Proposal 1: Election of Directors
The business and affairs of Nasdaq are managed under the direction of our Board. Our directors have diverse backgrounds and experience and represent a broad spectrum of viewpoints.
Pursuant to our Amended and Restated Certificate of Incorporation and By-Laws and based on our governance needs, the Board may determine the total number of directors. The Board is authorized to have ten directors following our 2018 Annual Meeting.
Each of the ten nominees identified in this proxy statement has been nominated by our Nominating & Governance Committee and Board for election to a one-year term. All nominees have consented to be named in this proxy statement and to serve on the Nasdaq Board, if elected.
In an uncontested election, our directors are elected by a majority of votes cast at any meeting for the election of directors at which a quorum is present. This election is an uncontested election and therefore, each of the ten nominees must receive the affirmative vote of a majority of the votes cast to be duly elected to the Board. Any shares not voted, including as a result of abstentions or broker non-votes, will not impact the vote.
Our Corporate Governance Guidelines require that, in an uncontested election, an incumbent director must submit an irrevocable resignation as a condition to his or her nomination for election. If an incumbent director fails to receive the requisite number of votes in an uncontested election, the irrevocable resignation becomes effective and such resignation will be considered by the Nominating & Governance Committee. This Committee will recommend to the full Board whether or not to accept the resignation. The Board is required to act on the recommendation and to disclose publicly its decision-making process with respect to the resignation. All the incumbent directors have submitted an irrevocable resignation.
The Board of Directors unanimously recommends a vote FOR each of the nominees for director.
DIRECTOR NOMINATION PROCESS
The Nominating & Governance Committee considers possible candidates suggested by Board and Committee members, stockholders, industry groups and senior management. In addition to submitting suggested nominees to the Nominating & Governance Committee, a Nasdaq stockholder may nominate a person for election as a director, provided the stockholder follows the procedures specified in Nasdaq’s By-Laws. The Nominating & Governance Committee reviews all candidates in the same manner, regardless of the source of the recommendation. In addition, the Nominating & Governance Committee may engage a third-party search firm from time-to-time to assist in identifying and evaluating qualified candidates. In 2017, the Nominating & Governance Committee retained Spencer Stuart to help identify director prospects, perform candidate outreach, assist in reference and background checks and provide other related services.
We are obligated by the terms of a stockholders’ agreement dated February 27, 2008 between Nasdaq and Borse Dubai, as amended, to nominate and generally use best efforts to cause the election to the Nasdaq Board of one individual designated by Borse Dubai, subject to certain conditions. H.E. Kazim is the individual designated by Borse Dubai as its nominee. We also are obligated by the terms of a stockholders’ agreement dated December 16, 2010 between Nasdaq and Investor AB to nominate and generally use best efforts to cause the election to the Nasdaq board of one individual designated by Investor AB, subject to certain conditions. Mr. Wallenberg is the individual designated by Investor AB as its nominee.
Nasdaq’s common stock is currently listed on The Nasdaq Stock Market and Nasdaq Dubai. In order to qualify as independent under the Listing Rules of The Nasdaq Stock Market, a director must satisfy a two-part test. First, the director must not fall into any of several categories that would automatically disqualify the director from being deemed independent. Second, no director qualifies as independent unless the Board affirmatively determines that the director has no direct or indirect relationship with the company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Under the Nasdaq Dubai Business Rules and the Markets Rules of the Dubai Financial Services Authority, a director is considered independent if the Board determines the director to be independent in character and judgment and to have no commercial or other relationships or circumstances that are likely to affect, or could appear to impair, the director’s judgment in a manner other than in the best interests of the company.
Based upon detailed written submissions by each director nominee, the Board has determined that all of our director nominees are independent under the rules of The Nasdaq Stock Market and Nasdaq Dubai, other than Ms. Friedman. Ms. Friedman is deemed not to be independent because she is Nasdaq’s President and CEO.
None of the director nominees are party to any arrangement with any person or entity other than the company relating to compensation or other payments in connection with the director’s or nominee’s candidacy or service as a director, other than arrangements that existed prior to the director’s or nominee’s candidacy.
DIRECTOR CRITERIA, QUALIFICATIONS, EXPERIENCE AND TENURE
In evaluating the suitability of individual Board nominees, the Nominating & Governance Committee takes into account many factors, including a general and diverse understanding of the global economy, capital markets, finance, technology and other disciplines relevant to the success of a large publicly-traded financial technology company; a general understanding of Nasdaq’s business and technology; the classification requirements under our By-Laws; the individual’s educational and professional background and personal accomplishments; and factors such as diversity, gender, age and geography.
The Committee evaluates each individual candidate in the context of the Board as a whole, with the objective of maintaining a group of directors that can further the success of Nasdaq’s business, while representing the interests of stockholders, employees and the communities in which the company operates. In determining whether to recommend a Board member for re-election, the Nominating & Governance Committee also considers the director’s past attendance at meetings, participation in and contributions to the activities of the Board and the most recent Board and director assessment.
The Board and the Nominating & Governance Committee believe all director nominees exhibit the characteristics below.
In evaluating the suitability of individual Board nominees, the Nominating & Governance Committee takes into account:
- a general and diverse understanding of the global economy, capital markets, finance, technology and other disciplines relevant to the success of a large publicly-traded financial technology company;
- a general understanding of Nasdaq’s business and technology;
- the classification requirements under our By-Laws;
- the individual’s educational and professional background and personal accomplishments; and
- factors such as diversity, gender, age and geography.
OUR DIRECTOR NOMINEES
In addition, there are other attributes, skills and experience that should be represented on the Board as a whole, but not necessarily by each director. The table below summarizes key qualifications, skills and attributes most relevant to serve on the Board. A mark indicates a specific area of focus or expertise on which the Board relies most. The lack of a mark does not necessarily mean the director does not possess that qualification or skill. Each director biography below describes each director’s qualifications and relevant experience in more detail.
|Capital Markets||Cybersecurity||FinTech||Mergers &|
Board & Corporate
|Melissa M. Arnoldi|
|Charlene T. Begley|
|Steven D. Black|
|Adena T. Friedman|
|Thomas A. Kloet|
|John D. Rainey|
|Michael R. Splinter|
|Lars R. Wedenborn|
Our Board has four standing Committees:
- Audit Committee
- Finance Committee
- Management Compensation Committee
- Nominating & Governance Committee
Our Board has four standing Committees: an Audit Committee, a Finance Committee, a Management Compensation Committee and a Nominating & Governance Committee. Each of these Committees, other than the Finance Committee, is composed exclusively of directors determined by the Board to be independent. The Chair of each Committee reports to the Board in Chairman’s Session or Executive Session on the topics discussed and actions taken at each meeting. The independent Board Chairman is responsible for chairing the Executive Sessions of the Board and reporting to the President and CEO and Corporate Secretary on any actions taken during Executive Sessions. A description of each standing Committee is included on the following pages.
Thomas A. Kloet (Chair)
Melissa M. Arnoldi
Charlene T. Begley
John D. Rainey
Lars R. Wedenborn
Meetings in 2017
- Oversees Nasdaq’s financial reporting process on behalf of the Board.
- Appoints, retains, approves the compensation of and oversees the independent registered public accounting firm.
- Assists the Board by reviewing and discussing the quality and integrity of accounting, auditing and financial reporting practices at Nasdaq, including assessing the staffing of employees in these functions.
- Assists the Board by reviewing the adequacy and effectiveness of internal controls and the effectiveness of Nasdaq’s ERM and regulatory programs.
- Reviews and approves or ratifies all related party transactions, as further described below under “Certain Relationships and Related Transactions.”
- Assists the Board in reviewing and discussing Nasdaq’s Global Ethics and Corporate Compliance Program, SpeakUp! Program and confidential whistleblower process.
- Assists the Board in its oversight of the Internal Audit function.
- Reviews and recommends to the Board for approval the company’s regular dividend payments.
- Updates the Board on discussions and decisions from the Audit Committee meetings.
- Oversaw Nasdaq’s financial reporting process and reviewed the disclosures in the company’s quarterly earnings releases, quarterly reports on Form 10-Q and annual report on Form 10-K.
- Reviewed non-GAAP disclosures, impairment assessments and the impact or potential impact of changes in various accounting standards.
- Provided oversight on the performance of the Internal Audit function during the year.
- Oversaw control remediation efforts by management.
- Reviewed and discussed the company’s ERM program, including its governance structure, risk assessments and risk management practices and guidelines.
- Reviewed, approved and oversaw the company’s Cybersecurity Strategic Plan.
- Received regular updates on information security initiatives, cybersecurity threats and new technology initiatives from the Chief Information Officer and Chief Information Security Officer.
- Reviewed key regulatory compliance matters.
- Provided oversight for the Global Ethics and Corporate Compliance Program and received regular updates on Nasdaq’s SpeakUp! Program and confidential whistleblower process.
- Reviewed a report on Nasdaq’s fraud management program.
- Evaluated the performance of the independent auditor and continued to review and approve all services provided and fees charged by such auditors.
- Reviewed and approved or ratified all related party transactions, as further described below under “Certain Relationships and Related Transactions.”
- Oversaw and discussed with management at every meeting key risks, including emerging and escalating risks.
- Held Executive Sessions individually with the external auditor, Internal Audit, the General Counsel and Chief Regulatory Officer, the CFO and the Chief Information Officer.
- Received informational reports from the external auditor on revenue recognition and disclosure requirements and other related critical audit matters.
Risk Oversight Role:
- Reviews the systems of internal controls, financial reporting and the Global Ethics and Corporate Compliance Program.
- Reviews the ERM program, including policy, structure and process.
- Each member of the Audit Committee is independent as defined in Rule 10A-3 adopted pursuant to the Sarbanes-Oxley Act of 2002 and in the Listing Rules of The Nasdaq Stock Market. The Board determined that Messrs. Kloet, Rainey and Wedenborn and Ms. Begley are “audit committee financial experts” within the meaning of SEC regulations. Each also meets the “financial sophistication” standard of The Nasdaq Stock Market.
- Reviews and recommends for approval by the Board the capital plan of the company, including the plan for repurchasing shares of the company’s common stock and the proposed dividend plan.
- Reviews and recommends for approval by the Board significant mergers, acquisitions and business divestitures.
- Reviews and recommends for approval by the Board significant capital market transactions and other financing arrangements.
- Reviews and recommends for approval by the Board significant capital expenditures, lease commitments and asset disposals, excluding those included in the approved annual budget.
- Conducted a comprehensive review of the Capital Allocation Plan for ultimate Board approval.
- Reviewed and approved certain financing transactions in connection with the acquisition of eVestment.
- Reviewed and approved the refinancing of the company’s revolving credit facility and the implementation of a commercial paper program.
Risk Oversight Role:
- Monitors operational and strategic risks related to Nasdaq’s financial affairs, including capital structure and liquidity risks.
- Reviews the policies and strategies for managing financial exposure and certain risk management activities of Nasdaq’s Treasury function.
John D. Rainey (Chair)
Adena T. Friedman
Meetings in 2017
|MANAGEMENT COMPENSATION COMMITTEE|
Steven D. Black (Chair)
Charlene T. Begley
Michael R. Splinter
Meetings in 2017
- Establishes and annually reviews the executive compensation philosophy.
- Reviews and approves all compensation and benefit programs applicable to Nasdaq’s executive officers annually. Program changes applicable to the President and CEO and CFO are referred to the Board for final approval.
- Reviews and approves the base salary, incentive compensation, performance goals and equity awards for executive officers. For the President and CEO and CFO, these items will be referred to the Board for final approval.
- Reviews and approves the base salary and incentive compensation for those non- executive officers with target total cash compensation in excess of $1,000,000 or an equity award valued in excess of $600,000.
- Extensive focus on development of executive talent and succession planning.
- Reviewed the effectiveness of the annual and long-term incentive plans.
- Together with the Nominating & Governance Committee, led the annual performance evaluation of the President and CEO.
Risk Oversight Role:
- Monitors the risks associated with elements of the compensation program, including organizational structure, compensation plans and goals, succession planning, organizational development and selection processes.
- Evaluates the effect the compensation structure may have on risk-related decisions.
- Each member of the Management Compensation Committee is independent and meets the additional eligibility requirements set forth in the Listing Rules of The Nasdaq Stock Market.
- Determines the skills and qualifications necessary for the Board, develops criteria for selecting potential directors and manages the Board refreshment process.
- Identifies, reviews, evaluates and nominates candidates for annual elections to the Nasdaq Board.
- Leads the annual assessment of the effectiveness of the Board, Committees and individual directors.
- Together with the Management Compensation Committee, leads the annual performance assessment of the President and CEO.
- Identifies and considers emerging corporate governance issue and trends.
- Reviews feedback from engagement sessions with investors and determines follow-up actions and plans.
- Monitors company compliance with corporate governance requirements and policies.
- Reviews and recommends the Board and Committee membership and leadership structure.
- Reviews and recommends to the Board candidates for election as officers with the rank of EVP or above.
- Considered stockholder feedback and input on governance topics and evolving governance issues, trends and policies, including ESG and the stockholder proposal on right to act by written consent.
- Focused on the ongoing and continual Board refreshment process.
- In connection with the Board review of the strategic pivot of the organization, discussed the qualifications and skills necessary for future director nominees.
- Conducted the annual Board and Committee effectiveness assessment, developed action plans based on the results and monitored follow-up items.
Risk Oversight Role:
- Oversees risks related to the company’s governance structure, trends, policies and processes.
- Monitors independence of the Board.
- Each member of the Nominating & Governance Committee is independent, as required by the Listing Rules of The Nasdaq Stock Market.
Michael Splinter (Chair)
Steven D. Black
Thomas A. Kloet
Meetings in 2017
Annual non-employee director compensation is based upon a compensation year beginning and ending in May. Staff directors, including Ms. Friedman, do not receive compensation for serving on the Board. Every two years, the Management Compensation Committee reviews the Director Compensation Policy, considers a competitive market analysis of director compensation data and recommends changes, if any, to the policy to the Board for approval. The following table reflects the compensation policy for nonemployee directors for the current and prior compensation years.
Each non-employee director may elect to receive the annual retainer in cash (payable in equal semi-annual installments), equity or a combination of cash and equity. Each non-employee director also may elect to receive Committee Chair and/or Committee member fees in cash (payable in equal semi-annual installments) or equity.
The annual equity award and any equity elected as part of the annual retainer or for Committee Chair and/or Committee member fees are awarded automatically on the date of the Annual Meeting of Stockholders immediately following election and appointment to the Board.
All equity paid to Board members consists of RSUs that vest in full one year from the date of grant. The amount of equity to be awarded is calculated based on the closing market price of our common stock on the date of the Annual Meeting. Unvested equity is forfeited in certain circumstances upon termination of the director’s service on the Board.
Directors are reimbursed for business expenses and reasonable travel expenses for attending Board and Committee meetings. Non-employee directors do not receive retirement, health or life insurance benefits. Nasdaq provides each non-employee director with director and officer liability insurance coverage, as well as accidental death and dismemberment and travel insurance for and only when traveling on behalf of Nasdaq.
Under our stock ownership guidelines, non-employee directors must maintain a minimum ownership level in Nasdaq common stock of five times the annual cash retainer for Board members.
STOCK OWNERSHIP GUIDELINES
Under our stock ownership guidelines, non-employee directors must maintain a minimum ownership level in Nasdaq common stock of five times the annual cash retainer for Board members. Shares owned outright, through shared ownership and in the form of vested and unvested restricted stock, are taken into consideration in determining compliance with these stock ownership guidelines. Exceptions to this policy may be necessary or appropriate in individual situations and the Chairman of the Board may approve such exceptions from time to time. New directors have until four years after their initial election to the Board to obtain the minimum ownership level. All of the directors were in compliance with the guidelines as of December 31, 2017.
2017 Director Compensation Table
1 Adena T. Friedman and Robert Greifeld are not included in this table as they are (or were, in the case of Mr. Greifeld) employees of Nasdaq and thus received no compensation for their service as directors. For information on the compensation received by Ms. Friedman as an employee of the company, see “Compensation Discussion and Analysis” and “Executive Compensation Tables.”
2 The differences in fees earned or paid in cash reported in this column largely reflect differences in each individual director’s election to receive the annual retainer and Committee service fees in cash or RSUs. These elections are made at the beginning of the Board compensation year in May and apply throughout the year. In addition, the difference in fees earned or paid also reflects individual Committee service.
3 The amounts reported in this column reflect the grant date fair value of the stock awards computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of these amounts are included in note 13 to the company’s audited financial statements for the fiscal year ended December 31, 2017 included in our annual report on Form 10-K. The differences in the amounts reported among non-employee directors primarily reflect differences in each individual director’s election to receive the annual retainer and Committee service fees in cash or RSUs.
4 These stock awards, which were awarded on May 10, 2017 to all the non-employee directors elected to the Board on that date, represent the annual equity award and any portion of annual retainer or Committee service fees that the director elected to receive in equity. Each non-employee director received the annual equity award, which consisted of 2,996 RSUs with a grant date fair value of $199,983. Mr. Splinter elected to receive his Chairman retainer in equity so he received an additional 3,595 RSUs with a grant date fair value of $239,966. Directors Arnoldi, Black, Hutchins, Kazim and Kloet elected to receive all of their annual retainers in equity, so they each received an additional 1,123 RSUs with a grant date fair value of $74,960. In addition, individual Directors received the following amounts for Committee service fees: Ms. Arnoldi (149 RSUs with a grant date fair value of $9,946); Mr. Black (524 RSUs with a grant date fair value of $34,977); Mr. Hutchins (374 RSUs with a grant date fair value of $24,965); H.E. Kazim (74 RSUs with a grant date fair value of $4,940); and Mr. Splinter (449 RSUs with a grant date fair value of $29,971). Following his election to the Board, Mr. Rainey received a stock award on July 31, 2017, representing the annual equity award, which consisted of 2,689 RSUs with a grant date fair value of $199,981.
5 The aggregate number of unvested and vested shares and units of restricted stock beneficially owned by each non-employee director as of December 31, 2017 is summarized in the following table.
All of the directors were in compliance with the stock ownership guidelines as of December 31, 2017.
6 Fees Earned or Paid in Cash to Mr. Kloet include fees of $72,500 for his service as a director of Nasdaq, Inc., consisting of $37,500 of annual retainer for the 2016-2017 compensation year and $35,000 of Committee Chair and Member fees for the 2017-2018 compensation year. Fees Earned or Paid in Cash to Mr. Kloet also include fees of $130,000 for his service as Chairman of the Boards of our U.S. exchange subsidiaries and their Regulatory Oversight Committees. Fees earned for Board and Committee service for our exchange subsidiaries are paid only in cash. Mr. Kloet directs most of the fees for his service as a director to a 501(c) (3) charity of his choice.
7 Fees Earned or Paid in Cash to Mr. Wedenborn include fees for his service both as a director of Nasdaq, Inc. ($47,500) and as Chairman of the Board of Nasdaq Nordic Ltd ($32,692 (€29,000)). The latter amount was converted to U.S. dollars from euros at an exchange rate of $1.1273 per euro, which was the average exchange rate for 2017. Fees earned for Board and Committee service for our exchange subsidiaries are paid only in cash.