DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

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  Preliminary Proxy Statement.
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  Definitive Proxy Statement.
  Definitive Additional Materials.
  Soliciting Material Pursuant to §240.14a-12.

Aramark

(Name of Registrant as Specified In Its Charter)

 

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

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NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT


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2018 Annual Meeting of Shareholders Wednesday, January 31, 2018 at 10:00am EST Philadelphia Marriott Downtown 1201 Market Street Philadelphia, PA 19107


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DEAR FELLOW SHAREHOLDERS:

Every day at Aramark, we focus on delivering excellence to the customers, consumers and communities we are privileged to serve across the globe. Our mission to Enrich and Nourish Lives is carried out daily by our associates who are committed to dreaming and doing – never losing sight of the importance of delighting people wherever they learn, work, play and recover.

 

I am pleased to report that 2017 was another successful year as we made further strides on our transformative journey while delivering strong results – led by a double-digit increase in adjusted earnings per share for the fourth consecutive year. Our performance was driven by maintaining a clear-eyed focus on our winning strategy:

 

  Accelerating Growth

  Activating Productivity

  Attracting Talent

  Achieving Portfolio Optimization

 

At Aramark, everything begins with the principle that the ‘Consumer Sets the Table,’ meaning that we must understand, anticipate and meet their needs centered on:

 

Quality – providing products featuring superior ingredients that are sourced and prepared the right way

 

Health & Wellness – developing a variety of items that are fresh and good for you,
led by our groundbreaking Healthy for Life partnership with the American Heart Association

 

Convenience – capitalizing on technology to enable speed of service that fits within today’s busy and fast-paced schedules

 

Personalization – tailoring and customizing our offerings to be relevant to individual tastes and preferences

 

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Eric J. Foss

Chairman, President and

Chief Executive Officer

 

We also continued our progress in building a sound corporate governance structure that is the foundation of financial integrity, shareholder transparency and sustainable results. Our commitment to solicit shareholder feedback ensures ongoing dialogue that results in adopting best practices and continuous improvement. Our outreach efforts this year included approaching shareholders representing over two-thirds of our stock ownership and led to several important actions:

  Implementing proxy access by-laws
  Adding return on invested capital as a performance metric for our long-term performance awards
  Increasing the weighting of performance awards

In addition, we advanced in the areas of Board composition and diversity, as well as in compensation practices. We remain committed to evolving our governance structure as our company, the industry and our shareholder base evolve. You can rely on our vigilance around accountability, transparency and open dialogue with shareholders as a hallmark of our governance practices.

Finally, we announced two strategic, financially compelling transactions that will drive meaningful growth and enhance our competitive position across our portfolio. We have acquired Avendra, the leading hospitality procurement service provider in North America that manages nearly $5 billion in annual purchasing spend. We also entered into an agreement to acquire AmeriPride, one of the largest uniform rental and linen supply companies in North America. These transactions meet our objective to enhance scale and capability in our core business, and represent the next step in our commitment to creating sustainable value for our shareholders. We look forward to welcoming the hard working team members of Avendra and AmeriPride to the Aramark family.

Looking forward, I remain confident in the outlook for our company. Thank you for your investment in Aramark and your ongoing interest. Our success is fueled by your confidence in us, and we count on your support to enable our future success.

I am pleased to invite you to attend Aramark’s Annual Meeting of Shareholders on Wednesday, January 31, 2018, at 10:00 am/EST at the Philadelphia Marriott Downtown (1201 Market Street, Philadelphia, PA 19107). It will be my pleasure to welcome you and provide details about our 2017 performance and our dedication to delivering long-term shareholder value. Whether or not you are able to attend, your voice is important, and we hope that you will cast your vote at your earliest convenience. Thank you.

 

 

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Chairman, President and Chief Executive Officer

 

 


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Notice of 2018 Annual Meeting of Shareholders

 

 

DATE AND TIME:

Wednesday, January 31, 2018 at 10:00 am (Eastern Standard Time)

PLACE:

Philadelphia Marriott Downtown, 1201 Market Street, Philadelphia, Pennsylvania 19107

ITEMS OF BUSINESS:

 

PROPOSAL 1. To elect the 11 director nominees listed in the proxy statement to serve until the 2019 annual meeting of shareholders and until their respective successors have been duly elected and qualified;

 

PROPOSAL 2. To consider and vote upon a proposal to ratify the appointment of KPMG LLP as Aramark’s independent registered public accounting firm for the fiscal year ending September 28, 2018;

 

PROPOSAL 3. To hold a non-binding advisory vote on executive compensation; and

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

RECORD DATE:

The Board of Directors has fixed December 8, 2017, as the record date for the meeting. This means that only shareholders as of the close of business on that date are entitled to receive this notice of the meeting and vote at the meeting and any adjournments or postponements of the meeting.

HOW TO VOTE:

Shareholders of record can vote their shares by using the Internet or the telephone or by attending the meeting in person and voting by ballot. Instructions for voting by using the Internet or the telephone are set forth in the Notice of Internet Availability that has been provided to you. Shareholders of record who received a paper copy of the proxy materials also may vote their shares by marking their votes on the proxy card provided, signing and dating it, and mailing it in the envelope provided, or by attending the meeting in person and voting by ballot.

 

By Order of the Board of Directors,

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Stephen R. Reynolds

Executive Vice President, General Counsel and Secretary

December 21, 2017

 

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Proxy Statement Summary

     2  

Corporate Governance Highlights

  

2017 Business Performance Highlights

     3  

Executive Compensation

     6  

Corporate Governance Matters

     8  

Proposal No. 1 – Election of Directors

     8  

Director Nominees

     9  

Corporate Governance

     17  

Director Compensation

     24  

Audit Committee Matters

     26  

Proposal No.  2 – Ratification of Independent Registered Public Accounting Firm

     26  

Fees to Independent Registered Public Accounting Firm

     27  

Report of Audit and Corporate Practices Committee

     28  

Compensation Matters

     29  

Proposal No.  3 – Advisory Vote to Approve Executive Compensation

     29  

Compensation Discussion and Analysis

     30  

Compensation Committee Report

     47  

Compensation Tables

     48  

Equity Compensation Plan Information

     68  

Certain Relationships and Related Transactions

     69  

Security Ownership of Certain Beneficial Owners and Management

     70  

Section 16(a) Beneficial Ownership Reporting Compliance

     72  

General Information

     73  

2018 Annual Shareholders Meeting

     73  

2019 Annual Shareholders Meeting

     77  

Annex A

     Annex-1  

 

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Proxy Statement Summary

 

 

This summary highlights information contained elsewhere in this proxy statement, which is first being sent or made available to shareholders on or about December 21, 2017. You should read the entire proxy statement carefully before voting. For more information regarding the Company’s 2017 performance, please review Aramark’s Annual Report.

MISSION & STRATEGY

Aramark’s mission is to “Deliver experiences that enrich and nourish lives.” This mission is anchored in our core values which guide our execution in the marketplace:

 

  Sell and Serve with Passion. Placing clients and consumers at the center of all that we do by listening and responding to their needs with service focused on quality and innovation.

 

  Set Goals. Act. Win! Maintaining a culture of accountability where performance matters and exhibiting leadership that achieves and exceeds expectations through our execution.

 

  Front-Line First. Providing our front-line employees with tools and training that empower them to deliver excellence at the point of service to thousands of consumers and clients every day.

 

  Integrity and Respect Always. The highest ethical standards are the cornerstone of the Aramark brand and help us earn the trust of our key constituents.

We strive to accomplish this mission through a repeatable business model founded on five principles of excellence—selling, service, execution, marketing and operations. We operate our business with social responsibility, focusing on initiatives that support our diverse workforce, advance consumer health and wellness, protect our environment, and strengthen our communities. Aramark is recognized as one of the World’s Most Admired Companies by FORTUNE, as well as an employer of choice by the Human Rights Campaign and DiversityInc.

 

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Total Shareholder Return - ARMK vs. S&P 5001 Adjusted Operating Income $M2


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2017 BUSINESS PERFORMANCE HIGHLIGHTS

As we evaluate our compensation approach for the year, we note that Aramark reported another record year in 2017. We delivered a 14% increase in constant currency adjusted earnings per share (“EPS”) (28% increase in GAAP EPS), the fourth consecutive year of double-digit adjusted EPS growth. We also achieved improvements in numerous other financial metrics*, a 30 basis point improvement in our leverage ratio to 3.5x and a 36% increase in our free cash flow generation. We continued to execute against a focused strategy to accelerate growth, activate productivity, attract the best talent and achieve portfolio optimization, and our strong results this year reflect the success of this strategy.

*See Annex A of this proxy statement for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.

Total Shareholder Return of 110% since our IPO vs. 41% for the S&P 500. Our cost and productivity initiatives have improved adjusted operating income and margins…

 

 

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…which have accelerated adjusted earnings per share growth, allowing us to increase the financial flexibility of the Company for the long run.

 

 

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1 As of the end of fiscal 2017

2 Constant currency as reported in each respective year

3 The 53rd week is estimated to have increased Fiscal 2014 adjusted EPS by $0.02

4 As of the end of the relevant fiscal year

 

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Adjusted Earnings Per Share2 Net Debt to Covenant Adjusted EBITDA


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CURRENT BOARD OF DIRECTORS

 

 

DIRECTOR

 

 

AGE

   

 

OCCUPATION

 

 

COMMITTEE

MEMBERSHIPS

 

Eric J. Foss

 

 

 

 

59

 

 

 

 

Chairman, President and Chief Executive Officer, Aramark

   

 

Pierre-Olivier
Beckers-Vieujant

 

 

 

 

57

 

 

 

 

Honorary President and Chief Executive Officer, Delhaize Group

 

 

Audit and Corporate Practices

Nominating and Corporate Governance

 

Lisa G. Bisaccia

 

 

 

 

61

 

 

 

 

Executive Vice President and Chief Human Resources Officer, CVS Health Corporation

 

 

Compensation and Human Resources

Nominating and Corporate Governance

 

Richard W. Dreiling

 

 

 

 

64

 

 

 

 

Former Chairman and Chief Executive Officer, Dollar General Corporation

 

 

Compensation and Human Resources

Finance

 

Irene M. Esteves

 

 

 

 

58

 

 

 

 

Former Chief Financial Officer, Time Warner Cable Inc.

 

 

Audit and Corporate Practices

Finance (Chair)

 

Daniel J. Heinrich

 

 

 

 

61

 

 

 

 

Former Chief Financial Officer, The Clorox Company

 

 

Audit and Corporate Practices (Chair)

Finance

 

Sanjeev K. Mehra

Lead Director

 

 

 

 

58

 

 

 

 

Former Advisory Director and Vice Chairman, Global Private Equity, Merchant Banking Division, Goldman, Sachs & Co.

 

 

Compensation and Human Resources

Nominating and Corporate Governance (Chair)

 

Patricia B. Morrison

 

 

 

 

58

 

 

 

 

Executive Vice President, Customer Support Services & Chief Information Officer, Cardinal Health, Inc.

 

 

Audit and Corporate Practices

Finance

 

John A. Quelch

 

 

 

 

66

 

 

 

 

Dean and Vice Provost, University of Miami School of Business Administration

 

 

Audit and Corporate Practices

Nominating and Corporate Governance

 

Stephen I. Sadove

 

 

 

 

66

 

 

 

 

Former Chairman and Chief Executive Officer, Saks Incorporated

 

 

Compensation and Human Resources (Chair)

Nominating and Corporate Governance

CORPORATE GOVERNANCE

We are committed to strong corporate governance practices, which promote the long-term interests of shareholders, strengthen financial integrity, and foster attractive Company performance as demonstrated by the following:

Key Governance Practices

 

  11 Director Nominees, of Which 10 Are Independent

 

  Diversity of Skills, Experience and Backgrounds of Directors and Robust Director Nominee Selection Process

 

  Annual Election of All Directors

 

  Independent Audit, Compensation, Nominating and Corporate Governance and Finance Committees

 

  Alignment of Director and Shareholder Interests through Director Equity Grants, which, in 2018, comprise 62% of base annual compensation

 

  Independent Lead Director

 

  Annual Board Self-Assessment and Board Skills and Experience Assessment

 

  Executive Sessions of Independent Directors Held at Each Regularly Scheduled Board Meeting

 

  Adoption of Proxy Access

 

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SHAREHOLDER ENGAGEMENT

Over the past few years, in response to shareholder feedback, the Board has incorporated the enhancements to our executive compensation program and corporate governance practices that are depicted in the timeline below.

 

 

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SHAREHOLDER ENGAGEMENT & CORPORATE GOVERNANCE ENHANCEMENTS TIMELINE FEBRUARY Adopted a clawback policy NOVEMBER Granted 3-year adjusted EPS ‘cliff vesting’ performance awards NOVEMBER Added free cash flow metric to management bonus plan FEBRUARY Eliminated liberal share recycling AUGUST Implemented proxy access by-laws NOVEMBER Performance awards weighting increased to 50% Granted 3-year adjusted EPS & ROIC ‘cliff-vesting’ performance awards


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EXECUTIVE COMPENSATION

Our Executive Compensation Programs

Our compensation programs are designed to support our overall commitment to continued growth and the provision of quality and innovative services to our clients and customers in order to ensure continued shareholder value creation. Our programs are focused on three important goals:

Align with Shareholder Interests: Align each executive’s interests with shareholders’ interests by requiring significant stock ownership, tying substantial portions of pay to performance, paying a significant portion of compensation in equity and subjecting equity compensation to performance conditions and multi-year vesting periods;

Performance Based: Tie significant portions of compensation to performance in order to achieve our short-term and long-term business goals; and

Market Competitiveness: Attract and retain key executives with the capability to lead the business forward by providing innovative and effective service to our clients and customers.

Percentage of Variable NEO Compensation “At Risk” The charts below highlight the significant percentage of the CEO’s compensation and the average compensation of our other named executive officers (“NEOs”) as a group for fiscal 2017 that is variable and “at-risk.”

 

 

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CEO PAY MIX OTHER NEO PAY MIX Salary and other Annual cash incentive Equity Awards Total pay at risk

 

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VOTING MATTERS AND BOARD RECOMMENDATIONS

 

 

PROPOSAL

 

 

BOARD’S RECOMMENDATION

 

Proposal 1. Election of 11 Director Nominees (page 8)

 

 

FOR Each Director Nominee

 

Proposal 2. Ratification of KPMG LLP as Independent Registered Public

Accounting Firm for 2018 (page 26)

  FOR

 

Proposal 3. Advisory Approval of Executive Compensation (page 29)

 

 

FOR

2018 ANNUAL MEETING OF SHAREHOLDERS

 

Date and Time:

   Wednesday, January 31, 2018 at 10:00 am EST

Record Date:

   December 8, 2017

Place:

   Philadelphia Marriott Downtown, 1201 Market Street, Philadelphia, PA 19107

 

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Corporate Governance Matters

 

 

 

 

PROPOSAL NO. 1 - ELECTION OF DIRECTORS

 

PROPOSAL SUMMARY

What Are You Voting On?

We are asking our shareholders to elect 11 director nominees listed below to serve on the Board for a one-year term. Information about the Board and each director nominee is included in this section.

Voting Recommendation

The Board recommends that you vote “FOR” each director nominee listed below. After consideration of the individual qualifications, skills and experience of each of our director nominees and, where applicable, his or her prior contributions to the Board, it believes a Board composed of the 11 director nominees would be well-balanced and effective.

The Board, upon recommendation from the Nominating and Corporate Governance Committee (the “Nominating Committee”), has nominated 11 directors for election at the Annual Meeting. Each of the directors elected at the annual meeting will hold office until the annual meeting of shareholders to be held in 2019 or until his or her successor has been elected and qualified, or until his or her earlier death, resignation, removal or disqualification. Each of Messrs. Foss, Beckers-Vieujant, Dreiling, Heinrich, Mehra, Quelch, and Sadove, and Mses. Bisaccia, Esteves and Morrison currently serves as a member of the Board of Directors. Mr. Darden is a new director nominee for our 2018 Annual Meeting of Shareholders.

Unless contrary instructions are given, the shares represented by a properly executed proxy will be voted “FOR” each of the director nominees presented below. If, at the time of the meeting, one or more of the director nominees has become unavailable to serve, shares represented by proxies will be voted for the remaining director nominees and for any substitute director nominee or nominees designated by the Board of Directors, unless the size of the Board is reduced. The Board knows of no reason why any of the director nominees will be unavailable or unable to serve. Proxies cannot be voted for a greater number of persons than the director nominees listed.

 

 

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The Board of Directors recommends a vote “FOR” each nominee for Director


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DIRECTOR NOMINEES

The following information describes certain information regarding our director nominees as of December 21, 2017.

Director Nominee Composition

 

 

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Director Nominee Skills, Experience, and Background

The Board regularly reviews the skills, experience, and background that it believes are desirable to be represented on the Board and, in conjunction with the Board’s refreshment process described below, has recently re-evaluated these skills and qualifications to better align with the Company’s strategic vision and business and operations. The following is a description of some of these skills, experience, and background:

 

 

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Strategic Leadership Experience driving strategic direction and growth of an organization Operations Management Expertise Experience or expertise in managing the operations of a business or major organization Industry Background Knowledge of or experience in one or more of the Company’s specific industries (e.g., food, facilities management, and uniform services) Public Company Board Service Experience as a board member of another publicly-traded company. Financial Acumen & Expertise Experience or expertise in financial accounting and reporting or the financial management of a major organization Corporate Finance & M&A Experience Experience in corporate lending or borrowing, capital markets transactions, significant mergers or acquisitions, private equity, or investment banking Senior Management Leadership Experience serving in a senior leadership role of a major organization (e.g., Chief Financial Officer, General Counsel, President, or Division Head) Technology Background or Expertise Experience or expertise in information technology or the use of digital media or technology to facilitate business objectives CEO Leadership Experience serving as the Chief Executive Officer of a major organization International Experience Experience doing business internationally


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The following is a summary of some of the skills, experience, and background that our director nominees bring to the Board:

 

 

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SKILLS, EXPERIENCE AND BACKGROUND STRATEGIC LEADERSHIP CORPORATE FINANCE & M&A EXPERIENCE SENIOR MANAGEMENT LEADERSHIP INTERNATIONAL EXPERIENCE TECHNOLOGY BACKGROUND OR EXPERTISE FINANCIAL ACUMEN & EXPERTISE PUBLIC COMPANY BOARD SERVICE INDUSTRY BACKGROUND CEO LEADERSHIP OPERATIONS MANAGEMENT EXPERTISE


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Eric J. Foss Director since: 2012 Age: 59 Chairman, President and Chief Executive Officer, Aramark Biography: Eric J. Foss has been our Chairman of the Board since February 2015 and our President and Chief Executive Officer (“CEO”) since May 2012. Before joining us, Mr. Foss served as Chief Executive Officer of Pepsi Beverages Company from February 2010 until December 2011. Prior to that Mr. Foss served as Chairman and Chief Executive Officer of The Pepsi Bottling Group from 2008 until 2010; President and Chief Executive Officer from 2006 until 2007; and Chief Operating Officer from 2005 until 2006. Mr. Foss serves on the board of CIGNA Corporation and previously served on the board of UDR, Inc. Mr. Foss also serves on the board of directors of privately-held Catalyst Inc. Skills & Qualifications: Having served as our CEO since May 2012, Mr. Foss’s extensive knowledge of the Company and its wide-ranging operations are invaluable to the Board. In addition, Mr. Foss’s experience on strategic and operational matters that he obtained prior to joining Aramark as a public company Chief Executive Officer is greatly valued by the Board. Mr. Foss also brings to the Board a long career focused on retail strategies and consumer preference matters. Experience Highlights: CEO Leadership, Strategic Leadership, Operations Management Expertise, Public Company Board Service Non-Independent Director Aramark Committees: None Other Public Boards: CIGNA Corporation CIG Pierre-Olivier Beckers-Vieujant Director since: 2015 Age: 57 Honorary President and Chief Executive Officer, Delhaize Group Biography: Pierre-Olivier Beckers-Vieujant most recently served as President and Chief Executive Officer of Delhaize Group, an international food retailer, from January 1999 to November 2013 and prior to that held numerous positions with that company since 1983. He currently serves on the board of directors of The D’Ieteren Group. Mr. Beckers-Vieujant previously served as a director of Delhaize America, Inc. and Delhaize Belgium. He has been President of the Belgian Olympic Interfederal Committee since December 2004 and was elected to the International Olympic Committee in July 2012. Mr. Beckers-Vieujant also serves as a director of The Bata Shoe Company and Belron, which are privately-held. Skills & Qualifications: Mr. Beckers-Vieujant has over 20 years of experience internationally and in the U.S., bringing valuable experience to the Board from his years leading an employee-intensive business in the food industry. A former public company Chief Executive Officer, Mr. Beckers-Vieujant brings important leadership insights and strategic perspective to the Board. Experience Highlights: CEO Leadership–Former, Industry Experience, Operations Management Expertise, International Experience Independent Director Aramark Committees: Audit & Corporate Practices; Nominating & Corporate Governance Other Public Boards: The D’Ieteren Group


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Lisa G. Bisaccia Director since: 2016 Age: 61 Executive Vice President and Chief Human Resources Officer, CVS Health Corporation Biography: Lisa G. Bisaccia has been Executive Vice President and Chief Human Resources Officer for CVS Health Corporation since 2015. From 2010 to 2015, Ms. Bisaccia served as Senior Vice President and Chief Human Resources Officer for CVS Health Corporation. Prior to that, Ms. Bisaccia served as Vice President, Human Resources, Retail division of CVS from 2008 to 2009 and Vice President, Compensation, Benefits and HR Operations/Technology from 2004 to 2008. Prior to joining CVS, Ms. Bisaccia was with Fleetboston Financial Corporation serving in various compensation and benefits roles. Skills & Qualifications: Ms. Bisaccia’s significant experience in human resources, in particular in a high headcount business, has been an excellent addition to the Board. Ms. Bisaccia’s strategic and operations leadership also is of great value to the Board. Experience Highlights: Senior Management Leadership, Human Resources Experience, Strategic Leadership, Operations Management Expertise Independent Director Aramark Committees: Compensation & Human Resources; Nominating & Corporate Governance Other Public Boards: None Calvin Darden Director since: New Nominee Age: 67 Former Senior Vice President, U.S. Operations, United Parcel Service, Inc. Biography: Calvin Darden is currently Chief Executive Officer and Chairman of Darden Petroleum & Energy Solutions, LLC, a national distributor and regional provider of refined petroleum products and bio fuels founded by Mr. Darden in 2015. From 1995 to 2005, Mr. Darden served as Senior Vice President, U.S. Operations of United Parcel Service, Inc. Mr. Darden had a 33-year career with UPS where he served in a variety of senior leadership roles. Mr. Darden currently serves as a director of Target Corporation and Cardinal Health, Inc. Mr. Darden served on the board of directors of Coca-Cola Enterprises, Inc. (now known as Coca-Cola European Partners Plc) from 2003 to 2016. Skills & Qualifications: Mr. Darden’s expertise in supply chain networks, logistics and other operational matters would be highly valuable to the Board. In addition, Mr. Darden’s senior management experience for many years in a high-headcount business with a significant customer service element would provide important insights to the Board. Mr. Darden’s service on a number of public company boards would also be valuable to the Board as it relates to governance and similar matters. Experience Highlights: Operations Management Expertise, Senior Management Leadership, Strategic Leadership, Public Company Board Service Independent Director Aramark Committees: New Nominee Other Public Boards: Cardinal Health, Inc., Target Corporation


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Richard Dreiling Director since: 2016 Age: 64 Former Chairman and Chief Executive Officer, Dollar General Corporation Experience Highlights: CEO Leadership – Former, Strategic Leadership, Operations Management Expertise, Public Company Board Service Independent Director Aramark Committees: Compensation & Human Resources; Finance Other Public Boards: Kellogg Company, Lowe’s Companies, Inc., PulteGroup, Inc. Biography: Richard Dreiling is the former Chairman and Chief Executive Officer of Dollar General Corporation, serving as Chief Executive Officer from January 2008 to June 2015 and Chairman of the board of directors from December 2008 until January 2016. Before joining Dollar General, Mr. Dreiling served as Chief Executive Officer, President and a director of Duane Reade Holdings, Inc. and Duane Reade Inc., from November 2005 until January 2008, and as Chairman of the Board of Duane Reade from March 2007 until January 2008. Prior to that, Mr. Dreiling, beginning in March 2005, served as Executive Vice President – Chief Operating Officer of Longs Drug Stores Corporation, an operator of a chain of retail drug stores on the West Coast and Hawaii, after having joined Longs in July 2003 as Executive Vice President and Chief Operations Officer. From 2000 to 2003, Mr. Dreiling served as Executive Vice President – Marketing, Manufacturing and Distribution at Safeway, Inc. Prior to that, Mr. Dreiling served from 1998 to 2000 as President of Vons, a southern California food and drug division of Safeway. Mr. Dreiling is a director of Kellogg Company, Lowe’s Companies, Inc., and PulteGroup, Inc. Skills & Qualifications: Mr. Dreiling’s over 40 years of retail industry experience at all operating levels has added significant value to the Board. Mr. Dreiling has served as Chief Executive Officer of a large public company and brings to the Board very valuable insight and leadership attributes as a result of that experience. Irene M. Esteves Director since: 2015 Age: 58 Former Chief Financial Officer, Time Warner Cable Inc. Biography: Irene M. Esteves most recently served as Chief Financial Officer of Time Warner Cable Inc. from July 2011 to May 2013. She previously served as Executive Vice President and Chief Financial Officer of XL Group plc. Prior to that position, Ms. Esteves was Senior Vice President and Chief Financial Officer of Regions Financial Corporation. She currently serves as a director of R.R. Donnelley & Sons Company and Spirit AeroSystems Holdings Inc. and previously served as a director of Level 3 Communications, Inc., Timberland Co., Johnson Diversey Inc., and tw telecom inc. Skills & Qualifications: Ms. Esteves’ experience as a public company CFO and her over 20 years of experience overseeing global finance, risk management, and corporate strategy for U.S. and multi-national companies make her well qualified to serve on the Board. The Board has determined Ms. Esteves to be an audit committee financial expert and her accounting experience and skills are important to the Company. Experience Highlights: Senior Management Leadership, Financial Acumen & Expertise, Corporate Finance & M&A, Strategic Leadership Independent Director Aramark Committees: Audit & Corporate Practices; Finance Other Public Boards: R.R. Donnelley & Sons Company and Spirit AeroSystems Holdings Inc.


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Daniel J. Heinrich Director since: 2013 Age: 61 Former Chief Financial Officer, The Clorox Company Biography: Daniel J. Heinrich most recently served as Chief Financial Officer at The Clorox Company from 2003 to 2011. He started with Clorox in 2001 as Vice President and Controller and served in that role until 2003. Prior to joining Clorox he was Senior Vice President and Treasurer of Transamerica Finance Corporation from 1996 to 2001; Senior Vice President, Controller and Treasurer of Granite Management Company from 1994 to 1996; Senior Vice President, Controller and Chief Accounting Officer of First Nationwide Bank from 1986 to 1994; and in public accounting at Ernst & Young LLP from 1978 to 1986. Mr. Heinrich serves as a director of Edgewell Personal Care, Inc. (formerly Energizer Holdings, Inc.), Ball Corporation, and privately-held E. & J. Gallo Winery. Skills & Qualifications: The Board greatly values Mr. Heinrich’s extensive financial and business background and his tenure as a public company CFO. The Board has determined Mr. Heinrich to be an audit committee financial expert and his accounting experience and skills are important to the Company. In addition, Mr. Heinrich brings to the Board significant experience on information technology issues. Experience Highlights: Senior Management Leadership, Financial Acumen & Expertise, Corporate Finance & M&A Public Company Board Service Independent Director Aramark Committees: Audit & Corporate Practices (Chairman); Finance Other Public Boards: Edgewell Personal Care, Inc., Ball Corporation Sanjeev K. Mehra Director since: 2007 Age: 58 Former Advisory Director and Vice Chairman, Global Private Equity, Merchant Banking Division, Goldman, Sachs & Co. Experience Highlights: Financial Acumen & Expertise, Corporate Finance & M&A, Strategic Leadership, International Experience Independent Director Aramark Committees: Compensation & Human Resources; Nominating & Corporate Governance (Chairman) Other Public Boards: None Biography: Sanjeev Mehra most recently served as an Advisory Director of Goldman, Sachs & Co.’s Principal Investment Area of its Merchant Banking Division from March 2016 to July 2017. He was previously a Managing Director of the same group from 1996 and Vice Chairman of its Global Private Equity Group until March 2016. Mr. Mehra previously served as a director of First Aviation Services, Inc., Max Financial Services, Ltd., Interline Brands, Inc., Hawker Beechcraft, Inc., Burger King Holdings, Inc., KAR Auction Services, Inc., and SunGard. Skills & Qualifications: Mr. Mehra’s experience in private equity at Goldman, Sachs & Co. provides the Board with additional financial acumen and board leadership experience and perspective. Mr. Mehra is the Board’s Lead Director and his experience on the boards of a number of other public companies and his service on the Board since 2007 are invaluable in that role.


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Patricia Morrison Director since: 2017 Age: 58 Executive Vice President, Customer Support Services & Chief Information Officer, Cardinal Health, Inc. Experience Highlights:
Senior Management Leadership, Technology Background and Expertise, Operations Management Expertise Independent Director Aramark Committees: Audit & Corporate Practices; Finance Other Public Boards: Splunk, Inc. Biography: Patricia Morrison currently serves as the Executive Vice President of Customer Support Services and Chief Information Officer of Cardinal Health, Inc. Prior to joining Cardinal Health, Ms. Morrison was Chief Executive Officer of Mainstay Partners, a technology advisory firm, from 2008 to 2009. Previously, Ms. Morrison was Executive Vice President and Chief Information Officer for Motorola, where she oversaw all strategic, operational and financial aspects of the company’s information technology architecture, systems, tools, processes and infrastructure. Earlier in her career Ms. Morrison held the role of Chief Information Officer with GE Electrical Distribution. After four years with GE, she was the Chief Information Officer at Quaker Oats which was later acquired by PepsiCo in 2001.
Skills & Qualifications: Ms. Morrison has broad expertise in managing complex, multi-business shared services. A respected and experienced technology professional, Ms. Morrison is recipient of the Fisher-Hopper Prize for Lifetime Achievement in CIO Leadership. Ms. Morrison brings valuable information technology and shared services experience to the Board. John A. Quelch Director since: 2016 Age: 66
Dean and Vice Provost, University of Miami School of Business Administration Biography: John A. Quelch has been Dean and Vice Provost at the University of Miami School of Business Administration since July 2017. From January 2013 to June 2017, Dr. Quelch was the Charles Edward Wilson Professor of Business Administration at Harvard Business School and Professor in Health Policy and Management at Harvard School of Public Health. Between February 2011 and January 2013, Dr. Quelch served as Dean, Vice President and Distinguished Professor of International Management at the China Europe International Business School in Shanghai. From July 2001 through January 2011, he was Professor and Senior Associate Dean at the Harvard Business School. From July 1998 through June 2001, he was Dean of the London Business School. Dr. Quelch currently serves as a director of Alere, Inc. and privately-held Luvo, Inc. and previously served as a director of Propel Media, Inc., and WPP plc. Skills & Qualifications: Dr. Quelch’s international business experience and academic credentials have been an excellent addition to the Board. In particular, Dr. Quelch’s work in the areas of marketing and strategic thought have been a valuable asset. An expert in public health, Dr. Quelch provides important insights on public health matters affecting the Company or its business. Experience Highlights: Senior Management Leadership, Strategic Leadership, International Experience, Public Company Board Service Independent Director Aramark Committees: Audit & Corporate Practices; Nominating & Corporate Governance Other Public Boards:
Alere, Inc.


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Stephen I. Sadove Director since: 2013 Age: 66
Former Chairman and Chief Executive Officer, Saks Incorporated
Biography: Stephen Sadove is currently head of Stephen Sadove & Associates and a founding partner of JW Levin Partners. He served as Chief Executive Officer of Saks Incorporated from 2006 until November 2013 and Chairman and CEO from 2007 until November 2013. He was Chief Operating Officer of Saks from 2004 to 2006. Prior to joining Saks in 2002, Mr. Sadove was with Bristol-Myers Squibb Company from 1991 until 2002, first as President, Clairol from 1991 to 1996, then President, Worldwide Beauty Care from 1996 to 1997, then President, Worldwide Beauty Care and Nutritionals from 1997 to 1998, and finally, Senior Vice President and President, Worldwide Beauty Care. He was employed by General Foods Corporation from 1975 until 1991 in various managerial roles, most recently as Executive Vice President and General Manager, Desserts Division from 1989 until 1991. Mr. Sadove currently serves as a director of Colgate-Palmolive Company, Park Hotels & Resorts Inc. and Ruby Tuesday, Inc. and privately-held Buy It Mobility.
Skills & Qualifications: Mr. Sadove’s extensive knowledge of financial and operational matters in the retail industry, including as to technology matters, and his experience as a public company Chief Executive Officer are highly valuable to the Board. In addition, Mr. Sadove’s service on a number of public company boards provides important insights to the Board on governance and similar matters.
Experience Highlights:
CEO Leadership – Former, Operations Management Expertise, Strategic Leadership, Public Company Board Service
Independent Director
Aramark Committees:
Compensation & Human Resources; Nominating & Corporate Governance; Stock
Other Public Boards:
Colgate-Palmolive Company, Park Hotels & Resorts Inc., Ruby Tuesday, Inc.


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CORPORATE GOVERNANCE

Board Structure and Leadership

The Board manages or directs the business and affairs of the Company, as provided by Delaware law, and conducts its business through meetings of the Board and five standing committees: the Audit and Corporate Practices Committee (the “Audit Committee”), the Compensation Committee, the Nominating Committee, the Finance Committee and the Stock Committee. The Board is currently led by Mr. Foss, our Chairman, President and Chief Executive Officer.

The Board, upon the recommendation of the Nominating Committee, has determined that, at this time, combining the positions of Chairman and Chief Executive Officer as part of a governance structure that includes a lead independent director (the “Lead Director”) is the best board organization for Aramark. Aramark has a strong and effective Board that works very well together and 10 of the 11 Board nominees, if elected, will be independent directors. The Board’s committees are composed solely of, and chaired by, independent directors. Our independent directors meet at each regularly scheduled Board meeting in separate executive sessions, without Mr. Foss present, chaired by Mr. Mehra, the Lead Director.

The role of the Lead Director is to: (i) preside at all meetings of the Board at which the Chairman and Chief Executive Officer is not present, including executive sessions, (ii) in collaboration with the Chairman and Chief Executive Officer, establish agendas and materials for Board meetings, and in consultation with other directors, establish agendas for executive sessions, (iii) serve as principal liaison between the independent directors and the Chairman and Chief Executive Officer (however, all independent directors are encouraged to communicate directly with the Chairman), (iv) call meetings of independent directors, (v) if requested by shareholders, ensure that he is available for consultation and direct communication, (vi) with the Chairman of the Nominating Committee, if applicable, participate in the Board’s annual self-evaluation and provide Board-related performance feedback to the Chairman and Chief Executive Officer, (vii) with the Chairman of the Compensation Committee, participate in the annual discussion of the Chairman and Chief Executive Officer’s performance feedback and leadership succession and (viii) perform other duties as the Board may specify on a situational basis.

Aramark’s strong Board, with a proactive Lead Director and independent committee chairs, ensures that the Board, and not the Chairman alone, determines the Board’s areas of focus. The Chairman is guided by the strong independent directors, including the Lead Director. In addition, having the Chief Executive Officer also serve as Chairman creates a bridge to management that helps provide the Board with the management support that it needs.

Director Independence and Independence Determinations

Under our Corporate Governance Guidelines and NYSE rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with the Company or any of its subsidiaries.

The Board has established guidelines of director independence to assist it in making independence determinations, which conform to the independence requirements in the NYSE listing standards. In addition to applying these guidelines, which are set forth in our Corporate Governance Guidelines (which may be found on the Corporate Governance page of the Investor Relations section on our website at www.aramark.com), the Board will consider all relevant facts and circumstances in making an independence determination. Our Corporate Governance Guidelines provide that none of the following relationships will disqualify any director or nominee from being considered “independent” and such relationships will be deemed to be an immaterial relationship with Aramark:

 

  A director’s or a director’s immediate family member’s ownership of five percent or less of the equity of an organization that has a relationship with Aramark;

 

  A director’s service as an executive officer or director of or employment by, or a director’s immediate family member’s service as an executive officer of, a company that makes payments to or receives payments from Aramark for property or services in an amount which, in any fiscal year, is less than the greater of $1 million or two percent of such other company’s consolidated gross revenues; or

 

  A director’s service as an executive officer of a charitable organization that received annual contributions from Aramark and its Foundation that have not exceeded the greater of $1 million or two percent of the charitable organization’s annual gross revenues (Aramark’s automatic matching of employee contributions will not be included in the amount of Aramark’s contributions for this purpose).

 

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The policy of the Board is to review the independence of all directors at least annually. The Nominating Committee undertook its annual review of director independence and made a recommendation to the Board of Directors regarding director independence. In making its independence determinations, the Nominating Committee and the Board considered various transactions and relationships between Aramark and the directors or between Aramark and certain entities affiliated with a director, including in each case, Todd M. Abbrecht, Lawrence T. Babbio, Jr. and Leonard S. Coleman, Jr., who each served as a director during a portion of fiscal 2017. The Nominating Committee and the Board considered that each of Messrs. Abbrecht, Mehra, and Quelch and Mses. Bisaccia and Morrison are or were employed by organizations that do business with Aramark, where (i) each of such transactional relationships was for the purchase or sale of goods and services in the ordinary course of Aramark’s business, and the amount received by Aramark or such company in each of the previous three years did not exceed the greater of $1 million and 1% of either Aramark’s or such organization’s consolidated gross revenues or (ii) in the case of transactions with Goldman Sachs and its affiliates, of which Mr. Mehra was an advisory director during fiscal 2017 and an employee during fiscal 2016, also included Goldman Sachs and its affiliates’ participation as a lender in the ordinary course of business in the Company’s revolving credit facility, along with approximately 15 other lenders, for which Goldman’s lending commitment and associated interest payments was less than 1% of the consolidated gross revenues of Goldman Sachs. As a result of this review, the Board affirmatively determined that each of Messrs. Beckers-Vieujant, Darden, Dreiling, Heinrich, Mehra, Quelch and Sadove, Mses. Bisaccia, Esteves and Morrison is independent and Messrs. Abbrecht, Babbio, and Coleman was independent under the guidelines for director independence set forth in our Corporate Governance Guidelines and for purposes of applicable NYSE standards. In addition, at the committee level, the Board has also determined that each member of the Audit Committee is “independent” for purposes of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), each member of the Compensation Committee and Stock Committee is independent for purposes of applicable NYSE standards and that each member of the Stock Committee also qualifies as an outside director for purposes of Section 162(m) under the Internal Revenue Code and as a non-employee director for purposes of Section 16 of the Exchange Act.

Board Assessment

The Board is focused on enhancing its performance through a rigorous assessment process of the effectiveness of the Board and its committees in order to increase shareholder value. We have designed our Board evaluation process to solicit input and perspective from all of our directors on various matters, including:

 

  the effectiveness of the Board and its operations;

 

  the Board’s leadership structure;

 

  board composition, including the directors’ capabilities, experiences and knowledge;

 

  the quality of Board interactions; and

 

  the effectiveness of the Board’s committees.

As set forth in its charter, the Nominating Committee oversees the Board and committee evaluation process. Annually, the Chairman, President and Chief Executive Officer, the Lead Director and the Nominating Committee determine the appropriate form of evaluation and consider the design of the process to ensure it is both meaningful and effective. In 2017, the Board engaged an independent third party to conduct the evaluation of the Board and the Audit, Compensation, Nominating and Finance Committees and intends to do so in the future from time to time.

The independent third party interviewed each director and then summarized and presented to the full Board the feedback from these interviews. As a result of this Board assessment process, the Board is satisfied that it and the committees are operating effectively to carry out their responsibilities and achieve the right balance between oversight of the business and involvement in management operations.

Board Committees and Meetings

The Board held seven meetings during fiscal 2017. During fiscal 2017, each director attended at least 75% of the aggregate of all Board meetings and all meetings of committees on which he or she served, in each case with respect to the portion of fiscal 2017 that they each served. All Aramark directors standing for election and new nominees are expected to attend the annual meeting of shareholders and all of the directors standing for election attended the 2017 Annual Meeting.

 

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Each of our five standing committees operates under a written charter approved by the Board. The charters of each of our standing committees are available in the Investor Relations section of our website at www.aramark.com.

The current composition of each Board committee is set forth below:

 

DIRECTOR

 

 

AUDIT      

COMMITTEE*      

 

COMPENSATION      

COMMITTEE      

 

FINANCE      

COMMITTEE      

 

NOMINATING      

COMMITTEE      

 

STOCK      

COMMITTEE      

Eric J. Foss

                   

Pierre-Olivier Beckers-Vieujant

  X               X        

Lisa G. Bisaccia

      X           X        

Richard W. Dreiling

      X       X           X    

Irene M. Esteves

  X#           Chair            

Daniel J. Heinrich

  Chair#           X            

Sanjeev K. Mehra, Lead Director

      X           Chair        

Patricia B. Morrison

  X           X            

John A. Quelch

  X               X        

Stephen I. Sadove

      Chair           X       X    

Meetings in 2017

  9       6       6       5        

 

# Qualifies as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K
* All members of the Audit Committee are financially literate within the meaning of the NYSE listing standards

 

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Committee    Responsibilities
Audit and Corporate Practices Committee   

•  Prepares the audit committee report required by the U.S. Securities and Exchange Commission (the “SEC”) to be included in our proxy statement

 

•  Assists the Board in overseeing and monitoring the quality and integrity of our financial statements

 

•  Oversees the Company’s management of enterprise risk and monitors our compliance with legal and regulatory requirements

 

•  Oversees the work of the internal auditors and the qualifications, independence, and performance of our independent registered public accounting firm

 

Compensation and Human Resources Committee   

•  Sets our compensation program and compensation of our executive officers and directors

 

•  Monitors our incentive and equity-based compensation plans and reviews our contribution policy and practices for our retirement benefit plans

 

•  Prepares the compensation committee report required to be included in our proxy statement under the rules and regulations of the SEC

 

Nominating and Corporate Governance Committee   

•  Identifies individuals qualified to become new members of the Board, consistent with criteria approved by the Board of Directors

 

•  Reviews the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the Board select, the director nominees for the next annual meeting of shareholders

 

•  Identifies Board members qualified to fill vacancies on any Board committee and recommends that the Board appoint the identified member or members to the applicable committee

 

•  Reviews and recommends to the Board corporate governance principles applicable to us

 

•  Oversees the evaluation of the Board and, to the extent not considered by another committee, management, and handles such other matters that are specifically delegated to the Committee by the Board from time to time

 

Finance Committee   

•  Reviews our long-term business direction and goals and the strategy for maintaining that direction and achieving those goals

 

•  Reviews with management and recommends to the Board our overall financial plans, including capital expenditures, acquisitions and divestitures, securities issuances, incurrences of debt and the performance of our retirement benefit plans and recommends to the Board specific transactions involving these matters

 

•  Approves certain financial commitments and acquisitions and divestitures by the Company up to specified levels

 

Stock Committee   

•  Authorized by the Board to administer or grant approvals under our equity and incentive compensation plans and to approve specific equity transactions or incentive awards involving our officers and directors and the Company

 

•  Approves performance targets under our Senior Executive Bonus Plan and equity compensation plans

 

 

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Oversight of Risk Management

Aramark’s management is responsible for day-to-day risk management activities. The Board, acting directly and through its committees, is responsible for the oversight of Aramark’s risk management.

Our Audit Committee periodically reviews our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. In addition, our Audit Committee reviews risks related to compliance with ethical standards, including our Business Conduct Policy, the Company’s approach to enterprise risk management and operational risks, including those related to information security and system disruption. Through its regular meetings with management, including the accounting, finance, legal, and internal audit functions, our Audit Committee reviews and discusses the risks related to its areas of oversight and reports to the Board with regard to its review. Our Finance Committee focuses on financial risks associated with the Company’s capital structure and acquisitions and divestitures that the Company is considering. Our Compensation Committee oversees compensation-related risk management, as discussed further in this proxy statement under “Compensation Matters-Compensation Discussion and Analysis-Compensation Risk Disclosure.” Our Nominating Committee oversees risks associated with board structure and other corporate governance policies and practices. Our Finance, Compensation and Nominating Committees also regularly report their findings to the Board.

Our Chief Executive Officer and other executive officers regularly report to the non-executive directors and the Audit, the Compensation, the Nominating and the Finance Committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. In addition, the Board receives periodic detailed operating performance reviews from management. Our vice president of internal audit reports functionally and administratively to our chief financial officer and directly to the Audit Committee. We believe that the leadership structure of the Board provides appropriate risk oversight of our activities.

Management Succession Planning

The Board’s responsibilities include succession planning for the Chief Executive Officer and other executive officer positions. The Compensation Committee oversees the development and implementation of our succession plans. At least once annually, the Chief Executive Officer provides the Board with an assessment of senior managers and their potential to succeed to the position of Chief Executive Officer. This assessment is developed in consultation with the Lead Director and the Chair of the Compensation Committee. The Compensation Committee is also responsible for follow-up actions with respect to succession planning as may be delegated by the Board from time to time. High potential executives meet regularly with the members of the Board.

Executive Sessions

From time to time, and, consistent with our Corporate Governance Guidelines, at least semi-annually, the Board meets in executive session without members of management present. Mr. Mehra, as Lead Director, presides at these executive sessions.

Code of Conduct

We have a Business Conduct Policy that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, which is available on the Investor Relations section of our website at www.aramark.com. Our Business Conduct Policy contains a “code of ethics,” as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our Internet website.

Committee Charters and Corporate Governance Guidelines

The charters of the Compensation Committee, the Nominating Committee, the Audit Committee, the Finance Committee and the Stock Committee and our Corporate Governance Guidelines are available under the Investor Relations section of our website at www.aramark.com. Please note that all references to our website in this Proxy Statement are intended to be inactive textual references only.

 

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Copies of our Business Conduct Policy, the charters of the Compensation Committee, the Nominating Committee, the Audit Committee, the Finance Committee and the Stock Committee and our Corporate Governance Guidelines also are available at no cost to any shareholder who requests them by writing or telephoning us at the following address or telephone number:

Aramark

1101 Market Street

Philadelphia, PA 19107

Attention: Investor Relations

Telephone: (215) 409-7287

Director Nomination Process

The Nominating Committee does not set specific, minimum qualifications that directors must meet in order for the Nominating Committee to recommend them to the Board. Rather, it believes that each director and director candidate should be evaluated based on his or her individual merits, taking into account Aramark’s needs and the composition of the Board. In nominating a slate of directors, the Nominating Committee’s objective is to select individuals with skills and experience that can be of assistance in operating our business. All candidates are evaluated in the same manner regardless of who recommended such candidate for nomination. When reviewing the qualifications of potential director candidates, the Nominating Committee considers:

 

  whether individual directors possess the following personal characteristics: integrity, education, accountability, business judgment, business experience, reputation and high performance standards, and

 

  all other factors it considers appropriate, which may include accounting and financial expertise; industry knowledge; corporate governance background; executive compensation background; strategic leadership experience; senior management experience; prior public company board service; international experience or background; age, gender and ethnic and racial background; civic and community relationships; existing commitments to other businesses; potential conflicts of interest with other pursuits; legal considerations, such as antitrust issues; and the size, composition and combined expertise of the existing Board.

The Board believes that, as a whole, it should strive to possess the following core competencies: accounting and finance, management, crisis response, industry knowledge, international leadership and strategy/vision, among others. While the Board does not have a formal policy with regard to diversity, the Nominating Committee and the Board strive to ensure that the Board is composed of individuals who together possess a breadth and depth of experience relevant to the Board’s oversight of Aramark’s business and strategy.

In our most recent director candidate search, a third-party director search firm was retained by the Nominating Committee to assist in identifying and evaluating candidates for board membership who best satisfy Aramark’s criteria for directors. Messrs. Mehra and Foss vetted the candidates proposed by our third-party director search firm and determined which candidates should be reviewed by the Nominating Committee. The Nominating Committee then discussed the finalist candidates and the Chairman of the Nominating Committee reported on such candidates to the Board. Individual members of the Board were given the opportunity to meet with the candidates either in person or by phone. Following that process, and upon recommendation by the Nominating Committee, the Board nominated Calvin Darden for election to the Board.

Proxy Access

In August 2017, the Board approved an amendment and restatement of the Company’s By-laws to implement proxy access. Our By-laws, as amended, permit a shareholder, or a group of up to 20 shareholders, that has continuously owned for three years at least 3% of the Company’s outstanding common shares, to nominate and include in the Company’s annual meeting proxy materials up to the greater of two directors or 20% of the number of directors serving on the Board, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in our By-laws. Shareholder requests to include shareholder-nominated directors in the Company’s proxy materials for the 2019 Annual Meeting of Shareholders must be received by the Corporate Secretary no earlier than October 3, 2018 and no later than November 2, 2018.

 

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Board Refreshment

The Board and the Nominating Committee regularly consider the long-term make up of our Board and how the members of our Board change over time. The Board and Nominating Committee also consider the skills, experience, and backgrounds needed for the Board as our business and the industries and sectors in which we do business evolve. The Board and Nominating Committee also understand the importance of Board Refreshment and aim to strike a balance between the knowledge that comes from longer-term service on the board with the new experience, ideas and energy that can come from adding directors to the Board. Assuming the election of this year’s proposed director nominees, since Mr. Foss joined the Company as Chief Executive Officer, and in connection with the exit of the private equity sponsors and the Company’s initial public offering, we will have added 9 new independent directors to the Board and have had 8 directors step down or not stand for re-election. We believe the average tenure for our director nominees of approximately 3.6 years reflects the new and independent Board that is well-positioned to continue the Company’s growth as a public company.

 

 

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HOW WE THINK ABOUT BOARD REFRESHMENT: + Skills, Expertise & Experience + Retirement Age + Annual Board Evaluation = Board Evolution BOARD REFRESHMENT Under Eric J. Foss’s leadership 9 New Directors Elected 3 Women Directors Elected 2 Ethnically Diverse Directors Elected 9 Independent Directors Added


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DIRECTOR COMPENSATION

Annual Cash Compensation for Board Service

In fiscal 2017, each non-employee director received compensation at an annual rate of $100,000 for service on the Board, payable quarterly in arrears. The Lead Director was eligible to receive an additional annual retainer of $50,000, and the chairpersons of the Audit Committee, Compensation Committee, Nominating Committee and Finance Committee were eligible to receive an additional annual retainer of $20,000, provided, in each case, that such committee chairperson was a non-employee director. Directors who join the Board during the fiscal year or serve as a committee chairperson for a portion of the fiscal year receive a prorated amount of the relevant annual cash compensation.

In 2017, Messrs. Mehra, Heinrich and Sadove and Ms. Esteves each received additional fees for serving as Lead Director and/or chairing the Nominating, Audit, Compensation or Finance Committee.

Annual Deferred Stock Unit Grant

Under the Company’s current director compensation policy, which has been in effect since January 1, 2016, non-employee directors are eligible for an annual grant of deferred stock units (“DSUs”) with a value of $160,000 on the date of the annual meeting of shareholders and directors have the right to elect whether the DSUs granted will deliver shares on: (i) the vesting date of the DSUs or (ii) the first day of the seventh month after the date the director ceases to serve on the Board.

In accordance with the director compensation policy, each member of the Board who was not an employee of the Company received a grant of approximately $160,000 worth of DSUs under the Amended and Restated 2013 Management Stock Incentive Plan (the “2013 Stock Plan”) in February 2017. These DSUs will vest on the day prior to the Company’s first annual meeting of shareholders that occurs after the grant date, subject to the director’s continued service on the Board through the vesting date, and will be settled in shares of the Company’s common stock pursuant to each director’s election as described above. Directors who are appointed to the Board during the year will be entitled to a prorated grant of DSUs. All DSUs accrue dividend equivalents from the date of grant until the date of settlement.

Ownership Guidelines

Effective November 11, 2015, the Board of Directors has adopted a minimum ownership guideline, providing that each director must retain at least five times the value of the annual cash retainer in shares of common stock or DSUs, and that the required level of ownership be attained five years after the later of the date of approval of the guidelines and the director’s start date.

Director Deferred Compensation Plan

Non-employee directors are able to elect with respect to all or a portion of their cash board retainer fees to (i) to receive all or a portion of such cash fees in the form of DSUs or (ii) to defer all or a portion of such cash fees under our 2005 Deferred Compensation Plan. The DSUs that a director elects to receive in lieu of cash fees will be awarded under our 2013 Stock Plan and will be fully vested on grant and settled in shares of our common stock on the first day of the seventh month after the director ceases to serve on the Board. Cash amounts that a director elects to defer under the unfunded 2005 Deferred Compensation Plan are credited at an interest rate based on Moody’s Long Term Corporate Baa Bond Index rate for October of the previous year, which was 4.38% beginning January 1, 2017. From October 1, 2016 until December 31, 2016, we credited amounts deferred with an interest rate equal to 5.34%. The 2005 Deferred Compensation Plan permits participants to select a payment date and payment schedule at the time they make their deferral election, subject to a three-year minimum deferral period. All or a portion of the amount then credited to a deferral account may be withdrawn, if the withdrawal is necessary in light of a severe financial hardship.

The interest rate for 2005 Deferred Compensation Plan will be adjusted on January 1, 2018, based on the Moody’s Long Term Corporate Baa Bond Index rate for October 2017 which was 4.32%.

Other Benefits

All directors are eligible for an annual matching contribution to a college or other non-profit organization in an amount up to $10,000 and directors are also eligible for matching contributions in an amount up to $10,000 in response to natural disasters through the Company’s community involvement efforts to the same extent as employees of the Company.

 

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Director Compensation Table for Fiscal 2017

The following table sets forth compensation information for our non-employee directors in 2017. Messrs. Abbrecht, Babbio and Coleman did not stand for re-election at our 2017 Annual Meeting of Shareholders in February 2017, and Ms. Morrison joined the Board of Directors on February 1, 2017.

 

Name  

Fees

Earned

or Paid in

Cash(1) ($)

   

Stock

Awards(2)

($)

   

Option

Awards

($)

   

Change in
Pension Value
and
Nonqualified

Deferred
Compensation

Earnings(3) ($)

   

All Other

Compensa-

tion(4) ($)

    Total
($)
 

Todd M. Abbrecht

    40,879                         2,667       43,546  

Lawrence T. Babbio Jr.

    40,879                         20,423       61,302  

Pierre-Olivier Beckers-Vieujant

    100,003       159,997                         260,000  

Lisa G. Bisaccia

    100,003       159,997             63       15,000       275,063  

Leonard S. Coleman Jr.

    34,066                         30,423       64,489  

Richard W. Dreiling

    100,003       159,997                         260,000  

Irene M. Esteves

    113,245       159,997                   10,000       283,242  

Daniel J. Heinrich

    120,003       159,997                   12,499       292,499  

Sanjeev K. Mehra

    170,003       159,997                   2,667       332,667  

Patricia B. Morrison

    66,212       159,997                   10,000       236,209  

John A. Quelch

    100,003       159,997                   10,000       270,000  

Stephen I. Sadove

    113,245       159,997                   22,499       295,740  

 

(1) Includes base director fees at an annual rate of $100,000, as well as a Lead Director fee of at an annual rate of $ 50,000 for Mr. Mehra and Committee chairperson fees at an annual rate of $20,000 for each of Messrs. Abbrecht, Babbio, Heinrich, Mehra and Sadove and Ms. Esteves. With regard to Messrs. Abbrecht, Babbio, Sadove and Ms. Esteves, their chairperson fees were prorated based on the amount of time each Director served as a chairperson. Messrs. Dreiling, Mehra and Quelch and Ms. Esteves elected to defer 100% of their cash retainers (inclusive of fees) into DSUs. Ms. Bisaccia elected to defer her cash retainer (inclusive of fees), 50% into DSUs and 50% into the 2005 Deferred Compensation Plan.

 

(2) Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 with respect to the 4,825 DSUs granted on February 1, 2017 (which had a grant date fair value of $33.16 per DSU). As of the end of fiscal 2017, directors held the following deferred stock units (including dividend equivalent units), all of which are vested except for those granted on February 1, 2017:

 

Name   DSUs and
Equivalents
          Name   DSUs and
Equivalents
 

Pierre-Olivier Beckers-Vieujant

    13,912.2165      

Sanjeev K. Mehra

    27,596.6704  

Lisa G. Bisaccia

    13,176.1723      

Patricia B. Morrison

    4,864.0917  

Richard W. Dreiling

    13,832.7509      

John A. Quelch

    13,832.7509  

Irene M. Esteves

    18,341.4769      

Stephen I. Sadove

    20,017.2174  

Daniel J. Heinrich

    20,017.2174        

For additional information on the valuation assumptions and more discussion with respect to the deferred stock units, refer to Note 10 to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 29, 2017.

 

(3) Includes amounts earned on deferred compensation in excess of 120% of the applicable federal rate, based upon the above-market return at the time the rate basis was set.

 

(4) The following are included in this column:

 

  (a) Charitable contributions of $10,000 made in the name of or on behalf of each of Messrs. Coleman, Heinrich, Quelch and Sadove and Mses. Bisaccia, Esteves and Morrison in accordance with the Company’s director charitable contribution matching program. Additionally, includes contributions for disaster relief of $10,000 made in the name of or on behalf of Mr. Sadove and $5,000 in the name of or on behalf of Ms. Bisaccia.

 

  (b) The dollar value of dividend equivalents accrued on deferred stock units granted prior to February 5, 2014 (the date the Company announced the payment of its first quarterly dividend), where dividends were not factored into the grant date fair value required to be reported for such awards. The total value of dividend equivalents accrued on deferred stock units for the directors during fiscal 2017, in each case for awards granted prior to February 5, 2014, is as follows: for Mr. Abbrecht, $2,667, for Mr. Babbio, $20,423, for Mr. Coleman, $20,423, for Mr. Heinrich, $2,499, for Mr. Mehra, $2,667, and for Mr. Sadove, $2,499. For awards granted on or after February 5, 2014, the value of dividend equivalents allocated to deferred stock units in the form of additional units with the same vesting terms as the original awards is not included in this column because their value is factored into the grant date fair value of awards. Additional units awarded in connection with dividend adjustments are subject to vesting and delivery conditions as part of the underlying awards.

 

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Audit Committee Matters

 

 

 

PROPOSAL NO. 2 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

PROPOSAL SUMMARY

What Are You Voting On?

We are asking our shareholders to ratify the appointment of KPMG LLP (“KPMG”) to serve as the Company’s independent registered public accounting firm for fiscal 2018, which ends September 28, 2018. Although the Audit Committee has the sole authority to appoint the Company’s independent registered public accounting firm, the Audit Committee and the Board submit the selected firm to the Company’s shareholders as a matter of good corporate governance.

Voting Recommendation

The Board recommends that you vote “FOR” the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for fiscal 2018.

The Audit Committee has selected KPMG to serve as the Company’s independent registered public accounting firm for fiscal 2018. Although action by the shareholders on this matter is not required, the Audit Committee values shareholder views on the Company’s independent registered public accounting firm and believes it is appropriate to seek shareholder ratification of this selection. If the shareholders do not ratify the appointment of KPMG, the selection of the independent registered public accounting firm may be reconsidered by the Audit Committee. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time of the year if it determines that such a change would be in the best interests of the Company and its shareholders. The Company has been advised that representatives of KPMG are scheduled to attend the Annual Meeting, and they will have an opportunity to make a statement if the representatives desire to do so. It is expected that the KPMG representatives will also be available to respond to appropriate questions.

The shares represented by your properly executed proxy will be voted “FOR” this proposal, which would be your vote to ratify the selection of KPMG LLP as our independent registered public accounting firm, unless you specify otherwise.

 

 

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The Audit Committee assists the Board in its oversight of the Company’s independent registered public accounting firm, which assistance includes the responsibility to appoint, compensate, retain, and oversee the firm. The independent registered public accounting firm reports directly to the Audit Committee. The Audit Committee reviews the independent registered public accounting firm’s qualifications, independence, and performance at least annually. In connection with this review, the Audit Committee considers whether there should be a regular rotation of the independent registered public accounting firm to assure continuing auditor independence. Further, in conjunction with the mandated rotation of the independent audit firm’s lead engagement partner, the Audit Committee is involved in the selection of the independent audit firm’s lead engagement partner.

 

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The Audit Committee has appointed KPMG as the Company’s independent registered public accounting firm for fiscal 2018. KPMG has served as the Company’s independent registered public accounting firm since 2002. The Audit Committee believes that the continued retention of KPMG as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. In addition to KPMG’s independence, the Audit Committee considered:

 

•  KPMG’s capabilities, expertise, and historical performance on the Company’s audits;

 

  

•  KPMG’s compliance with regulations; and

 

•  The effectiveness of KPMG’s processes, including its quality control, timeliness, and responsiveness and interaction with management;

  

•  KPMG’s efforts towards efficiency, including with respect to process improvements and fees.

Benefits of KPMG’s tenure as the Company’s independent registered public accounting firm include:

 

Increased Audit Quality

After years of experience as the

Company’s independent auditor, KPMG

has gained institutional knowledge of and

deep expertise in the Company’s global

operations and businesses, accounting

policies and practices, and internal control

over financial reporting that increases the

quality of their audit.

 

Competitive Fees

KPMG’s fees are competitive with their

peers because of their familiarity with

the Company and its businesses.

 

Avoid Transition to New Auditor

Engaging a new independent auditor
would likely result in additional costs

and require a significant time

commitment from management, which

could distract management from its

focus on other areas, such as financial

reporting and internal controls.

FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Set forth below is information relating to the aggregate fees billed by KPMG for professional services rendered for each of the last two fiscal years as well as a description of each fee category.

 

     FISCAL
2016
    FISCAL
2017
 

Audit Fees

  $ 6,427,405     $ 5,696,880  

Audit-related Fees

  $ 110,076     $ 234,582  

Tax Fees

  $ 266,740     $ 565,450  

All Other Fees

           

TOTAL

  $ 6,804,221     $ 6,496,912  

Audit fees include the audit of annual financial statements, the review of quarterly financial statements, the performance of statutory audits, procedures and comfort letters related to registration statements.

Audit-related fees include assurance and related services that were reasonably related to the audit of annual financial statements and reviews of quarterly financial statements, but not reported under Audit Fees. Audit-related fees include: retirement plan audits, accounting consultations for proposed transactions and certain reports.

Tax fees include domestic and international tax consulting.

The Audit Committee considered whether providing the non-audit services shown in this table was compatible with maintaining KPMG’s independence and concluded that it was.

Policy for the Pre-Approval of Audit and Permissible Non-Audit Services

The Audit Committee annually reviews and pre-approves the services that may be provided by the Company’s independent registered public accounting firm without obtaining further specific pre-approval from the Audit Committee. The Audit Committee has also adopted a Pre-Approval Policy that contains a list of pre-approved services, which the Audit Committee may revise from time to time, based on subsequent determinations. The Audit Committee has delegated pre-approval authority to the chairman of the Audit Committee, or in his absence or unavailability, to another specified member of the Audit Committee. The chairman of the Audit Committee or such specified member will report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the audit fees, audit-related fees and tax fees were pre-approved by the Audit Committee or the chairman of the Audit Committee.

 

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REPORT OF AUDIT AND CORPORATE PRACTICES COMMITTEE

The Audit Committee represents and assists the Board and is composed solely of directors who satisfy the independence and financial literacy requirements, and the heightened independence criteria applicable to audit committee members, of the NYSE Rules and applicable securities laws. In addition, the Board has determined that each of Daniel J. Heinrich and Irene M. Esteves is an audit committee financial expert as defined under the rules of the SEC.

The Audit Committee operates under a written charter approved and adopted by the Board, which sets forth its duties and responsibilities. This charter can be found on the Company’s website at www.aramark.com under the Investor Relations section. This charter is reviewed annually and updated as appropriate to reflect the Audit Committee’s evolving role, changes in regulatory requirements and oversight practices, and investor feedback.

The Audit Committee’s purpose is to assist the Board in its oversight of:

 

  The performance of the Company’s internal audit function;

 

  The qualifications, independence, and performance of the independent auditors;

 

  The Company’s compliance with legal and regulatory requirements; and

 

  The accounting, reporting, and financial practices of the Company, including the quality and integrity of the Company’s financial statements.

The Audit Committee met nine times in fiscal 2017 and fulfilled each of its duties and responsibilities as outlined in its charter. The Audit Committee regularly conferred with KPMG, the Company’s internal auditors, and senior management in separate executive sessions to discuss any matters that the Audit Committee, KPMG, the Company’s internal auditors, or senior management believed should be discussed privately with the Audit Committee. The Audit Committee has direct access to KPMG and the Company’s internal auditors, which each report directly to the Audit Committee.

2017 Audited Financial Statements and Internal Controls

The Company’s management has primary responsibility for establishing and maintaining effective internal control over financial reporting and preparing the Company’s financial statements and disclosures. KPMG, the Company’s independent registered public accounting firm for fiscal 2017, is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles in the United States and on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee oversees the performance of these responsibilities by KPMG and management, including the processes by which these responsibilities are fulfilled.

In the performance of its oversight function and in accordance with its responsibilities under its charter, the Audit Committee has reviewed and discussed with management and KPMG the Company’s audited financial statements as of and for the fiscal year ended September 29, 2017. The Audit Committee also discussed with KPMG the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301 “Communications with Audit Committees.” Finally, the Audit Committee received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, and discussed with KPMG their independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2017 filed with the SEC.

Members of the Audit and Corporate Practices Committee:

Daniel J. Heinrich, Chairman

Pierre-Olivier Beckers-Vieujant

Irene M. Esteves

Patricia B. Morrison

John A. Quelch

 

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Compensation Matters

 

 

 

PROPOSAL NO. 3 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

PROPOSAL SUMMARY

What Are You Voting On?

Pursuant to Section 14A of the Exchange Act, we are asking our shareholders to vote on a non-binding, advisory basis to approve the compensation paid to our Named Executive Officers, as disclosed in this proxy statement.

Voting Recommendation

The Board recommends that you vote “FOR” this proposal, because it believes that the Company’s compensation policies and practices effectively achieve the Company’s primary goals of attracting and retaining key executives, rewarding achievement of the Company’s short-term and long-term business goals, and aligning our executives’ interests with those of our shareholders to create long-term sustainable value.

This proposal calls for the approval of the following resolution:

“RESOLVED, the shareholders of the Company hereby approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement, pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”

In considering your vote, we invite you to review the Compensation Discussion and Analysis beginning on the next page. This advisory proposal, commonly referred to as a “say on pay” proposal, is not binding on the Board. However, the Board takes shareholder feedback seriously and it and the Compensation Committee will review and consider the voting results when evaluating the Company’s executive compensation program.

The shares represented by your properly executed proxy will be voted “FOR” this proposal, which would be your vote to approve, on a non-binding basis, the compensation paid to our named executive officers, unless you specify otherwise.

The Board has adopted a policy of providing for annual “say on pay” votes, so the next “say on pay” vote will take place at the Company’s 2019 annual meeting.

 

 

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The Board recommends that you vote “FOR” approval of executive compensation


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COMPENSATION DISCUSSION AND ANALYSIS

2017 Company Financial Highlights

Aramark delivered strong results in fiscal 2017, increasing constant currency adjusted earnings per share by 14%. The Company also reduced its net debt to covenant adjusted EBITDA leverage ratio by 30 basis points to 3.5x. Free cash flow improved 36% versus the prior year to $520 million.

 

 

LOGO

This performance supported an increase in our quarterly shareholder dividend from 10.3 cents per share to 10.5 cents per share and we continue to reinvest in the business to drive long-term shareholder value.

See Annex A of this proxy statement for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.

Compensation paid in fiscal 2017 and the new long-term incentives granted in fiscal 2018 reflect Aramark’s strong fiscal 2017 performance and are consistent with the Compensation Committee’s philosophy for compensation described on page 31.

Shareholder Engagement and Corporate Governance Enhancements

After the Company’s return to the public market in fiscal 2014, the Board and the senior management team developed a more robust shareholder engagement program. Following the exit of the Company’s private equity sponsors, investment funds affiliated with one or more of GS Capital Partners, CCMP Capital Advisors, J.P. Morgan Partners, Thomas H. Lee Partners and Warburg Pincus, LLC, as controlling shareholders in 2015 and the valuable feedback received in connection with the Company’s recent annual meetings, the Board and senior management have further increased their effort in this regard.

In 2017, we approached many of our large investors, whose holdings represented over two-thirds of the outstanding shares of Aramark common stock, to discuss governance matters, including the results of the most recent “say on pay” vote, and any other feedback or concerns the shareholder might have. We engaged in substantive discussions with several of these shareholders. Management then reported the feedback to the Board, including the Compensation Committee. The Board and the Compensation Committee considered the feedback, the favorable results of our annual shareholder vote on executive compensation for the previous fiscal year and the review of our practices against published guidelines.

 

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58% 3 - year TSR 14% Constant currency adjusted earnings per share 36% Free cash flow


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Which Executives are Covered

As required by SEC rules, this compensation discussion and analysis provides information regarding our executive compensation programs for the following executive officers (the “named executive officers” or “NEOs”) in fiscal 2017:

 

NAME   TITLE

Eric J. Foss

  Chairman, President and Chief Executive Officer

Stephen P. Bramlage

  Executive Vice President and Chief Financial Officer

Lynn B. McKee

  Executive Vice President, Human Resources

Stephen R. Reynolds

  Executive Vice President, General Counsel and Secretary

Harrald Kroeker

  Senior Vice President, Integration

Executive Compensation Philosophy

Our executive compensation program supports one of the anchors of our transformation strategy – attracting and retaining the best talent – which in turn supports the two other anchors of the Company’s strategy: accelerating growth and activating productivity.

The program includes three key goals:

 

1. Align with Shareholder Interests: Align the interests of our executives with those of our shareholders by requiring significant stock ownership, tying significant portions of pay to performance, paying a significant portion of compensation in equity and subjecting equity compensation to multi-year performance conditions and vesting periods;

 

2. Performance Based: Tie significant portions of compensation to performance and our short-term and long-term business goals; and

 

3. Market Competitiveness: Attract and retain key executives with the capability to lead the business forward.

1. Align with Shareholder Interests

The Compensation Committee promotes alignment of our NEOs’ and other executives’ interests with those of our shareholders in a number of ways, including through awards of long term equity incentives, stock ownership guidelines, restrictions on hedging and pledging and a clawback policy.

Significant Portions of Compensation are Paid in Equity. For 2017, 67% of total compensation awarded to the CEO and 54% of total compensation awarded to all other NEOs was paid in long-term equity incentives. The long-term equity incentives encourage a focus on long-term performance because the ultimate value of the awards will depend upon the value of Company stock and, in certain cases, Company performance, over a period of several years.

Stock Ownership Requirements. Our named executive officers are subject to stock ownership guidelines requiring that they obtain and maintain ownership of Aramark stock equal to a multiple of their base salaries.

 

  Mr. Foss: Required to hold stock valued at six times base salary

 

  Other NEOs: Required to hold stock valued at three times base salary

Current executives must comply with our stock ownership guidelines within five years after November 10, 2015 (the date of the adoption of the timing requirement) or, if later, five years after joining the Company. See page 45 below for more details.

Restrictions on Hedging and Pledging. We restrict hedging and pledging of Aramark stock and none of our named executive officers have engaged in any hedging or pledging of their Aramark stock. See page 45 below for more details.

Clawback Policy. In fiscal 2015, the Compensation Committee and our Board approved an incentive compensation recoupment, or “clawback”, policy.

The policy provides that, if the Compensation Committee or the Board determines that an executive officer or other direct report of the CEO was overpaid incentive compensation as a result of reported financial or operating results that were misstated and that such person has engaged in misconduct that contributed to the misstatement, the Company may seek to recover the amount of any overpayment or cancel such excess incentive compensation.

 

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Incentive compensation covered by the policy includes annual cash incentives and performance based long-term incentives such as PSUs and performance restricted stock. The policy became effective for annual cash incentives paid and long-term performance awards granted after February 3, 2015.

2. Performance Based

Our business requires management to lead employees to deliver exceptional, value-driven experiences to our clients and customers. To motivate strong performance and promote retention, we make a significant percentage of our NEO compensation variable and “at-risk”, tying each NEO’s compensation to the Company’s performance, the executive’s continued employment with us and the performance of the Company’s common stock.

CEO Compensation and Company Performance The graph below shows the total compensation of our CEO versus the performance of the Company (as measured by adjusted EPS).

For fiscal 2017, our CEO’s total compensation decreased despite the improved performance of the Company (as measured by adjusted EPS). See Annex A of this proxy statement for a reconciliation of non-GAAP financial measures to our results as reported under GAAP.

 

 

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(1) Constant currency as reported in each respective year
(2) Total Compensation is as presented in the “Total” column of the Summary Compensation Table.

Annual Cash Incentive

In fiscal 2017, all of our NEOs participated in the Senior Executive Bonus Plan. Under that plan, our Compensation Committee primarily uses performance under the Management Bonus Plan, which is applicable to our other executives and employees, as the main factor in determining actual bonuses awarded. If no bonus would have been earned using the criteria under the Management Bonus Plan, it is unlikely the NEOs would be awarded a payout under the Senior Executive Bonus Plan.

In 2017, the Management Bonus Plan was comprised of 90% company-wide financial objectives and 10% individual functional or business objectives.

Company-wide financial objectives under the Management Bonus Plan for 2017 consisted of the following:

 

PERFORMANCE METRIC   TARGET ($ millions)

Adjusted EBIT (40%)

  $994.9

Adjusted Sales (25%)

  $14,817.2

Free Cash Flow (25%)

  $320.0*

 

* Free Cash Flow target, adjusted for accounting rule change, was approximately $370.0 million, which did not have an impact on achievement.

 

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Adjusted EPS1 VS. CEO total compensation2 Adjusted EPS Total compensation


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The Compensation Committee establishes these performance targets consistent with the Company’s long-term expectations for the business, which include:

 

  Mid-to-high single-digit growth in adjusted operating income or adjusted EBIT;

 

  Organic or adjusted sales growth of three percent to five percent; and

 

  Low double digit percentage growth of adjusted earnings per share.

For the Compensation Committee to award each of the NEOs his or her annual cash incentive based on performance under the Management Bonus Plan, the Company would need to (1) achieve one or more of the financial objectives identified above at least at a threshold level and/or (2) the individual would have to achieve his or her functional or business objectives. Further, the Compensation Committee may use negative discretion to further reduce the annual cash incentives earned under the Senior Executive Bonus Plan to levels below what the Management Bonus Plan payouts would provide. Any payout under the Senior Executive Bonus Plan cannot exceed a pre-established percentage of adjusted EBIT, set in advance for each executive.

See “Company Performance Data Relevant to Compensation Actions” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” for more information on the operation of our annual cash incentive programs.

All of our named executive officers were granted annual cash incentive awards for fiscal 2018 under the Senior Executive Bonus Plan. “See “Personal Performance Assessment and Specific Compensation Actions for the Named Executives” below for more information on fiscal 2017 awards and payments and fiscal 2018 awards.

Long Term Incentives

For our NEOs, long term incentives generally consist of performance restricted stock or PSUs, restricted stock units, and stock options.

In fiscal 2017, our NEOs received grants of equity awards, 40% of which were in the form of performance restricted stock, 40% in the form of time-vesting stock options and 20% in the form of time-vesting restricted stock units (“RSUs”). Approximately 9% of the awards granted to Mr. Foss (based on grant date fair value) was also subject to a relative total shareholder return performance condition. Each NEO also holds unvested equity awards granted in prior years, which vest over a period of three or four years from the date of grant (in some circumstances, subject to performance vesting conditions).

Time-Vesting Stock Options and RSUs. The time-vesting stock options and RSUs granted in fiscal 2017 will vest ratably over a period of four years, subject to the NEOs’ continued employment with us through such period.

Performance Stock. Since fiscal 2014, we have granted performance restricted stock or PSUs as a component of our compensation program. The performance restricted stock granted in fiscal 2017 will vest at the end of fiscal 2019, subject to the Company achieving the threshold level of performance of a cumulative adjusted EPS target for the 2017-2019 fiscal years. Subject to continued employment through such date, between 50% of the target number of awards (for achievement of threshold performance) and 200% of the target number of awards (for achievement of maximum performance or greater) are eligible to vest.

The following table shows the performance period for our outstanding performance stock or PSUs as of the end of fiscal 2017 and the grants made in early fiscal 2018, the grant date, the potential payment date and the performance measures and potential payout for each cycle.

 

Percentage Of

Total Equity

Awards

  Performance
Period
  Grant Date   Payment
Date
(If Earned)
  Performance
Measures
  Potential Payout

40%

  Fiscal 2015   November 2014   November 2015,
2016, 2017
  Adjusted EPS    50% (Threshold) – 200% (Maximum) 

40%

  Fiscal 2018   November 2015   November 2018   Adjusted EPS    50% (Threshold) – 200% (Maximum) 

40%

  Fiscal

2017-2019

  November 2016   November 2019   Adjusted EPS    50% (Threshold) – 200% (Maximum) 

50%

  Fiscal
2018-2020
  November 2017   November
2020
  Adjusted EPS
(50%) ROIC
(50%)
   50% (Threshold) – 200% (Maximum) 

 

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Mr. Fosss Performance Awards. Approximately 9% of Mr. Foss’s stock options, restricted stock units, and performance restricted stock granted in fiscal 2017 (based on grant date fair value) will vest and payout at the end of fiscal 2019 if the Company’s relative total shareholder return is among the top five total shareholder returns of the Company’s peer group over the three-year performance period of fiscal 2017-2019, and in the case of the performance restricted stock, also subject to the Company achieving the cumulative adjusted EPS target for fiscal years 2017-2019 similar to the performance restricted stock described in the paragraph above (vesting at 50% for threshold performance and up to 200% for maximum performance). The Compensation Committee included this additional performance requirement on this portion of the grants to Mr. Foss to increase the performance orientation of Mr. Foss’s long term incentives and further align these long term incentives with shareholder interests.

See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” for more information on the operation of our fiscal 2017 equity grants.

In November 2017, the Compensation Committee approved fiscal 2018 grants of time-vesting stock options and restricted stock units and PSUs, where the PSUs have a performance target based on a cumulative adjusted EPS target and return on invested capital (“ROIC”), each weighted at 50%, for the 2018, 2019 and 2020 fiscal years (with corresponding performance multipliers ranging from 0%-200% on each such weighted portion of the award) and such performance stock units are not scheduled to vest until the end of fiscal 2020, subject to the achievement of the threshold level of performance. The Committee chose ROIC as an additional performance metric in order to incentivize the efficient use of capital. Approximately 12% of Mr. Foss’s fiscal 2018 grants of stock options, restricted stock units and performance stock units are also subject to an additional performance vesting requirement that the Company’s relative total shareholder return is at least at threshold performance level as compared among total shareholder returns of the Company’s peer group over the three-year performance period of fiscal 2018-2020 (and with a corresponding TSR performance multiplier ranging from 0% – 100% of the total award shares).

3. Market Competitiveness

Our compensation program is structured to enable us to maintain our competitive position for key executive talent. To establish our market competitive compensation practices, our Compensation Committee refers, in part, to peer group data and a subset of the Willis Towers Watson 2016 CDB General Industry Executive Compensation Survey – U.S. that is size-adjusted based on Aramark’s revenue (211 companies from the overall survey of 484 companies) (“Survey Data” and together with the Company’s applicable peer group data, “Market Practice”).

Additionally, our Compensation Committee considers executives’ current compensation or compensation from prior employment to determine the amount necessary to attract or retain such individuals. We motivate retention, in part, through long term incentives with multi-year vesting schedules. Our stock options, restricted stock units, performance stock units and performance restricted stock generally vest in or over three or four years, which encourages our executives to remain with us for extended periods of time.

Compensation Actions in Relation to Fiscal 2017

Overview of the Compensation Components

The principal components of Aramark’s executive compensation program are base salary, an annual cash incentive and long term incentives. We also provide employee benefits, post-employment benefits and a limited number of perquisites.

Base Salary – Base salary reflects the value of the position and the attributes the executive brings to Aramark, including tenure, experience and skill level. Salary levels for our executives are reviewed at least annually.

Annual Cash Incentive – The annual cash incentive bonus is designed to drive and reward performance and is based on financial objectives, individual performance goals and objectives established by the Compensation Committee.

Our named executive officers are entitled to earn an annual cash incentive under our Senior Executive Bonus Plan, under which a bonus pool is established each year and funded with a percentage of adjusted EBIT. Under that plan, our Compensation Committee primarily uses performance under the Management Bonus Plan, which is applicable to our other executives and employees, as the main factor in determining actual bonuses awarded. Payout under the Management Bonus Plan is based on achievement against specified financial objectives and functional or business objectives set at the beginning of each year.

 

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For fiscal 2017, the metrics under the Management Bonus Plan included adjusted EBIT, adjusted sales, free cash flow and functional objectives specific to each executive’s function. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Annual Cash Incentive” for more information on the operation of our annual cash incentive programs.

Long Term Incentives – Long term equity incentives are granted in order to align our executives’ interests with those of our shareholders, encouraging them to focus on long-term performance and to motivate retention.

Long term equity incentives were generally issued to senior executives in the following mix in fiscal 2017:

 

  40% in performance restricted shares,

 

  20% in time-vesting restricted stock units; and

 

  40% in time-vesting stock options.

November 2016 Grants In early fiscal 2017, the Compensation Committee granted time-vesting stock options, time-vesting restricted stock units and performance restricted stock with a performance target based on a cumulative adjusted EPS target for the 2017- 2019 fiscal years, eligible to cliff vest at the end of fiscal 2019, in order to ensure a continued long-term focus on the part of the senior executives.

Approximately 9% of the grants made to Mr. Foss are also subject to an additional performance vesting requirement that the Company’s relative total shareholder return be one of the top five of the Company’s peer group over the three-year performance period consisting of the 2017- 2019 fiscal years. The Compensation Committee included this specific performance condition based on relative total shareholder return to increase the performance orientation of Mr. Foss’s long term incentives and the alignment of these long term incentives with shareholder interests. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Equity Incentive Awards” for more information on the operation of our fiscal 2017 equity grants.

November 2017 Grants

Annual Grants

In early fiscal 2018, the Compensation Committee granted time-vesting stock options, time-vesting restricted stock units and PSUs with performance targets based on cumulative adjusted EPS and ROIC targets for the 2018-2020 fiscal years (with 50% weighting for each such performance goal and corresponding performance multiples ranging from 0% – 200% of each such portion of the award), eligible to cliff vest at the end of fiscal 2020, in order to ensure a continued long-term focus on the part of the senior executives.

For fiscal 2018, the Compensation Committee’s approach to long-term equity incentives was generally consistent with fiscal 2017, except the percentage of PSUs was increased to 50%, the percentage of time-vesting stock options was lowered to 30% and an additional performance metric for ROIC was added to the PSUs to increase the performance-based orientation of such awards and to better align incentives with business goals, including the efficient use of capital.

Approximately 12% of the grants made to Mr. Foss is also subject to an additional performance condition that the Company’s total shareholder return be a certain percentile relative to the total shareholder return of the Peer Group during a three-year performance period consisting of fiscal 2018-2020. The payout for these awards based on the percentile of relative total shareholder return achieved is as follows (with linear interpolation for percentile achievement in between the stated levels shown below).

 

Relative TSR Percentile   TSR Multiplier

90th Percentile or Above

  100%

75th Percentile

    67%

55th Percentile

    33%

Below 55% Percentile

      0%

New Retirement Vesting Provisions

Beginning for grants in fiscal 2018, the award agreements provide that if the NEO has been employed by the Company for at least five years, is at least 62 years old and gives the Company at least one year’s written notice

 

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of his or her intent to retire (such a retirement, a “Retirement with Notice”), then upon such Retirement with Notice all of the remaining tranches of such equity incentives will continue to vest on their original schedules (with the vesting of performance-based equity incentives to remain subject to the achievement of the relevant performance condition), in the case of Mr. Foss, and the next two tranches (or one tranche if only one unvested tranche is remaining) of such equity incentives will continue to vest in the case of the other NEOs. Additionally, in the event of a Retirement with Notice, vested stock options will remain exercisable for up to three years following the later of such Retirement with Notice or applicable vesting date. The Compensation Committee made this change to the forms of award agreements in order to incentivize senior executives to remain with the Company until at least age 63 and to encourage such executives to provide advance notice of their retirement to ensure orderly succession for senior roles. The new Retirement with Notice feature applicable beginning with fiscal 2018 awards applies in addition to the regular retirement vesting features which continue to apply in a manner similar to the prior fiscal year’s awards. In addition, the new form of award agreements for the NEOs provide that if the NEO breaches his or her restrictive covenants under his or her employment agreement, the NEO will forfeit any unvested portion of the award and be required to return to the Company the pre-tax value of any vested or delivered awards.

Other Compensation Components – The Compensation Committee provides additional benefits to the NEOs that it believes are customary for executives of similar rank to enable our executives to focus on our business and enhance their commitment to us.

Savings Incentive Retirement Plan: We make available a non-qualified savings plan intended as a substitute for those employees ineligible to participate in our 401(k) plan because of certain legal requirements.

Severance Arrangements and Payments upon a Change of Control: Our executives are entitled to certain payments and benefits in connection with certain terminations of employment. These provisions are intended to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and our other constituents without concern over whether the transactions may jeopardize the executive’s own employment.

Equity awards granted since the IPO and agreements with our NEOs that provide for other payments in connection with a change of control contain a “double trigger” in order for the executive to receive compensation, meaning that awards will be accelerated only if the executive’s employment is terminated in connection with the change of control. For more information about change of control and severance payments for our named executive officers, see the disclosure under “Potential Post-Employment Benefits.”

Perquisites: We provide our NEOs with other benefits that we believe are reasonable and encourage retention. The costs of these benefits constitute a small percentage of each named executive officer’s total compensation. We believe that these benefits enable our executives to focus on our business and enhance their commitment to us.

These benefits are reflected in the All Other Compensation column in the Summary Compensation Table and include:

 

    premiums paid on life insurance;

 

    a survivor income protection plan (entitling a surviving spouse or domestic partner and dependent children to receive the executive’s full base salary for one year after the executive’s death and one half of the executive’s base salary for the subsequent nine years, or alternatively, an amount equal to his or her base salary upon retirement or death for a participant who is at least 65 years old and has attained five years of employment – currently, only Ms. McKee participates under this plan);

 

    disability insurance and excess health insurance;

 

    receipt of a car allowance and no cost parking at a garage near Company offices;

 

    an executive physical;

 

    financial planning services; and

 

    personal use of Company tickets or the Company box and related items at sporting or other events.

Our Compensation Committee has also established a policy, which it has determined to be in our business interest, that directs the CEO to use the Company’s aircraft for all air travel, whether personal or business, whenever possible. Under the policy, the CEO may also designate other members of senior management to use the Company aircraft for air travel.

 

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Mr. Foss reimburses the Company for the amount by which the aggregate incremental cost to the Company attributable to his personal use of the Company’s aircraft exceeds $250,000 per fiscal year. Some of Mr. Foss’s business use of the corporate aircraft in fiscal 2017 included flights to attend outside board meetings at the companies or organizations for which he served as a director. We believe that Mr. Foss’s service on these boards, and his ability to conduct Company business while traveling to these board meetings, provides benefits to us and therefore deem it to be business use. Mr. Foss has a car and driver that we provide to him. Much of his use of the Company-provided car and driver, which generally enables him to make efficient use of travel time, is business use, although Mr. Foss utilizes the car and driver for commuting to and from the office, which is considered personal use, and for other limited personal use.

Company Performance Data Relevant to Compensation Actions

As mentioned in the Summary above, Aramark operational and financial performance was strong in 2017.

In awarding annual cash incentives for the NEOs, the Compensation Committee first calculated the maximum amount that could have been awarded to these executives under the Senior Executive Bonus Plan based on the Company’s fiscal 2017 adjusted EBIT and each executive’s percentage bonus opportunity determined by the Compensation Committee at the beginning of fiscal 2017. The Compensation Committee then calculated what the NEOs would have received under the Management Bonus Plan if each had been a participant in the plan.

Specific performance metrics under the Management Bonus Plan in 2017 and the Company’s achievement against those metrics are as follows:

 

Incentive Pay

Component

  Performance Metric
and Weight(1)
  Threshold   Target   Maximum   Achievement
(Percent of  Target)
    ($ millions)

Annual Cash Incentive

  Adjusted EBIT (40%)   $945.2   $994.9   $1,044.7   $980.5 (98.6%)
  Adjusted Sales (25%)   $13,335.5   $14,817.2   $16,298.9   $14,672.9 (99.0%)
  Free Cash Flow (25%)   $256.0   $320.0   $384.0   $519.6 (162.4%)
  Factors Specific to Executive’s Function (10%)       Varies based on NEO’s function       See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table – Annual Cash Incentive”

 

(1) Represents performance metrics under the Management Bonus Plan, which is referenced by the Compensation Committee as a basis for payments under the Senior Executive Bonus Plan.

The performance metrics above are intended to incentivize executives to achieve results consistent with the Company’s long-term framework for its financial performance which consists of mid to high single digit growth in adjusted operating income or adjusted EBIT, 3% to 5% organic or adjusted sales growth, and low double digit percentage growth in adjusted EPS.

The relative weighting of adjusted EBIT, adjusted sales, and free cash flow for purposes of determining the annual cash incentives of the NEOs reflects the fact that all three performance measures are important with more weight given to adjusted EBIT and lesser but equal weight given to each of adjusted sales and free cash flow.

Following the end of fiscal 2017, in evaluating the operation of the Senior Executive Bonus Plan and the results the NEOs would have achieved if they had participated in the Management Bonus Plan, the Compensation Committee analyzed the performance under the Management Bonus Plan for senior management against the performance under the Management Bonus Plan for other employees, who did not have Free Cash Flow as a Company performance metric. Identifying that high performance against the Free Cash Flow metric resulted in higher achievement for senior management under the plan as compared to other employees, the Compensation Committee determined to exercise additional negative discretion in calculating actual bonus awards under the Senior Executive Bonus Plan, reducing awards from achievement of 112.5% of target performance to 101.5% of target, to better align the ultimate payout percentages of the NEOs as compared to the other employees of the Company.

 

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In addition to the specific performance metrics, the Compensation Committee also considered corporate performance generally in setting salaries and making other decisions about the total compensation provided to the executives.

Personal Performance Assessment and Specific Compensation Actions for the Named Executives

In making compensation decisions, the Compensation Committee considers corporate performance generally, the specific metrics of corporate performance noted above, and individual performance for each NEO. The Compensation Committee also considers total compensation and other factors relevant to its compensation philosophy (including, for example, market and competitive data provided by its independent compensation consultant).

The Compensation Committee assesses the CEO’s performance annually. The CEO and Executive Vice President, Human Resources (along with other executives in certain cases), annually assess the performance of the other NEOs, which assessments are then shared with the Compensation Committee. The Compensation Committee considers those assessments along with its own impressions of the NEOs based on the NEOs’ interactions with the Compensation Committee and the Board.

 

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Mr. FossIn November 2016, the Compensation Committee considered Mr. Foss’s performance during fiscal 2016, his prior year’s compensation, his compensation relative to the Peer Group and the value of Mr. Foss’s outstanding equity awards in terms of both wealth creation opportunity and retention power. As a result of that analysis, the Compensation Committee took the following actions for Mr. Foss:

 

•  Maintained his base salary for calendar year 2017 at the same level as calendar year 2016.

 

•  Maintained his annual cash incentive target of $3,400,000 for fiscal 2017 and established a maximum award under the Senior Executive Bonus Plan of 1.01% of adjusted EBIT (up to a maximum of $10 million).

 

•  Awarded long term incentives with a grant date fair value of $10.9 million consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units and was intended to recognize Mr. Foss’ leadership and sustained performance. As a result, his total direct compensation was in the top quartile of the Peer Group.

 

•  In order to increase the performance orientation of Mr. Foss’s long-term incentives, approximately $956,000 (based on grant date fair value) or 9% of the total long term incentive award described above is subject to an additional relative total shareholder return performance vesting requirement. These awards will cliff vest on September 27, 2019 if the Company’s total shareholder return is among the top five total shareholder returns of the Company’s peer group over the three-year performance period for fiscal 2017-2019. This award subject to the relative total shareholder return performance requirement consisted of 40% stock options, 20% restricted stock units and 40% performance restricted stock with the same 2017-2019 cumulative adjusted EPS target as the other performance restricted stock awarded to Mr. Foss.

 

In November 2017, the Compensation Committee considered Mr. Foss’s performance during fiscal 2017, his prior year’s compensation, his compensation relative to the Peer Group and the value of his outstanding equity awards. As a result of that analysis, the Compensation Committee took the following actions for Mr. Foss:

 

•  Exercised negative discretion under the Senior Executive Bonus Plan and awarded him a cash incentive bonus of $3,451,900 for fiscal 2017, which was the amount that he would have received had he participated in the Management Bonus Plan further reduced by additional negative discretion as previously described.

 

•  Maintained his base salary for calendar year 2018 at the same level as calendar year 2017.

 

•  Maintained his annual cash incentive target of $3,400,000 for fiscal 2018 and established a maximum award under the Senior Executive Bonus Plan of 0.92% of adjusted EBIT (up to a maximum of $10 million).

 

•  Awarded long-term incentives with a grant date value of $11.3 million consisting of 50% performance stock units, 30% time-vesting stock options and 20% time-vesting restricted stock units, including $1.4 million of equity incentives that will only cliff vest on October 2, 2020 if and to the extent the Company’s total shareholder return as a percentile relative to the total shareholder return of the Peer Group exceeds certain levels. The total shareholder return portion of the long-term incentives consists of 50% performance stock units, 30% time-vesting stock options and 20% time-vesting restricted stock units with the performance stock units having the same 2018-2020 cumulative adjusted EPS and ROIC targets as the other performance stock units awarded to Mr. Foss. The intent of such awards was to appropriately reward Mr. Foss for and incentivize his sustained performance and as a result his direct compensation was in the top quartile of the Peer Group.

 

 

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Mr. Bramlage The Compensation Committee took the following compensation actions for Mr. Bramlage in November 2016 related to fiscal 2017:

 

•  Raised his base salary for calendar year 2017 by 8% to $660,960 in order to increase his compensation to closer to the median of base salary of the Peer Group.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.25% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $660,960, which represents the same annual cash incentive target, as a percentage of base salary that he had in fiscal 2016.

 

•  Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which was the same value awarded in the previous fiscal year.

 

 

In November 2017 the Compensation Committee took the following actions for Mr. Bramlage:

 

•  Exercised negative discretion under the Senior Executive Bonus Plan and awarded him a cash incentive bonus of $671,000 for fiscal 2017, which was the amount that he would have received had he participated in the Management Bonus Plan further reduced by additional negative discretion as previously described.

 

•  Raised his base salary for calendar year 2018 by 7% to $707,227 in order to increase his base salary to the market median of the Peer Group.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.23% of adjusted EBIT and an annual cash incentive target for fiscal 2018 of $707,227 which represents the same annual cash incentive target as a percentage of base salary that he had in fiscal 2017.

 

•  Awarded long-term incentives with a grant date value of $2,100,000 consisting of 50% performance stock units, 30% time-vesting stock options and 20% time vesting restricted stock units, which was an increase over the amount awarded in November 2016 and was intended to result in his total compensation being closer to the market median for the Peer Group.

 

 

Ms. McKeeThe Compensation Committee took the following compensation actions for Ms. McKee in November 2016 related to fiscal 2017:

 

•  Raised her base salary for calendar 2017 by 2.5% to $700,232, which is generally consistent with the overall annual salary increase budget for the Company.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.20% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $700,232, which represents the same annual cash incentive target as a percentage of base salary that she had in fiscal 2016.

 

•  Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which was the same value awarded in the previous fiscal year.

 

 

In November 2017 the Compensation Committee took the following actions for Ms. McKee.

 

•  Exercised negative discretion under the Senior Executive Bonus Plan and awarded her a cash incentive bonus of $710,900 for fiscal 2017, which was the amount that she would have received had she participated in the Management Bonus Plan further reduced by additional negative discretion as previously described.

 

•  Maintained her base salary for calendar year 2018 at the same level as calendar year 2017.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.18% of adjusted EBIT and an annual cash incentive target for fiscal 2018 of $700,232 which represents the same annual cash incentive target as a percentage of base salary that she had in fiscal 2017.

 

•  Awarded long-term incentives with a grant date value of $1,600,000 consisting of 50% performance stock units, 30% time-vesting stock options and 20% time vesting restricted stock units, which was the same amount awarded in November 2016.

 

 

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Mr. ReynoldsThe Compensation Committee took the following compensation actions for Mr. Reynolds in November 2016 related to fiscal 2017:

 

•  Raised his base salary for calendar 2017 by 2.5% to $543,869 which is generally consistent with the overall annual salary increase budget for the Company.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.20% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $543,869, which represents the same annual cash incentive target as a percentage of base salary that he had in fiscal 2016.

 

•  Awarded long term incentives with a grant date fair value of $1,600,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units, which was the same value awarded in the previous fiscal year.

 

 

In November 2017 the Compensation Committee took the following actions for Mr. Reynolds.

 

•  Exercised negative discretion under the Senior Executive Bonus Plan and awarded him a cash incentive bonus of $552,200 for fiscal 2017, which was the amount that he would have received had he participated in the Management Bonus Plan further reduced by additional negative discretion as previously described.

 

•  Maintained his base salary for calendar year 2018 at the same level as calendar year 2017.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.18% of adjusted EBIT and an annual cash incentive target for fiscal 2018 of $543,869 which represents the same annual cash incentive target as a percentage of base salary that he had in fiscal 2017.

 

•  Awarded long-term incentives with a grant date value of $1,600,000 consisting of 50% performance stock units, 30% time-vesting stock options and 20% time vesting restricted stock units, which was the same amount awarded in November 2016.

 

 

Mr. KroekerThe Compensation Committee took the following compensation actions for Mr. Kroeker in November 2016 related to fiscal 2017:

 

•  Raised his base salary for calendar year 2016 by 2.5% to $548,888, which was generally consistent with the overall annual salary increase budget for the Company.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.20% of adjusted EBIT and an annual cash incentive target for fiscal 2017 of $466,555.

 

•  Awarded long term incentives with a grant date fair value of $1,200,000 consisting of 40% performance restricted stock, 40% time-vesting stock options and 20% time-vesting restricted stock units. The value of this grant was consistent with the value received by other executives at his level.

 

 

In November 2017 the Compensation Committee took the following actions for Mr. Kroeker.

 

•  Exercised negative discretion under the Senior Executive Bonus Plan and awarded him a cash incentive bonus of $473,700 for fiscal 2017, which was the amount that he would have received had he participated in the Management Bonus Plan further reduced by additional negative discretion as previously described.

 

•  Maintained his base salary for calendar year 2018 at the same level as calendar year 2017.

 

•  Established a maximum award under the Senior Executive Bonus Plan of 0.18% of adjusted EBIT and an annual cash incentive target for fiscal 2018 of $466,555 which represents the same annual cash incentive target as a percentage of base salary that he had in fiscal 2017.

 

•  Awarded long-term incentives with a grant date value of $1,200,000 consisting of 50% performance stock units, 30% time-vesting stock options and 20% time vesting restricted stock units, which was the same amount awarded in November 2016.

 

 

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Information About How the Compensation Committee Makes Decisions and Interacts with Others

Peer Group

The Compensation Committee refers to a peer group in order to benchmark executive pay, consider the retention value of compensation and provide a foundation for other compensation design and award decisions.

In 2015, the Compensation Committee, taking into account the advice of its independent compensation consultant, established the Company’s peer group using a variety of quantitative and qualitative factors. The peer group is reviewed on an annual basis and was originally determined based on the following criteria (in each case, originally using data relative to the Company in fiscal 2014):

 

Comparable in Size

  Revenue between 0.3 times and 3 times
    Enterprise value between 0.25 times and 5 times
    Operating margin between 2.5% and 10%

Similar Industry/Operating Model

  Provides business services
    Logistics-centered business model
    Repeatable business model and consumer facing

Competitor for Talent

  Attracting new employees to the Company and retaining current executives

The independent compensation consultant reviewed Aramark’s Peer Group in 2017 utilizing criteria similar to the criteria used in 2015 described above and did not recommend any changes other than removing Tyco due to its acquisition by Johnson Controls Plc. Based on our fiscal 2017 results, as compared to the Peer Group, our revenues approximated the median, our enterprise value was between the 25th percentile and median, our market capitalization was at the 25th percentile, and the number of our employees was between the median and 75th percentile.

 

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Peer Group and Characteristics

The following table sets forth characteristics of the Peer Group companies based on Aramark’s fiscal 2017 performance and results:

 

     COMPARABLE IN SIZE   SIMILAR INDUSTRY/OPERATING MODEL     
COMPANY NAME   REVENUE  

ENTERPRISE

VALUE

 

OPERATING

MARGIN

  BUSINESS
SERVICES
  LOGISTICS   CONSUMER
FACING WITH
REPEATABLE
BUSINESS
MODEL
  COMPETITOR
FOR TALENT

Carnival

  X   X           X   X    

C.H. Robinson Worldwide

  X   X   X   X   X        

Darden Restaurants

  X   X   X       X   X    

FedEx

      X   X   X   X   X    

Hertz Global Holdings

  X   X   X   X   X   X    

Macy’s

  X   X   X       X   X   X

Manpower

  X   X   X   X   X        

Marriott International

  X   X   X       X   X   X

McDonalds

  X               X   X   X

MGM Resorts International

  X   X           X   X    

PepsiCo

                  X       X

RR Donnelley & Sons

  X   X   X   X   X        

Starbucks

  X               X   X   X

Sysco

      X   X   X   X       X

United Parcel Service

              X   X   X   X

Waste Management

  X   X       X   X        

Yum! Brands

  X   X           X   X    

Survey Data

In evaluating the compensation of certain of our NEOs, the Compensation Committee also references certain survey data. In 2017, the Compensation Committee referred to, in part, peer group data and a subset of the Willis Towers Watson 2016 CDB General Industry Executive Compensation Survey – U.S. that is size-adjusted based on Aramark’s revenue (211 companies from the overall survey of 484 companies), to perform a market check of the individual components of compensation and total compensation for Messrs. Reynolds and Kroeker and Ms. McKee. We do not consider any specific company included in the survey data to be a material factor in the review of the compensation of our named executive officers.

Independence of the Compensation Consultant

The Compensation Committee recognizes the importance of using an independent compensation consultant that is appropriately qualified and that provides services solely to the Compensation Committee and not to the Company.

Since 2007, the Compensation Committee has engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent consultant. It did so again in 2017.

The Compensation Committee annually reviews its relationship with FW Cook and determines whether to renew the engagement. Only the Compensation Committee has the right to approve services to be provided by, or to terminate the services of, FW Cook. FW Cook and its affiliates do not provide any services to the Company or any of the Company’s affiliates other than advising the Compensation Committee on director and executive compensation.

During 2017, the Compensation Committee considered FW Cook’s independence and determined that the engagement of FW Cook did not raise any conflict of interest or other issues that would adversely impact FW Cook’s independence, including using the six factors set forth in the SEC and New York Stock Exchange rules regarding compensation advisor conflicts of interest and independence. Accordingly, the Compensation Committee determined FW Cook to be independent and free from conflicts of interest.

 

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Role of Independent Compensation Consultant

The Compensation Committee’s independent compensation consultant provides the Compensation Committee with general services related to executive and director compensation each year. These services include market intelligence, compensation trends, suggestions about compensation program design, general views on specific requests to the Compensation Committee from management regarding compensation program design or decisions, the review of the peer group, benchmarking executive pay against the peer group and against the broader market for executive talent, and an analysis of the risk profile of the compensation system. In particular years, the services also have included thorough analyses of particular compensation issues. During 2017, FW Cook advised the Compensation Committee with respect to the long-term equity incentive program and recommended that the percentage of PSUs be increased to 50% with a corresponding decrease in the percentage of stock options to 30% and that the additional performance metric of ROIC be added to the PSUs.

In May, August and October 2017, FW Cook reviewed Mr. Foss’s compensation compared to the Peer Group and in particular analyzed his equity awards to ensure that they motivated him to drive performance while encouraging retention. Based on guidance from the Compensation Committee, FW Cook provided advice to the Chairman of the Compensation Committee who then, based on such advice, made recommendations to the Compensation Committee with respect to Mr. Foss’s 2018 compensation, including the grant of $11.3 million in long term incentives including $1.4 million of long term incentives subject to relative shareholder return vesting discussed above. FW Cook also recommended the new retirement provisions for the NEOs’ long-term incentives and the change in the structure of Mr. Foss’ long-term incentives subject to relative shareholder return vesting previously discussed.

FW Cook, after evaluating current NEO compensation levels and Market Practice, also advised that no significant changes to base salaries of Messrs. Reynolds and Kroeker and Ms. McKee are required to support the competitiveness of the Company’s compensation programs. FW Cook also indicated that target bonus opportunities for Messrs. Bramlage, Reynolds and Kroeker and Ms. McKee are at or above the median of Market Practice. The Compensation Committee then determined to maintain the base salaries for calendar 2018 of Messrs. Reynolds, Kroeker and Ms. McKee at the same level as calendar 2017 and to increase the base salary of Mr. Bramlage by seven percent in order for his base salary to be at the median of the Peer Group. The Compensation Committee also determined to maintain the same percentage bonus target for Messrs. Bramlage, Reynolds, Kroeker and Ms. McKee for fiscal 2018 as they had for fiscal 2017.

In fiscal 2017, FW Cook also advised the Compensation Committee with respect to certain features of the Company’s Amended and Restated 2013 Stock Incentive Plan and Amended and Restated Senior Executive Performance Bonus Plan which were approved by shareholders at the 2017 Annual Meeting.

Interaction of the Compensation Committee with Executive Officers and Others

CEO: The Compensation Committee regularly seeks the advice of the CEO. In 2017, it sought his input on the performance of his direct reports including the other named executive officers and his views on how performance metrics and goals will motivate other executives and the workforce. The Compensation Committee also discusses with the CEO matters relating to the retention of key executives and employees and sought his input on his performance results in 2017 and his objectives for 2018.

EVP, Human Resources: The Compensation Committee regularly asks Ms. McKee, Executive Vice President, Human Resources to attend portions of the Compensation Committee’s meetings in order to discuss compensation design and award issues, allow her to review and respond to suggestions about compensation matters and ask for her input about compensation decisions.

Other Executive Officers: As necessary, the Executive Vice President and Chief Financial Officer attends Compensation Committee meetings to discuss and review financial metrics relating to our compensation programs. Additionally, the Executive Vice President and General Counsel or the Senior Vice President and Deputy General Counsel attend Compensation Committee meetings to advise about legal requirements and provide regulatory updates.

 

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In administering the annual cash and long term equity incentive plans of the Company, the Compensation Committee approves cash and equity awards to executive officers and/or recommends such approval by the Stock Committee, as appropriate, for purposes of obtaining certain exemptions under Rule 16b-3 of the Exchange Act and exceptions under Section 162(m) of the Internal Revenue Code. References in this proxy statement to actions taken by the Compensation Committee may, in certain circumstances, refer to actions formally taken by the Stock Committee in conjunction with additional corresponding actions taken by the full Compensation Committee.

Long Term Incentive Grant Procedures

Timing of Awards The Compensation Committee intends to make annual awards of long term equity incentives at its meeting held early in each fiscal year. The Compensation Committee has in the past, and may in the future, make limited grants of long term incentives on other dates, including to retain key employees, to compensate an employee in connection with a promotion or to compensate newly hired executives for equity or other benefits lost upon termination of their previous employment or to otherwise induce them to join our Company.

Grant Date and Exercise Price The grant date of long term incentives to executives may be the date of Compensation Committee approval or, if specified in the approval, a later date, including a date of subcommittee or Stock Committee approval if designated by the Compensation Committee. The exercise price of option grants is the closing market price of our common stock on the date of grant.

Stock Ownership Guidelines

The Compensation Committee has adopted the following stock ownership guidelines to help align the interests of each NEO with those of Aramark’s shareholders.

 

EXECUTIVE   STOCK OWNERSHIP GUIDELINE(1)   CURRENT STATUS

CEO

  6x annual base salary   Meets or Exceeds Guideline

Executive Vice President and CFO

  3x annual base salary   Meets or Exceeds Guideline

Executive Vice President, HR

  3x annual base salary   Meets or Exceeds Guideline

Executive Vice President and GC

  3x annual base salary   Meets or Exceeds Guideline

Senior Vice President, Integration

  3x annual base salary   On Track to Meet Guideline

 

(1) Multiple of annual base salary. Prior to attainment, absolute value is determined annually based on then-current salary and the prior year’s average of month-end stock closing prices.

For purposes of determining compliance with the guidelines, shares included are limited to those that are (1) directly or indirectly beneficially owned (held indirectly, such as through family trusts or by immediate family members) or (2) unvested restricted stock units or restricted shares. Therefore, unexercised vested and unvested stock options and unearned or unvested PSUs or performance restricted stock are not considered when determining compliance with the guidelines.

These guidelines require that the specified amount be attained by the fifth anniversary of the later of (1) the named executive officer’s start date with the Company or (2) November 10, 2015 (the date this timing requirement was adopted). If a named executive officer has not attained the guideline amount by such date, one half of all shares delivered upon vesting of awards held by such named executive officer (net of withholding for tax obligations) must be retained until the guideline amount has been attained.

All of our named executive officers exceed, have met or are on track to meet their guideline amount within the five-year period. For example, as of December 8, 2017, our CEO held shares and RSUs with a value on such date equal to more than 36 times his annual base salary.

Prohibitions on Hedging and Pledging

The Company’s Securities Trading Policy restricts pledging and prohibits our directors, officers and employees from engaging in hedging, speculative or other transactions that hedge or offset any decrease in the market value of Aramark stock (including swaps, forwards, options and futures) except in certain very limited circumstances.

To date, no current director or officer has utilized any of the exceptions. None of our directors or named executive officers or other executive officers has currently pledged Aramark stock.

 

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The Board has not approved any exceptions for hedging transactions to date and does not currently anticipate any situation where it would do so in the future.

Compensation Risk Disclosure

As part of its responsibility to set appropriate executive compensation, the Compensation Committee annually considers balance in the compensation program and its impact on Aramark’s risk management profile.

Specifically, in 2017, the Compensation Committee considered whether the mix of performance-based pay, the performance metrics and the degree of difficulty of the performance goals was sufficient to encourage management to strive for strong performance without encouraging risk taking beyond established risk parameters. The Compensation Committee also considered the input of its independent compensation consultant regarding the risk profile of the compensation program as well as various factors that would mitigate risks associated with Aramark’s compensation program. These factors include: an effective balance between the cash and equity mix and short and long-term focus; the use of multiple performance metrics for annual incentive programs; substantial stock ownership guidelines; a clawback policy; an anti-hedging policy; and independent committee oversight of the compensation programs.

After discussing all such matters, the Compensation Committee determined that in relation to 2017, Aramark’s compensation program is appropriately structured and does not motivate individuals or groups to take risks that are reasonably likely to have a material adverse effect on the Company.

Impact of Regulatory Requirements on Executive Compensation

Sections 280G and 4999. Sections 280G and 4999 of the Internal Revenue Code (the “Code”) limit our ability to take a tax deduction for certain “excess parachute payments” (as defined in the Code) and impose excise taxes on each executive that receives “excess parachute payments” in connection with his or her severance and other payments from us that are contingent on or in connection with a change of control.

The Compensation Committee considered the adverse tax liabilities imposed by Sections 280G and 4999, as well as other competitive factors, when it structured certain post-termination compensation payable to our named executive officers. The potential adverse tax consequences to us and/or the executive, however, are not necessarily determinative factors in such decisions. Our 2007 agreement with Ms. McKee relating to employment requires us to make a gross-up payment to compensate her for any excise taxes (and income taxes on such gross-up payment) that she incurs under Section 4999. Subsequently, as market practices changed, the Compensation Committee determined it would no longer provide such gross-up payments. As a result, no gross-up was provided in the agreements entered into with Messrs. Foss, Bramlage, Reynolds and Kroeker.

Section 162(m). Section 162(m) of the Code generally limits tax deductions for compensation paid to named executive officers (other than the chief financial officer) to $1,000,000, except to the extent that the compensation constitutes “performance-based compensation” for purposes of Section 162(m). We became subject to the Section 162(m) compensation deduction limit commencing upon the date of our 2017 Annual Meeting of Shareholders.

The Compensation Committee expects to structure performance-based awards in compliance with Section 162(m) requirements applicable to the “performance-based compensation” exception, and the Compensation Committee considers the loss of deductibility, as well as other factors, when it structures compensation arrangements for our named executive officers. However, the potential tax consequences to Aramark are not necessarily determinative and the Compensation Committee may from time to time determine that certain compensation awards that would result in non-deductible compensation expenses would be in the best interests of the Company, such as if necessary to accomplish particular business objectives or to attract and retain certain executives. Additionally, Aramark and the Compensation Committee are continuing to monitor pending tax bills which, if approved, could curtail or eliminate the performance-based compensation exception under Section 162(m) and could also expand the group of individuals potentially covered by the deduction limitations under Section 162(m).

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K and in this Proxy Statement relating to our 2018 Annual Meeting of Shareholders. Submitted by the Compensation Committee of the Board:

Stephen I. Sadove, Chairman

Lisa G. Bisaccia

Richard W. Dreiling

Sanjeev K. Mehra

 

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COMPENSATION TABLES

2017 Summary Compensation Table

The following tables, narrative and footnotes discuss the compensation of the Chairman, President, and Chief Executive Officer, the Chief Financial Officer, and the three other most highly compensated executive officers in 2017, who are referred to as named executive officers or NEOs.

 

Name and

Principal position

  Year    

Salary(1)

($)

   

Bonus

($)

   

Stock

Awards(2)

($)

   

Option

Awards(3)

($)

   

Non-

Equity

Incentive

Plan

Compen-

Sation(4)

($)

   

Change in

Pension value

And non-

Qualified

Deferred

Compensation

Earnings(5)
($)

   

All

Other

Compen-

Sation(6)

($)

   

Total

($)

 

Eric J. Foss,

President and Chief

Executive Officer

    2017       1,700,000             6,388,467       4,467,809       3,451,900       3,239       313,583       16,324,998  
    2016       1,700,000             6,516,166       4,575,843       3,726,000       2,355       530,648       17,051,012  
    2015       1,622,625             7,800,020       7,790,065       3,300,000       1,498       624,198       21,138,406  

Stephen P. Bramlage,

EVP and Chief

Financial Officer

    2017       648,720             960,034       640,007       671,000       382       61,689       2,981,832  
    2016       609,000             960,008       640,002       670,700       68       415,031       3,294,809  
    2015       300,000             2,200,041       800,003       272,000             159,593       3,731,637  

Lynn B. McKee,

EVP, Human Resources

    2017       695,831             960,034       640,007       710,900       13,709       58,382       3,078,863  
    2016       679,804             960,008       640,002       748,700       12,682       74,888       3,116,084  
    2015       666,475             960,024       640,005       607,000       11,744       77,779       2,963,027  

Stephen R. Reynolds,

EVP, General Counsel

and Secretary

    2017       540,553             960,034       640,007       552,200       1,942       36,595       2,731,331  
    2016       528,003             960,008       640,002       581,500       1,467       61,592       2,772,572  
    2015       517,650             960,024       1,103,130       472,000       953       59,056       3,112,813  

Harrald Kroeker

Senior Vice President,

Integration

    2017       545,541             720,042       480,003       473,700             24,669       2,243,955  
    2016       532,875             510,026       340,001       498,800             24,479       1,906,181  
                                                                       

 

(1) For fiscal years 2015, 2016 and 2017, Messrs. Foss and Reynolds and Ms. McKee, and for fiscal years 2016 and 2017 only, Mr. Bramlage, each deferred a portion of their salaries under the 2007 Savings Incentive Retirement Plan. These amounts are reflected in the Salary column, and for fiscal 2017 are reflected in the Non-Qualified Deferred Compensation Table for Fiscal Year 2017.

 

(2) Includes the aggregate grant date fair value of restricted stock units, performance stock units and performance stock awards granted in the respective fiscal year computed in accordance with FASB ASC Topic 718. For performance stock units and performance stock awards, the grant date fair value reported is based upon the probable outcome of the performance condition at the grant date as described in the table below, which also identifies the grant date fair value at the highest level of performance:

 

         Fiscal 2015 Grants             Fiscal 2016 Grants             Fiscal 2017 Grants      
    

Probable

Outcome ($)

   

Highest
Level of

Performance
($)

   

Probable

Outcome
($)

   

Highest
Level of

Performance
($)

   

Probable

Outcome ($)

   

Highest
Level of

Performance
($)

 

Eric J. Foss

  $ 5,200,013     $ 10,400,026     $ 4,344,100     $ 8,688,200     $ 4,258,978     $ 8,517,956  

Stephen P. Bramlage

  $ 800,009     $ 1,600,018     $ 640,005     $ 1,280,011     $ 640,022     $ 1,280,044  

Lynn B. McKee

  $ 640,006     $ 1,280,012     $ 640,005     $ 1,280,011     $ 640,022     $ 1,280,044  

Stephen R. Reynolds

  $ 640,006     $ 1,280,012     $ 640,005     $ 1,280,011     $ 640,022     $ 1,280,044  

Harrald Kroeker

                  $ 340,017     $ 680,034     $ 480,017     $ 960,034  

With regard to Mr. Foss, the table immediately above does not include certain awards granted in fiscal years 2016 and 2017 that are subject only to time-based and market-based conditions (relative total shareholder return), because these awards are not subject to any performance-based conditions that would vary the number of shares that vest if the relative total shareholder return condition is achieved. The grant date fair value of awards with market-based conditions is determined based on a Monte Carlo simulation model for market-based total shareholder return. For additional information on the valuation assumptions and more discussion with respect to the valuation of equity awards, refer to Note 10 to the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 29, 2017.

 

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(3) This column represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The amounts shown for fiscal year 2015 include the grant date fair value for certain performance-based stock options granted prior to such fiscal years for which vesting was subject to EBIT targets where such target was not established at the time the option was granted, as targets for later years had not been determined. For fiscal 2015, these amounts are, for Mr. Foss, $2,590,063 and for Mr. Reynolds, $463,125. For Messrs. Foss and Reynolds, these amounts are attributable to a portion of performance-based stock options that were awarded in fiscal 2012 for Mr. Foss and fiscal 2013 for Mr. Reynolds, but whose annual performance target was established in November 2014, and, for Mr. Reynolds, a portion of performance-based stock options that were awarded in fiscal 2013 and which vested in connection with the achievement of certain returns on sales of shares by our former Sponsors in fiscal 2015. With regard to Mr. Foss, a portion of the stock options granted in fiscal years 2016 and 2017 have a market-based condition (relative total shareholder return). These options are not subject to any performance-based conditions that would vary the number of options that vest if the relative total shareholder return condition is achieved. The grant date fair value of these options with market-based conditions is determined based on a Monte Carlo simulation model for market-based total shareholder return. For additional information on the valuation assumptions and more discussion with respect to the stock options, refer to Note 10 to the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 29, 2017.

 

(4) Includes payment under the Senior Executive Bonus Plan for each of Messrs. Foss, Bramlage, Reynolds and Kroeker (with regard to fiscal year 2017) and Ms. McKee and payment for Mr. Kroeker, with regard to fiscal year 2016, under the Management Bonus Plan.

 

(5) Includes amounts earned on deferred compensation in excess of 120% of the applicable federal rate, based upon the above-market return at the time the rate basis was set.

 

(6) The following are included in this column for 2017:

 

  a. The aggregate incremental cost to us of the following perquisites: car allowance, premium payments for disability insurance, premium payments for an excess health insurance plan, payments for an executive physical, parking fees paid by the Company, financial planning and, for Messrs. Foss and Bramlage, costs associated with personal use of the Company aircraft and/or personal use of the Company’s fractional ownership of an additional aircraft, personal use of Company-owned tickets or the Company-owned suite at sports stadiums and arenas and, for Mr. Foss, personal use of a Company-provided car and driver.

 

  b. With regard to Mr. Foss, $177,972 for Mr. Foss’s personal use of the Company aircraft and personal use of the Company’s fractional ownership of an additional aircraft. Pursuant to a resolution adopted by the Compensation Committee and an Aircraft Time Sharing Agreement entered into between Mr. Foss and the Company, Mr. Foss reimburses the Company for the amount by which the aggregate incremental cost to the Company attributable to his personal use of the Company aircraft exceeds $250,000 per year. The calculation of incremental cost for personal use of Company aircraft includes the variable costs incurred as a result of his personal flight activity, including charges for aircraft fuel, landing fees, and any travel expenses for the flight crew. The variable costs for the Company’s fractional ownership share include the regular hourly charge, the fuel variable charge, international flat fees and other fees. Mr. Foss is not reimbursed by the Company for any personal income taxes associated with his personal use of the Company aircraft or the Company’s fractional ownership share.

 

  c. Premium payments for term life insurance or the Survivor Income Protection Plan as follows: for Mr. Foss, $1,308, for Mr. Bramlage, $1,308, for Ms. McKee, $6,971, for Mr. Reynolds, $1,308 and for Mr. Kroeker, $1,308.

 

  d. Amounts that constitute the Company match to the Savings Incentive Retirement Plan for fiscal 2017 of $9,000 for each of Messrs. Foss, Bramlage and Reynolds and Ms. McKee.

 

  e. The dollar value of dividend equivalents accrued or credited on certain restricted stock units and performance stock units granted prior to February 5, 2014 (the date the Company announced the payment of its first quarterly dividend), where dividends were not factored into the grant date fair value required to be reported for such awards. Also includes the cash dividends accrued on restricted stock awards, which will be paid out on the applicable vesting date. The total value of dividend equivalents accrued or credited on restricted stock units and performance stock units and the total value of cash dividends accrued on restricted stock for the executive officers during fiscal 2017, in each case for awards granted prior to February 5, 2014, is as follows: for Mr. Foss, $65,783, for Ms. McKee, $6,781, for Mr. Reynolds, $4,899, and for Mr. Kroeker, $1,973. For awards granted on or after February 5, 2014, the value of dividend equivalents credited or otherwise allocated to restricted stock units or performance stock units in the form of additional units with the same vesting terms as the original awards is not included in the “All Other Compensation” column because their value is factored into the grant date fair value of awards. Additional units awarded in connection with dividend adjustments are subject to vesting and delivery conditions as part of the underlying awards.

 

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Grants of Plan-Based Awards for Fiscal Year 2017

The following table provides information about equity and non-equity awards granted or deemed granted to our named executive officers in fiscal 2017.

 

Name

 

Type(1)

 

Grant
Date

   

Committee

Meeting

Date

   

 

Estimated Future

Payouts under
Non-Equity Incentive

Plan Awards(2)

   

Estimated Future

Payouts under
Equity Incentive

Plan Awards

   

All

Other

Stock

Awards:

Number

of

Shares of

Stock or

Units

   

All

Other

Option

Awards:

Number

of

Securities

Underlying

Options

   

Exercise

or Base

Price of
Option

Awards

($/sh)

   

Grant

Date

Fair

Value of
Stock and

Option

Awards(3)

 
       

Thres-

hold

    Target    

Maxi-

mum

   

Thres-

hold

    Target    

Maxi-

mum

         

Foss

  ACI                     850,000       3,400,000       10,000,000                                                          
    NQSOs(4)     11/18/2016       11/8/2016                                                               468,086     $ 34.08     $ 3,960,008  
    PSAs(5)     11/18/2016       11/8/2016                               58,099       116,198       232,396                             $ 3,960,028  
    RSUs(6)     11/18/2016       11/8/2016                                                       58,099                     $ 1,980,014  
    TSR_NQSOs(7)     11/18/2016       11/8/2016                                       141,844                             $ 34.08     $ 507,802  
    TSR_PSAs(8)     11/18/2016       11/8/2016                               17,606       35,212       70,424                             $ 298,950  
    TSR_PSUs(9)     11/18/2016       11/8/2016                                       17,606                                     $ 149,475  

Bramlage

  ACI                     165,240       660,960       1,288,872                                                          
    NQSOs(4)     11/18/2016       11/8/2016                                                               75,651     $ 34.08     $ 640,007  
    PSAs(5)     11/18/2016       11/8/2016                               9,390       18,780       37,560                             $ 640,022  
    RSUs(6)     11/18/2016       11/8/2016                                                       9,390                     $ 320,011  

McKee

  ACI                     175,058       700,232       1,365,452                                                          
    NQSOs(4)     11/18/2016       11/8/2016                                                               75,651     $ 34.08     $ 640,007  
    PSAs(5)     11/18/2016       11/8/2016                               9,390       18,780       37,560                             $ 640,022  
    RSUs(6)     11/18/2016       11/8/2016                                                       9,390                     $ 320,011  

Reynolds

  ACI                     135,967       543,869       1,060,545                                                          
    NQSOs(4)     11/18/2016       11/8/2016                                                               75,651     $ 34.08     $ 640,007  
    PSAs(5)     11/18/2016       11/8/2016                               9,390       18,780       37,560                             $ 640,022  
    RSUs(6)     11/18/2016       11/8/2016                                                       9,390                     $ 320,011  

Kroeker

  ACI                     116,639       466,555       909,782                                                          
    NQSOs(4)     11/18/2016       11/8/2016                                                               56,738     $ 34.08     $ 480,003  
    PSAs(5)     11/18/2016       11/8/2016                               7,043       14,085       28,170                             $ 480,017  
    RSUs(6)     11/18/2016       11/8/2016                                                       7,043                     $ 240,025  

 

(1) ACI = Annual Cash Incentive; NQSO = Non-Qualified Stock Option; RSU = Restricted Stock Unit; PSU = Performance Stock Unit; PSA = Performance Stock Award; TSR = Total Shareholder Return (Outperformance award).

 

(2) The amounts represent the threshold, target, and maximum payouts under the Management Bonus Plan for the 2017 performance period which serves as the basis for the annual cash incentive payments under the Senior Executive Bonus Plan in which Messrs. Foss, Bramlage, Reynolds and Kroeker and Ms. McKee participated in 2017. With regard to Mr. Foss, the maximum shown is the maximum allowed under the Senior Executive Bonus Plan. The maximum bonuses under the Senior Executive Bonus Plan for fiscal 2017 as a percentage of the aggregate bonus amount under the Senior Executive Bonus Plan are: for Mr. Foss, 54%; for Mr. Bramlage, 14%; and for each of Messrs. Reynolds and Kroeker and Ms. McKee, 11%.

 

(3) This column shows the full grant date fair value of non-qualified stock options, restricted stock units, performance stock units and performance stock awards granted to our named executive officers in fiscal 2017 under FASB ASC Topic 718. The grant date fair value for performance stock units and performance stock awards granted in fiscal 2017 assumes achievement of the target amount. For additional information on the valuation assumptions, refer to Note 10 to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 29, 2017. These amounts do not correspond to the actual value that will be received by the named executive officers.

 

(4) These stock options were granted under the 2013 Stock Plan, vest annually 25% per year over four years and have a ten-year term, subject to the grantee’s continued employment with the Company.

 

(5) These performance stock awards were granted under the 2013 Stock Plan, and vest at the end of fiscal 2019, provided that the performance target, based on adjusted earnings per share, is met for the three-year period ending September 27, 2019.

 

(6) These restricted stock units were granted under the 2013 Stock Plan and vest annually 25% per year over four years, subject to the grantee’s continued employment with the Company.

 

(7) These performance based non-qualified stock options are subject to the achievement of a relative TSR performance target for the three-year period ending September 27, 2019, and will vest following the completion of fiscal year 2019, provided that the performance target is met.

 

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(8) These performance stock awards are subject to the achievement of a relative TSR performance target for the three-year period ending September 27, 2019, and an adjusted earnings per share performance target for the three year period ended September 27, 2019, and will vest following the completion of fiscal year 2019, provided that the performance targets are met.

 

(9) These performance stock units are subject to the achievement of a relative TSR performance target for the three-year period ending September 27, 2019, and will vest following the completion of fiscal year 2019, provided that the performance target is met.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

Annual Cash Incentive

Senior Executive Bonus Plan

In fiscal 2017, all of our named executive officers participated in the Senior Executive Bonus Plan. Under the Senior Executive Bonus Plan, the Compensation Committee approved in November 2016 the establishment of a bonus pool that was funded based on 1.86% of adjusted EBIT. For purposes of the Senior Executive Bonus Plan and the formula used to determine the bonus pool approved by the Compensation Committee, adjusted EBIT is income from both continuing and discontinued operations before income taxes, if any, and before interest expense and other financing costs, in each case as shown in our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended September 29, 2017. In addition, adjusted EBIT for purposes of the pool excluded incremental customer relationship amortization and incremental depreciation that resulted from the 2007 going private transaction (the “2007 Transaction”) and share-based compensation expense. These adjustments were made to normalize the adjusted EBIT number so that it does not reflect certain non-operational items.

As described in the Compensation Discussion and Analysis, the primary reference points the Compensation Committee considers when determining the use of negative discretion in awarding annual cash incentives to the executive officers participating in the Senior Executive Bonus Plan is a target percentage of base salary and reference to how each such executive would have been compensated under the Management Bonus Plan.

Management Bonus Plan

In fiscal 2017, each of our named executive officers participated in the Senior Executive Bonus Plan, which the Compensation Committee administers with reference to hypothetical achievement under the Management Bonus Plan.

Each November (or at another time during the year in the case of a new hire or promotion), the Compensation Committee sets an annual cash incentive target in dollars for each executive who participates in the Management Bonus Plan. For fiscal 2017, the Management Bonus Plan was composed of two parts: a financial portion, based on the Company’s adjusted EBIT, adjusted sales and free cash flow, which determines 90% of the overall potential Management Bonus Plan award, and an individual portion, based on functional or business group objectives, which determines the remaining 10% of the award.

Adjusted EBIT: The adjusted EBIT target for fiscal 2017 was $994.9 million, which determines 40% of the total target. Actual 2017 adjusted EBIT was $980.5 million, representing 98.6% of target achievement. The adjusted EBIT target for purposes of the Management Bonus Plan excludes the impact of currency translation, acquisitions and divestitures, the incremental customer relationship amortization and incremental depreciation from the 2007 Transaction and share-based compensation expense and includes an adjustment for severance and other charges and branding charges and an amount intended to normalize the plan targets for corporate functional participants.

Adjusted Sales: The adjusted sales target for fiscal 2017 was $14.8 billion, which determines 25% of the total target. Actual 2017 adjusted sales was $14.7 billion, representing 99.0% of target achievement. The sales target for purposes of the Management Bonus Plan is adjusted for the impact of currency translation and acquisitions and divestitures and includes an amount intended to normalize the plan targets for corporate functional participants.

Free Cash Flow: The free cash flow target for fiscal 2017 was $320.0 million, which determines 25% of the total target. Actual 2017 free cash flow was $519.6 million, representing 162.4% of target achievement. The free cash flow target for purposes of the Management Bonus Plan represents net cash provided by operating activities less net purchases of property and equipment, client contract investments and other.

 

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Functional Objectives: The functional objectives that comprised 10% of the overall Management Bonus Plan calculations for the executives who earned annual cash incentives under the Senior Executive Bonus Plan were as follows: for Mr. Foss, implement and execute a focused business plan to achieve the key financial goal; develop, pursue and execute a strategic plan that enables long term shareholder value creation; develop and execute a plan to strengthen the Board of Directors and improve Board effectiveness; and develop a high performing organization, for Messrs. Bramlage, Reynolds and Kroeker, and for Ms. McKee, improving overall employee engagement.

The following table describes the threshold, target and maximum for each of the components of the Management Bonus Plan for fiscal 2017:

 

Measure

  Performance   Payout
 

(Percentage of Target

Performance)

 

(Percentage of Target

Incentive)

  Threshold   Target   Maximum   Threshold   Target   Maximum

Adjusted EBIT (40%)

  95   100   105   25   100   200

Adjusted Sales (25%)

  90   100   110   25   100   200

Free Cash Flow (25%)

  80   100   120   25   100   200

Functional Objectives (10%)

  1   100   150   1   100   150

As the table illustrates, the Company must attain a threshold, or minimum, performance on each measure of the financial portion of the Management Bonus Plan for the participant to receive any payout under the financial portion. If the threshold performance is achieved, the participant would receive 25% of the payout for that financial measure, which would increase to 100% when 100% of the financial measure is attained. If greater than 100% of the target for a particular financial measure is achieved, the participant would receive more than 100% payout on that financial measure up to the maximum percentage set forth in the table. The payout under the individual portion of the Management Bonus Plan is directly proportional to the level of achievement of the functional objectives and the maximum payout for this measure is as described in the table. Therefore, if the maximum performance of all measures was achieved, the executive would receive up to 195% of his or her target bonus amount.

 

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Fiscal 2017 Annual Cash Incentive Opportunities and Payouts and Fiscal 2018 Annual Cash Incentive Opportunities

For fiscal 2017, under the Management Bonus Plan our adjusted EBIT was $980.5 million and our adjusted sales was $14.7 billion and our free cash flow was $519.6 million. The following table sets forth for each named executive officers the bonus opportunity as percentages of adjusted EBIT, the maximum amount that could have been awarded to him or her for fiscal 2017 based on the Company’s achievement of adjusted EBIT, the target annual cash incentive opportunities set by the Compensation Committee, the actual annual cash incentives awarded (which was primarily based on what the executive would have received under the Management Bonus Plan), as well as the percentages of the adjusted EBIT and target annual cash incentive the Compensation Committee established in November 2017 in respect of fiscal 2018 awards:

 

Executive  

Fiscal 2017

Percentage

of

Adjusted

EBIT

 

Maximum
Incentive

Potential

Based on

Fiscal 2017

Results

 

Fiscal 2017

Target

Incentive

Opportunity

as a
Percentage

of Salary

 

Actual

Incentive

Awarded

for Fiscal

2017

 

Fiscal 2018

Percentage

of

Adjusted

EBIT

 

Fiscal 2018

Target

Incentive

Opportunity

as a
Percentage

of Salary

Mr. Foss

  1.01% (up to

a maximum

of $10 million)

  $9.625 million   200%   $3,451,900   0.92% (up to

a maximum

of $10 million)

  200%

Mr. Bramlage

  0.25%   $2.406 million   100%   $671,000   0.23%   100%

Ms. McKee

  0.20%   $1.925 million   100%   $710,900   0.18%   100%

Mr. Reynolds

  0.20%   $1.925 million   100%   $552,200   0.18%   100%

Mr. Kroeker

  0.20%   $1.925 million   85%   $473,700   0.18%   85%

The Compensation Committee reviewed Mr. Foss’s functional objectives described above that it had set for him at the beginning of fiscal 2017 and his performance against such objectives and determined that he had achieved the maximum level of performance of his functional objectives, which for fiscal 2017 on an enterprise basis was 80%. The Compensation Committee then determined that each of Messrs. Bramlage, Reynolds, and Kroeker and Ms. McKee had achieved an 80% level of performance of their functional objectives, in each case based upon an assessment of the performance of each of the respective executives and departments against the objectives described above as well as the overall financial performance of the Company. As a result of this level of financial and functional objective achievement, Mr. Foss’s payout under the Management Bonus Plan as well as those of Messrs. Bramlage, Reynolds, and Kroeker and Ms. McKee would have been 112.5% of his or her respective target.

The Compensation Committee then exercised further negative discretion to reduce the overall payout percentage for Mr. Foss, Messrs. Bramlage, Reynolds and Kroeker and Ms. McKee from 112.5% to 101.5% of his or her respective target due to the level of achievement of Free Cash Flow and the desire to better align the named executive officers’ bonus payouts to those of executives who did not have a Free Cash Flow bonus target.

Equity Incentive Awards

Fiscal 2017 Awards

In November 2016, the Compensation Committee granted an annual award to each of the Company’s named executive officers in respect of fiscal 2017 compensation.

Time-vesting Awards: restricted stock units and stock options granted in fiscal 2017 are generally subject to a vesting schedule with 25% of the award vesting on each of the first four anniversaries of the date of grant, subject to the participant’s continued employment with the Company or one of its subsidiaries through each such anniversary.

Performance-based Awards: Shares of performance restricted stock granted in fiscal 2017 generally vest at the end of a three-year period, subject to achievement of a specified performance target and the participant’s continued employment with the Company. The performance metric for the shares of performance restricted stock granted in

 

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fiscal 2017 was based upon a cumulative adjusted EPS target for the 2017, 2018 and 2019 fiscal years. The adjusted EPS target and actual is calculated as adjusted net income divided by a constant share number. Adjusted net income is calculated as reported net income excluding the impact of currency translation, acquisitions and divestitures, the incremental customer relationship amortization and incremental depreciation from the 2007 Transaction, any expenses or charges related to any equity offering, acquisition, disposition, refinancing or similar transaction, share-based compensation expense and gains, losses and settlements impacting comparability and including an adjustment for severance and other charges and the tax impact related to these adjustments.

No awards may become earned in fiscal 2017; however, the number of shares of performance restricted stock that can be earned in fiscal 2019 is based upon the percentage of the adjusted EPS target that is achieved as follows:

 

Adjusted Earnings Per

Share Performance Level

As A Percentage of Target

 

Percentage Of Target Number

of PSAs Earned

less than 90.8%

  0%

90.8%

  50%

100%

  100%

109.9% or greater

  200%

If the performance target is satisfied at or above 90.8%, the shares of performance stock earned effectively convert into time-vesting restricted stock, vesting in entirety, upon certification of performance, subsequent to the completion of the performance period.

In November 2016, the Compensation Committee also granted to Mr. Foss stock options and performance stock units that will each vest on the third anniversary of the grant date and performance restricted stock with the same vesting and payout subject to the achievement of the cumulative fiscal 2017-2019 adjusted EPS target as the performance restricted stock described above, which stock options, performance stock units, and performance restricted stock are subject to an additional performance vesting requirement that the Company’s relative total shareholder return be one of the top five of the Company’s peer group over the three-year performance period beginning October 1, 2016 and ending September 27, 2019.

See “Grants of Plan Based Awards for Fiscal Year 2017” for further information regarding the November 2016 equity grants.

All restricted stock units and performance stock units will accrue dividend equivalents from the date of grant until the date of settlement in shares (with the dividend equivalents earned on performance stock units determined based upon the actual achievement against target performance). Shares of performance restricted stock accrue cash dividends that are payable only upon the vesting of the underlying performance restricted stock. Time-vesting restricted stock units, performance stock units, performance restricted stock and stock options also vest in connection with certain termination events, as described in more detail in “Potential Post-Employment Benefits.”

Other Outstanding Equity Awards

Employment Agreements and Change of Control Arrangements

We have employment agreements with all of the named executive officers for indeterminate periods terminable by either party, in most cases subject to post-employment severance and benefit obligations. While we do have these agreements in place, from time to time, it has been necessary to renegotiate some terms upon actual termination. For more information regarding change of control and severance payments for our named executive officers, see the disclosure under “Potential Post-Employment Benefits.”

 

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Outstanding Equity Awards at 2017 Fiscal Year-End

The following table provides information with respect to outstanding equity awards held by our named executive officers at 2017 fiscal year-end.

 

          Option Awards     Stock Awards  
Name   Type     Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable(1)
   

Number of

Securities

Underlying

Unexercised

Options(#)

Unexercisable(2)

   

Equity

Incentive

Plan Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

    Option
Exercise
Price
   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock That

Have

Not

Vested (#)

   

Market

Value of
Shares or

Units of
Stock That

Have Not
Vested

   

Equity

Incentive

Plan

Awards:

Number of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

(#)

   

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

($)

 

  Foss

  NQSOs       1,450,000                 $ 13.90 (4)      6/6/2022                          
    NQSOs       1,247,638                 $ 16.21       6/20/2023                          
    NQSOs       342,998                 $ 16.21       7/31/2022                          
    NQSOs       577,812       192,605           $ 23.92       12/20/2023                          
    NQSOs       313,630       313,632           $ 28.66       11/19/2024                          
    NQSOs       104,540       313,623       126,716 (3)    $ 32.65       11/20/2025                          
    NQSOs             468,086       141,844 (3)    $ 34.08       11/18/2026                          
    PSAs(5)                                                 309,451.0000     $ 12,566,805  
    PSUs(6)                                     62,517.0224     $ 2,538,816       36,585.6805 (8)    $ 1,485,744  
    RSUs(7)                                     179,887.2461     $ 7,305,221              

 Bramlage  

  NQSOs       44,944       44,944           $ 31.40       4/6/2025                          
    NQSOs       16,895       50,687           $ 32.65       11/20/2025                          
    NQSOs             75,651           $ 34.08       11/18/2026                          
    PSAs(5)                                                 38,382.0000     $ 1,558,693  
    PSUs(6)                                     8,730.9107     $ 354,562              
    RSUs(7)                                     56,292.8375     $ 2,286,052              

 McKee(10)

  NQSOs       100,000                 $ 9.48 (4)      3/2/2020                          
    NQSOs       250,000                 $ 11.63 (4)      6/22/2021                          
    NQSOs       94,518                 $ 16.21       7/9/2023                          
    NQSOs       25,828                 $ 16.21       7/31/2021                          
    NQSOs       23,112       7,705           $ 23.92       12/20/2023                          
    NQSOs       38,600       38,602           $ 28.66       11/19/2024                          
    NQSOs       16,895       50,687           $ 32.65       11/20/2025                          
    NQSOs             75,651           $ 34.08       11/18/2026                          
    PSAs(5)                                                 38,382.0000     $ 1,558,693  
    PSUs(6)                                     7,695.7547     $ 312,525              
    RSUs(7)                                     23,892.9572     $ 970,293              

 Reynolds

  NQSOs       62,500                 $ 14.99       12/5/2022                          
    NQSOs       18,906                 $ 16.21       7/9/2023                          
    NQSOs       55,484                 $ 16.21       7/31/2023                          
    NQSOs       18,489       6,165           $ 23.92       12/20/2023                          
    NQSOs       38,600       38,602           $ 28.66       11/19/2024                          
    NQSOs       16,895       50,687           $ 32.65       11/20/2025                          
    NQSOs             75,651           $ 34.08       11/18/2026                          
    PSAs(5)                                                 38,382.0000     $ 1,558,693  
    PSUs(6)                                     7,695.7547     $ 312,525              
    RSUs(7)                                     23,670.9763     $ 961,278              

 

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          Option Awards     Stock Awards  
Name   Type     Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable(1)
   

Number of

Securities

Underlying

Unexercised

Options(#)

Unexercisable(2)

   

Equity

Incentive

Plan Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

    Option
Exercise
Price
   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock That

Have

Not

Vested (#)

   

Market

Value of
Shares or

Units of
Stock That

Have Not
Vested

   

Equity

Incentive

Plan

Awards:

Number of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

(#)

   

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

($)

 

Kroeker

  NQSOs       32,106       10,702           $ 20.00       12/11/2023                          
    NQSOs       24,124       24,127           $ 28.66       11/19/2024                          
    NQSOs       8,975       26,928           $ 32.65       11/20/2025                          
    NQSOs             56,738           $ 34.08       11/18/2026                          
    PSAs(5)                                                 14,085.0000     $ 571,992  
    PSUs(6)                                     4,809.7174     $ 195,323       10,645.9926 (9)    $ 432,334  
    RSUs(7)                                     18,582.0980     $ 754,619              

 

(1) The amounts in this column are time-vesting and performance-based options that have vested, generally based on the vesting schedules described below in footnote 2, provided that a certain portion of these options which were subject to performance conditions may have vested at an earlier or later time when such performance conditions were satisfied.

 

(2) These are options subject to time-vesting and, other than as set forth below, vest 25% per year over four years from the date of grant, provided that the named executive officer is still employed by us, with certain exceptions (disability, retirement or death). See “Potential Post-Employment Benefits.” Other than as set forth below, all options were granted on the date that is ten years prior to the listed expiration date. Certain options included in this column were granted in connection with an equity exchange offer in fiscal 2013 and have vesting schedules based upon the original vesting schedule of the award that was exchanged, as set forth below.

 

Name   Expiration Date   Grant Date   Vesting Schedule

McKee

  July 31, 2021   July 31, 2013   One-third on each of December 15, 2013, 2014 and 2015

Foss

  July 31, 2022   July 31, 2013   25% on each of December 15, 2013, 2014, 2015 and 2016

Reynolds

  July 31, 2023   July 31, 2013   20% vested on grant and 20% vest on each of December 15, 2013, 2014, 2015 and 2016

 

(3) These are stock options subject to a relative TSR vesting condition for a three-year period as outlined below and are not eligible to vest until the end of the performance period:

 

Name   Award Date          

Number of Securities Underlying        

Unexercised Unearned Options (#)        

 

Performance Period      

End Date      

Foss

  11/20/2015   126,716   9/28/2018
  11/18/2016   141,844   9/27/2019

 

(4) Exercise price reflects the reduction of $1.06 per share, in connection with the spin-off of Seamless Holdings by the Company on October 26, 2012.

 

(5) These are shares of performance restricted stock that are not eligible to vest prior to the end of the performance period as outlined below, and vest provided that the named executive officer is still employed by us on such dates with certain exceptions (disability, retirement or death). See “Potential Post-Employment Benefits”. Performance restricted stock awards do not accrue dividend equivalents, but instead accrue cash dividends to be delivered only upon vesting of the underlying shares. For awards granted subject to fiscal 2018, fiscal 2016—2018 and fiscal 2017-2019 performance periods, we have reflected the awards at target because the actual adjusted EPS results for fiscal 2017 represented above threshold performance for fiscal 2018 and that portion of the fiscal 2017-2019 performance period and we have assumed that the TSR conditions will be satisfied. The actual number of shares that will be distributed with respect to fiscal 2018, fiscal 2016-2018 and fiscal 2017-2019 performance periods are not yet determinable. The awards vest between 50% and 200% of target amount based on actual performance during the performance periods, assuming the threshold performance requirement is met.

 

Name   Award Date     Target PSAs
Outstanding
    Performance Condition   Performance Period

Foss

    11/20/2015       36,754     Adjusted EPS + TSR   Adjusted EPS: FY 2018

TSR: FY 2016 – FY 2018

    11/18/2016       35,212     Cumulative Adjusted EPS + TSR   FY 2017 – FY 2019

 

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Name   Award Date    

Target PSAs

Outstanding

    Performance Condition   Performance Period

Foss

    11/20/2015       121,287     Adjusted EPS   FY 2018
    11/18/2016       116,198     Cumulative Adjusted EPS   FY2017 – FY2019

Bramlage

    11/20/2015       19,602     Adjusted EPS   FY 2018
    11/18/2016       18,780     Cumulative Adjusted EPS   FY2017 – FY2019

McKee

    11/20/2015       19,602     Adjusted EPS   FY 2018
    11/18/2016       18,780     Cumulative Adjusted EPS   FY2017 – FY2019

Reynolds

    11/20/2015       19,602     Adjusted EPS   FY 2018
    11/18/2016       18,780     Cumulative Adjusted EPS   FY2017 – FY2019

Kroeker

    11/18/2016       14,085     Cumulative Adjusted EPS   FY2017 – FY2019

 

(6) Unless otherwise noted, these are performance stock units, which were subject to the achievement of an adjusted earnings per share target for fiscal 2015, which was achieved at 100% and which vest in three equal annual installments from the grant dates (November 19, 2014 for each named executive officer, other than Mr. Bramlage, whose grant date was April 4, 2015), provided that the named executive officer is still employed by us on such dates, with certain exceptions (disability, retirement or death). See “Potential Post-Employment Benefits”. The number of performance stock units listed includes dividend equivalents accrued with respect to such award.

 

(7) These are restricted stock units that are subject to time-vesting and, unless otherwise noted, vest in four equal annual installments, provided that the named executive officer is still employed by us on such dates, with certain exceptions (disability, retirement or death). See “Potential Post-Employment Benefits”. The number of restricted stock units listed includes dividend equivalents accrued with respect to such award.

 

Name       Award Date        

    Number of Shares or    

Units of Stock That
Have Not Vested (#)

          Name       Award Date        

    Number of Shares or    

Units of Stock That
Have Not Vested (#)

 

Foss

    12/20/2013       27,765.3524      

Reynolds

    12/20/2013       891.0511  
      11/19/2014       46,888.8005             11/19/2014       5,772.0744  
      11/20/2015       46,496.2238             11/20/2015       7,514.7580  
      11/18/2016       58,736.8694             11/18/2016       9,493.0928  

Bramlage

    4/6/2015       32,736.2896 *    

Kroeker

    12/11/2013       3,860.1785  
      4/6/2015       6,548.6971             11/19/2014       3,608.5804  
      11/20/2015       7,514.7580             11/20/2015       3,993.0139  
      11/18/2016