Hackett Group, Inc DEF 14A, filed Mar 23, 2023
Hackett Group, Inc. (HCKT)
About this DEF 14A
Hackett Group, Inc filed this DEF 14A on March 23, 2023.
Table of Contents
| ☐ | Preliminary Proxy Statement |
| ☒ | Definitive Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to Rule §240.14a-12 |
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11. |
Table of Contents
1001 Brickell Bay Drive, 30th Floor
Miami, Florida 33131
March 23, 2023
Dear Shareholder:
You are cordially invited to attend the 2023 Annual Meeting of Shareholders of The Hackett Group, Inc. (the “Company”) to be held on May 4, 2023, at 11:00 a.m. (local time) at the Company’s headquarters located at 1001 Brickell Bay Drive, 30th Floor, Miami, Florida.
At this meeting you will be asked to:
| • | vote for the election of the director identified in the accompanying proxy statement; |
| • | hold an advisory vote on executive compensation; |
| • | hold an advisory vote on the frequency of the advisory vote on executive compensation; and |
| • | ratify the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 29, 2023. |
These matters are discussed in detail in the accompanying proxy statement.
It is important that your shares be represented at the meeting whether or not you plan to attend.
On or about March 23, 2023, we are mailing to our shareholders a notice containing instructions on how to access our proxy statement and 2022 Annual Report and vote online. The notice also contains instructions on how you can receive a paper copy of your proxy materials, including the Annual Report, proxy statement and proxy card.
We look forward to receiving your vote.
| Sincerely, |
|
|
| Ted A. Fernandez |
| Chairman and Chief Executive Officer |
Table of Contents
THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, 30th Floor
Miami, Florida 33131
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2023
The 2023 Annual Meeting of Shareholders of The Hackett Group, Inc. (the “Company”) will be held on May 4, 2023, at 11:00 a.m.(local time) at the Company’s headquarters located at 1001 Brickell Bay Drive, 30th Floor, Miami, Florida, for the following purposes:
| 1. | to elect to the Board of Directors the director identified in the accompanying proxy statement; |
| 2. | to hold an advisory vote on executive compensation; |
| 3. | hold an advisory vote on the frequency of the advisory vote on executive compensation; |
| 4. | to ratify the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 29, 2023; and |
| 5. | to transact such other business as may properly come before the meeting or any postponement or adjournment thereof. |
The Board of Directors has fixed the close of business on March 15, 2023, as the record date for determining the shareholders entitled to notice of and to vote at the annual meeting. Only holders of common stock of record at the close of business on that date will be entitled to notice of and to vote at the annual meeting or any postponement or adjournment thereof. A list of the Company’s shareholders entitled to vote at the annual meeting will be open to examination by any shareholder for any purpose related to the meeting during ordinary business hours for the ten days prior to the annual meeting at the Company’s offices, as well as on May 4, 2023, at the location of the annual meeting. All shareholders are invited to attend the annual meeting.
On or about March 23, 2023, we are mailing to our shareholders a notice containing instructions on how to access our proxy statement and 2022 Annual Report and vote online. The notice also contains instructions on how you can receive a paper copy of your proxy materials, including the Annual Report, proxy statement and proxy card.
| By Order of the Board of Directors, |
| Frank A. Zomerfeld |
| Secretary |
| Miami, Florida |
| March 23, 2023 |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 4, 2023: The Hackett Group, Inc.’s Proxy Statement and 2022 Annual Report are available at www.edocumentview.com/hckt.
Table of Contents
Whether or not you plan to attend the annual meeting, we ask that you do the following. If you are receiving this document via U.S. mail, please complete, date, sign and return the enclosed proxy card in the postage prepaid envelope or vote by telephone or through the Internet as instructed on the proxy card. If you sign and return your proxy card without specifying a choice, your shares will be voted in accordance with the recommendations of the Board of Directors. If you are receiving this document via Internet delivery only, please vote by telephone or through the Internet as instructed on the notice you received via U.S. mail. You may, if you wish, revoke your proxy at any time before it is voted by submitting to the Secretary of the Company, Frank A. Zomerfeld, a written revocation or a duly executed proxy bearing a later date, or by attending the annual meeting and voting in person. If you submit your proxy by telephone or through the Internet, you may also revoke it by submitting a new proxy using the same procedures at a later date. The telephone and Internet voting facilities for shareholders of record will close at 1:00 a.m. Central Time on the day of the annual meeting.
Table of Contents
Table of Contents
| Page | ||||
| 4 | ||||
| 4 | ||||
| 5 | ||||
| 7 | ||||
| 7 | ||||
| 9 | ||||
| 9 | ||||
| 10 | ||||
| 11 | ||||
| 11 | ||||
| 11 | ||||
| |
12 |
| ||
| 12 | ||||
| 13 | ||||
| 14 | ||||
| 15 | ||||
| 15 | ||||
| 16 | ||||
| 18 | ||||
| 19 | ||||
| 19 | ||||
| Timing of Equity Incentive Plan Awards and Discretionary Equity Awards |
20 | |||
| Tax and Accounting Considerations and Compensation Deductibility Policy |
20 | |||
| 20 | ||||
| 21 | ||||
| 22 | ||||
| 24 | ||||
| OPTION EXERCISES AND STOCK VESTED (During fiscal year-ended December 30, 2022) |
25 | |||
| Narrative Disclosure to Summary Compensation Table and Plan-Based Awards Table |
25 | |||
| 27 | ||||
| 29 | ||||
| 29 | ||||
| 30 | ||||
| 30 | ||||
| 31 | ||||
| 32 | ||||
| Relationship Between Compensation Actually Paid and Net Income/Adjusted Diluted Earnings Per Share |
32 | |||
| Description of Relationship Between Company TSR and Peer Group TSR |
32 | |||
| Tabular List of Most Important Financial Performance Measures |
33 | |||
| |
34 |
| ||
| PROPOSAL 3 ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION |
36 | |||
| 37 | ||||
| 38 | ||||
| 39 | ||||
| 40 | ||||
| 42 | ||||
| 43 | ||||
| 44 | ||||
| A-1 | ||||
i
Table of Contents
THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, 30th Floor
Miami, Florida 33131
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 2023
VOTING INFORMATION
This proxy statement and the accompanying notice of annual meeting and proxy card are being made available, on or about March 23, 2023, to the shareholders of The Hackett Group, Inc. (the “Company” or “Hackett”), in connection with the solicitation of proxies by the Board of Directors of the Company (the “Board”) to be voted at the 2023 Annual Meeting of Shareholders to be held on May 4, 2023 at 11:00 a.m. (local time) at the Company’s headquarters located at 1001 Brickell Bay Drive, 30th Floor, Miami, Florida and any postponement or adjournment thereof.
Your shares will be voted in accordance with the instructions contained on a properly executed proxy card submitted to the Company or in accordance with your instructions submitted via the telephone or Internet.
The Board recommends that you vote:
| • | “FOR” the Board’s nominee for director; |
| • | “FOR” Proposal 2 to approve, in an advisory vote, the Company’s executive compensation; |
| • | “EVERY YEAR” on Proposal 3 recommending the frequency of the advisory vote on executive compensation; and |
| • | “FOR” Proposal 4 to ratify the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 29, 2023. |
Executed but unmarked proxies submitted to the Company will be voted in accordance with the Board’s recommendations.
If any other matters are properly brought before the annual meeting, proxies will be voted in the discretion of the proxy holders. The Company is not aware of any such matters that are proposed to be presented at the annual meeting.
On or about March 23, 2023, the Company is mailing to its shareholders a notice containing instructions on how to access this proxy statement and the Company’s 2022 Annual Report and to vote online. The notice also contains instructions on how you can receive a paper copy of your annual meeting materials, including the notice of annual meeting, proxy statement and proxy card. Shareholders receiving this document and accompanying proxy card and annual report via the Internet may submit their proxies by telephone or through the Internet as instructed in the notice delivered via U.S. mail. Shareholders receiving this document and accompanying proxy card via U.S. mail may submit a signed proxy card or they may submit their proxy by telephone or through the Internet as instructed on the proxy card. Telephone and Internet proxies must be used in conjunction with, and will be subject to, the information and terms contained on the proxy card. These procedures may not be available to shareholders that hold their shares through a broker, nominee, fiduciary or other custodian. If your shares are held in this manner, please check your proxy card or contact your broker, nominee, fiduciary or other custodian to determine whether you will be able to vote by telephone or through the Internet.
If you share an address with one or more other shareholders, you may have received notification that you will receive only a single copy of the annual report, notice and proxy statement for your entire household unless
1
Table of Contents
you have notified us that you wish to continue receiving individual copies. This practice, known as “householding,” is designed to reduce printing and mailing costs. If you would like to revoke your consent to “householding,” or if you are receiving multiple copies at your address and would like to enroll in “householding,” please submit your request to Josie Estevez-Lugo at 1001 Brickell Bay Drive, 30th Floor, Miami, FL 33131 or call us at (305) 379-8005 . If you own your shares in “street name,” please contact your broker, bank, trustee, or other intermediary to make your request.
The cost of soliciting proxies in the form enclosed herewith will be borne entirely by the Company. In addition to the solicitation of proxies by mail, proxies may be solicited by directors, officers and regular employees of the Company, without extra remuneration, by personal interviews, telephone or otherwise. The Company will request persons, firms and corporations holding shares in their name or in the names of their nominees, which are beneficially owned by others, to send proxy materials to and obtain proxies from the beneficial owners and will reimburse the holders for their reasonable expenses in doing so.
The securities that may be voted at the annual meeting consist of shares of the Company’s common stock. Each outstanding share of common stock entitles its owner to one vote on each matter as to which a vote is taken at the annual meeting. The close of business on March 15, 2023, has been fixed by the Board as the record date (the “Record Date”) for determination of shareholders entitled to vote at the annual meeting. On the Record Date, 27,177,819 shares of common stock were issued and outstanding and entitled to vote. The presence, in person or by proxy, of at least a majority of the shares of common stock issued and outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the annual meeting. Shares can be voted only if the shareholder is present in person or represented by proxy. Whether or not you plan to attend in person, you are encouraged to sign and return the enclosed proxy card or vote by telephone or through the Internet as instructed on the proxy card or in the notice mailed to you.
Assuming the presence of a quorum at the annual meeting, the following voting standards will apply to the various proposals:
| • | The Board’s nominee for director will be elected only if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. For more information regarding the majority voting provisions of the Bylaws, see “Proposal 1-Election of Directors” on page 4 of this proxy statement. |
| • | The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is required to approve the advisory vote on executive compensation in Proposal 2. |
| • | The option of one year, two years or three years that receives the most votes cast at the meeting will be the frequency of the advisory vote on executive compensation recommended by shareholders in Proposal 3. However, because the vote is advisory and not binding on the Board or the Company, the Board may decide to hold an advisory vote on executive compensation more or less frequently than the option recommended by shareholders. |
| • | The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is required to ratify the appointment of the Company’s independent registered public accounting firm for the fiscal year ending December 29, 2023 in Proposal 4. |
Abstentions and broker non-votes will be treated as shares that are present in person or represented by proxy at the meeting and entitled to vote for purposes of determining the presence of a quorum at the annual meeting. A “broker non-vote” occurs when a nominee holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because the nominee does not have discretionary voting power and has not received instructions from the beneficial owner. Abstentions and broker non-votes will not have any effect on the approval of Proposals 1 and 3. Because abstentions will be counted for purposes of determining the shares present or
2
Table of Contents
represented at the annual meeting and entitled to vote, abstentions will have the same effect as a vote “against” Proposals 2 and 4. Broker non-votes will not have any effect on the approval of Proposals 2 or 4.
The presence of a shareholder at the annual meeting will not automatically revoke the shareholder’s proxy. Shareholders may, however, revoke a proxy at any time prior to its exercise by filing with the Secretary of the Company a written notice of revocation, by delivering to the Company a duly executed proxy bearing a later date or by attending the annual meeting and voting in person. If you submitted your proxy by telephone or through the Internet, you may also revoke it by submitting a new proxy using the same procedures at a later date. The telephone and Internet voting facilities for shareholders of record will close at 1:00 a.m. Central Time on the day of the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE BOARD NOMINEE AND FOR THE APPROVAL OF PROPOSALS 2, AND 4 AND “EVERY YEAR” FOR PROPOSAL 3.
3
Table of Contents
PROPOSAL 1
ELECTION OF DIRECTORS
General
The Company’s articles of incorporation provide that the Board shall consist of no fewer than five directors and no more than fifteen directors. The Company’s bylaws provide that the number of directors, within such limits, shall be determined by resolution of the Board. The Board currently is composed of seven directors. The Board is divided into three classes. One class is elected each year for a term of three years.
One director will be elected at the annual meeting. The Board has nominated John R. Harris, an existing director, for the position. If elected, Mr. Harris will serve a three-year term expiring at the annual meeting in 2026. You can find more information about Mr. Harris below.
Unless otherwise instructed on the proxy, it is the intention of the proxy holders to vote the shares represented by each properly executed proxy for the election of the nominee. The Board believes that the nominee will stand for election and will serve if elected. However, if the nominee fails to stand for election or is unable to accept election, proxies will be voted by the proxy holders for the election of such other person as the Board may recommend.
Since this election is not contested, the Board’s nominee for director will be elected only if the votes cast for such nominee’s election exceeds the votes cast against such nominee’s election. If Mr. Harris is not re-elected, our bylaws provide that he must tender his resignation to the Board. The Nominating and Corporate Governance Committee will then consider such resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject any such tendered resignation within 90 days after certification of the election results and will publicly disclose its decision and the rationale therefor. If the resignation is not accepted, the director will continue to serve until his successor is elected and qualified, until there is a decrease in the number of directors, or until the director’s earlier resignation or removal. The majority voting provisions for the election of directors apply only to uncontested elections in which the number of nominees does not exceed the number of directors to be elected. In the event of an election in which the number of nominees exceeds the number of directors to be elected, nominees will be elected by a plurality vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
THE ELECTION OF MR. HARRIS AS DIRECTOR.
Information as to the Nominee and Continuing Directors
The following table sets forth certain information regarding the Board’s nominee for election as director and those directors who will continue to serve as such after the annual meeting.
| Name |
Age (1) | Director Since (2) |
Position held with the Company |
Term Expires |
||||||||||
| NOMINEES |
||||||||||||||
| John R. Harris(3) |
75 | 2006 | 2023 | |||||||||||
| CONTINUING DIRECTORS |
||||||||||||||
| Maria A. Bofill(3) |
65 | 2021 | 2024 | |||||||||||
| David N. Dungan |
69 | 2000 | Vice Chairman and Chief Operating Officer | 2024 | ||||||||||
| Richard N. Hamlin(3) |
75 | 2003 | 2024 | |||||||||||
| Ted A. Fernandez |
66 | 1997 | Chairman and Chief Executive Officer | 2025 | ||||||||||
| Robert A. Rivero(3) |
81 | 2016 | 2025 | |||||||||||
| Alan T.G. Wix(3) |
81 | 1999 | 2025 | |||||||||||
4
Table of Contents
| (1) | The ages shown are as of March 15, 2023. |
| (2) | The years shown reflect the year in which these persons were first elected or appointed as directors. |
| (3) | Member of the Audit, Compensation and Nominating and Corporate Governance Committees. |
The principal occupations and other public company directorships for the past five years or more of the nominees for director and the six directors whose terms of office will continue after the annual meeting are set forth below. Specific experience, qualifications, attributes and skills that the Board believes qualify each current director, including the director nominees, for his or her position on the Board are also summarized below. This description is not intended as an exclusive description of the types of expertise or contributions provided by each director.
Nominee
John R. Harris is a private investor and director at several companies. He is Chairman of HIFU Prostate Cancer Services, Inc., a privately held company and leading provider of non-invasive high intensity ultrasound treatment for localized prostate cancer, since 2015. He has in-depth experience in public company operations and management, having served as the former President and Chief Executive Officer of eTelecare Global Solutions, a provider of outsourced customer care services, from February 2006 until October 2009. Mr. Harris served as Chief Executive Officer of Seven Worldwide Inc., a digital content management company, from December 2003 to January 2005. From July 2002 to December 2003, he served as Chief Executive Officer and President of Delinea Corporation, an application and business process management company serving the energy industry. From August 2001 to July 2002, Mr. Harris served as Chief Executive Officer and President of Exolink. From September 1999 to September 2001, he served as Chairman and Chief Executive Officer of Ztango, Inc. Mr. Harris has an extensive history of senior executive leadership positions and board participation in the information technology, media, telecommunications and outsourcing industries. Mr. Harris spent twenty-five years with Electronic Data Systems (“EDS”), during which he held a variety of executive leadership positions including Group Executive and President of EDS’s four strategic business units serving the telecommunications and media industries. He also served as EDS’s Corporate Vice President, Marketing & Strategy. Mr. Harris provides significant public company board experience through his prior service on the boards of, and as an advisor to, companies including BancTec, Applied Graphic Technologies, Genuity, CapRock Communications, Startek, Premier Global and Sizmek (formerly DG Fast Channel Service Source International, Inc. and Mobivity Holding Corp.).
Continuing Directors
Maria A. Bofill is a seasoned executive, having served in senior strategic finance and operational roles for public and privately held multinational companies. She currently serves as the Director of Business Development for TTG Talent Solutions, a boutique talent acquisition and placement firm. From June 2016 to September 2019, Ms. Bofill served as the Chief Financial Officer for Fyffes North America, Inc. From May of 2008 to June of 2016, she served as the Director of Finance and Administration and Treasurer of Fresh Quest, Inc. From October 2005 to May 2008, Ms. Bofill served as the Managing Principal of Octavian, Inc. From January 1988 to October of 2005, she served as the Vice President of Finance and Administration for the North America region of Fresh Del Monte Produce. The Company benefits from Ms. Bofill’s in-depth financial and accounting experience which provides additional depth to the Audit Committee. Her experience working with multinational organizations is a valuable asset to the Company and provides insight into international markets. Ms. Bofill’s more recent experience in the talent acquisition industry also benefits the Company which seeks to source high quality resources in highly competitive employment markets.
David N. Dungan is a founder of the Company, along with Mr. Fernandez. He served as a Managing Director from the Company’s inception until March 2000 when he became a director and was named Chief Operating Officer (“COO”). Mr. Dungan was named Vice Chairman in February of 2006. Prior to founding the
5
Table of Contents
Company, Mr. Dungan served as the National Partner-in-Charge of the World Class Finance Practice of the Strategic Services Consulting Division of KPMG, LLP (“KPMG”) from May 1994 to February 1997. Mr. Dungan joined KPMG in 1986 and, until May 1994, held various executive positions with that firm. Mr. Dungan provides the Board with broad financial and operational experience managing and leading a professional services firm focused on business consulting.
Richard N. Hamlin is a consultant and investor. He previously served as the Chief Financial Officer of CommerceQuest, Inc. from July 2002 to August 2003. He provides the Board with extensive financial and accounting experience gained over a more than thirty-year career as a Certified Public Accountant at KPMG. Mr. Hamlin served as a partner of KPMG for twenty-one years, which included service on KPMG’s board of directors from 1994 to 1998, and later became a partner of KPMG Consulting. Mr. Hamlin’s work experience provides additional depth of capability to the Audit Committee. Mr. Hamlin also has prior experience on a public company board as a former member of the board of directors and Chairman of the Audit Committee of eTelecare Global Solutions. Mr. Hamlin provides operational perspective from outside of the business consulting industry, having served as the Chairman and Trustee of the Dakota Minnesota Eastern Railroad, a wholly-owned subsidiary of Canadian Pacific Railroad, from October 2007 through November 2008.
Ted A. Fernandez founded the Company in 1997 based on a strategy he developed from his extensive history in the professional services industry, which included an eighteen-year career with KPMG. From 1979 to 1994, Mr. Fernandez held several industry executive and client service positions with KPMG. His career at KPMG culminated in the role of the National Managing Partner of KPMG’s Strategic Services Consulting Division from May 1994 to January 1997. Mr. Fernandez also served as a member of KPMG’s Management Committee from 1995 to 1997. He brings an in-depth knowledge of the professional services industry, especially business consulting, and organizational leadership within that industry. He also provides extensive financial and accounting experience to the Board. Mr. Fernandez provides the Board with day to day knowledge of the Company’s business and markets. He also provides broad and deep experience with strategic plan development and execution. Mr. Fernandez has served as the Chairman of the Board and Chief Executive Officer (“CEO”) since founding the Company.
Robert A. Rivero held numerous operating management positions with KPMG from 1965 to 1999 as a Senior Managing Partner of KPMG where he held positions ranging from Office Managing Partner, Regional Partner in Charge and ultimately, National Senior Partner in Charge, leading nine different business units (both domestic and overseas). Since 2003, Mr. Rivero has served as the chief executive officer of RAR Management Services, LLC which provides advisory services to CEOs, assists companies in the development and implementation of strategic action plans for growth and profitability, and provides solutions to international business operating challenges. The Company benefits from Mr. Rivero’s broad experience base within the professional services industry. He also brings additional in-depth knowledge of financial and accounting experience to the Board. With experience advising senior executives of large international companies and having lived and managed operations in Europe, Latin America & Southeast Asia, Mr. Rivero’s knowledge of international markets is a valuable asset to the Board.
Alan T.G. Wix was the Chairman of Fiva Marketing, Ltd. from April 2003 to December 2008. Mr. Wix served as the Chairman of the Board of Farsight PLC from April 1999 until June 2005. Mr. Wix served as the Chief Executive Officer of Farsight PLC from April 1999 until June 2002. Mr. Wix brings to the Board an extensive history of senior executive leadership at a major financial institution, having retired in August 1998 as Managing Director Core IT Development of Lloyds TSB, a position he held from January 1993. From April 1990 to January 1993, Mr. Wix held the position of Head of Development at Lloyds TSB. Prior to being elevated to that position, Mr. Wix held a variety of positions within the information systems division of Lloyds TSB. He has in-depth operational experience leading a significant division of an institution with global reach. He also has extensive experience as a purchaser of technology and business consulting services, and, as such, provides perspective on customer experience. Mr. Wix is a native of the United Kingdom and spent his professional career in the United Kingdom. He continues to make his home there. His knowledge of the European marketplace provides valuable international perspective to the Board.
6
Table of Contents
Other Executive Officer
The principal occupation during the past five years or more of the Company’s other executive officer is set forth below.
Robert A. Ramirez, 56, is the Company’s Executive Vice President, Finance and Chief Financial Officer (“CFO”), a position he has held since August 2007. Mr. Ramirez served as Corporate Controller of the Company from July 2006 through July 2007. Mr. Ramirez served as Senior Director, Finance and Practice Controller of the Company from October 2005 to July 2006 when he was named Corporate Controller. Mr. Ramirez held a variety of other positions within the Company’s business intelligence, finance transformation and retail consulting practices from 1998 to 2005.
Board Diversity Matrix
Board Diversity Matrix (As of March 15, 2023)
| Total Number of Directors |
7 | |||||||||||||||
| Male | Female | Non-Binary | Did Not Disclose Gender |
|||||||||||||
| Part I: Gender Identity |
||||||||||||||||
| Directors |
6 | 1 | ||||||||||||||
| Part II: Demographic Background |
||||||||||||||||
| African American or Black |
||||||||||||||||
| Alaskan Native or American Indian |
||||||||||||||||
| Asian |
||||||||||||||||
| Hispanic or Latinx |
2 | 1 | ||||||||||||||
| Native Hawaiian or Pacific Islander |
||||||||||||||||
| White |
4 | |||||||||||||||
| Two or More Races or Ethnicities |
||||||||||||||||
| LGBTQ+ |
||||||||||||||||
| Did Not Disclose Demographic Background |
||||||||||||||||
Corporate Governance and Other Matters
Board Composition
The Board consists of seven members, five of whom are considered “independent directors” under the listing standards of the Nasdaq Stock Market (“Nasdaq”). The Company’s independent directors are Maria A. Bofill, Richard N. Hamlin, John R. Harris, Robert A. Rivero and Alan T.G. Wix. The Board currently has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each of the Board’s standing committees consists entirely of independent directors.
Leadership Structure
The roles of Chairman of the Board and Chief Executive Officer have been unified since the Company was founded, and the Board believes that the unification of those roles remains appropriate for the Company at this time. The Board believes that its leadership structure both (1) demonstrates to its employees, clients and shareholders that the Company is under strong leadership with a single person setting the tone and having primary responsibility for managing its operations, and (2) provides an effective connection between management’s role of identifying, assessing and managing risks and the Board’s role of risk oversight. The Board believes that Mr. Fernandez has an in-depth knowledge of the issues, opportunities and challenges that the
7
Table of Contents
Company faces, and therefore that he is best positioned to develop agendas and highlight issues that ensure that the Board’s time and attention are focused on the most critical matters impacting the Company. The Board has not appointed a “lead” director. The Board believes that its current structure with five of its seven members being independent and with each of its standing committees being chaired by and consisting entirely of independent directors, provides effective independent director oversight of the Company’s operations. The Board recognizes that different board leadership structures may be appropriate for companies in different situations and understands that no structure is appropriate for all companies. While the Board intends to review the appropriate leadership structure for the Company from time to time, the Board believes that the Company has been, and continues to be, well-served by its current leadership structure.
The Board’s Role in Strategy Oversight
The Board and management team are focused on maximizing shareholder value and building long-term business success through sound corporate governance and the implementation of Hackett’s strategy. The Board regularly evaluates strategic opportunities to enhance shareholder value.
Each year, the Board undertakes a strategic review of the proposed annual plan, which includes business strategy and a detailed operating plan. The strategic review includes an evaluation of how best to leverage and strengthen our strategic differentiators and a thorough assessment of our services portfolio, including merger and acquisition opportunities. As part of this process, the Board also reviews our capital allocation model and human capital plans, including strategic hires, talent management, and talent development priorities. The proposed annual plan is then revised, if necessary, and approved by the Board. On a quarterly basis, the Board monitors execution of the annual plan and considers any adjustments as required. The annual plan may also be reviewed and revised by the Board as needed throughout the year to reflect changing conditions or new opportunities.
The Board’s Role in Risk Oversight
The Board is responsible for overseeing the Company’s management of the significant risks facing the business, including properly safeguarding the Company’s assets, maintaining appropriate financial and other internal controls, complying with applicable laws and regulations, and implementing proper corporate governance practices. Risks are considered in all business decisions and in connection with the development of the Company’s business strategy. The Board as a whole is responsible for reviewing and approving the Company’s annual operating plan. In connection with that review, the Board typically inquires of management as to the greatest areas of risk associated with the annual operating plan and the Company’s operating model taken as a whole and evaluates whether these risks are appropriately mitigated. In addition, the Board’s committees, which meet regularly and report back to the Board, play significant roles in carrying out the Board’s risk oversight function. Company management also plays an important role in connection with risk management through the implementation and evaluation of effective internal controls and other internal processes.
The Board delegates to the Audit Committee responsibility for assisting the Board with several risk oversight functions, including oversight of:
| • | the quality and integrity of the Company’s consolidated financial statements and its financial reporting and disclosure practices; |
| • | the Company’s systems of internal controls regarding finance and accounting compliance; |
| • | the independence and performance of the Company’s independent registered public accounting firm; |
| • | the Company’s ethical compliance programs, including the Company’s anti-bribery and anti-corruption policies; |
| • | the Company’s information technology systems, including cybersecurity; and |
| • | all transactions with related parties. |
8
Table of Contents
The Board delegates to the Compensation Committee responsibility for assisting the Board in the oversight of risks related to the Company’s compensation programs. The Compensation Committee is charged with understanding the risks and rewards associated with the Company’s compensation philosophy and ensuring that its various compensation programs are aligned with the Company’s goals and objectives.
The Board delegates to the Nominating and Corporate Governance Committee authority to develop and implement the Company’s director nomination guidelines and to recommend nominees for election, ensuring that the Board contains the appropriate mix of experience, qualifications, attributes and skills necessary to effectively exercise its oversight function. The Nominating and Corporate Governance Committee also is responsible for developing and implementing the Company’s corporate governance guidelines and for considering social responsibility, environmental and sustainability matters.
Audit Committee
The Audit Committee reviews, acts on, and reports to the Board with respect to various auditing and accounting matters. The Audit Committee is directly responsible for the appointment, compensation, evaluation, retention and oversight of the Company’s independent accountants. The primary functions of the Audit Committee are to assist the Board in its responsibility for oversight of:
| • | the quality and integrity of the Company’s consolidated financial statements and its financial reporting and disclosure practices; |
| • | the Company’s system of internal controls regarding finance and accounting compliance; |
| • | the independence and performance of the Company’s independent registered public accounting firm; |
| • | the Company’s ethical compliance programs, including the Company’s anti-bribery and anti-corruption policies; |
| • | the Company’s information technology systems, including cyber security; |
| • | all transactions with related parties; and |
| • | decisions to enter into swap transactions that are exempt from the clearing and margin requirements of the Commodity Exchange Act and regulations promulgated thereunder. |
The Audit Committee performs all functions required of audit committees of public companies under applicable laws, rules and regulations and the requirements of the Nasdaq.
The current members of the Audit Committee are Messrs. Hamlin (Chairman), Harris, Rivero and Wix and Ms. Bofill. The Board has determined that each current member of the Audit Committee is independent under the Nasdaq’s listing standards and the SEC’s heightened independence requirements for members of audit committees. The Board has determined that Mr. Hamlin, Mr. Rivero and Ms. Bofill are “audit committee financial experts”, as that term is defined under SEC rules.
The Audit Committee is governed by a written charter. A copy of the charter can be found on the Company’s website at https://www.thehackettgroup.com/governance/. For further information on the Audit Committee, see the “Report of the Audit Committee” on page 37 in this proxy statement.
Compensation Committee
The Compensation Committee is responsible for determining the compensation of the Company’s executive officers and approving executive compensation and human resource programs for the Company. The Compensation Committee determines the compensation of the Company’s CEO. In addition, the Compensation Committee has the following authority and responsibilities:
| • | to approve the compensation of all executive officers other than the CEO with input from the CEO; |
9
Table of Contents
| • | to review, approve and, when appropriate, recommend to the Board for approval, incentive compensation plans, equity-based plans, employment agreements and any severance arrangements or plans; |
| • | to administer the Company’s incentive compensation plans, equity-based plans and employee benefit plans; |
| • | to review the Company’s incentive compensation arrangements to determine whether they encourage excessive risk-taking, and to review and discuss at least annually the relationship between risk management policies and practices and compensation; |
| • | to review director compensation for service on the Board and Board committees periodically and to recommend any changes to the Board; and |
| • | to periodically retain an outside consultant to review the Company’s compensation programs. |
The current members of the Compensation Committee are Messrs. Harris (Chairman), Hamlin, Rivero and Wix and Ms. Bofill. The Board has determined that the current members of its Compensation Committee are independent under the Nasdaq’s listing standards.
For 2022, as in prior years, the Company conducted, and the Compensation Committee reviewed, a risk assessment of its compensation programs and considered the extent to which its compensation policies and practices influence the behaviors of its executives and other employees with respect to taking business risks that could affect the Company. The Company believes that none of its compensation policies and practices are reasonably likely to have a material adverse effect on the Company.
The Compensation Committee is governed by a written charter. A copy of the charter can be found on the Company’s website at https://www.thehackettgroup.com/governance/. For further information on the Compensation Committee, see the “Compensation Committee Report” on page 14 in this proxy statement.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for:
| • | identifying individuals qualified to become members of the Board; |
| • | recommending candidates for election or re-election to the Board; |
| • | developing and implementing the Company’s corporate governance guidelines; |
| • | considering social responsibility, environmental and sustainability matters; and |
| • | overseeing the Company’s Human Rights and Modern Slavery Policy. |
The current members of the Nominating and Corporate Governance Committee are Messrs. Wix (Chairman), Hamlin, Harris and Rivera and Ms. Bofill.
The Nominating and Corporate Governance Committee selects and must approve all candidates to stand for election as directors. Pursuant to the Company’s bylaws, other candidates may also be nominated by any shareholder, provided each such other nomination is submitted in accordance with the procedures set forth in the bylaws. For a discussion of the requirements for including information with respect to a shareholder’s nominee in the Company’s proxy statement, see “Shareholder Proposals for the Annual Meeting in 2024” on page 42 of this proxy statement.
The Nominating and Corporate Governance Committee is also responsible for the development and implementation of the Company’s corporate governance guidelines. The Company’s corporate governance
10
Table of Contents
guidelines can be found on the Company’s website at https://www.thehackettgroup.com/governance/. The corporate governance guidelines implemented by the Nominating and Corporate Governance Committee contain criteria that the Committee employs to identify and recommend candidates to the Board. These criteria include:
| • | personal and professional integrity; |
| • | the skills, business experience and industry knowledge useful in the oversight of the Company based on the perceived needs of the Company and the Board at any given time; |
| • | the ability and willingness to devote the required amount of time to the Company’s affairs, including preparation for and attendance at Board and committee meetings; |
| • | interest, capacity and willingness, in conjunction with the members of the Board, to serve the long-term interests of the Company and its shareholders; |
| • | to the extent considered appropriate by the Board, whether a director candidate may be considered to be a “financial expert” as defined in relevant SEC rules; and |
| • | freedom from any personal or professional relationships that would adversely affect the ability to serve the best interests of the Company and its shareholders. |
As reflected in the Company’s Corporate Governance Guidelines, the Nominating and Corporate Governance Committee believes that a director candidate should have expertise, skills, knowledge and experience that, when taken together with that of other Board members, will lead to a Board that is effective, collegial and responsive to the needs of the Company. Diversity of race, ethnicity, gender, LGBTQ+ identity and age are important factors in evaluating candidates for Board membership.
The Nominating and Corporate Governance Committee is governed by a written charter. A copy of the charter can be found on the Company’s website at https://www.thehackettgroup.com/governance/.
Stock Ownership Guidelines
The Company’s corporate governance guidelines also contain stock ownership guidelines for the Company’s CEO. Pursuant to these guidelines, the Company’s CEO is required to own a number of shares of the Company’s common stock equal in value to six times his annual base salary. The Company’s CEO currently satisfies these requirements. The Company’s CEO is required to purchase shares in the open market to satisfy these guidelines if necessary. Once the guidelines are achieved, the CEO will not be considered to be out of compliance with these guidelines due to fluctuations in the Company’s stock price.
Policy Regarding Hedging and Pledging
The Company’s corporate governance guidelines contain restrictions that prohibit directors and officers of the Company from, directly or indirectly, engaging in hedging transactions with respect to securities of the Company. A hedge transaction is defined as the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or any transaction that hedges, offsets, or is designed to hedge or offset, any decrease in the market value the Company’s common stock. The Company’s corporate governance guidelines also contain restrictions that prohibit directors and officers of the Company from pledging securities of the Company as collateral for a loan or otherwise using securities of the Company to secure a debt (e.g., to secure a margin loan) without the prior written approval of the Audit Committee.
Code of Conduct and Ethics
The Company has adopted a Code of Conduct and Ethics that is applicable to all directors, officers and employees of the Company and complies with the requirements of Section 406(c) of the Sarbanes-Oxley Act. The Code of Conduct and Ethics reflects the Company’s policy of dealing with all persons, including its
11
Table of Contents
customers, employees, investors, regulators and vendors, with honesty and integrity. A copy of the Company’s Code of Conduct and Ethics can be found on the Company’s website at https://www.thehackettgroup.com/governance/. The Company intends to post amendments to or waivers from the Code of Conduct and Ethics that are applicable to the Company’s CEO, CFO or Controller on its website in accordance with SEC rules. Historically, the Company’s employees were required to acknowledge that they had reviewed and were in compliance with the Code of Conduct upon hiring and when changes were made to the Code. Beginning in 2023, all employees will be required to acknowledge the Code of Conduct on an annual basis as well as complete the Company’s anti-corruption and anti-corruption training course.
Cybersecurity
Our Board of Directors recognizes that security is critical to the services we provide and to our infrastructure that supports our delivery efforts. The Audit Committee is responsible for oversight of the Company’s information technology systems, including cybersecurity. It regularly reviews the status of the initiatives such as the seeking of certifications associated with our information technology systems. The Company has designed its cybersecurity program and controls, and maintains a detailed set of written policies, consistent with industry security frameworks, standards, and guidance. We regularly review the effectiveness of our cybersecurity controls, promptly addressing any identified risk areas, and subject our information technology systems to testing performed by external parties on an annual basis. Company employees are required to successfully complete a cybersecurity training course. In addition, the Company performs periodic testing to evaluate the effectiveness of its training programs and to help prevent loss associated with the disclosure of personal information. To date, the Company has not identified any material breach of its information technology systems.
Corporate Social Responsibility
The Hackett Group is committed to corporate social responsibility. We aim to achieve this through the ongoing support of relationships with our people and the community, as well as upholding our duty to act in an environmentally responsible manner. We embrace these commitments with enthusiasm and aim to continuously develop our corporate social responsibility to promote a vibrant, positive and professional workforce.
People
The Company believes in the continuous development and support of our employees in order to provide a positive, collaborative, and successful workforce by providing a safe and inclusive workplace culture and a commitment to diversity through hiring and training.
Environment
It is the Company’s policy to maintain environmentally responsible business practices and to comply with all applicable laws and regulations relating to the impact of its business on the environment. The Company is dedicated to reducing its already low impact on the environment. The direct emissions from sources the Company controls is minimal to none. Emissions from utilities that the Company purchases is directly correlated to the amount of office space that it leases. We believe that the most significant environmental impacts associated with the Company’s operations relate to indirect emissions that occur in connection with business travel.
The Company seeks to minimize travel associated with its client service delivery efforts and leases office space only when and where it is essential. During the COVID-19 pandemic, the Company significantly reduced the amount of office space that it leases. The Company also experienced a dramatic reduction in business travel. While on a post-COVID basis we have experienced increased client-related travel, given our transition to a remote delivery model, we do not expect project related travel to return to pre-COVID levels. We also expect to continue to follow our minimal footprint approach to leasing office space, and we do not expect the amount of office space we lease to return to pre-COVID levels for the foreseeable future. Where we do lease space, we will endeavor to do so in buildings that have received higher energy efficiency certifications or ratings.
12
Table of Contents
Community
The Company works to support all within our community through our charitable fulfillments, as well as our student outreach programs.
Supply Chain
Through its Global Partner Code of Conduct, the Company requires its business partners to act with integrity and respect human rights, the health and safety of its employees and information security, and ecourages its business partners to manage their environmental impact.
For more information about our commitment to corporate social responsibility go to: https://thehackettgroup.imagerelay.com/share/75366a9f22674361bb1b3a61c494d435. The Company’s Global Partner Code of Conduct can be found at:
https://thehackettgroup.imagerelay.com/share/4c8dd6209f144f938b39080965f5f67d. The Company’s Health and Safety Policy can be found at: https://thehackettgroup.imagerelay.com/share/88d44a44065947e78376edfc3c3aa57c.
Other Matters
During the fiscal year ended December 30, 2022, the Board held 8 meetings, the Audit and Compensation Committees each held 6 meetings and the Nominating and Corporate Governance Committee held 4 meetings. During that period, no director attended fewer than 75% of the total number of all meetings of the Board and any committee on which he or she served. The Company’s independent directors regularly meet as a group in executive session outside of the presence of management.
The Company’s shareholders may communicate with its Board members via written correspondence mailed to the Company’s corporate headquarters at 1001 Brickell Bay Drive, 30th Floor, Miami, Florida 33131. Correspondence will be forwarded as directed by the shareholder. The Company may first review such communications and screen out solicitations for goods and services and similar inappropriate communications unrelated to the Company or its business.
Historically, all regularly scheduled meetings of the Board and its committees have been held in person, and, all of the Company’s directors have been expected to attend the annual meeting of shareholders in person. In 2020 and 2021, with the COVID-19 pandemic, all regularly scheduled meetings of the Board and its committees were held via video conference. As part of the Company’s precautions regarding COVID-19, each of our directors attended the 2022 Annual Meeting of Shareholders via teleconference except for our CEO who was present in person. Beginning with the second quarter of 2022, our Board members have had the option to attend Board and committee meetings in person. All of the Company’s directors are expected to attend the 2023 Annual Meeting of Shareholders in person, but will be given the option to attend via video conference, if necessary, as a health precaution.
13
Table of Contents
COMPENSATION COMMITTEE REPORT
The Compensation Committee met with management to review and discuss the Compensation Discussion and Analysis below. Based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K for its fiscal year ended December 30, 2022, and the Board has approved that recommendation.
Respectfully submitted,
Compensation Committee
John R. Harris, Chairman
Maria A. Bofill
Richard N. Hamlin
Robert A. Rivero
Alan T.G. Wix
14
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
Overview of Compensation Philosophy and Objectives
The Committee’s objectives relating to compensation are to align the financial interests of its leaders with those of its shareholders and to attract and retain highly qualified executives. The Company achieves these objectives by linking a substantial portion of each individual’s compensation to the achievement of financial and operational objectives in a particular business unit or the Company as a whole. The Compensation Committee has adopted a “pay-for-performance” compensation program for the Company’s named executive officers. The program rewards the achievement of annual adjusted diluted net earnings per share targets which, if met, result in the payment of cash bonuses and equity bonuses, which are in the form of performance-based restricted stock units. The program also rewards the achievement of long-term business objectives based on the continued improvement of operating performance, earnings growth and share value appreciation by vesting these performance-based restricted stock units over a subsequent minimum three-year period. This represents the long-term component of our executive compensation programs. This vesting period, during which the value of our common stock can rise or fall based on Company performance, places a premium on the execution of the Company’s long-term strategy and further aligns our executives’ interests with those of our shareholders. The short-term and long-term components of the Company’s compensation programs require the Company’s executive officers to focus on the future growth and current profitability of the Company, as well as, on increasing shareholder value.
The main goals of the Company’s executive compensation program are as follows:
| • | to motivate and focus executives on critical business issues; |
| • | to ensure that the executive team has clear goals and accountability with respect to the Company’s financial performance; |
| • | to attract and retain executive talent; |
| • | to increase shareholder value; and |
| • | to provide significant incentive opportunities tied to the attainment of specific financial performance goals. |
In order to attract, retain, and commit top executives to the fulfillment of superior performance results, the executive compensation program is designed to provide superior pay opportunities in exchange for superior performance.
The Company believes that its compensation program supports its business strategies and directly links pay with performance results. The Company continues to observe what it believes to be its directly comparative pay market, which is other strategic consulting and business advisory organizations and professional services firms which are mostly of significantly greater size.
In order to assure that its executive compensation is both competitive and appropriate, the Compensation Committee reviews executive compensation periodically to determine whether any adjustments to specific compensation components should be implemented. In connection with this process, the Compensation Committee primarily considers the value of cash salary and incentive cash and stock compensation. These compensation components are even more meaningful since the Company does not contribute to any retirement programs in any form including defined benefit, defined contribution or supplemental retirement plans for its executives.
The Compensation Committee also periodically reviews external market data on executive compensation in order to obtain a general understanding of current compensation practices. In 2017, the Compensation Committee retained John Bloedorn, an independent compensation consultant formerly with Mercer who was involved with
15
Table of Contents
the development of the Company’s current executive compensation program, to gather relevant marketplace data on total compensation for similar executive positions. This data consisted of annual salary, short-term incentives, long-term incentives, and pay mix. Data was obtained from total compensation information of similarly sized publicly traded companies including a subset of the Company’s historical peer group and the most recent Institutional Shareholder Services peer group at that time. In addition to Mr. Bloedorn’s analysis, the Compensation Committee also considered the Company’s direct competitor group which consisted of primarily private and much larger consulting groups such as McKinsey, Bain, BCG and the consulting arms of PwC, Deloitte, E&Y and KPMG. In reviewing external data, the Compensation Committee does not engage in direct benchmarking to establish compensation levels or make specific compensation decisions for several reasons. One such reason is that the Company has a unique structure, set of skill requirements and differs from many of the larger size surveyed companies. Also, many of the Company’s peer competitors are either privately held or are consulting divisions of companies that are significantly larger than the Company, such as Bain, McKinsey, BCG, Accenture and the consulting groups of the Big Four accounting firms. These companies may not provide public data that can be used for comparative purposes. Instead, the Compensation Committee reviews survey data to gain a better understanding of general compensation practices. In establishing executive compensation, the Compensation Committee takes into account a number of considerations, including individual and Company performance, experience, responsibilities, retention and the lack of a retirement benefits program. Periodic review of external market data is, however, considered to be a necessary point of reference. It is the Company’s preference that performance rather than benchmarking data drive executive compensation. Based on its analysis and advice it received from Mr. Bloedorn, the Compensation Committee determined that its compensation structure and compensation levels were appropriate for the Company. An independent compensation consultant was not engaged in connection with the Compensation Committee’s approval of the 2022 or 2023 executive compensation programs, however, the Company continues to rely on the conclusions of Mr. Bloedorn to make executive compensation decisions.
The Compensation Committee has determined that the advisors retained or consulted by the Committee are independent and raise no conflict of interest concerns. Mr. Bloedorn does not provide any services to the Company other than those services for which he was retained by the Compensation Committee.
The Elements of Executive Compensation at the Company
Overview
The Company’s executive compensation program that applies to its three named executive officers, Messrs. Fernandez, Dungan and Ramirez, rewards the named executive officers for the achievement of exceptional operating results by providing significant incentive opportunities tied to the attainment of specific financial performance goals. The design of the program has been substantially consistent since it was created by the Compensation Committee in 2005 based on recommendations from Mercer, a nationally recognized executive compensation consulting firm. The program consists of base salaries and cash and equity incentive bonus opportunities that the Company believes are market competitive for companies of similar size within its industry. Our executive compensation program consists of two primary elements: (1) short-term compensation in the form of annual compensation, consisting of base salaries, annual cash incentive compensation and employee benefits; and (2) long-term incentive compensation in the form of performance-based restricted stock units which, after being earned through the achievement of performance targets, then vest over a three-year period.
Performance-based cash awards and restricted stock awards are tied to the achievement of adjusted diluted net earnings per share targets based on a Board-approved annual operating plan. Adjusted diluted net earnings per share is defined as net income before income from discontinued operations, if applicable, and excludes restructuring charges and asset impairments, acquisition-related adjustments, non-cash stock compensation expense, the amortization of intangible assets and included a long-term effective cash tax rate for 2022. For 2023 adjusted diluted net earnings per share will be calculated using a tax rate based on Generally Accepted Accounting Principles (“GAAP”). Adjusted diluted net earnings per share is based on weighted average common
16
Table of Contents
and common equivalent shares outstanding. In addition, the Compensation Committee retains the right to exclude the impact of certain nonrecurring events from the adjusted diluted net earnings per share calculation when, in the opinion of the Compensation Committee, inclusion would not accurately reflect the core operating performance of the Company. The Committee believes that adjusted diluted net earnings per share is the best measure of core operating performance for determining incentive compensation.
On an annual basis, the Compensation Committee evaluates and establishes the threshold and target achievement levels for the Company’s incentive compensation program for its named executive officers, which consist of its CEO, COO and CFO, which it refers to as “Commence,” “Goal” and “Superior.” If the Company’s performance falls short of the established goals for business growth, then the bonus compensation paid in connection with the program is reduced or no bonuses are paid at all. Payouts are interpolated if results fall between performance levels and extrapolated for performance exceeding the Superior level. The Company believes the targets established for its named executive officers are challenging. This program has been in effect for eighteen years. In two of those years, no bonuses were paid to the named executive officers as the Commence performance target was not achieved. In seven of those years, a bonus was paid based on results which were between the Commence and the Goal targets. Including 2020, during which a modified executive compensation program was utilized in light of the impact of the COVID-19 pandemic on our business, in two of those years, the Goal target was achieved. In seven of those years, over which average adjusted diluted earnings per share growth was 110%, the Company’s performance exceeded the Superior target. Excluding 2010, when adjusted diluted earnings per share growth was 476%, the average adjusted diluted earnings per share growth over the other six years in which Superior targets were achieved was 50%.
The Compensation Committee targets an even balance between the cash and equity incentive award opportunities included in the Company’s compensation programs overall, but weights the equity component in the named executive officer compensation program more heavily in the case of its CEO and COO. Performance-based equity grants issued to employees, other than the Company’s named executive officers, typically vest over a three or four-year period, based on the recipient’s individual compensation program. This is with the exception of two programs designed for the Company’s senior leadership. The first of those programs was introduced in 2020, and vests a portion of the participant’s annual equity opportunity after the conclusion of the compensation year subject to the achievement of a minimal level of Company profitability and the achievement of personal management objectives established for the individual. For 2023, thirteen individuals will participate in this program including Mr. Ramirez. Mr. Fernandez and Mr. Dungan do not participate in this program. The second of these programs offers the participant the opportunity to receive a significant equity grant if the person achieves an extraordinary long-term financial goal for which the person has three or four years to achieve. The equity grant, if awarded, would vest on the first anniversary of the grant date. Mr. Fernandez and Mr. Dungan do not participate in this program. All equity grants, other than those issued upon hiring or for retention purposes, are issued based on the achievement of Company, group or individual performance goals, or any combination thereof or extraordinary individual contribution. Vesting is contingent on continued employment. The Company regards this vesting period as an important retention tool. More importantly, the Company believes that incentive compensation that is paid in the form of equity that vests over three or four years serves as a meaningful long-term incentive, the ultimate value of which is directly correlated to the price of the Company’s common stock at the end of the vesting period. This rewards employees for increasing shareholder value. A heavier weighting on the incentive equity component ties a greater portion of the Company’s CEO and COO’s ultimate compensation to the ability to deliver increased shareholder value over the vesting period. To further ensure the alignment of the CEO’s interests with those of the Company’s shareholders, the Board of Directors has adopted stock ownership guidelines that require the CEO to own a number of shares equal in value to six times his annual base salary. The CEO is currently in compliance with these guidelines.
Annual Compensation
Annual compensation consists of base salaries, annual incentive compensation and employee benefits.
17
Table of Contents
Base Salaries
The salaries payable to the Company’s named executive officers are generally recommended to the Board by the Compensation Committee during the first quarter of each fiscal year. Each of the named executive officers is a party to an employment agreement that establishes a minimum salary level for the named executive officer. The employment agreements do not provide for any guaranteed increases to base salaries. Messrs. Fernandez, Dungan and Ramirez base salaries in 2022 were $750,000, $525,000 and $400,000, respectively. The CEO’s base salary was last increased in 2005. The COO’s last salary increase was in 2006. The last increase to the CFO’s salary occurred in 2020.
The Company believes the base salaries it currently pays to its named executive officers are at market competitive levels for companies of similar size within its industry. See the “Summary Compensation Table” on page 21 of this proxy statement and the related footnotes for additional information about base salaries.
Incentive Compensation
The Company’s annual incentive program reflects the Compensation Committee’s belief that a significant portion of the named executive officers’ compensation should be tied to company performance. For 2022, variable, non-guaranteed performance-based compensation paid to Messrs. Fernandez, Dungan and Ramirez represented 86%, 83%, and 69%, respectively, of their total compensation. The annual incentive component of the Company’s executive compensation program consists of annual performance-based cash incentive awards and performance-based equity incentive grants in the form of restricted stock units of which, if earned based on performance, then one third vests annually over a three-year period commencing on the first anniversary of the grant date. These performance-based cash and equity opportunities are tied to the achievement of adjusted diluted net earnings per share targets based on a Board-approved operating plan. Each participant in the Company’s executive compensation program has target cash and equity incentive opportunities expressed as a percentage of salary. Cash and equity payouts are based on the dollar amount of the opportunity earned based on target levels achieved. For our CEO and COO, the equity opportunities have historically been more heavily weighted than the cash opportunities, including in 2022 and for 2023. Performance-based equity incentive awards earned are expressed in a dollar amount and divided by the Company’s share price on the date of grant to calculate the equity incentive grant in the form of restricted stock units, the value of which is ultimately determined by the Company’s stock price on the date of vesting.
Employee Benefits
The named executive officers, like the rest of the Company’s employees, receive certain customary employee benefits. For 2022, these benefits included health, dental and vision coverage, prescription drug plans, life insurance, flexible spending accounts, short-term and long-term disability insurance and a 401(k) plan. The Company covers approximately 60% of the total cost of the health benefits for its U.S.-based employees, including its named executive officers. In other geographies, the Company’s compensation and benefits packages vary by country and are based on market standards, local custom and legal requirements in the jurisdiction. The Company does not provide for any special retirement-related benefits, such as pensions or 401(k) contribution matches, for its senior executives.
No Perquisites
The Company does not provide any executive perquisites.
Shareholder “Say on Pay” Vote
In the “Say on Pay” vote provided by the Company at its 2022 annual meeting of shareholders, our shareholders approved the compensation of the Company’s executives as disclosed in the Company’s proxy statement for the meeting, with approximately 97% of the votes cast in favor. The Compensation Committee
18
Table of Contents
considered the results of this vote in setting the compensation of the Company’s named executive officers and decided to maintain the structure of the Company’s current executive compensation programs for fiscal year 2022.
Executive Compensation Decisions for 2022
Base Salary
The Compensation Committee believes that the base salaries of the Company’s CEO, COO and CFO remain at market competitive levels for companies of similar size within the Company’s industry. The CEO’s base salary was last increased in 2005. The COO’s last salary increase was in 2006. The last increase to the CFO’s salary occurred in 2020.
Incentive Compensation
Each participant in the Company’s executive compensation program has cash and equity incentive opportunities expressed as a percentage of salary that are tied to specified performance targets. For 2022, incentive compensation awarded to Messrs. Fernandez, Dungan and Ramirez in the form of cash and restricted stock units subject to a three-year vesting period represented 86%, 83%, and 69%, respectively, of their total compensation as reported in the Summary Compensation Table.
At its meeting held on February 17, 2022, the Compensation Committee reviewed and approved the 2022 base salaries and cash and equity incentive plan targets for the Company’s named executive officers as well as the Company’s other senior leaders. The Compensation Committee specifically approved a program for its named executive officers that would pay annual cash and equity bonuses in connection with the achievement of 2022 adjusted diluted earnings per share performance targets. For 2022, the “Goal” and “Superior” targets established by the Compensation Committee were $1.37 and $1.46, respectively. These targets represented a 12% and 20% improvement over the Company’s prior year actual adjusted diluted net earnings per share results, respectively. Both the Goal and Superior target percentage improvement calculations above exclude the impact of a software sale transaction which represented approximately 9 cents of the Company’s 2021 full year adjusted diluted net earnings per share.
2022 Performance Outcomes
In 2022, for executive compensation purposes, the Company’s adjusted diluted earnings per share was $1.52, as compared to the Superior target of $1.46. This resulted in performance-based cash and equity bonuses above the “superior” level payout under the Company’s 2022 executive compensation plan. The adjusted diluted earnings per share amount of $1.52 used for compensation payout purposes includes a long-term effective tax rate for all four quarters. The Company reported actual annual adjusted diluted earnings per share of $1.50 which included a GAAP tax rate for 2022. Since the compensation program targets for the Company’s named executive officers approved by the Compensation Committee in February of 2022 were based on a long-term effective tax rate, the Compensation Committee retained the long-term tax rate for the purposes of computing compensation results in 2022. Please refer to Appendix A, “Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results” for a reconciliation of adjusted results, including adjusted diluted earnings per share, to reported GAAP results for 2022.
Executive Compensation Decisions for 2023
At its meeting held on February 16, 2023, the Compensation Committee reviewed and approved 2023 base salaries and cash and equity incentive plan targets for the Company’s named executive officers, as well as for the Company’s other senior leaders. Consistent with prior years, the Compensation Committee specifically approved a program for its named executive officers that, in addition to base salaries, would pay annual cash and equity incentive bonuses in connection with the achievement of specified 2023 performance targets. The Compensation
19
Table of Contents
Committee chose to retain annual adjusted diluted net earnings per share as the performance target in the 2023 program which will be based on a GAAP tax rate.
The Company’s Compensation Committee has once again established challenging performance targets for 2023. The Company’s annual adjusted diluted net earnings per share must improve at least 13% from the 2022 actual adjusted diluted earnings per share in order for the named executive officers to earn their “Goal” cash and equity performance incentive awards. The Company’s annual adjusted diluted net earnings per share must improve at least 20% from 2022 in order for the named executive officers to earn their “Superior” cash and equity performance incentive awards.
For 2023, Mr. Ramirez will also participate in our senior leadership equity program whereby an annual equity opportunity is subject to the achievement of personal management objectives approved by the Compensation Committee.
Timing of Equity Incentive Plan Awards and Discretionary Equity Awards
The Company does not have a program, plan or practice to time equity awards, including option grants, to its named executive officers or directors in coordination with the release of material non-public information. The Company consistently presents to its Compensation Committee for approval all year-end cash and equity bonus awards based on the previous year’s results at the first Compensation Committee meeting of the year. However, the timing of this approval may be changed in the event of extraordinary circumstances. The Company’s equity plan expressly prohibits the repricing of options and SARs.
Tax and Accounting Considerations and Compensation Deductibility Policy
In evaluating compensation program alternatives, the Compensation Committee considers, among other factors, the potential impact on the Company of Section 162 (m) of the Internal Revenue Code (“Section 162(m)”). Section 162(m) imposes a $1,000,000 per person limit on the annual tax deduction for compensation paid to the Company’s CEO, CFO, and certain other current and former executive officers.
The Compensation Committee, however, believes that it is important for it to retain maximum flexibility in designing compensation programs that are in the best interests of the Company and its stockholders, even if such approach results in certain amounts that may be payable in excess of $1,000,000 to not be deductible under Section 162(m). As a result, the Compensation Committee has approved and reserves the right to approve compensation that does not qualify for deductibility in circumstances it deems appropriate to promote varying corporate goals.
Compensation Recovery
The Company has adopted an Incentive Compensation Recoupment Policy that allows for the recovery from its current or former named executive officers of any erroneously awarded compensation in the three-year period prior to a restatement. A copy of the Company’s Incentive Compensation Recoupment Policy can be found on the Company’s website at https://www.thehackettgroup.com/governance/.
20
Table of Contents
SUMMARY COMPENSATION TABLE
| Name and Principal Position |
Year | Salary ($) | Stock Awards ($)(1)(2) |
Non-Equity Incentive Plan Compensation ($)(1) |
Total ($) | |||||||||||||||
| Ted A. Fernandez (Chairman, Chief Executive Officer) |
2022 | 750,000 | 2,748,240 | 2,042,100 | 5,540,340 | |||||||||||||||
| 2021 | 750,000 | 3,027,600 | 2,304,000 | 6,081,600 | ||||||||||||||||
| 2020 | 750,000 | 678,068 | 398,864 | 1,826,932 | ||||||||||||||||
| David N. Dungan (Vice Chairman, Chief Operating Officer) |
2022 | 525,000 | 1,442,826 | 1,143,576 | 3,111,402 | |||||||||||||||
| 2021 | 525,000 | 1,589,490 | 1,290,240 | 3,404,730 | ||||||||||||||||
| 2020 | 525,000 | 355,986 | 223,364 | 1,104,350 | ||||||||||||||||
| Robert A. Ramirez (Executive Vice President Finance and Chief Financial Officer) |
2022 | 400,000 | 443,040 | 443,040 | 1,286,080 | |||||||||||||||
| 2021 | 400,000 | 489,600 | 489,600 | 1,379,200 | ||||||||||||||||
| 2020 | 400,000 | 106,364 | 206,364 | 712,728 | ||||||||||||||||
| (1) | See “Compensation Discussion and Analysis” beginning on page 15 of this proxy statement for a discussion of how the non-equity (cash) incentive amounts are determined. These non-equity (cash) and equity grants are performance-based and were determined based on the achievement of annual adjusted diluted net earnings per share targets. Also see the “Grants of Plan-Based Awards” table on page 22 of this proxy statement for additional detail on non-equity (cash) and equity incentive compensation earned based on fiscal 2022 performance. |
| (2) | Amounts shown in this column are based on the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, as amended, of grants of performance-based restricted stock units to the named executive officers in the applicable fiscal year. Assumptions used in the calculation of the amounts in this column are described in Note 10 to our audited consolidated financial statements contained in our Form 10-K for the fiscal year ended December 30, 2022. |
21
Table of Contents
GRANTS OF PLAN-BASED AWARDS
FOR FISCAL YEAR 2022
The following table sets forth information on the cash and equity grant awards issued to the named executive officers under the Company’s executive compensation plan for fiscal 2022.
| Name |
Grant Date |
Cash (Non-Equity) Incentive Compensation Awards ($) |
Equity (Restricted Stock Unit) Incentive Compensation (#)(1) |
Grant Date Fair Value of Stock Awards ($) |
||||||||||||
| Ted A. Fernandez |
February 17, 2023 | 2,042,100 | 125,262 | 2,748,240 | ||||||||||||
| David N. Dungan |
February 17, 2023 | 1,143,576 | 65,762 | 1,442,826 | ||||||||||||
| Robert A. Ramirez |
February 17, 2023 | 443,040 | 20,193 | (2) | 443,040 | |||||||||||
| (1) | See “Compensation Discussion and Analysis” beginning on page 15 of this proxy statement for a discussion of the performance criteria and how these performance-based awards are determined. One third of each equity grant vests annually beginning with the first anniversary of the grant date. |
| (2) | Excludes 5,469 restricted stock units granted on February 17, 2023 which will vest in full one year from the date of grant subject to Mr. Ramirez’ satisfaction of the achievement of personal management objectives established. See “Executive Compensation Decisions for 2023” on page 19 of this proxy statement for more information about these restricted stock units. |
Equity Compensation Plan Information
The Company maintains The Hackett Group, Inc. 1998 Stock Option and Incentive Plan, as amended (the “Plan”) and The Hackett Group, Inc. Employee Stock Purchase Plan, as amended (the “ESPP”).
The table below sets forth the following information as of December 30, 2022, for (1) all compensation plans previously approved by the Company’s shareholders and (2) all compensation plans not previously approved by the Company’s shareholders:
| • | The number of securities to be issued upon the exercise of outstanding options, warrants and rights and the vesting of unvested restricted stock units; |
| • | The weighted-average exercise price of such outstanding options, warrants and rights; and |
| • | The number of securities remaining available for future issuance under the plans, other than securities to be issued upon the exercise of such outstanding options, warrants and rights and the vesting of restricted stock units. |
22
Table of Contents
| Plan Category |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights and the Vesting of Unvested Restricted Stock Units (#) |
Weighted Average Exercise Price of Outstanding Options and Unvested Restricted Stock Units, Warrants and Rights ($) |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column 1) (#)(3) |
|||||||||
| Restricted stock units issued under equity |
1,212,902 | (4) | — | 2,415,312 | (2) | |||||||
| Stock options issued under equity compensation plans approved by |
— | (4) | — | 438,445 | ||||||||
| Equity compensation plans not approved by shareholders |
— | — | — | |||||||||
|
|
|
|
|
|||||||||
| Total |
1,212,902 | 2,853,757 | ||||||||||
|
|
|
|
|
|||||||||
| (1) | The equity compensation plans approved by the Company’s shareholders are the Plan and the ESPP. The Plan authorizes the issuance of compensation equity awards in the form of restricted stock, restricted stock units, stock options and SARs. Since fiscal year 2005, the Company’s primary equity compensation plan component has been restricted stock units. As such, the Company believes it is important to highlight in this table statistical information related to the restricted stock units issued, outstanding and unvested as well as the shares available under the sublimit for issuance of restricted stock and restricted stock units under the Plan. |
| (2) | As of the Record Date, the number of shares available for issuance pursuant to awards of restricted stock or restricted stock units was 2,001,241. |
| (3) | This amount does not include 241,447 shares available for issuance under the ESPP. |
| (4) | As of the Record Date, the number of issued and unvested restricted stock units was 1,122,011 and there were no outstanding stock options, either vested or unvested. |
23
Table of Contents
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information concerning unvested restricted stock units for each named executive officer outstanding as of the end of fiscal 2022.
(Does not include equity awards granted after fiscal year-end. See the “Grants of Plan-Based Awards” table on page 22 of this Proxy Statement and “Executive Compensation Decisions for 2022” on page 19 of this proxy statement for information on payments and grants made following the 2022 fiscal year-end related to 2022 performance-based compensation.)
| Outstanding Restricted Stock Awards |
||||||||
| Name |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
||||||
| Ted A. Fernandez |
201,587 | (1) | 4,106,327 | |||||
| David N. Dungan |
105,834 | (2) | 2,155,839 | |||||
| Robert A. Ramirez |
35,284 | (3) | 718,735 | |||||
| (1) | Includes 201,587 performance-based restricted stock units granted in 2020, 2021 and 2022 for 2019, 2020 and 2021 fiscal year performance, respectively. In 2023, 81,050 of the restricted stock units will vest. Excludes 125,262, restricted stock units granted on February 17, 2023, for 2022 fiscal year performance, one third of which will vest annually on the anniversary of the date of grant. See “Executive Compensation Decisions for 2022” on page 19 of this proxy statement for more information about these restricted stock units. |
| (2) | Includes 105,834 performance-based restricted stock units granted in 2020, 2021 and 2022 for 2019, 2020 and 2021 fiscal year performance, respectively. In 2023, 42,552 of the restricted stock units will vest. Excludes 65,762, restricted stock units granted on February 17, 2023, for 2022 fiscal year performance, one third of which will vest annually on the anniversary of the date of grant. See “Executive Compensation Decisions for 2022” on page 19 of this proxy statement for more information about these restricted stock units. |
| (3) | Includes 35,284 performance-based restricted stock units granted in 2020, 2021 and 2022 for 2019, 2020 and 2021 fiscal year performance, respectively, and includes a discretionary grant of 3,410 restricted stock units granted in 2020. In 2023, 14,164 of the restricted stock units will vest. Excludes 20,193, restricted stock units granted on February 17, 2023, for 2022 fiscal year performance, one third of which will vest annually on the anniversary of the date of grant. See “Executive Compensation Decisions for 2022” on page 19 of this proxy statement for more information about these restricted stock units. Excludes 5,469 restricted stock units granted on February 17, 2023 which vest in full one year from the date of grant subject to Mr. Ramirez’ satisfaction of the achievement of established personal management objectives. See “Executive Compensation Decisions for 2023” on page 19 of this proxy statement for more information about these restricted stock units. |
24
Table of Contents
OPTION EXERCISES AND STOCK VESTED
(During fiscal year-ended December 30, 2022)
The following table sets forth information concerning the vesting of stock awards in the form of restricted stock units, for each named executive officer during fiscal 2022. Value realized is based on the closing price for the Company’s common stock on the date of exercise or vesting, respectively.
| Stock Awards | ||||||||
| Name |
|
Number of Shares Acquired on Vesting (#)(1) |
|
Value Realized on Vesting ($) |
||||
| Ted A. Fernandez |
42,976 | 832,875 | ||||||
| David N. Dungan |
22,562 | 437,252 | ||||||
| Robert A. Ramirez |
9,078 | 175,932 | ||||||
| (1) | Reflects the total number of vested restricted stock units. The following table provides additional information regarding the vested restricted stock units: |
| Name |
Total Number of Restricted Stock Units Vested (#) |
Net Restricted Stock Units Received After Tax Withholding (#) |
||||||
| Ted A. Fernandez |
42,976 | 32,531 | ||||||
| David N. Dungan |
22,562 | 12,387 | ||||||
| Robert A. Ramirez |
9,078 | 6,867 | ||||||
Narrative Disclosure to Summary Compensation Table and Plan-Based Awards Table
Mr. Fernandez
Mr. Fernandez entered into an employment agreement with the Company effective as of June 2, 1998. It was amended on November 10, 2004, June 10, 2005, December 30, 2008 and March 10, 2017. The agreement provides for a three-year term (with an automatic renewal for one additional year on each subsequent anniversary thereafter unless either party gives contrary notice) and currently provides for an annual salary and bonus to be determined and paid pursuant to a bonus plan to be adopted by the Board for each fiscal year. The agreement also contains certain confidentiality, non-competition and non-solicitation provisions. Mr. Fernandez’s employment agreement also includes the following provisions:
| • | upon termination by the Company without cause, or upon termination by Mr. Fernandez for “good reason,” Mr. Fernandez will receive one year’s annual salary and bonus paid in lump sum and full vesting of all issued and outstanding equity grants; |
| • | upon termination for disability, Mr. Fernandez will receive one year’s annual salary and bonus paid in lump sum and full vesting of all issued and outstanding equity grants; |
| • | upon termination due to death, all issued and outstanding equity grants will immediately vest and or settle; |
| • | upon a change of control, upon termination, Mr. Fernandez will receive two hundred percent of his annual salary and bonus paid in a lump sum and full vesting of all unvested issued and outstanding equity grants upon termination. The calculation of the change of control payment equals two hundred percent (200%) of Mr. Fernandez’s average total compensation for the three full fiscal years immediately preceding the change of control; and |
| • | the agreement does not provide for any golden parachute excise tax gross-ups. |
25
Table of Contents
Also see “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 16 of this proxy statement.
Mr. Dungan
Mr. Dungan entered into an employment agreement with the Company effective as of December 26, 2001. It was amended on November 10, 2004, March 24, 2006, December 30, 2008 and March 10, 2017. Mr. Dungan’s agreement provides for a three-year term (with an automatic renewal for one additional year on the first and each subsequent anniversary thereafter unless either party gives contrary notice) and currently provides for an annual salary and bonus to be determined and paid pursuant to a bonus plan to be adopted by the Board for each fiscal year. The agreement contains certain confidentiality, non-competition and non-solicitation provisions. The agreement also includes the following provisions:
| • | upon termination by the Company without cause, or upon termination by Mr. Dungan for “good reason,” Mr. Dungan will receive one year’s annual salary and bonus paid in lump sum and full vesting of all issued and outstanding equity grants; |
| • | upon termination for disability, Mr. Dungan will receive one year’s annual salary and bonus paid in lump sum and full vesting of all issued and outstanding equity grants; |
| • | upon termination due to death, all issued and outstanding equity grants will immediately vest and or settle; |
| • | after a change of control, upon termination, Mr. Dungan will receive two hundred percent of his annual salary and bonus paid in a lump sum and full vesting of all unvested issued and outstanding equity grants upon termination. The calculation of the change of control payment equals two hundred percent (200%) of Mr. Dungan’s average total compensation for the three full fiscal years immediately preceding the change of control; and |
| • | the agreement does not provide for any golden parachute excise tax gross-ups. |
Also see “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 16 of this proxy statement.
Mr. Ramirez
Mr. Ramirez entered into an employment agreement with the Company effective as of August 1, 2007. Mr. Ramirez’s employment agreement provided for a three-year term (with an automatic renewal for one additional year thereafter on each subsequent anniversary unless either party gives contrary notice) and currently provides for an annual salary and bonus pursuant to a bonus plan to be adopted by the Board for each fiscal year. The agreement contains provisions regarding confidentiality, non-competition and non-solicitation. The agreement also includes the following provisions:
| • | if Mr. Ramirez is terminated by the Company without cause, or Mr. Ramirez terminates his employment with “good reason,” Mr. Ramirez will be entitled to a severance payment at the rate of his annual salary and benefits for a six-month period from the date of termination; |
| • | if Mr. Ramirez finds new employment after termination, the Company may eliminate or reduce such severance payments and benefits; |
| • | if Mr. Ramirez’s employment is terminated by the Company without cause or by Mr. Ramirez with “good reason,” in either case in anticipation of in connection with or within one year after a “change of control” (as defined), his salary will be continued for one year, his benefits will be continued for one year (subject to cessation if Mr. Ramirez is entitled to similar benefits from a new employer) and all unvested issued and outstanding equity grants will immediately vest; and |
| • | the agreement does not provide for any golden parachute excise tax gross-ups. |
Also see “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 16 of this proxy statement.
26
Table of Contents
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The tables below quantify (in U.S. dollars) the potential payments upon termination or a change in control of the Company for each of the named executive officers actively employed by the Company at the end of fiscal 2022. All amounts are calculated assuming (i) a termination date of December 30, 2022 and (ii) the price per share of the Company’s securities was the closing market price as of that date. These payments are subject to the terms of the employment agreements that are summarized under “Narrative Disclosure to Summary Compensation Table and Plan-Based Awards Table” on page 25 of this proxy statement.
| Mr. Fernandez’s Benefits and Payments Termination |
Death ($) |
Disability ($) |
By the Company for Cause ($) |
By the Executive for Good Reason ($) |
Change of Control ($) |
|||||||||||||||
| Compensation: |
||||||||||||||||||||
| Base Salary |
— | 750,000 | — | 750,000 | — | |||||||||||||||
| Annual Bonus |
— | 2,042,100 | — | 2,042,100 | — | |||||||||||||||
| Restricted Stock Units |
4,106,327 | 4,106,327 | — | 4,106,327 | 4,106,327 | |||||||||||||||
| Change of Control Payment |
— | — | — | — | 8,965,915 | |||||||||||||||
| Benefits and Perquisites: |
||||||||||||||||||||
| Health Insurance Premiums |
— | 28,191 | — | 28,191 | 28,191 | |||||||||||||||
| Life, Accidental Death |
— | 5,426 | — | 5,426 | 5,426 | |||||||||||||||
| Life Insurance Premium |
— | 18,360 | — | 18,360 | 18,360 | |||||||||||||||
| Gross-up Payment |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
4,106,327 | 6,950,404 | — | 6,950,404 | 13,124,219 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Mr. Dungan’s Benefits and Payments Termination |
Death ($) |
Disability ($) |
By the Company for Cause ($) |
By the Executive for Good Reason ($) |
Change of Control ($) |
|||||||||||||||
| Compensation: |
||||||||||||||||||||
| Base Salary |
— | 525,000 | — | 525,000 | — | |||||||||||||||
| Annual Bonus |
— | 1,143,576 | — | 1,143,576 | — | |||||||||||||||
| Restricted Stock Units |
2,155,839 | 2,155,839 | — | 2,155,839 | 2,155,839 | |||||||||||||||
| Change of Control Payment |
— | — | — | — | 5,080,321 | |||||||||||||||
| Benefits and Perquisites: |
||||||||||||||||||||
| Health Insurance Premiums |
— | 16,247 | — | 16,247 | 16,247 | |||||||||||||||
| Life, Accidental Death |
— | 1,547 | — | 1,547 | 1,547 | |||||||||||||||
| Life Insurance Premium |
— | — | — | — | — | |||||||||||||||
| Gross-up Payment |
— | — | — | — | — | |||||||||||||||
| — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
2,155,839 | 3,842,209 | — | 3,842,209 | 7,253,954 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
27
Table of Contents
| Mr. Ramirez’s Benefits and Payments |
Death ($) |
Disability ($) |
By the Company for Cause ($) |
By the Executive for Good Reason ($) |
Change of Control ($) |
|||||||||||||||
| Compensation: |
||||||||||||||||||||
| Base Salary |
— | — | — | 200,000 | 400,000 | |||||||||||||||
| Annual Bonus |
— | — | — | — | — | |||||||||||||||
| Stock Options and Restricted |
718,735 | 718,735 | — | 718,735 | 718,735 | |||||||||||||||
| Benefits and Perquisites: |
||||||||||||||||||||
| Health Insurance Premiums |
— | 23,904 | — | 23,904 | 23,904 | |||||||||||||||
| Life, Accidental Death |
— | 4,937 | — | 4,937 | 4,937 | |||||||||||||||
| Life Insurance Premium |
— | 15,892 | — | 15,892 | 15,892 | |||||||||||||||
| Gross-up Payment |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
718,735 | 763,468 | — | 963,468 | 1,163,468 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Includes value of 201,587 unvested restricted stock units outstanding at year end. The outstanding restricted stock units would vest upon a change of control, Mr. Fernandez’s death, disability, resignation for good reason or involuntary termination without cause. |
| (2) | Includes value of 105,834 unvested restricted stock units outstanding at year end. The outstanding restricted stock units would vest upon a change of control, Mr. Dungan’s death, disability, resignation for good reason or involuntary termination without cause. |
| (3) | Includes value of 35,284 unvested restricted stock units outstanding at year end. The outstanding restricted stock units would vest upon a change of control, Mr. Ramirez’s death, disability, resignation for good reason or involuntary termination without cause. |
In certain cases, the tax laws deny an income tax deduction for payments that are contingent upon a change in control. Benefits under the employment agreements will be delayed or modified if such delays or modifications are necessary to comply with the rules governing deferred compensation plans under Section 409A of the Internal Revenue Code.
28
Table of Contents
DIRECTOR COMPENSATION
Director Compensation for 2022
Directors who are officers or employees of the Company or any subsidiary of the Company receive no additional compensation for serving on the Board or any of its committees. Each outside director receives an annual $40,000 cash retainer, paid quarterly. All directors are reimbursed for travel expenses incurred in connection with attending Board and committee meetings.
The Company’s outside directors also receive an annual restricted stock unit grant equal in value to $72,000 on the date of grant. All restricted stock units granted under this program will vest in full on the one-year anniversary of the date of grant and will also vest upon involuntary termination of service, including change of control. Upon reaching ten years of service on the Board, outside director members receive a restricted stock unit grant equal in number of units to his or her annual service grant for that year. Each of the Company’s outside directors is allowed to elect to defer the receipt of their shares upon vesting for three years, five years or until death, disability or termination of service on the Board.
Director Compensation for Fiscal 2022
| Name |
Fees Earned or Paid in Cash ($) |
Stock Awards (1) ($) |
Total ($) |
|||||||||
| Maria A. Bofill |
40,000 | 72,000 | 112,000 | |||||||||
| Richard N. Hamlin |
40,000 | 72,000 | 112,000 | |||||||||
| John R. Harris |
40,000 | 72,000 | 112,000 | |||||||||
| Robert A. Rivero |
40,000 | 72,000 | 112,000 | |||||||||
| Alan T.G. Wix |
40,000 | 72,000 | 112,000 | |||||||||
| (1) | Amounts shown in this column are based on the aggregate grant date fair value as computed in accordance with FASB ASC Topic 718, as amended, for restricted stock units during fiscal 2022. The aggregate number of restricted stock unit awards and the aggregate number of stock option awards outstanding at fiscal year-end appears in the “Outstanding Director Equity Awards at 2022 Fiscal Year-End” table below. |
Director Compensation for 2023
For 2023, the Company’s Outside Director Compensation Program will remain unchanged.
OUTSTANDING DIRECTOR EQUITY AWARDS
AT 2022 FISCAL YEAR-END
| Name |
Restricted Stock Unit Awards (unvested) (#) |
|||
| Maria A. Bofill |
3,744 | (1) | ||
| Richard N. Hamlin |
3,744 | (1) | ||
| John R. Harris |
3,744 | (1) | ||
| Robert A. Rivero |
3,744 | (1) | ||
| Alan T.G. Wix |
3,744 | (1) | ||
| (1) | Does not include 3,282 restricted stock units granted on February 17, 2023, in connection with the Company’s Outside Director Compensation Plan, which vest on the first anniversary of the date of grant. |
29
Table of Contents
Compensation Committee Interlocks
The Compensation Committee consists of Messrs. Harris (Chairman), Hamlin, Rivero and Wix and Ms. Bofill. No current or former member of the Compensation Committee is, or has ever been, an officer or employee of the Company. None of the Company’s directors and none of their family members are employed as an executive of another company where any of the Company’s executives serve on the compensation committee of which the director is an executive.
PAY RATIO
Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO). The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934 (the “Exchange Act”)..
In identifying our median employee, our calculation included the base salary for each employee as of December 30, 2022, commissions paid in 2022 and any cash and equity performance and non-performance-based bonus compensation paid or granted, respectively, to such employees in 2023 based on their performance for fiscal year 2022. Bonus information for 2022 was not available for all employees as of the Record Date as several of our practices conduct performance reviews during the first quarter of the year and approve raises and pay bonuses in April. For employees in these practices we estimated 2022 cash and equity bonuses. The amount included for equity performance and non-performance-based bonus compensation grants equaled the fair market value of the shares underlying such grant as of the grant date, however, these grants are subject to time vesting which requires continued employment of the grantee for a period of time ranging from three to four years. Cash compensation for these purposes included base salary or wages plus overtime pay, cash bonuses, cash commissions and comparable cash elements of compensation in non-U.S. jurisdictions, if applicable, and was calculated using internal payroll and/or tax records. Salaries or wages paid in non-U.S. jurisdictions were converted to U.S. dollars using exchange rates in effect as of December 30, 2022. We did not apply any cost-of-living adjustments as part of the calculation.
We selected the median employee based on 1,205 full-time and part-time workers who were employed as of December 30, 2022.
The fiscal year 2022 annual total compensation as determined under Item 402 of Regulation S-K for our CEO was $5,540,340. The 2022 annual total compensation as determined under Item 402 of Regulation S-K for our median employee was $106,244. The ratio of our CEO’s annual total compensation to our median employee’s total compensation for fiscal year 2022 is 52 to 1.
We have employees in countries with differing labor market characteristics. As such, for purposes of comparability we have also calculated the total annual compensation for our median employee in the United States where we have 665 employees and generate the majority of our revenue and profitability. The total annual compensation for the median U.S. based employee is $180,752 The ratio of our CEO’s annual total compensation to our median U.S. based employee’s total compensation for fiscal year 2022 is 31 to 1.
30
Table of Contents
Summary Compensation Table Total for CEO(1)(2) |
Compensation Actually Paid to CEO(3) |
Average Summary Compensation Table Total for Non-CEO Named Executive Officers(1)(2) |
Average Compensation Actually Paid to Non-CEO Named Executive Officers(3) |
Value of Initial Fixed $100 Investment Based On: |
||||||||||||||||||||||||||||
Year |
Total Shareholder Return(4) |
Peer Group Total Shareholder Return(5) |
Adjusted Net Income(6) |
Adjusted Diluted Earnings Per Share(7)(8) |
||||||||||||||||||||||||||||
2022 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
2021 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
2020 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
CEO |
Other NEOs |
|||||||||||||||||||||||
2022 |
2021 |
2020 |
2022 |
2021 |
2020 |
|||||||||||||||||||
SCT Total Compensation |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Minus SCT Stock Awards Value |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Plus Value of Unvested Equity Awards Granted in respective year |
||||||||||||||||||||||||
Change in Value of Unvested Equity Awards during respective year |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Change in Value of Equity Awards Vested in respective year |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Total Compensation Actually Paid |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Year |
Compensation Actually Paid to CEO(3)[(4)] |
Year over Year Increase (Decrease) |
Average Compensation Actually Paid to Non-CEO Named Executive Officers(3)(4) |
Year over Year Increase (Decrease) |
Adjusted Net Income(6) |
Year over Year Increase (Decrease) |
Adjusted Diluted Earnings Per Share |
Year over Year Increase (Decrease) |
||||||||||||||||||||||||
2022 |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
2021 |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
2020 |
$ | - |
% | $ | % | $ | - |
% | $ | - |
% | |||||||||||||||||||||
Year |
Total Shareholder Return(4) |
Year over Year Increase (Decrease) |
Peer group Total Shareholder Return(5) |
Year over Year Increase (Decrease) |
||||||||||||
2022 |
$ | % | $ | % | ||||||||||||
2021 |
$ | % | $ | % | ||||||||||||
2020 |
$ | - |
% | $ | - |
% | ||||||||||
| • |
Table of Contents
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Exchange Act, the Company is providing its shareholders an opportunity to indicate whether they support the named executive officer compensation as described in this proxy statement. This advisory vote, commonly referred to as a “Say on Pay” vote, is not intended to address any specific item of compensation, but instead relates to the “Compensation Discussion and Analysis,” the tabular disclosures regarding named executive officer compensation and the narrative disclosures accompanying the tabular presentation. These disclosures allow you to view the Company’s executive compensation program and the application of the Company’s compensation philosophies for the years presented. This advisory vote will be presented on an annual basis unless otherwise disclosed.
The Company’s primary objectives relating to executive compensation are to (1) align the financial interests of its executives with those of its shareholders by linking a substantial portion of each executive’s compensation to the achievement of financial objectives for the Company as a whole and (2) attract and retain highly qualified executives with salaries and incentive programs that are competitive with companies of similar or greater size within its industry.
The Company’s executive compensation programs, which focus on operating performance, earnings growth and share price appreciation, reflect the Company’s “pay for performance” approach to compensation. Annually, our executives have the opportunity to earn cash payouts and equity awards based on the achievement of adjusted diluted net earnings per share growth targets specified by the Company’s Compensation Committee. Another key aspect of the executive compensation programs is that a meaningful part of total compensation is paid with performance-based restricted stock unit grants that not only requires the achievement of a performance-based target to earn the grant, but also has a three-year vesting period following the date of grant which occurs after the performance period. The vesting requirement of the equity portion of the compensation program (1) extends the value of the current year compensation program for an additional three-year period, (2) creates a strong incentive for the executives to increase shareholder value, and (3) serves as a powerful executive retention tool. This equity component is also essential to the compensation and retention of the Company’s executives since the Company does not provide retirement (pension or 401(k) match) benefits for its senior executives and offers no perquisites. Finally, our CEO and COO are significant shareholders which continues to provide an incentive for the CEO and COO to focus on share value appreciation in order to maximize the benefit of the vested awards.
In 2022, for executive compensation purposes, the Company’s adjusted diluted earnings per share was $1.52, as compared to the Superior target of $1.46. This resulted in performance-based cash and equity bonuses above the “superior” level payout under the Company’s 2022 executive compensation plan. The adjusted diluted earnings per share amount of $1.52 used for compensation payout purposes includes a long-term effective tax rate for all four quarters. The Company reported actual annual adjusted diluted earnings per share of $1.50 in its fourth quarter earnings announcement which included a GAAP tax rate for 2022. Since the compensation program targets for the Company’s named executive officers approved by the Compensation Committee in February of 2022 were based on a long-term effective tax rate, the Compensation Committee retained the long-term tax rate for the purposes of computing compensation results. Please refer to Appendix A, “Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results” for a reconciliation of adjusted results, including adjusted diluted earnings per share, to reported GAAP results for 2022.
The Company’s Compensation Committee has once again established challenging performance targets for 2023. The Company’s adjusted diluted net earnings per share must improve at least 13% from 2022 in order for the named executive officers to earn their “Goal” cash and equity performance incentive awards. The Company’s adjusted diluted net earnings per share must improve at least 20% in order for the named executive officers to earn their “Superior” cash and equity performance incentive awards. For 2023, adjusted diluted earnings per share will be calculated using a GAAP tax rate.
34
Table of Contents
For 2023, Mr. Ramirez will also participate in our senior leadership equity program which vests a portion of the participant’s annual equity opportunity after the conclusion of the compensation year subject to the achievement of personal management objectives established for each individual.
See “Compensation Discussion and Analysis” beginning on page 15 of this proxy statement for more information regarding aspects of the Company’s executive compensation programs and the Compensation Committee’s decisions in respect of executive compensation in 2022. See also “Narrative Disclosure to Summary Compensation Table and Plan-Based Awards Table” beginning on page 25 of this proxy statement for more information regarding the terms contained in the employment agreements of our named executive officers.
For the reasons discussed in this proxy statement, including under “Compensation Discussion and Analysis” above, the Board unanimously recommends that shareholders vote in favor of the following resolution:
“Resolved, that the shareholders approve the compensation of the Company’s named executive officers as disclosed in this proxy statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and the related footnotes and narrative disclosures.”
Although this vote is advisory and is not binding on the Company, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote is required to approve the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 2
35
Table of Contents
PROPOSAL 3
ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
The Dodd-Frank Act requires that we submit to a vote of our shareholders once every six years a non-binding advisory proposal on the frequency of future “Say on Pay” votes. The last year that we submitted a proposal for “Say on Pay” to our shareholders as required by the Dodd-Frank Act and SEC rules and regulations was in 2017, therefore a vote of our shareholders is required this year. Shareholders are entitled to vote on an advisory basis as to whether future “Say on Pay” votes should occur every one, two or three years, or to abstain from voting. At the 2017 Annual Meeting, shareholders voted in favor of a frequency of holding future advisory votes on executive compensation of every year. This year, the Board recommends that shareholders vote “every year” for the non-binding advisory proposal on the frequency of future advisory votes on executive compensation. The Board believes that a vote every year is closely aligned with the goal of our compensation programs to support value creation and to incentivize and reward performance. We believe having yearly votes will allow shareholders to better judge our programs in relation to our performance on an annual basis and is consistent with our policy of seeking regular input from our shareholders on our corporate governance matters and compensation programs.
As this proposal is advisory, and not binding on the Board or the Company, the Board my decide to hold an advisory vote on executive compensation more or less frequently than the option recommended by shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS SELECT “EVERY YEAR” ON PROPOSAL 3 RECOMMENDING THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION.
36
Table of Contents
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board currently consists of Messrs. Hamlin (Chairman), Harris, Rivero and Wix and Ms. Bofill. The Audit Committee is composed of “independent” directors as defined in standards promulgated by the SEC and the Nasdaq. The Board determined that Mr. Hamlin, Mr. Rivero and Ms. Bofill are “audit committee financial experts” under the SEC rules. The Company’s Audit Committee is governed by a written charter. A copy of the Audit Committee Charter can be found on the Company’s website at https://www.thehackettgroup.com/governance/. All members of the Audit Committee share equally the responsibility for the performance of the functions set forth below.
The Audit Committee discussed with RSM US LLP (“RSM”) the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. In addition, the Audit Committee has discussed with RSM its independence from management and the Company, and it received the written disclosures and letter from RSM as required by applicable requirements of the PCAOB regarding RSM’s communications with the Audit Committee concerning independence.
The Audit Committee discussed with RSM the overall scope and plans for the Company’s audit. The Audit Committee meets with RSM, without management present when appropriate, to discuss the results of their quarterly reviews and annual examination, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee held 6 meetings during fiscal 2022.
The Audit Committee approved all audit and non-audit services provided by RSM in fiscal 2022, as described in “Pre-Approval of Non-Audit Services” below.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal control over financial reporting. In performing its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements of the Company for the fiscal year ended December 30, 2022 with management and with representatives of RSM. The Audit Committee also reviewed, and discussed with management and representatives of RSM, management’s assessment and report and RSM’s report and attestation on the effectiveness of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) inclusion of the audited consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended December 30, 2022, filed with the SEC.
Pre-Approval of Non-Audit Services
All audit-related services, tax services and other services were approved by the Audit Committee, which concluded that the provision of such services by RSM was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Policy for Pre-Approval of Non-Audit Services provides for pre-approval of non-audit-related, tax and other services specifically described by the Audit Committee in the policy on an annual basis. In addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. If the entire Audit Committee is not able to convene so that permitted non-audit services desired to be performed by the Company’s independent auditors can be reviewed and approved on a timely basis, the Audit Committee Chairman is authorized to approve such services and make a verbal report to the full Audit Committee as to the nature and cost of such services at the next Audit Committee meeting following such approval.
Respectfully submitted,
Audit Committee
Richard N. Hamlin, Chairman
Maria A. Bofill
John R Harris
Robert A. Rivero
Alan T.G. Wix
37
Table of Contents
PROPOSAL 4
TO RATIFY THE APPOINTMENT OF RSM US LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 29, 2023
The Audit Committee of the Board has appointed RSM US LLP (“RSM”) as the independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 29, 2023. During fiscal year 2022, RSM served as the Company’s independent registered certified public accounting firm and also provided other audit-related services. See “Fees Paid to Independent Accountants” below.
The appointment of RSM is being presented to the shareholders for ratification. If the appointment is not ratified, the Audit Committee of the Board will consider whether it should select a different independent registered public accounting firm. The Company’s bylaws do not require that the shareholders ratify the appointment of RSM as its independent auditors. This proposal is being submitted to the shareholders because the Company believes it is a matter of good corporate practice. The Company expects that representatives of RSM will be present at the annual meeting in person or by video-conference. They will be given an opportunity to make a statement if they desire to do so, and it is expected that they will be available to respond to appropriate questions.
Fees Paid to Independent Accountants
The following table sets forth fees for professional services provided by RSM and associated entities, including RSM International entities for the audit of the Company’s consolidated financial statements for fiscal years 2022 and 2021 and fees billed for audit-related services, tax services, and all other services rendered by RSM for fiscal years 2022 and 2021:
| 2022 | 2021 | |||||||
| Audit Fees(1) |
$ | 554,992 | $ | 535,890 | ||||
| Audit-Related Fees(2) |
$ | 17,850 | $ | 13,390 | ||||
| Tax Fees(3) |
$ | — | $ | — | ||||
| All Other Fees(4) |
$ | 150,000 | $ | — | ||||
| (1) | Represents aggregate fees for professional services provided in connection with the audit of the Company’s annual consolidated financial statements, reviews of its quarterly consolidated financial statements and audit services provided in connection with other statutory or regulatory filings. Fees also include the report and attestation on the effectiveness of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. |
| (2) | Represents fees for services in connection with audits of the Company’s benefit plans, mergers and acquisitions and recently issued accounting pronouncements. |
| (3) | Represents fees for services provided in connection with the Company’s tax compliance program. |
| (4) | Represents fees for services provided to the Company not otherwise included in the categories seen above. |
If you are a beneficial owner of shares held on your behalf in “street name” by a broker or other nominee, and you do not provide your broker or other nominee with voting instructions, your broker or other nominee will have discretion to vote your shares with respect to this proposal. The proposal will be approved by the vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 4: TO RATIFY THE APPOINTMENT OF RSM US LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 29, 2023.
38
Table of Contents
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review, Approval or Ratification of Related Person Transactions
In accordance with the charter for the Audit Committee, the members of the Audit Committee, all of whom are independent directors, review and approve in advance any transaction which involves “related persons,” that is, parties whose relationship with the Company may enable them to negotiate terms more favorable than those available to other, more independent parties and all other transactions to the extent required by Nasdaq or applicable law to be approved by an audit committee or comparable body. For purposes of these procedures, the individuals and entities that are considered “related persons” include:
| • | any of the Company’s directors, nominees for director and executive officers; |
| • | any person known to be the beneficial owner of five percent or more of the Company’s common stock (a “5% Shareholder”); and |
| • | any immediate family member, as defined in Item 404(a) of Regulation S-K, of a director, nominee for director, executive officer and 5% Shareholder. |
The following related person transactions occurred during 2022 and 2023 on a year to date basis:
On February 25, 2022, the Company repurchased (i) 3,962 shares of its common stock from Maria Bofill, a member of the Board of Directors; (ii) 5,151 shares of its common stock from John Harris, a member of the Board of Directors; (iii) 4,962 shares of its common stock from Richard Hamlin, a member of the Board of Directors: (iv) 4,962 shares of its common stock from Robert Rivero, a member of the Board of Directors; and (v) 11,962 shares of its common stock from Alan T.G. Wix, a member of the Board of Directors. These repurchases were made at a price per share of $20.50, which was the closing price of a share of our common stock on the Nasdaq on February 24, 2022.
On February 23, 2023, the Company repurchased (i) 19,979 shares of its common stock from Richard Hamlin, a member of the Board of Directors; (ii) 3,744 shares of its common stock from John Harris, a member of the Board of Directors; (iii) 3,744 shares of its common stock from Robert Rivero, a member of the Board of Directors; and (iv) 10,000 shares of its common stock from Alan T.G. Wix, a member of the Board of Directors. These repurchases were made at a price per share of $18.96, which was the closing price of a share of our common stock on the Nasdaq on February 23, 2023.
The repurchase transactions involving our directors were completed under a repurchase program for the Company’s outside directors which was approved by Audit Committee and were affected as part of the Company’s existing share repurchase program.
39
Table of Contents
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial ownership of common stock as of March 15, 2023 by:
| • | each person (or group of affiliated persons) known by the Company to be the beneficial owner of more than 5% of the outstanding common stock; |
| • | each of the named executive officers; |
| • | each director and nominee of the Company; and |
| • | all of the Company’s directors and executive officers as a group. |
| Name of Beneficial Owner |
Amount and Nature of Beneficial Ownership (#)(12) |
Percent of Class (%)(12) |
||||||
| Ted A. Fernandez(1)(12) |
1,581,155 | 5.8 | ||||||
| David N. Dungan(2)(12) |
685,110 | 2.5 | ||||||
| Robert A. Ramirez(3)(12) |
111,920 | 0.4 | ||||||
| Maria Bofill(4)(12) |
4,744 | * | ||||||
| Richard N. Hamlin(5)(12) |
30,295 | * | ||||||
| John R. Harris(6)(12) |
22,191 | * | ||||||
| Robert A. Rivero(7)(12) |
— | * | ||||||
| Alan T .G. Wix(8)(12) |
6,559 | * | ||||||
| Blackrock, Inc.(9) |
2,661,942 | 9.8 | ||||||
| Trigran Investments, Inc.(10) |
1,752,359 | 6.4 | ||||||
| The Vanguard Group(11) |
1,672,798 | 6.2 | ||||||
| All current directors and current named executive officers as a |
2,441,974 | 9.0 | ||||||
| * | Represents less than 1%. |
| (1) | Excludes 245,800 unvested performance-based restricted stock units that would vest upon a change of control, Mr. Fernandez’s death, disability, resignation for good reason or involuntary termination without cause. Includes 157,091 of shares which are held in trust for the benefit of Mr. Fernandez’ children. |
| (2) | Excludes 129,045 unvested performance-based restricted stock units that would vest upon a change of control, Mr. Dungan’s death, disability, resignation for good reason or involuntary termination without cause. Includes 92,652 shares held in the DND Family Trust. |
| (3) | Excludes 41,313 unvested restricted stock units that would vest upon a change of control, Mr. Ramirez’s death, disability, resignation for good reason or involuntary termination without cause. |
| (4) | Excludes 3,282 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service on the Board. |
| (5) | Excludes 3,282 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service on the Board. Also includes 1,300 shares held by Mr. Hamlin’s wife in an individual retirement account. |
| (6) | Excludes 3,282 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service on the Board. Also includes 22,191 vested restricted stock units of which Mr. Harris elected to defer receipt in connection with the Company’s Outside Director Compensation program. |
| (7) | Excludes 3,282 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service on the Board. |
40
Table of Contents
| (8) | Excludes 3,282 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service on the Board. |
| (9) | The information reported is based on a Schedule 13G/A filed with the SEC on February 3, 2023 by BlackRock, Inc. (“BlackRock”). The statement discloses that, as of the date specified in the filing, BlackRock had sole voting power with respect to 2,567,358 shares of common stock and sole dispositive power with respect to 2,661,942 shares of common stock. The address for BlackRock is 55 East 52nd Street, New York, NY 10055. For additional disclosure regarding the persons affiliated with BlackRock and their voting and dispositive powers with regard to the Company’s common stock, please refer to the Schedule 13G/A filed with the SEC on February 3, 2023. |
| (10) | The information reported is based on a Schedule 13G/A filed with the SEC on February 10, 2023 by Trigran Investments, Inc. (“Trigran”). The statement discloses that, as of date specified in the filing, Trigran, in accordance with Rule 13d-1(k)(1) of the Act, had shared voting power with respect to 1,657,941 shares of common stock and shared dispositive power with respect to 1,752,359 shares of common stock. The address for Trigran is 630 Dundee Road, Suite 230, Northbrook, IL 60062. For additional disclosure regarding the persons affiliated with Trigran and their voting and dispositive powers with regard to the Company’s common stock please refer to the Schedule 13G/A filed with the SEC on February 10, 2023. |
| (11) | The information reported is based on a Schedule 13G/A filed with the SEC on February 9, 2023 by The Vanguard Group (“Vanguard”). The statement discloses that, as of date specified in the filing, Vanguard had sole dispositive power with respect to 1,604,364 shares of common stock, shared voting power with respect to 45,112 shares of common stock and shared dispositive power with respect to 68,434 shares of common stock. The address for Vanguard is 100 Vanguard Boulevard, Malvern PA 19355. For additional disclosure regarding the persons affiliated with Vanguard and their voting and dispositive powers with regard to the Company’s common stock please refer to the Schedule 13G/A filed with the SEC on February 9, 2023. |
| (12) | The persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable, and except as indicated in the other footnotes to this table. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock underlying restricted stock units, held by that person that are currently vested or exercisable, or that will vest or become exercisable within 60 days after March 15, 2023 are both deemed outstanding and included in the number of shares beneficially owned by such person. |
41
Table of Contents
SHAREHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 2024
Any proposal or proposals by a shareholder intended to be included in the Company’s proxy statement and form of proxy relating to the 2024 Annual Meeting of Shareholders must be received by the Company no later than November 23, 2023, pursuant to the proxy solicitation rules of the SEC. Nothing in this paragraph shall be deemed to require the Company to include in its proxy statement and proxy relating to the 2024 Annual Meeting of Shareholders any shareholder proposal which may be omitted from the Company’s proxy materials pursuant to applicable regulations of the SEC in effect at the time such proposal is received. Pursuant to the Company’s bylaws, all other shareholder proposals to be presented at the 2024 Annual Meeting of Shareholders must be submitted in writing and received by the Secretary of the Company at the principal executive offices of the Company not earlier than February 4, 2024 and not later than March 4, 2024. However, if the date of the 2024 Annual Meeting of Shareholders is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the 2023 Annual Meeting, the shareholder must deliver the notice not earlier than the 90th day prior to the annual meeting and not later than the close of business on the later of the 60th day prior to the annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The shareholder’s notice with respect to such proposal must comply with the requirements set forth in the Company’s bylaws.
Similarly, shareholders may nominate director candidates for the 2024 Annual Meeting, provided that such nominations must be submitted in writing and received by the Secretary of the Company at the principal executive offices of the Company not earlier than February 4, 2024 and not later than March 4, 2024. However, if the date of the 2024 Annual Meeting of Shareholders is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the 2023 Annual Meeting, the shareholder must deliver the notice not earlier than the 90th day prior to the annual meeting and not later than the close of business on the later of the 60th day prior to the annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. If the number of directors to be elected to the Board is increased and there is no public announcement by the Company naming all of the nominees for director or specifying the size of the increased board at least 70 days prior to the first anniversary of the preceding annual meeting, then a shareholder wishing to nominate a director for the new position must deliver the notice not later than the close of business on the tenth day following the day on which public announcement of the date of the meeting is first made.
The shareholder’s notice nominating a candidate for director must set forth:
| • | as to each person whom the shareholder proposes to nominate for election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Section 14(a) of the Securities Exchange Act of 1934 and the rules and regulations thereunder (together with the nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and |
| • | as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, the name and address of the shareholder, as it appears on the Company’s books, and of the beneficial owner, the class and number of shares of the Company that are owned of record and beneficially by the shareholder and beneficial owner, respectively, and a representation that the shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. |
In addition to satisfying the foregoing requirements under the Company’s bylaws, to comply with the universal proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders who intend to solicit proxies in support of director nominees other that the Company’s nominees must provide notice that sets for the information required by Rule 14a-19 under the Exchange Act no later than March 4, 2024.
42
Table of Contents
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
Upon written request, the Company will provide, without charge, a copy of its Annual Report on Form 10-K for its fiscal year ended December 30, 2022. For a copy of the Company’s Form 10-K, please contact Josie Estevez-Lugo at 1001 Brickell Bay Drive, 30th Floor, Miami, FL 33131, telephone (305) 375-8005, facsimile (305) 379-8810.
43
Table of Contents
OTHER BUSINESS TO BE TRANSACTED
As of the date of this proxy statement, the Board knows of no other matters that may come before the annual meeting. However, if any other matters properly come before the meeting, it is the intention of the proxy holders to vote or act in accordance with their best judgment with respect to such matters.
By Order of the Board of Directors,
|
|
| Frank A. Zomerfeld |
| Secretary |
| March 23, 2023 |
44
Table of Contents
APPENDIX A
RECONCILIATION OF REPORTED (GAAP) TO ADJUSTED (NON-GAAP) RESULTS
The following table sets forth the GAAP income from continuing operations before income taxes reconciliation to Company adjusted net income per common share for the twelve months ended December 30, 2022, assuming a long-term net tax rate of 25% (in thousands, except per share amounts):
| GAAP net income |
$ | 40,802 | ||
| Non-cash stock compensation expense |
10,252 | |||
| Acquisition-related non-cash stock compensation expense |
15 | |||
| Restructuring charges and asset impairment reversal |
(651 | ) | ||
| Amortization of intangible assets |
154 | |||
|
|
|
|||
| Company adjusted income before income taxes |
50,572 | |||
| Company adjusted income tax expense |
1,917 | |||
|
|
|
|||
| Company adjusted net income |
$ | 48,655 | ||
|
|
|
|||
| Company adjusted diluted net income per common share |
$ | 1.52 | ||
| Weighted average common and common equivalent shares outstanding |
31,962 |
The foregoing table is being presented solely because the Company’s executive compensation program for 2022 used adjusted net income assuming a long-term tax rate of 25%. For 2023, the Company’s executive compensation program will use adjusted diluted earnings per share calculated using a GAAP tax rate.
The following table sets forth the GAAP income from continuing operations before income taxes reconciliation to Company adjusted net income per common share for the twelve months ended December 30, 2022, utilizing the GAAP income tax rate (in thousands, except per share amounts):
| GAAP net income |
$ | 40,802 | ||
| Non-cash stock compensation expense |
10,252 | |||
| Acquisition-related non-cash stock compensation expense |
15 | |||
| Restructuring charges and asset impairment reversal |
(651 | ) | ||
| Amortization of intangible assets |
154 | |||
|
|
|
|||
| Company adjusted income before income taxes |
50,572 | |||
| GAAP income tax expense |
2,562 | |||
|
|
|
|||
| Company adjusted net income |
$ | 48,010 | ||
|
|
|
|||
| Company adjusted diluted net income per common share |
$ | 1.50 | ||
| Weighted average common and common equivalent shares outstanding |
31,962 |
A-1
Table of Contents
| Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. |
| Your vote matters – here’s how to vote! | ||
| You may vote online or by phone instead of mailing this card. | ||
| Votes submitted electronically must be received by 1:00 a.m., Central Time, on May 4, 2023. | ||
| Online Go to www.investorvote.com/hckt or scan the QR code – login details are located in the shaded bar below. | ||
| Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada | ||
| Save paper, time and money! Sign up for electronic delivery at www.investorvote.com/hckt | ||
| 2023 Annual Meeting Proxy Card |
| IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
|
A
|
Proposals –The Board of Directors recommend a vote FOR the nominees listed and FOR Proposals 2, 4 and 1 YEAR on Proposal 3. |
| 1. Election of Directors: | ||||||||||||||||||||||
| For | Against | Abstain | ||||||||||||||||||||
| 01 - John R. Harris |
☐ | ☐ | ☐ | |||||||||||||||||||
| For | Against | Abstain | ||||
| 2. To approve, in an advisory vote, the Company’s executive compensation; |
☐ | ☐ | ☐ | |||
| 4. To ratify the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 29, 2023 |
☐ | ☐ | ☐ | |||
| 1 Year |
2 Years | 3 Years |
Abstain | |||||
| 3. An advisory vote on the approval of the frequency of shareholder votes on executive compensation; |
☐ | ☐ | ☐ | ☐ |
|
B
|
Authorized Signatures – This section must be completed for your vote to count. Please date and sign below. |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
| Date (mm/dd/yyyy) – Please print date below.
|
Signature 1 – Please keep signature within the box. | Signature 2 – Please keep signature within the box. | ||||||
| / / |
|
|
1 U P X |
03RZ0A
Table of Contents
2023 Annual Meeting Admission Ticket
2023 Annual Meeting of The Hackett Group, Inc. Shareholders
Thursday, May 4, 2023, 11:00 am ET
The Hackett Group, Inc. Company Headquarters
1001 Brickell Bay Drive, Suite 3000
Miami, Florida
Upon arrival, please present this admission ticket and photo identification at the registration desk.
The proxy statement and The Company’s Annual Report on Form 10-K are available at:
www.edocumentview.com/hckt
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders.
The material is available at: www.investorvote.com/hckt
|
Small steps make an impact.
Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/hckt
|
| IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
Notice of 2023 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting – May 4, 2023
Ted A. Fernandez and Robert A. Ramirez, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of The Hackett Group, Inc. to be held on May 4, 2023 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR the nominees and FOR Proposals 2, 4 and 1 YEAR on Proposal 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
(Items to be voted appear on reverse side)
|
C
|
Non-Voting Items |
| Change of Address – Please print new address below.
|
Comments – Please print your comments below.
|
Meeting Attendance | ||||||||
| Mark box to the right if you plan to attend the Annual Meeting. | ☐ |