|
|
497,475
|
|
|
Robert A. Ramirez
|
|
|
—
|
|
|
|
—
|
|
|
|
38,799
|
|
|
|
138,220
|
|
23
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The tables below quantify (in U.S. Dollars) the potential payments upon termination or a change in control of the Company for each of the
named executive officers actively employed by the Company at the end of fiscal 2011. All amounts are calculated assuming a fiscal year-end 2011 termination date of December 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Fernandez’s Benefits and Payments
Upon Termination
|
|
Death
($)
|
|
|
Disability
($)
|
|
|
By
the
Company for
Cause
($)
|
|
|
By the
Executive for
Good Reason
($)
|
|
|
Change in
Control
($)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
750,000
|
|
|
|
—
|
|
|
|
750,000
|
|
|
|
1,500,000
|
|
|
Annual Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,059,300
|
|
|
|
2,118,600
|
|
|
Stock Options and Restricted Stock Units (unvested and accelerated)
|
|
|
3,217,357
|
(1)
|
|
|
3,217,357
|
(1)
|
|
|
—
|
(1)
|
|
|
3,217,357
|
(1)
|
|
|
3,217,357
|
(1)
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Insurance Premiums
|
|
|
15,773
|
|
|
|
15,773
|
|
|
|
—
|
|
|
|
15,773
|
|
|
|
15,773
|
|
|
Life, Accidental Death and Disability Premiums
|
|
|
1,118
|
|
|
|
1,118
|
|
|
|
—
|
|
|
|
1,118
|
|
|
|
1,118
|
|
|
Life Insurance Premium
|
|
|
10,600
|
|
|
|
10,600
|
|
|
|
—
|
|
|
|
10,600
|
|
|
|
10,600
|
|
|
Gross-up Payment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,244,848
|
|
|
|
3,994,848
|
|
|
|
—
|
|
|
|
5,054,148
|
|
|
|
6,863,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Dungan’s Benefits and Payments
Upon Termination
|
|
Death
($)
|
|
|
Disability
($)
|
|
|
By the
Company
for
Cause
($)
|
|
|
By the
Executive for
Good Reason
($)
|
|
|
Change in
Control
($)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
525,000
|
|
|
|
—
|
|
|
|
525,000
|
|
|
|
1,050,000
|
|
|
Annual Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
420,000
|
|
|
|
840,000
|
|
|
Stock Options and Restricted Stock Units (unvested and accelerated)
|
|
|
2,055,624
|
(1)
|
|
|
2,055,624
|
(1)
|
|
|
—
|
(1)
|
|
|
2,055,624
|
(1)
|
|
|
2,055,624
|
(1)
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Insurance Premiums
|
|
|
10,957
|
|
|
|
10,957
|
|
|
|
—
|
|
|
|
10,957
|
|
|
|
10,957
|
|
|
Life, Accidental Death and Disability Premiums
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Life Insurance Premium
|
|
|
5,606
|
|
|
|
5,606
|
|
|
|
—
|
|
|
|
5,606
|
|
|
|
5,606
|
|
|
Gross-up Payment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,072,187
|
|
|
|
2,597,187
|
|
|
|
—
|
|
|
|
3,017,187
|
|
|
|
3,962,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Ramirez’s Benefits and Payments
Upon Termination
|
|
Death
($)
|
|
|
Disability
($)
|
|
|
By the
Company
for
Cause
($)
|
|
|
By the
Executive for
Good Reason
($)
|
|
|
Change in
Control
($)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
|
|
300,000
|
|
|
Annual Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stock Options and Restricted Stock Units (unvested and accelerated)
|
|
|
517,740
|
(1)
|
|
|
517,740
|
(1)
|
|
|
—
|
|
|
|
517,740
|
(1)
|
|
|
517,740
|
(1)
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Insurance Premiums
|
|
|
15,773
|
|
|
|
15,773
|
|
|
|
—
|
|
|
|
15,773
|
|
|
|
15,773
|
|
|
Life, Accidental Death and Disability Premiums
|
|
|
690
|
|
|
|
690
|
|
|
|
—
|
|
|
|
690
|
|
|
|
690
|
|
|
Life Insurance Premium
|
|
|
4,271
|
|
|
|
4,271
|
|
|
|
—
|
|
|
|
4,271
|
|
|
|
4,271
|
|
|
Gross-up Payment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
538,474
|
|
|
|
538,474
|
|
|
|
—
|
|
|
|
688,474
|
|
|
|
838,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
(1)
|
Does not include any value ascribed to issued but unearned and unvested performance stock option grants that would vest on a pro-rata basis based on achievements
against pro-forma earnings per share and pro-forma EBITDA targets upon death, disability, termination without cause or for good reason or upon a change of control. (See “Executive Compensation Program Decisions” for 2012 on page 16.)
|
In certain cases the tax laws deny an income tax deduction to a company for payments that are contingent upon a
change in control. Benefits under the contracts will be delayed or modified if such delays or modifications are necessary to comply with the rules governing deferred compensation plans under Section 409A of the Internal Revenue Code.
DIRECTOR COMPENSATION
(For the fiscal year ended December 30, 2011)
Director Compensation for
2011.
Directors who are officers or employees of the Company or any subsidiary of the Company receive no additional compensation for serving on the Board or any of its committees. For 2011, each outside director received an annual $15,000 cash
retainer. Outside directors also received a cash fee of $4,000 for each regularly scheduled Board meeting attended in person and a cash fee of $1,500 for each regularly scheduled Board meeting attended by telephone. Committee members also received a
cash fee of $1,000 for each regularly scheduled committee meeting attended. Both Board and committee members also received a cash fee of $750 for each special meeting attended. All directors are reimbursed for travel expenses incurred in connection
with attending Board and committee meetings.
For 2011, the Company’s outside directors also received an annual
restricted stock unit grant equal in value to $60,000 on the date of grant. All restricted stock units granted under this program vest in three equal annual installments beginning on the first anniversary of the grant and will also vest upon
termination of service. The Board reserves the right to make additional stock option or restricted stock unit grants to directors who are not officers of the Company on a discretionary basis during any fiscal year. Upon reaching ten years of service
on the Board, a member receives a restricted stock unit grant equal in number of units to his or her annual service grant for that year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees
Earned or
Paid
in
Cash
($)
|
|
|
Restricted
Stock
Awards
(1)($)
|
|
|
Stock
Option
Awards
(1)($)
|
|
|
Total
($)
|
|
|
Terence M. Graunke
|
|
|
32,500
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
92,500
|
|
|
Richard N. Hamlin
|
|
|
40,000
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
John R. Harris
|
|
|
40,000
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
Edwin A. Huston
|
|
|
40,000
|
|
|
|
120,000
|
(2)
|
|
|
—
|
|
|
|
160,000
|
|
|
Alan T.G. Wix
|
|
|
40,000
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
(1)
|
Amounts shown in these columns are based on the aggregate grant date fair value as computed in accordance with FASB ASC Topic 718 for restricted stock unit and stock
option awards during fiscal 2011. The aggregate number of stock awards and the aggregate number of option awards outstanding at fiscal year-end appears in the following “Outstanding Director Equity Awards at 2011 Fiscal Year-End” table on
page 26.
|
|
(2)
|
Includes Mr. Huston’s ten year service grant issued in 2011.
|
Director Compensation for 2012.
For 2012, directors who are officers or employees of the Company or any subsidiary of the Company receive no additional compensation for serving on the Board or any
of its committees. The Company’s outside directors will receive an annual restricted stock unit grant equal in value to $60,000 on the date of grant. All restricted stock units granted under this program will continue to vest in three equal
annual installments beginning on the first anniversary of the grant and will also vest upon termination of service. The
25
Board reserves the right to make additional stock option or restricted stock unit grants to directors who are not officers of the Company on a discretionary basis during any fiscal year. Upon
reaching ten years of service on the Board, a member receives a restricted stock unit grant equal in number of units to his or her annual service grant for that year. Beginning with grants that occur in 2012, each of our outside directors will be
allowed to elect to defer the receipt of their shares upon vesting for three years, five years or until death, disability or termination of service on our Board.
Also for 2012, each outside director will continue to receive an annual $15,000 cash retainer. Outside directors also will receive a cash fee of $4,000 for each regularly scheduled Board meeting attended
in person and a cash fee of $1,500 for each regularly scheduled Board meeting attended by telephone. Committee members also will receive a cash fee of $1,000 for each regularly scheduled committee meeting attended, whether in person or otherwise.
Both Board and committee members will also receive a cash fee of $750 for each special meeting attended, whether in person or otherwise. For 2012, the cash component of our Outside Compensation Program will not exceed $40,000 per year. All directors
will continue to be reimbursed for travel expenses incurred in connection with attending Board and committee meetings.
OUTSTANDING DIRECTOR EQUITY AWARDS
AT 2011 FISCAL YEAR-END
|
|
|
|
|
|
|
Name
|
|
Restricted Stock
Awards
(vested/unvested)
(#)
|
|
Stock Option Awards
(exercisable/
unexercisable)
(#)
|
|
Terence M. Graunke
|
|
— /23,759(1)
|
|
— / —
|
|
Richard N. Hamlin
|
|
— /30,297(1)
|
|
35,000 /—
|
|
John R. Harris
|
|
— /28,025(1)
|
|
— / —
|
|
Edwin A. Huston
|
|
— /45,828(1)
|
|
38,750 /—
|
|
Alan T.G. Wix
|
|
— /29,161(1)
|
|
31,700 /—
|
|
(1)
|
Does not include 15,385 restricted stock units granted on February 17, 2012 in connection with the Company’s Outside Director Compensation Plan one third of
which vest annually on the anniversary of the date of grant.
|
Compensation Committee Interlocks
The Compensation Committee consists of Messrs. Huston (Chairman), Hamlin, Harris and Wix. No current or former member of the Compensation
Committee is, or has ever been, an officer or employee of the Company. None of the Company’s directors and none of their family members are employed as an executive of another company where any of the Company’s executives serve on the
compensation committee of which the director is an executive.
26
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are providing our shareholders
an opportunity to indicate whether they support our named executive officer compensation as described in this Proxy Statement. This advisory vote, commonly referred to as “Say on Pay,” is not intended to address any specific item of
compensation, but instead relates to the Compensation Discussion and Analysis, the tabular disclosures regarding named executive officer compensation, and the narrative disclosures accompanying the tabular presentation. These disclosures allow you
to view our executive compensation program and the application of our compensation philosophies for the years presented.
The
Company’s objectives relating to executive compensation are to attract and retain highly qualified executives at salaries that are competitive with companies of similar or greater size within its industry, and to align the financial interests
of those executives with those of its shareholders by linking a substantial portion of each executive’s compensation to the achievement of financial objectives for the Company as a whole. The Board and the Compensation Committee are
focused on operating performance, earnings growth and share price appreciation.
Our executive compensation programs reflect
the Company’s “pay for performance” approach to compensation. In the Board’s view, the growth of earnings per share is the most direct way to measure performance that should result in long-term share value appreciation. Another
key aspect of the executive compensation is that a meaningful part of total compensation is paid with performance based restricted stock that not only requires the achievement of performance targets and also has a three-year vesting period. The
vesting requirement of the equity portion of the compensation program (i) extends the value of current year compensation to a three-year period, (ii) creates a strong incentive for the executives to increase shareholder value, and
(iii) serves as a powerful executive retention. Lastly, the executive compensation program also considers that the Company provides no special retirement (pension or 401(k) match) benefits for senior executives.
The Company grew pro-forma earnings per share by 23% in 2011 which resulted in performance awards at “Goal”. These results were
on top of the 440% pro-forma earnings per share growth in 2010 which resulted in performance awards in excess of the “Superior” targets for the Company’s named executive officers. Our 2011 executive compensation was approximately 40%
lower than 2010 compensation.
The Company’s Compensation Committee has established challenging performance targets for
2012 given the volatile but gradually improving global market conditions. The Company’s pro-forma earnings per share and pro-forma EBITDA performance must improve at least 15% from 2011 actual results in order for our named executive officers
to earn their “Goal” cash and restricted stock unit performance incentive awards. Further, the Company’s pro-forma earnings per share and pro-forma EBITDA performance must improve at least 30% from 2011 actual results in order for the
Company’s named executive officers to earn their “Superior” cash and restricted stock unit performance incentive awards.
For 2012 and continuing through 2015, the Company’s CEO and COO have agreed to forgo one half of each of their restricted stock bonus opportunity measured at “Goal” in exchange for a
performance based stock option grant issued to each individual in 2012 which will not fully vest unless both pro-forma earnings per share and pro-forma EBITDA improve by 50% from 2011 levels as described above. (See “Compensation Decisions for
2012” on page 16 of this Proxy Statement.) Further, unless the price of the Company’s common stock achieves a certain level which represents significant appreciation over current levels, neither executive will receive the level of
compensation that they would have received if the Company had retained one hundred percent of their restricted stock unit bonus opportunity and the Company achieved “Goal” targets for each of 2012 through 2015.
27
For the reasons discussed above, the Board unanimously recommends that shareholders vote in
favor of the following resolution:
“Resolved, that the shareholders approve the compensation of the Company’s
named executive officers as disclosed in this Proxy Statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and the related footnotes and narrative disclosures.”
Although this vote is advisory and is not binding on the Company, the Compensation Committee will take into account the outcome of the
vote when considering future executive compensation decisions. The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote is required to approve the Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” PROPOSAL 2:
THE APPROVAL OF THE RESOLUTION APPROVING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
28
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board currently consists of Messrs. Hamlin (Chairman), Harris, Huston and Wix. The Audit Committee is composed
of “independent” directors as defined in standards promulgated by the SEC and NASDAQ. The Board determined that Messrs. Hamlin and Huston are audit committee financial experts under the SEC rules. The Company’s Audit Committee is
governed by a written charter approved by the Board. A copy of the Audit Committee’s updated charter, which was adopted and became effective on February 27, 2009, can be found on the Company’s website at
http://www.thehackettgroup.com/about/ir_governance.jsp
. All members of the Audit Committee share equally the responsibility for the performance of the functions set forth below.
The Audit Committee reviewed with BDO USA, LLP (“BDO”) all matters required to be discussed by Statement of Auditing Standards
No. 61 “Communications with Audit Committees,” as amended. In addition, the Audit Committee has discussed with BDO its independence from management and the Company, and it received the written disclosures and letter delivered to the
Audit Committee by BDO as required by applicable requirements of the Public Company Accounting Oversight Board regarding BDO’s communications with the Audit Committee concerning independence, and considered the compatibility of non-audit
services with BDO’s independence.
The Audit Committee discussed with BDO the overall scope and plans for the
Company’s audit. The Audit Committee meets with BDO, without management present when appropriate, to discuss the results of their quarterly reviews and annual examination, their evaluations of the Company’s internal controls, and the
overall quality of the Company’s financial reporting. The Audit Committee held 6 meetings during fiscal year 2011.
The
Audit Committee has approved all audit and non-audit services provided by BDO in 2011. See “Pre-approval of Non-Audit Services” below.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process,
including the systems of internal controls. In performing its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements of the Company for the fiscal year ended December 30, 2011 with management and
with representatives of BDO. The Audit Committee also reviewed, and discussed with management and representatives of BDO, management’s assessment and report and BDO’s assessment and report and attestation on the effectiveness of internal
control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board has approved) that the
audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 30, 2011, for filing with the SEC.
Pre-approval of Non-Audit Services
All audit-related services, tax
services and other services were pre-approved by the Audit Committee, which concluded that the provision of such services by BDO was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit
Committee’s Policy for Pre-Approval of Non-Audit Services provides for pre-approval of audit-related, tax and other services specifically described by the Audit Committee on an annual basis. In addition, individual engagements anticipated to
exceed pre-established thresholds must be separately approved. If the entire Audit Committee is not able to convene so that permitted non-audit services desired to be performed by the Company’s independent auditors can be reviewed and approved
on a timely basis, the Audit Committee Chairman is authorized to approve such services and make a verbal report to the full Audit Committee as to the nature and cost of such services at the next Audit Committee meeting following such approval.
Respectfully submitted,
Audit
Committee
Richard N. Hamlin, Chairman
John R. Harris
Edwin A. Huston
Alan T.G. Wix
29
PROPOSAL 3
TO RATIFY THE APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 28, 2012
The Audit
Committee of the Board has appointed BDO USA, LLP (“BDO”) as the independent registered certified public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 28, 2012 and
will review the appointment at its August 2012 meeting. During fiscal year 2011, BDO served as the Company’s independent registered certified public accounting firm and also provided other audit-related services. See “Fees Paid to
Independent Accountants” below.
The appointment of BDO is being presented to the shareholders for ratification. If the
appointment is not ratified, the Audit Committee of the Board will consider whether it should select a different independent registered certified public accounting firm when it convenes its August 2012 meeting.
The Company’s Bylaws do not require that the shareholders ratify the appointment of BDO as its independent auditors. This proposal
is being submitted to the shareholders because the Company believes it is a matter of good corporate practice.
The Company
expects that representatives of BDO will be present at the annual meeting. They will be given an opportunity to make a statement if they desire to do so, and it is expected that they will be available to respond to appropriate questions.
Fees Paid To Independent Accountants
The following table sets forth fees for professional services provided by BDO for the audit of the Company’s consolidated financial statements for fiscal years 2011 and 2010, and fees billed for
audit-related services, tax services, and all other services rendered by BDO during fiscal years 2011 and 2010:
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2011
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2010
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Audit Fees (1)
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$
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543,800
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$
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537,800
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Audit-Related Fees (2)
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$
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18,000
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$
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18,000
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Tax Fees (3)
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$
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—
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$
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—
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All Other Fees (4)
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$
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—
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$
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—
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(1)
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Represents aggregate fees for professional services provided in connection with the audit of the Company’s annual consolidated financial statements, reviews of its
quarterly consolidated financial statements and audit services provided in connection with other statutory or regulatory filings. Fees also include the report and attestation on the effectiveness of internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of 2002.
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(2)
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Represents fees for services in connection with audits of the Company’s benefit plans, mergers and acquisitions and recently issued accounting pronouncements.
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(3)
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Represents fees for services provided in connection with the Company’s tax compliance.
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(4)
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Represents fees for services provided to the Company not otherwise included in the categories seen above.
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The accompanying proxy will be voted in favor of the proposal unless the shareholder indicates to the contrary on the proxy. The Proposal
will be approved by the vote of a majority of the shares present in person or by proxy and entitled to vote on the Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3:
TO RATIFY THE APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 28, 2012
30
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review, Approval or Ratification of Related Person Transactions
In accordance with the charter for the Audit Committee of the Board, the members of the Audit Committee, all of whom are independent directors, review and approve in advance any transaction which involves
“related persons”, that is, parties whose relationship with the Company may enable them to negotiate terms more favorable than those available to other, more independent parties and all other transactions to the extent required by NASDAQ
or applicable law to be approved by an audit committee or comparable body. For purposes of these procedures, the individuals and entities that are considered “related persons” include:
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•
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Any of our directors, nominees for director and executive officers;
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•
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Any person known to be the beneficial owner of five percent or more of our common stock (a “5% Stockholder”); and
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•
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Any immediate family member, as defined in Item 404(a) of Regulation S-K, of a director, nominee for director, executive officer and 5%
Stockholder. We will report all such material related person transactions under applicable accounting rules, federal securities laws and SEC rules and regulations.
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31
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial ownership of common stock as of March 15, 2012:
(i) by each person (or group of affiliated persons) known by the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) by each of the named executive officers; (iii) by each director and nominee of
the Company; and (iv) by all of the Company’s directors and executive officers as a group.
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Name of Beneficial Owner
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Amount and
Nature of
Beneficial
Ownership
(#)(1)
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Percent of
Class
(%)(1)
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Ted A. Fernandez(2)(4)
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3,293,752
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8.0
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David N. Dungan(2)(5)
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1,942,419
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4.7
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Robert A. Ramirez(2)(6)
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184,053
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—
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Terence M. Graunke(3)(7)
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4,979,690
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12.1
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Richard N. Hamlin(2)(8)
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142,921
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—
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John R. Harris(2)(9)
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66,193
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—
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Edwin A. Huston(2)(10)
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129,807
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—
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Alan T.G. Wix(2)(11)
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81,596
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—
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Columbia Wanger Asset Management, L.P.(12)
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6,579,500
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15.9
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FMR, LLC(13)
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2,245,613
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5.4
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All current directors and current named executive officers as a group (8 persons)
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10,820,431
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26.2
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*
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Represents less than 1%.
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(1)
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The persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable, and except as indicated in the other footnotes to this table. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to restricted stock units, options or warrants held by that person that are currently vested or exercisable, or that will vest or become exercisable within 60 days after
March 15, 2012 (or upon the occurrence of an event, such as change of control, resignation for good reason or involuntary termination without cause) are deemed outstanding. The Company also includes in these amounts all unvested but earned
performance restricted stock units held by our named executive officers and members of our Board as it believes this results in a more accurate representation of overall share ownership. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
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(2)
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The address for each of Messrs. Dungan, Fernandez, Hamlin, Harris, Huston, Ramirez and Wix is 1001 Brickell Bay Drive, Suite 3000, Miami, Florida 33131.
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(3)
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The address for Mr. Graunke is in care of Lake Capital Management LLC, 676 North Michigan Ave., Suite 3900, Chicago, Illinois 60611.
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(4)
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Includes 593,589 unvested performance-based restricted stock units that would vest upon a change of control, Mr. Fernandez’s resignation for good reason or
involuntary termination. Includes 157,091 shares which are held in trust for the benefit of Mr. Fernandez’s children. Also includes 300,000 vested options to purchase common stock. Does not include 1,912,500 unvested performance-based
stock options.
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(5)
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Includes 371,177 unvested performance-based restricted stock units that would vest upon a change of control, Mr. Dungan’s resignation for good reason or
involuntary termination. Includes 191,150 shares held through the DJD Family Limited Partnership, and 350,000 shares held in the Jeanine G. Dungan Trust dated August 5, 1998. Also includes 150,000 vested options to purchase common stock. Does
not include 1,004,063 unvested performance-based stock options.
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(6)
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Includes 91,704 unvested performance based restricted stock units that would vest upon a change of control, Mr. Ramirez’s resignation for good reason or
involuntary termination. Does not include 100,000 unvested performance-based stock options.
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32
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(7)
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Mr. Graunke joined the Company’s Board on November 10, 2009, in connection with of its acquisition of Archstone Consulting. As of the Record Date, Lake
Capital and certain of its affiliates (the “Lake Affiliates”), Archstone Holdings LLC and certain of its affiliates (the “Archstone Affiliates”), Mr. Graunke and Paul G. Yovovich (the “Reporting Persons”) have the
shared power to vote or direct the vote and shared power to dispose or direct the disposition of 4,949,648 of shares of common stock. The number of shares reported above includes 30,042 unvested restricted stock units issued to Lake Capital in
recognition for Mr. Graunke’s service on the Board that would vest upon termination of service on the Board. The address of the principal business and principal office of each of the Reporting Persons is 676 N. Michigan Ave, Suite 3900,
Chicago, Illinois 60611.
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(8)
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Includes 35,000 vested options to purchase common stock and 30,892 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation
program that would vest upon termination of service on the Board. Also includes 1,300 shares held by Mr. Hamlin’s wife in an individual retirement account.
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(9)
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Includes 30,159 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service
on the Board.
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(10)
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Includes 38,750 vested options to purchase common stock and 30,525 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation
program that would vest upon termination of service on the Board.
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(11)
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Includes 31,700 vested options to purchase common stock and 30,525 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation
program that would vest upon termination of service on the Board.
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(12)
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The information reported is based on Form 13G/A filed with the SEC on February 10, 2012 by Columbia Wanger Asset Management, LLC. (“WAM”) an investment
advisor as defined in Rule 13d-1(b)(1)(ii)(E) of the Act. The statement discloses that, as of the time of the filing, WAM, a registered investment adviser had sole voting power with respect to 5,861,500 shares of common stock and dispositive power
with respect to 6,579,500 shares of common stock. This amount includes shares held by Columbia Acorn Trust (“Acorn Trust”) a Massachusetts business trust that is advised by WAM. The address of WAM and Acorn Trust is 227 West Monroe Street,
Suite 3000, Chicago, Illinois 60606.
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(13)
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The information reported is based on Form 13G/A filed with the SEC on February 14, 2012 by FMR LLC (”FMR”). The statement discloses that, as of the time
of the filing, (i) FMR a parent holding company or control person as defined in Rule 13d-1(b)(1)(ii)(G) of the Act had sole voting power with respect to 1,806,761 shares of common stock and sole dispositive power with respect to 2,245,613
shares of common stock. The address for FMR is 82 Devonshire Street, Boston, Massachusetts 02109. For additional disclosure regarding the persons affiliated with FMR and their voting and dispositive powers with regard to the Company’s common
stock please refer to the Form 13G/A filed with the SEC on February 14, 2012.
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Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
directors, executive officers and holders of more than 10% of the common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Based upon a review of
filings with the SEC, the Company believes that all of its directors and executive officers complied during fiscal year 2011 with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, except for one late Form 4
filed on behalf of Mr. Ramirez and Mr. Wix.
33
SHAREHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 2013
Any proposal or proposals by a shareholder intended to be included in the Company’s Proxy Statement and form of proxy relating to
the 2013 Annual Meeting of Shareholders must be received by the Company no later than November 26, 2012, pursuant to the proxy solicitation rules of the SEC. Nothing in this paragraph shall be deemed to require the Company to include in its
Proxy Statement and proxy relating to the 2013 Annual Meeting of Shareholders any shareholder proposal which may be omitted from the Company’s proxy materials pursuant to applicable regulations of the SEC in effect at the time such proposal is
received.
Pursuant to the Company’s bylaws, all other shareholder proposals to be presented at the 2013 Annual Meeting
of Shareholders must be submitted in writing and received by the Secretary of the Company at the principal executive offices of the Company not earlier than February 7, 2013 and not later than March 8, 2013; provided, however, that in the
event that the date of the 2013 Annual Meeting of Shareholders is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the 2012 Annual Meeting, the shareholder must so deliver the notice not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The
shareholder’s notice with respect to such proposal must comply with the requirements set forth in the Company’s bylaws.
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
Upon written request the
Company will provide, without charge, a copy of its Annual Report on Form 10-K for its fiscal year ended December 30, 2011. For a copy of the Company’s Form 10-K, please contact Josie Estevez-Lugo at 1001 Brickell Bay Drive, Suite
3000, Miami, FL 33131, telephone (305) 375-8005, facsimile (305) 379-8810.
34
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board knows of no other matters that may come before the annual meeting. However, if any
other matters properly come before the meeting, it is the intention of the proxy holders to vote or act in accordance with their best judgment with respect to such matters.
By Order of the Board of Directors,
Frank A. Zomerfeld
Secretary
35
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Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods
outlined
below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE
TITLE
BAR.
Proxies submitted by the Internet or telephone must be
received by
1:00 a.m., Central Time, on May 4, 2012.
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Vote by Internet
• Go to
www.investorvote.com/hckt
• Or scan the QR code with your smartphone
• Follow the steps outlined on the secure
website
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Vote by telephone
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•
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Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
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•
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Follow the instructions provided by the recorded message
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Using a
black ink
pen, mark your votes with an
X
as shown in this example. Please do not write outside the designated areas.
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x
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q
IF YOU HAVE NOT VOTED
VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
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A
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Proposals — The Board recommends a vote
FOR
all nominees, and
FOR
Proposals 2 and 3.
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1.
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Election of Directors:
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For
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Withhold
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For
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Withhold
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+
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01 - David N. Dungan
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¨
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¨
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02 - Richard N. Hamlin
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¨
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¨
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For
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Against
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Abstain
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For
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Against
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Abstain
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2.
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Say on Pay - An advisory vote on the approval of executive officer
compensation.
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¨
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¨
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¨
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3.
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To ratify the appointment of BDO USA LLP as The Hackett Group,
Inc.’s independent registered public accounting firm for 2012.
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¨
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¨
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¨
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B
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Non-Voting Items
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Change of Address
— Please print your new
address below.
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Comments
— Please print your comments below.
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Meeting Attendance
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Mark the box to the right if you plan to attend the Annual Meeting.
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¨
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C
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Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
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Please sign exactly as name(s)
appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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Date (mm/dd/yyyy) — Please print date below.
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Signature 1 — Please keep signature within the box.
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Signature 2 — Please keep signature within the box.
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/ /
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2012 Annual Meeting Admission Ticket
2012 Annual Meeting of
The Shareholders of The Hackett Group, Inc.
Friday, May 4, 2012
11:00 A.M. Local Time
The Hackett Group, Inc.’s Company Headquarters
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
Upon arrival, please present this admission ticket
and photo identification at the registration desk.
Important notice regarding the Internet availability of
proxy materials for the Annual Meeting of shareholders.
The proxy
statement and The Company’s Annual Report on Form 10-K are available at:
www.edocumentview.com/hckt
q
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
Proxy — The Hackett Group, Inc.
Notice of 2012 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors
for Annual Meeting – May 4, 2012
Ted A. Fernandez or Robert A. Ramirez, or any of them, each with the power of substitution,
are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of The Hackett Group, Inc. to be held on May 4, 2012
or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted by the shareholder. If no such directions
are indicated, the Proxies will have authority to vote FOR all nominees and FOR Proposals 2 and 3.
In their discretion, the Proxies
are authorized to vote upon such other business as may properly come before the meeting.
(Items to be voted appear on reverse side.)
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