UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant ☑
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☑ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Under Rule l4a-l2 |
ATLAS AIR WORLDWIDE HOLDINGS, INC. | ||||
(Name of Registrant As Specified In Its Charter) | ||||
N/A | ||||
(Name of Person(s) Filing Proxy statement, if Other Than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
☑ | No fee required. | |||
☐ | Fee computed on table below per Exchange Act Rules l4a-6(i)(4) and 0-11 | |||
(1) | Title of each class of securities to which transaction applies:
| |||
| ||||
(2) | Aggregate number of securities to which transaction applies:
| |||
| ||||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth in the amount on which the filing fee is calculated and state how it was determined):
| |||
| ||||
(4) | Proposed maximum aggregate value of transaction:
| |||
| ||||
(5) | Total fee paid:
| |||
| ||||
☐ | Fee paid previously with preliminary materials. | |||
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | |||
(1) | Amount Previously Paid:
| |||
| ||||
(2) | Form, Schedule or Registration Statement No.:
| |||
| ||||
(3) | Filing Party:
| |||
| ||||
(4) | Date Filed:
| |||
|
LETTER TO OUR SHAREHOLDERS FROM THE BOARD OF DIRECTORS
Dear Shareholders,
We are pleased to invite you to attend the Annual Meeting of Shareholders on Wednesday, May 23, 2018. Our meeting will be held at 9:00 a.m., local time, at the Belmond Charleston Place Hotel, located at 205 Meeting Street, Charleston, South Carolina 29401.
As your Board, we welcome this opportunity to communicate with you. In stewarding your Company, we seek to achieve long-term, sustainable performance and create value through the right business strategies, prudent risk management, effective corporate governance practices, environmental and social initiatives, effective executive compensation programs, and well-functioning talent and succession planning. We would like to highlight a few areas of particular significance for the Board this past year:
A Year of Exciting Growth
2017 was a year of exciting growth for Atlas Air Worldwide. We delivered record volumes, record revenue, and robust earnings growth, and we expect that to continue in 2018. Our performance in 2017 and our outlook for higher volumes, revenue and earnings in 2018 reflect the strategic initiatives that we have put in place over many years initiatives that have transformed our company, broadened our customer base, and diversified our fleet.
We are capitalizing on our strong market position and our focus on express, e-commerce and fast-growing global markets. We are operating in a strong airfreight environment, underpinned by global economic growth. And with the building blocks we have in place, we see opportunities to grow with existing customers and new ones.
Our vision is to be our customers most trusted partner. And we are committed to driving value for our shareholders.
2017 Financial and Operating Performance
Our financial and operating performance in 2017 reflected the leadership and strength of our ACMI and Charter businesses, the growth of our annuity-like Dry Leasing operations, and ongoing efficiency and productivity initiatives.
Volumes increased 20% to 252,802 block hours in 2017, with revenue growing 17% to $2.16 billion and total direct contribution by our business segments increasing 15% to $422.6 million.
On a reported basis, income from continuing operations, net of taxes, increased more than five-fold to $224.3 million, or $8.68 per diluted share, primarily due to a $130.0 million benefit related to the revaluation of our deferred tax liabilities as a result of the U.S. Tax Cuts and Jobs Act.
On an adjusted basis, income from continuing operations, net of taxes*, grew 17% to $133.7 million, or $4.93 per diluted share in 2017, with EBITDA, as adjusted*, rising 12% to $428.6 million.
* | Adjusted income from continuing operations, net of taxes, Adjusted net income, Adjusted Diluted EPS, and EBITDA, as adjusted, are non-GAAP measures. A reconciliation to the most directly comparable GAAP measures is contained in Exhibit A attached hereto. |
In addition to our focus on express, e-commerce and growing global markets, both reported and adjusted results in 2017 benefited from our first full year of contribution from Southern Air, a highly complementary business combination that has expanded our platform into 777 and 737 operations, and our service for Amazon, which was accretive for the full year and which we expect to become meaningfully more accretive to our earnings and cash flows over time.
A Stronger Company
Atlas Air Worldwide is a stronger company today, well-positioned to capitalize on market dynamics and to deliver significant growth in 2018 in our volumes, revenue, EBITDA, as adjusted, and adjusted net income.
As we move ahead, we will continue to build upon the innovations, successes and growth that are our hallmarks.
With the strength of our brand and our global market leadership in outsourced aircraft and services, the integration of Southern Air, our long-term agreements with Amazon, and our outstanding employees, we are eager to drive value and benefits for our customers and to grow revenue and earnings for our shareholders.
Shareholder Outreach and Say-on-Pay Responsiveness
In 2017, we further enhanced our already robust shareholder engagement practices in response to last years Say-on-Pay result. We actively reached out to holders representing approximately 75% of our outstanding shares to better understand their perspectives and consider their ideas to further improve our corporate governance practices, sustainability, executive compensation programs, business strategy and performance, capital allocation strategy and public disclosures. A member of our Compensation Committee participated in a number of engagement meetings, and a number of extra meetings and discussions were held by our Compensation Committee to ensure timely and meaningful responsiveness to feedback as well as our recent Say-on-Pay outcomes. This specifically targeted engagement was done in parallel with our ongoing investor relations outreach.
At the Board level, we continue to take shareholder viewpoints under careful consideration when reviewing and refining our programs, communications, and disclosures.
In alignment with specific shareholder feedback, we have adopted some very significant and impactful changes to our executive pay programs that became effective in 2018, including amending our CEOs long-term incentives to contain a strict double-trigger provision, adding a relative Total Shareholder Return element to all performance long-term incentive (LTI) awards, enhanced disclosure regarding LTI goal setting, adjustments to our peer group to reflect appropriate comparators to our evolving global business and increasing CEO stock ownership guidelines from 5x to 6x base salary, further aligning our CEO and shareholder interests.
Board Composition and Refreshment
Over the past two years, we have continued our commitment to best-in-class corporate governance practices, with a particular focus on maintaining the right balance of skills, experience, and diversity on our Board.
As a result of our regular evaluation of the composition of the Board and focus on refreshment, we are pleased to report that we have nominated two new independent Directors for election at the 2018 Annual Meeting: Jane H. Lute, who brings to the Board extensive cybersecurity experience, and Sheila A. Stamps, who has an extensive background in banking and finance. Two of our long-standing Directors will not stand for re-election. Since 2016, we have added five new Directors, constituting one-half of the Board. Each of these individuals brings complementary perspectives and experiences that further align the Boards skills and expertise with the Companys long-term business strategy.
We have also refreshed our Board and Committee leadership roles. In 2017, we appointed a new Chairman of our Board and Chair of the Nominating and Governance Committee and refreshed the composition of each of our committees. In recent years, we also appointed new Chairs of the Audit Committee and Compensation Committee.
As demonstrated by the many actions we have taken to enhance the Board, the Board is vigilant when it comes to ensuring it has strong leadership and membership in place to promote shareholder interests and continued alignment with corporate governance and compensation best practices.
Continued Alignment of Strategy, Performance and Executive Compensation
Our strong 2017 financial and operating results are a reflection of our leadership in international aviation outsourcing. During 2017, key accomplishments included significant progress toward the integration of Southern Air, significant progress on our initiative to provide air transport services for leading e-commerce retailer Amazon, expanded relationships with existing customers, including DHL Express and FedEx, and the establishment of new relationships with new customers, including Asiana Cargo, Cathay Pacific Cargo, DHL Global Forwarding, and Nippon Cargo Airlines. Our long-term strategy is to move more deeply into express, e-commerce and fast-growing global markets. Driving our execution of this strategy are an experienced, dedicated team of employees focused on our customers expectations; a modern, superior fleet tailored to meet our customers unique needs; a broad array of value-added, global operating services; and a solid financial structure.
Our 2017 executive compensation programs were thoughtfully structured to align with our long term strategy and drive our operational performance and deliver strong financial results. Shareholder feedback has been and will continue to be influential in shaping our governance and executive compensation practices.
Focus on Environmental, Social and Governance Issues
We are dedicated to serving our customers and the communities in which we operate. Fulfilling this commitment dictates that we build a vibrant, innovative organization that satisfies our customers needs and delivers value to our shareholders. Effectively addressing environmental, social and governance issues is a key part of building a premier organization. Doing so means maintaining sound business practices and long-term, sustainable strategies that are designed to (1) minimize the impact of our business on the environment and partner us with our customers and other stakeholders to ensure a clean, low-carbon future (such as our FuelWise program and planned participation in CORSIA), (2) prioritize our shareholders while actively ensuring the needs of our other stakeholders are appropriately addressedfor example, earning trust and support by maintaining the highest level of legal and ethical conduct by our employees, maintaining practices and policies that create a diverse and respectful environment for our globally situated employees and reward them for their hard work, ingenuity and creativity, and (3) actively involve our company and its employees in our local and global community through programs ranging from volunteering at local socioeconomically disadvantaged schools to providing varied and extensive aid relief during disasters and times of need. Please see the section titled Environmental, Social and Governance Issues for a discussion of the various ways in which we address these matters, which we view as an important part of our business.
We look forward to our continued dialogue with you and welcome your feedback as we execute our strategy and focus on sustainable, long-term value creation. Please feel free to share your thoughts or concerns with us. Communications may be addressed to the Board in care of the Office of the Secretary, Atlas Air Worldwide Holdings, Inc., 2000 Westchester Avenue, Purchase, NY 10577, or e-mailed to corporate.secretary@atlasair.com.
We value your input and thank you for your investment and ongoing support.
Robert F. Agnew, Chairman
Timothy J. Bernlohr
Charles F. Bolden, Jr.
William J. Flynn
James S. Gilmore III
Bobby J. Griffin
Carol B. Hallett
Frederick McCorkle
Duncan J. McNabb
John K. Wulff
Notice of 2018 Annual Meeting of Shareholders |
To be held on May 23, 2018
We will hold the 2018 Annual Meeting of Shareholders of Atlas Air Worldwide Holdings, Inc., a Delaware corporation, on Wednesday, May 23, 2018, at 9:00 a.m., local time, at the Belmond Charleston Place Hotel, 205 Meeting Street, Charleston, South Carolina, for the following purposes:
1. | To elect a Board of Directors to serve until the 2019 Annual Meeting of Shareholders or until their successors are elected and qualified; |
2. | To ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2018; |
3. | To hold an advisory vote to approve the compensation of the Companys Named Executive Officers; |
4. | To consider and vote on a proposal to approve our 2018 Incentive Plan; and |
5. | To transact such other business, if any, as may properly come before the meeting and any adjournments thereof. |
The foregoing matters are described in more detail in the Proxy Statement that is attached to this notice.
Only shareholders of record at the close of business on April 2, 2018, which date has been fixed as the record date for notice of the Annual Meeting of Shareholders, are entitled to receive this notice and to vote at the meeting and any adjournments thereof.
YOUR VOTE IS VERY IMPORTANT. WE HOPE YOU WILL ATTEND THIS ANNUAL MEETING OF SHAREHOLDERS IN PERSON. WHETHER OR NOT YOU ATTEND IN PERSON, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD. RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL MEETING OF SHAREHOLDERS, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE RETURNED A PROXY CARD. IF YOU HAVE RECEIVED MORE THAN ONE PROXY CARD, IT IS AN INDICATION THAT YOUR SHARES ARE REGISTERED IN MORE THAN ONE ACCOUNT. PLEASE COMPLETE, DATE, SIGN AND RETURN EACH PROXY CARD YOU RECEIVE.
By Order of the Board of Directors |
|
ADAM R. KOKAS Executive Vice President, General Counsel and Secretary |
April 19, 2018
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 23, 2018
This Proxy Statement and the AAWW 2017 Annual Report are available for
downloading, viewing and printing at http://www.ezodproxy.com/atlasair/2018.
PROXY SUMMARY |
PROXY SUMMARY
2017 Performance Highlights
Overview of Business
We are a leading global provider of outsourced aircraft and aviation services. We operate the worlds largest fleet of 747 freighters and provide customers a broad array of 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations. Our fleet totaled 103 aircraft at year-end 2017, including 13 we added pursuant to growth initiatives in 2017.
We provide unique value to our customers by giving them access to a wide range of modern, efficient aircraft, combined with outsourced aircraft operating services that we believe lead the industry in terms of quality and global scale. We operated 48,983 flights serving 422 destinations in 103 countries in 2017, reflecting our far-reaching global scale and scope.
Our customers include express delivery providers, e-commerce retailers, airlines, freight forwarders, the U.S. military, and charter brokers. We provide global services with operations in Africa, Asia, Australia, Europe, the Middle East, North America, and South America.
2017 Performance Highlights and Key Accomplishments
We delivered record volumes, record revenue, and robust earnings growth in 2017, reflecting our growth initiatives and our focus on express, e-commerce and fast-growing global markets.
Strategic Initiatives
| We achieved significant progress during 2017 toward our integration of Southern Air, a highly complementary 2016 business combination that has expanded our platform into 777 and 737 operations; provided our customers with access to a broader array of aircraft and operating services; and generated new avenues of business growth. |
| We recorded significant progress on our initiative to provide air transport services for leading e-commerce retailer Amazon. We placed and began operating 11 new 767-300 freighters for Amazon during 2017, raising the number to 12 at year-end. That was in line with our expectations when we commenced this new service in 2016 and with our expectation for a total of 20 aircraft by the end of 2018. |
i
PROXY SUMMARY |
| Also in 2017, we completed agreements to operate 747 freighters for several new customers, including Asiana Cargo, Cathay Pacific Cargo, DHL Global Forwarding, and Nippon Cargo Airlines. |
Growth/Results
Our financial and operating performance in 2017 reflected the leadership and strength of our ACMI and Charter businesses, the growth and annuity-like contribution of our Dry Leasing operations, ongoing efficiency and productivity initiatives, and a disciplined balance sheet focus.
In addition to our focus on express, e-commerce and growing global markets, our results in 2017 benefited from the first full year of contribution from Southern Air and our service for Amazon, which was accretive for the full year and which we expect to become meaningfully more accretive to our earnings and cash flows over time.
We see tremendous opportunity for continued growth in these markets fueled by an expanding global middle class with higher levels of disposable income. Further globalization will require expansive and time-definite air networks to facilitate the international flow of goods.
Along with expanding our operating platforms and our fleet from 90 to 103 aircraft during 2017, we continued to maintain a safe, compliant operation while retaining the same lean management structure.
We continue to execute on strategic initiatives to strengthen and diversify our business mix, expand our customer base, generate cost savings through operating efficiencies, and enhance our portfolio of assets and services. Our actions have positioned us to capitalize on market opportunities.
Strong Performance in 2017
Integration of Southern Air (Five 777 and Five 737
|
Initial Amazon Accretion (12 of 20 767-300Fs)
|
Key New Customer (Multiple 747 Placements)
|
Reported/Adjusted EPS1 $8.68/$4.93
| |||||||||
Expanded Operating Platforms and Results
|
Business, Earnings and Cash Flow Growth
|
Focused on Fast-
|
Growth Initiatives, Alignment
|
Disciplined and Balanced Capital Allocation Strategy
We are committed to creating, enhancing and delivering value to our shareholders. Our commitment reflects a disciplined and balanced capital allocation strategy that has focused on maintaining a strong balance sheet, investing in modern, efficient assets and returning capital to shareholders.
2017 Capital Allocation Actions:
| Expanded fleet from 90 to 103 aircraft |
| Issued $289 million of convertible senior notes |
| Secured $286 million of financing for thirteen 767-300 aircraft (including one spare) for Amazon dry lease and CMI agreements |
| Paid $207 million of debt principal |
1 | Adjusted Diluted EPS from continuing operations, net of taxes is a non-GAAP measure. A reconciliation to the most directly comparable GAAP measure is contained in Exhibit A attached hereto. |
ii
PROXY SUMMARY |
| Focused on maintaining a healthy cash position $305.5 million2 at year-end 2017 |
| Maintained authority to repurchase shares up to $25 million |
In May 2017, we issued $289.0 million aggregate principal amount of convertible senior notes that mature on June 1, 2024. The net proceeds of the offering were used to repay higher-cost revolving credit facility borrowings; enhance business and financial flexibility; support long-term growth; fund the cost of convertible note hedge transactions (after such cost was partially offset by proceeds to the Company from the sale of warrants); and for general corporate purposes.
Shareholder Outreach, Engagement and Say-on-Pay Responsiveness
We have engaged in extensive ongoing shareholder outreach over the past seven years to better understand shareholder perspectives and consider ideas for improvements to, among other things, our corporate governance, sustainability and executive compensation practices, as well as our business strategy and performance, capital allocation strategy and public disclosures. This year, we again engaged in a particularly robust shareholder outreach program, reaching out to shareholders representing approximately 75% of our outstanding shares and engaging in discussions with those representing about one-half of our outstanding shares. We have made significant recent changes to our governance and executive compensation practices in response to insights gained during these discussions.
In response to our 2017 Say-on-Pay result, the Board and its Compensation Committee undertook a particularly robust and multifaceted outreach program during the balance of 2017. These extra efforts included participation by a member of our Compensation Committee in multiple in-person and telephonic meetings with shareholders and resulted in specific shareholder feedback prompting tangible compensation and governance enhancements. All committee members also convened in a number of extra, non-regularly-scheduled meetings and discussions and considered and provided analysis focused on Say-on-Pay responsiveness.
During all shareholder outreach meetings, AAWW sought input on proactively developed changes to our pay program, as well as emerging topics of expressed shareholder interest, such as environmental, social and governance issues (ESG). We received many supportive and positive comments on the Companys direction (both from a business growth and governance perspective), the proposed pay program changes and our board rotation/refreshment and outlook, even from several shareholders who voted against Say-on-Pay or individual directors in 2017.
As a result of specific feedback from shareholders, we implemented a number of key changes to our compensation program and practices to specifically address our recent Say-on-Pay outcomes, and made changes to our governance practices in response to topics of importance raised by shareholders. Examples of feedback received are also included below.
2 | Includes cash, cash equivalents, short-term investments and restricted cash. |
iii
PROXY SUMMARY |
iv
PROXY SUMMARY |
v
PROXY SUMMARY |
The diagram below represents our ongoing shareholder outreach process, further enhanced this year with Board member involvement and seeking specific feedback in response to our recent Say-on-Pay outcomes.
Compensation Program that Aligns Pay and Performance
Our compensation programs are designed to drive achievement of our business strategies and provide competitive opportunities. Accordingly, achievement of most of those opportunities depends on the attainment of certain performance goals tied to Company performance. Atlas compensation programs are designed to provide compensation that:
1. | Attracts, motivates and retains high-performing executives |
2. | Provides performance-based incentives to reward achievement of short- and long-term business goals and strategic objectives which align with our operating plan, while recognizing individual contributions |
3. | Aligns the interests of our executives with those of our shareholders |
In making compensation decisions for 2017, the Compensation Committee considered our operating strategy and goals, as well as comments received through our shareholder outreach program, and took into account our Say-on-Pay results. In response to shareholder feedback and Say-on-Pay voting results, we have adopted some very significant and impactful changes, as described on pages iv v and the Compensation Discussion and Analysis.
vi
PROXY SUMMARY |
The Company performance metrics we believe are important to our shareholders are the same metrics as we use in our incentive plans in 2017:
Annual Incentives
Company Performance Metric |
NEO Performance Metric | |||
Company Financial Performance Adjusted Net Income
|
Adjusted Net Income
| |||
Customer On-Time Reliability Stringent standards specified under customer contracts
|
Customer Service On-Time Reliability
| |||
Company Business Plan and Strategic Initiatives
|
Individual Performance Objectives based heavily on annually set corporate strategic objectives
| |||
Long-Term Incentives PSUs and Performance Cash
| ||||
EBITDA Growth
|
EBITDA Growth
| |||
Return on Invested Capital
|
Return on Invested Capital
| |||
TSR (for awards granted in 2018 and after) |
Comparative TSR (for awards granted in 2018 and after)
|
Strong, Well-Balanced Corporate Governance Practices
✓ | Highly Qualified Board. Our Directors bring deep industry experience to provide effective oversight in the boardroom. |
✓ | Independent Board Leadership. We have separate Chairman of the Board and CEO roles with an independent Chairman elected annually by our Board. In recent years, we have refreshed the independent Chairman and the Chairs of our Audit Committee, Compensation Committee, and Nominating and Governance Committee, providing strong, independent Board and Committee leadership. |
✓ | Focus on Board Composition, Refreshment and Rotation. We regularly evaluate the composition of our Board and our Committee leadership to ensure that we have the right balance of experience and perspective, and a mix of skills, backgrounds, and diversity to effectively facilitate oversight of management and strategy. To that end, we have welcomed three new directors, Bobby J. Griffin, John K. Wulff and Charles F. Bolden, Jr., to our Board in 2016 and 2017 and have nominated Jane H. Lute and Sheila A. Stamps for election to the Board at the 2018 Annual Meeting. As indicated above, we also rotated the Chair of the Board in mid-2017 following the rotation of the Chairs of our Audit Committee, Compensation Committee, and Nominating and Governance Committee. |
Shareholders should note that while the Board does not follow formal age and tenure policies, it is the Boards current expectation that Chairs (Board and Committees) will serve from three to five years and that members of the Board will serve up to 15 years. Both the Board and the Nominating and Governance Committee review Board and Committee composition, refreshment and rotation matters on a regular basis.
vii
PROXY SUMMARY |
Director Nominees
|
||
Jane H. Lute | Shelia A. Stamps |
Recently-Elected Directors
|
||||
Bobby J. Griffin | John K. Wulff | Charles F. Bolden, Jr. | ||
(2016) | (2016) | (2017) |
To best serve shareholders, our two Director nominees and three recently joined Directors bring an appropriate balance of fresh perspective and experience to effectively oversee strategy and management.
Upon election by our shareholders at the 2018 Annual Meeting, the average tenure of our Directors and the composition of our Board would be six years:
To evidence the Boards focus on refreshment, tenure and composition matters, the Boards average tenure has declined from eight years in April 2016 to six years today (assuming the election of the entire proposed Board slate).
✓ | Best Practices. We maintain corporate governance best practices that promote accountability and protect shareholder rights, including the adoption of proxy access provisions in our by-laws and the implementation of majority voting in uncontested elections. |
In addition, we have annually elected Directors, 100% Board independence (except our CEO), separate CEO and Chairman positions, no poison pill in place, 100% independent Board committees, and ongoing dialogue with shareholders, including on governance, executive compensation, and other key business matters.
Please see pages 14-21 for further discussion of our governance practices.
viii
TABLE OF CONTENTS |
TABLE OF CONTENTS
Page | ||||
1 | ||||
3 | ||||
3 | ||||
3 | ||||
5 | ||||
6 | ||||
8 | ||||
14 | ||||
14 | ||||
14 | ||||
16 | ||||
16 | ||||
17 | ||||
18 | ||||
18 | ||||
19 | ||||
19 | ||||
21 | ||||
23 | ||||
23 | ||||
24 | ||||
26 | ||||
29 | ||||
30 | ||||
37 | ||||
51 | ||||
52 | ||||
63 | ||||
64 | ||||
Proposal No. 3 Advisory Vote to Approve the Compensation of Our Named Executive Officers |
65 | |||
67 |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement |
TABLE OF CONTENTS |
Page | ||||
|
|
75 |
| |
75 | ||||
77 | ||||
77 | ||||
Deadline for Receipt of Shareholder Proposals to be Presented at the 2019 Annual Meeting |
78 | |||
Shareholder Proposals to Be Included in Our 2019 Proxy Statement |
78 | |||
78 | ||||
78 | ||||
78 | ||||
78 | ||||
79 | ||||
79 | ||||
79 | ||||
79 | ||||
79 | ||||
80 | ||||
80 | ||||
80 | ||||
81 | ||||
82 | ||||
| Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
GENERAL INFORMATION |
ATLAS AIR WORLDWIDE HOLDINGS, INC.
2000 Westchester Avenue
Purchase, New York 10577
PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS |
May 23, 2018
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the Board of Directors or Board) of Atlas Air Worldwide Holdings, Inc., a Delaware corporation (AAWW or the Company), for use at the Annual Meeting of Shareholders (the Annual Meeting) to be held on Wednesday, May 23, 2018, at the Belmond Charleston Place Hotel, 205 Meeting Street, Charleston, South Carolina at 9:00 a.m., local time, and at any adjournments or postponements of the Annual Meeting. It is expected that this Proxy Statement and the accompanying proxy will first be mailed or delivered to shareholders beginning on or about April 23, 2018. Proxies may be solicited in person, by telephone or by mail, and the costs of such solicitation will be borne by AAWW.
THE COMPANY
AAWW is a leading global provider of outsourced aircraft and aviation operating services. We operate the worlds largest fleet of 747 freighters and provide customers with a broad array of 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations.
AAWW is a holding company with two wholly owned operating subsidiaries, Atlas Air, Inc. (Atlas) and, as of April 7, 2016, Southern Air, Inc. (Southern). We also have a 51% economic interest and a 75% voting interest in Polar Air Cargo Worldwide, Inc. (Polar). In addition, we are the parent company of several wholly owned subsidiaries related to our dry leasing services (collectively referred to as Titan). Except as otherwise noted, AAWW, Atlas, Southern and Titan (along with all other entities included in AAWWs consolidated financial statements) are collectively referred to herein as the Company, AAWW, we, us, or our.
Combined with Polar, AAWW provides ACMI, CMI, Charter and Dry Leasing services to DHL Express (DHL) in support of DHLs transpacific express, North American and intra-Asian networks. Additionally, we fly between the Asia Pacific region, the Middle East and Europe on behalf of DHL and other customers. Atlas also provides incremental charter capacity to Polar and DHL Express from time to time.
Our primary service offerings include the following:
| ACMI (Aircraft, Crew, Maintenance, and Insurance): We provide outsourced cargo and passenger aircraft operating solutions, including the provision of an aircraft, crew, maintenance, and insurance. Customers assume fuel, demand, and price risk and most other operational fees and costs. |
| CMI (Crew, Maintenance, and Insurance): Within ACMI, we also provide outsourced cargo and passenger aircraft operating solutions, generally including the provision of crew, line maintenance, and insurance, but not |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 1
THE COMPANY |
the aircraft. Customers assume fuel, demand and price risk, and are responsible for providing the aircraft (which they may lease from us), heavy and non-heavy maintenance, and most other operational fees and costs. |
| Charter: We provide cargo and passenger aircraft charter services to customers including the U.S. military Air Mobility Command, brokers, freight forwarders, direct shippers, airlines, sports teams and fans, and private charter customers. The customer pays a fixed charter fee that includes fuel, insurance, landing fees, navigation fees, and most other operational fees and costs. |
| Dry Leasing: We provide cargo and passenger aircraft and engine leasing solutions. The customer operates, and is responsible for insuring and maintaining, the flight equipment. |
We currently operate our service offerings through the following reportable segments: ACMI, Charter, and Dry Leasing.
ACMI and CMI | Charter | Dry Leasing | ||||||
~75% of Block Hours | ~25% of Block Hours | Not Tied to Block Hours |
* | Block Hours are the time intervals between when an aircraft departs the terminal until it arrives at the destination terminal and are the units by which we typically charge ACMI and Charter customers. In Dry Leasing, customers are typically charged a fixed monthly amount for the use of an aircraft or engine. |
2 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
ABOUT THE ANNUAL MEETING |
At our Annual Meeting, the holders of shares of our Common Stock, par value $0.01 per share (the Common Stock), will act upon the matters outlined in the notice of meeting at the beginning of this Proxy Statement, in addition to transacting such other business, if any, as may properly come before the meeting or any adjournments thereof. The shares represented by your proxy will be voted as indicated on your proxy, if properly executed. If your proxy is properly signed and returned, but no directions are given on the proxy, the shares represented by your proxy will be voted:
| FOR the election of the Director Nominees named herein, to serve until the 2019 Annual Meeting or until their successors are elected and qualified (Proposal No. 1); |
| FOR ratifying the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2018 (Proposal No. 2); |
| FOR the adoption of an advisory vote approving the compensation of our NEOs (the Say-on-Pay vote) (Proposal No. 3); |
| FOR the approval of our 2018 Incentive Plan (Proposal No. 4). |
In addition, if any other matters are properly submitted to a vote of shareholders at the Annual Meeting, the accompanying form of proxy gives the proxy holders the discretionary authority to vote your shares in accordance with their best judgment on that matter. Unless you specify otherwise, it is expected that your shares will be voted on those matters as recommended by our Board of Directors, or if no recommendation is given, in the proxy holders discretion.
For additional information regarding our Annual Meeting, see Additional Information at the end of this Proxy Statement.
Record Date and Voting Securities
All of our shareholders of record at the close of business on April 2, 2018 (the Record Date) are entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. As of the Record Date, there were 25,561,798 shares of Common Stock issued and outstanding. Each outstanding share of Common Stock will be entitled to one vote on each matter considered at the Annual Meeting. A description of certain restrictions on voting by shareholders who are not U.S. citizens, as defined by applicable laws and regulations, can be found in Additional Information Limited Voting by Foreign Owners at the end of this Proxy Statement.
A majority of the outstanding shares of Common Stock as of the Record Date must be present, in person or by proxy, at the Annual Meeting to have the required quorum for the transaction of business. If the number of shares of Common Stock present in person and by proxy at the Annual Meeting does not constitute the required quorum, the Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum.
Proposal No. 1: Election of Directors. In an uncontested election, a Director is elected by a majority of the votes cast (the number of shares voted For a Director-Nominee must exceed the number of votes cast Against that Director-Nominee). Shares voting Abstain or broker non-votes will have no effect on the election of Directors. Brokers, banks, and other nominees have no discretionary voting power in respect of this item.
Proposal No. 2: Ratification of the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2018. The affirmative vote of a majority of the shares represented at the Annual Meeting, either in person or by proxy and entitled to vote on this proposal, is required to ratify the selection of PricewaterhouseCoopers LLP. Shares voting Abstain
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 3
ABOUT THE ANNUAL MEETING |
will have the same effect as a vote Against this Proposal 2. Brokers, banks, and other nominees have discretionary voting power in respect of this item.
Proposal No. 3: Advisory Vote to Approve the Compensation of the Companys NEOs. Because Proposal 3 asks for a nonbinding, advisory vote, there is no required vote that would constitute approval. We value highly the opinions expressed by our shareholders in this advisory vote, and our Compensation Committee, which is responsible for overseeing and administering our executive compensation programs, will consider the outcome of the vote when designing our compensation programs and making future compensation decisions for our NEOs. Shares voting Abstain will have the same effect as a vote Against this Proposal 3. Broker non-votes will have no effect on this nonbinding advisory vote. Brokers, banks, and other nominees have no discretionary voting power in respect of this item.
Proposal No. 4: Approval of our 2018 Incentive Plan. The affirmative vote of a majority of the shares represented at the Annual Meeting, either in person or by proxy and entitled to vote on this proposal, is required to approve our 2018 Incentive Plan. Shares voting Abstain or broker non-votes will have no effect on approval of an amendment to our 2018 Incentive Plan. Brokers, banks, and other nominees have no discretionary voting power in respect of this item.
4 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
PROPOSAL NO. 1 ELECTION OF DIRECTORS
Our Board has nominated 10 persons to stand for election at the 2018 Annual Meeting and to hold office until the next Annual Meeting. All Nominees are currently Directors elected at the 2017 Annual Meeting, except for Ms. Lute and Ms. Stamps, who are new director candidates. The Nominating and Governance Committee has recommended the 10 Nominees for nomination by the Board after an evaluation of the size and composition of the Board and a review of each members skills, characteristics, and independence. The Board believes that each of the Nominees brings strong skills, background, experience and industry expertise to the boardroom, giving the Board as a group the appropriate balance of skills needed to exercise its oversight responsibilities. While the Company does not have a formal policy regarding the diversity of its Directors, the Board believes that diversity with respect to gender, ethnicity, background, professional experiences and perspectives is an important element in the Board selection process. Both the Nominating and Governance Committee and the full Board will consider attributes such as race, gender, cultural background and professional experience when reviewing candidates for the Board and in assessing the Boards overall composition.
Each Nominee has consented to be named as a Nominee for election as a Director and has agreed to serve if elected. Except as otherwise described below, if any of the Nominees is not available for election at the time of the Annual Meeting, discretionary authority will be exercised to vote for substitutes designated by our Board of Directors, unless the Board chooses to reduce the number of Directors. Management is not aware of any circumstances that would render any Nominee unavailable. At the Annual Meeting, Directors are expected to be elected to hold office until the 2019 Annual Meeting or until their successors are elected and qualified, as provided in our By-Laws.
Because this election is not a contested election, each Director will be elected by the vote of the majority of the votes cast when a quorum is present. A majority of the votes cast means that the number of votes cast for a Director exceeds the number of votes cast against that Director. Votes cast excludes abstentions and any votes withheld by brokers in the absence of instructions from street name holders (broker non-votes).
It is the policy of the Board that, as a condition of nomination, each incumbent Director nominated has submitted to the Secretary of the Company an irrevocable contingent resignation. This resignation will be effective only if (i) the Nominee fails to receive a majority of the votes cast in an uncontested election and (ii) the Board accepts such resignation within 60 days following the certification of the election results.
Retiring Directors
General Frederick McCorkle and Governor James S. Gilmore III, Directors of the Company since 2004, are retiring from the Board and will not stand for reelection at this years Annual Meeting. The Board wishes to thank General McCorkle and Governor Gilmore for their service, leadership and dedication to the Company over the past 14 years and to recognize the numerous contributions they have made over that time as members of the Board. Their experience and knowledge of the Company will be missed.
|
||
Frederick McCorkle | James S. Gilmore III |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 5
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Board Composition and Nomination Considerations
Our Board strives to maintain an appropriate balance of experience, tenure, diversity, leadership, skills and qualifications that are of importance to our Company and the execution of our strategy. Given the diversity of our business operations, it is important to bring together Directors with differing experiences, perspectives and backgrounds to ensure proper oversight of the interests of our Company and our shareholders.
The Nominating and Governance Committee works with the full Board to determine the qualifications and experiences it believes are most relevant and responsive to the needs of our business. In doing so, the Nominating and Governance Committee takes into account a number of factors, including:
| Evolving strategic priorities; |
| Existing characteristics of our Board, including tenure and diversity; |
| Results of our annual Board and Committee self-evaluations; and |
| Shareholder feedback sought as part of a robust outreach program with Board member participation. |
Evaluation of Director Nominees and Expansion of Board
In 2017 and early 2018, the Board of Directors and the Nominating and Governance Committee continued a process for seeking out, evaluating and recommending potential candidates for election to the Board. During 2017 and early 2018, the full Board, under the guidance of the Nominating and Governance Committee, undertook a thorough review of the skills, qualifications and tenure of our incumbent Directors, as well as the size of the Board, in the context of our long-range strategic plan, consistent with our governance principles, and taking into account feedback from shareholder outreach. The Board reviewed in detail the experience, skills, and qualifications of our incumbent Directors and identified areas that would enhance the overall strength of our current Board and the ability of the Company to execute its long-term strategic plan. For 2017, the Board engaged an independent third-party facilitator who conducted the annual evaluation of the Board and its three standing Committees. The results of these evaluations and the meaningful and tangible feedback generated were also considered by the Board and the Committee in searching for and evaluating nominees who could (1) add new and different areas of subject-matter expertise to the Board consistent with our growing Company and long-term strategy, and (2) strengthen the overall effectiveness of the Board. Key skills and qualifications that the Board and Committee identified included information technology, cybersecurity, finance, banking, executive leadership experience and presence, as well as public company board experience.
The Board and the Nominating and Governance Committee asked all of the Directors to consider the skills and qualifications identified and recommend potential candidates to be considered. A special committee of the Board, consisting of the Chair of the Nominating and Governance Committee, the Chairman of the Board, the Chief Executive Officer and another of the independent Directors, was then established to interview and evaluate the identified candidates and make recommendations to the Nominating and Governance Committee. Over several months, this special committee interviewed all candidates recommended by the members of the Nominating and Governance Committee, as well as members of the Board. While all of the candidates interviewed demonstrated an extraordinary and diverse background and scope of experience, the Nominating and Governance Committee determined to recommend, and with approval by the Board to nominate, Ms. Lute, who has extensive information technology and cybersecurity experience, and Ms. Stamps, who has an extensive background in banking and finance, for election as Directors of the Company. Both nominees possess senior executive leadership experience, as well as public company board experience.
6 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Director Skills and Experience
Our Board selected Director Nominees based on their diverse skills, qualifications, backgrounds and expertise, which the Board believes will contribute to the effective oversight of the Company. The chart below depicts the current skills, qualifications, and expertise represented on our Board.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE NOMINEES NAMED ON THE IMMEDIATELY FOLLOWING PAGES.
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 7
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Robert F. Agnew
Independent Chairman Age: 67 Director since: 2004
Committees: Nominating and Governance |
Background: Mr. Agnew is President and Chief Executive Officer of Morten Beyer & Agnew, an international aviation consulting firm experienced in the financial modeling and technical due diligence of airlines and aircraft funding (Morten Beyer & Agnew is a privately held business).
Mr. Agnew has over 30 years of experience in aviation and marketing consulting and has been a leading provider of aircraft valuations to banks, airlines, and financial institutions worldwide. Previously, he served as Senior Vice President of Marketing and Sales at World Airways. Mr. Agnew began his commercial aviation career at Northwest Airlines, where he concentrated on government and contract sales, schedule planning, and corporate operations research. Earlier, he served in the U.S. Air Force as an officer and instructor navigator with the Strategic Air Command. Mr. Agnew is also a member of the Board of directors of TechPubs LLC (a privately held business) and, within the last five years, served as director of Stanley Martin Communities, LLC (also a privately held business). In addition, he is a member of the Board of Trustees of the International Society of Transport Aircraft Trading Foundation and formerly chaired the Military Airlift Committee of The National Defense Transportation Association.
| |||
Board Skills and Qualifications: Civil and Governmental Aviation; Finance, Accounting and Risk Management; Global Operations; Mergers and Acquisitions; Military Affairs; Current/Previous Senior Executive Experience; Supply Chain and Procurement; Sales and Marketing; Strategic Planning; Transportation and Security
| ||||
Timothy J. Bernlohr
Independent Director Age: 59 Director since: 2006
Committees: Audit (Chair) Nominating and Governance |
Background: Mr. Bernlohr is the founder and managing member of TJB Management Consulting, LLC, which specializes in providing project-specific consulting services to businesses in transformation, including restructurings, interim executive management and strategic planning services (TJB Management Consulting is a privately held business). Mr. Bernlohr founded the consultancy in 2005. Mr. Bernlohr was President and Chief Executive Officer of RBX Industries, Inc., which was a nationally recognized leader in the design, manufacture, and marketing of rubber and plastic materials to the automotive, construction, and industrial markets, until it was sold in 2005. Prior to joining RBX in 1997, Mr. Bernlohr spent 16 years in the International and Industry Products divisions of Armstrong World Industries, where he served in a variety of management positions. Mr. Bernlohr also serves as a director of WestRock Company (Chairman, Compensation Committee), Overseas Ship Holding Group (Chairman, Compensation Committee) and International Seaways, Inc. (Chairman, Compensation Committee) Mr. Bernlohr has advised that he is not standing for reelection to the Overseas Ship Holding Group board. Within the last five years, he was a director of Chemtura Corporation, Rock-Tenn Company, The Cash Store Financial Services Inc., and Aventine Renewable Resources.
| |||
Board Skills and Qualifications: Capital Structure; Corporate Governance; Finance, Accounting and Risk Management; Legal, Regulatory and Government Affairs; Mergers and Acquisitions; Current/Previous Senior Executive Experience; Supply Chain and Procurement; Sales and Marketing; Strategic Planning; Transportation and Security
|
8 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Charles F. Bolden, Jr.
Independent Director Age: 71 Director since: February 2017
Committees: Audit |
Major General Charles F. Bolden, Jr., Retired U.S. Marine Corps served as the 12th Administrator of the National Aeronautics and Space Administration (NASA) from July 2009 to January 2017. As Administrator, he led a nationwide NASA team to advance the missions and goals of the U.S. space program. General Boldens 34-year career with the U.S. Marine Corps also included 14 years as a member of NASAs Astronaut Office. After joining the Office in 1980, General Bolden traveled to orbit four times aboard the space shuttle between 1986 and 1994, commanding two of the missions and piloting two others. His flights included deployment of the Hubble Space Telescope and the first joint U.S.-Russian shuttle mission, which featured a cosmonaut as a member of his crew. General Bolden left NASA in 1994 and returned to the operating forces of the Marine Corps. His final duty was as Commanding General of the 3rd Marine Aircraft Wing, Miramar, Calif. General Bolden currently serves as Director of Lord Corporation (a privately held business) and Blue Cross/Blue Shield of South Carolina (a mutual insurance company).
| |||
Board Skills and Qualifications: Civil and Governmental Aviation; Corporate Governance; Global Operations; Military Affairs; Public Company Board Experience; Strategic Planning; Transportation and Security
|
William J. Flynn
President and CEO Age: 64 Director since: 2006 |
Background: Mr. Flynn has been our President and Chief Executive Officer since June 2006. Mr. Flynn has a 41-year career in international supply chain management and freight transportation.
Prior to joining us, Mr. Flynn served as President and Chief Executive Officer of GeoLogistics Corporation since 2002 where he led a successful turnaround of the companys profitability and the sale of the company in September 2005. Prior to his tenure at GeoLogistics, Mr. Flynn served as Senior Vice President at CSX Transportation from 2000 to 2002. Mr. Flynn spent over 20 years with Sea-Land Service, Inc., a global provider of container shipping services, serving in roles of increasing responsibility in the U.S., Latin America, and Asia. He ultimately served as head of the companys operations in Asia. Mr. Flynn is also a director of Republic Services, Inc. but is not standing for reelection to that companys board. He also serves as a director of Airlines for America (a trade association).
| |||
Board Skills and Qualifications: Capital Structure; Civil and Governmental Aviation; Corporate Governance; Finance, Accounting and Risk Management; Global Operations; International Trade; Legal, Regulatory and Government Affairs; Mergers and Acquisitions; Military Affairs; Current/Previous Senior Executive Experience; Supply Chain and Procurement; Public Company Board Experience; Sales and Marketing; Strategic Planning; Transportation and Security
|
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 9
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Bobby J. Griffin
Independent Director Age: 69 Director since: 2016
Committees: Compensation Nominating and Governance
|
Background and Experience: Mr. Griffin served as President International Operations for Ryder System, Inc., a global provider of transportation, logistics and supply chain management solutions from 2005 to 2007. Beginning in 1986, Mr. Griffin served in various other management positions with Ryder, including as Executive Vice President International Operations from 2003 to 2005 and Executive Vice President Global Supply Chain Operations from 2001 to 2003. Prior to Ryder, Mr. Griffin was an executive at ATE Management and Service Company, Inc., which was acquired by Ryder in 1986. He currently serves as director of Hanesbrands Inc., United Rentals, Inc. and WESCO International, Inc.
| |||
Board Skills and Qualifications: Corporate Governance; Current/Previous Senior Executive Experience; Global Operations; International Trade; Mergers and Acquisitions; Public Company Board Experience; Supply Chain and Procurement; Strategic Planning; Transportation and Security
|
Carol B. Hallett
Independent Director Age: 80 Director since: 2006
Committees: Compensation (Chair) Nominating and Governance |
Background: Ms. Hallett has been of counsel at the U.S. Chamber of Commerce since 2003 and served as a member of the U.S. Chamber Foundation Board of Directors from 2003 to 2015. From 1995 to 2003, Ms. Hallett was President and Chief Executive Officer of the Air Transport Association of America (ATA), the nations oldest and largest airline trade association, now known as the Airlines for America (A4A). Prior to joining the ATA, Ms. Hallett served as senior government relations advisor with Collier, Shannon, Rill & Scott from 1993 to 1995. From 2003 to 2004, she was chair of Homeland Security at Carmen Group, Inc., where she helped develop the homeland security practice for the firm. From 1986 through 1989, Ms. Hallett served as United States Ambassador to the Commonwealth of the Bahamas. From 1989 to 1993, she was Commissioner of the United States Customs Service. Ms. Hallett has also served as a director of Rolls Royce-North America (a unit of Rolls Royce Group plc) from 2003 to 2018. In addition, she was appointed by the Secretaries of Treasury and Homeland Security and served on the Customs Oversight Advisory Committee (COAC) from 2011 to 2015. Ms. Hallett has served on the Transnational Threat Committee at the Center for Strategic and International Studies since 2003. Within the last five years, she was a director of G4S Government Solutions Inc. (a privately held business).
| |||
Board Skills and Qualifications: Civil and Governmental Aviation; Global Operations; International Trade; Legal, Regulatory and Government Affairs; Military Affairs; Supply Chain and Procurement; Public Company Board Experience; Strategic Planning; Transportation and Security
|
10 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Jane H. Lute
Independent Director Age: 61
New Director Nominee |
Background and Experience: Ms. Lute is the President and CEO of SICPA North America, a company that specializes in providing solutions to protect the integrity and value of products, processes, and documents. Ms. Lute also serves as Special Advisor to the Secretary-General of the United Nations, where she has held several positions in peacekeeping and peace building. Previously, Ms. Lute served as Deputy Secretary for the U.S. Department of Homeland Secretary from 2009-2013. She also served as Chief Executive Officer of the Center for Internet Security (CIS), an operating not-for-profit organization and home of the Multi-State Information Sharing and Analysis Center (MS-ISAC), providing cybersecurity services for state, local, tribal and territorial governments. Ms. Lute is a member of several international commissions focused on cybersecurity and the future of the Internet. She began her distinguished career in the United States Army and served on the National Security Council staff under both Presidents George H.W. Bush and William Jefferson Clinton. Ms. Lute holds a Ph.D. in political science from Stanford University and a J.D. from Georgetown University. She is a member of the Virginia bar. Ms. Lute is also a director of Union Pacific Corporation.
| |||
Board Skills and Qualifications: Cybersecurity and Information Technology; Corporate Governance; Global Operations; Legal, Regulatory and Government Affairs; Military Affairs; Current/Previous Senior Executive Experience; Public Company Board Experience
|
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 11
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Duncan J. McNabb
Independent Director Age: 65 Director since: 2012
Committees: Audit Nominating and Governance (Chair) |
Background: General Duncan J. McNabb, Retired, U.S. Air Force served as Commander of the United States Air Mobility Command from 2005 to 2007 and Commander of the United States Transportation Command (USTRANSCOM) from 2008 until his retirement from the Air Force in December 2011. USTRANSCOM is the single manager for air, land, and sea transportation for the Department of Defense (DOD). He also served as DODs Distribution Process Owner, overseeing DODs end-to-end supply chain, transportation, and distribution to our armed forces worldwide. General McNabb commanded more than $56 billion in strategic transportation assets, over 150,000 service personnel and a worldwide command-and-control network. A graduate of the United States Air Force Academy and Air Force pilot, he flew more than 5,600 hours in transport and rotary aircraft, including the C-17. General McNabb has held command and staff positions at squadron, group, wing, major command and DOD levels. During his over 37-year military career, General McNabb also served as the Air Force Deputy Chief of Staff for Plans and Programs with responsibility for all Air Force programs and over $500 billion in funding over the Air Forces Five-Year Defense Plan (FYDP). He later served as Director of Logistics on the Joint Staff and was responsible for operational logistics and strategic mobility support to the Chairman of the Joint Chiefs and the Secretary of Defense. Before his final command at USTRANSCOM, McNabb served as the 33rd Vice Chief of Staff of the Air Force. General McNabb is also a Director and Chairman of the Government Security Committee of AT Kearney Public Sector & Defense Services (a privately held business), a member of the Boards of Directors of AAR Corp. and of Elbit Systems of America (a privately held business), as well as a cofounder and a managing partner of Ares Mobility Solutions, Inc. (also a privately held business). He serves as Chairman of the Board of Trustees for Arnold Air Society and Silver Wings, Chairman of the Airlift/Tanker Association and is a member of the Board of Visitors of the United States Air Forces Air University. Within the last five years, he was also a director of AdvanTac Technologies and HDT Global (both privately held businesses).
| |||
Board Skills and Qualifications: Civil and Governmental Aviation; Global Operations; International Trade; Legal, Regulatory and Government Affairs; Military Affairs; Supply Chain and Procurement; Public Company Board Experience; Strategic Planning; Transportation and Security
|
12 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
PROPOSAL NO. 1 ELECTION OF DIRECTORS |
Sheila A. Stamps
Independent Director Age: 60
New Director Nominee |
Background and Experience: Ms. Stamps, has a diversity of strategic and financial experience including governance oversight of aviation businesses. She previously served as Executive Vice President at Dreambuilder Investments, LLC, a private mortgage investment company, from 2011 to 2012. She served from 2008 to 2011 as Director of Pension Investments and Cash Management at New York State Common Retirement Fund, and from 2004 to 2005 as a Fellow at the Weatherhead Center for International Affairs at Harvard University. Prior to this, Ms. Stamps served as a Managing Director and Head of Relationship Management, Financial Institutions at Bank of America (formerly FleetBoston Financial Corporation). From 1982 to 2003, she held a number of executive positions with Bank One Corporation (now, JPMorgan Chase & Co.), including Managing Director and Head of European Asset-Backed Securitization and Managing Director and Senior Originator of Asset-Backed Securitization. She currently serves as a Director of CIT Group, Inc. and CIT Bank N.A.; Commissioner and Audit Committee Chair of the New York State Insurance Fund; and Director of IES Abroad. Ms. Stamps holds an MBA from the University of Chicago; serves on the Board Advisory Services Faculty of the National Association of Corporate Directors; and is recognized as a NACD Board Leadership Fellow.
| |||
Board Skills and Qualifications: Capital Structure; Corporate Governance; Finance, Accounting and Risk Management; Legal, Regulatory and Government Affairs; Marketing; Strategic Planning; Current/Previous Senior Executive Experience; Public Company Board Experience
|
John K. Wulff
Independent Director Age: 69 Director since: 2016
Committees: Audit Compensation |
Background and Experience: Mr. Wulff is the former Chairman of the board of directors of Hercules Incorporated, a specialty chemicals company, a position he held from July 2003 until Ashland Inc.s acquisition of Hercules in November 2008. Prior to that time, he served as a member of the Financial Accounting Standards Board from July 2001 until June 2003. Mr. Wulff was previously Chief Financial Officer of Union Carbide Corporation, a chemical and polymers company, from 1996 to 2001. During his 14 years at Union Carbide, he also served as Vice President and Principal Accounting Officer from January 1989 to December 1995, and Controller from July 1987 to January 1989. Mr. Wulff was also a partner of KPMG LLP and predecessor firms from 1977 to 1987. Mr. Wulff is also a member of the board of directors of Celanese Corporation. Within the last five years, Mr. Wulff served as a director of Chemtura Corporation, Moodys Corporation and Sunoco, Inc.
| |||
Board Skills and Qualifications: Finance, Accounting and Risk Management; Current/Previous Senior Executive Experience; Governmental and Regulatory; Capital Structure; Corporate Governance; Global Operations; Mergers and Acquisitions; Public Company Board Experience; Strategic Planning
| ||||
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 13
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS
Our Board held five in-person meetings and four telephonic meetings in 2017. Pursuant to Board policy, Directors are expected to attend all Board and Committee meetings, as well as our annual meeting of shareholders. Each standing Director attended more than 75% of the meetings of the Board and committees of the Board on which such Director serves. All of the standing Directors attended the 2017 Annual Meeting.
The Chairman of the Board is an independent director. We have maintained separate roles for the Chairman of the Board and the CEO for almost 14 years. While we do not have a formal policy in place, the Board evaluates its leadership structure on a periodic basis to ensure it aligns with the evolving circumstances and needs of the Company. The Board believes that its current structure is in the best interest of the Company and its shareholders.
The separation of the roles contributes to the Boards strong and independent oversight of a focused and effective management team. It allows the CEO to focus on the everyday operations of the business while also positioning the Chairman to provide independent counsel and leadership to the Board, CEO, and management team relating to Company operations, governance, and compensation matters. The independent Chairmans key responsibilities include:
| Presiding over meetings of our Board of Directors, executive sessions of our nonmanagement Directors and our annual meeting of shareholders; |
| Briefing the CEO on issues discussed in executive sessions; |
| Facilitating communications among directors and between the CEO and the Board, and supervising the circulation of information to the full Board; |
| Developing, in conjunction with our CEO, and approving the agenda for our Board meetings; |
| Recommending Board committee appointments and responsibilities in conjunction with the Nominating and Governance Committee; |
| Leading the evaluation process of our CEO, with oversight of the annual Board or Committee self-evaluations; |
| Overseeing the periodic review of managements strategic plan; and |
| Carrying out any other responsibilities requested by the CEO or the Board. |
We currently believe that having an independent Chairman also promotes a greater role for the nonexecutive Directors in the oversight of the Company, including oversight of material risks facing the Company, encourages active participation by the independent Directors in the work of our Board of Directors, and enhances our Board of Directors role of representing shareholders interests.
Board Effectiveness, Annual Assessment and Refreshment
The Board is focused on enhancing its performance through a rigorous assessment process of the effectiveness of the Board and its Committees with a view to increasing shareholder value. We have designed our Board evaluation process to solicit input and perspective from all our Directors on various matters, including, but not limited to:
| The effectiveness of the Board and its operations; |
| The Boards leadership structure; |
| Board composition, including the Directors capabilities, experiences and knowledge; |
14 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
| The quality of Board interactions; |
| The effectiveness of Board Committees; |
| Efficiency of Board and Committee meetings; and |
| The evaluation process itself. |
As set forth in its charter, the Nominating and Governance Committee oversees the Board and Committee evaluation process. The process includes written evaluation forms that assess the effectiveness of the Board and its standing Committees and that provide feedback on an unattributed basis. Candid, one-on-one discussions between the Chairman of the Nominating and Governance Committee and each of the other Board members are also conducted and provide additional individual feedback.
In 2017, the Nominating and Governance Committee engaged an independent third party to conduct the evaluations of the Board and our standing committees (Audit, Compensation and Nominating and Governance), and may do so in the future from time to time. The independent third party prepared the applicable evaluation forms and interviewed each Director to obtain additional comments and feedback. Regardless of whether an independent third party is involved in the evaluation process, the results of the assessments are compiled without attribution into a single form and sent to the Directors for a full Board assessment and to each Committee member, for those Committees on which they serve, to identify areas for future improvement. The evaluation results and the feedback received are used to update policies and practices as appropriate. The feedback is also considered by the Nominating and Governance Committee and the full Board when searching for and evaluating future Board nominees to help ensure we are adding the proper mix of subject matter expertise and perspective consistent with the needs of our growing company and our long-term strategy. In response to feedback received form Directors in 2017, areas identified for improvement included gender and experiential diversity, senior-level succession planning, long-term strategy and risk mitigation and continued Board focus on shareholder returns, among others.
During 2017 and early 2018, continuing the process developed and implemented over the previous two years, the full Board, under the guidance of the Nominating and Governance Committee, undertook a thorough review of the skills, qualifications and tenure of our incumbent Directors, as well as the size of the Board, in the context of our long-term strategic plan. The Board was particularly focused on enhancing its expertise in information technology, cybersecurity, banking and finance, as well as seeking nominees who had executive experience and presence and public company board experience. While the Company does not have a formal policy with respect to diversity, the Board believes that building a diverse Board comprised of individuals from different backgrounds and with a range of experiences and viewpoints is desirable.
Through this process, the Board identified Ms. Lute, who has an extensive cybersecurity background and is currently a director of Union Pacific Corporation, and Ms. Stamps, who has extensive banking and finance experience and currently serves on the board of CIT Group Inc., as candidates for election to the Board at the 2018 Annual Meeting. See Director Core Competencies above for additional information.
The graphic below summarizes the robust process undertaken by the Board to identify the new Director nominees in 2018:
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 15
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
Board Oversight of Risk-Mitigation Process
The Board of Directors is responsible for oversight of the Companys risk-assessment and management process.
The Board delegates to the Compensation Committee responsibility for oversight of managements compensation risk assessment, and ensuring that the compensation practices of the Company continue to not encourage excessive risk-taking by management.
The Board delegates other risk-management oversight matters to our Audit Committee. The Audit Committees responsibilities include:
| Direct oversight of our internal audit function, including the organizational structure and staff qualification, as well as the scope and methodology of the internal audit process; and |
| A review, at least annually, of our enterprise risk-management plan to ensure that appropriate measures and processes are in place, including discussion of the major risks, the key strategic plan assumptions considered during the assessment and steps implemented to monitor and mitigate such exposures on an ongoing basis. |
The Audit and Compensation Committees report to the Board, as appropriate, when a matter rises to the level of a material, enterprise-level risk. In addition to the reports from the Audit and Compensation Committees, the Board periodically discusses risk oversight, included as part of its annual detailed corporate strategy review.
The Companys management is responsible for day-to-day risk management. Our Internal Audit, Safety, Security, Corporate Controller, Information Technology, Human Resources, Legal, Business Resiliency, and Treasury Departments serve as the primary monitoring and testing functions for Company-wide policies and procedures, and manage the day-to-day oversight of the risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, technological, compliance, and reporting levels.
We believe that the division of risk-management responsibilities as described above is an effective approach for addressing risks facing the Company.
The Nominating and Governance Committee has determined that all Directors, including our new Nominees but excluding Mr. Flynn, are independent under Company standards and SEC and NASDAQ rules. The Nominating and Governance Committee classifies the following Directors nominated for election at the Annual Meeting as independent: Ms. Hallett, Lute and Stamp and Messrs. Agnew, Bernlohr, Bolden, Griffin, McNabb and Wulff.
Our Nominating and Governance Committee Charter includes categorical standards to assist the Nominating and Governance Committee in making its determination of Director independence within the meaning of the rules of the SEC and the Marketplace Rules of NASDAQ. The Nominating and Governance Committee will not consider a Director to be independent if, among other things, he or she:
| Was employed by us at any time in the last three years; |
| Has an immediate family member who is, or in the past three years was, employed by us as an executive officer; |
| Has accepted or has an immediate family member who has accepted any compensation from us in excess of $120,000 during a period of 12 consecutive months within the three years preceding the determination of independence (other than compensation for Board service, compensation to a family member who is a nonexecutive employee, or benefits under a tax-qualified retirement plan or nondiscretionary compensation); |
| Is, was or has a family member who is or was a partner, controlling shareholder, or executive officer of any organization to which we made or from which we received payments for property or services in the current year or any of the past three fiscal years in an amount that exceeds the greater of $200,000 or 5% of the recipients consolidated gross revenues for the year; |
16 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
| Is or has a family member who is employed as an executive officer of another entity where at any time during the last three years any of the Companys executive officers serve or served on the entitys compensation committee; or |
| Is or has a family member who is a current partner of the Companys independent registered public accounting firm or was or has a family member who was a partner or employee of the Companys independent registered public accounting firm who worked on the Companys audit at any time during the last three years. |
Pursuant to the Nominating and Governance Committee Charter and as further required by NASDAQ rules, the Nominating and Governance Committee made a subjective determination as to each nonemployee Director that no relationship exists which, in the opinion of the Board, would interfere with such individuals exercise of independent judgment in carrying out his or her responsibilities as a Director. As part of such determination, the Nominating and Governance Committee examined, among other things, whether there were any transactions or relationships between AAWW and an organization of which a nonemployee Director or Director Nominee has been a partner, shareholder, or officer within the last fiscal year. The purpose of this review was to determine whether any such relationships or transactions were inconsistent with a determination that a Director is independent.
As part of the Boards ongoing review of the Companys practices and in consideration of specific shareholder feedback, our Board has implemented many compensation, Board and governance enhancements during recent years. The below table provides a summary of these changes.
2017 2018 | ||
Compensation | ||
✓ |
Transition to strict double-trigger standard for all awards, requiring actual separation from service for second trigger (see page 58) | |
✓ |
Addition of relative TSR performance measure to LTI awards to further strengthen pay-for- performance alignment (see page 43) | |
✓ |
Enhanced disclosure around LTI performance target setting (see page 44) | |
✓ |
Increased CEO stock ownership guidelines to 6x base salary to further align CEO incentives with shareholders (see page 50) | |
✓ |
Revisions to peer group to reflect appropriate comparators for our growing and evolving global business (see page 47) | |
✓ |
No increase to our CEOs base salary or bonus award opportunity in over five years (see page 37) | |
✓ |
Compensation member participation in shareholder outreach (see page v) | |
Board | ||
✓ |
Nominated two new directors to the Board in 2018, with a focus on gender diversity, cybersecurity and banking/finance skills (see page 7) | |
✓ |
Significant changes to Board leadership, including new Chairman of the Board in May 2017 and ongoing refreshment of Committee Chairs (see page viii) | |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 17
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
2016 2017 | ||
Compensation | ||
✓ |
Increased the weight of corporate performance goals from 50% to 60% in determining compensation of our NEOs under the AIP | |
✓ |
Enhanced disclosure to clarify rigor of performance goals under the AIP | |
✓ |
Formalized existing practice of granting equity awards subject to vesting periods greater than one year by adding minimum vesting language to 2016 Plan | |
✓ |
Engaged a new independent compensation consultant, Pay Governance | |
Board | ||
✓ |
Additional Board refreshment including one new director added in 2017 and two new directors added in 2016 | |
✓ |
Adopted limits on Director service on other boards in keeping with market best practices and investor input regarding a boards time commitment | |
Governance | ||
✓ |
Added proxy access provisions to our by-laws | |
✓ |
Added enhanced disclosure of our environmental, social and governance policies | |
Additional Changes Prior to 2016 Annual Meeting | ||
Compensation | ||
✓ |
Reduced CEO LTI award opportunity from 4.75 multiple of salary to 3.75 multiple of salary in to be better aligned with peer group levels | |
✓ |
Revised CEO LTI award grant level to be targeted at approximately median of peers | |
Governance | ||
✓ |
Adopted majority voting to elect Directors in uncontested elections |
The outside members of the Board, as well as our Board Committees, meet in executive session (with no management Directors or management present) on a regular basis, as well as upon the request of one or more outside Directors. The sessions have been generally scheduled and led by the Chairman of the Board, and executive sessions of our committees are chaired by the respective committee chair. The executive sessions include topics the outside Directors or Committee members deem appropriate.
The Board of Directors welcomes input and suggestions. Shareholders and other interested parties who wish to communicate with the Board may do so by mail to the Office of the Secretary, Atlas Air Worldwide Holdings, Inc., 2000 Westchester Avenue, Purchase, NY 10577, or e-mail to corporate.secretary@atlasair.com. All communications received by Directors from third parties that relate to matters within the scope of the Boards responsibilities will be forwarded to the Chairman of the Board. All communications received by Directors from third parties that relate to matters within the responsibility of one of the Board committees will be forwarded to the Chairman of the Board and the Chairman of the appropriate committee. All communications received by Directors from third parties that relate to ordinary business matters that are not within the scope of the Boards responsibilities are forwarded to AAWWs General Counsel.
18 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
Code of Ethics and Employee Handbook
Our Audit Committee monitors our Code of Ethics applicable to the CEO, Senior Financial Officers and Members of the Board of Directors. The Code includes certain provisions regarding disclosure of violations and waivers of, and amendments to, the Code of Ethics by covered parties. The Code of Ethics is reviewed on an annual basis. Any person who wishes to obtain a copy of our Code of Ethics may do so by writing to the Office of the Secretary, Atlas Air Worldwide Holdings, Inc., 2000 Westchester Avenue, Purchase, NY 10577. A copy of the Code of Ethics is available in the Corporate Background section of our website at www.atlasair.com under the heading Code of Conduct.
We also have an Employee Handbook and Code of Conduct that sets forth, among other things, the policies and business practices that apply to all employees of any AAWW operating subsidiary in accordance with applicable federal, state and local laws and best practices, with the exception of the pilots of Southern. Southern pilots are currently subject to a separate Employee Handbook that is similar in content to our Employee Handbook and Code of Conduct. We are commencing a comprehensive review of our Employee Handbook and Code of Conduct in 2018 and anticipate having a new single Employee Handbook for all employees of AAWW operating subsidiaries by year-end. The Employee Handbooks address such topics as compliance with laws, moral and ethical conduct, equal employment opportunity, promoting a work environment free from harassment or discrimination, paid time off, work place leaves, the protection of intellectual property and proprietary information, and numerous other personal policies and procedures.
Environmental, Social and Governance Issues
As a leading global provider of outsourced aviation operating services, we encounter and manage a broad range of environmental, social and governance (ESG) issues. We have identified the following ESG issues, by category, as among the most relevant to our business and of highest interest to our key stakeholders:
Environmental:
| Setting groundwork to participate in CORSIA, the global carbon emissions program governing international flying starting on January 1, 2021 |
| Our current fleet consists primarily of 747-8F, 747-400F and 777F aircraft, which have reduced environmental impact and noise, and are modern assets that we believe are superior in terms of fuel efficiency, range, capacity and loading capabilities |
| Our newer-model -8F aircraft are about 15% more fuel-efficient than our 400s, which translates into approximately 15% lower carbon dioxide emissions |
| The -8Fs are also approximately 30% less noisy than 747-400 aircraft |
| We conserve fuel wherever possible through our FuelWise fuel management information system, which uses our existing data to analyze fuel consumption performance, enabling us to track fuel-burn rates more accurately and efficiently and to identify additional opportunities to conserve fuel |
| We work with our customers to plan routes that are more fuel-efficient |
| We participate in industry and governmental initiatives to optimize air traffic management systems, where advances could result in substantial reductions in fuel use and emissions and fewer interruptions at airports |
| Our record on the ground is also very strong, with no significant spills of fuel, deicing fluids or other liquids |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 19
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
Social
| We are an Equal Opportunity Employer |
| We have affirmative action plans in place to ensure that qualified applicants and employees are receiving an equal opportunity for recruitment, selection, advancement and every other term and privilege associated with employment with AAWW |
| We have a zero tolerance policy for harassment, discrimination or retaliation of any kind in the workplace |
| We seek to attract talented individuals as employees and to develop them to their fullest potential |
| We also seek to offer our employees highly competitive compensation and benefit packages to retain them for the long term |
| The health and safety of our employees, particularly our crewmembers, is paramount, and our health and safety track record reflects this commitment |
| Our crewmembers and dispatchers are represented by the International Brotherhood of Teamsters, Aviation Division |
| We encourage diversity and inclusiveness in our workforce |
| We have specific policies in place prohibiting human trafficking |
| We have provided cost-free charter flights for disaster relief and have encouraged our employees to support disaster relief and related activities |
| We sponsor fundraising efforts and employee volunteer events for nonprofit organizations such as Junior Achievement (with employees regularly volunteering at socioeconomically disadvantaged area schools) and the American Red Cross, including Company matches of employee donations |
Governance
| We are firmly committed to maintaining a strong corporate governance program, which reflects best practices |
| We endorse the concept of Board and Committee refreshment, which has resulted in the election of five new Board members over the last two years (assuming all nominees are elected at the 2018 Annual Meeting) and the rotation of the Chairman of the Board and the Chairs of our three standing Committees over the last three years |
| We have a rigorous and effective Board and Committee evaluation process in place, which evaluations are conducted internally or by an independent third party. The results and feedback of the evaluations are used to identify areas of future improvement, to update policies and practices, as appropriate, and to help the Board and the Nominating and Governance Committee evaluate future Board nominees to ensure we are adding the proper mix of subject matter expertise and perspectives to the Board |
| We require our employees to act responsibly in full compliance with all applicable laws and standards and to maintain the highest level of ethical conduct in their dealings with customers, suppliers and other stakeholders |
| We provide recurrent compliance training to our employees that supports their ability to act responsibly in full compliance with all applicable laws and standards |
| We are committed to maintaining a strong control environment and to making effective controls an integral part of our routine business practices and having effective checks and balances in place so that we can address many issues before they become larger problems |
| We are committed to frequent and extensive shareholder engagement, which has included Board member participation, to learn what issues are important to the owners of your Company |
20 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
| Your Board of Directors is committed to enhancing shareholder value and has approved a long-term strategic plan, which is designed to achieve this objective and which is being implemented by senior management under the Boards close supervision |
Compensation of Nonemployee Directors
The compensation of our nonemployee Directors is reviewed by the Compensation Committee on a periodic basis. In 2017, the Compensation Committee reviewed the current compensation amounts for nonemployee directors in tandem with Pay Governance LLC, the Committees independent compensation consultant. Based on such review, the Committee determined that the compensatory arrangements currently in place for the nonemployee Directors are reasonably aligned with Company size and that no changes to such arrangements would be made at present.
Compensation for our nonemployee Directors consists of the following:
Cash Retainer
| Each of our nonemployee Directors receives a $95,000 annual cash retainer, payable quarterly in advance. |
Equity Compensation Restricted Stock Units
| On the date of our annual meeting of shareholders, each of our nonemployee Directors receives an annual grant of restricted stock units for a number of shares having a value (calculated based on the closing price of our Common Stock on the date of grant) of $110,000. |
| The RSUs generally vest and are automatically converted into common shares on the earlier of (i) the date immediately preceding the Companys next succeeding annual meeting of shareholders or (ii) the one-year anniversary of the date of grant. |
| Nonemployee directors have the option to defer the receipt of common shares resulting from the vesting of their restricted stock units. |
Chairman Position
| The Chairman of the Board receives $150,000 annually; and |
| The Chairs of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee receive $20,000, $15,000 and $15,000, respectively, per year. |
Meeting Fees
| Directors do not receive regular meeting fees. However, if more than six meetings of the Board or any Committee occur (determined independently) in any given year, meeting fees are paid at the rate of $1,500 per meeting (with the Chairman of the Board or the Committee Chair being paid at the rate of $3,000 for any such meeting). |
Medical, Dental and Vision Care Insurance
| Optional medical, dental and vision care coverage have been made available to certain nonemployee Directors and their eligible dependents on terms and at a premium cost similar to that charged to Company employees. Eligibility for this benefit has ended, but remains in effect for nonemployee Directors whose original participation began in or before 2011. |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 21
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
| Certain nonemployee Directors who opt not to stand for re-election to the Board after reaching age 60 and who have 10 or more years of Board service are eligible to participate in the Companys medical plans (at full premium cost to the Director) until they become eligible for Medicare benefits. Eligibility for this benefit has ended, but remains in effect for nonemployee Directors whose original participation began in or before 2011. |
2017 Total Compensation of Nonemployee Directors
The following table shows (i) the cash amount paid to each nonemployee Director for his or her service as a nonemployee Director in 2017, and (ii) the grant date fair value of restricted stock units awarded to each nonemployee Director in 2017, calculated in accordance with the accounting guidance on share-based payments. Mr. Flynn did not receive any additional compensation for his service as a Director in 2017.
Name |
Fees Paid in Cash ($) |
Stock Awards ($)(1) |
Total ($) |
|||||||||
Robert F. Agnew |
180,500 | 109,998 | 290,498 | |||||||||
Timothy J. Bernlohr |
125,500 | 109,998 | 235,498 | |||||||||
Charles F. Bolden, Jr. |
74,250 | 109,998 | 184,248 | |||||||||
James S. Gilmore III |
110,000 | 109,998 | 219,998 | |||||||||
Bobby Griffin |
101,000 | 109,998 | 210,998 | |||||||||
Carol B. Hallett |
120,500 | 109,998 | 230,498 | |||||||||
Frederick McCorkle |
182,000 | 109,998 | 291,998 | |||||||||
Duncan J. McNabb |
110,000 | 109,998 | 219,998 | |||||||||
John K. Wulff |
102,500 | 109,998 | 212,498 |
(1) | These units vest on the date of the 2018 Annual Meeting. The grant date fair value was $48.65 per share. |
Nonemployee Directors Outstanding Equity Awards at Fiscal Year-End 2017
The table below shows outstanding equity awards for our nonemployee Directors as of December 31, 2017. Market values reflect the closing price of our Common Stock on the NASDAQ Global Market on December 31, 2017, which was $58.65 per share.
Name | Grant Date |
Number of Shares or (#)(1) |
Market Value
of ($) | ||||||||||||
Robert F. Agnew |
5/24/17 | 2,261 | 132,608 | ||||||||||||
Timothy J. Bernlohr |
5/24/17 | 2,261 | 132,608 | ||||||||||||
Charles F. Bolden, Jr. |
5/24/17 | 2,261 | 132,608 | ||||||||||||
James S. Gilmore III |
5/24/17 | 2,261 | 132,608 | ||||||||||||
Bobby Griffin |
5/24/17 | 2,261 | 132,608 | ||||||||||||
Carol B. Hallett |
5/24/17 | 2,261 | 132,608 | ||||||||||||
Frederick McCorkle |
5/24/17 | 2,261 | 132,608 | ||||||||||||
Duncan J. McNabb |
5/24/17 | 2,261 | 132,608 | ||||||||||||
John K. Wulff |
5/24/17 | 2,261 | 132,608 |
(1) | These units vest on the date of the 2018 Annual Meeting. The grant date fair value was $48.65 per share. |
22 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
Board and Committee Information
Our Board maintains three standing committees, an Audit Committee, Compensation Committee, and Nominating and Governance Committee, each of which has a charter that details the committees responsibilities. The charters for all the standing committees of the Board of Directors are available in the Corporate Background section of our website located at www.atlasair.com and by clicking on the Corporate Governance link. The charters are also available in print and free of charge to any shareholder who sends a written request to the Secretary at Atlas Air Worldwide Holdings, Inc., 2000 Westchester Avenue, Purchase, NY 10577.
Nominating and Governance Committee
The Nominating and Governance Committee currently consists of Mr. McNabb (Chairman), Messrs. Agnew, Bernlohr and Griffin, and Ms. Hallett, each of whom is an independent Director within the meaning of the applicable NASDAQ rules. The principal functions of the Nominating and Governance Committee are to:
| Identify and approve individuals qualified to serve as members of our Board; |
| Select Director Nominees for the next annual meeting of shareholders; |
| Review at least annually the independence of our Directors; |
| Oversee our Corporate Governance Principles; and |
| Perform or oversee an annual review of the CEO, the Board and its committees. |
The Nominating and Governance Committee held four in-person meetings and one telephonic meeting in 2017. In addition, a subcommittee of the Nominating and Governance Committee met several times in 2017 and in early 2018 to interview and evaluate candidates for the Board.
Evaluation of Director Nominees and Expansion of the Board
Our Nominating and Governance Committee is responsible for reviewing and developing the Boards criteria for evaluating and selecting new Directors. The Nominating and Governance Committees charter sets forth the criteria for skills and characteristics for Directors (see Election of Directors for the qualifications and experience of current Directors). The Nominating and Governance Committee identifies new candidates from a variety of sources, including recommendations submitted by shareholders.
The Nominating and Governance Committee strives to maintain an independent Board with broad and diverse experience and judgment that is committed to representing the long-term interests of our shareholders. New and incumbent Directors are individually evaluated from a skills and characteristics perspective on a number of different factors, including the following traits: high personal standards; the ability to make informed business judgments; literacy in financial and business matters; the ability to be an effective team member; a commitment to active involvement and an ability to give priority to the Company; no affiliations with competitors; achievement of high levels of accountability and success in his or her given fields; experience in the Companys business or in professional fields or other industries or as a manager of international business so as to have the ability to bring new insight, experience or contacts and resources to the Company; no direct affiliations with major suppliers, customers or contractors; and preferably previous public company board experience with good references.
As part of the Nominating and Governance Committees ongoing evaluation of the Boards composition, in 2017 and early 2018, our Board named Ms. Lute and Ms. Stamps to the slate of the 2018 Director Nominees, which would maintain the size of the Board at 10. Ms. Lute and Ms. Stamps were recommended as Director candidates by the Nominating and Governance Committee following referrals by our current Directors as part of the Nominating and Governance Committees process for identifying potential Directors. Ms. Lute has notable experience in cybersecurity, information technology, legal, regulatory and government affairs, and military affairs. Ms. Stamps has extensive experience in finance, banking, accounting and risk management, legal, regulatory and government affairs and corporate governance. Both Ms. Lute and Ms. Stamps have executive leadership experience, and both have public-company board experience.
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 23
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
The Nominating and Governance Committee will also consider whether potential Nominees are independent, as defined in applicable rules and regulations of the SEC and NASDAQ. The Board will nominate new Directors only from candidates identified, screened, and approved by the Nominating and Governance Committee. The Nominating and Governance Committee uses the criteria specified above when considering candidates for a Board seat and then searches for candidates that best meet those criteria without limitations imposed on the basis of race, gender, or national origin. The Board will also take into account the nature of and time involved in a Directors service on other boards in evaluating the suitability of individual Directors and making its recommendation to AAWWs shareholders. Service on boards of other organizations must be consistent with our conflict of interest policies applicable to Directors and other legal requirements.
While the Company does not have a formal policy regarding the diversity of its Directors, the Board believes that diversity with respect to gender, ethnicity, background, professional experiences and perspectives is an important element in the Board selection process. Both the Nominating and Governance Committee and the full Board will consider attributes such as race, gender, cultural background and professional experience when reviewing candidates for the Board and in assessing the Boards overall composition. The goal is to achieve a Board that provides effective oversight of the Company through the appropriate balance of diversity of perspectives, experience, expertise, skills, specialized knowledge and other qualifications and attributes of the individual Directors.
Our Nominating and Governance Committee will consider shareholder recommendations for candidates to serve on the Board, provided that such recommendations are made in accordance with the Nominating and Governance Committees policy on security-holder recommendations of Director Nominees (the Shareholder Nominating Policy), which is subject to a periodic review by the Nominating and Governance Committee. Among other things, the Shareholder Nominating Policy provides that a shareholder-recommendation notice must include the shareholders name, address, and the number of shares beneficially owned, as well as the period of time such shares have been held, and should be submitted to the Office of the Secretary, Atlas Air Worldwide Holdings, Inc., 2000 Westchester Avenue, Purchase, NY 10577. A copy of our current Policy on Security Holder Recommendation of Director Nominees is available in the Corporate Background section of our website at www.atlasair.com. In evaluating shareholder Nominees, the Board and the Nominating and Governance Committee seek to achieve a balance of knowledge, experience, and capability. As a result, the Nominating and Governance Committee evaluates shareholder Nominees using the same membership criteria set forth above.
Corporate Governance Principles
We annually review our Corporate Governance Principles, believing that sound corporate governance practices provide an important framework to assist the Board in fulfilling its responsibilities. The business and affairs of AAWW are managed under the direction of our Board, which has responsibility for establishing broad corporate policies, setting strategic direction, and overseeing management. An informed, independent, and involved Board is essential for ensuring our integrity, transparency, and long-term strength, and maximizing shareholder value. The Corporate Governance Principles address such topics as codes of conduct; Director nominations and qualifications; Board committees; Director compensation; conflicts and waivers of compliance; powers and responsibilities of the Board; Board independence; serving on other boards and committees; meetings; Director access to officers and other employees; shareholder communications with the Board; annual Board evaluations; financial statements and disclosure matters; delegation of power; and oversight and independent advisors. A copy of our Corporate Governance Principles is available in the Corporate Background section of our website at www.atlasair.com.
The Audit Committee of the Board of Directors currently consists of five outside Directors: Messrs. Bernlohr (Chairman), Bolden, Gilmore, McNabb and Wulff, each of whom is an independent Director within the meaning of the applicable rules and regulations of the SEC and NASDAQ (see also Director Independence above). The Board has determined that Messrs. Bernlohr and Wulff are audit committee financial experts as defined under applicable SEC rules.
24 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
The Audit Committees primary function, as set forth in its written charter (available in the Corporate Background section of our website at www.atlasair.com under the heading Audit Committee Charter) is to assist the Board in overseeing the:
| Quality and integrity of the financial statements of the Company; |
| Qualifications and independence of our independent registered public accounting firm; |
| Performance of the Companys internal audit function and independent registered public accounting firm; |
| Compliance with legal and regulatory requirements by the Company; and |
| Effectiveness of the Companys financial reporting process, disclosure practices and systems of internal controls. |
The Audit Committee is also responsible for overseeing the Companys Code of Ethics (see also Code of Ethics above) and related party transactions. The Audit Committee held four in-person meetings and four telephonic meetings in 2017.
Evaluation of Independent Registered Public Accounting Firm
As noted above, the Audit Committee assists the Board in overseeing the independent registered public accounting firms qualifications, independence and performance. The Audit Committee is also responsible for appointing the independent registered public accounting firm and approving, in advance, audit and permitted nonaudit services in accordance with the Committees preapproval policy (see also Proposal No. 2 below).
The Audit Committee received from AAWWs independent registered public accounting firm, PricewaterhouseCoopers LLP (PwC), the written communications required by applicable requirements of the Public Company Accounting Oversight Board regarding communications with the Audit Committee concerning independence and satisfied itself as to the independence of PwC.
In addition to PwCs independence, the Audit Committee considered several other factors in deciding whether to reappoint PwC, including the quality of PwCs staff and work; PwCs procedures related to quality control; the communication and interaction with our PwC team; PwCs capability and expertise to perform an audit of a company having the complexity of AAWWs business; the length of time PwC has served as the Companys independent registered public accounting firm; the appropriateness of PwCs fees; and the potential impact of changing our independent registered public accounting firm. As a result, the Audit Committee has selected PwC as the Companys independent registered public accounting firm for the year ending December 31, 2018.
Audit Committee Report
AAWW management has responsibility for preparing the Companys financial statements and PwC is responsible for auditing those financial statements. In this context, the Audit Committee has reviewed and discussed AAWWs audited consolidated financial statements as of and for the fiscal year ended December 31, 2017 with management and with PwC. The Audit Committee discussed with PwC the matters required to be discussed by Auditing Standard No. 1301 Communications with Audit Committees.
Based upon its reviews and discussions, including the matters related to PwCs independence, as described above, the Audit Committee recommended, and the Board of Directors approved, that AAWWs audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for filing with the SEC.
THE AUDIT COMMITTEE
Timothy J. Bernlohr, Chair
Charles F. Bolden, Jr.
James S. Gilmore III
Duncan J. McNabb
John K. Wulff
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 25
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
Duties and Responsibilities
The Boards Compensation Committee assists the Board in discharging and performing its duties regarding the compensation of our executives, including our NEOs, executive succession planning, and other matters. The Compensation Committee also is the administrator of our long-term incentive award and annual bonus plans.
The Compensation Committee is also responsible for:
| Reviewing, evaluating and establishing compensation plans, programs and policies for, and reviewing and approving the total compensation of, our senior executives at the level of executive vice president and above, including our CEO; |
| Monitoring the search for, and approving the proposed compensation for, all senior executives at the level of executive vice president and above and periodically reviewing and making recommendations to the full Board regarding the compensation of Directors; and |
| Retaining and overseeing the independent compensation consultant that provides advice regarding executive and Director compensation matters. |
Processes and Procedures
Following approval of the annual budget, either before or during the first quarter of each year, the Committee establishes the minimum financial performance objective required before any annual incentive award payment may be made, as well as the years objectives for financial, on-time customer service reliability and individual performance goals and objectives for senior executives. All are taken into account in setting the performance range for each such executive and ultimately in determining the amount of each such executives annual award payment, if any. The Committee establishes these criteria, with the advice of the independent compensation consultant and outside counsel, as appropriate, after reviewing information submitted to the Committee by the CEO and Chief Human Resources Officer (CHRO) (at the request of the Committee). Our CEO and CHRO also provide information to the Committee regarding annual and long-term incentive plans that the Committee considers, with the advice of the independent compensation consultant and outside counsel, in its determination of awards under those plans.
The Compensation Committee is required by its charter to meet at least four times annually. During 2017, the Compensation Committee held four in-person meetings and two telephonic meetings and acted once by written consent. In 2017, the Compensation Committee consisted of four outside Directors, Ms. Hallett (Chair), Mr. Wulff, Mr. Griffin and Mr. McCorkle, each of whom is an independent Director within the meaning of applicable SEC and NASDAQ rules.
Compensation Determination Process
The Compensation Committee has primary responsibility for determining and approving, on an annual basis, the compensation of our CEO and other executive officers. The Compensation Committee receives information and advice from its independent compensation consultant, as well as from our human resources, finance and legal departments and management to assist in compensation determinations.
| Role of Independent Compensation Consultant |
| The Compensation Committee engaged the services of Pay Governance LLC (Pay Governance) in 2017, which reported directly to the Committee and provided no other services to the Company or any of its affiliates. For 2017, the Committee assessed the independence of Pay Governance pursuant to the SEC and NASDAQ rules and concluded that no conflict of interest existed that would prevent Pay Governance from independently representing the Compensation Committee. |
26 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
| Pay Governance provides advice and analysis to the Compensation Committee on the design, structure and level of executive and director compensation, and, when requested by the Compensation Committee, attends meetings of the Compensation Committee and participates in executive sessions without members of management present. The independent compensation consultant reports directly to the Compensation Committee, and the Compensation Committee reviews, on an annual basis, the independent compensation consultants performance and provides the independent compensation consultant with direct feedback on its performance. |
| Role of Our Senior Executives |
| While the Compensation Committee has the responsibility to approve and monitor all compensation for our executive officers, management plays an important role in determining executive compensation. Management, at the request of the Compensation Committee, recommends financial goals that drive the business and works with Pay Governance to analyze competitive market data and to recommend compensation levels for our executive officers. Our CEO and CHRO likewise assist the Compensation Committee by providing their evaluation of the performance of our other executive officers and recommending compensation for NEOs other than themselves, including adjustments to annual incentive compensation, based on individual performance. Any individual whose performance or compensation is to be discussed at a Compensation Committee meeting does not attend such meeting (or the applicable portion of such meeting) unless specifically invited by the Compensation Committee, and the CEO is not present during voting or deliberations regarding his compensation. |
The Committees Risk Assessment of Our Compensation Policies
The Compensation Committee is aware of the need to routinely assess the Companys compensation policies and practices as they relate to the Companys risk management and whether the structure and administration of the Companys compensation and incentive programs could promote imprudent in excessive risk-taking. With the support of Pay Governance, the Compensation Committee considered the structure and administration of our compensation program and determined that our program is appropriately balanced and does not promote imprudent or excessive risk-taking. Significant factors contributing to their conclusion included:
| Extent of oversight. The Compensation Committee, with support supplied from members of management, regularly reviews the performance of our compensation plans. |
| Governance. Oversight roles are clearly defined throughout the Company to ensure that pay plans are aligned with business goals and risk tolerances, stress tested under realistic assumptions, and balanced between corporate standards and business-unit autonomy. |
| Risk profile and balance within the incentive structure. Our plans are designed by the Compensation Committee to appropriately balance fixed and variable pay, cash and equity, short- and long-term incentives, and corporate, business-unit and individual performance goals. |
| Plan design. Our plans are designed to avoid such features as overly steep incentive slopes, unreasonable goals or thresholds that may incentivize unnecessary risk-taking, uncapped payouts, rigidly formulaic awards, undue focus on any one element of compensation, and misaligned timing of payouts and we maintain risk mitigating features including the Compensation Committees retained discretion with respect to assessing awards, clawbacks, and shareholding requirements. |
| Performance metrics. Performance metrics reflect risk and use of capital, quality and sustainability of results and do not provide an incentive to management to seek short-term results that encourage high-risk strategies designed to exact short-term results at the expense of long-term performance and value. Starting with long-term incentive awards issued in 2018, such awards will contain a direct shareholder-return metric, as described in more detail in the Compensation Discussion and Analysis section. |
| Individual Performance and Discretion. Annual incentive awards are determined, in part, based on the Committees evaluation of individual performance and contributions. Further, the Committee may exercise a certain amount of discretion in approving final award payouts, which mitigates the potential for inappropriate risk-taking that can result from a strict application of formulaic compensation arrangements. |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 27
CORPORATE GOVERNANCE, BOARD AND COMMITTEE MATTERS |
| Clawback Policy. The Compensation Committee has adopted a clawback policy, pursuant to which, the Company may seek to recoup certain incentive-based compensation in the event the Company is required to restate its publicly reported financial statements due to material noncompliance with any financial reporting requirement under the securities laws as a result of misconduct. |
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee serves as a member of the Board of Directors or the compensation committee of any entity that has one or more of our executive officers serving as members of the Board or Compensation Committee.
28 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION DISCUSSION AND ANALYSIS
Our Compensation Discussion and Analysis (CD&A) describes Atlas Airs executive compensation program, including total 2017 compensation, for our named executive officers listed below:
William J. Flynn |
President and Chief Executive Officer | |
John W. Dietrich |
Executive Vice President and Chief Operating Officer | |
Michael Steen |
Executive Vice President and Chief Commercial Officer | |
Adam Kokas |
Executive Vice President, General Counsel, Chief Human Resources Officer and Secretary | |
Spencer Schwartz |
Executive Vice President and Chief Financial Officer |
The CD&A and the Executive Compensation Tables are organized as follows:
Section
|
Subject
|
Page
| ||
Overview
|
◾ 2017 Performance Highlights and Key Achievements
|
30
| ||
|
31
| |||
◾ Program Design and Say-on-Pay Responsiveness
|
31
| |||
◾ Pay for Performance in Action
|
34
| |||
◾ Best Practices and Risk Mitigation
|
35
| |||
Discussion of our Compensation Program
|
||||
|
37
| |||
|
37
| |||
◾ Performance-Based Compensation: Annual and Long-Term Incentive Compensation
|
37
| |||
|
38 | |||
◾ Long-Term Incentive Compensation
|
41
| |||
|
46
| |||
|
47
| |||
◾ Other Elements of Compensation
|
49
| |||
◾ Additional Compensation Policies
|
50
| |||
|
50
| |||
|
50
| |||
|
50
| |||
|
50
| |||
|
51 | |||
Compensation Tables and Explanatory Notes
|
◾ 2017 Summary Compensation Table
|
52
| ||
◾ 2017 Grants of Plan-Based Awards
|
54
| |||
◾ 2017 Outstanding Equity Awards
|
55
| |||
◾ 2017 Options Exercises and Stock Vested
|
56
| |||
◾ Nonqualified Deferred Compensation
|
56
| |||
|
57
| |||
◾ Potential Payments Upon Termination or Change of Control
|
58
|
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 29
COMPENSATION DISCUSSION AND ANALYSIS |
30 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION DISCUSSION AND ANALYSIS |
32 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION DISCUSSION AND ANALYSIS |
34 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION DISCUSSION AND ANALYSIS |
36 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components | Base Salary | 2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Discussion of Our Compensation Program
Three primary components for our NEOs compensation include (1) Base Salary, (2) Annual Incentives and (3) Long-Term Incentives. See Primary Components of NEO Composition on page 34 as well as below for additional details on our compensation components.
Purpose: Compensate executives for their leadership, management responsibility, experience, sustained high level of performance, and contribution to our success.
Process for setting salaries: The amount of any senior executive salary increase has been determined by the Compensation Committee, in consideration of a number of factors, including but not limited to the nature and responsibilities of the position; level of performance of the individual; expertise of the individual; advice of the Compensation Committees independent compensation consultant, including survey data; and recommendations of the CEO (except regarding his own salary) and the Chief Human Resources Officer (except regarding his own salary).
Salary levels for NEOs are generally reviewed annually by the CEO and the Compensation Committee as part of the performance review process.
Salary in 2017: The Compensation Committee made no adjustments to the salary for the CEO. The Compensation Committee has not increased the salary for the CEO in five years.
The Compensation Committee has not increased salaries for the other NEOs since 2014, except in February 2015 for Mr. Steen whose annual base salary was increased by $20,000 in connection with his promotion to President and CEO of the Companys Titan dry leasing subsidiary, while also retaining his EVP position for AAWW.
|
The 2017 annual base salary rates for Messrs. Flynn, Dietrich, Steen, Kokas and Schwartz were, respectively, $1,035,000, $665,000, $600,000, $537,000 and $525,000.
Performance-Based Compensation: Annual and Long-Term Incentive Compensation
The Compensation Committee takes a holistic approach to incentive compensation, using a combination of related short- and long-term performance-based incentives to encourage achievement of the Companys annual, as well as longer-term, strategic goals.
|
At-Risk Philosophy:
The Compensation Committee believes that a significant portion of a senior executives compensation should be at-risk, based upon the Companys financial and operating performance. Performance-based compensation aligns senior executive compensation with our goals for corporate financial and operating performance and encourages a high level of individual performance. For 2017, 66.5% of our CEOs maximum total direct compensation opportunity (base salary and maximum payout opportunity of annual and long-term incentive awards granted in 2017) was performance-based. Beginning in 2018, an even greater portion of our CEOs compensation will be at-risk due to changes to our performance-based long-term incentive awards, described further below including the addition of a TSR modifier.
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 37
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components Annual Incentive Plan | 2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Annual cash incentive compensation awards to our executives are made under our AIP. The AIP is part of the Companys 2016 Incentive Plan. Bonuses are payable based on the achievement of the adjusted net income (ANI), on-time customer reliability, and individual business objectives as further described below. As a preliminary matter, the Company must generate a threshold level of ANI for any award to be payable under the AIP.
Each of our executives is assigned a minimum threshold, target bonus opportunity and a maximum bonus opportunity. The 2017 bonus opportunity range for each executive is set forth in the table below:
Executive | Range of Bonus as % of Base Salary | |
Mr. Flynn |
75 - 100 - 200% | |
Mr. Dietrich |
67.5 - 90 - 180% | |
Mr. Steen |
67.5 - 90 - 180% | |
Mr. Kokas |
63.75 - 85 - 170% | |
Mr. Schwartz |
63.75 - 85 - 170% |
How We Set Our AIP Incentive Metrics:
We base a significant portion of our executives compensation on the Companys financial and operating performance to align senior executive compensation with our goals for corporate financial as well as operating performance and to encourage a high level of individual performance. The annual metrics upon which our incentive plans are structured are designed to drive, on an integrated basis, the achievement of key business, financial, on-time customer reliability, and operational annual results, as well as to recognize the individual contributions of our executives towards these goals.
In designing the annual incentive awards for our executives, the Compensation Committee considers the Board-approved annual budget, as well as short- and long-term strategic goals, and then designs the annual targets, including adjusted net income, around the Board-approved budget and strategic plan, which is consistent with the earnings framework that we provide publicly in our related earnings release. As described below, each of our AIP metrics is set at a challenging, rigorous level, which results in payouts only for strong performance.
38 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Base Salary | Main Components Annual Incentive Plan | 2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Alignment Between Our Performance, Our Strategy and Our AIP Incentive Metrics:
Set forth below are the metrics used under our AIP performance incentive plans in 2017 to provide appropriate rewards for prudent risk-taking, key financial performance and objective results in support of our business strategy. In addition, we believe that our performance metrics align and underscore the link between incentive compensation and the successful execution of our business strategy, and reflect our ongoing commitment to a pay-for-performance compensation philosophy.
Annual Incentives | ||||
Company Financial Performance Metrics |
Weighting | Link to Company | ||
Adjusted Net Income* |
60% | Aligned with the creation of shareholder value and the achievement of objective relevant financial performance targets.
| ||
On-time customer reliability | 20% |
Objective, measurable goals that provide an incentive to management to meet or exceed challenging standards set by our customers in the applicable service agreements (maintaining superior on-time customer reliability is essential to differentiating AAWW from its competitors and strengthening long-term customer relationships).
|
Individual Performance Metrics | ||||
Individual performance objectives | 20% | Tied directly to the annual and long-term goals set in our board-approved annual operating budget and long-term strategic plan, including continuous improvement and cost savings, diversifying our business, and enhancing our financial results.
|
* | We use Adjusted Net Income (ANI) to measure our financial results. ANI excludes certain income and expense items that will never impact cash, and provides the best measure of our annual financial results. In addition, as a result of warrant accounting, our diluted shares outstanding fluctuate as a function of our share price throughout the year, making an absolute metric (ANI) more useful for our investors and analysts than a per-share metric. |
Note: Detailed quantitative Company financial performance goals for our incentive compensation plans are disclosed for the completed 2017 fiscal year, and due to potential for competitive harm, 2018 goals will be disclosed in next years Proxy Statement.
2017 AIP Payout
Based on strong achievement of our ANI, on-time customer reliability, and individual performance objectives weighted for each executive as set forth immediately above and below, the Compensation Committee determined an AIP payout for 2017 at 1.76x of Target for our NEOs. The 2017 AIP as a percentage of salary for Messrs. Flynn, Dietrich, Steen, Kokas and Schwartz was 176%, 158%, 158%, 150% and 150%, respectively. Actual bonus amounts paid to Messrs. Flynn, Dietrich, Steen, Kokas, and Schwartz under the AIP are included in the Summary Compensation Table for Fiscal 2017 under Non-Equity Incentive Plan Compensation.
Adjusted Net Income Objective Metric. The most heavily weighted performance factor in the 2017 AIP was adjusted net income (ANI). For purposes of the AIP, the ANI performance range was (1) a threshold amount of $94.29 million, (2) $125.72 million for the target amount, and (3) $138.29 million representing maximum achievement. For 2017, ANI was $134.4 million, or 1.69x of target (making 2017 ANI approximately 18% higher than 2016 ANI).
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 39
COMPENSATION DISCUSSION AND ANALYSIS |
Base Salary | Main Components Annual Incentive Plan | 2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Our ANI target setting under the AIP is designed to be rigorous. The target amount of $125.72 million in 2017 represented an approximately 10% increase over the Companys actual ANI of $114.3 million in 2016.
|
* | ANI is a non-GAAP measure. A reconciliation to the most directly comparable GAAP measure is contained in Exhibit A attached hereto. |
On-Time Customer Reliability Objective Metric. An additional objective performance metric that was used to determine 2017 AIP payments was our on-time customer reliability. Our 2017 on-time customer reliability goals are objective, measurable goals that are set to meet or exceed challenging standards set forth in our customer contracts. In 2017, our weighted overall on-time performance was achieved at 1.73x of Target. While such specific goals are customer-specific and proprietary, they are all very aggressive and denote a high level of on-time performance.
2017 Individual Performance Objectives. Individual annual performance objectives for our NEOs are reviewed with and approved by the Compensation Committee early in the year, or late in the preceding year, when the Companys operating plan is being approved by the Board of Directors. These individual performance objectives are based in large part on our annual business plan and our long-term strategic plan, including continuous improvement and cost savings, diversifying our business, and enhancing our financial results, among others.
Our Compensation Committee reviewed each NEOs 2017 MBO accomplishments in detail and certified that each of our NEOs exceeded their individual performance objectives, resulting in a 2x Target performance factor.
2017 Individual Performance Objectives for our NEOs included:
Executive / Company Long- Term Strategic Plan Objective |
Sample 2017 Performance Objective | Sample 2017 Accomplishment | ||
Mr. Flynn
Recalibrate and Execute the Companys Strategic Plan; Develop and Structure Corporate Balance Sheet to Fund Growth Initiatives |
Support plans to diversify and grow revenue and profitability, including the recalibration of the companys strategic plan
Continue development of the Atlas fleet plan to provide for customer growth and fleet modernization
|
✓ Delivered record revenues an increase of 17% and 20% volume growth
✓ Successfully acquired, converted and on-boarded all 11 required aircraft for Amazon in 2017 | ||
Mr. Dietrich
Execute Strategic Plan; Implement Long-Term Labor Strategy |
Facilitate and lead the integration and merger with Southern Air, including pursuit of a Single Operating Certificate (SOC)
Execute against the Companys long-term strategic plan with respect to Amazon |
✓ Successfully integrated Southern Air into Atlas on time and on budget, achieving transactional synergies well beyond the business case
✓ Completed all critical SOC requirements and positioned to implement SOC at Company discretion
✓ Oversaw and managed the operational implementation of the Amazon network, including crew training, station start-ups, aircraft conversion and on-boarding of the 11 Amazon aircraft in 2017
|
40 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Base Salary | Performance-Based Incentives | 2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Executive / Company Long- Term Strategic Plan Objective |
Sample 2017 Performance Objective | Sample 2017 Accomplishment | ||
Mr. Steen
Strategic Plan and Business Development; Develop and Implement Titan Growth Plan |
Identify, engage and realize opportunities to expand scope and drive growth of company operations and footprint
Develop and execute specific fleet-type strategies to support growth of Titan business
|
✓ Achieved record placements 10 placements with 7 new customers
✓ Delivered record Titan revenues of $119M in 2017 (vs. $105M in 2016) | ||
Mr. Kokas
Facilitate Growth Initiatives; Develop Organization to Deliver the Strategic Plan |
Successfully manage Amazon ramp-up
Achieve key recruiting and retention assignments to support growth plan |
✓ Provided legal advice, led negotiations and created documentation relating to various Amazon agreements and relationship development, including overseeing transactions relating to delivery of 11 aircraft and securing of 20 (plus spare) total
✓ Oversee talent management, employee engagement, diversity and inclusion initiatives relating to existing employees and over 15% increase in ground and crew new-hires in 2017.
| ||
Mr. Schwartz
Recalibrate and Execute the Strategic Plan to Enhance Shareholder Value; Develop and Structure the Balance Sheet to Fund Growth Initiatives |
Develop the Atlas fleet plan and determine financing initiatives to address growth while maintaining a strong balance sheet
Support plans to diversify and grow revenue and profitability, including the recalibration of the companys strategic plan |
✓ Supported the recalibration of the strategic plan, with a focus on express, e-commerce and fast-growing global markets
✓ Executed convertible note issuance and several financing facilities to fund aircraft additions at very low interest rates
✓ Delivered annual Southern Air synergy savings higher than previously anticipated |
3. Long-Term Incentive Compensation
During 2017, the Compensation Committee made long-term incentive grants to our NEOs in the form of performance share units, performance-based cash awards, and time-based restricted stock units.
Long-Term Incentive Awards
The total long-term incentive grant in a given year is based on a multiple calculated as a percentage of base salary. For the CEO, the multiple is based on his actual base salary and for the other NEOs and other executives, the multiple is based on an average base salary for all executives at a particular level (for example Executive Vice President, Senior Vice President or Vice President). The multiple is converted into an aggregate LTI plan award opportunity dollar amount, and for 2017 awards, which, consistent with prior years, is then converted into a target number of RSU and PSU awards using the average closing price for the 30 trading days ending on February 28, 2017, trailing the grant date.
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 41
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components Long Term Incentives |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
For 2017, the LTI award consisted of three-year performance stock units and performance cash awards and four-year vesting restricted stock units, all as more fully described below. The weighting mix of the LTI components were as follows:
Performance at time of grant: (1) Time-vesting Restricted Stock Units 50%, (2) Performance Stock Units 25% (target level) and (3) Cash 25% (target level)
At a possible future maximum payout of our performance-based LTI: (1) Time-vesting Restricted Stock Units 33%, (2) Performance Stock Units 33% and (3) Performance Cash 33%.
Assuming achievement at maximum performance opportunity, the performance share units and performance cash units together would pay at two-thirds of the value of the overall award grant.
How We Set Our LTI Incentive Metrics:
Long-term performance incentives are directly linked to Company long-term strategic initiatives that are intended to enhance shareholder long-term interests currently, EBITDA growth and Average ROIC. Starting with awards granted in 2018, our performance LTI includes a TSR metric. |
In designing the long-term incentive awards for our executives, the Compensation Committee considers the Board-approved business plan, as well as long-term strategic goals, and designs long-term incentive targets, including Average ROIC and EBITDA growth. We believe that most of our executives total compensation should be at risk and that a significant portion of their total compensation should be equity-based, providing a strong alignment between the senior executives compensation and shareholders interests.
Our long-term business strategy contemplates initiatives that enhance our organizational and operating capabilities, generate additional operating efficiencies, broaden our portfolio of assets and services, and diversify our business mix.
42 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Link Between Our Performance, Our Strategy and Our LTI Incentive Metrics:
Set forth below are the metrics used under our long-term performance incentives in 2017 to provide appropriate rewards for prudent risk-taking, key financial performance and objective results in support of our business strategy. In addition, we believe that our performance metrics align and underscore the link between incentive compensation and the successful execution of our business strategy, and reflect our ongoing commitment to a pay-for-performance compensation philosophy.
Long-Term Incentives | ||||
Performance Metrics | Weighting | Rationale | ||
EBITDA growth |
50% |
Encourages management to pursue long-term profit potential and cash flow opportunities and is consistent with achievement of the Companys long-term strategic goals.
Used for companies in industries like ours that require significant upfront financial investments. EBITDA growth is an appropriate measure of underlying profit potential and an indicator of operating cash flow.
| ||
Average ROIC | 50% |
Drives growth and profitability through the efficient use of our capital and encourages prudent risk-taking.
Used because the Companys strategic plan involves a significant investment program in its aircraft fleet, and the ability of the Company to manage its balance sheet to generate returns is an important measure to investors.
|
Relative TSR modifier (effective beginning with 2018 awards) |
±20% adjustment based on relative performance against comparator group | Direct result of shareholder feedback following 2017 Say-on-Pay result.
Adds relative metric to our LTI in accordance with shareholder feedback. (Company 3-year share performance compared to S&P SmallCap 600 Index companies)
Further aligns compensation with shareholder returns and value
|
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 43
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components Long Term Incentives |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
We have not disclosed the 2017 specific EBITDA growth and Average ROIC targets for the three-year performance period because they represent confidential, commercially sensitive information that we do not disclose to the public and that could cause competitive harm if known in the marketplace. Both EBITDA growth and Average ROIC targets, as well as the factors that influence these measures, such as revenue and efforts to control costs, are inherently competitive and, if disclosed, would provide valuable insight into areas of focus for the Company. The Compensation Committee sets the EBITDA growth and Average ROIC goals at a level that it believes would be challenging but possible for the Company to achieve. In the interest of providing as much disclosure as appropriate to aid shareholders in assessing the rigor of our LTI metrics, below is a detailed description of our LTI goal-setting process:
Additional Information on Long-term Incentive Goal Setting:
The performance LTI grant has three separate goals for both the EBITDA Growth and Average ROIC metrics Threshold, Target, and Maximum. The Threshold values are set at levels the Compensation Committee believes are reasonably achievable, to motivate and support retention objectives. The Target values are set at levels that are expected to be difficult, but attainable. The Maximum levels require outstanding performance resulting from stronger than forecasted market growth and stretch by management to capitalize on that growth. Threshold levels for both the EBITDA Growth and Average ROIC metric of the 2017 grant were set at or above the Threshold levels of the 2016 grant.
The performance goals for the 2017 2019 performance period were established during the first quarter of 2017. When establishing the performance goals for the 2017 grant, the Compensation Committee took into account the Federal Reserves real GDP growth outlook, commentary from the Organization for Economic Cooperation and Development (OECD), and freight-tonne kilometer (FTK) forecasts from the International Air Transport Association (IATA). The Committee used those inputs as a primary set of guidelines when establishing the goals, which are further described below. OECD is an inter-governmental economic organization with 35 member countries that was founded to stimulate world trade and economic progress, and IATA is a global organization of airlines; since we are an airline with global reach, these entities forecasts provide a reasonable and balanced prediction of macro-economic trends against which to measure our performance and these forecasts are considered by AAWW (and often shareholders) when considering potential long term performance.
EBITDA Growth:
| Threshold Set at a level consistent with the OECD outlook and in excess of the Federal Reserve outlook |
| Target Set consistent with the IATA FTK growth estimate and in excess of the US and OECD outlooks |
| Maximum Growth well beyond industry and economist projections |
Average ROIC:
| Threshold Slightly above Atlas weighted average cost of capital |
| Target Meaningfully above Atlas weighted average cost of capital |
| Maximum Significantly above Atlas weighted average cost of capital |
Our long-term incentive performance metrics relate to key Company long-term strategies and provide substantial payouts only upon achievement of exceptional performance.
At the end of the three-year period, the awards vest based on a performance matrix ranging from no vesting if the Companys performance is in the bottom quintile of both EBITDA growth and Average ROIC metrics to 2x target vesting if performance on both metrics is in the top quintile. Target vesting (100% of the award) is achieved if the
44 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components Long Term Incentives |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Companys performance is at the target level. Starting with awards granted in 2018, performance LTI awards will be further subject to a comparative total shareholder return (Comparative TSR) modifier, based on AAWW share price performance during the three-year performance period relative to the component companies of the S&P 600 SmallCap Index. The Comparative TSR modifier will be applied to the vesting percentage determined based on the achievement of the EBITDA growth and Average ROIC metrics and could increase or decrease that vesting percentage by up to 20%. However, no upward modification will be made in the event the absolute total shareholder return is negative, even if the Comparative TSR performance achieved would have provided for an upward adjustment.
Payout of 2015-2017 Performance LTI Awards. In the first quarter of 2018, the Compensation Committee reviewed AAWWs performance over the three-year performance period ended December 31, 2017 for grants made in 2015. The performance metrics for these awards were EBITDA growth and three-year average ROIC applied on an absolute basis. Performance LTI payouts for the 2015-2017 performance period were made in early 2018 for our NEOs other than our CEO Mr. Flynn, whose retirement eligibility entitled him to an accelerated payout in September 2016 due to the Amazon transaction. 2015-2017 Performance LTIs were paid at twice the target level due to the triggering of certain change in control provisions set forth in the Performance LTI as a result of our 2016 transaction with Amazon. All of such performance awards (except for Mr. Flynns 2017 awards due to the inability to make retroactive amendments without naming materially adverse tax consequences) provided for such payout not at the time of a change in control but following the completion of continued employment during the scheduled performance period following any such change in control to provide retention incentives to key employees while appropriately adjusting for the changed performance environment.
Performance-Based Share Units
Performance share units, or PSUs, are paid in AAWW common shares upon vesting. Key characteristics of the PSUs granted in 2017 are as follows:
| Pays only if the Company achieves, over a three-year period, rigorous preset objective financial targets measured as compared to comparative financial targets for a peer group. |
| Subject to the following financial metrics for the 2017 grant: EBITDA growth and ROIC. |
| The grant date value is reported in the Summary Compensation Table, but actual value (if any) will not be realized by the NEOs until the three-year period ends and then only if the awards meet applicable performance criteria. |
Cash-based Long-Term Incentive Awards
Cash-based long-term incentive awards are paid at the end of a three-year performance period. Key characteristics of the cash-based long-term incentive awards are as follows:
| Pays only if the Company achieves, over a three-year period, rigorous preset comparative financial targets. |
| Subject to the following financial metrics for the 2017 grant: EBITDA growth and ROIC. |
Restricted Stock Units
Restricted stock units, or RSUs, are paid in shares of Common Stock and have the following key characteristics:
| Vest annually on the anniversary of grant date over a four-year period. |
| Align economic interests of management with long-term shareholders. |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 45
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components Long Term Incentives |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
RSUs are designed to attract and retain executives by providing them with (1) stock ownership during the applicable vesting period, and (2) a strong incentive to remain with the Company until at least the applicable vesting period ends. In addition, our stock ownership guidelines described below encourage continued alignment between NEOs and other executives and our shareholders.
2016 Transformative Events Impacting CEO Compensation in 2016
2016 was a truly historic and transformative year for the Company, with an immediately accretive acquisition of a competitor, Southern Air, that expanded our fleet into the 737 and 777 operating platforms, followed shortly by a transaction with Amazon that was approved by over 99% of shareholders. Due to long-standing arrangements with our CEO at the time relating to his retirement eligibility, payouts of certain then-outstanding long-term incentive awards were accelerated in 2016 due to a deemed change of control related to the transaction with Amazon. No incremental payments were made to any of our NEOs, including our CEO, as a result of the Amazon transaction. As set forth in the Summary Compensation Table, the acceleration resulted in an extraordinary one-time increase in the reportable amount of our CEOs 2016 total compensation value; 2017 reportable compensation for Mr. Flynn is consistent with historical levels, approximately 45% of the 2016 reportable value.
Mr. Flynn did not receive any LTI vesting or payouts in 2017 due to the 2016 payouts.
46 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components Long Term Incentives |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Carefully Analyzed and Revised Peer Group to Aid Our Compensation Decisions
Our Compensation Committee, together with its independent compensation consultant, periodically reviews relevant competitive market pay data for executives in our industry and similar industries. The Committee identifies a core group of companies, used to periodically assess the Companys compensation levels and practices, as one factor in the compensation-setting process. This year, as part of the slate of proactive, shareholder-favored executive compensation program changes made in response to our 2017 say-on-pay result, our Compensation Committee worked with its independent compensation consultant over the course of many months to refine our peer group.
The Compensation Committee believes that identification of peers using a broad industry sector code is inadequate and does not establish similarity of operations and business models, nor adequately represent past, current and future competitors for managerial talent, factors the Compensation Committee considers in the selection of companies for these purposes.
Given the global nature and structure of our business, we believe it is critical to recruit and retain executives with a breadth of experience in global markets. A significant portion of our revenue is derived from companies and business activity based outside of the United States, including those of our unconsolidated subsidiary, Polar Air, which is operated by our leadership team. In 2017, we operated 48,983 flights, serving 422 destinations in 103 countries.
For peer comparison purposes, AAWWs revenue includes its subsidiary Polars revenue.
| AAWW holds a 75% voting interest and 51% economic interest in Polar. |
| Polar operates a fleet of 747 and 767 freighters in time-definite, airport-to-airport scheduled air cargo service to North America, Asia, Europe and the Middle East. |
| Mr. Flynn serves as Chairman, CEO and President, Mr. Dietrich serves as Executive Vice President and Chief Transportation Officer and Mr. Kokas serves as Executive Vice President, General Counsel, Chief Human Resources Officer and Assistant Secretary of Polar. As executive officers of Polar, Messrs. Flynn, Dietrich and Kokas have significant Polar-related executive, operating and administrative responsibilities. In addition, Messrs. Flynn, Dietrich, Kokas and Schwartz are members of the Polar board of directors, with Mr. Flynn as Chairman. |
Because AAWW controls the voting interests of Polar and many of AAWWs NEOs serve in executive positions at Polar for the benefit of both AAWW (as majority owner of Polar) and Polar, we believe including Polars revenues with AAWWs for purposes of peer group comparisons is appropriate.
For 2017, our peer group includes companies that are, in comparison to AAWW:
| Comparably sized as measured by revenue, with median revenue peer group in 2017 of $2.1 billion, and with revenues that range from 0.16x to 2.56x of AAWWs revenue. (AAWWs 2017 revenue (i) was approximately $3.0 billion, including approximately $823 million from Polar and (ii) estimated at $3.2 billion in 2018, inclusive of Polar revenue). |
| Operate and compete for business and talent in similar industries, including transportation, logistics and aerospace services industries. |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 47
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components of Components |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Our 2017 peer group is comprised of the following companies:
Company | Description | Revenue for FY2017 ($ in millions) | ||
AAR Corp. |
Provider of aviation services to the worldwide commercial aerospace and government/defense industries |
$1,902.1 | ||
Alliant Techsystems Inc. (nka: Orbital ATK, Inc.) |
Aerospace, defense, commercial products | 4,764.0 | ||
Barnes Group Inc. |
Aerospace and industrial manufacturer | 1,436.5 | ||
Bristow Group Inc. |
Offshore helicopter transport services | 1,422.7 | ||
Curtiss-Wright Corp. |
Engineered, technologically advanced products and services | 2,271.0 | ||
Echo Global Logistics, Inc. |
Technologically enabled business process outsourcing | 1,943.1 | ||
Esterline Technologies Corp. |
Aerospace and defense manufacturer | 2,026.8 | ||
GATX Corporation |
Railcar leasing | 1,376.9 | ||
Hexcel Corporation |
Industrial manufacturer | 1,973.3 | ||
Kansas City Southern |
International transportation | 2,582.9 | ||
Park-Ohio Holdings Corp. |
Industrial supply chain logistics and diversified manufacturing industries | 1,412.9 | ||
Rockwell Collins, Inc. |
Avionics and information technology systems and services provider | 7,640.0 | ||
Ryder System, Inc. |
Truck rental, supply chain and fleet management services | 7,329.6 | ||
Spirit Aerosystems Holdings, Inc. |
Aero structures manufacturer | 6,983.0 | ||
Teledyne Technologies, Inc. |
Provider of enabling technologies for industrial growth markets | 2,603.8 | ||
Tidewater Inc. |
Large offshore service vessels to global energy industry provider | 490.9 | ||
TransDigm Group Inc. |
Commercial and military aerospace components manufacturer | 3,552.7 | ||
Trinity Industries, Inc. |
Transportation, construction and industrial products manufacturer | 3,662.8 | ||
Median Revenue of Peers* |
$2,148.9 | |||
Atlas Air Worldwide Holdings, Inc. |
2,983.3 |
* | B/E Aerospace Inc. was acquired by Rockwell Collins, Inc. in April 2017 and is no longer part of our peer group. |
48 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components of Components |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
During 2017, the Compensation Committee engaged Pay Governance to review the current peer group to ensure the group aligned with our current business model, included companies with which AAWW competes for executive talent, business and capital, and appropriately accounted for the Companys continued revenue growth. To be included in the peer group, the following considerations were used:
| Russell 3000 companies and current peers and proxy advisory firm peers |
| GICS/SIC codes for select industries for all: Aerospace & Defense, Air Freight & Logistics, Road and Rail |
| GICS/SIC codes for select industries for peers: Airlines, Machinery, Trading Companies and Distributors |
| Revenue between $0.75 and $6.0 billion |
| Market Capitalization between $0.5 and $6.0 billion |
| Assets between $1 and $10.0 billion |
| Capital intensity greater than 0.75 |
Beginning in 2018, the Committee will utilize the revised peers (which include the addition of Aerojet Rocketdyne Holdings, Inc., Air Transport Services Group, Inc., BWX Technologies, Inc., Cubic Corp., Engility Holdings, Inc., Genesee & Wyoming Inc., Hawaiian Holdings Inc., KLX Inc., Moog Inc., Triumph Group Inc., Werner Enterprises, Inc., and Wesco Aircraft Holdings, Inc.) for plan design and benchmarking (if the Committee chooses to do so).
The following companies were removed: Bristow Group Inc., Kansas City Southern, Orbital ATK, Inc., Rockwell Collins Inc., Ryder System, Inc., Spirit Acrosystems Holdings, Inc., Tidewater Inc., Transdigm Group Inc., and Trinity Industries Inc.
As a secondary source and broader group, the Committee may also refer to the S&P SmallCap 600 or S&P Composite 1500 indices as additional reference points.
Other Elements of Compensation
Other Benefits and Limited Perquisites
We provide our executives with common benefits, which include health insurance (including certain limited retiree health benefits), severance benefits commensurate with position, 401(k) plan participation, and a retirement restoration program. The Compensation Committee believes that perquisites should be limited and not broad-based. Such perquisites are limited principally to financial counseling and limited travel-related benefits, including limited tax reimbursement payments related thereto. Details concerning these perquisites can be found in the footnotes to the 2017 Summary Compensation Table below.
Retirement Plans
In addition to the Companys 401(k) plan, the Company maintains the 401(k) Restoration and Voluntary Deferral Plan (the Retirement Restoration Plan) for employees holding the title of Executive Vice President or higher. This plan is a nonqualified deferred compensation plan intended to make eligible employees whole for compensation limits imposed under our 401(k) plan. Under the retirement restoration plan, a participant is eligible to make elective deferrals and to receive employer credits equal to 5% of eligible compensation in excess of the limits described in Sections 401(a)(17) and 402(g) of the Code. Initial employer credits vest upon the third anniversary of the executives initial eligibility for the plan, and all employer credits after such anniversary are fully vested. Deferrals and employer credits are credited with notional earnings equal to the prime interest rate until distributed on the earliest of (i) the participant becoming disabled, (ii) the participants separation from service (including death), or (iii) a change of control of the Company.
Under our Benefits Program for Senior Executives, employees holding the rank of Executive Vice President or above would become retirement-eligible upon attaining age 60 and 10 years of service. Of our NEOs, only Mr. Flynn is currently retirement-eligible, and no other NEO is retirement-eligible for several years. Please see pages [54-56] for further detail regarding provisions relating to Mr. Flynns retirement eligibility.
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 49
COMPENSATION DISCUSSION AND ANALYSIS |
Main Components of Components |
2016 Transformative Events | Peer Group | Other Elements | Additional Policies |
Additional Compensation Policies
In support of the Board philosophy that performance and equity incentives provide the best incentives for our NEOs and other members of management and promote increases in shareholder value, the Board monitors compliance with Stock Ownership Guidelines (the Guidelines) covering all Directors, NEOs, and certain other executives. Such guidelines include both stock ownership and recommended stock holding periods as described below. The Guidelines require executives to achieve certain levels of share ownership over a five-year period based on the lesser of a percentage of annual base salary or a fixed number of shares.
Current target share ownership levels for the Directors and the NEOs under the Guidelines are generally based on the lesser of: (1) 4x annual base cash retainer, or 7,500 shares, for independent Directors, (2) 6x base salary, or 120,000 shares, for the CEO, (3) 3.5x base salary, or 40,000 shares, for the Chief Executive Officer of Titan (currently, Mr. Steen) and the President of Atlas Air (currently, Mr. Dietrich,) and (4) 3x base salary, or 30,000 shares, for other executive vice presidents.
All of our Directors and NEOs are in full compliance with the requisite Common Stock ownership levels set forth in the Guidelines.
Section 162(m) of the Code, as in effect for 2017, restricts the deductibility for federal income tax purposes of the compensation paid to the CEO and each of the other NEOs who was an executive officer at the end of the applicable fiscal year (other than our Chief Financial Officer) for such fiscal year to the extent that such compensation for such executive exceeds one million dollars and does not qualify as qualified performance-based compensation as defined under Section 162(m) of the Code. The Compensation Committee historically considered available opportunities to deduct compensation paid to NEOs for U.S. federal income tax purposes. The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, eliminated the exception for performance-based compensation and expanded the number of executives to which the 162(m) limit may apply. As a result, except to the extent provided in limited transition relief, compensation over one million dollars paid to any named executive officer will no longer be deductible under Section 162(m) of the Code. The Compensation Committee reserves the right to provide compensation to our executives that is not deductible, including but not limited to when necessary to comply with contractual commitments, or to maintain the flexibility needed to attract talent, promote retention, or recognize and reward desired performance.
The Compensation Committee generally grants equity awards to NEOs in the first quarter of each year. The Compensation Committee does not have any programs, plans or practices of timing these awards in coordination with the release of material nonpublic information. In fact, such awards are granted a week or more following the filing of the Companys 10-K and the related issuance of its earnings release. We have never backdated, re-priced, or spring-loaded any of our equity awards.
We have had a compensation clawback policy since 2014, in order to enhance the alignment of our compensation program features with best practices and consistent with feedback received from our shareholders. Our clawback policy permits us to seek to recover certain amounts of annual cash incentive compensation awarded to any executive officers on or after February 2014 if payment of such compensation was based on the achievement of financial results that were subsequently the subject of a substantial restatement of our financial statements due to material noncompliance and the executive officers intentional misconduct after February 2014 that contributed to higher amount of cash incentive compensation received.
50 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS |
Letter to the Shareholders from the Board of Directors
In managing the Company, our entire Board of Directors seeks to achieve long-term, sustainable performance and create value through a well reasoned long-term strategic plan, prudent risk management, effective corporate governance practices and executive compensation programs, and well-functioning talent and succession planning. Please see Letter to the Shareholders from the Board of Directors appearing at the beginning of this Proxy Statement.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section with senior management. Based on this review, the Compensation Committee recommends to the Board of Directors that the Compensation Discussion and Analysis section be included in this proxy statement.
THE COMPENSATION COMMITTEE |
Carol B. Hallett, Chair Bobby J. Griffin Frederick McCorkle John K. Wulff |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 51
2017 SUMMARY COMPENSATION TABLE |
Compensation Tables and Explanatory Notes
2017 Summary Compensation Table
As described in the Compensation Discussion and Analysis Overview section of this Proxy Statement, based on our extensive shareholder outreach over the last several years, and to address our recent Say-on-Pay outcomes, we have made numerous changes to our compensation programs, while maintaining and enhancing our pay for performance philosophy and ensuring that these programs do not promote excessive risk taking. Please read the Compensation Discussion and Analysis Overview appearing on pages 30-36 of this Proxy Statement, along with the remainder of the Compensation Discussion and Analysis section on pages 37-50 and the material presented below.
The following table provides information concerning compensation for our NEOs during fiscal year 2017:
Name and Principal Position (a) |
Year (b) |
Salary ($) (c) |
Bonus ($) (d) |
Stock Awards ($) (e) |
Option Awards ($) (f) |
Non-Equity Incentive Plan Compensation ($) (g) |
All Other Compensation ($) (i) |
Total ($) (j) (*) | ||||||||
William J. Flynn |
2017 | 1,035,040 | | 2,973,791 | | 1,821,639 | 194,974 | 6,025,444 | ||||||||
President and Chief |
2016 | 1,035,040 | | 2,717,144 | | 9,112,626 | 622,977 | 13,487,787 | ||||||||
Executive Officer |
2015 | 1,035,040 | | 2,940,674 | | 2,028,600 | 203,570 | 6,207,884 | ||||||||
John W. Dietrich |
2017 | 665,026 | | 1,689,468 | | 1,053,383 | 188,711 | 3,596,588 | ||||||||
Chief Operating Officer |
2016 | 665,026 | | 1,543,654 | | 4,873,328 | 188,753 | 7,270,762 | ||||||||
2015 | 665,026 | | 1,670,631 | | 1,173,060 | 155,044 | 3,663,761 | |||||||||
Michael T. Steen |
2017 | 600,023 | | 1,689,468 | | 950,421 | 177,755 | 3,417,667 | ||||||||
Chief Commercial Officer |
2016 | 600,023 | | 1,543,654 | | 4,786,044 | 179,606 | 7,109,328 | ||||||||
2015 | 600,023 | | 1,670,631 | | 1,058,400 | 119,361 | 3,448,415 | |||||||||
Adam R. Kokas |
2017 | 537,021 | | 1,388,821 | | 803,369 | 164,280 | 2,893,491 | ||||||||
General Counsel and Chief |
2016 | 537,021 | | 1,268,939 | | 4,363,036 | 158,273 | 6,327,269 | ||||||||
Human Resources Officer |
2015 | 537,021 | | 1,515,846 | | 894,642 | 113,411 | 3,060,920 | ||||||||
Spencer Schwartz |
2017 | 525,020 | | 1,388,821 | | 785,417 | 177,415 | 2,876,673 | ||||||||
Chief Financial Officer |
2016 | 525,020 | | 1,268,939 | | 4,347,817 | 157,113 | 6,298,889 | ||||||||
2015 | 525,020 | | 1,515,846 | | 874,650 | 118,061 | 3,033,577 |
Summary Compensation Table Notes
Column (e) Stock Awards
The amounts included reflect the grant date fair value of stock awards, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures and with performance awards valued based on the probable outcome of performance conditions. For more information about the assumptions used in valuing these awards, see Note 15 in our Annual Report on Form 10-K and footnote (5) to the Grants of Plan-Based Awards table below. Stock awards for 2017 reflect the aggregate grant date fair value of (i) time-based restricted stock units vesting over four years and (ii) performance share units for the three-year performance period ending December 31, 2019 (see pages 41-45 for a discussion of the methodology followed by the Compensation Committee to determine the number of performance share units awarded) assuming target level performance. Performance share units are settled in shares of Common Stock at 0% to 200% of target based upon AAWWs EBITDA growth and average ROIC performance relative to internal targets over such three-year performance period. Assuming that the performance share units are paid at the maximum level, the aggregate dollar values of restricted stock unit and performance share unit awards for 2017 (based on the closing price of our Common Stock on the date of grant) would be $2,973,791 for Mr. Flynn, $1,689,468 for Mr. Dietrich and Mr. Steen and $1,388,821 for Mr. Schwartz and Mr. Kokas.
52 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
2017 SUMMARY COMPENSATION TABLE |
Column (g) Non-Equity Incentive Plan Compensation
Reflects cash payments made under the AIP Program, a subplan of our 2016 Incentive Plan, as well as the value of the NEOs cash-based long-term incentive awards. The performance goals for the cash-based long-term incentive awards granted in 2016 and 2015, were deemed satisfied at maximum performance levels in accordance with their terms in connection with the Amazon transaction.
Column (i) All Other Compensation
All Other Compensation includes Company matching contributions under our 401(k) plan. For 2017, these amounts totaled $12,000 for Messrs. Flynn, Dietrich and Schwartz and $9,000 for Messrs. Steen and Kokas.
We provide a limited number of perquisites and other personal benefits to our senior executives. We believe these benefits are reasonable, competitive and consistent with our overall executive compensation program and philosophy and with comparable programs maintained by the companies with which we compete for executive talent. The costs of these benefits constitute only a small percentage of each NEOs total compensation. For 2017, these personal benefits included financial counseling and tax preparation fees and limited travel-related expenses. Reimbursement of taxes owed for these benefits for 2017 totaled $32,096 for Mr. Flynn, $26,061 for Mr. Dietrich, $26,203 for Mr. Steen, $24,449 for Mr. Kokas, and $29,682 for Mr. Schwartz. These amounts are included in the All Other Compensation column.
As described above in the section entitled Other Elements of Compensation Retirement Plans, our NEOs are entitled to receive an employer contribution under the Retirement Restoration Plan. The portion of account balances attributable to employer contributions made under the Retirement Restoration Plan to each of our NEOs during 2017 totaled $114,790 for Mr. Flynn, $118,918 for Mr. Dietrich, $111,303 for Mr. Steen, $101,920 for Mr. Kokas and $100,559 for Mr. Schwartz. These amounts are included in the All Other Compensation column. See Nonqualified Deferred Compensation below for additional information about the Retirement Restoration Plan.
The All Other Compensation column also includes de minimis amounts for group term life insurance and long-term disability insurance.
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 53
2017 GRANTS OF PLAN-BASED AWARDS |
2017 Grants of Plan-Based Awards
The grants set forth in the following table were made pursuant to (i) our 2016 Incentive Plan, as amended and restated, and related award agreements and (ii) our AIP, each of which is described in more detail in the section headed Compensation Discussion and Analysis above.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards(4) |
All Other Stock Awards: Number of Shares of Stock or Units (#) (i) |
All Other Option Awards: Number of Securities Underlying Options (#) (j) |
Exercise or Base Price of Option Awards ($) (k) |
Grant Date Fair Value of Stock and Option Awards(5) ($) (l) |
|||||||||||||||||||||||||||||||||||||||
Name (a) |
Grant Date (b) |
Threshold ($) (c) |
Target ($) (d) |
Maximum ($) (e) |
Threshold (#) (f) |
Target (#) (g) |
Maximum (#) (h) |
|||||||||||||||||||||||||||||||||||||
William J. Flynn |
|
|||||||||||||||||||||||||||||||||||||||||||
AIP(1) |
776,250 | 1,035,000 | 2,070,000 | | | | | | | | ||||||||||||||||||||||||||||||||||
LTIPLTC(2) |
3/9/17 | | 970,313 | 1,940,626 | | | | | | | | |||||||||||||||||||||||||||||||||
LTIPPSUs(3) |
3/9/17 | | | | | 18,289 | 36,578 | | | | 991,264 | |||||||||||||||||||||||||||||||||
LTIPRSUs(4) |
3/9/17 | | | | | | | 36,578 | | | 1,982,527 | |||||||||||||||||||||||||||||||||
John W. Dietrich |
|
|||||||||||||||||||||||||||||||||||||||||||
AIP(1) |
448,875 | 598,500 | 1,197,000 | | | | | | | | ||||||||||||||||||||||||||||||||||
LTIPLTC(2) |
3/9/17 | | 551,250 | 1,102,500 | | | | | | | | |||||||||||||||||||||||||||||||||
LTIPPSUs(3) |
3/9/17 | | | | | 10,390 | 20,780 | | | | 563,138 | |||||||||||||||||||||||||||||||||
LTIPRSUs(4) |
3/9/17 | | | | | | | 20,781 | | | 1,126,330 | |||||||||||||||||||||||||||||||||
Michael T. Steen |
|
|||||||||||||||||||||||||||||||||||||||||||
AIP(1) |
405,000 | 540,000 | 1,080,000 | | | | | | | | ||||||||||||||||||||||||||||||||||
LTIPLTC(2) |
3/9/17 | | 551,250 | 1,102,500 | | | | | | | | |||||||||||||||||||||||||||||||||
LTIPPSUs(3) |
3/9/17 | | | | | 10,390 | 20,780 | | | | 563,138 | |||||||||||||||||||||||||||||||||
LTIPRSUs(4) |
3/9/17 | | | | | | | 20,781 | | | 1,126,330 | |||||||||||||||||||||||||||||||||
Adam R. Kokas |
|
|||||||||||||||||||||||||||||||||||||||||||
AIP(1) |
342,338 | 456,450 | 912,900 | | | | | | | | ||||||||||||||||||||||||||||||||||
LTIPLTC(2) |
3/9/17 | | 453,150 | 906,300 | | | | | | | | |||||||||||||||||||||||||||||||||
LTIPPSUs(3) |
3/9/17 | | | | | 8,541 | 17,082 | | | | 462,922 | |||||||||||||||||||||||||||||||||
LTIPRSUs(4) |
3/9/17 | | | | | | 17,083 | | | 925,899 | ||||||||||||||||||||||||||||||||||
Spencer Schwartz |
|
|||||||||||||||||||||||||||||||||||||||||||
AIP(1) |
334,688 | 446,250 | 892,500 | | | | | | | | ||||||||||||||||||||||||||||||||||
LTIPLTC(2) |
3/9/17 | | 453,150 | 906,300 | | | | | | | | |||||||||||||||||||||||||||||||||
LTIPPSUs(3) |
3/9/17 | | | | | 8,541 | 17,082 | | | | 462,922 | |||||||||||||||||||||||||||||||||
LTIPRSUs(4) |
3/9/17 | | | | | | | 17,083 | | | 925,899 |
(1) | Represents the range of potential cash payouts under the AIP for 2017. The actual AIP payouts for 2017 are included in the Summary Compensation Table above. |
(2) | Represents the grant (under the Long-Term Incentive Plan) of performance cash awards that vest only if certain preestablished performance criteria for the period beginning on January 1, 2017 and ending December 31, 2019 are achieved. Pursuant to SEC rules, the value of these awards is reported in the 2017 Summary Compensation Table even though the awards will not be paid until 2019, subject to the executives continued employment. |
(3) | Represents the grant (under the Long-Term Incentive Plan) of performance-based long-term stock awards that vest only if certain preestablished performance criteria for the period beginning on January 1, 2017 and ending December 31, 2019 are achieved. |
(4) | Represents award of time-based restricted stock units that vest ratably over a four-year period. |
(5) | The fair value of the restricted stock units and performance share units shown in the table is based on the closing market price of our Common Stock as of the date of the particular award, computed in accordance with GAAP, excluding the effect of estimated forfeitures and with performance awards valued based on the probable outcome of performance conditions. See footnote (e) to the Summary Compensation table for the assumptions used in valuing these awards and for the grant date fair value of awards if maximum levels of performance were achieved. |
54 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
2017 OUTSTANDING EQUITY AWARDS |
2017 Outstanding Equity Awards
The table below shows outstanding equity awards for our NEOs as of December 31, 2017. Market values reflect the closing price of our common stock on the NASDAQ Global Market on December 31, 2017, which was $58.65 per share.
Name (a) |
Number of Securities Underlying Unexercised Options Exercisable (#) (b) |
Number of Securities Underlying Unexercised Options Unexercisable (#) (c) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) |
Option Exercise Price ($) (e) |
Option Expiration Date (f) |
Number of Shares or Units of Stock That Have Not Vested (#) (g) |
Market Value of Shares or Units of Stock That Have Not Vested ($) (h) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (i) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (j) |
|||||||||||||||||||||||||||
William J. Flynn |
| | | | | 36,578 | (7) | 2,145,300 | 18,289 | (6) | 1,072,650 | |||||||||||||||||||||||||
| | | | | | | | | ||||||||||||||||||||||||||||
| | | | | | | | | ||||||||||||||||||||||||||||
John W. Dietrich |
| | | | | 7,146 | (1) | 419,113 | | | ||||||||||||||||||||||||||
| | | | | 11,729 | (3) | 687,906 | 23,458 | (2) | 1,375,812 | ||||||||||||||||||||||||||
| | | | | 21,760 | (5) | 1,276,224 | 29,014 | (4) | 1,701,671 | ||||||||||||||||||||||||||
| | | | | 20,781 | (7) | 1,218,806 | 10,390 | (6) | 609,374 | ||||||||||||||||||||||||||
Michael T. Steen |
| | | | | 7,146 | (1) | 419,113 | | | ||||||||||||||||||||||||||
| | | | | 11,729 | (3) | 687,906 | 23,458 | (2) | 1,375,812 | ||||||||||||||||||||||||||
| | | | | 21,760 | (5) | 1,276,224 | 29,014 | (4) | 1,701,671 | ||||||||||||||||||||||||||
| | | | | 20,781 | (7) | 1,218,806 | 10,390 | (6) | 609,374 | ||||||||||||||||||||||||||
Adam R. Kokas |
| | | | | 7,146 | (1) | 419,113 | | | ||||||||||||||||||||||||||
| | | | | 10,642 | (3) | 624,153 | 21,284 | (2) | 1,248,307 | ||||||||||||||||||||||||||
| | | | | 17,888 | (5) | 1,049,131 | 23,850 | (4) | 1,398,803 | ||||||||||||||||||||||||||
| | | | | 17,083 | (7) | 1,001,918 | 8,541 | (6) | 500,930 | ||||||||||||||||||||||||||
Spencer Schwartz |
| | | | | 7,146 | (1) | 419,113 | | | ||||||||||||||||||||||||||
| | | | | 10,642 | (3) | 624,153 | 21,284 | (2) | 1,248,307 | ||||||||||||||||||||||||||
| | | | | 17,888 | (5) | 1,049,131 | 23,850 | (4) | 1,398,803 | ||||||||||||||||||||||||||
| | | | | 17,083 | (7) | 1,001,918 | 8,541 | (6) | 500,930 |
(1) | Restricted share units awarded on February 21, 2014 vest 25% ratably on each of February 21, 2015, 2016, 2017, and 2018, with one remaining outstanding vesting date of February 21, 2018. |
(2) | Performance share units awarded on February 24, 2015 vest on attainment of certain preestablished performance criteria during the three-year performance period ended December 31, 2017. The performance goals were deemed satisfied at maximum performance levels in accordance with their terms in connection with the Amazon transaction due to the change of control. |
(3) | Restricted stock units awarded on February 24, 2015 vest 25% ratably on each anniversary date of grant, with remaining outstanding vesting dates of February 24, 2018 and 2019, and would fully vest upon certain terminations of employment, as described in more detail in the section entitled Potential Payments Upon Termination or Change of Control Payments Upon a Change of Control and Termination of Employment Long-Term Incentive Awards. |
(4) | Performance share units awarded on February 11, 2016 vest on attainment of certain preestablished performance criteria during the three-year performance period ended December 31, 2018. The performance goals were deemed satisfied at maximum performance levels in accordance with their terms in connection with the Amazon transaction due to the change of control. |
(5) | Restricted stock units awarded on February 11, 2016 vest 25% ratably on each anniversary date of grant, with remaining outstanding vesting dates of February 11, 2018, 2019, and 2020, and would fully vest upon certain terminations of |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 55
2017 OPTION EXERCISES AND STOCK VESTED; NONQUALIFIED DEFERRED COMPENSATION |
employment, as described in more detail in the section entitled Potential Payments Upon Termination or Change of Control Payments Upon a Change of Control and Termination of Employment Long-Term Incentive Awards. |
(6) | Performance share units awarded on March 9, 2017 vest on attainment of certain pre-established performance criteria during the three-year performance period ended December 31, 2019. |
(7) | Restricted stock units awarded on March 9, 2017 vest 25% ratably on each anniversary date of grant, with remaining outstanding vesting dates of March 9, 2018, 2019, 2020, and 2021. |
2017 Option Exercises and Stock Vested
The following table sets forth information relating to stock vesting during fiscal 2017 for each of our NEOs:
Option Awards | Stock Awards | |||||||||||||||||||
Name (a) |
Number of Shares Acquired On Exercise (b)(#) |
Value Realized on Exercise (c)($) |
Number of Shares Acquired on Vesting (d)(#) |
Value Realized on Vesting (e)($) (1) | ||||||||||||||||
William J. Flynn |
| | | | ||||||||||||||||
John W. Dietrich |
| | 48,844 | 2,587,585 | ||||||||||||||||
Michael T. Steen |
| | 48,844 | 2,587,585 | ||||||||||||||||
Adam R. Kokas |
| | 47,010 | 2,488,601 | ||||||||||||||||
Spencer Schwartz |
| | 47,010 | 2,488,601 |
(1) | The value is calculated based on the closing market price of our Common Stock as of the vesting date of the applicable award. |
Nonqualified Deferred Compensation
As described above in the section entitled Other Elements of Compensation Retirement Plans, our NEOs are entitled to receive an annual employer contribution under the Retirement Restoration Plan.
The table below sets forth the amount of employer contributions made under the Retirement Restoration Plan to each of our NEOs during 2017. Each Executive Officer is 100% vested in his aggregate account balance.
Name (a) | Executive Contributions in Last Fiscal Year (b)($) |
Registrant Contributions in Last Fiscal Year (c)($)(1) |
Aggregate Earnings in Last Fiscal Year (d)($) |
Aggregate Withdrawals/ Distributions (e)($) |
Aggregate Balance at Last Fiscal Year End (f)($) | ||||||||||||||||||||
William J. Flynn |
| 114,790 | 652 | | 129,938 | ||||||||||||||||||||
John W. Dietrich |
| 118,918 | 419 | | 128,652 | ||||||||||||||||||||
Michael T. Steen |
| 111,303 | 378 | | 120,085 | ||||||||||||||||||||
Adam R. Kokas |
| 101,920 | 339 | | 109,780 | ||||||||||||||||||||
Spencer Schwartz |
| 100,559 | 331 | | 108,244 |
(1) | The amounts reported in this column for each NEO are reflected in the All Other Compensation column of the Summary Compensation Table. |
56 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
EMPLOYMENT AGREEMENTS |
There were no changes to either of Mr. Flynns or Mr. Dietrichs employment agreements in 2017.
William J. Flynn. Pursuant to Mr. Flynns employment agreement, he receives a base annual salary at a rate that is reviewed at least annually and may be adjusted from time to time by our Compensation Committee. If Mr. Flynn is terminated by the Company for cause, or if he resigns other than for good reason, he would be entitled to receive salary earned up to date of termination or resignation. If Mr. Flynn is terminated by the Company without cause, or if he resigns for good reason (as defined in the agreement and discussed in the section headed Payments Upon a Change of Control and Termination of Employment below), he would be entitled to (i) an amount equal to two times his then-current annual base salary (one-third of which would be payable on the first day of the seventh month following termination of employment (the Payment Commencement Date), with the balance payable in accordance with Atlas normal pay schedule beginning on the Payment Commencement Date and continuing for one year thereafter); (ii) accrued but unused vacation pay; (iii) all vested rights and benefits pursuant to other Company plans and programs; (iv) health and welfare benefits coverage for 12 months (provided that such coverage will cease if Mr. Flynn receives comparable coverage from subsequent employment); and (v) a cash payment under our AIP equal to the lesser of (a) the amount he would have received if he had been employed by Atlas on the last day of such year (assuming for such purpose that 50% of any individual bonus objectives had been achieved) or (b) his target bonus percentage. Substantially equivalent compensation and benefits would be payable in the event of Mr. Flynns permanent disability (as defined) or his death. If, within 12 months immediately following a change of control (as defined in the agreement and discussed in the section headed Payments Upon a Change of Control and Termination of Employment below), Mr. Flynns employment is terminated not for cause or if he resigns for good reason, Mr. Flynn would be entitled to the same compensation and benefits as described above, except that the amount of the payment to which he would be entitled would be increased from two to three times his then-current annual base salary (one-fourth of which would be payable on the Payment Commencement Date, with the balance payable in accordance with Atlas normal pay schedule beginning on the Payment Commencement Date and continuing for 18 months thereafter). Moreover, if, within six months following termination of employment by Atlas for reasons other than cause or by Mr. Flynn for good reason, a change of control occurs, then, in addition to the payment described above, Mr. Flynn would be entitled to an additional amount equal to 12 months of his then-current monthly base salary.
Under the terms of his employment agreement, Mr. Flynn is prevented from soliciting or interfering with any of our contracts, client relationships, independent contractors, suppliers, customers, employees, or Directors for a period of two years following termination of his employment with us. Additionally, for a period of one year following termination of his employment, Mr. Flynn may not accept employment with, or give advice to, any air cargo carrier carrying on a business substantially similar to Atlas. Mr. Flynns employment agreement was entered into on April 21, 2006 and became effective on June 22, 2006. It was initially amended at year-end 2008 and further amended in 2011.
John W. Dietrich. Pursuant to Mr. Dietrichs employment agreement, he receives an annual base salary at a rate that is reviewed and adjusted from time to time by our Compensation Committee. Under the agreement, if Mr. Dietrich is terminated by the Company for cause, or if he resigns for other than good reason, he would be entitled to receive salary earned up to the date of termination or resignation. If Mr. Dietrichs employment is terminated without cause, or if Mr. Dietrich resigns for good reason (as defined in his agreement), he would be entitled to an amount equal to two times his then current annual base salary, payable in a single lump sum on the Payment Commencement Date, which amount increases to three times his then current annual base salary if his employment is terminated or he resigns for good reason within 12 months immediately following a change of control. Mr. Dietrich would also be entitled to (i) any accrued but unused vacation pay; (ii) all vested rights and benefits pursuant to our Company plans and programs; (iii) relocation benefits back to the Chicago, IL area; (iv) health and welfare benefits coverage for 12 months (provided such coverage will cease if Mr. Dietrich receives comparable coverage from subsequent employment); and (v) a cash payment under our AIP equal to the lesser of (a) the amount he would have received if he had been employed by Atlas on the last day of such year (assuming for such purpose that 50% of any individual bonus objectives had been achieved) or (b) his target bonus percentage. Substantially equivalent compensation and benefits would be payable in the event of Mr. Dietrichs
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 57
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL |
permanent disability (as defined) or his death. Moreover, if, within six months following termination of employment by Atlas for reasons other than cause or by Mr. Dietrich for good reason, a change of control occurs, then, in addition to the payment described above, Mr. Dietrich would be entitled to an additional amount equal to 12 months of his then-current monthly base salary.
Mr. Dietrichs employment agreement also provides that he will not, for a period of one year following the termination of his employment with us, solicit or interfere with any of our contracts, client relationships, independent contractors, suppliers, customers, employees, or Directors. Additionally, for a period of one year following termination of his employment, Mr. Dietrich may not accept employment in a non-attorney capacity with, or give non-legal advice to, certain of our major competitors. Mr. Dietrichs employment agreement was amended and restated effective September 15, 2006 and was further amended at year-end 2008 and in 2011.
Aside from Messrs. Flynn and Dietrich, our other NEOs do not have employment agreements.
Potential Payments Upon Termination or Change of Control
Our AIP for Senior Executives, Incentive Plans and related award agreements, employment agreements with Mr. Flynn and Mr. Dietrich and Benefits Program for Senior Executives (the Benefits Program) provide for payments and benefits to our executive officers upon certain terminations of employment, a change of control of the Company, or retirement.
For purposes of these plans and arrangements, a change of control of the Company means a change of control as defined in Section 409A of the Code and in the regulations promulgated thereunder, which generally includes (i) the acquisition by any person or group of more than 50% of the total fair market value or total voting power of the Common Stock, (ii) the acquisition by any person or group, during any twelve-month period of ownership, of stock possessing 30% or more of the total voting power of the Company, (iii) the replacement of a majority of the membership of the Companys Board of Directors during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Companys then Board of Directors, or (iv) the acquisition by a person or group during any twelve-month period of assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all assets of the Company.
Based on our extensive shareholder outreach and related feedback, equity and other long-term incentive award agreements under our Incentive Plan generally are subject to double-trigger provisions that require a change of control to be accompanied by a qualifying termination of employment in order for any such award to vest on an accelerated basis. However, in 2016, due to Mr. Flynns retirement eligibility, the terms of his then existing awards entitled him to acceleration and payment in connection with the Amazon transaction. In response to our Say-on-Pay result in 2017 as well as specific shareholder feedback received through our extensive outreach efforts in which a Compensation Committee member participated, the Compensation Committee has restructured Mr. Flynns awards starting in 2018 to contain a strict double-trigger requirement (his 2017 awards could not be similarly modified retroactively without causing materially adverse tax consequences under Code Section 409A). All other NEOs also have strict double trigger requirements.
Payments Upon Termination of Employment or Retirement (Without a Change of Control)
Severance Entitlements
Mr. Steen, Mr. Schwartz and Mr. Kokas participate in the Benefits Program as do Mr. Flynn and Mr. Dietrich to the extent severance benefits and related matters are not specifically covered in their respective employment agreements. The Benefits Program provides for the following severance payments and benefits in the event the executive is terminated by the Company without cause or due to disability, or the executive resigns for good reason (as defined below), in the absence of a change of control of the Company: (i) 24 months continued base salary; (ii) twelve months of reimbursement of the portion of COBRA health and welfare continuation coverage premiums attributable to employer cost-share on an after-tax basis; and (iii) an annual bonus payment for the year of termination, based on the lesser of actual and target performance.
58 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL |
For purposes of the Benefits Program, good reason means (i) a reduction in the executive officers annual base salary, except where such reduction is part of a general salary reduction by the Company, or the executive officer ceasing to be eligible to earn an annual bonus under the Companys annual bonus plan, (ii) the executive officer ceasing to hold the title of Executive Vice President, other than through promotion or through reassignment to another job title of comparable responsibility, or (iii) a reduction in job responsibilities which diminishes the executive officers opportunity to earn a bonus under the Companys annual bonus plan.
Mr. Flynns and Mr. Dietrichs severance benefits under their individual employment agreements in the event of certain terminations in the absence of a change of control of the Company are described above under the section entitled Employment Agreements.
Annual Incentive Program
A participant in our AIP for Senior Executives would be entitled to receive an annual bonus payment under the plan, based on the lesser of actual and target level performance, in the event of a termination by the Company without cause or a resignation for good reason (as defined below), or in the event of the participants retirement, in each case in the absence of a change of control of the Company. In the event of a participants death or termination by reason of disability in the absence of a change of control, the Company may in its sole discretion pay all or a portion of the participants annual incentive award based on participants performance and duration of employment during the plan year.
For purposes of the AIP, good reason means (i) a material reduction in the participants duties and responsibilities or (ii) a reduction of the participants aggregate salary, benefits and other compensation, except where such reduction is part of a general salary reduction by the Company.
Long-Term Incentive Awards
In the event of a termination of employment by the Company without cause or due to death or disability in the absence of a change of control of the Company, a pro-rata portion of our executive officers outstanding PSUs and cash-based long-term incentive awards would vest, based on the portion of the performance period elapsed prior to such termination, with all applicable performance goals determined at the end of the performance period based on actual performance. Mr. Flynns outstanding PSUs would vest without proration but payout would be based on actual performance determined at the end of the performance period in the event of a qualifying retirement approved by a majority of the Board of Directors (not including Mr. Flynn). Our executive officers outstanding RSUs would immediately vest in the event of a termination by the Company due to death or disability (or, with respect to Mr. Flynn, a Board-approved retirement) in the absence of a change of control of the Company.
Payments Upon a Change of Control (Without Termination of Employment)
Annual Incentive Program
In the event of a change of control of the Company, a participant in our AIP for Senior Executives would remain eligible to receive an annual bonus payment following the completion of the plan year in which the change of control occurs, based on the greater of target level performance and actual performance determined at the end of the performance period.
Long-Term Incentive Awards
In the event of a change of control of the Company, all outstanding PSUs and cash-based long-term incentive awards would be deemed satisfied at maximum performance levels. All outstanding long-term incentive awards would immediately vest in connection with the change of control if the awards are not assumed or substituted by the acquiror in the transaction. If, however, the awards are assumed or substituted by the acquiror in the transaction (as was the case in the Amazon transaction), then the awards would remain outstanding subject to the executive officers continued employment, and would immediately vest in the event of certain terminations of
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 59
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL |
employment following the change of control, as described in the section entitled Payments Upon a Change of Control and Termination of Employment Long-Term Incentive Awards below.
Nonqualified Deferred Compensation
As described above in section entitled Other Elements of Compensation Retirement Plans, our NEOs are entitled to receive an annual employer contribution under the Retirement Restoration Plan. Each of our executive officers is fully vested in his account balance under the Retirement Restoration Plan. All account balances under the plan would become immediately payable in the event of a change of control.
Payments Upon a Change of Control and Termination of Employment
Severance Entitlements
Mr. Steen, Mr. Schwartz and Mr. Kokas participate in the Benefits Program, which provides for the following severance payments and benefits in the event the executive is terminated by the Company without cause or resigns for good reason (as defined above), within the twelve-month period following a change of control of the Company: (i) a cash payment equal to three times his then-current annual base salary, payable in a lump sum, (ii) twelve months reimbursement of the portion of COBRA health and welfare continuation coverage premiums attributable to employer cost-share on an after-tax basis and (iii) an annual bonus payment for the year of termination, based on the lesser of actual and target performance.
If Mr. Steen, Mr. Schwartz or Mr. Kokas is terminated by the Company without cause or due to disability, or resigns for good reason, within the six-month period prior to a change of control of the Company, then he would be entitled to receive a cash payment equal to one-times his then-current annual base salary (in addition to any payments or benefits he was otherwise entitled to receive in connection with such termination, as described in the section entitled Payments Upon Termination of Employment or Retirement (Without a Change of Control) Severance Entitlements), payable in a lump sum six months following the change of control.
None of Mr. Steen, Mr. Schwartz or Mr. Kokas is entitled to any tax gross-up payments in the event the executive officer is subject to the golden parachute excise tax under Section 4999 of the Code. Receipt of the separation payments and benefits described above is conditioned upon the applicable executive officer executing a release of claims in favor of the Company and complying with a restrictive covenant agreement.
Mr. Flynns and Mr. Dietrichs severance benefits under their individual employment agreements in the event of certain terminations following a change of control are described under the section entitled Employment Agreements above.
Long-Term Incentive Awards
In the event of a termination by the Company without cause or due to death or disability, or the executive officers resignation for good reason (as defined below) (or, for Mr. Flynn, a Board-approved retirement), in each case following a change of control of the Company, all outstanding long-term incentive awards that were not substituted or assumed by the acquiror in connection with the transaction would immediately vest, with any applicable performance goals deemed satisfied at maximum performance levels.
For purposes of the long-term incentive awards, good reason means (i) a material reduction in the executive officers duties and responsibilities, (ii) a reduction in the executive officers aggregate salary, benefits and other compensation (including any incentive opportunity), other than as part of a general reduction applicable to all similarly situated employees, or (iii) a relocation to a position that is located greater than 40 miles from the executive officers most recent principal location of employment with the Company.
60 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
POST-TERMINATION AND CHANGE OF CONTROL TABLE |
POST-TERMINATION AND CHANGE OF CONTROL TABLE
The table below sets forth the estimated dollar value of the payments and other benefits our NEOs would receive in the event of his termination of employment or a change of control that are in addition to amounts previously earned and accrued by the executive, in each case assuming that such termination is without cause and such termination or change of control occurred on December 31, 2017.
These estimates were valued based on the closing price of our Common Stock as quoted on the NASDAQ Global Market on December 29, 2017 (the last trading day of 2017), which was $58.65 per share. The actual amounts to be paid can only be determined at the time of such events.
These estimates assume that the NEO (a) executes a release of claims, (b) does not violate the executives noncompetition or nonsolicitation agreements or any other restrictive covenants with us following termination, (c) does not receive medical and life insurance coverage from another employer within twelve months of the termination of his employment, (d) does not have any unused vacation time and (e) does not incur legal fees or relocation expenses requiring reimbursement from us.
These estimates exclude the following items:
| Payments under our AIP for Senior Executives that each NEO became entitled to as of December 31, 2017. |
| The value of the NEOs accrued balances under the Companys 401(k) Restoration and Voluntary Deferral Plan, which are disclosed in the Nonqualified Deferred Compensation Table above. |
| The value of PSUs and cash-based long-term incentive awards granted to our NEOs in 2015 that vested upon the completion of the applicable performance period on December 31, 2017. |
Name | Payments on Termination of Employment Due to Death(1) |
Payments on Termination of Employment Due to Disability(2) |
Payments on Termination of Employment Without Cause(3) |
Payments in Connection with a Change of Control Without Qualifying Termination of Employment |
Payments in Connection with a Change of Control With a Qualifying Termination of Employment(4) |
|||||||||||||||
William J. Flynn |
$ | 5,066,022 | $ | 5,066,022 | $ | 6,101,022 | $ | 129,938 | $ | 10,540,979 | ||||||||||
John W. Dietrich |
9,349,854 | 9,349,854 | 6,346,306 | 128,652 | 12,915,246 | |||||||||||||||
Michael T. Steen |
7,961,287 | 9,161,287 | 6,099,239 | 120,085 | 12,603,179 | |||||||||||||||
Adam R. Kokas |
6,813,247 | 7,887,247 | 5,249,382 | 109,780 | 10,772,930 | |||||||||||||||
Spencer Schwartz |
6,811,711 | 7,861,711 | 5,213,646 | 108,244 | 10,725,194 |
(1) | Represents (a) two times Mr. Flynns and Mr. Dietrichs annual base salary, (b) the estimated cost of 12 months of reimbursement of the portion of COBRA health and welfare continuation coverage premiums attributable to employer cost-share on an after-tax basis, (c) the estimated cost of relocation reimbursement for Mr. Dietrich and (d) the aggregate value of the NEOs long-term incentive awards, prorated based on the portion of the performance period elapsed prior to December 31, 2017 and assuming target level performance, in the case of the NEOs PSUs and cash-based long-term incentive awards. However, a change of control of the Company occurred on September 20, 2016 in connection with the Amazon transaction (Amazon Transaction) for purposes of certain of the Companys benefit plans and arrangements. As a result, instead of the benefits otherwise receivable in the case of death, all of the NEOs long-term incentive awards granted prior to the change of control would have vested, without proration and with any applicable performance criteria deemed satisfied at maximum levels (except the CEO, as his long-term incentive awards granted prior to the change of control vested in connection with the change of control), in the event of the NEOs death on December 31, 2017. |
(2) | Represents (a) two times the NEOs annual base salary, (b) the estimated cost of 12 months of reimbursement of the portion of COBRA health and welfare continuation coverage premiums attributable to employer cost-share on an after-tax basis, (c) the estimated cost of relocation reimbursement for Mr. Dietrich and (d) the aggregate value of the NEOs long-term incentive awards outstanding, prorated based on the portion of the performance period elapsed prior to December 31, 2017 and assuming target level performance, in the case of the NEOs PSUs and cash-based long-term incentive awards. However, in connection with the Amazon Transaction, instead of the benefits otherwise receivable in the case of disability, all of the NEOs long-term incentive awards granted prior to the change of control would have vested, without proration and with any applicable performance criteria deemed satisfied at maximum levels, in the event of a termination of employment by the Company due to disability on December 31, 2017. |
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 61
POST-TERMINATION AND CHANGE OF CONTROL TABLE |
(3) | Represents (a) two times the NEOs annual base salary, (b) the estimated cost of 12 months of reimbursement of the portion of COBRA health and welfare continuation coverage premiums attributable to employer cost-share on an after-tax basis, (c) the estimated cost of relocation reimbursement for Mr. Dietrich and (d) the aggregate value of the NEOs PSUs and cash-based long-term incentive awards, prorated based on the portion of the performance period elapsed prior to December 31, 2016 and assuming target level performance. However, as described above, in connection with the Amazon Transaction, instead of the benefits otherwise receivable upon termination of employment, all of the NEOs long-term incentive awards granted prior to the change of control would have vested, without proration and with any applicable performance criteria deemed satisfied at maximum levels, in the event of a termination of employment by the Company without cause on December 31, 2017. |
(4) | Represents (a) three times the NEOs annual base salary, (b) the estimated cost of twelve months of reimbursement of the portion of COBRA health and welfare continuation coverage premiums attributable to employer cost-share on an after-tax basis, (c) the estimated cost of relocation reimbursement for Mr. Dietrich and (d) the aggregate value of the NEOs long-term incentive awards, with any applicable performance criteria deemed satisfied at maximum levels. The amounts in this column do not reflect any reductions for federal excise tax levied on certain excess termination payments under Section 4999 of the Code. |
62 | Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement
PAY RATIO |
Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act (together with any SEC guidance issued thereunder, the pay ratio rules), presented below is the ratio of annual total compensation of our CEO to the annual total compensation to our median employee (excluding our CEO).
Median Employee
Our median employee is a First Officer flying one of our Boeing 747-400 aircraft.
Company crew member salaries are determined under a collective bargaining agreement, which is currently under renegotiation. Seniority, performance, job skills and rank are some of the factors that go into determining crew member compensation.
Pay Ratio
The 2017 annual total compensation as determined in accordance with the applicable pay ratio rules for our CEO was $6,025,444. The 2017 annual total compensation as determined under the pay ratio rules for our median employee was $95,761. The ratio of our CEOs annual total compensation to our median employees total compensation for fiscal year 2017 is 62.9 to 1.
Measurement Process
The ratio is calculated in a manner consistent with the pay ratio rules. In identifying our median employee, we calculated the annual total compensation of each of our employees and our consolidated subsidiaries for the 12 month period that ended on December 31, 2017. Total compensation for these purposes included base wages or salary, any applicable bonuses or profit sharing plan payouts and any other taxable elements of compensation and was calculated using IRS Form W-2 data supplemented with internal payroll and HR records. We did not apply any cost-of-living adjustments as part of the calculation.
We selected the median employee based on approximately 2,856 full-time, part-time and temporary workers who were employed as of December 31, 2017, which number excludes all employees located outside of the United States (91 individuals; 36 in Hong Kong, 10 in the United Kingdom, 12 in the United Arab Emirates, 3 in Germany, 3 in South Korea, 1 in Luxembourg, 6 in Japan, 4 in Australia, 3 in the Netherlands, 5 in Chile, 4 in Brazil, and 4 in Singapore). These persons were excluded pursuant to the de minimis exemption provided under the pay ratio rules. For full-time and part-time employees who were hired in 2017 but did not work the full year, we annualized their compensation but did not make any full-time equivalent adjustments. We did not include independent contractors in our determination.
The detailed process through which our Compensation Committee determines our executive compensation, including our CEOs compensation, is detailed in pages 26-28 and our Compensation and Discussion and Analysis section.
Atlas Air Worldwide Holdings, Inc. 2018 Notice & Proxy Statement | 63
PROPOSAL NO. 2 |
PROPOSAL NO. 2 RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018
The Audit Committee has selected PwC as the Companys independent registered public accounting firm for the year ending December 31, 2018 and has directed that management submit the selection of that firm to the shareholders for ratification at the Annual Meeting. PwC has served as the Companys independent registered public accounting firm since 2007. In accordance with SEC rules and PwC policies, the firms lead engagement partner rotates every five years. The Audit Committee is directly involved in the selection of the new partner when there is a rotation. Representatives from PwC are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.
Shareholder ratification of the selection of PwC as the Companys independent registered public accounting firm is not required by the Companys By-Laws or otherwise. However, we are submitting the selection of PwC to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PwC. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interests of the Company and its shareholders.
Services provided to us by PwC for each of the last two fiscal years are described below (dollars in thousands):
2017 | 2016 | |||||||
Audit Fees |
$ | 2,449 | $ | 2,093 | ||||
Audit-Related Fees |
131 | 3 | ||||||
Tax Fees |
1,719 | 1,670 | ||||||
Other Fees |
| 46 | ||||||
Total |
$ | 4,299 | $ | 3,812 | < |