Named Executive Officer Compensation

Named Executive Officer Compensation

Proposal 2: Approval of the Company’s Executive Compensation of an Advisory Basis

We are asking stockholders to approve, on an advisory basis, the company’s executive compensation as reported in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the executive compensation program and practices described in this proxy statement.

We urge stockholders to read the Compensation Discussion and Analysis below as well as the executive compensation tables and narrative beginning on page 54. The Compensation Discussion and Analysis describes our executive compensation program and the decisions made by our Management Compensation Committee in 2017 in more detail. The compensation tables provide detailed information on the compensation of our NEOs. The Board and the Management Compensation Committee believe that the compensation program for our NEOs has been effective in meeting the core principles described in the Compensation Discussion and Analysis in this proxy statement and has contributed to the company’s long-term success.

In accordance with Section 14A of the Exchange Act and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the 2018 Annual Meeting of Stockholders.

RESOLVED, that the stockholders of Nasdaq, Inc. approve, on an advisory basis, the compensation of Nasdaq’s NEOs, as disclosed in the proxy statement for Nasdaq’s 2018 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the executive compensation tables and other related tables and narrative disclosure.

This advisory vote is not binding on the Board and the Management Compensation Committee. Although non-binding, the Board and the Management Compensation Committee will review and consider the outcome of the vote when making future decisions regarding our executive compensation program.

The Board has adopted a policy providing for annual stockholder advisory votes to approve the company’s executive compensation. Under the current version of the policy, the next advisory vote to approve executive compensation will occur at the 2019 Annual Meeting of Stockholders.

The Board of Directors unanimously recommends a vote FOR the approval of the company’s executive compensation on an advisory basis.

Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides a summary of our executive compensation philosophy and programs and describes the compensation decisions we have made under these programs and the factors considered in making those decisions. This Compensation Discussion and Analysis and the Executive Compensation Tables focus on the compensation of our NEOs for 2017.

Business Performance Highlights

We achieved strong financial and operational performance across many of our business segments in 2017 while continuing to diversify our business, invest significantly in future initiatives and integrate our recent acquisitions.

Achieved record net revenues of $2.43 billion for the full year ended December 31, 2017.
Increased net revenues 7% year over year, led by 10% growth in Market Technology and a 9% increase in Information Services.
Improved market share in our largest trading categories, multiply-listed U.S. options, U.S. equities and Nordic equities.
Achieved and exceeded the initial $60 million synergies with respect to key 2016 acquisitions ahead of schedule.
Led U.S. exchanges with 136 IPOs, representing 63% of all U.S. IPOs, and welcomed 268 total new listings on The Nasdaq Stock Market.
Market Technology order intake totaled $292 million during 2017 while total order backlog set a new record of $847 million at December 31, 2017.
Closed the acquisition of eVestment, a leading content and analytics provider used by asset managers, investment consultants and asset owners.
Returned $446 million in value to stockholders through $203 million in repurchased stock and $243 million in paid dividends.
Achieved 71.6% three-year cumulative TSR, significantly outperforming the S&P 500 and the Nasdaq Composite over this time period.

Decision-Making Framework

We design our executive compensation program to reward financial and operational performance, effective strategic leadership and achievement of business unit goals and objectives, which are key elements in driving stockholder value and sustainable growth. Our compensation program is grounded in best practices and ethical and responsible conduct.

KEY GOVERNANCE FEATURES OF EXECUTIVE COMPENSATION PROGRAM

The following table summarizes the specific features of our executive compensation program. We believe our executive compensation practices drive performance and serve our stockholders’ long-term interests.


What We Do
Maintain robust stock ownership guidelines
Maintain a long-standing incentive “clawback” policy
Provide change in control protection that requires a “double trigger”
Conduct a comprehensive annual risk assessment of our compensation program
Conduct an annual executive talent review and discussion on succession planning
Pay for performance; 100% of annual incentives and annual long-term incentive grants are performance-based
Provide only limited perquisites, which provide nominal additional assistance to allow executives to focus on their duties

What We Don't Do
Provide ongoing supplemental executive retirement plans; all benefits have been frozen
Permit re-pricing of underwater stock options without stockholder approval
Accrue or pay dividends on unearned or unvested equity awards
Pay tax gross-ups on severance arrangements and perquisites
Award non-performance based stock options
Allow hedging or pledging of Nasdaq stock
Guarantee bonus payments for our NEOs

On an annual basis, the Management Compensation Committee reviews Nasdaq’s compensation philosophy, programs and practices.

TOTAL REWARDS PHILOSOPHY

As the company made a pivot in its strategic direction, we assessed and renewed our robust performance-based compensation philosophy to ensure it is meeting the needs of not only the company but also the stockholders. On an annual basis, the Management Compensation Committee reviews Nasdaq’s compensation philosophy, programs and practices. The following reflects our current total rewards philosophy.

Nasdaq’s total rewards program is designed to attract, retain and empower employees to act with integrity, use ingenuity, deliver insights, pursue possibilities and achieve great results to successfully execute the company’s growth strategy.

Nasdaq’s balanced total rewards program encourages decisions and behaviors that align with the short and long-term interests of the company’s stockholders.

The building blocks of our total rewards program are designed to promote and support our strategy and:

  • Reinforce our cultural values of: Clients, Passion, Innovation, Integrity, Effectiveness and Resiliency.
  • Energize and align employees with the most important priorities, and encourage and reward high levels of performance, innovation and growth, while not promoting undue risk.
  • Retain our most talented employees in a highly dynamic, competitive talent market.
  • Engage and excite current and future employees who possess the leading skills and competencies needed for us to achieve our strategy and objectives.

Our philosophy is based on the following guiding principles. Each individual component of compensation is considered independently and is not based on a formula. Each component, however, is intended to be complementary to the overall compensation package awarded to the executives.

Pay For Performance
A substantial portion of compensation is variable or “at risk” and directly linked to individual, company and business unit performance.
Retention
Long-term vesting features ensure that an employee must remain with the company for a period of time to
receive value from an award.
Competitive Market Analysis
Total compensation is sufficiently competitive with industry peers to attract and retain executives with
similar levels of experience, skills, education and responsibilities.
Internal Equity
Compensation takes into account the different levels of responsibilities, scope, risk, performance and
future potential of our executives.
Collateral Implications
Our total compensation mix encourages executives to take appropriate, but not excessive, risks to improve
our performance and build long-term stockholder value.
Stockholder Alignment
The financial interests of executives are aligned with the long-term interests of our stockholders through
stock-based compensation and performance metrics that correlate with long-term stockholder value.
At our 2017 Annual Meeting of Stockholders, over

of the votes cast were in favor of the advisory vote to approve executive compensation.
SAY ON PAY RESULTS

Each year we carefully consider the results of our Say on Pay advisory vote from the prior year. At our 2017 Annual Meeting of Stockholders, over 98% of the votes cast were in favor of the advisory vote to approve executive compensation. In 2017 we retained the core elements of our executive compensation program, policies and decisions and believe that our programs continue to appropriately motivate and reward our senior management.

In addition to the perspective provided by the Say on Pay results, we also carefully solicit and consider feedback from our stockholders on executive compensation, corporate governance and other issues throughout the year. For further information on our stockholder engagement, see “Engaging with Our Stockholders” on page 20.
COMPENSATION DETERMINATIONS

We have established a process for evaluating the performance of the company, the President and CEO and other NEOs for compensation purposes. On an annual basis, the Management Compensation Committee, the Board and Nominating & Governance Committee review our President and CEO’s performance in Executive Session. As part of their deliberative process, the Management Compensation Committee and Board evaluate our President and CEO’s performance against the pre-established corporate goals and determine appropriate President and CEO compensation. The factors considered include our President and CEO’s performance against annual performance objectives, the performance of the company, the quality and development of the management team and employee engagement.
With the support of the Human Resources Department, our President and CEO develops compensation recommendations for the executive officers for consideration by the Management Compensation Committee and/or the Board. As part of this process, our President and CEO meets individually with each executive to discuss his or her performance against pre-established objectives determined during the previous year, as well as performance objectives and development plans for the coming year. This meeting gives each executive an opportunity to present his or her perspective of his or her performance and potential objectives and challenges for the upcoming year. Our President and CEO presents the results of each of the executive meetings to the Management Compensation Committee for its review and consideration as part of its deliberation process.

COMPETITIVE POSITIONING

To evaluate the external competitiveness of our executive compensation program, we compare certain elements of the program to similar elements used by peer companies. In setting 2017 compensation levels, the Management Compensation Committee used a comprehensive peer group, consisting of 21 companies, to conduct a competitive market analysis of the compensation program for our NEOs. We believe using and disclosing a peer group supports good governance and provides valuable input into compensation levels and program design.

When forming the peer group, we considered potential peers among both direct industry competitors and companies in related industries with similar talent needs. After identifying potential peers on this basis, we used the seven screening criteria to the left to select appropriate peer companies.

Each of these factors was initially weighted equally to develop a more refined list of companies for consideration. We then further reviewed each remaining company to determine its appropriateness for the final peer group with a particular focus on identifying meaningful talent peers. Certain companies were eliminated because of factors such as a significantly different market capitalization, limited competitive position for executive talent or limited global complexity relative to Nasdaq.

We believe the current peer group includes an accurate representation of Nasdaq’s industry competitors and size-relevant, talent-focused comparators. In addition, we believe that year-over-year  onsistency in peer group usage is desirable for reviewing trends in market pay movement.

PEER GROUP

The peer group consists of the following companies.¹

Automatic Data Processing, Inc.DST Systems, Inc.London Stock Exchange Group plc
Bats Global Markets, Inc.(2)E*TRADE Financial CorporationMasterCard Incorporated
BGC Partners Inc.Fidelity National Information Services, Inc.S&P Global Inc.
CBOE Holdings, Inc.Fiserv, Inc.TD Ameritrade Holding Corporation
CME Group Inc.Intercontinental Exchange, Inc.TMX Group Ltd.
Deutsche BörseInvesco Ltd.The Charles Schwab Corporation
Discover Financial ServicesLegg Mason, Inc.Visa Inc.
1 This peer group differs from the peer group used for the performance graph included in Item 5 of our annual report on Form 10-K, which is for stock performance
comparisons and includes industry-only competitors.
2 Bats Global Markets, Inc. was removed from the peer group after being acquired by CBOE Holdings, Inc. in February 2017.

In addition to the peer group, we also take into account that Nasdaq faces competition for talent from private firms, such as high frequency and other small trading firms, private equity funds and non-public technology companies for which public compensation data is not available.

Peer group data serves as only one reference point in evaluating our executive compensation program. We use this data to see how various elements of our executive compensation program compare to other companies. However, we do not set the compensation of our executives based on this data or target executive compensation to a specific percentile of the compensation set by our competitors. Instead, the comparison is conducted solely to determine if the compensation is competitive to the market. Each executive is evaluated individually based on skills, knowledge, performance, growth potential and, in the Management Compensation Committee’s business judgment, the value he or she brings to  he organization and Nasdaq’s retention risk.

Each executive is evaluated individually based on skills, knowledge, performance, growth potential and, in the Management Compensation Committee’s business judgment, the value he or she brings to the organization and Nasdaq’s retention risk.

PRESIDENT AND CEO’S ROLE IN THE EXECUTIVE COMPENSATION PROCESS

Our President and CEO regularly attends Management Compensation Committee meetings at the invitation of the Management Compensation Committee and provides her perspective to the Management Compensation Committee regarding executive compensation matters generally and the specific performance of the other executive officers.

However, in accordance with the Listing Rules of The Nasdaq Stock Market, the President and CEO does not vote on executive compensation matters or attend Executive Sessions of the Management Compensation Committee or Board and the President and CEO is not present when her own compensation is being discussed or approved.

ROLE OF COMPENSATION CONSULTANTS

In 2017, our Human Resources Department engaged Meridian Compensation Partners to assist staff in gathering data, reviewing best practices and making recommendations to the Management Compensation Committee about our executive compensation program. Meridian does not provide any other services to Nasdaq other than executive compensation consulting. Meridian does not directly advise the Management Compensation Committee or attend meetings. In 2017, we paid Meridian $33,820 in fees for competitive market data for executives and outside directors and $115,040 in fees for other executive compensation services. However, Meridian does not determine or recommend the amount or form of executive or director compensation.

TALLY SHEETS

When recommending compensation for the President and CEO and other NEOs, the Management Compensation Committee reviews tally sheets that detail the various elements of compensation for each executive. These tally sheets are used to evaluate the appropriateness of the total compensation package, to compare each executive’s total compensation opportunity with his or her actual payout and to ensure that the compensation appropriately reflects the compensation program’s focus on pay for performance.

What We Pay and Why: Elements of Executive Compensation

 ElementsWhat We DidObjectivesWhere Described in More Detail
FIXEDBase Salary
  • Fixed amount of compensation for service during the year
  • Reward scope of responsibility, experience and individual performance
Page 62
AT-RISKAnnual Incentive Compensation
  • At-risk compensation, dependent on goal achievement

  • Formula-driven annual incentive linked to corporate financial, business unit financial and strategic objectives and other organizational priorities
  • Promote strong business results by rewarding value drivers, without creating an incentive to take excessive risk

  • Serve as key compensation vehicle for rewarding results and differentiating individual performance each year
Page 63
Long-Term Incentive Compensation
  • Award values are granted based on market competitive norms and individual performance

  • 100% of PSUs are paid in shares of common stock upon vesting based on three-year relative TSR ranking compared to peers and to the broad market, over each cycle
  • Motivate and reward executives for outperforming peers over several years

  • Ensure that executives have a significant stake in the long-term financial success of the company, aligned with the stockholder experience

  • Promote longer-term retention
Page 68
BENEFITSRetirement, Health and Welfare
  • 401(k) plan with company match

  • Competitive welfare benefits

  • Frozen pension plan and frozen supplemental executive retirement plan
  • Provide market-competitive benefits to attract and retain top talent

  • Frozen plans reflect legacy arrangements
Page 72
SEVERANCESeverance Arrangements — Termination Due to Change in Control ("Double Trigger")
  • Severance and related benefits paid upon termination without cause or resignation for good reason following a change in control

  • Accelerated equity vesting upon termination post-change in control
  • Retention of executives through a change in control

  • Preserve executive objectivity when considering transactions in the best interest of stockholders

  • Assist in attracting top talent

  • Equity provisions keep executives whole in situations where shares may no longer exist or awards cannot otherwise be replaced
Page 72
Severance Arrangements — Other
  • Specified amounts under employment arrangements with some executive officers

  • Discretionary guidelines, for involuntary terminations without cause
  • Provide transition assistance if employment ends involuntarily

  • Promote smooth succession planning upon retirement

  • Assist in attracting top talent

  • Allow the company to obtain release of employment-related claims
Page 72
OTHER COMPENSATIONLimited Perquisites
  • Limited additional benefits provided to certain executives
  • Provide nominal additional assistance that allows executives to focus on their duties
Page 73

Nasdaq’s executive compensation program is designed to deliver pay in accordance with corporate, business unit and individual performance

PAY FOR PERFORMANCE

Nasdaq’s executive compensation program is designed to deliver pay in accordance with corporate, business unit and individual performance. A large percentage of total target compensation is “at-risk” through long-term equity awards and annual cash incentive awards. These awards are linked to actual performance and include a substantial portion of equity. The mix of actual direct compensation for our NEOs in 2017 is shown below.

NEOs—2017 Actual Direct Compensation Mix

BASE SALARY

We review base salaries on an annual basis. In addition, we may make adjustments to base salaries during the year in response to significant changes in an executive’s responsibilities or events that would impact the long-term retention of a key executive. Salaries are established at levels commensurate with each executive’s title, position and experience, recognizing that each executive is managing a component of a complex global company.

The following table shows each NEO’s base salary at December 31, 2017 and 2016.

Under the terms of Ms. Friedman’s employment agreement, her base salary for 2017 was $1,000,000, which was increased from her 2016 base salary in connection with her promotion to President and CEO.

In April 2017, Mr. Peterson’s base salary was increased from $525,000 to $550,000 based on performance-related factors and to align his compensation with our total rewards philosophy to reward, motivate and retain our top performers.

In April 2017, Mr. Wittman’s base salary increased from $475,000 to $500,000 based on performance-related factors. In addition, in August 2017 his base salary increased from $500,000 to $550,000 to reflect the increased scope of his role after taking responsibility for all of Global Trading and Market Services.

ANNUAL INCENTIVE COMPENSATION

Annual performance-based cash incentives are an integral part of our executive compensation program. Our NEOs receive such awards through our ECIP.

Plan-Based Target Award Opportunities

Target annual cash incentive award opportunities are established for our NEOs based on an assessment of each officer’s position and responsibilities, the competitive market analysis and the company’s retention objectives.

The following table shows each NEO’s target annual incentive opportunity in 2017 and 2016.

For 2017, Ms. Friedman’s target annual incentive compensation was increased from $1,500,000 to $2,000,000 associated with her promotion to President and CEO.

In April 2017, Mr. Peterson’s target annual incentive compensation was increased from $800,000 to $825,000 based on his high level of performance and competitive market positioning.

In April 2017, Mr. Wittman’s target annual incentive compensation was increased from $725,000 to $750,000 based on his high level of performance and competitive market positioning. In addition, in August 2017 his target annual incentive compensation was increased from $750,000 to $825,000 in recognition of the increased scope of his role after assuming responsibility for all of Global Trading and Market Services.

Performance Goals

The annual cash incentive award payments for our executives are based on the achievement of pre-established, quantifiable performance goals. The President and CEO selects and recommends goals for the other executive officers based on their areas of responsibility and input from each executive. The Management Compensation Committee and/or the Board review and consider our President and CEO’s recommendations and approve the goals for the coming year after identifying the objectives most critical to our future growth and most likely to hold executives accountable for the operations for which they are responsible.

The annual cash incentive awards are tied to results in the following areas:

  • corporate objectives, including:
    • operating income (run rate), which measures business efficiency and profitability;
    • net revenues, which measure the ability to drive revenue growth; and
    • employee engagement, which measures overall employee satisfaction and motivation; and
  • business unit objectives, which are defined business unit-specific goals (financial and strategic) that contribute to the company’s short and long-term performance.

Operating income (run rate) and net revenues are the company’s primary measures of short-term business success and key drivers of long-term stockholder value. Targets for operating income (run rate) and net revenues are set at the beginning of each year, as part of the company’s annual budgeting process and are subject to adjustment for transactions and other extraordinary events. The employee engagement objectives are established at the beginning of the year by the Management Compensation Committee and/or the Board to focus the executive team on certain enterprise initiatives.

Business unit objectives also are established at the beginning of the year and are subject to adjustment for transactions and other extraordinary events. The business unit objectives consist of financial and strategic objectives specific to the business unit. The Management Compensation Committee and/or the Board set the business unit objectives to reflect the key responsibilities of each executive and incent focus on particular objectives in 2017. In lieu of business unit objectives, our President and CEO had strategic objectives relating to the entire organization.

We set goals at levels where the maximum payout would be difficult to achieve and beyond budget assumptions. The following table shows each NEO’s performance objectives for 2017 and the relative weighting of these objectives.

The annual cash incentive award payments for our executives are based on the achievement of pre-established, quantifiable performance goals.

 

Potential Payouts

Payouts are determined after the end of the year and are based on the sum of (i) actual performance under each corporate objective and (ii) actual performance against an executive’s business unit/strategic objectives. Each goal applicable to the NEOs for 2017 had a minimum, target and maximum performance level.

Scoring of each goal is based on actual goal achievement compared to the target. In 2017, payouts on each goal could vary between 0% and 200% of the target. However, certain non-financial goals that were not aligned with longer term strategic-value generation were funded in accordance with the achievement of the operating income (run rate) goal. This funding ensures that there is better alignment with the overall financial results of the company.

Payouts under the incentive compensation program also take into account ethical and responsible conduct, and awards are subject to negative adjustment at the full discretion of the Management Compensation Committee and/or the Board based on conduct.

Corporate Objectives Performance vs. Goals

The table below summarizes the 2017 corporate objectives.

1 Corporate operating income (run rate) excludes Nasdaq NEXT (i.e., our innovation investment program), foreign exchange impact, intra-year acquisitions and nonrecurring expense items. Corporate net revenues exclude Nasdaq NEXT, foreign exchange impact and intra-year acquisitions. Non-GAAP expense items primarily include amortization expense of acquired intangible assets, merger and strategic initiatives costs and restructuring charges. As a result, these calculations differ from the U.S. GAAP calculations of operating income and revenues less transaction-based expenses reported in our annual report on Form 10-K.
2 In addition to the Overall Senior Leadership Index results, Messrs. Ptasznik, Knight, Peterson and Wittman were also scored on their Business Unit Leadership Index results.

2017 Business Unit Financial and Strategic Objectives Performance vs. Goals

The Management Compensation Committee and/or the Board assessed each officer’s achievement of the business unit financial and strategic objectives in 2017, as described below. Specific metrics for these goals are not disclosed for competitive purposes. However, 100% of our NEO goals were defined with quantifiable performance metrics and were approved by the Management Compensation Committee. No discretion was applied to any goal scoring unless specially noted below.

1 The maximum payout was funded at 122% of target based on operating income (run rate) results.

Award Payouts

In early 2018, the Management Compensation Committee and/or the Board determined the final levels of achievement for each of the goals and approved payout amounts. There were no guaranteed minimum payouts for any of our NEOs.

1 In addition to Mr. Knight’s calculated award of $909,300, he also received an additional award of $50,700 to reflect his contributions to Project Revitalize, which were
not fully reflected in the 5% weighting of that strategic goal.
2 In addition to Mr. Wittman’s calculated award of $917,638, he also received an additional award of $32,362 for driving results within his control, despite lower than
expected volumes in 2017.

LONG-TERM INCENTIVE COMPENSATION

Long-term incentive compensation for our executive officers consists entirely of performance-based equity awards. For officers at the EVP level or above, we grant PSUs based on relative TSR over a three-year performance period. Consistent with our pay for performance philosophy, this program represents 100% of the officer’s long-term stock-based compensation.

In 2017, each NEO received a grant of PSUs subject to a three-year cumulative performance period beginning on January 1, 2017 and ending on December 31, 2019. The shares earned, if any, vest at the end of the performance period. Performance is determined by comparing Nasdaq’s TSR to two groups of companies, each weighted 50%.

One group consists of all S&P 500 companies and the other group consists of the peer companies on the left. The peer companies include other global exchanges with sizable market capitalizations.

The TSR results are measured at the beginning and end of the three-year performance period. Nasdaq’s relative performance ranking against each of these groups will determine the final number of shares delivered to each individual. The maximum payout will be 200% of the target number of PSUs granted if Nasdaq ranks at the 85th percentile or above of both groups. However, if Nasdaq’s TSR is negative for the three-year performance period, regardless of TSR ranking, the payout cannot exceed 100% of the target number of PSUs granted.

Below is a table showing the amount of shares a grantee may receive based upon different levels of achievement against each of the groups. For each group, the resulting shares earned will be calculated by multiplying the relevant percentage from the table below by one-half of the target award amount.

Global Exchange Peer Companies

Used for Three-Year PSUs
ASX Limited
BM&F Bovespa
Bolsa Mexicana de Valores
Bolsas Y Mercados Espanoles
CBOE Holdings, Inc.
CME Group Inc.
Deutsche Börse
Euronext
Hong Kong Stock Exchange
Intercontinental Exchange
Japan Exchange
London Stock Exchange Group
NEX Group
Singapore Exchange
TMX Group Ltd.

For levels of achievement between points, the resulting shares earned will be calculated based on straight-line interpolation.

Award Determination

In setting Ms. Friedman’s 2017 equity award target, the Management Compensation Committee focused on motivating performance, with significant upside and downside based on relative performance. Historical awards, newness to the role and the retention value of Ms. Friedman’s outstanding equity were taken into account when determining the target amount of her award. Peer group data also was considered in establishing a market-competitive award level.

Ms. Friedman recommended the specific equity award targets for each of the other NEOs, which varied among executives depending upon responsibilities and retention considerations. The Management Compensation Committee and Board evaluated these recommendations and determined that the amount of each award reflected the individual’s contributions, was aligned with competitive market levels and was appropriate for retention purposes.

The target amount and target face value of the PSUs awarded to each of the NEOs under this program is set forth in the table below. The 2017 awards were approved on March 28, 2017 and granted on March 31, 2017, which was the date of Nasdaq’s annual employee equity grant.

One-Time President and CEO Option Award

In addition to the annual grant awarded to Ms. Friedman, the Management Compensation Committee and Board of Directors granted her a one-time, performance-based stock option award with a value of $4,000,000 to recognize her promotion to President and CEO and to provide strong motivation to deliver long-term stock price appreciation in alignment with stockholder interests. 100% of Ms. Friedman’s option grant is performance-based, and the grant vests one-third per year over three years, contingent upon the achievement of performance metrics.

The performance criteria for the option grant are set forth in the table below.

Annual fully diluted EPS growth is determined based upon the percentage by which the fully diluted EPS of the company, as determined in accordance with U.S. GAAP for the fiscal year, exceeds the fully diluted EPS of the company, as determined in accordance with U.S. GAAP for the prior fiscal year.

2017 Vesting of One-Time President and CEO Option Award

On January 30, 2018, the Management Compensation Committee and the Board evaluated and approved the performance results for the vesting of the first one-third of the stock options granted to Ms. Friedman in January of 2017. The company’s 2017 fully diluted EPS growth, negatively adjusted for a one-time after-tax, non-cash intangible asset impairment charge of $341 million related to the full write-off of the eSpeed trade name and a rebranding of our Fixed Income business, exceeded the performance requirement, which resulted in the approval of the vesting of one-third of the 2017 option award, or 89,605 options.

Settlement of 2015 PSU Grants Based on Relative TSR

On December 31, 2017, the Management Compensation Committee evaluated and approved the performance results for the PSUs granted to senior executives in 2015. These PSUs were subject to a three-year cumulative performance period beginning on January 1, 2015 and ending on December 31, 2017 and performance was determined by comparing Nasdaq’s TSR to two groups of companies, each weighted 50%. One group consisted of all S&P 500 companies and the other group consisted of 16 peer companies. We measure our TSR performance relative to two different groups in order to align with the varied interests of our stockholders.

The following table sets forth the 2015 PSU performance measure results.

Based on these results, the NEOs earned the number of PSUs set forth below as compared to the target amounts granted.

Other 2017 Equity Grants

In recognition of the increased scope and criticality of his role after assuming leadership responsibility for all of Global Trading and Market Services, Mr. Wittman received a special one-time grant of RSUs with a face value of $1,000,000 in August 2017. The RSU grant vests 1/3 each year over a three-year period.

General Equity Award Grant Practices

The Management Compensation Committee and the Board approve annual equity awards at their regular March meetings, which are scheduled well in advance without regard to material company news announcements.

We believe that the current and expected expense and share utilization are reasonable and justified in light of the Management Compensation Committee’s goals of aligning the long-term interests of officers and employees with those of stockholders and rewarding officers for long-term relative TSR growth while retaining a strong management team. We actively monitor the expense and share utilization associated with annual grants, and are committed to making adjustments to grant practices when appropriate.

Throughout the performance periods for equity awards, the Management Compensation Committee receives updates on the executives’ progress in achieving applicable performance measures and monitors the compensation expense and share run rate that the company is incurring for outstanding equity awards.

The reference price for calculating the value of equity awards granted is the closing market price of Nasdaq’s common stock on the date of grant. Existing equity ownership levels are not a factor in award determinations as we do not want to discourage senior executives from holding significant amounts of Nasdaq’s common stock.

Throughout the performance periods for equity awards, the Management Compensation Committee receives updates on the executives’ progress in achieving applicable performance measures.

BENEFITS

Nasdaq provides a comprehensive benefits program to our executives, including the NEOs, which mirrors the program offered to our other employees. These benefits include, among others things, a 401(k) plan with 6% matching contributions, health and welfare benefits and an employee share purchase program. Under these plans, our NEOs participate on the same terms as other employees.

SEVERANCE

Except in employment agreements and other agreements for certain officers as described in this proxy statement, we are not obligated to pay general severance or other enhanced benefits to any NEO upon termination of his or her employment. However, the Management Compensation Committee and/or the Board has the discretion to pay severance plan benefits. Severance plan  decisions do not influence other compensation decisions as these decisions are focused on motivating our executives to remain with Nasdaq and contribute to our future success.

Change in control severance is defined in employment agreements for certain NEOs, as described in this proxy, and in a change in control severance policy for NEOs without an employment agreement. We believe that the terms for triggering payment under each of the arrangements described in this proxy statement are reasonable. For example, these arrangements use what is known as a “double trigger,” meaning that a severance payment as a result of a change in control is activated only upon the occurrence of both a change in control of the company and a qualifying loss of employment. Benefits under these arrangements will be provided only if Nasdaq is the target organization. In addition, a change in control under these arrangements is limited to situations where the acquirer obtains a majority of Nasdaq’s voting securities or the current members of our Board (or their approved successors) cease to constitute a majority of the Board.

For further information on Nasdaq’s limited severance arrangements, see “Named Executive Officer Compensation – Potential Payments Upon Termination or Change in Control.”

OTHER

Because our executive compensation program emphasizes pay for performance, it includes very few perquisites for our executives. Under her employment agreement, for security reasons, we provide Ms. Friedman with a company car and a security-trained driver for use when conducting company business. NEOs are eligible to receive basic financial planning services and executive health exams. In addition, like all employees and contractors, our executives are eligible to receive 100% corporate matching funds (and sometimes more for specific initiatives) for donations to an IRS-registered, 501(c) (3)-compliant organization. Participation in each of these programs is voluntary. We do not provide tax gross-up payments on perquisites.

We monitor the risks associated with our compensation program on an ongoing basis.

Risk Mitigation and Other Pay Practices

RISK ASSESSMENT OF COMPENSATION PROGRAM

We monitor the risks associated with our compensation program on an ongoing basis. In February 2018, the Management Compensation Committee and Audit Committee were presented with the results of an annual formal assessment of our employee compensation program in order to evaluate the risks arising from our compensation policies and practices. This risk assessment report reflected a comprehensive review and analysis of the components of our compensation program. The Management Compensation Committee and Audit Committee both concluded, based on the risk assessment report’s findings, that any risks arising from our compensation program are not reasonably likely to have a material adverse effect on the company.

The risk assessment was performed by an internal working group consisting of employees in the Human Resources, Group Risk Management and Internal Audit Departments, as well as the Offices of General Counsel and Corporate Secretary. The findings were presented to the Global Risk Management Committee, which concurred with the working group’s report. The risk assessment included the following steps:

  • collection and review of existing Nasdaq compensation policies and pay structures;
  • development of a risk assessment scorecard, analysis approach and timeline; and
  • review and evaluation of controls that might mitigate risk-taking (e.g., equity vesting structure, incentive recoupment policy and stock ownership guidelines).

STOCK OWNERSHIP GUIDELINES

We have long recognized the importance of stock ownership as an essential means of closely aligning the interests of our executives with the interests of our stockholders. In addition to using equity awards as a primary long-term incentive compensation tool, we have in place stock ownership guidelines for our senior executives. Under its charter, the Management Compensation Committee is responsible for reviewing the stock ownership guidelines annually and verifying compliance.

Under the guidelines, the covered executives are expected to own specified dollar amounts of Nasdaq common stock based on a multiple of their base salary, as set forth in the table below.

TitleValue of Shares Owned
President and CEO6x base salary
CFO4x base salary
EVPs3x base salary

Individual holdings, shares jointly owned with immediate family members or held in trust, shares of restricted stock (including vested and unvested), shares underlying PSUs after completion of the performance period and shares purchased or held through Nasdaq’s plans, such as the Nasdaq ESPP, count toward satisfying the guidelines. New executives and executives who incur a material change in their responsibilities are expected to meet the applicable level of ownership within four years of their start date or the date of the change in responsibilities. All of the NEOs who were required to be in compliance with the guidelines on December 31, 2017 were in compliance with the guidelines as of that date.

STOCK HOLDING GUIDELINES

We encourage our senior executives to retain equity grants until the applicable stock ownership level discussed above is reached. Under the stock ownership guidelines, these officers must hold the specified dollar amounts of stock through the end of their employment with Nasdaq. We feel that our guidelines provide proper alignment of the interests of our management and our stockholders and therefore, we do not have additional stock holding requirements beyond the stock ownership guidelines.

TRADING CONTROLS AND HEDGING AND PLEDGING POLICIES

We prohibit directors or executive officers from engaging in securities transactions that allow them either to insulate themselves, or profit, from a decline in Nasdaq’s stock price (with the exception of selling shares outright). Specifically, these individuals may not enter into hedging transactions with respect to Nasdaq’s common stock, including short sales and transactions in derivative securities. Finally, these individuals may not pledge, hypothecate or otherwise encumber their shares of Nasdaq common stock.

Nasdaq permits all employees, including the NEOs, to enter into plans established under Rule 10b5-1 of the Exchange Act to enable them to trade in our stock, including stock received through equity grants, during periods in which they might not otherwise be able to trade because material nonpublic information about Nasdaq has not been publicly released. These plans include specific instructions to a broker to trade on behalf of the employee if our stock price reaches a specified level or if certain other events occur and therefore, the employee no longer controls the decision to trade.

INCENTIVE RECOUPMENT POLICY

The Board and Management Compensation Committee have adopted an incentive recoupment or “clawback” policy that is applicable to officers with the rank of EVP and above. The policy provides that the company may recoup any cash or equity incentive payments predicated upon the achievement of financial results or operating metrics that are subsequently determined to be incorrect on account of material errors, material omissions, fraud or misconduct.

The Board and Management Compensation Committee have adopted an incentive recoupment or “clawback” policy that is applicable to officers with the rank of EVP and above.

TAX AND ACCOUNTING IMPLICATIONS OF EXECUTIVE COMPENSATION

The Management Compensation Committee considers income tax and other consequences of individual compensation elements when it is analyzing the overall level of compensation and the mix of compensation among individual elements.

Section 162(m) of the Internal Revenue Code of 1986, as amended, provided a limit of $1 million on the remuneration that may be deducted by a public company in any year in respect of the President and CEO and the three other most highly compensated executive officers (other than the principal financial officer). However, “performance-based compensation” was fully deductible if the plan under which the compensation was paid had been approved by the stockholders and met other requirements. We attempted to structure our compensation arrangements so that amounts paid are tax deductible to the extent feasible and consistent with our overall compensation objectives.

Section 162(m) was amended by the Tax Cuts and Jobs Act, which was enacted on December 22, 2017 and effective January 1, 2018. New Section 162(m) still provides a limit of $1 million on the remuneration that may be deducted by a public company; however, remuneration in any year in respect of the President and CEO, the principal financial officer and the three other most highly compensated executive officers is now considered. Also, under the new legislation, there is no exception for “performance-based compensation,” unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Given the limited guidance to date on this transition relief, the extent of the transition relief available to Nasdaq has not been entirely determined. Going forward, although “performance-based” criteria is no longer relevant in determining whether remuneration is deductible for tax purposes, the Management Compensation intends to continue to apply such criteria in structuring future compensation arrangements.

Depending upon the relevant circumstances at the time, the Management Compensation Committee may determine to award compensation that is not deductible. In making this determination, the Management Compensation Committee balances the purposes and needs of our executive compensation program against potential tax and other implications.

Generally, under U.S. GAAP, compensation is expensed as earned. We generally recognize compensation expense for equity awards on a straight-line basis over the requisite service period of the award.

Management Compensation Committee Report

The Management Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with our management. After such discussions, the Management Compensation Committee recommended to Nasdaq’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into Nasdaq’s annual report on Form 10-K.

The Management Compensation Committee

Steven D. Black, Chair
Charlene T. Begley
Michael R. Splinter

Management Compensation Committee Interlocks and Insider Participation

None of the members of the Management Compensation Committee is an executive officer, employee or former officer of Nasdaq. With the exception of Ms. Friedman, none of Nasdaq’s executive officers serves as a current member of the Nasdaq Board. None of Nasdaq’s executive officers serves as a director or a member of the compensation committee of any entity that has one or more executive officers serving on the Nasdaq Board or Management Compensation Committee.

Executive Compensation Tables

The following tables, narrative and footnotes present the compensation of the NEOs during 2017 in the format mandated by the SEC.

2017 Summary Compensation Table

1 The amounts reported in this column reflect the grant date fair value of the stock awards, including PSUs and RSUs, 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. Since the 2017 three-year PSU award payouts are contingent on TSR-related performance-based vesting conditions, the grant date fair values were determined based on a Monte Carlo simulation model.
The Monte Carlo simulation model takes into account expected price movement of Nasdaq stock as compared to peer companies. As a result of the company’s pregrant 2017 TSR performance relative to peer companies, the Monte Carlo simulation model assigned a significantly higher value to each 2017 three-year PSU than the closing price of Nasdaq’s stock on the grant date. Therefore, the value reflected in the 2017 Summary Compensation Table does not reflect the target grant date face value shown in the Long-Term Stock-Based Compensation section of the Compensation Discussion and Analysis in this proxy statement, and there is no assurance that the target grant date face values or FASB ASC Topic 718 fair values will ever be realized. The table below summarizes the target grant date face value of PSU grants that the Management Compensation Committee and the Board approved for the NEOs compared to the FASB ASC Topic 718 fair value.

2 The amounts reported in this column reflect the grant date fair value of the option 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.
3 The amounts reported in this column reflect the cash awards made to the NEOs under the ECIP or other performance-based incentive compensation programs.
4 The amounts reported in this column reflect the actuarial increase in the present value of the NEOs’ benefits under all pension plans established by Nasdaq. Assumptions used in calculating the amounts include a 3.70% discount rate as of December 31, 2017, a 4.15% discount rate as of December 31, 2016, a 4.30% discount rate as of December 31, 2015, a 4.20% discount rate as of December 31, 2014, retirement at age 62 (which is the earliest age at which a participant may retire and receive unreduced benefits under the plans) and other assumptions used as described in note 12 to the company’s audited financial statements for the fiscal year ended December 31, 2017 included in our annual report on Form 10-K. Since Mr. Knight is older than 62, his actual age was used to calculate the present value of his accumulated benefit. None of the NEOs received above-market or preferential earnings on deferred compensation in 2017, 2016 or 2015.
5 The following table sets forth the 2017 amounts reported in the “All Other Compensation” column by type. The incremental cost of personal use of the company car (including commutation) is calculated based on an allocation of the cost of the driver, tolls, fuel, maintenance and other related expenses.

2017 Grants of Plan-Based Awards Table

1 The amounts reported in these columns represent the possible range of payments under the ECIP or other performance-based incentive compensation programs. For information about the amounts actually earned by each named executive officer under the ECIP or other performance-based incentive compensation programs, see “Executive Compensation Tables – 2017 Summary Compensation Table.” Amounts are considered earned in fiscal year 2017 although they were not paid until 2018.
2 The amounts reported in these columns represent the possible range of PSUs that each named executive officer may earn under the Equity Plan, depending on the achievement of performance goals established by the Management Compensation Committee and/or Board.
3 The amount reported in this column represents shares underlying performance-based options granted under the Equity Plan that vest in one-third annual installments contingent on Nasdaq’s satisfaction of certain specified performance goals established by the Management Compensation Committee and/or Board for each of the fiscal years ending December 31, 2017, 2018 and 2019. On January 30, 2018, the Management Compensation Committee and Board determined that the performance goal for 2017 was met, resulting in the settlement of the first one-third of the grant.
4 The amount reported in this column represents the exercise price of the stock options reported in the previous column and is equal to the closing market price of our common stock on the date of grant.
5 The amounts reported in this column represent the grant date fair value of the total equity awards reported in the previous columns calculated pursuant to FASB ASC Topic 718 based upon the assumptions discussed 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. For further information about the calculation of these amounts, see “Executive Compensation Tables – 2017 Summary Compensation Table” on page 77.

2017 Outstanding Equity Awards at Fiscal Year-End Table

1 These performance-based options will vest in one-half annual installments contingent on Nasdaq’s satisfaction of certain specified performance goals established by the Management Compensation Committee and/or Board for each of the fiscal years ending December 31, 2018 and 2019.
2 This PSU award is subject to a three-year performance period ending on December 31, 2018. The amount reported is the target award amount, although the actual number of shares awarded could range from 0% to 200% of the target award amount, depending on the level of achievement of certain specified performance goals established by the Management Compensation Committee and/or Board.
3 This PSU award is subject to a three-year performance period ending on December 31, 2019. The amount reported is the target award amount, although the actual number of shares awarded could range from 0% to 200% of the target award amount, depending on the level of achievement of certain specified performance goals established by the Management Compensation Committee and/or Board.
4 These RSUs will vest as to one-half on each of July 11, 2018 and July 11, 2019.
5 These RSUs will vest as to one-third on each of August 1, 2018, August 1, 2019 and August 1, 2020.

2017 Option Exercises and Stock Vested Table

1 The amounts reported in this column are calculated by multiplying the number of shares received upon exercise by the difference between the closing market price
2 The amounts reported in this column are calculated by multiplying the number of shares of stock that vested by the closing market price of our common stock on the vesting date.
3 The amount reported includes 70,187 shares that were withheld to pay taxes in connection with the vesting(s).
4 The amount reported includes 3,997 shares that were withheld to pay taxes in connection with the vesting(s).
5 The amount reported includes 15,482 shares that were withheld to pay taxes in connection with the vesting(s).
6 The amount reported includes 20,056 shares that were withheld to pay taxes in connection with the vesting(s).
7 The amount reported includes 12,648 shares that were withheld to pay taxes in connection with the vesting(s).

Retirement Plans

Nasdaq maintains frozen non-contributory, defined-benefit pension plans and non-qualified supplemental executive retirement plans for certain senior executives. Future service and salary for all participants do not count toward an accrual of benefits under these plans. However, participants continue to receive credit for future service for vesting of the frozen accrued benefit.

Nasdaq also maintains a supplemental employer retirement contribution plan, which was designed to enhance retirement contributions for certain officers whose base salaries or total contributions to qualified plans exceeded certain IRS limitations. As of January 1, 2014, Nasdaq discontinued contributions to the supplemental employer retirement contribution plan. However, participants continue to receive interest on prior contributions to the plan.

Nasdaq’s frozen retirement plans reflect legacy agreements.

2017 Pension Benefits Table

1 Messrs. Ptasznik and Peterson are not participants in the pension plan or supplemental executive retirement plan.
2 Since the pension plan and supplemental executive retirement plan were frozen in 2007, the number of years of credited service for each named executive officer under those plans differs from such officer’s number of years of actual service with Nasdaq. As of December 31, 2017, Ms Friedman had 21.42 years of actual service with Nasdaq, while Mr. Wittman had 31.00 years and Mr. Knight had 18.50 years. Generally, participants in the pension plan became vested in retirement benefits under the plan after five years of service from the participant’s date of hire. Participants in the supplemental executive retirement plan generally became vested in retirement benefits under the plan after reaching age 55 and completing 10 years of service. As of December 31, 2017, Mr. Knight was vested in benefits payable under both the pension plan and the supplemental executive retirement plan, and Ms. Friedman and Mr. Wittman were vested in benefits payable under the pension plan.
3 The amounts reported comprise the actuarial present value of the named executive officer’s accumulated benefit under the pension plan and supplemental executive retirement plan as of December 31, 2017. Assumptions used in calculating the amounts include a 3.70% discount rate as of December 31, 2017, retirement at age 62 (which is the earliest age at which a participant may retire and receive unreduced benefits under the plans) and other assumptions used as described in note 12 to the company’s audited financial statements for the fiscal year ended December 31, 2017 included in our annual report on Form 10-K. Since Mr. Knight is older than 62, his actual age was used to calculate the present value of his accumulated benefit.

2017 Nonqualified Deferred Compensation Table

1 Ms. Friedman, Mr. Ptasznik and Mr. Peterson are not participants in the supplemental employer retirement contribution plan.
2 The amounts reported in this column represent interest earned during 2017 on account balances. Interest is paid at an annual rate of 7% (which is the 10-year U.S. Treasury securities rate on the effective date of the supplemental employer retirement contribution plan plus an additional 1%). These amounts have not been included in the “Summary Compensation Table” for the fiscal year ended December 31, 2017 or for previous years.
3 The amounts reported in this column represent account balances at December 31, 2017. These amounts include contributions that the company previously made to the NEOs under the supplemental employer retirement contribution plan and interest earned on account balances. To the extent that the NEOs were considered NEOs in prior years’ proxy statements, the Supplemental ERC contributions for prior years were reported in the column “All Other Compensation” in the “Summary Compensation Table” found in our proxy statement for the annual meeting of stockholders.

Employment Agreements

Nasdaq currently has employment agreements with three of its NEOs: Ms. Friedman, Mr. Knight and Mr. Peterson. In addition to the employment agreements, Nasdaq has entered into other agreements with each of these officers related to confidentiality and intellectual property protection.

Ms. Friedman’s and Mr. Peterson’s employment agreements prohibit them from rendering services to a competing entity for a period of two years following the last date of employment. To receive certain termination payments and benefits, Ms. Friedman and Mr. Peterson must execute a general release of claims against Nasdaq. In addition, termination payments and benefits may be discontinued if either NEO breaches the restrictive covenants in either the employment agreementor the continuing obligations agreement. Mr. Knight’s agreement prohibits him from rendering services to a competing entity for a period of one year following the last date of employment.

Each employment agreement for all three NEOs sets forth the payments and benefits that she or he will receive under various termination scenarios. For further information about these payments and benefits, see “Executive Compensation Tables – Potential Payments upon Termination and Change in Control.

Nasdaq currently has employment agreements with three of its NEOs:
Ms. Friedman, Mr. Knight and Mr. Peterson.

ADENA T. FRIEDMAN

Associated with her promotion to the role of President and CEO, Ms. Friedman entered into a new employment agreement on November 14, 2016. The term of the agreement
is January 1, 2017 to January 1, 2022, with no automatic renewals.

The new agreement provides for:

  •  an annual base salary of no less than $1,000,000;
  • annual incentive compensation that is targeted at not less than $2,000,000 based on the achievement of one or more performance goals established by the Management
    Compensation Committee; and
  • a 2017 equity grant with a target value of not less than $6,000,000 in the form of PSUs.

Although no equity award grants are guaranteed after 2017 under the agreement, Ms. Friedman may receive grants of equity awards, based on the Management Compensation Committee’s evaluation of the performance of Nasdaq and Ms. Friedman, peer group market data and internal equity and consistent with past practices.

EDWARD S. KNIGHT

On October 24, 2016, Nasdaq amended the employment agreement with Mr. Edward S. Knight. The term of the employment agreement is through February 22, 2019, with no automatic renewals.

The agreement provides that Mr. Knight will receive:

  • an annual base salary at a rate not less than the rate of base salary in effect on the date of the initial agreement; and
  • incentive compensation for each calendar year during the term as the Management Compensation Committee may award in its discretion.

Under the agreement, the Management Compensation Committee may grant Mr. Knight equity awards under the Equity Plan.

BRADLEY J. PETERSON

On August 1, 2016, Nasdaq entered into a new employment agreement with Mr. Bradley J. Peterson. The term of the employment agreement is August 1, 2016 to July 31, 2021, with no automatic renewals.

The agreement provides that Mr. Peterson will report directly to the CEO and receive:

  • an annual base salary of no less than $525,000;
  • annual incentive compensation that is targeted at not less than $800,000 based on the achievement of one or more performance goals established by the CEO and the Management Compensation Committee; and
  • an annual equity award with a target value of not less than $1,600,000 in accordance with the terms of the Equity Plan.

Except in employment agreements and other agreements for certain officers as described in this proxy statement, we are not obligated to pay general severance or other enhanced benefits to any NEO upon termination of his or her employment.

Potential Payments upon Termination or Change in Control

INVOLUNTARY TERMINATION NOT FOR CAUSE OR VOLUNTARY TERMINATION WITH GOOD REASON

Employment Agreements

Under their employment agreements, if Ms. Friedman’s or Mr. Peterson’s employment is terminated by the company without cause, or by the executive for good reason, he or she will be entitled to the following severance payments and benefits from the company:

  • a cash payment equal to the sum of: (i) two times the prior year’s annual base salary (for Mr. Peterson, this amount decreased to 1.5 times the prior year’s annual base salary after the first six months of his agreement), (ii) the target bonus amount for the year prior to the year terminated and (iii) any pro rata target bonus for the year of termination if performance goals are satisfied; and
  • a taxable monthly cash payment equal to the employer’s share of the COBRA premium for the highest level of coverage available under the company’s group health plans, until the earlier of 24 months (for Mr. Peterson, 18 months) or the date he or she is eligible for coverage under another employer’s health care plan.

Under her employment agreement, Ms. Friedman also would receive continued vesting for 12 months of outstanding PSUs, based on actual performance during the respective periods.

Under Mr. Knight’s employment agreement, if his employment is terminated by the company without cause or by Mr. Knight for good reason, the company is obligated to pay to Mr. Knight:

  • a pro rata portion of the incentive compensation for the year of termination;
  • a lump sum cash payment equivalent to continuation of base salary and incentive compensation, if any, until the later of the end of the term of the agreement or 24 months following the date of such termination of employment; and
  • health coverage at its expense until the later of the end of the term of the agreement or 24 months following the date of such termination of employment.

Ms. Friedman and Messrs. Knight and Peterson have agreed to be subject to certain post-termination restrictive covenants relating to non-competition, non-solicitation, non-disparagement and confidentiality.

Other Agreements

Under the terms of his employment offer letter, if Mr. Ptasznik’s employment is terminated by the company without cause, or by the executive for good reason, he will be eligible for the following severance payments and benefits from the company:

  • a cash payment under Nasdaq’s severance guidelines, which will be no less than the sum of: (i) 18 months of base salary and (ii) his target bonus;
  • a taxable monthly cash payment equal to the employer’s share of the COBRA premium for the highest level of coverage available under the company’s group health plans, until the earlier of 12 months or the date he is eligible for coverage under another employer’s health care plan;
  • 18 months of continued equity vesting after termination; and
  • acceleration of vesting of his one-time, new hire RSU grant, if termination occurs within the first three years of employment.

Other Severance for NEOs

Severance payments and benefits payable to NEOs not subject to an employment agreement or other severance arrangement would be made at the sole discretion of the company and the Management Compensation Committee. These payments are based on historical practices and predetermined guidelines that have been approved by the Management Compensation Committee.

ECIP

Under the ECIP, in the event an NEO’s employment is terminated for any reason other than death, disability or retirement, the executive’s right to a non-equity incentive plan compensation award for the year of termination is forfeited. The Management Compensation Committee, in its sole discretion, may pay a pro rata incentive compensation award to the executive for the year of termination.

Ms. Friedman and Messrs. Knight and Peterson have agreed to be subject to certain post-termination restrictive covenants relating to  non-competition, non-solicitation, non-disparagement and confidentiality.

DEATH OR DISABILITY

Employment Agreements

Under the employment agreements with Ms. Friedman and Mr. Peterson, in the event of death or disability, each executive is entitled to a pro rata target bonus for the year of termination and accelerated vesting of all unvested equity that was awarded as of the effective date of her or his agreement. Mr. Knight, in the event of death or disability, is entitled to accelerated vesting of all unvested equity.

ECIP

Under the ECIP, an NEO may, in the discretion of the Management Compensation Committee, receive a pro rata portion of his or her incentive compensation award in the event of death or disability.

Equity Plan

With respect to the other NEOs, under the relevant terms and conditions of the Equity Plan and the individual equity award agreements, all stock options or RSUs that would have vested within one year from the date of death or disability will immediately vest and all vested options may be exercised until the earlier of one year from the date of death or disability or their expiration date. Under the PSU award agreements for all the NEOs, in the event of disability, unvested PSU awards will be forfeited. In the event of death, unvested PSU awards will vest upon the later of the date of death or the date the performance period for the awards is completed.

RESIGNATION THROUGH RETIREMENT NOTICE

In order to ensure a smooth transition to successors, Mr. Peterson (after August 1, 2018) and Mr. Knight may terminate their employment by providing the company with at least 270 days prior written notice. If the executive’s employment is terminated with prior delivery of this notice, he will be entitled to the following payments and benefits:

  • a cash payment equal to any pro rata target bonus for the year of termination if performance goals are satisfied; and
  • continued vesting of all outstanding equity awards based on actual performance during the relevant performance period.

TERMINATION DUE TO CHANGE IN CONTROL (“DOUBLE TRIGGER”)

All “change in control” payments and benefits are subject to a “double trigger,” meaning that payments are made only when both a change in control of the company and a qualifying loss of employment occur.

All “change in control” payments and benefits are subject to a “double trigger,” meaning that payments are made only when both a change in control of the company and a qualifying loss of employment occur.

Employment Agreements

Under their employment agreements, if Ms. Friedman’s or Mr. Peterson’s employment is terminated within two years after a change in control either by the company without cause or by the executive for good reason, the executive will be entitled to the following severance payments and benefits from the company:

  • a cash payment equal to the sum of: (i) two times the prior year’s annual base salary, (ii) the target bonus amount for the year prior to the year termination occurs and (iii) any pro rata target bonus for the year of termination if performance goals are satisfied;
  • a taxable monthly cash payment equal to the employer’s share of the COBRA premium for the highest level of coverage available under the company’s group health plans, until the earlier of 24 months or the date he or she is eligible for coverage under another employer’s health care plan; and
  • continued life insurance and accidental death and dismemberment insurance benefits for the same period as the continued health coverage payments.

Under Mr. Knight’s employment agreement, if his employment is terminated within one year after a change in control either by the company without cause or by Mr. Knight for good reason, Mr. Knight shall receive the same benefits he would be entitled to if his employment was terminated by the company without cause or by Mr. Knight for good reason in the absence of a change in control, as described above. His equity would vest in accordance with the terms of the Equity Plan.

Change in Control Severance Plan

Under the company’s change in control severance plan, EVPs (including Mr. Ptasznik and Mr. Wittman) are entitled to benefits in the event of a change in control. If the executive’s employment is terminated by the company without cause within two years following a change in control or by the executive for good reason within one year after a change in control, then he or she will be entitled to the following severance payments and benefits from the company:

  • a cash payment equal to the sum of (i) two times annual base salary, (ii) the target bonus amount as defined by the ECIP, (iii) any pro rata target bonus for the year of termination and (iv) any unpaid bonus which had been earned for a completed plan year;
  • payment of the employer’s share of COBRA premiums for continued coverage under health plans until the earlier of 24 months following termination, or the date the executive is eligible for coverage under another employer’s health care plan; and
  • outplacement services for up to 12 months, with a maximum value of $50,000.

Under a “best net provision,” if amounts payable due to a change in control would be subject to an excise tax under Section 4999 of the Internal Revenue Code, payments or benefits to the executive would be reduced to an amount that would not trigger an excise tax.

The change in control severance plan contains restrictive covenants, which, among other things, require the executive to maintain the confidentiality of the company’s proprietary information and to refrain from disparaging the company. Each executive also is prohibited from soliciting the company’s employees or rendering services to a competitor for one year following termination. Further, to receive the benefits, the executive must execute a general release of claims against the company. In addition, the change in control payments and benefits may be discontinued if the executive breaches the restrictive covenants.

Equity Plan

Under the Equity Plan, if outstanding awards are assumed or substituted by the successor company and an employee, including an NEO, is involuntarily terminated by the company other than for cause within a one-year period after a change in control, all unvested equity awards will vest on the termination date. For awards not assumed or substituted by the successor company, all nvested awards shall vest immediately prior to the effective time of the change in control.

ESTIMATED TERMINATION OR CHANGE IN CONTROL PAYMENTS AND BENEFITS

The table on the following page reflects the payments and benefits payable to each NEO in the event of a termination of the executive’s employment under several different circumstances. The amounts shown assume that termination was effective as of December 31, 2017, use the executive’s compensation and service levels as of that date and are estimates of the amounts that would be payable to the NEOs in each situation. The actual amounts to be paid can only be determined at the time of an executive’s actual separation from the company. Factors that may affect the nature and amount of payments made on termination of employment, among others, include the timing of the event, compensation level, the market price of the company’s common stock and the executive’s age. Annual incentive amounts are shown at target. The reported value of the accelerated vesting of outstanding equity awards is based on the intrinsic value of these awards (the value based upon the market price of the company’s common stock on December 29, 2017). The value of PSUs that continue to vest after termination is reported as if the grants vested at target on the termination date. The amounts shown in the table do not include payments and benefits available generally to salaried employees, such as accrued vacation pay, pension benefits and any death, disability or welfare benefits available under broad-based plans. For information on pension and deferred compensation plans, see the “2017 Pension Benefits Table” on page 82.

CEO Pay Ratio

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to disclose the median of the annual total compensation of our employees, the annual total compensation of our principal executive officer, President and CEO Adena T. Friedman, and the ratio of these two amounts.

We have estimated the median of the 2017 annual total compensation of our employees, excluding Ms. Friedman, to be $109,556. The 2017 annual total compensation of Ms. Friedman was $14,460,580. The ratio of the annualized total compensation of Ms. Friedman to the estimated median of the annual total compensation of our employees was 132 to 1. We note that a substantial portion of Ms. Friedman’s total compensation for 2017 was the one-time stock-option award she received in connection with her promotion to President and CEO, which had a grant date fair value of approximately $3,999,997. Excluding the one-time stock option award, the ratio would have been 95 to 1.

Our CEO pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules. We identified our median employee by examining the 2017 actual total compensation (which consists of the employee’s base salary as of October 5, 2017, actual bonus paid in 2017 and grant date value of actual equity awards granted in 2017) for all individuals, excluding Ms. Friedman, who were employed by Nasdaq as of October 5, 2017. We did not make any cost-of-living adjustments or full-time equivalent adjustments. After identifying the median employee, we calculated total compensation for 2017 for this employee using the same methodology we used for our NEOs in the Summary Compensation Table.

We employed 4,412 full-time and part-time employees, including hourly employees, on October 5, 2017 (1,785 in the United States and 2,627 in jurisdictions outside of the United States). 355 employees who joined Nasdaq after October 5, 2017 due to the acquisition of eVestment were not included in the total population. Also, consistent with the applicable rules, we excluded certain employees from our total employee population when determining our median employee. As permitted under the de minimis exemption, we excluded all of our 25, 22, 48, 99 and 4 employees in Estonia, Latvia, Germany, the Netherlands and Spain, respectively, collectively representing approximately 4.5% of our workforce. We also excluded 11 employees who became our employees due to the acquisition of Sybenetix in September 2017, as permitted by merger/acquisition exemption. Following the application of these exclusions, the total number of employees used in our median employee analysis was 4,203 (1,785 in the United States and 2,418 in jurisdictions outside of the United States).

Proposal 3: Approval of the Equity Plan, as Amended and Restated

We are requesting that stockholders approve the Equity Plan, as amended and restated to, among other things, (i) increase by 5,500,000 the number of shares of our common stock authorized for issuance pursuant to awards under the Equity Plan, (ii) extend the term of the Equity Plan; and (iii) make other technical and administrative revisions to the Equity Plan.

SUMMARY OF KEY CHANGES TO THE EQUITY PLAN

Below is a summary of key changes to the Equity Plan:

  • Increase in Number of Shares. Increase the number of available shares under the Equity Plan by 5,500,000 shares.
  • Director Compensation Limits. Provide that the total cash and equity compensation paid to any non-employee director cannot exceed $1,300,000 for any fiscal year.
  • Prohibition on Payment of Dividends on Unvested Awards. Provide that dividends or dividend equivalents may not be paid until an underlying award vests (i.e., expands the prohibition from performance-based compensation awards to all awards, regardless of whether an award has service or performance-based vesting conditions).
  • Tax Withholding. Permit tax withholding on awards up to the maximum statutory rate in the relevant jurisdiction.
  • Administrative Changes. Make certain other technical and administrative changes.

The Board of Directors unanimously recommends a vote FOR the approval of the Equity Plan, as amended and restated.

BACKGROUND

Increase in the Number of Shares

We believe that our long-term success and the continued growth of stockholder value depend on our ability to attract, retain and motivate qualified employees, officers and directors of the company. As a result, in recent years a significant component of our compensation program has consisted of grants of RSUs and PSUs. In the recent past, we have granted annual equity awards to all qualified Nasdaq employees, and we consider those equity grants to be a key part of our overall compensation program. Additionally, the number of employees of the company and its affiliates has also grown significantly due to recent acquisitions. The Equity Plan is the only equity-based incentive plan used by the company to provide equity-based awards to employees, officers, consultants, advisors and non-employee directors.

As of the record date, there were approximately 5,892,080 shares available for future awards under the Equity Plan. The company anticipates using approximately 932,793 of these shares in connection with the annual employee equity grant in early 2018. In light of the limited number of shares available for future awards, the increase in eligible participants, and the continuing need for the company to be able to make equity-based awards to motivate and retain employees, officers, consultants, advisors and non-employee directors and to align their interests with the interests of stockholders generally, the company is proposing to increase the number of shares available for awards under the Equity Plan. The company is seeking approval by the stockholders of an increase in the number of shares of common stock available for future awards under the Equity Plan by 5,500,000 shares, bringing the total number of shares available for awards under the Equity Plan since the Equity Plan’s inception to 47,200,000 shares. The number of shares authorized for issuance under the plan was last increased in 2014, when 5,500,000 shares were added to the Equity Plan. The company also is seeking approval of the other modifications to the Equity Plan described above.

The company is seeking approval by the stockholders of an increase in the number of shares of common stock available for future awards under the Equity Plan by

HISTORICAL AWARD INFORMATION

Common measures of a stock plan’s cost include burn rate and overhang. The burn rate, or equity run rate, refers to how fast a company uses the supply of shares authorized for issuance under its stock plan. Over the last two years, the company has maintained an average equity run rate of approximately 0.8% of shares of common stock outstanding per year. Overhang measures the degree to which our stockholders’ ownership has been diluted by stock-based compensation awarded under our Equity Plan (“existing overhang”) and is also calculated including shares that may be awarded under our Equity Plan in the future (“total overhang”).

The following table shows the values for our key equity metrics over the past two years.

1 Equity run rate is calculated by dividing the number of shares subject to equity awards granted (at target) during the year by the weighted-average basic number of shares outstanding during the year.
2 Existing overhang is calculated by dividing the number of shares subject to equity awards outstanding at the end of the fiscal year by the number of weighted average basic shares outstanding at the end of fiscal year.
3 Total overhang is calculated by dividing (a) the sum of (x) the number of shares subject to equity awards outstanding at the end of the year and (y) the number of shares available for future grants at the end of the year, by (b) the number of weighted average basic shares outstanding at the end of the year.

NUMBER OF SHARES REQUESTED

When determining the number of shares to add to the Equity Plan, the Management Compensation Committee and Board reviewed and considered, among other things, the potential impact on stockholders as measured by run rate and overhang, projected future share usage and projected forfeitures of awards, including the following information:

  • Assuming stockholder approval of the Equity Plan, approximately 11,392,080 shares (approximately 5,892,080 of which were available as of the record date) will be available for future award grants. We expect this amount to last for up to five years of awards. This estimate is based on historical equity usage and plan designs. While we believe this modeling provides a reasonable estimate of how long such a share reserve would last, there are a number of factors that could impact our future share usage.
  • The total overhang resulting from the share request, including awards outstanding under our Equity Plan, represents approximately 9.1% of the shares of common stock outstanding as of the record date.

CONTINUED PROMOTION OF GOOD COMPENSATION PRACTICES

The Equity Plan contains a number of provisions that the company believes are consistent with the interests of stockholders and sound corporate governance practices. After the amendment and restatement, the Equity Plan will continue to contain such provisions. For example, the Equity Plan will continue to provide for:

  • No liberal definition of “change in control.” The change in control definition contained in the Equity Plan is not a “liberal” definition that would be activated on mere stockholder approval of a transaction.
  • No automatic grants. The Equity Plan does not provide for automatic grants to any participant.
  • No tax “gross-ups.” The Equity Plan does not provide for any tax “gross-ups” or similar payments or reimbursements to defray tax liability associated with the issuance of awards under the plan.
  • No liberal share recycling of stock options on stock appreciation rights. The Equity Plan limits the shares that may be awarded again under the plan.
  • Recoupment policy. Awards granted under the Equity Plan are subject to the company’s incentive recoupment policy.
  • No repricing of stock options or stock appreciation rights. The Equity Plan prohibits the repricing of stock options and stock appreciation rights.
  • No discounted stock options. Stock options and stock appreciation rights may not be granted with an exercise price lower than the fair market value of the underlying shares on the date of grant.

Following the amendment and restatement, the Equity Plan also will contain the following new provisions:

  • Limits on non-employee director compensation. Non-employee directors are subject to an overall annual compensation limit covering both cash and equity compensation.
  • Prohibition on payment of dividends on unvested awards. The Equity Plan provides that dividends or dividend equivalents may not be paid until an underlying award has been earned and vested.

AUTHORIZED SHARES AND STOCK PRICE

Nasdaq’s Amended and Restated Certificate of Incorporation authorizes the issuance of 300,000,000 shares of common stock. There were 166,559,654 shares of common stock issued and outstanding as of the record date (February 26, 2018) and the closing price per share of common stock as of that date was $81.66.

SUMMARY OF THE EQUITY PLAN, AS AMENDED AND RESTATED

The following is a summary of the material terms of the Equity Plan, as amended and restated, and as such is qualified by the actual terms of the Equity Plan. The following summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Equity Plan, which is attached as Annex B and incorporated herein by reference. Stockholders are encouraged to read the text of the Equity Plan in its entirety.

The company believes the Equity Plan is an important vehicle to motivate and retain talented employees, and to align the interests of employees generally with those of stockholders.

Purpose

The Equity Plan is a broad-based plan intended to provide equity-based incentives to the company’s employees and other eligible participants. The company believes the Equity Plan is an important vehicle to motivate and retain talented employees, and to align the interests of employees generally with those of stockholders.

Administration

The Equity Plan is administered by the Management Compensation Committee. The Committee selects participants and, in a manner consistent with the terms of the Equity Plan, has the exclusive power to, among other things, determine the form and terms of the awards, including any vesting, exercisability, payment or other restrictions. Subject to certain limitations, the Committee may also delegate some or all of its authority to one or more administrators.

Eligibility

In general, persons eligible to be a participant under the Equity Plan include officers, employees, consultants, advisors and nonemployee directors of the company or any subsidiary or affiliate of the company. As of the record date, 10 executive officers, 8 nonemployee directors and approximately 4,493 employees were eligible to receive awards under the Equity Plan.

Term

The Equity Plan will expire on April 24, 2028.

Shares Available Under the Equity Plan and Individual Award Limit

The total number of shares authorized for awards under the Equity Plan since its inception is 47,200,000 shares of company common stock (which takes into account the proposed 5,500,000 share increase). In addition to the overall limit, the Equity Plan limits the number of shares of common stock that may be subject to incentive stock options and also provides that no participant may receive awards under the Equity Plan in any calendar year that relate to more than 2,000,000 shares.

Share Counting Rules

When awards are granted under the Equity Plan, the full number of shares subject to the award is charged against the number of shares that remain available for delivery pursuant to awards. After grant, any shares covered by an award that is forfeited, or an award that is settled for cash or otherwise expires, terminates or is cancelled without the delivery of shares, or otherwise without the participant having received any benefit therefrom, or shares withheld from such an award (other than options and stock appreciation rights) to satisfy any tax withholding obligations, shall, to the extent of any such forfeiture, expiration, termination, withholding or cancellation, be returned to the pool of shares again available for issuance under the Equity Plan. The following shares of common stock may not again be made available for issuance as awards under the Equity Plan: (i) shares of common stock not issued or delivered as a result of the net settlement of an outstanding option or stock appreciation right; (ii) shares of common stock used to pay the exercise price related to an outstanding option or used to pay withholding taxes related to an outstanding option or stock appreciation right; and (iii) shares repurchased by the company with the proceeds from the exercise of any option. In addition, with respect to stock appreciation rights, the number of shares counted against the share limits under the Equity Plan shall be the full number of shares subject to the stock appreciation right if the stock appreciation right is settled in shares.

Determination of Fair Market Value Under the Equity Plan

Fair market value with respect to shares, as of any date, is determined in accordance with a valuation methodology approved by the Committee in good faith and in accordance with Section 409A of the Internal Revenue Code and other laws to the extent applicable. However, if the Committee does not specify otherwise, fair market value will mean the closing sale price on the Nasdaq Stock Market on the relevant date, or, if no closing price is reported, the closing sale price on the next succeeding date a price is reported.

Types of equity and equity-based awards

  • Stock Options
  • Stock Appreciation Rights
  • Restricted Stock and RSU Awards
  • Other Stock-Based Awards
  • Performance Compensation Awards

Types of Awards

The Equity Plan provides a variety of equity and equity-based awards to preserve flexibility. The types of awards that may be issued under the Equity Plan are described below.

Stock Options

The Committee is authorized to grant “incentive stock options” under Section 422 of the Code and non-qualified stock options to participants under the Equity Plan. The exercise price of any stock option granted may not be less than the fair market value of the company’s common stock on the date the option is granted. The terms and conditions of each stock option grant will be determined by the Committee and set forth in the applicable award agreement or certificate, but a stock option may not have a term longer than ten years. A stock option may, as determined by the Committee, be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the Committee may accelerate the vesting of stock options.

A participant may exercise his or her option for all or part of the number of shares or rights which he or she is eligible to exercise under terms of the applicable award agreement. The Committee has the discretion to determine the form(s) and method(s) by which payment of the exercise price will be made by the participant, including, without limitation, by use of cash, by exchanging shares owned by the participant (which are not the subject of any pledge or other security interest), by “net settling” the option to have the company retain the number of shares with a fair market value on the date of exercise to satisfy the exercise price, through any broker’s cashless exercise procedure approved by the Committee, or any combination of the foregoing.

Unless the applicable award agreement provides otherwise, the Equity Plan provides for certain rules with respect to outstanding options at the time of separation from service or entitlement to long term disability benefits. In general, unless the Committee otherwise specifies in the award agreement, a stock option expires upon the earlier of (i) its stated expiration date or (ii) 90 days after separation from service (unless separation is due to death, retirement, or cause — as such terms are defined in the Equity Plan). Generally, unless the Committee otherwise specifies in the award agreement, on a participant’s (i) separation from service due to death or retirement, all unvested options that would have been vested on or before the first anniversary of such separation from service will vest and continue to be exercisable for a period ending one year following the separation from service (or until the option’s expiration date, if sooner); and (ii) separation from service for cause, all unvested options will be forfeited and any vested options will continue to be exercisable for a period ending 10 days following the separation from service (or until the option’s expiration date, if sooner). The Equity Plan contains certain rules with respect to long term disability that are similar to death and retirement. Any unvested options will immediately be deemed cancelled and forfeited upon any other separation from service. Stock options will not contain reload rights or be subject to repricing.

The terms and conditions of each award granted under the Equity Plan are established by the Committee and set forth in an associated award agreement.

Stock Appreciation Rights

The Committee is authorized to grant stock appreciation rights (SARs) to participants under the Equity Plan. The exercise price of any SAR granted may not be less than the fair market value of the company’s common stock on the date the SAR is granted. The terms and conditions of each SAR grant will be determined by the Committee and set forth in the applicable award agreement or certificate, but a SAR may not have a term longer than ten years. A SAR may, as determined by the Committee, be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the Committee may accelerate the vesting of SARs.

A participant may exercise his or her SAR for all or part of the number of shares or rights which he or she is eligible to exercise under terms of the applicable award agreement. SARs may be settled in cash or shares, as set forth in the applicable award agreement.

Unless the applicable award agreement provides otherwise, the Equity Plan provides for certain rules with respect to outstanding SARs at time of separation from service or entitlement to long term disability benefits. In general, unless the Committee otherwise specifies in the award agreement, a SAR expires upon the earlier of (i) its stated expiration date or (ii) 90 days after separation from service (unless separation is due to death, retirement, or cause, as such terms are defined in the Equity Plan). Generally, unless the Committee otherwise specifies in the award agreement, on a participant’s (i) separation from service due to death or retirement, all unvested SARs that would have been vested on or before the first anniversary of such separation from service will vest and continue to be exercisable for a period ending one year following the separation from service (or until the SAR’s expiration date, if sooner); and (ii) separation from service for cause, all unvested SARs will be forfeited and any vested SARs will continue to be exercisable for a period ending 10 days following the separation from service (or until the SAR’s expiration date, if sooner). The Equity Plan contains certain rules with respect to long term disability that are similar to death and retirement. Any unvested SARs will immediately be deemed cancelled and forfeited upon any other separation from service. SARs will not contain reload rights or be subject to repricing.

Restricted Stock and RSU Awards

The Committee may grant restricted stock or RSUs to participants under the Equity Plan. Each RSU shall have a value equal to the fair market value of a share of company common stock, and may be paid in cash, shares, other securities or other property, at the sole discretion of the Committee. The terms and conditions of each such award are established by the Committee and set forth in an associated award agreement. Restricted stock or RSUs, as determined by the Committee, may be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the Committee may accelerate the vesting of restricted stock or RSUs. Subject to the terms of the Equity Plan and award agreement, a participant granted restricted stock will generally have the same rights as one of the company’s stockholders during the restriction period. A participant granted RSUs will only have the rights of a general unsecured creditor of the company and will not be a stockholder with respect to the shares underlying RSUs unless and until the RSUs convert to shares of common stock.

Unless the applicable award agreement provides otherwise, the Equity Plan provides for certain rules with respect to the vesting of restricted stock and RSU awards at the time of separation from services or entitlement to long term disability benefits. In general, unless the Committee otherwise specifies in the award agreement, in the event of separation from service due to death or retirement (as defined in the Equity Plan), then all restricted stock or RSU awards that would have become vested on or before the first anniversary of such death or retirement (had the individual remained in employment) shall vest on the date of death or retirement. The Equity Plan contains certain rules with respect to long term disability that are similar to death and retirement. In all other events of separation from service (including separation from service for cause), the participant’s unvested restricted stock and RSU awards shall be deemed cancelled and forfeited on the date of the participant’s separation from service.

Other Stock-Based Awards

Subject to the terms of the Equity Plan, the Committee may grant participants other awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of the company’s common stock. The Committee will determine the terms and conditions of such awards and set forth such terms and conditions in an award agreement. Other stock-based awards may, as determined by the Committee, be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the Committee may accelerate the vesting of other stock-based awards.

The Committee may provide in the terms and conditions of any award that receipt of the award is contingent on satisfaction of an individual or corporate performance requirement and/or a vesting requirement.

Performance Compensation Awards

The Committee may provide in the terms and conditions of any award that receipt of the award is contingent on satisfaction of an individual or corporate performance requirement and/or a vesting requirement.

Performance criteria may be used to measure the performance of the company, any business unit, division, department, or function, calculated on a GAAP or non-GAAP basis, on an absolute or relative basis, and measured over a period determined by the Committee. Adjustments may be made to reflect significant identified events, such as asset writedowns, changes in tax laws and accounting standards, and extraordinary nonrecurring items. The Committee may exercise discretion to not pay an award or to pay less than the award otherwise earned based on performance against the performance criteria set.

The Equity Plan provides that dividends or dividend equivalents may not be paid until an underlying award vests.

Dividends and Dividends Equivalents

At the sole discretion of the Committee, an award may provide the participant with dividends or dividend equivalents, payable in cash, shares of common stock, other securities or other property; provided, however, that any such dividends or dividend equivalents shall be paid with respect to an award only to the extent such underlying award has been earned and vested, regardless of whether or not such vesting is contingent upon continued employment, the achievement of performance goals, or both. The accrual of dividend equivalent amounts payable upon vesting is permitted.

Adjustments for Corporate Changes

In the event of dividends or other distributions, recapitalizations, reorganizations or other specified events affecting the company or its shares of common stock as described under the Equity Plan, appropriate and equitable adjustments shall be made by the Committee to the number of shares of common stock of the company available for grant, as well as to other maximum limitations under the Equity Plan (e.g., exercise prices and number of awards), and the number of shares of common stock of the company or other rights and prices under outstanding awards in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Equity Plan.

Transferability

Generally, except as otherwise determined by the Committee, no award and no right under any award may be assigned, sold or transferred by a participant other than by will or by the laws of descent and distribution.

Amendment and Termination

The Board may amend, alter, suspend, discontinue or terminate the Equity Plan or any portion thereof at any time. However, no such change will be made without: (i) stockholder approval if such approval is necessary to comply with tax or regulatory requirements for which or with which our Board deems it desirable or necessary to comply or (ii) the consent of the affected participant, if such action would adversely affect any material rights of the participant under any outstanding award. In addition, the Committee may amend the Equity Plan or any portion thereof at any time to cure any ambiguities, correct defective or inconsistent provisions or make other immaterial changes. Notwithstanding the foregoing, the Committee may not accelerate the payment or settlement of any award that constitutes a deferral of compensation for purposes of Section 409A of the Code unless such acceleration is permitted under such rules and regulations.

The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any awards granted under the Equity Plan, but cannot take any such action that would adversely affect the right of any participant without the consent of the affected participant.

Effect of Change in Control

Unless otherwise provided in an award agreement or otherwise determined by the Committee, awards under the Equity Plan are subject to special provisions upon the occurrence of a change in control (as defined in the Equity Plan) transaction with respect to the company.

The awards will be assumed or substituted by the successor company in connection with a change in control according to the following terms:

  • Assumed or substituted performance compensation awards will no longer be subject to any performance goals and such awards will be converted into a number of units equal in value to the target number of units of the award and will be contingent on the participant’s continued performance of service for the successor company through the original vesting date of the award.
  • Assumed or substituted awards other than performance compensation awards should preserve the rights and benefits of the award as in effect prior to such assumption or substitution and will be subject to substantially similar terms and conditions (e.g., vesting) as in effect prior to such assumption or substitution.
  • In the event that the participant’s employment is involuntarily terminated by the company or its successor other than for cause (as defined in the Equity Plan), all unvested awards granted to the participant shall vest immediately upon such termination and will be settled (or become exercisable in the case of options or stock appreciation rights), in accordance with their terms.

For awards not assumed or substituted, unless otherwise provided in the award agreement, upon the change in control all unvested awards shall vest immediately and will be settled (or become exercisable in the case of options or SARs), in accordance with their terms.

Recoupment Policy

Awards under the Equity Plan are subject to the company’s incentive recoupment policy.

STOCK OPTIONS AWARDED TO DATE

The following table shows the number of stock options, including any awards that were subsequently cancelled or surrendered for taxes, which Nasdaq has awarded, to date, to the following individuals or groups:

  • the NEOs;
  • two former executive officers, Messrs. Robert Greifeld and Hardwick Simmons, who each have received over five percent of the total number of stock options, including any options that were subsequently cancelled or surrendered for taxes, awarded under the Equity Plan;
  • all ten of the current executive officers as a group (for information about the current executive officers, see “Executive Officers”);
  • all eight of the current non-employee directors as a group (for information about the current non-employee directors, see “Proposal 1: Election of Directors”);
  • one director nominee, Jacob Wallenberg; and
  • all employees, excluding the current executive officers, as a group.

NEW EQUITY PLAN BENEFITS

The Committee has discretionary authority to grant awards pursuant to the Equity Plan and there is no provision for automatic grants. Therefore, future benefits that would be received under the Equity Plan by executive officers and other employees under the Equity Plan currently are not determinable.

SHARES AVAILABLE FOR ISSUANCE UNDER EQUITY PLANS

The following table sets forth information regarding outstanding options and shares reserved for future issuance under all of Nasdaq’s compensation plans as of December 31, 2017.

1 The amounts in this column include only the number of shares to be issued upon exercise of outstanding options, warrants and rights. At December 31, 2017, we also had 3,331,462 shares to be issued upon vesting of outstanding RSUs and PSUs.
2 This amount includes 5,801,663 shares of common stock that may be awarded pursuant to the Equity Plan and 2,089,763 shares of common stock that may be issued pursuant to the ESPP.

TAX TREATMENT OF AWARDS

The following is a general summary as of the date of this proxy statement of the U.S. federal income tax consequences associated with awards under the Equity Plan. The federal tax laws are complex and subject to change and the tax consequences for any participant will depend on his or her individual circumstances.

Non-Qualified Stock Options

A non-qualified stock option results in no taxable income to the optionee or deduction to the company at the time it is granted. An optionee exercising an option will generally realize taxable compensation at that time in the amount of the difference between the option price and the then market value of the shares, and income tax withholding requirements apply upon exercise. A deduction for federal income tax purposes will generally be allowable to the company in the year of exercise in an amount equal to the taxable compensation realized by the optionee. The optionee’s tax basis in the option shares is equal to the option price paid for such shares plus the amount includable in income upon exercise. At sale, appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain (or loss) depending upon how long the shares have been held.

Incentive Stock Options

An incentive stock option within the meaning of Section 422 of the Code (“ISO”) results in no taxable income to the optionee or deduction to the company at the time it is granted. However, the excess of the fair market value of the shares of common stock acquired over the stock option exercise price is an item of adjustment in computing the alternative minimum taxable income of the optionee. If the optionee holds the shares of common stock received as a result of an exercise of an ISO for at least two years from the date of the grant and one year from the date of exercise, then the gain realized on disposition of the shares of common stock is treated as a long-term capital gain. If the shares of common stock are disposed of during this period, however, (i.e., a “disqualifying disposition”), then the optionee will include in income, as compensation for the year of the disposition, an amount equal to the excess, if any, of the fair market value of the shares of common stock received upon exercise of the stock option over the stock option price (or, if less, the excess of the amount realized upon disposition over the stock option price). The excess, if any, of the sale price over the fair market value on the date of exercise will be a shortterm capital gain. In such case, the company will be entitled to a deduction, generally in the year of such a disposition, for the amount includible in the optionee’s income as compensation. The optionee’s basis in the shares of common stock acquired upon exercise of an ISO is equal to the stock option price paid, plus any amount includable in his or her income as a result of a disqualifying disposition.

Stock Appreciation Rights

Generally, the recipient of a SAR will not recognize taxable income at the time the SAR is granted. A participant that exercises a SAR will realize taxable compensation at the time of exercise equal to the amount received, whether in cash or stock. The amount recognized by the participant is subject to income tax withholding requirements if the participant is an employee or former employee. In general, there will be no federal income tax deduction allowed to the company upon the grant or termination of a SAR. However, upon the settlement of the SAR amount, the company will be entitled to a deduction equal to the amount of ordinary income the recipient is required to recognize as a result of the settlement.

Restricted Stock

Upon the grant of restricted stock, a participant will not recognize taxable income and the company will not be allowed a tax deduction. Rather, on the date when the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the shares on that date (less the price paid, if any, for such shares). Alternatively, a participant may file with the IRS a “section 83(b) election” no later than 30 days after the date of grant of restricted stock, as a result of which he will recognize taxable ordinary income at the time of the grant, generally in an amount equal to the fair market value of the shares on the date of grant, less any amount paid for the grant. The amount recognized by the participant is subject to income tax withholding requirements if the participant is an employee or former employee. At the time the participant recognizes income with respect to the restricted stock, the company is generally entitled to a deduction in an equal amount. Upon the sale of any shares that are delivered to the participant pursuant to an award, the participant will realize capital gain (or loss) measured by the difference between the amount realized and the fair market value of the shares on the date the shares were vested/delivered to the participant pursuant to the award.

Stock Units

A participant who receives stock units (whether RSUs or PSUs) will be taxed at ordinary income tax rates on the then fair market value of the shares of common stock distributed at the time of settlement of the stock units and a corresponding deduction will be allowable to the company at that time (subject to Section 162(m) of the Code). The participant’s tax basis in the shares will equal the amount taxed as ordinary income, and on subsequent disposition the participant will realize long-term or short-term capital gain or loss.

Impact of Section 409A

The Equity Plan has been designed so that awards thereunder either are not subject to the deferred compensation rules of Section 409A or, if subject to Section 409A, are intended to be compliant with Section 409A. Awards subject to Section 409A, but not compliant with Section 409A, could result in accelerated taxation of the awards and an additional 20 percent tax and interest charge tax to the participant. These potential penalties on the participant could reduce the value of grants subject to Section 409A and adversely affect the company’s ability to achieve the Equity Plan’s purposes.

Section 162(m)

With certain exceptions, Section 162(m) of the Code limits the company’s deduction for compensation in excess of $1,000,000 paid to the company’s CEO and certain other NEOs (“covered employees”). Compensation paid to “covered employees” was historically not subject to the deduction limitation if it was considered “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.

In December 2017, as part of the Tax Cuts and Jobs Act of 2017, Section 162(m) was substantially amended to eliminate the qualified performance-based exception to the deduction limitation and to provide limited transitional relief to existing plans.

As a result, it is uncertain whether compensation that the Committee originally intended to structure as performance-based compensation under Section 162(m) will be deductible. The Committee may take into account the potential transitional relief under Section 162(m) in connection with executive compensation programs which are eligible for such relief.

However, the Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with our business needs.

Title Goes Here