UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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

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    PRA GROUP, INC.

(Name of Registrant as Specified In Its Charter)

N/A

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

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About PRA Group, Inc.

Headquartered in Norfolk, Virginia and incorporated in Delaware, we are a global financial and business services company with operations in the Americas and Europe. Our primary business is the purchase, collection and management of portfolios of nonperforming loans. The accounts we acquire are primarily the unpaid obligations of individuals owed to credit grantors, which include banks and other types of consumer, retail and auto finance companies. We acquire portfolios of nonperforming loans in two broad categories: Core and Insolvency. Our Core operation specializes in purchasing and collecting nonperforming loan accounts, which we purchased at a substantial discount to face value since either the credit grantor and/or other third-party collection agencies have been unsuccessful in collecting the full balance owed. Our Insolvency operation consists primarily of purchasing and collecting nonperforming loan accounts subject to bankruptcy proceeding. We also provide the following fee-based services: class action claims recovery services and servicing of consumer bankruptcy accounts in the United States (“U.S.”). For more information about our business, please refer to our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 12, 2019. The information contained on, or that can be accessed through our website, including any document referenced in this Proxy Statement, is not, and shall not be deemed to be, a part of this Proxy Statement.

 Notice of Annual Meeting of Stockholders

  FELLOW STOCKHOLDERS:

We are pleased to invite you to the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of PRA Group, Inc. (the “Company”) to be held on Thursday, June 13, 2019 at 130 Corporate Boulevard, Norfolk, Virginia 23502 at 12:00 noon Eastern time. At the Annual Meeting, stockholders will be asked to vote on the following items:

Stockholders of record as of the close of business on April 16, 2019 are entitled to receive notice of, and to vote at, the Annual Meeting. Included in these materials are the Proxy Statement and the Company’s 2018 Annual Report to Stockholders, which are first being made available to stockholders on or about April 29, 2019. If you received printed copies of the proxy materials, you also received a proxy card or voting instruction form.

Every vote is important and valued by the Company. Therefore, we encourage you to vote your shares through the internet, by phone or, if you received a printed copy of the proxy card, by mail, using the instructions provided below even if you plan to attend the Annual Meeting.

By Order of the Board of Directors,

Steven D. Fredrickson		LaTisha S. Owens
Executive Chairman		Corporate Secretary
April 29, 2019

YOU CAN VOTE IN ONE OF FOUR WAYS
		Visit the website listed on your notice of meeting or proxy card to vote VIA THE INTERNET				If you received printed proxy materials, sign, date and return your proxy card in the envelope provided to vote BY MAIL
		Call the telephone number on your proxy card to vote BY TELEPHONE				Attend the Annual Meeting to vote IN PERSON
Important notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on June 13, 2019: Our Proxy Statement and 2018 Annual Report to stockholders are available at http://www.viewproxy.com/PRAGroup/2019.

PRA Group, Inc.

2019 Proxy Statement

Table of Contents

2019 Proxy Statement  |  PRA Group    

120 CORPORATE BOULEVARD

NORFOLK, VIRGINIA 23502

Proxy Statement

Annual Meeting of Stockholders

June 13, 2019

Purpose

This Proxy Statement is being made available to stockholders on or about April 29, 2019 in connection with a solicitation by the Board of PRA Group, Inc. (the “Company,” “PRA,” “we,” “us” or “our”) of proxies to be voted at the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjournments or postponements thereof, to be held at 12:00 noon, Eastern time, Thursday, June 13, 2019, at the Company’s headquarters at 130 Corporate Boulevard, Building III, Second Floor, Norfolk, Virginia 23502, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. For information concerning attending the Annual Meeting, please see page 44 of this Proxy Statement.

Record Date

At the close of business on April 16, 2019, which is the record date for the Annual Meeting (the “Record Date”), there were 45,383,831 shares of our common stock outstanding and entitled to vote at the Annual Meeting.

Quorum

In order for business to be conducted at the Annual Meeting, a majority of the issued and outstanding shares of the Company’s common stock entitled to vote, represented in person or by proxy, must be present.

Vote Required

Each stockholder will have one vote for each share of the Company’s common stock held as of the Record Date. Shares of our common stock represented by properly executed proxies will be voted at the Annual Meeting in accordance with the choices indicated on the proxy. Abstentions on a specific proposal will be considered as present at the Annual Meeting and will be counted for purposes of determining whether a quorum is present, but will have no effect on the outcome of any proposal.

If you provide specific voting instructions, your shares will be voted as you instruct. If you vote through the internet or by phone and vote as recommended by our Board or if you sign and return your proxy card, but do not provide instructions, your shares will be voted as follows:

With respect to Proposal 1, the election of directors, each director nominee shall be elected by plurality vote. Proposals 2 and 3 shall be approved if a majority of the shares present in person or represented by proxy and entitled to vote on the matter, vote in favor of the applicable proposal.

2019 Proxy Statement  |  PRA Group    1

Corporate Governance

The primary responsibility of our Board is to exercise its business judgment while acting in the best interests of the Company and its stockholders. Our Board has responsibility for establishing broad corporate policies, setting strategic direction, and overseeing management, which is responsible for the daily operations of the Company. Our Board must fulfill its responsibilities consistent with its fiduciary duties to the Company and its stockholders and in compliance with applicable laws and regulations. To assist our Board with fulfilling its duties, our Board has implemented a leadership structure that supports its oversight responsibilities, created standing and ad hoc committees to formally handle duties that our Board deems significant, and adopted policies and procedures that reflect our Board’s commitment to good corporate governance, including Corporate Governance Guidelines, a Code of Conduct and a policy to approve transactions with related parties.

Board Leadership

Our Board believes that whether to have the same individual occupy the offices of Chairman of the Board and CEO should be decided by the Board, from time to time, in its business judgment after considering relevant factors, including the specific needs of the Company and what is in the best interests of the Company and its stockholders.

Currently, the roles of Chairman and CEO are separated, which our Board believes is appropriate. Separation of the roles allows Mr. Stevenson to focus on managing the daily operations of the Company in his role as CEO, while Mr. Fredrickson oversees our Board’s significant functions. As Executive Chairman, Mr. Fredrickson has leveraged his extensive experience in the financial sector and past daily operational management experience to effectively and efficiently guide our Board by focusing its attention on issues of greatest importance to the Company and its stockholders.

Our Corporate Governance Guidelines provide that a Lead Independent Director shall be selected by the independent directors whenever the individual selected to serve as Chairman of the Board is also the CEO or otherwise not independent. Lance L. Weaver currently serves as the Lead Independent Director since Mr. Fredrickson is not independent. Mr. Weaver’s duties and responsibilities as the Lead Independent Director include:

Code of Conduct

Our Board has adopted a Code of Conduct, which applies to our directors and all employees of the Company, including our CEO, CFO and principal accounting officer. Our Code of Conduct, which can be found on our website at www.pragroup.com, governs the work behavior and business relationships of the Company’s directors, officers, employees and independent third parties acting on behalf of the Company and sets forth the Company’s policies regarding ethics and standards of business conduct, including conflicts of interest and insider trading. We will disclose amendments to our Code of Conduct, as well as any waivers of the Code, on our website as permitted by SEC rules. During 2018, there were no waivers of our Code of Conduct for any director or executive officer.

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Corporate Governance

Board’s Role in Risk Oversight

Our Board recognizes that the Company faces a broad range of risks, including financial, regulatory, operational, political, reputational, governance, and legal, that may affect the Company’s ability to execute corporate strategies and fulfill business objectives. The Board is responsible for overseeing the Company’s risk profile and management’s processes for assessing and managing risk, while management is responsible for daily risk management.

The Board has assigned to its Committees responsibility for reviewing, evaluating and making recommendations to the Board concerning important risk categories that fall within their scope of responsibility, including the following:

Management’s role in assisting the Board with its risk oversight responsibility is critical. The Chief Compliance Officer attends all meetings of the Compliance Committee and meets in executive session with the Board at least quarterly. Other members of senior management routinely attend Board meetings and report on their activities, including significant risks. These reports include risk considerations and discussions concerning actions and strategies for monitoring, managing and mitigating any risks identified. The Company’s Compliance Department documents known compliance risks, assesses the sufficiency of risk identification, and recommends risk management and mitigation strategies.

Policy for Approval of Related Party Transactions

Our Board has adopted a written policy for review, approval and disclosure of transactions between the Company and directors, director nominees, executive officers, beneficial owners of more than 5% of the Company’s common stock and immediate family members of any of the foregoing (each, a “related party”). Under our Related Party Transaction Policy, the Nominating and Corporate Governance Committee must approve or ratify all related party transactions involving amounts greater than $120,000 in a calendar year and in which a related party has a direct or indirect material interest. Under the Policy, certain transactions with related parties are deemed pre-approved, such as transactions in which the related party’s interest arises solely from the person’s service as a director of another entity that is a party to the transaction, certain charitable contributions and transactions determined by competitive bids. In assessing a related party transaction, the Nominating and Corporate Governance Committee considers several factors including, the commercial reasonableness of the terms of the transaction, the materiality of the transaction to the Company and the impact of the transaction on the related party’s independence.

2019 Proxy Statement  |  PRA Group    3

Our Board and its Committees

Building Our Board

Our Board recognizes that the duties and responsibilities of a director require highly skilled individuals with diverse qualities, skills, attributes and professional experience. Our Board and the Nominating and Corporate Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of our Board’s overall composition and the Company’s current and future needs. The Nominating and Corporate Governance Committee reviews potential candidates for director vacancies and recommends nominees to our Board for approval and may retain, from time to time, a third-party search firm to assist in identifying potential candidates.

Our Board and Nominating and Corporate Governance Committee have determined that there are general requirements for service on the Board that all directors must possess, including the following:

While our Board does not have a specific diversity and inclusion policy, it does consider diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership.

Director Qualifications

In addition to the characteristics each director must possess, our Board and the Nominating and Corporate Governance Committee have identified certain qualifications, experiences, knowledge, skills and abilities that are important to be represented on our Board as a whole, in light of the Company’s current needs and business priorities. The table below reflects the specific qualifications and experiences of each director that led our Board to conclude that the director is qualified to serve on our Board. While we expect each director to be knowledgeable in these areas, a “✓” in the chart below indicates that the item is a specific qualification or experience that the director brings to our Board. The absence of a “✓” for a particular item does not necessarily mean that the director does not possess that qualification or experience.

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Our Board and its Committees

Board Committees

The standing Committees of our Board are the Audit Committee, Compensation Committee, Compliance Committee and Nominating and Corporate Governance Committee. Each standing Committee operates pursuant to a written charter, which is available on the Investor Relations section of the Company’s website. All members of the standing Committees are independent as defined by NASDAQ Stock Market (“NASDAQ”) listing standards and SEC rules. In addition, each standing Committee has the ability to retain, at the Company’s expense, special legal, accounting or other consultants or advisors it deems necessary in the performance of its duties. Additional information concerning the standing Committees is included in the chart below.

2019 Proxy Statement  |  PRA Group    5

Our Board and its Committees

Director Independence

Our Board has established guidelines, which conform to the independence requirements included in the NASDAQ listing standards and SEC rules and regulations, to assist it in determining director independence. Based on these guidelines, our Board has determined that Messrs. Atal, Fain, Nussle, Olsen, Tabakin and Weaver and Mses. Brown, Connelly and Kyle are independent according to Nasdaq listing standards and SEC rules.

Director Attendance

During 2018, our Board held 12 meetings. Each director attended at least 75% of the aggregate number of meetings of our Board and the Committees on which the director served during 2018. Directors are encouraged to attend our Annual Meeting of Stockholders and all then serving directors attended the 2018 Annual Meeting.

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Our Board and its Committees

Communications with the Board

Stockholders may communicate with members of our Board by transmitting their correspondence by mail or email. All such communications should be sent to the attention of the Corporate Secretary as specified below:

Corporate Secretary

PRA Group, Inc.

120 Corporate Boulevard

Norfolk, Virginia 23502

corporatesecretary@pragroup.com

Communications that are addressed to one or more directors will be collected and organized by the Corporate Secretary and forwarded to the Executive Chairman, or if addressed to a specific independent director, to that director, as soon as practicable. Communications that are abusive, in bad taste or that present safety or security concerns may be handled differently. If multiple communications are received on a similar topic, the Corporate Secretary may forward only representative correspondence or summaries. The Company’s Corporate Secretary will determine whether any communication addressed to our entire Board as a whole should be properly addressed by our entire Board or by a Committee. If a response to the communication is warranted, the content and method of the response will be coordinated with the Company’s Corporate Secretary.

Stockholders may use the Company’s toll-free ethics hotline to communicate concerns to our Board in a confidential or anonymous manner by dialing 1-855-874-2659. All stockholder communications to the Company’s confidential ethics hotline are referred to the Lead Independent Director.

Director Compensation

Our Board, upon the recommendation of the Compensation Committee, establishes the compensation for our non-employee directors. Non-employee director compensation for 2018 included annual cash retainers for our Board members, Committee members and Chairs, and our Lead Independent Director. On the date of the 2018 Annual Meeting, each non-employee director also received an equity award valued at approximately $120,000 that consisted of RSUs, which vest on the anniversary of the grant date. The vesting schedule for the RSUs and the director stock ownership guidelines described below are intended to align our non-employee directors’ economic interests with those of our stockholders.

Details concerning our non-employee director compensation for 2018 are as follows:

2019 Proxy Statement  |  PRA Group    7

Our Board and its Committees

Our non-employee directors received the following compensation for service during 2018:

In addition to the compensation described above, each non-employee director is reimbursed for travel expenses incurred for attending Board meetings and reasonable expenses associated with participating in continuing education programs. The Company offers no retirement benefits or perquisites to directors. The Company maintains policies of directors’ and officers’ liability insurance covering all directors.

Mr. Fredrickson, who serves as the Executive Chairman of the Board and is not an executive officer of the Company, does not receive compensation for his service as a director. However, Mr. Fredrickson receives compensation from the Company consistent with the terms of the First Amended Executive Chairman Agreement dated May 18, 2018. This Agreement, which expires December 31, 2019, provides for a base salary of $600,000 and a target bonus of $650,000. For 2018, the Compensation Committee approved a cash bonus for Mr. Fredrickson under the Company’s 2018 Annual Bonus Plan of $585,000, which was 90% of target, and equity awards valued at $1,500,000 on the date of grant, with terms consistent with those described under “LTIP Awards” on page 27 of this Proxy Statement.

Director Stock Ownership Guidelines

Recognizing that each director should have a substantial personal investment in the Company, our Board has adopted stock ownership guidelines that apply to each non-employee director, which requires beneficial ownership by each non-employee director of shares of the Company’s common stock valued at not less than five times the director’s annual cash retainer for serving on our Board. Directors are expected to acquire and maintain this share ownership threshold within five years after joining our Board. As of March 31, 2019, all non-employee directors who have served on our Board for at least five years have met the stock ownership requirement.

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Proposal 1: Election Of Directors

Our Board currently consists of 11 members. Our Certificate of Incorporation provides that our Board shall be divided into three classes with each class consisting of approximately one-third of the total number of directors. Each director serves a three-year term or, if earlier, until the director’s resignation, death or removal, and one class of directors is eligible for election at each annual meeting of stockholders. Nominees for director that receive the affirmative votes of a plurality of shares represented and voting in person or by proxy at the Annual Meeting will be elected.

The Nominating and Corporate Governance Committee recommended to the Board that John H. Fain, Geir L. Olsen, and Kevin P. Stevenson be nominated for election to the Board to serve until the 2022 Annual Meeting of Stockholders. Any nominee for director who receives a greater number of votes withheld than votes for the director’s election must tender the director’s resignation for consideration by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will then consider the best interests of the Company and its stockholders and will recommend to the full Board what action should be taken with respect to the tendered resignation.

Messrs. Fain, Olsen and Stevenson have each consented to serve as a director if elected. We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve. However, if any nominee should become unable or unwilling to serve, proxies may be voted for another person nominated as a substitute by the Board or the Board may reduce the number of directors. If the Board nominates a substitute, the shares represented by all valid proxies will be voted for that nominee.

The Company did not receive any nominations or recommendations for director from stockholders for consideration at the Annual Meeting.

2019 Proxy Statement  |  PRA Group    9

Proposal 1: Election of Directors

Director Nominees – Three-Year Terms Expiring at the 2022 Annual Meeting of Stockholders

		JOHN H. FAIN Age: 70 Director Since 2010 Committees: Compensation (Chair), Nominating and Corporate Governance

 

Mr. Fain has decades of business management experience, including service as the President and CEO of Metro Information Services, Inc. (“Metro”), an information technology consulting services firm that Mr. Fain cofounded that went public in 1997 and subsequently merged with Keane, Inc. in 2001. Mr. Fain retired from Keane in 2002.

Director Qualifications:

Mr. Fain’s insight concerning the use of information technology strategies in large companies, his operational and financial expertise and his experience as a CEO and director of a public company qualify him to serve on the Board.

 

 

 

 

		GEIR L. OLSEN Age: 46 Director Since 2016 Committees: Compliance

 

Mr. Olsen was the CEO and a board member of Aktiv Kapital, AS, a leading European consumer debt purchaser, from September 2011 until its acquisition by the Company in 2014. From August 2014 until January 2016, Mr. Olsen served as the CEO of PRA Group Europe. Prior to Aktiv Kapital, Mr. Olsen held various leadership roles in sales, marketing and strategy with Cisco Systems and Tandberg, a Norwegian company that Cisco acquired in 2010. He also advised financial services and technology companies as a consultant at McKinsey & Company for five years prior to joining Tandberg. In 2013, Mr. Olsen cofounded Ubon Partners, an investment company focused on early stage companies in

technology and financial services, and was a partner until December 2018. He is currently a member of the board of directors of Avida Finans, a diversified lender in the Nordic region, Molo Finance, a digital mortgage lender based in the U.K., and Andenes Investments, a private investment company focused on financial services companies.

Director Qualifications:

Mr. Olsen’s qualifications as a director include an in-depth understanding of the European consumer finance and debt purchase markets, and experience in using technology to transform businesses.

 

 

 

 

		KEVIN P. STEVENSON Age: 55 Director Since 2015 Committees: None

 

Mr. Stevenson has served as the Company’s President and CEO since June 1, 2017. From August 2015 to June 1, 2017, he served as the Company’s President and Chief Administrative Officer and from 2002 to August 2015, Mr. Stevenson served as the Company’s Executive Vice President, Chief Financial and Administrative Officer, Treasurer and Assistant Secretary. Prior to co-founding the Company with Mr. Fredrickson in 1996, Mr. Stevenson held various positions with Household Recovery Services (“HRSC”), including Controller, and Household Bank, where he served as the controller of a regional processing center and also managed the collections, technology, research and ATM departments. While at Household Bank, he participated in numerous bank and branch acquisitions as well as divestitures. Mr. Stevenson is a certified public accountant (inactive).

Director Qualifications:

Mr. Stevenson’s qualifications to serve on the Board include his deep Company and industry knowledge and strong financial acumen.

 

 

 

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Proposal 1: Election of Directors

Directors with Terms Expiring at the 2020 Annual Meeting of Stockholders

		DANIELLE M. BROWN Age: 48 Director Since 2019 Committees: Audit, Compliance

 

Ms. Brown was elected as a Director of the Company on January 3, 2019. Brown is a certified Lean Six Sigma Black Belt with over 20 years of experience in global technology services. Since November 2016, she has served as the Chief Information Officer (“CIO”) for Brunswick Corporation (NYSE), a global manufacturer and marketer of recreation products (“Brunswick”). Prior to her role at Brunswick, Brown served for 16 years in roles of increasing responsibility with DuPont Corporation (NYSE), including CIO for Global Business and head of global transformation and productivity. During her time at DuPont, Brown was also head of global data, business insight and analytics and global information technology strategy, planning, organization development and compliance.

Director Qualifications:

Ms. Brown’s experiences, including her tenure as CIO of two large, publicly traded and global companies, provide her with a comprehensive understanding of the complex issues facing public companies and qualify her to serve on the Board.

 

 

 

 

		MARJORIE M. CONNELLY Age: 57 Director Since 2018 Committees: Audit (Chair), Compensation

 

Ms. Connelly was elected as a Director of the Company on January 1, 2018, and served previously on the Company’s Board from 2013 to 2014. She has almost 30 years of experience in financial services. From November 2014 to December 2017, Ms. Connelly was the Chief Operating Officer of Convergys Corporation, a publicly traded, global

leader in customer management. From 2012 to 2013, she was the Interim President of Longwood University. From 2009 to 2011, Ms. Connelly was the Global Chief Operating Officer at Barclaycard where she was responsible for the operations and technology support of the consumer and commercial credit card, merchant acquiring and point of sale finance businesses. From 2006 to 2008, Ms. Connelly was the Chief Operating Officer of Wachovia Securities, and prior to that, she spent 12 years at Capital One Financial Services in roles of increasing responsibility, including Executive Vice President, Head of Infrastructure for U.S. credit card operations and interim Chief Information Officer.

Director Qualifications:

Ms. Connelly’s qualifications to serve on the Board include her extensive experience in the financial services industry with publicly-traded, global companies.

 

 

 

 

		JAMES A. NUSSLE Age: 58 Director Since 2013 Committees: Compensation, Nominating and Corporate Governance (Chair)

 

Mr. Nussle has served as President and CEO of the Credit Union National Association since September 2014. Mr. Nussle has also served on the board of trustees of Thrivent Financial Mutual Funds since 2011 and is an industry advisor to a private equity firm, Avista Capital Partners. Prior to his private sector career, Mr. Nussle served extensively in government at both the local and federal levels. He served eight terms as a U.S. Representative from Iowa between 1991 and 2007 and was selected by President George W. Bush in 2007 to serve as the Director of the Office of Management and Budget. Mr. Nussle’s career also includes four years as an elected prosecuting attorney in Iowa and the private practice of law in Iowa.

Director Qualifications:

In addition to his industry experience, Mr. Nussle’s legal background and significant experience interacting with regulators qualify him to serve on the Board.

 

 

 

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Proposal 1: Election of Directors

		SCOTT M. TABAKIN Age: 60 Director Since 2004 Committees: Audit, Compensation

 

Mr. Tabakin is an executive-level consultant, advising boards and management teams on strategy, capital raising, capital structures and exit strategies. He was a certified public accountant and has more than 35 years of public company and healthcare industry experience, which includes service as

Directors with Terms Expiring at the 2021 Annual Meeting of Stockholders

		VIKRAM A. ATAL Age: 63 Director Since 2015 Committees: Audit, Compliance (Chair)

 

Mr. Atal has served as President of Atal Advisers, LLC since February 2013, when he formed the business and strategy consulting firm. Prior to forming Atal Advisers, Mr. Atal served in executive roles with increasing responsibility with Citigroup, Inc. for 27 years, including as Executive Vice President for Citigroup’s global consumer bank from 2008 to 2013, where he had responsibility for shaping Citi as an information-centric enterprise, leveraging analytics and data to drive growth, and overseeing loss mitigation efforts against Citi’s high-risk consumer portfolio through the financial crisis; Chairman and CEO for Citi Cards’ branded and retail partner cards franchise in North America; leadership of partnership programs for Citi Cards, serving as CFO of Citi’s U.S. cards franchise and overseeing SEC, regulatory and business financial reporting for Citicorp. In October 2017, Mr. Atal became a member of the board of directors of Goldman Sachs Bank USA.

Director Qualifications:

Mr. Atal’s experience as a senior executive in the financial services industry along with his significant international experience working for complex, publicly traded organizations qualify him to serve on the Board.

 

 

 

 

		STEVEN D. FREDRICKSON Age: 59 Director Since 2002 Committees: None

 

Mr. Fredrickson has served as the Company’s Executive Chairman since June 2017 and was Chairman and CEO from 2002 until June 2017. He also served as the Company’s President from 1996 to August 2015. Prior to co-founding the Company in 1996 with Mr. Stevenson, Mr. Fredrickson held various leadership roles with HRSC Portfolio Services and Household Commercial Financial Services groups and specialized in corporate and real estate workouts at Continental Bank of Chicago.

Director Qualifications:

Mr. Fredrickson’s leadership of the Company, in his current role as Executive Chairman and in his former role as Chairman, President and CEO, and his extensive industry knowledge qualify him to serve on the Board.

 

 

 

 

 

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Proposal 1: Election of Directors

		PENELOPE W. KYLE Age: 71 Director Since 2005 Committees: Compliance, Nominating and Corporate Governance

 

Ms. Kyle has been President Emeritus of Radford University since July 2016, when she retired after serving more than 11 years as its first female President. Prior to her appointment as President of Radford University on June 1, 2005, Ms. Kyle served in various leadership roles in law, business and government, including as the first female Executive Director of the Virginia Lottery, for 13 years in a variety of legal and executive positions with CSX Corporation (NYSE) culminating in her becoming the company’s first female officer and as an attorney with McGuireWoods LLP. Ms. Kyle previously served as a director of Cornerstone Realty Income Trust, Inc. (NYSE), where she was a member of the compensation committee and chair of the audit committee.

Director Qualifications:

Ms. Kyle’s extensive leadership roles in law, business, and government, and particularly her role as a former chief executive of a public university, provide her with the requisite management experience and business expertise to serve on our Board.

 

 

 

		LANCE L. WEAVER Age: 64 Director Since 2015 Committees: Compensation

 

Mr. Weaver is an accomplished consumer financial services executive with nearly 40 years of experience across the consumer lending, mortgage and credit card asset classes. He has served as an advisor to financial services companies including VISA, Citigroup, Total System Services and Apollo Capital, and was President, Money Cards for Virgin Money Holdings in the U.K. from 2013 to 2015. Before holding these positions, Mr. Weaver’s experience includes serving as President of EMEA Card Services for Bank of America; service on the senior management team of MBNA Corporation for 15 years, and executive leadership roles with Citigroup, Wells Fargo and Maryland National Bank. Since November 2017, Mr. Weaver has served on the board of directors of Internap Corporation (Nasdaq), a leading provider of high-performance data center services including high-density colocation and value-added services such as managed hosting, cloud and network connectivity. He currently serves on Internap’s compensation committee.

Director Qualifications:

Mr. Weaver’s international experiences in the financial services industry along with his experience working for complex, highly regulated, publicly traded organizations qualify him to serve on the Board of Directors.

 

 

 

 

2019 Proxy Statement  |  PRA Group    13

Proposal 2: Ratification of Appointment of Independent Auditor

The Audit Committee is responsible for the engagement, compensation and oversight of the Company’s independent registered public accounting firm. As ratified by stockholders at the 2018 Annual Meeting, the Audit Committee appointed KPMG to serve as the Company’s independent registered public accounting firm for the year ended December 31, 2018. KPMG has served as the Company’s independent registered public accounting firm since 2007.

In evaluating the performance and considering the engagement of KPMG, including whether to rotate firms, the Audit Committee considers various factors, including KPMG’s capability and expertise in handling the scope and complexity of our audit, information related to audit effectiveness, the professionalism of KPMG’s team, the current level and quality of service, fees, and the potential impact of changing firms. The Audit Committee is directly involved in the selection of the lead engagement partner in conjunction with the periodic, mandated rotation of the lead partner. Based on these factors, the Audit Committee determined that the continued engagement of KPMG as our independent registered public accounting firm is in the best interests of the Company and its stockholders. As a result, the Audit Committee has selected KPMG to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2019.

Although not required to do so, the Board is submitting the appointment of KPMG for ratification by the Company’s stockholders as a matter of good corporate governance practice. The Audit Committee is not required to take any action based on the outcome of the vote on this Proposal 2. However, if our stockholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to select a different independent registered public accounting firm. Even if the selection of KPMG is ratified by the stockholders, the Audit Committee, in its discretion, may appoint a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. Representatives of KPMG are expected to attend the Annual Meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019.

Fees Paid to KPMG

KPMG served as the Company’s independent registered public accounting firm with respect to the audits of the Company’s consolidated financial statements and the effectiveness of the Company’s internal controls over financial reporting for the year ended December 31, 2018. The following table sets forth the fees billed or expected to be billed by KPMG for audit and other services for the years ended December 31, 2017 and 2018.

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Proposal 2: Ratification of Appointment of Independent Auditor

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has adopted policies and procedures that require the pre-approval of audit, audit-related and permissible non-audit services provided by KPMG. In the event that the Audit Committee Chair provides such pre-approval, the Audit Committee Chair will report any pre-approval decisions to the Audit Committee at its next meeting. During 2018, all audit, audit-related and permissible non-audit services provided by KPMG were pre-approved by the Audit Committee or Audit Committee Chair. The Audit Committee has considered the provision of these services by KPMG and has determined that the services are compatible with KPMG maintaining its independence.

Responsibilities

The Audit Committee’s written charter, adopted by the Board of Directors, outlines the Committee’s organization, meeting protocol, and responsibilities. The Committee reviews the charter annually and recommends amendments as necessary to the Board for its approval. In carrying out its responsibilities, the Audit Committee meets regularly, together with management, the internal auditor, and KPMG. During these meetings, the Committee reviews and discusses draft financial statements and earnings releases, significant accounting and financial reporting matters, and the results of internal and external audit work. The Committee also meets in periodic executive sessions with KPMG to discuss the overall quality of the Company’s financial reporting and any other matters as appropriate. Additionally, the Audit Committee meets in periodic executive sessions with each of the Chief Financial Officer and the head of the Company’s internal audit department.

The Audit Committee relies on the knowledge and expertise of management and KPMG in carrying out its oversight responsibilities. Management is responsible for preparing the Company’s consolidated financial statements, maintaining adequate internal control over financial reporting, and assessing the effectiveness of the Company’s internal control over financial reporting. KPMG is responsible for conducting independent audits of the Company’s consolidated financial statements and internal and control over financial reporting, and for expressing an opinion on the conformity of the financial statements with generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to oversee these activities, including discussing with KPMG the scope of, plans for, and results of the annual audit. The Audit Committee is also responsible for oversight of the internal audit function, including its charter, audit plan, budget, performance, and activities.

Report of the Audit Committee

The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s financial reporting and internal control over financial reporting.

The Audit Committee has reviewed and discussed with management and KPMG the Company’s 2018 audited financial statements and the assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee has also discussed with KPMG the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board, including matters relating to the conduct of the audit of the Company’s financial statements as well as the quality and reasonableness of the Company’s critical accounting policies and estimates, and such other matters as are required to be discussed under auditing standards generally accepted in the United States of America. In addition, the Audit Committee has received from KPMG the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence and has discussed with KPMG its independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC.

Audit Committee

Scott M. Tabakin, Chair

Vikram A. Atal

Marjorie M. Connelly

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Executive Officers

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Proposal 3: Approval of NEO Compensation

Pursuant to Section 14A of the Exchange Act, the Company’s stockholders are being asked to approve, on a non-binding advisory basis, the compensation of the Company’s NEOs as disclosed in this Proxy Statement. This vote provides stockholders with the opportunity to express their views on the compensation of our NEOs.

An objective of the Company is to retain highly qualified and talented executives and to provide appropriate incentives to encourage their high performance, which creates value for the Company’s stockholders. As described in detail in this Proxy Statement, the Company seeks to closely align the interests of its NEOs with the interests of its stockholders and appropriately reward performance while discouraging unnecessary or excessive risk-taking. A vote on Proposal 3 will not approve any specific item of compensation, but rather the overall compensation of the Company’s NEOs. Accordingly, stockholders are asked to cast their votes “FOR” Proposal 3 to indicate their support for the Company’s compensation of its NEOs as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, Summary Compensation Table and related compensation tables and narrative.

This vote is not binding on the Company, the Board or the Compensation Committee. However, it will provide information to the Company, the Board and the Compensation Committee regarding stockholder sentiment about the Company’s executive compensation philosophy, policies and practices, which the Compensation Committee will be able to consider when determining executive compensation for the remainder of 2019 and beyond. The Compensation Committee values the opinions of its stockholders and will take into consideration any concerns they may raise (in the event there is any significant vote against the executive officer compensation as described in this Proxy Statement) when making future executive compensation decisions.

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Executive Compensation

Compensation Discussion & Analysis

Our Mission and Strategy

We deliver nonperforming loan solutions to clients and customers in a respectful, ethical way using data and analytics to guide business decisions that drive a long-term focus on success and customer care by: Improving Operational Efficiencies and Effectiveness; Developing Customer Engagement & Experience; Capitalizing on Market Potential; Investing in People, Culture & Brand; and Delivering Results, while demonstrating our core values of:

2018 Business Performance

Our key financial metrics for 2018 included: cash collections, cash efficiency, net operating income, and net income, as well as delivery on strategic goals.

We delivered record cash collections across PRA, which consisted of records in both Americas Core and Europe Core.

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Our cash efficiency ratio (cash receipts less operating expenses, divided by cash receipts) decreased from 60.8% in 2017 to 58.0% in 2018. The decline in the cash efficiency ratio was impacted significantly by our decision to increase the investment in the legal collections channel in the U.S. Our decision to increase our investment in the legal collections channel was driven by changes in the nature of accounts purchased, the regulatory environment and consumer behavior. In the short term, the increased investment in the legal collection channel results in expenses preceding collections and revenue, but we believe the increased investment will create positive long-term results.

Net operating income and net income were also impacted negatively by our investment in the legal collections channel in the U.S.

Strategic Goals

Key accomplishments in 2018 included the following:

Investment in Portfolios – We invested in record levels of portfolios, excluding the year we purchased Aktiv Kapital. Portfolio acquisitions increased 1% to $1.12 billion, surpassing $1.11 billion portfolio acquisitions in 2017, including record investment in Americas Core of $657.1 million, which followed a record year in 2017.

Compliance – We believe we have one of the industry leading compliance programs in the U.S., the most heavily regulated nonperforming loan purchasing market in the world. We utilize this compliance program as a guide when building programs outside of the U.S. while maintaining a focus on the customer journey to recovery.

Digital Collection Development – Digital collections in the U.S. doubled in 2018 as a result of our investment in that channel. We are now building on that success and rolling out improved payment sites across Europe. We improved digital services in the United Kingdom and launched digital capabilities in three of our European markets – Germany, Poland and Spain.

Strategic Relationships – We are focused on building relationships on a global basis which has been positively received, particularly with sellers who value our compliance program.

Government Relations Outreach – We have significantly increased our government relations outreach by adding new talent and meeting with regulators and legislators regarding topics that impact the nonperforming loan purchasing industry.

2018 Incentive Payments

Based on the evaluation of our achievement of the financial metrics and strategic goals discussed above, the Compensation Committee approved cash payouts for NEOs under our 2018 Annual Bonus Plan below target at 92%. The performance components of our annual long-term incentive program (“LTIP”) performance stock unit award (“PSU”), which consisted of return on equity (“ROE”) and total stockholder return (“TSR”), for the 3-year measurement period ended December 31, 2018 (the “2016 LTIP”), resulted in 0% payout.

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Executive Compensation

Pay-for-Performance Alignment

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Philosophy and Objectives of Our Executive Compensation Program

Our compensation philosophy and the objectives of our executive compensation program include:

Our executive compensation philosophy and program take into consideration the Company’s overall performance against its short- and long-term financial and strategic objectives while maximizing the financial efficiency of the overall program from tax, accounting, and cash flow perspectives.

Decision-Making: Role of the Compensation Committee

Our Board has delegated oversight of our executive compensation program to its Compensation Committee. Among its duties, the Compensation Committee is responsible for approving all compensation for our executive officers. Although the Compensation Committee considers the CEO’s recommendations, the Compensation Committee evaluates independently the CEO’s recommendations and makes all final compensation decisions within the parameters of its compensation philosophy. This process includes the following:

The Compensation Committee is supported in its work by FW Cook, its independent executive compensation consultant, the CEO (where appropriate), and other members of management.

Decision-Making: Role of the Chief Executive Officer

At the Compensation Committee’s request, our CEO attends portions of the Compensation Committee’s meetings to discuss the Company’s performance and compensation-related matters. While he does not participate in any deliberations relating to his own compensation, he shares his assessment of the performance of the other executive officers with the Compensation Committee. Based on his assessment and the Company’s

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Executive Compensation

overall performance and the performance of the other executive officers, our CEO makes recommendations to the Compensation Committee on certain compensation decisions. The Compensation Committee considers the CEO’s recommendations, as well as data and analyses provided by FW Cook (and to a lesser extent, the other members of management), but retains full discretion to approve, or recommend for the independent members of our Board to approve, all executive compensation.

Decision-Making: Role of the Compensation Consultant

FW Cook is the independent executive compensation consultant for, and reports directly to, the Compensation Committee. The Compensation Committee may replace FW Cook or hire additional consultants at any time and retains sole authority to hire any compensation consultant, approve such consultant’s compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.

A representative of FW Cook attends Compensation Committee meetings and communicates with the Compensation Committee Chair between meetings, as requested. FW Cook provides various executive compensation services to the Compensation Committee, including advising the Compensation Committee on the principal aspects of our executive compensation program, updating the Compensation Committee on evolving executive compensation practices and trends and providing market information and analysis regarding the competitiveness of our executive compensation program and award values in relation to performance.

During 2018, FW Cook performed the following key services for the Compensation Committee:

FW Cook provided no other services to the Company or the Committee during 2018. The Committee has assessed the independence of FW Cook pursuant to SEC rules and Nasdaq listing standards and has determined that no known conflict of interest exists that prevents FW Cook from serving as an independent compensation consultant to the Compensation Committee.

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Key Features of our Executive Compensation Program

What We Do

Most NEO total compensation is performance-based and salary comprises a

modest portion of each NEO’s overall compensation.

We target total direct compensation at the market median (50th percentile) of our Compensation Peer Group; we use median as the beginning reference point and the Compensation Committee then adjusts pay based on a comprehensive review of performance.

A portion of executives’ target compensation is earned based on PRA’s relative stock performance against the Global Industry Classification Standard (GICS) group of publicly traded consumer finance companies.

The Compensation Committee reserves the right to pay cash bonuses in equity in the event that an NEO has not made significant progress towards meeting established guidelines.

We enhance executive officer retention by providing a portion of our long-term equity program in time-based awards with multi-year vesting schedules.

Our Compensation Committee, which is comprised solely of independent directors, engages an independent compensation consultant.

We have adopted “double trigger” vesting for time-based equity awards following a change in control. Our NEOs are not entitled to accelerated vesting of their equity awards on a change in control of the Company or upon a termination of employment unless such termination occurs within six months before or 24 months following such change in control or in the event of the NEO’s death.

We maintain strong restrictive covenants in our employment agreements for our NEOs and obtain enhanced restrictive covenants in connection with our equity grants.

We have stock ownership guidelines for our CEO at five times salary, three times salary for our CFO and other executives designated as NEOs in the Company’s most recent proxy statement and one times salary for all other executive officers.

We reserve the right to clawback in the event of negative financial restatements. Our award agreements and Annual Bonus Plan provide that the Compensation Committee may cancel or clawback all or any portion of awards or the gain realized on the award and any benefits derived from that award.

What We Don’t Do

We believe that neither the design of our compensation programs nor the individual elements of our compensation programs encourage our employees, including our NEOs, to take unnecessary risk or excessive risks. The Compensation Committee annually reviews and approves our compensation strategy and programs and assesses the risks of these programs. This work is done to reduce the likelihood that any risks arising from our compensation programs will have material adverse effect on the Company, in either the short- or the long-term.

We do not base incentive compensation on a single performance metric, and we do not have guaranteed minimum payouts.

We do not provide across-the-board salary increases for our executives. Our Compensation Committee evaluates total compensation for all executives and only adjusts salary when necessary to reflect changes in the executive’s responsibilities or in market conditions.

We do not provide our NEOs with excise tax gross-ups.

We generally do not provide our executive officers with perquisites or other personal benefits.

We do not offer any nonqualified deferred-compensation plans or arrangements to our executive officers.

We do not allow hedging or pledging of Company securities.

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Executive Compensation

Use of Competitive Data

To maintain the competitiveness of our executive compensation program, the Compensation Committee believes that it is appropriate to establish compensation levels based on benchmarking, as well as information regarding pay practices at comparable companies. Accordingly, the Compensation Committee engaged FW Cook to review and make recommendations relating to the companies included in our 2018 Compensation Peer Group identified above. The Compensation Committee believes the Compensation Peer Group reflects the companies that most closely correlate with us in terms of size and business model and, therefore, include primarily companies in the consumer and specialty finance and data processing industries. The companies included in the Compensation Peer Group are comparable to the Company based on various metrics, including net income, market capitalization and complexity of operations. Revenue is taken into consideration, but not as heavily as the other metrics listed, as not all our cash receipts are represented in our revenue. A significant portion of our cash receipts is recorded as a reduction of principal on finance receivables amortization, rather than as revenue.

We target NEO total direct compensation at approximately the median of our Compensation Peer Group. Actual cash compensation may be above or below the median based on actual performance. Realized long-term equity incentives and total compensation will vary from the median based on actual financial and stock price performance.

With respect to our 2018 Compensation Peer Group, the Compensation Committee, based on the recommendation of FW Cook, approved the removal of Total Systems Services, due to its large revenue and market and the addition of Walker & Dunlop as a size-appropriate company that meets multiple screening criteria and operates in a comparable industry.

In addition to Compensation Peer Group data, the Compensation Committee reviews, but does not place as much emphasis on, financial services compensation survey data reported by the compensation consulting firm of

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Willis Towers Watson. The primary focus on the Compensation Peer Group data relates to more direct matches in terms of company size and business mix. The Compensation Committee uses this data to ascertain the competitive market for our NEOs, to determine whether the Company’s compensation levels are competitive, and to make any necessary adjustments to reflect executive performance and Company performance. As a part of this process, FW Cook measures target and actual pay levels for the Company and the Compensation Peer Group within each component of our total direct compensation and in the aggregate. FW Cook also reviews the mix of our executive direct compensation components with respect to fixed versus variable, short-term versus long-term and cash versus equity-based pay. This information is then presented to the Compensation Committee for its review and use.

The Compensation Committee generally compares the compensation of our NEOs to the median of the Compensation Peer Group. In addition, the Compensation Committee considers factors such as our performance relative to the Compensation Peer Group, the unique characteristics of the individual NEO’s position, and any succession and retention considerations.

Decisions For 2018

The following section contains information on the Compensation Committee’s decisions with respect to our NEOs on the various direct compensation components for 2018 and information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. Investors should not apply these performance measures and goals to other contexts. The tables included in this section are in addition to, and not in lieu of, the Summary Compensation Table required by the SEC, which can be found on page 33.

2018 Executive Compensation Elements

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Executive Compensation

Salary

We pay salaries in order to provide our NEOs with a reasonable level of fixed short-term compensation. Salary levels are typically reviewed at least annually by the Compensation Committee and adjusted as appropriate. Adjustments generally consist of merit increases, promotions or changes in responsibilities, or market adjustments. Salaries are determined on an individual basis. When determining any salary increases, the Compensation Committee considers an individual’s total direct compensation, his or her performance, Company performance, comparative peer and market compensation data, internal pay equity, and other relevant factors, including the scope of the executive’s responsibilities relative to peers and other executives, and retention concerns.

Effective June 4, 2018, Mr. Roberts assumed additional responsibility for shared oversight of our European operations along with the President of PRA Group Europe. Mr. Roberts’ salary increase reflects these expanded duties. In 2018, Messrs. Graves and Lagow received merit increase adjustments to their salaries based on individual performance, salary market positioning relative to peers and internal pay equity, as appropriate.

Annual Bonus Plan

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The Compensation Committee considered the financial results under “2018 Business Performance” and the following operational results when determining bonus payments under the 2018 Annul Bonus Plan:

Bonus payments for NEOs were paid at 90% of target, except for Mr. Roberts, who received 103% of his bonus target in recognition of his individual performance relating to corporate development and the oversight of European operations.

LTIP Awards

LTIP awards to our NEOs are a mix of PSUs and RSUs consistent with competitive practice. LTIP award amounts are established by reviewing prior year performance, potential future contributions, retention considerations and comparative peer and market compensation data for each NEO’s position in the Compensation Peer Group. LTIP awards are made under our 2013 Omnibus Incentive Plan (“Equity Plan”).

In 2018, we modified our LTIP design by making the following changes:

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Executive Compensation

Linear interpolation is performed to determine Target Shares Earned between Values.

Outstanding Performance Share Awards

During 2018, our NEOs had three tranches (award years 2016-2018) of PSU awards outstanding. The key features of these outstanding awards are included below:

Realization of 2016 LTIP

In March 2019, it was determined that ROE and TSR PSU awards, which were granted in January 2016 for the three-year performance period of 2016-2018, be paid at 0%.

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The target ROE for the 2016-2018 performance period was 16.4%. Actual performance of 10.8% was lower than the threshold of 14.4% and, therefore, no shares were awarded to our NEOs. TSR performance was calculated by comparing one-third of the TSR of companies in the Nasdaq Composite Index and the TSR of the Compensation Peer Group. Performance for the 2016-2018 period was lower than the threshold performance of the 35th percentile and therefore, no shares were awarded to our NEOs.

Other Compensation Matters

Tax-Qualified Plans

The Company offers a 401(k) plan for its employees, including our NEOs. The 401(k) plan is a long-term savings vehicle that enables employees to make pre-tax contributions via payroll deductions and receive tax-deferred earnings on the contributions made. Employees are eligible to make voluntary contributions to the plan of up to 100% of their compensation, subject to limitations under the Internal Revenue Code, after completing six months of service with the Company. The Company makes matching cash contributions of up to 4% of each participating employee’s eligible pay. Employees are able to direct their own investments, among a range of investment choices, under the plan.

We periodically compare the competitiveness of our benefits programs, including retirement benefits, for all our employees, including our NEOs, against other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median when compared to other employers.

Nonqualified Deferred Compensation Plans and Arrangements

The Company does not offer any nonqualified deferred compensation plans or arrangements to any of its employees, including our NEOs.

Employment Agreements

The Company has entered into employment agreements with each NEO that set forth the compensation, benefits, term of employment and other terms and conditions of each NEOs employment (“Employment Agreements”). The Employment Agreements superseded prior employment agreements, the terms of which expired on December 31, 2017.

The Employment Agreements provide for the following:

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Executive Compensation

Severance and Change in Control Arrangements

Pursuant to their employment agreements with the Company, our NEOs (or their beneficiaries or estates) are eligible for severance payments and other benefits upon terminations of employment for the following reasons:

In the case of a termination for cause, no severance payments will be made. We find each of these practices to be typical among our peers and we note that the receipt of severance benefits is subject to our NEOs’ compliance with non-compete/non-solicitation covenants and execution of a release of claims. In no instance will the Company provide excise tax reimbursements or gross-ups to any of our NEOs.

For detailed information on the estimated potential payments and benefits payable to our NEOs in the event of their termination of employment, including following a change in control of the Company, see the section titled “Post Employment Compensation Arrangements” (pages 37-39) in this Proxy Statement.

Perquisites and Other Personal Benefits

We do not provide our executive officers, including our NEOs, with perquisites or other personal benefits, except for comprehensive physical examinations. Our NEOs are encouraged to submit to a comprehensive physical examination every 3-5 years at the Company’s expense, at a cost of approximately $5,000 each. This perquisite is provided because we believe it serves a necessary business purpose and protects the interests of the organization and stockholders by requiring each NEO to receive high-quality preventative care, thereby increasing the likelihood of early detection for any serious illness that would prevent them from serving the Company to the best of their ability.

Stock Ownership Guidelines

The Company maintains stock ownership guidelines for the Company’s executive officers, including our NEOs. These stock ownership guidelines reflect the Board’s belief in the importance of aligning the economic interests of stockholders and management. The Compensation Committee is responsible for setting and periodically reviewing the guidelines. Guidelines for each executive position are determined based on factors including the executive role, scope of responsibilities, salary levels, Company stock price performance and market data. The stock ownership guidelines establish ownership goals to be achieved and maintained within five years from the date of hire or promotion.

Periodically, the Compensation Committee is provided with a report showing the extent to which our executives have met the applicable ownership guidelines. This report includes targeted share ownership, actual share ownership, our executives’ remaining non-vested RSUs, and any surplus or deficiency that exists. The Compensation Committee may determine whether, based on the executive’s success in achieving the executive’s stock ownership target, the executive’s annual bonus, if any, can be paid in stock, rather than in cash. To permit consistent long-term planning by an executive, once established, targets are not reset except upon the approval of the Compensation Committee in the event of a promotion of the executive, exceptional equity grants, or other considerations.

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The following chart details the equity ownership targets established for our NEOs and their progress towards those targets. As of the Record Date, each NEO has achieved their individual equity ownership target or is on track to reach their target within five years of becoming an NEO.

Pledging

The Company’s Anti-Pledging Policy prohibits its directors, officers and employees from pledging, alienating, attaching or otherwise encumbering the Company’s stock and any purported pledge, alienation, attachment or encumbrance thereof is void and unenforceable against the Company or any affiliate of the Company.

Hedging

The Company’s Anti-Hedging Policy prohibits its directors, officers and employees from speculating or hedging their interests in the Company’s stock. Accordingly, directors, officers and employees may not “play the market” in Company securities by engaging in speculative transactions such as any direct or indirect hedging transaction that could reduce or limit the individual’s economic risk with respect to his or her holdings, ownership or interest in the common stock or other securities of the Company, including outstanding stock options, stock appreciation rights or other compensation awards the value of which are derived from, make reference to or are based on the value or market price of common stock or other securities of the Company. Prohibited transactions include same day purchase and sales, prepaid variable forward contracts, equity swaps, short sales, collars, puts, calls or other derivative securities that are designed to hedge or offset a decrease in market value of the equity securities of the Company.

Clawback

In the event of a restatement of the Company’s financial statements that reduces the amount of the awards that would have been paid or vested had the financial results been properly reported, the Compensation Committee may cancel or clawback all or any portion of awards, cash and equity, or the gain realized on the award. In addition, all awards, cash and equity (and the benefits derived from the awards), are subject to recovery by the Company if required by rules adopted by the SEC or the NASDAQ Stock Exchange to implement Section 10D of the Exchange Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any other applicable rule, regulation or law.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code limits the deductibility of certain executives’ compensation that exceeds $1 million per year. The executive officers subject to Section 162(m) (the “Covered Employees”) include any individual who served as the CEO or CFO at any time during the taxable year and the three other most highly compensated officers (other than the CEO and CFO) for the taxable year, and once an individual becomes a Covered Employee for any taxable year beginning after December 31, 2016, that individual remains a Covered Employee for all future years, including following any termination of employment.

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Executive Compensation

The Compensation Committee carefully considers the tax impacts of its compensation programs on the Company, as well as on its executives. It is the Committee’s intent to maximize tax deductibility to the extent reasonable, provided the Company’s programs remain consistent with the Company’s overall executive compensation objectives. While the Compensation Committee is mindful of the potential impact upon the Company of Section 162(m), it reserves the right to adopt such compensation arrangements as may from time to time be desirable to reward, retain or attract top-quality management even if payments may not be fully or partially deductible under Section 162(m). The Compensation Committee believes that the tax deduction limitation should not be permitted to compromise our ability to design and maintain executive compensation arrangements that will attract and retain the executive talent to enable the Company compete successfully.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the section of this Proxy Statement entitled “Compensation Discussion and Analysis” with management. Based on this review and discussion, the Compensation Committee has recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

2018 Compensation Committee  

John H. Fain, Chair

Marjorie M. Connelly

Scott M. Tabakin

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Summary Compensation Table

The following table sets forth all compensation awarded to, earned by or paid to each of our NEOs for all services rendered to the Company for the years ended December 31, 2018, 2017, and 2016.