DEF 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No.    )
 
 
Filed by the Registrant  ☒
Filed by a Party other than the Registrant  ☐
Check the appropriate box:
 
  Preliminary Proxy Statement
 
Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Under §
240.14a-12
FAIR ISAAC CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
  No fee required.
  Fee paid previously with preliminary materials.
  Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11.
 


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LOGO

FAIR ISAAC CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD FEBRUARY 14, 2024

AND PROXY STATEMENT

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Please take notice that the 2024 Annual Meeting of the Stockholders of Fair Isaac Corporation (“Annual Meeting”) will be held at the time and place and for the purposes indicated below.

 

TIME

9:30 A.M., local time, on Wednesday, February 14, 2024

 

PLACE*

Rosewood Sand Hill

2825 Sand Hill Road

Menlo Park, California 94025

 

ITEMS OF BUSINESS

1.

To elect nine directors to serve until the 2025 Annual Meeting and thereafter until their successors are elected and qualified;

 

  2.

To approve the advisory (non-binding) resolution relating to the named executive officer compensation as disclosed in the accompanying proxy statement;

 

  3.

To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2024; and

 

  4.

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

 

 

All of the above matters are more fully described in the accompanying proxy statement.

 

RECORD DATE

You can vote if you were a stockholder of record at the close of business on December 18, 2023. A complete list of stockholders entitled to vote at the Annual Meeting shall be open to the examination of any stockholder, for any purpose germane to the Annual Meeting, at our offices at 5 West Mendenhall, Suite 105, Bozeman, Montana 59715, during ordinary business hours for at least ten days prior to the Annual Meeting. If you would like to view the stockholder list, please contact our Corporate Secretary to schedule an appointment.

 

ANNUAL REPORT

Our 2023 Annual Report on Form 10-K accompanies the proxy statement.

 

VOTING

Your Vote Is Important. We invite all stockholders to attend the meeting in person. However, to assure your representation at the meeting, you are urged to mark, sign, date and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope enclosed for that purpose or follow the Internet or telephone voting instructions on the proxy card. Any registered stockholder attending the meeting may vote in person even if he or she returned a proxy card.


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ADMITTANCE TO MEETING

Admittance to the Annual Meeting will be limited to stockholders. If you are a stockholder of record and plan to attend, please detach the admission ticket from your proxy card and bring it with you to the Annual Meeting. Stockholders who arrive at the Annual Meeting without an admission ticket will be required to present identification matching the corresponding stockholder account name at the registration table located outside the meeting room. If you are a stockholder whose shares are held by a bank, broker or other nominee, you will be asked to certify to such ownership at the registration table prior to the Annual Meeting.

 

 

LOGO

Mark R. Scadina

Executive Vice President, General Counsel and Secretary

January 10, 2024

 

* We intend to hold the Annual Meeting in person. In the event we decide to hold our Annual Meeting remotely, we will announce alternative arrangements for the meeting as promptly as practicable. These announcements will be made by press release that will also be filed as additional proxy materials, as applicable, with the U.S. Securities and Exchange Commission. Please check the “Investors” page of our website at www.fico.com prior to the meeting date.


Table of Contents

Table of Contents

 

PROXY SUMMARY

     1  

2024 Annual Meeting of Stockholders

     1  

Voting Methods

     1  

Voting Matters

     2  

Our Director Nominees

     2  

Our Corporate Governance Facts

     3  

Our Compensation Facts

     4  

2023 Elements of Compensation

     5  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     6  

Delinquent Section 16(a) Reports

     7  

PROPOSAL 1: ELECTION OF DIRECTORS

     8  

Annual Elections

     8  

Majority Voting Standard

     8  

Director Nominee Selection Process

     8  

Stockholder-Recommended Director Candidates

     8  

Director Nominee Biographies

     9  

PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION

     14  

PROPOSAL 3: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     15  

Audit and Non-Audit Fees

     15  

Policy on Audit Committee Preapproval of Audit and Non-Audit Services of Independent Auditors

     15  

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     17  

CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS

     18  

CORPORATE GOVERNANCE

     19  

Board Leadership Structure

     19  

Board Risk Oversight Role

     19  

Attendance at Board Meetings

     19  

Annual Board Self-Evaluations

     19  

Board Committees

     19  

Environmental, Social and Governance (“ESG”) Matters

     22  

Human Capital Resources

     22  

Insider Trading Policy

     26  

DIRECTOR COMPENSATION PROGRAMS

     27  

Non-Employee Director Compensation

     27  

Director Stock Ownership Guidelines

     28  

Director and Officer Liability Insurance Policies

     28  

DIRECTOR COMPENSATION FOR FISCAL 2023

     29  

EXECUTIVE COMPENSATION

     31  

Compensation Discussion and Analysis

     31  

Leadership Development and Compensation Committee Report

     52  

Leadership Development and Compensation Committee Interlocks and Insider Participation

     53  

Compensation Policies and Practices in Relation to Risk Management

     53  

SUMMARY COMPENSATION TABLE

     54  

GRANTS OF PLAN-BASED AWARDS FOR FISCAL 2023

     57  

Letter Agreements

     59  

OUTSTANDING EQUITY AWARDS AT FISCAL 2023 YEAR END

     61  


Table of Contents

FISCAL 2023 OPTION EXERCISES AND STOCK VESTED

     62  

NON-QUALIFIED DEFERRED COMPENSATION FOR FISCAL 2023

     63  

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

     64  

Executive Officer Management Agreements

     64  

Severance Arrangements

     65  

Equity Awards

     65  

Insurance Benefits

     65  

Estimated Payments That Would Have Been Made to the Named Executive Officers

     66  

EQUITY COMPENSATION PLAN INFORMATION

     71  

CEO PAY RATIO

     72  

PAY VERSUS PERFORMANCE

     73  

HELPFUL INFORMATION AND ONLINE RESOURCES

     79  

OTHER INFORMATION

     82  


Table of Contents

PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you are advised to read the entire proxy statement carefully before voting.

2024 Annual Meeting of Stockholders

 

Date and Time:

  

9:30 A.M., local time, on Wednesday, February 14, 2024

Place:

  

Rosewood Sand Hill located at 2825 Sand Hill Road, Menlo Park, California 94025

Record Date:

  

December 18, 2023

Voting Methods

 

By internet

www.proxyvote.com

  

Use the internet to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. The availability of internet voting for beneficial owners will depend on the voting processes of your broker, bank or nominee. We recommend that you follow the voting instructions in the materials you receive.

By telephone

1-800-690-6903

  

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. The availability of telephone voting for beneficial owners will depend on the voting processes of your broker, bank or nominee. We recommend that you follow the voting instructions in the materials you receive.

By mail   

Be sure to complete, sign and date the proxy card and return it in the prepaid envelope. If you are a stockholder of record and you return your signed proxy card without indicating your voting preferences, the persons named in the proxy card will vote FOR the election of each of the nominees for director, FOR the approval of the advisory (non-binding) resolution relating to the named executive officer compensation as disclosed in this proxy statement, and FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2024.

In person at the Annual Meeting   

All stockholders may vote in person at the Annual Meeting. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank or nominee and present it to the inspector of election with your ballot when you vote at the meeting.

 

1


Table of Contents

Voting Matters

Stockholders are being asked to vote on the following matters at the 2024 Annual Meeting of Stockholders. Please see the corresponding page numbers for additional information regarding each proposal.

 

Proposals

  Vote
Required
    Board
Recommendation
  Page Number for
Additional
Information

1.

   Election of Directors     Majority     FOR   8

2.

   Advisory Vote to Approve Executive Compensation     Majority     FOR   14

3.

   Ratification of Independent Registered Public Accounting Firm     Majority     FOR   15

Our Director Nominees

 

          Years as
Director
          

Committee

Memberships

   Other
Current
Public

Boards

Name

  Age    

Principal Occupation

  

Independent

 

AC(1)

 

GNEC(2)

 

LDCC(3)

Braden R. Kelly

    53     11   Partner of Health Evolution Partners    Yes    

 

LOGO

 

 

LOGO

  

Fabiola R. Arredondo

    57     4   Managing Partner of Siempre Holdings LLC    Yes      

 

LOGO

   2

James D. Kirsner

    80     17   Former Chief Financial Officer and head of Barra Ventures at Barra, Inc.    Yes  

 

LOGO

 

 

LOGO

    

William J. Lansing

    65     18   Chief Executive Officer of Fair Isaac Corporation    No         

Eva Manolis

    60     5   Former Vice President of Amazon.com, Inc.    Yes      

 

LOGO

   1

Marc F. McMorris

    55     8   Co-Chief Executive Officer and Co-Founder of Carrick Capital Partners, LLC    Yes  

 

LOGO

      

Joanna Rees

    62     9   Executive Chairman of West Global    Yes    

 

LOGO

 

 

LOGO

  

David A. Rey

    73     13   Former Executive Vice President and Chief Client Relationship Officer of UnitedHealth Group    Yes  

 

LOGO

      

H. Tayloe Stansbury

    62       Chief Executive Officer of Kaleidescape, Inc.    Yes  

LOGO

      

 

(1) 

AC = Audit Committee

 

(2) 

GNEC = Governance, Nominating and Executive Committee

 

(3) 

LDCC = Leadership Development and Compensation Committee

LOGO   = Member         LOGO   = Chair

 

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Table of Contents

Our Corporate Governance Facts

 

Board and Committee Summary

  

Current Size of Board

     9  

Current Number of Independent Directors

     8  

Board Committees Consist Entirely of Independent Directors

     Yes  

All Directors Attended at least 75% of Meetings Held

     Yes  

Annual Election of All Directors

     Yes  

Majority Voting for Directors

     Yes  

Plurality Carveout for Contested Elections

     Yes  

Director Resignation Policy

     Yes  

Separate Chairman and CEO

     Yes  

Chairman is Independent Director

     Yes  

Independent Directors Meet Regularly in Executive Session

     Yes  

Annual Board and Committee Self-Evaluations

     Yes  

Risk Oversight by Full Board and Committees

     Yes  

Annual Advisory Vote on Executive Compensation

     Yes  

Prohibit Hedging and Short Sales of FICO Securities

     Yes  

Stock Ownership Requirements for Directors and Executive Officers

     Yes  

Executive Compensation Recovery Policy

     Yes  

Stockholder Rights Summary

  

Controlled Company

     No  

Classified Board

     No  

Vote Standard for Mergers/Acquisitions

     Majority  

Vote Standard for Charter or Bylaw Amendment

     66.67%  

Stockholder Ability to Call Special Meetings

     No  

Stockholder Ability to Act by Written Consent

     Yes  

Cumulative Voting

     No  

Board Ability to Issue Blank-Check Preferred Stock

     Yes  

Poison Pill

     No  

 

3


Table of Contents

Our Compensation Facts

As administered by our Leadership Development and Compensation Committee (the “LDCC”), our compensation program seeks to closely link the financial interests of our Company’s executives with those of our stockholders. In making compensation decisions at the outset of fiscal 2023 and throughout the year, the LDCC sought to reinforce strong linkage between Company performance and executive compensation. In keeping with this objective, the LDCC continued to focus on prominently featuring performance-based cash- and equity-based incentives.

The LDCC uses the following guidelines in our compensation program to help achieve this overarching goal.

 

   

What We Do:

      

What We Do Not Do:

 

LOGO

 

We closely link performance-based rewards with the achievement of performance goals.

  

 

LOGO

 

Our compensation plans do not have minimum guaranteed payout levels.

 

LOGO

 

We cap payouts under our plans to discourage excessive or inappropriate risk taking by our executives.

  

 

LOGO

 

 

We do not permit hedging or short sales of our stock.

 

LOGO

 

Two-thirds of our annual long-term incentives are performance-based.

  

 

LOGO

 

 

We do not permit repricing of underwater stock options without stockholder approval.

 

LOGO

 

We emphasize long-term incentives to align executives’ interests with those of our stockholders.

  

 

LOGO

 

 

We do not provide tax gross-ups for our executives (other than with respect to relocation benefits and required spousal travel).

 

LOGO

 

We have double-trigger change in control provisions.

  

 

LOGO

 

 

We do not provide material perquisites.

 

LOGO

 

We have stock ownership guidelines that require non-employee directors and executive officers to own a specified amount of stock within five years of their initial election or appointment.

  

 

 

 

 

LOGO

 

We have a peer group comprised of companies of similar size and from relevant industries.

    

 

LOGO

 

The LDCC retains an independent compensation consultant.

    

 

LOGO

 

We hold an annual advisory vote on executive compensation.

  

 

 

 

 

LOGO

 

We seek feedback on executive compensation through stockholder engagement.

  

 

 

 

 

LOGO

 

We have a compensation recovery, or “clawback,” policy pertaining to all incentive-based compensation.

    

 

LOGO

 

We have a mandatory minimum vesting period of one year for equity awards.

    

 

LOGO

 

We limit the aggregate fair value of equity awards granted in any calendar year.

    

 

LOGO

 

We cap payouts under our severance policies.

    

 

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2023 Elements of Compensation

 

Element

 

Purpose and Philosophy

Base Salary  

•  Base salary provides our executive officers with financial stability and predictable cash flow.

 

•  Individual base salaries are determined by evaluating each executive officer’s role within the Company, experience, performance, and potential for development, as well as the base salaries of comparable roles within the peer group companies and the broader marketplace.

Short-Term Cash

Incentives

 

•  Our short-term cash incentive plan rewards the achievement of annual Company and individual performance goals.

 

•  Target cash incentive payment amounts are expressed as a percentage of base salary determined with reference to the peer group companies and the broader marketplace.

 

•  Participants may earn between zero and 250% of target, depending both upon Company and individual performance.

Long-Term Equity

Incentives

 

•  Long-term equity incentive awards directly link a significant portion of each executive officer’s target total direct compensation to the market value of our common stock, while promoting retention through multi-year vesting and performance periods.

 

•  Performance Share Units (“PSUs”) are earned based upon the extent to which annual Company financial performance targets are achieved with as few as zero and as many as 200% of the target PSUs eligible to be earned. Earned units are then subject to multi-year time-based vesting, promoting continued linkage to the market price of our common stock while also promoting retention.

 

•  Market Share Units (“MSUs”) are earned based on our relative total shareholder return measured over one-year, two-year, and three-year performance periods with as few as zero and as many as 200% of target MSUs eligible to be earned.

 

•  Restricted Stock Units (“RSUs”) represent a more stable equity-based compensation vehicle, ensuring linkage to the stock price performance of our common stock while promoting retention over a multi-year time-based vesting period.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Except as otherwise indicated, the following table and accompanying footnotes show information regarding the beneficial ownership of our common stock as of November 30, 2023 by:

 

   

each person who is known by us to own beneficially more than 5% of our common stock;

 

   

each current director and nominee for director;

 

   

each named executive officer; and

 

   

all directors and executive officers as a group.

As of the dates indicated in footnotes (3) and (4) below, publicly available information indicated that certain stockholders were beneficial owners of more than 5% of the outstanding shares of our common stock. The information in the table below is as reported in their filings with the U.S. Securities and Exchange Commission (“SEC”). The percentages noted in the table are as provided by such beneficial owners as of the date of their filing and not as of November 30, 2023. Based on a review of such SEC filings, we are not aware of any other beneficial owner of more than five percent of our common stock.

Shares of common stock underlying options that are currently exercisable or exercisable within 60 days are considered outstanding and beneficially owned by the person holding the options for the purposes of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Similarly, shares of common stock underlying RSUs, PSUs or MSUs that vest within 60 days are considered outstanding and beneficially owned by the person holding the RSUs, PSUs or MSUs for the purposes of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. As of November 30, 2023, 24,731,817 shares of common stock were outstanding.

 

Directors, Director Nominees, Named Executive Officers,

Executive Officers and 5% Stockholders

   Beneficial Ownership(1)  
   Number      Percent(2)  

BlackRock, Inc.(3)

     2,898,493        11.60

55 East 52nd Street, New York, NY 10055

     

Vanguard Group, Inc.(4)

     2,513,754        10.06

100 Vanguard Blvd., Malvern, PA 19355

     

William Lansing(5)

     468,729        1.89

Mark R. Scadina(6)

     134,515        *  

James Wehmann(7)

     65,217        *  

Joanna Rees(8)

     32,452        *  

Stephanie Covert(9)

     31,174        *  

Braden R. Kelly(10)

     19,836        *  

David A. Rey(11)

     18,165        *  

James D. Kirsner(12)

     16,348        *  

Eva Manolis(13)

     11,695        *  

Marc F. McMorris(14)

     5,414        *  

Fabiola R. Arredondo(15)

     4,980        *  

Steven Weber(16)

     2,433        *  

H. Tayloe Stansbury

     0        *  

Michael McLaughlin

     0        *  

All current directors, nominees and executive officers as a group (16 persons)(17)

     885,079        3.54

 

*

Represents holdings of less than 1%.

 

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Table of Contents
(1) 

To the Company’s knowledge, the persons named in the table have sole voting and sole dispositive power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.

 

(2) 

If the named person holds stock options exercisable on or prior to January 29, 2024, or RSUs, PSUs or MSUs that will vest on or prior to January 29, 2024, the shares underlying those options, RSUs, PSUs and MSUs are included in the number for such person. Shares deemed issued to a holder of stock options, RSUs, PSUs or MSUs pursuant to the preceding sentence are not deemed issued and outstanding for purposes of the percentage calculation with respect to any other stockholder.

 

(3) 

Information as to this person (including affiliated entities) is based on the Schedule 13G/A filed by this person on January 30, 2023. BlackRock, Inc. has sole voting power as to 2,719,705 shares and sole dispositive power as to 2,898,493 shares.

 

(4) 

Information as to this person is based on the Schedule 13G/A filed by this person on February 9, 2023. The Vanguard Group has shared voting power as to 20,309 shares, sole dispositive power as to 2,458,411 shares and shared dispositive power as to 55,343 shares.

 

(5) 

Includes options to purchase 61,432 shares, RSUs representing 10,735 shares, PSUs representing 23,315 shares and MSUs representing 33,503 shares. The Lansing Revocable Trust holds 339,744 shares.

 

(6) 

Includes options to purchase 7,367 shares, RSUs representing 2,914 shares, PSUs representing 5,927 shares and MSUs representing 8,837 shares. The Scadina Revocable Trust holds 85,081 shares.

 

(7) 

Includes RSUs representing 4,169 shares, PSUs representing 8,891 shares and MSUs representing 13,257 shares.

 

(8) 

Includes options to purchase 10,160 shares. The John Hamm and Joanna Rees Trust holds 22,292 shares.

 

(9) 

Includes RSUs representing 3,439 shares, PSUs representing 7,919 shares and MSUs representing 10,857 shares.

 

(10) 

Includes options to purchase 9,693 shares.

 

(11) 

Includes options to purchase 16,862 shares.

 

(12) 

Includes options to purchase 715 shares. The Kirsner Family Trust holds 15,633 shares.

 

(13) 

Includes options to purchase 11,695 shares.

 

(14) 

Includes options to purchase 5,172 shares.

 

(15) 

Includes options to purchase 3,396 shares.

 

(16) 

Includes RSUs representing 1,155 shares.

 

(17) 

Reflects all options, RSUs, PSUs, MSUs and shares held directly and indirectly by individuals or entities listed in the table, referenced in footnotes 5 through 8, and footnotes 10 through 16 above, plus additional RSUs representing 6,522 shares, PSUs representing 11,440 shares and MSUs representing 17,260 shares held by executive officers as of the date of this proxy statement who are not individually listed in this table. Ms. Covert’s and Mr. McLaughlin’s ownership are excluded from this amount as they are no longer executive officers.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our directors and executive officers to file reports of ownership and changes in ownership on Forms 3, 4, and 5 with the SEC. Based on our review of Forms 3, 4, and 5 that we have received from, or have filed on behalf of, our directors and executive officers, and on written representations from those persons that they were not required to file a Form 5, we believe that, during the fiscal year ended September 30, 2023, our directors and executive officers complied with all Section 16(a) filing requirements, other than with respect to five gift transactions undertaken by Joanna Rees on two different dates during the fiscal year and reported on the Form 4 filed by Ms. Rees on December 29, 2023.

 

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PROPOSAL 1: ELECTION OF DIRECTORS

Annual Elections

Directors are elected each year at our Annual Meeting of Stockholders to hold office until our next annual meeting or until a qualified replacement is duly elected. Our Bylaws specify that the Board of Directors (the “Board” or “Board of Directors”) will establish by vote how many directors will serve on the Board. The Board has currently set the number of directors at nine.

Majority Voting Standard

To be elected, the number of votes cast “FOR” a director nominee must exceed the number of votes cast “AGAINST” that nominee. The Company requires that all nominees submit an irrevocable letter of resignation as a condition to being named as a nominee, which resignation will be effective if (i) the nominee fails to receive a sufficient number of votes to be elected and (ii) the Board accepts such resignation. Cumulative voting for the election of directors is not permitted.

Director Nominee Selection Process

Our Governance, Nominating and Executive Committee selects nominees on the basis of recognized achievements and their ability to bring various skills and experience to the deliberations of the Board, as described in more detail in the Corporate Governance Guidelines available on the “Investors” page of our website at www.fico.com. The Governance, Nominating and Executive Committee also strongly values diversity and seeks opportunities to promote diversity within the Company’s leadership. This viewpoint is reflected in our Corporate Governance Guidelines and our Governance, Nominating and Executive Committee Charter, both of which include diversity as a consideration, and the Governance, Nominating and Executive Committee takes this into account when assessing our incumbents and candidates. Our Board currently includes three female directors and two racially/ethnically diverse directors.

All of the current nominees to the Board were recommended as nominees by the Governance, Nominating and Executive Committee, and the full Board voted unanimously to designate them as nominees for re-election at the Annual Meeting. All of the nominees are presently serving on our Board, and all have been previously elected by our stockholders, except for H. Tayloe Stansbury. On August 22, 2023, the Board increased the size of the Board from eight to nine members and appointed Mr. Stansbury to the Board to fill the resulting vacancy. Mr. Stansbury was recommended by current members of the Board, including our chief executive officer.

Stockholder-Recommended Director Candidates

Our Governance, Nominating and Executive Committee considers director candidates recommended by stockholders who are entitled to vote for the election of directors at the Annual Meeting and comply with the notice procedures described below. A stockholder who wishes to nominate a candidate must send a written notice to the FICO Corporate Secretary, 5 West Mendenhall, Suite 105, Bozeman, Montana 59715. Each notice must include the following information about the nominee:

 

   

Name, age, and business and residence addresses;

 

   

Principal occupation or employment;

 

   

Class, series and number of shares of FICO beneficially owned, and additional detailed “ownership information” regarding derivatives, voting arrangements, dividend interests, and related matters (as described in detail in our Bylaws);

 

   

A statement of the person’s citizenship; and

 

   

Any other information that must be disclosed about nominees in proxy solicitations pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder (including the nominee’s written consent to be named as a nominee and to serve as a director if elected).

 

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Each notice must also include the following information about the nominating stockholder and any beneficial owner on whose behalf the nomination is made:

 

   

The name and address, as they appear in our records;

 

   

The class, series and number of shares of FICO beneficially owned, and additional detailed “ownership information” regarding derivatives, voting arrangements, dividend interests, and related matters (as described in detail in our Bylaws);

 

   

A description of all agreements pursuant to which the nomination is being made, and any material interest of such stockholder or beneficial owner, or any affiliates or associates of such person, in such nomination;

 

   

A representation that the stockholder giving notice intends to appear in person or by proxy at the Annual Meeting to nominate the persons named in its notice;

 

   

A representation whether the stockholder or the beneficial owner intends, or is part of a group that intends, to deliver a proxy statement or form of proxy to holders of at least the percentage of FICO’s outstanding shares required to elect the nominee or otherwise solicit proxies from stockholders in support of the nomination; and

 

   

Any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder.

We may require any proposed nominee to furnish such other information as may reasonably be required by us to determine the eligibility of the proposed nominee to serve as a director.

Our Corporate Secretary must receive this information not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding Annual Meeting. In the case of an Annual Meeting which is held more than 25 days before or after such anniversary date, in order for notice by the stockholder to be considered timely, it must be received no later than the close of business on the 10th day following the date of the first public announcement of the date of the Annual Meeting.

Director Nominee Biographies

Set forth below is biographical information for each director nominee, as well as information regarding the particular experience, qualifications, attributes or skills of the nominees that led the Governance, Nominating and Executive Committee to conclude that they should serve as members of the Board. Each of these nominees is currently serving as a member of the Board.

Our Board of Directors has determined that Messrs. Kelly, Kirsner, McMorris, Rey, and Stansbury and Mses. Arredondo, Manolis and Rees meet its independence standards, which are set forth in the Corporate Governance Guidelines on the “Investors” page of our website at www.fico.com. The Board defines an independent director as one who has no material relationship with the Company and its subsidiaries either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company. In addition, independent directors must meet the requirements to be considered independent directors as defined under the current rules of the New York Stock Exchange (“NYSE”). Mr. Lansing is not independent, as he is employed by us as our CEO.

Each of the nominees has consented to being named in the proxy statement and to serve if elected. If any nominee becomes unavailable to serve, however, the persons named in the enclosed form of proxy intend to vote the shares represented by the proxy for the election of such other person or persons as may be nominated or designated by the Board of Directors, unless either they are directed by the proxy to do otherwise or the Board of Directors instead reduces the number of directors.

 

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Braden R. Kelly.    Director since 2013 and Chairman of the Board of Directors since February 2016; Chair of the Governance, Nominating and Executive Committee; Member of the Leadership Development and Compensation Committee; Age 53.

Mr. Kelly has been a Partner at Health Evolution Partners, a private equity investment firm focused on the health care industry, since January 2015 and has served in various positions at Health Evolution Partners, including Investment Partner from June 2013 to December 2014 and Senior Advisor from August 2008 to May 2013. From August 1995 to December 2006, Mr. Kelly was an employee and then Partner and Managing Director at General Atlantic Partners LLC, a global private equity investment firm focused on technology growth investing. Prior to joining General Atlantic Partners, Mr. Kelly worked in the investment banking division of Morgan Stanley & Co. as a member of the mergers, acquisitions and restructuring department. Mr. Kelly does not serve on any other public company boards nor has he served on any other public company boards in the past five years. Mr. Kelly earned an undergraduate degree from the University of Notre Dame.

Mr. Kelly has a deep financial background and contributes a critical business and corporate development perspective to the Board of Directors through his extensive experience with strategic mergers and acquisitions, a key growth opportunity for the Company. Mr. Kelly’s extensive analysis of the technology and health care industries through his work as a private equity investor provides him with valuable insight into the business environments in which our Company and the companies in some of our key markets operate. The Board also benefits from Mr. Kelly’s significant experience as a strategic advisor to companies and his global experience working with growth companies in the United States, Europe and India.

Fabiola R. Arredondo.    Director since 2020; Member of the Leadership Development and Compensation Committee; Age 57.

Ms. Arredondo has been the Managing Partner of Siempre Holdings, a private, single family investment office based in Greenwich, Connecticut, since 2001. Ms. Arredondo previously held senior operating roles at Yahoo! Inc., the British Broadcasting Corporation (BBC) and Bertelsmann SE & Co. KGaA. Since March 2017, Ms. Arredondo has served as a director of Campbell Soup Company, where she also serves as a member of the Audit Committee and the Finance and Corporate Development Committee. Since March 2015, Ms. Arredondo has served as a director of Burberry PLC, where she also serves as a member of the Nomination and Remuneration Committees. Ms. Arredondo joined the Board of Governors of FINRA in December 2022. From January 2007 to January 2016, Ms. Arredondo also served on the board of Experian PLC. Ms. Arredondo received a bachelor’s degree in political science from Stanford University, and an M.B.A. from Harvard Business School.

Ms. Arredondo brings a wealth of domestic and international operational and strategic experience as a former senior executive in the digital technology and media fields to the Board of Directors. She also has extensive public, private and non-profit board experience in a number of relevant areas, including: business model transformations; investment acquisition, integration and disposition skills; and the development of e-commerce distribution networks and effective digital marketing and sales initiatives.

James D. Kirsner.    Director since 2007; Chair of the Audit Committee; Member of the Governance, Nominating and Executive Committee; Age 80.

In 2001, Mr. Kirsner served as a consultant and interim Chief Operating Officer at Tukman Capital Management, an equity management firm. From 1993 until 2001, Mr. Kirsner was the Chief Financial Officer and head of Barra Ventures at Barra, Inc., an investment risk management services company. From 1967 until 1993, Mr. Kirsner was an audit professional with Arthur Andersen LLP, an international accounting and consulting firm. Mr. Kirsner was a partner in the firm from 1977 until his retirement in 1993. Mr. Kirsner does not serve on any other public company boards nor has he served on any other public company boards in the past five years. Mr. Kirsner received his undergraduate and master’s degrees from Wharton School of Business at the University of Pennsylvania.

 

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Mr. Kirsner brings extensive financial and accounting expertise to the Board of Directors. He serves as Chair of the Company’s Audit Committee and is qualified as an “audit committee financial expert” as defined under SEC guidelines. His significant public accounting, public company CFO, investment, and audit committee experience provide Mr. Kirsner with the financial acumen and leadership skills necessary to serve as Chair of our Audit Committee. He has also served on the board of another publicly traded company in the software industry, which provides us with additional valuable perspectives on our industry and on issues affecting similarly situated publicly traded companies.

William J. Lansing.    Director since 2006; Age 65.

Since January 2012, Mr. Lansing has served as the Company’s Chief Executive Officer. From February 2009 to November 2010, Mr. Lansing served as Chief Executive Officer and President at Infospace, Inc. From 2004 until 2007, Mr. Lansing served as Chief Executive Officer and President at ValueVision Media, Inc. From 2001 to 2003, he served as a General Partner at General Atlantic LLC, a global private equity firm. From 2000 to 2001, he was Chief Executive Officer at NBC Internet, Inc., an integrated Internet media company. From 1998 to 2000, he served as President, then as Chief Executive Officer at Fingerhut Companies, Inc., a direct marketing company. From 1996 to 1998, he was Vice President, Corporate Business Development at General Electric Company. In 1996, he was Chief Operating Officer/Executive Vice President at Prodigy, Inc. From 1986 through 1995, Mr. Lansing held various positions with McKinsey & Company, Inc. Mr. Lansing also served as Chairman of the Board for Shutterfly, Inc. from February 2017 to September 2019. He holds an undergraduate degree from Wesleyan University and a J.D. from Georgetown University.

Mr. Lansing is the only member of management who serves on our Board of Directors. As our Chief Executive Officer, Mr. Lansing has extensive, first-hand knowledge of our corporate strategy, business units, operations, and employees, as well as the opportunities, risks, and challenges faced by our Company. Mr. Lansing brings to his roles as an executive officer and director an extensive background in management through his past chief executive officer and other senior management positions held at various companies. His experience in the technology industry, particularly in the areas of the Internet and e-commerce, provides significant value across several of our business units.

Eva Manolis.    Director since 2018; Member of the Leadership Development and Compensation Committee; Age 60.

Ms. Manolis formerly served as Vice President of Consumer Shopping Experience from May 2010 to August 2016, and previously held various management positions beginning in 2005, at Amazon.com, Inc., an electronic commerce and cloud-computing company, where she led the worldwide development of core consumer-facing features, functionality and user interface designs across multiple websites, mobile apps, and business lines. Prior to joining Amazon, Ms. Manolis co-founded and served as Senior Vice President of Products at Shutterfly, Inc. from 1999 to 2002, and served as Senior Vice President, Product and Operations at KeepMedia, Inc., an online content provider, from 2002 to 2005. From October 2016 through September 2019, Ms. Manolis served on the board of Shutterfly, Inc., a public company, where she also served as a member of the Governance Committee. Since August 2019, Ms. Manolis has served as a director of iRobot, Inc., a public company, where she serves on the Audit Committee and the Compensation and Talent Committee. Ms. Manolis earned Bachelor of Science and Master of Science degrees in Electrical Engineering from Brown University.

Ms. Manolis brings a strong background in leadership and management in the technology industry, with a focus on designing and building innovative customer products and services. We value her deep expertise in this area, as well as her knowledge of corporate governance matters from her service on the board of directors of Shutterfly, Inc. and her service on the Compensation and Talent Committee of iRobot, Inc.

Marc F. McMorris.    Director since 2015; Member of the Audit Committee; Age 55.

Mr. McMorris has been Co-Chief Executive Officer at Carrick Capital Partners, a private equity investment firm that he co-founded, since March 2021. From January 2012 to March 2021, Mr. McMorris served as a

 

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Co-Founder and the Managing Director of Carrick Capital Partners. From September 1999 to December 2011, Mr. McMorris served in various leadership positions at General Atlantic, LLC, a global private equity investment firm focused on technology growth investing, including Managing Director from 2003 to December 2011. Mr. McMorris does not serve on any other public company boards nor has he served on any other public company boards in the past five years. Mr. McMorris earned an undergraduate degree from the University of Pennsylvania and an M.B.A. from Wharton School of Business at the University of Pennsylvania.

Mr. McMorris’s extensive experience in evaluating companies in the financial services and technology industries, together with his mergers and acquisitions experience, provides a strong complement to our Board. He currently provides guidance to technology companies in several different areas, including software as a service (“SaaS”), an area of strong focus for the Company moving forward. He is also qualified as an “audit committee financial expert” as defined under SEC guidelines.

Joanna Rees.    Director since 2015; Chair of the Leadership Development and Compensation Committee; Member of the Governance, Nominating and Executive Committee; Age 62.

Ms. Rees has been the Executive Chairman of West Global since November 2023, and previously served as the Managing Partner of West.Ventures since June 2016. West provides marketing and brand expertise and investment capital to leading high growth private companies. West client companies have included Twitter, Square, Impossible Foods, Inception Fertility, GoFundMe, Newfront Insurance, Braintree and Proxy, to name a few. Previously (from 2012 to June 2016) Ms. Rees was a Managing Director of Soda Rock Partners, an investment and consulting firm, where she served as an investor, board member and senior advisor to multiple high growth companies. In 1996, Ms. Rees founded VSP Capital, a San Francisco-based venture capital firm, where she served as Managing Partner until 2011. During her tenure with VSP Capital, Ms. Rees served on the board of more than 25 private, venture-backed companies across a broad range of industries. From 1995 to 1996, Ms. Rees worked at Vrolyk & Company, a boutique merchant bank, and from 1993 to 1995, Ms. Rees worked at BA Securities, an investment banking subsidiary of Bank of America. Ms. Rees spent her early career in advertising and brand management. From 1984 to 1989, she held several senior marketing management positions with Groupe Danone, a $20+ billion global consumer products firm, with her last position as head of new product development. Ms. Rees began her career at Benton & Bowles (now DMB&B), an advertising agency, working on multiple consumer brands. Ms. Rees was the co-creator of the Build Brand Value CEO forum, which she ran from 1997 to 2003 as part of VSP Capital. Ms. Rees serves on four private company boards. Ms. Rees does not serve on any other public company boards nor has she served on any other public company boards in the past five years. Ms. Rees earned a B.S. from Duke University and an M.B.A. from Columbia University.

Ms. Rees’s leadership and experience in investing in, advising and building leading growth companies are valuable to the Company as it seeks to continue to grow its business and broaden its portfolio with innovative new product categories. Ms. Rees has deep connections across a wide range of industries, including the technology and education industries, and access to thought leaders worldwide.

David A. Rey.    Director since 2011; Member of the Audit Committee; Age 73.

From December 2008 to May 2011, Mr. Rey served as Executive Vice President and Chief Client Relationship Officer of UnitedHealth Group. From 1972 until 2008, Mr. Rey was an employee and then partner at Accenture Ltd. (previously Andersen Consulting and Arthur Andersen LLP), a global consulting firm. Mr. Rey served as both the Global Managing Partner of the healthcare industry practice and, as a Senior Managing Partner, led Accenture’s large client relationship development program. Mr. Rey does not serve on any other public company boards nor has he served on any other public company boards in the past five years. Mr. Rey holds a B.S. in Industrial Engineering and Operations Research from the University of California, Berkeley.

Mr. Rey brings financial reporting and accounting expertise to the Board of Directors, as well as global, cross-industry experience in developing and sustaining the kind of large client relationships that increas-

 

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ingly drive our Company’s business growth. Mr. Rey’s strong financial background qualifies him as an “audit committee financial expert” as defined under SEC guidelines, and as such, he serves on the Company’s Audit Committee. In 2018, Mr. Rey earned the CERT Certificate in Cybersecurity Oversight from the National Association of Corporate Directors (NACD).

H. Tayloe Stansbury.    Director since 2023; Member of the Audit Committee; Age 62.

Mr. Stansbury has served as Chief Executive Officer of Kaleidescape, Inc., a provider of high-end movie players and servers, since November 2020. Mr. Stansbury previously served as interim Chief Executive Officer of Watermark Insights, LLC, a provider of software solutions for higher education, from July 2020 to November 2020. From May 2009 to May 2019, Mr. Stansbury served in various roles at Intuit Inc., an accounting and tax software company, including Executive Vice President and Chief Technology Officer. From 2007 to 2009, Mr. Stansbury served as Chief Information Officer of VMware Inc., a leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control. From 2001 to 2007, Mr. Stanbury served in various roles at Ariba, Inc., an information technology company, most recently as Executive Vice President of Products and Operations. During the past five years, Mr. Stansbury served on the board of directors of public companies TCV Acquisition Corp., Coupa Software Incorporated, and Shutterfly, Inc. Mr. Stansbury currently serves on the board of directors of private companies Watermark Insights, LLC and Kaleidescape, Inc. Mr. Stansbury earned an A.B. in Applied Mathematics from Harvard University.

Mr. Stansbury brings extensive experience in general management, cloud-based software and platform development, artificial intelligence, and cybersecurity.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.

 

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PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION

Pursuant to Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from its stockholders to approve the compensation of our named executive officers as described under “Executive Compensation — Compensation Discussion and Analysis” and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement.

This proposal gives our stockholders the opportunity to express their views on the Company’s named executive officer compensation. Because your vote is advisory, it will not be binding upon the Board of Directors. However, the LDCC will consider the outcome of the vote when making future executive officer compensation decisions.

As we discuss below in our Compensation Discussion and Analysis, we believe that our compensation policies and decisions are designed to deliver a performance-based pay philosophy, are aligned with the long-term interests of our stockholders and are competitive. The Company’s principal compensation policies, which enable the Company to attract, motivate and retain talented executive officers to lead the Company in the achievement of our business objectives, include:

 

   

We make annual cash compensation decisions based on assessment of the Company’s performance against measurable financial goals, as well as each executive’s individual performance.

 

   

We emphasize long-term incentive compensation awards that collectively reward executive officers based on individual performance, external and internal peer equity compensation practices, and the performance of the Company’s stock.

 

   

Approximately two-thirds of the target value of fiscal 2023 annual long-term equity awards granted to executive officers in December 2022 was in the form of performance-based incentives.

 

   

We require stock ownership by our senior executive officers.

As a result, we are presenting this proposal, which gives you as a stockholder the opportunity to vote on our named executive officer compensation as disclosed in this proxy statement by voting “FOR” or “AGAINST” the following resolution:

RESOLVED, that the stockholders approve the compensation of the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the Company’s Proxy Statement for its 2024 Annual Meeting.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS BELIEVES THAT THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS IS APPROPRIATE AND RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE NAMED EXECUTIVE OFFICER COMPENSATION AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE COMPENSATION TABLES AND OTHERWISE IN THIS PROXY STATEMENT.

 

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PROPOSAL 3: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

It is the responsibility of the Audit Committee to select and retain independent auditors. Our Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as our independent auditors for the Company’s fiscal year ending September 30, 2024. Although stockholder ratification of the Audit Committee’s selection of independent auditors is not required by our Bylaws or otherwise, we are submitting the selection of Deloitte for stockholder ratification so that our stockholders may participate in this important corporate decision. If not ratified, the Audit Committee will reconsider the selection, although the Audit Committee will not be required to select different independent auditors for the Company.

Representatives of Deloitte will be present at the Annual Meeting and will have an opportunity to make a statement and respond to questions from stockholders present at the meeting.

Audit and Non-Audit Fees

The following table presents fees for professional audit services rendered by the Company’s independent registered public accounting firm for the fiscal years ended September 30, 2023 and September 30, 2022, for the audit of our annual financial statements and fees for other services rendered by the firm during those respective periods.

 

     2023      2022  

Audit Fees

   $ 3,325,000      $ 3,157,000  

Audit-Related Fees

     366,000        838,000  

Tax Fees

     163,000        304,000  

All Other Fees

     2,000        2,000  
  

 

 

    

 

 

 

Total

   $ 3,856,000      $ 4,301,000  
  

 

 

    

 

 

 

Audit Fees.    Audit fees consisted of fees for services rendered in connection with the annual audit of our consolidated financial statements, quarterly reviews of financial statements included in our quarterly reports on Form 10-Q, and the audit of internal control over financial reporting. Audit fees also consisted of services provided in connection with statutory audits, consultation on accounting matters and SEC registration statement services.

Audit-Related Fees.    Audit-related fees consisted principally of fees for financial and non-financial attestation services (Service Organization Control), debt offering, customer compliance audits and audits of financial statements of employee benefit plans.

Tax Fees.    Tax services consisted of fees for tax consultation and tax compliance services.

All Other Fees.    All other fees consisted of fees for access to an online library of accounting and financial reporting literature.

Our Audit Committee considers whether the provision of services other than for audit fees is compatible with maintaining our independent auditor’s independence, and has determined that these services for fiscal 2023 and 2022 were compatible. The services described above were approved by the Audit Committee pursuant to Rule 2-01 of Regulation S-X under the Exchange Act.

Policy on Audit Committee Preapproval of Audit and Non-Audit Services of Independent Auditors

Our Audit Committee is responsible for appointing, setting compensation, and overseeing the work of the independent auditors. The Audit Committee has established a policy regarding preapproval of all audit and permitted non-audit services provided by the independent auditors. On an ongoing basis, management communicates specific projects and categories of service for which it requests the advance approval of the Audit Committee. The Audit Committee reviews these requests and advises management if the Audit Committee approves the engagement of the independent auditors. On a periodic basis, management reports to the Audit

 

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Committee regarding the actual spending for such projects and services compared to the approved amounts. The Audit Committee may also delegate the ability to preapprove audit and permitted non-audit services to a subcommittee consisting of one or more members, provided that any such preapprovals are reported on at the next Audit Committee meeting.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2024.

 

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee selects and retains an independent registered public accounting firm as the Company’s independent auditor and assists the Board in overseeing (1) the integrity of the Company’s financial statements, (2) the independent auditor’s qualifications and independence, (3) the performance of the Company’s internal audit function and independent auditor, and (4) the compliance by the Company with legal and regulatory requirements related to financial affairs and reporting. The Board of Directors has adopted a written charter for the Audit Committee that addresses the responsibilities of the Audit Committee. This charter is available on the “Investors” page of our website at www.fico.com.

While the Audit Committee has the responsibilities and powers set forth in its charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable legal and other requirements. These are the responsibilities of management and the independent auditor. Additionally, in performing its oversight function, the Audit Committee necessarily relies on the work and assurances of, and information provided by, management and the independent auditor.

Deloitte & Touche LLP (“Deloitte”) served as the Company’s independent auditor for the fiscal year ended September 30, 2023. In fiscal 2023, the Audit Committee met and held discussions with management and Deloitte on numerous occasions. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management and Deloitte the Company’s quarterly consolidated financial statements prior to the filing of each Quarterly Report on Form 10-Q and the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023. The Audit Committee discussed with Deloitte matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. Deloitte also provided to the Audit Committee the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with Deloitte the firm’s independence and tenure.

Based upon the Audit Committee’s discussions with management and the independent auditor, and the Audit Committee’s review of the representations of management and the report of the independent auditor to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC.

Submitted by the Audit Committee:

James D. Kirsner, Chair

Marc F. McMorris

David A. Rey

H. Tayloe Stansbury

 

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CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS

We maintain a written policy for the approval of any related person transactions. A “Related Person,” for purposes of our policy, means:

 

   

Any person who is, or at any time since the beginning of our last fiscal year was, a director or executive officer or a nominee for director;

 

   

Any person known to be the beneficial owner of more than 5% of our common stock; or

 

   

Any immediate family member of the foregoing persons.

“Immediate family members” include children, stepchildren, parents, stepparents, spouses, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and any other person (other than a tenant or employee) sharing the household of one of these individuals.

Under the Related Persons Transaction Policy, any transaction, arrangement or relationship in which the Company (including any of its subsidiaries) is or will be a participant and in which a Related Person has a direct or indirect interest (a “Related Persons Transaction”) must be reviewed by the Audit Committee, except that the following transactions, arrangements or relationships are exempt under the policy:

 

   

Payment of compensation by the Company to a director or executive officer of the Company for such person’s service to the Company in that capacity;

 

   

Transactions available to all employees or all stockholders of the Company on the same terms; and

 

   

Transactions that, when aggregated with the amount of all other transactions between the Company and the Related Person or any entity in which the Related Person has an interest, involve less than $120,000 in a fiscal year.

In determining whether to approve a Related Persons Transaction, the Audit Committee will consider the following:

 

   

Whether the terms are fair to the Company;

 

   

Whether the transaction is material to the Company;

 

   

The importance of the Related Persons Transaction to the Related Person;

 

   

The role the Related Person has played in arranging the Related Persons Transaction;

 

   

The structure of the Related Persons Transaction; and

 

   

The interests of all Related Persons in the Related Persons Transaction.

We will only enter into a Related Persons Transaction if the Audit Committee determines that the Related Persons Transaction is not inconsistent with the interests of the Company and its stockholders, the Related Persons Transaction is beneficial to the Company, and the terms of the Related Persons Transaction are fair to the Company. No Related Persons Transactions occurred during fiscal 2023.

 

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CORPORATE GOVERNANCE

Board Leadership Structure

The Board of Directors does not have a policy with respect to the separation of the offices of Chairman of the Board and Chief Executive Officer. The Board of Directors believes that it is in the best interest of the Company for the Board of Directors to make a determination on this matter when it appoints a new Chief Executive Officer or Chairman. The Board of Directors has determined that, currently, the most effective leadership structure is to have a separate Chairman of the Board, a position held by Mr. Kelly since February 2016, and Chief Executive Officer, a position held by Mr. Lansing since January 2012, as it provides us the best access to the judgments and experience of both individuals while providing a mechanism for the Board’s independent oversight of management. As a result, the Chairman presides over the meetings of the Board of Directors and the stockholders, and the Chief Executive Officer is allowed more time to focus energies on the management of the Company’s business.

Board Risk Oversight Role

Our management is responsible for identifying the various risks facing the Company, formulating risk management policies and procedures, and managing the Company’s risk exposures. Our Board of Directors’ responsibility is to monitor the Company’s risk management processes by informing itself concerning our material risks and evaluating whether management has reasonable controls in place to address the material risks. The Audit Committee of the Board of Directors has been monitoring management’s responsibility in the area of risk oversight. Our internal risk management team reports to the Audit Committee on our major risk exposures and the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies. The Audit Committee also reviews with management the Company’s cybersecurity risk exposures and the steps management has taken to monitor and minimize such risks to the Company. The Audit Committee, in turn, reports on the matters discussed at the committee level to the full Board of Directors.

Attendance at Board Meetings

During fiscal 2023, the Board of Directors met five times. Each director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings held by all committees of the Board on which such director served.

All Board members are expected to attend our Annual Meeting. All directors then standing for election attended the 2023 Annual Meeting.

Our Corporate Governance Guidelines provide that independent directors will meet in executive session without the Chief Executive Officer or other management present at each regular Board meeting. Braden R. Kelly, the Chairman of the Board, is independent and presides at executive sessions held in accordance with our Corporate Governance Guidelines.

Annual Board Self-Evaluations

The Board of Directors and committees conduct annual self-evaluations to assess the qualifications, attributes, skills and experience represented on the Board and to determine whether the Board and its committees are functioning effectively.

Board Committees

Our Board has three standing committees: Audit; Leadership Development and Compensation; and Governance, Nominating and Executive. All of the members of the committees are independent directors under the applicable SEC rules and NYSE listing standards. Each committee’s charter expressly provides that the committee has the sole discretion to retain, compensate, and terminate its advisors. Current copies of the charters of the three committees are available on the “Investors” page of our website at www.fico.com. The following sets forth

 

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the primary responsibilities and number of meetings in fiscal 2023 for each of our committees, as well as membership of each of our committees as of January 1, 2024.

 

Audit Committee

       

Primary Responsibilities:

Fiscal 2023 Meetings: 9

James D. Kirsner (Chair)

Marc F. McMorris

David A. Rey

H. Tayloe Stansbury

     

Assists the Board in overseeing the integrity of our financial statements;

 

  

  

Oversees the qualifications and independence of our independent auditor;

 

  

  

Oversees performance of our internal audit function and independent auditor;

 

  

  

Oversees our Company’s compliance program, including codes of conduct, as well as compliance with legal and regulatory requirements related to financial affairs and reporting;

 

  

  

Appoints, retains, compensates, and replaces the independent auditor;

 

  

  

Reviews the audited financial statements with management and the independent auditor, and on an annual basis it provides an Audit Committee Report wherein it states that it recommends to the Board that the audited financial statements be included in our Annual Report on Form 10-K; and

 

  

  

Reviews with management the Company’s cybersecurity risk exposures and the steps management has taken to monitor and minimize such risks to the Company.

     

Independence:

  

  

Each member of the Audit Committee is independent as defined in Rule 10A-3 adopted pursuant to the Sarbanes-Oxley Act of 2002 and in the NYSE listing rules; and

 

  

  

The Board determined that all members of the Audit Committee are financially literate under NYSE listing rules, and that each of Messrs. Kirsner, McMorris and Rey is an “audit committee financial expert” under the SEC regulations.

 

Leadership Development and

Compensation Committee

       

Primary Responsibilities:

Fiscal 2023 Meetings: 7

Joanna Rees (Chair)

Fabiola R. Arredondo

Braden R. Kelly

Eva Manolis

     

Overall oversight responsibility for the directors’ and executive officers’ compensation plans and the compensation policies and programs of the Company;

 

  

  

Reviews and approves the level and terms of the executive officers’ annual and long-term compensation;

 

  

  

Evaluates the performance of the CEO and other executive officers of the Company;

 

  

  

Administers the Company’s long-term incentive plans, as well as makes recommendations to the Board of Directors regarding the adoption of other incentive plans;

 

  

  

Makes recommendations to the Governance, Nominating and Executive Committee with respect to the form and amount of director

 

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Leadership Development and

Compensation Committee

       

Primary Responsibilities:

     

compensation, and, jointly with the Governance, Nominating and Executive Committee, recommends changes in director compensation to the Board;

 

  

  

Monitors compliance by directors and officers with the Company’s stock ownership guidelines;

 

  

  

Solicits input from independent directors and periodically reviews and reports to the Board with respect to succession planning for the Chief Executive Officer and other senior management positions;

 

  

  

Regularly reviews and provides guidance to management with respect to the Company’s human capital management policies, programs and strategies, including but not limited to those regarding talent recruitment, development and retention, succession planning, health and safety, organizational culture, employee engagement, workforce diversity, and compensation and benefits; and

 

  

  

Oversees and administers the Company’s policies, plans and agreements concerning the recovery of incentive compensation.

     

Independence:

  

  

Each member of the Leadership Development and Compensation Committee is independent as required by the NYSE listing rules.

 

Governance, Nominating and Executive

Committee

       

Primary Responsibilities:

Fiscal 2023 Meetings: 4

Braden R. Kelly (Chair)

James D. Kirsner

Joanna Rees

     

Reviews annually with the Board the composition (e.g., skills, experience, diversity, age) of the Board, the requisite skills and characteristics of new Board members, and the performance and continued tenure of incumbent Board members;

 

     

Seeks individuals qualified to become Board members for recommendation to the Board;

     

Develops and recommends to the Board the criteria for identifying and evaluating director candidates, and recommends candidates for election or reelection to the Board;

     

Leads the Board in an annual evaluation of the Board’s performance, reports annually to the Board on the results of the evaluation, and oversees the annual evaluation of the Board’s committees, and the self-evaluation of individual directors;

     

Establishes the agenda for each Board meeting in cooperation with the CEO and appropriate senior management;

     

Recommends to the Board the membership of the standing committees of the Board;

     

Annually reviews and reassesses the adequacy of the Corporate Governance Guidelines and recommends any proposed changes to the Board for approval;

     

Has general oversight of the Company’s objectives, policies and efforts related to corporate responsibility matters, including

 

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Governance, Nominating and Executive

Committee

       

Primary Responsibilities:

     

sustainability, environmental, corporate citizenship, social responsibility, political and public policy matters;

     

Receives recommendations of the Leadership Development and Compensation Committee with respect to the form and amount of director compensation, and, jointly with the Leadership Development and Compensation Committee, recommends changes in director compensation to the Board;

     

Takes action in accordance with Board policy with respect to investment, budget and capital and exploratory expenditure matters arising in the normal course of the Company’s business as the same may from time to time be conducted, subject to such threshold limits as are set from time to time by the Board; and

     

Takes action pertaining to selling, leasing, pledging, mortgaging or otherwise disposing of property or assets of the Company, subject to such threshold limits as are set forth from time to time by the Board.

     

Independence:

     

Each member of the Governance, Nominating and Executive Committee is independent as required by the NYSE listing rules.

Environmental, Social and Governance (“ESG”) Matters

We recognize the importance of environmental, social, and governance issues. We have a long-standing commitment to the environment, the communities we call home, our employees, and other stakeholders, and we are proud of our strong governance practices. Our Board and certain of its committees oversee our progress on various ESG initiatives. Additional information regarding our commitment and approach to ESG matters appears on the Corporate Responsibility page of our website at www.fico.com/en/corporate-responsibility. The information on that page is not incorporated herein and is not a part of our proxy solicitation materials.

Human Capital Resources

Our People

As of September 30, 2023, we employed 3,455 persons across 29 countries. Of these, our largest representation includes 1,283 (37%) based in the United States, 1,259 (36%) based in India, and 270 (8%) based in the United Kingdom. Other than to the extent mandated by applicable law in certain foreign jurisdictions, none of our employees are covered by a collective bargaining agreement, and no work stoppages were experienced during fiscal 2023.

Our Board of Directors and executive leadership team believe that our people are vital to our success. The LDCC oversees all human capital management policies, programs, and strategies, including but not limited to those regarding talent recruitment, development and retention, health and safety, organizational culture, employee engagement, diversity, inclusion and belonging, and compensation and benefits. The LDCC also periodically reviews and reports to the Board with respect to succession planning for our Chief Executive Officer and other senior management positions. In addition, our Chief Human Resources Officer reports to our Board periodically on people-focused programs.

Three Core Values define our culture and serve to guide behavior and decision-making across our business: Act Like an Owner, Delight Our Customers and Earn the Respect of Others. Our selection process for new talent includes an evaluation against these values. Each new hire receives a personal welcome memo from the Chief Executive Officer reinforcing these values. In addition, we conduct recurring education sessions for both people

 

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managers and individual contributors targeting values-based behaviors. Finally, the performance of each employee is formally evaluated annually against values-based expectations captured in a behaviorally anchored “rubric.”

Employee Engagement

Unlocking the full potential of each individual by gaining their emotional commitment to help drive both personal and company success is an important priority. The resulting discretionary effort provides a powerful force for positive organizational change and ownership. We refer to this as “engagement” and, for the past decade, we have conducted quarterly workforce surveys to measure employee engagement and gain feedback and insights from our people about ways to improve the employee experience and the effectiveness of our business operations. Detailed findings from these surveys are promptly communicated to all employees, individual work teams, the executive team, and our Board and the findings are leveraged to drive positive organizational change. We involve designated employee “ambassadors” who work with senior leaders to explore findings, identify high value actions, and amplify messaging to help our people understand how survey participation can connect to positive change.

Examples of organizational changes that have been driven by the insights from these surveys include investments in workforce capacity, expanded recruiting of under-represented groups, broadened and more frequent company-wide communications, broadened employee stock ownership, expanded benefit programs including paid parental leave, well-being, family building, childcare reimbursement, and company-funded transportation programs, enhanced incentive plan funding, and expanded investments in professional development and culture-based initiatives to promote inclusiveness and belonging. Because of this ongoing dialogue and related actions, our e-Sat score (“How happy are you working at FICO”) exceeds, and nearly all of 22 engagement driver scores are at or above our external benchmark scores, with our Communication score (“I feel well-informed about what’s going on at FICO.”), our Action Taking score (“I believe meaningful action will be taken as a result of this survey.”), and our Leadership score (“I have confidence in the leadership team.”) leading by the widest margins. One of our engagement drivers specifically addresses attrition risk: “I rarely think about looking for a job at a different company.” We closely monitor this “retention” driver to gain insights and take steps to help mitigate unplanned attrition risk. As a result, our rate of voluntary attrition remains below industry average.

Awards and Recognition

Engaging our people, acting on their insights, and investing in organizational culture remain ongoing priorities, and it is encouraging to receive external recognition for these efforts. During fiscal 2023, we received several accolades including: (1) being named by Forbes as one of America’s Best Midsize Employers (for a third consecutive year); (2) being named by Forbes for the second consecutive year as one of America’s Best Employers for Women; (3) being recognized for the corporate social responsibility (“CSR”) Champion in Gender (Women) Initiatives Award by India’s Bangalore Chambers of Industry and Commerce; (4) receiving two DivHERsity awards in India for top 20 most innovative practices involving diversity hiring and women-focused leadership and development programs; and (5) achieving certification from the Great Place to Work Institute for our operations in Brazil for the fifth consecutive year.

Diversity, Inclusion, and Belonging

FICO believes in the business value of workforce diversity. Innovation is critical for any technology company – and we believe that it is fueled by the creative thinking that happens when people with different perspectives and backgrounds come together. We believe that diverse teams can better relate to and deliver against the many and varied needs of our clients. We also believe that promoting a culture where individual differences are truly valued allows us to attract the very best talent while encouraging our people to reach their full potential.

Foundationally, we have adopted a “Commitment to Inclusion and Belonging Policy” which provides that all employment-related decisions be made in compliance with established equal opportunity statutes. Accordingly, all decisions to employ, transfer, promote, train, compensate or otherwise provide access to benefit

 

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programs are to be made in accordance with these statutes. In addition, in the United States we have established an Affirmative Action Program and underlying plans for office locations with 50 or more employees to formally measure, report on and identify needed actions to close any gaps involving the utilization and advancement of women, minorities, disabled persons, and veterans.

As one strategy to accelerate progress in expanding workforce diversity, we engage in targeted campus recruiting efforts. In the United States, we maintained and expanded our partnership with the Management Leadership for Tomorrow (MLT.org) organization, which helped us connect with racially diverse college students for summer internships followed by offers of full-time employment upon graduation.

To help ensure understanding of our Commitment to Inclusion and Belonging Policy, as well as our Policy Against Harassment and other foundational and compliance policies, all new hires are provided with a copy of these policies during their onboarding process. In addition, we reinforce the importance of these policies during annual policy reminder communications. To equip our people with appropriate knowledge and outline their responsibilities as they specifically relate to preventing harassment and creating an inclusive work environment, we mandate a minimum of two hours of formal training, including competency testing, for all people managers every two years, with new people managers receiving this training within six months of appointment. All colleagues, including individual contributors, are also required to attend an abbreviated version of this training program every two years. Finally, we deliver a range of other “dialogue sessions” throughout the year, attended by a large percentage of our workforce, designed to build understanding of various forms of unconscious bias and strategies to overcome them. Our newest course in this regard fosters an understanding of neurodiversity and related workplace accommodation strategies.

Additional information on our diversity programs and efforts are available on the Corporate Responsibility page of our website at www.fico.com/en/corporate-responsibility. Information contained on our website is not deemed part of or incorporated by reference into this proxy statement.

Talent Recruitment

We leverage organizational culture as a competitive advantage in our efforts to attract talent from the broadest possible pool. This includes marketing our Core Values, opportunities for professional development, competitive compensation and benefit programs, and strong focus on work/life balance and flexible work locations including home-based work. In addition, our job descriptions and public job postings have been written to reflect inclusive language.

We deploy selection practices which ensure strong alignment between candidate qualifications and knowledge and skills needed for success in each role, while avoiding unconscious biases through hiring manager education and use of decision tools. We have adopted a policy that seeks a level of qualified applicant pool diversity to be achieved prior to offer extension as a strategy for building workforce diversity along with high quality hires. Further, in the U.S., we detail our targeted base pay ranges on all public job postings and instruct our recruiters that they are prohibited from inquiring about a candidate’s current level of compensation.

Professional Development

To support professional development, we offer a structured onboarding program with training specific to a variety of identified career paths to help new employees become rapidly engaged and productive. We have invested in building the FICO Integrated Learning Organization (“ILO”), which is led by our Chief Learning Officer. The ILO develops customized learning content for colleagues, clients, and partners around the world. We deliver high quality, targeted new hire onboarding, technology and product skill training, compliance and management and leadership education through this “FICO Learning” platform. This allows our employees to obtain the knowledge and skills to effectively perform in their current roles, while also preparing them for new opportunities. We also offer financial support for degreed or certificated programs through a tuition reimbursement program.

 

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Some of our employee development programs are mandatory. These include training targeting our Commitment to Inclusion and Belonging Policy, our Policy Against Harassment and other foundational compliance policies. Beyond these broad courses, a strength of our approach is that it can be highly customized by role and individual to target specific knowledge or skill priorities. On average, FICO employees engage in 20-40 hours of formal training per year inclusive of structured courses and self-paced exploratory learning. Management insights, coupled with quarterly employee engagement surveys and learning program feedback surveys ensure that the learning content delivered by our ILO remains highly relevant and effective.

Compensation and Benefit Programs

We regularly participate in market-based compensation surveys, seek the advice of outside experts, and leverage new hire and unplanned attrition trend data to ensure that our base pay and incentive structures are competitive. We create a strong sense of shared purpose by having our CEO and each member of our executive leadership team participate in the same annual cash incentive bonus plan as all non-sales employees across our organization.

We conduct annual structured talent management and semi-annual rewards program reviews that are designed to closely link rewards to individual performance outcomes and to ensure fairness in promotion and pay decisions. We have invested in building behaviorally anchored “performance rubrics” for all major role types across our organization to bring greater objectivity to the performance assessment process.

Over the course of the past decade, we’ve steadily and significantly expanded participation in our annual performance-based equity program from 7% to nearly 33% of our workforce. In addition, we offer an Employee Stock Purchase Plan for eligible employees, which is designed to promote broad-based equity participation.

We offer competitive health and welfare benefit plans with significant company subsidies to offset premiums, retirement plans with a competitive company match to encourage participation and flexible paid-time-off programs including vacation, sick time, and disability time. We have paid Maternity and Parental Leave benefits totaling up to 12 weeks, and we have adopted a Wellness Program designed to provide broad-based physical and mental health education and personal health coaching, as well as quarterly cash Wellness Awards designed to help employees fund wellness-related purchases which they find most valuable. We are also in the process of implementing a new global Family Building Benefit program, which provides infertility, cryopreservation, surrogacy, and adoption support services. In India, we recently implemented a new Childcare Reimbursement program to assist parents of young children.

Promoting a Healthy and Safe Work Environment

We are committed to providing a safe and healthy workplace, and our professional work environments reflect that commitment with state-of-the-art computing equipment, sit-stand desk options, ergonomic chairs, and well-appointed breakrooms. We foster a healthy work/life balance for our people via both remote and hybrid work location policies that provide significant flexibility surrounding work location and work schedules. We continuously strive to meet or exceed compliance with all laws, regulations and accepted practices pertaining to workplace safety. All employees and contractors are required to comply with established safety policies, standards, and procedures. Our benefits and facilities teams regularly conduct ergonomic evaluations and take all reasonable steps to accommodate the unique needs of individuals. In addition, we conduct periodic training designed to promote a safe and healthy work environment – including both office and home-based work settings. Our Remote and Hybrid Work Policies allow our people to flexibly work from home and office environments, and we have provided our people with workstation and other equipment at both home and work. We have also substantially reduced employee travel to only essential business needs in favor of ongoing video-based meetings. Beyond workplace safety, all employees are made aware of and bound by our Code of Business Conduct and Ethics policy which sets forth clear expectations on a number of dimensions, including health and safety commitments.

 

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FICO prohibits all workplace violence and threatening behavior by employees. Behaviors can include physical violence, as well as oral or written statements, gestures or expressions that communicate a direct or indirect threat of physical harm. We are committed to providing a work environment free of unlawful harassment. Our policy prohibits all unlawful harassment including sexual harassment and harassment based on pregnancy, childbirth or related medical conditions, race, religious creed, color, national origin or ancestry, physical or mental disability, medical condition, veteran status, marital status, age, gender, sexual orientation or any other basis protected by federal, state, or local law or ordinance or regulation.

Finally, all employees and contingent workers are required to pass a comprehensive pre-employment background check addressing criminal convictions and verification of employment eligibility, identity, and educational and work history credentials.

Insider Trading Policy

We have adopted an insider trading policy that governs the purchase, sale, and other dispositions and transactions in our securities by our directors, officers, and employees, which is reasonably designed to promote compliance with insider trading laws, rules and regulations.

 

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DIRECTOR COMPENSATION PROGRAMS

Non-Employee Director Compensation

The following compensation components are paid to our non-employee directors:

 

   

Annual retainer fees;

 

   

An equity grant upon initial election to the Board; and

 

   

Annual equity grants.

Our Compensation Program for Non-Employee Directors, initially adopted on December 8, 2016 and amended on March 1, 2022 (the “Program”), for fiscal 2023 was as described below.

Under the Program, each non-employee director was entitled to receive annual retainer fees in the amounts set forth below and was paid in cash quarterly in arrears during their annual term commencing upon their election or re-election at each Annual Meeting of Stockholders. Such amounts are pro-rated for appointments made to the Board of Directors, Chair of a standing Board committee or Chairman of the Board between Annual Meetings.

 

  

 

Base annual retainer fee payable to all non-employee directors

   $ 60,000  
   

Additional annual retainer fee payable to Chairs of the Board’s Audit Committee, Leadership Development and Compensation Committee and Governance, Nominating and Executive Committee

   $ 25,000  
   

Additional annual retainer fee payable to Independent Chairman of the Board

   $ 100,000  
   

Additional annual retainer fee payable to non-Chair members of the Audit Committee, Leadership Development and Compensation Committee and Governance, Nominating and Executive Committee

   $ 15,000  

The stock price used for purposes of all calculations made under the Program equaled the average closing price of a share of the Company’s stock for the trading days within the 30-calendar-day period that ended on the eleventh calendar day before the date of grant.

Each non-employee director had the right, prior to the Annual Meeting, to elect to receive some or all of these annual retainer fees in the form of fully vested nonqualified stock options instead of cash. A director who elected to receive some or all of these annual retainer fees in the form of a stock option received an option to purchase a number of shares equal to the amount of the retainer or portion of the retainer being converted divided by the Black-Scholes value of an option.

Upon initial election to the Board, each non-employee director was entitled to receive a number of nonqualified stock options subject to three-year ratable vesting equal to $460,000 divided by the Black-Scholes value of a nonqualified stock option. The director was able to elect to convert either 50% or 100% of these stock options to RSUs subject to three-year ratable vesting. The number of RSUs was determined by dividing the aggregate Black-Scholes value of the nonqualified stock options being exchanged by the value of an RSU.

Annual equity grants made to non-employee directors who were re-elected at the 2023 Annual Meeting of Stockholders after serving on the Board at least since the previous Annual Meeting were in the form of stock options subject to one-year cliff vesting equal to $230,000 divided by the Black-Scholes value of a nonqualified stock option, and each committee chair received an additional annual grant in the form of stock options subject to one-year cliff vesting equal to $30,000 divided by the Black-Scholes value of a nonqualified stock option. Each director was able to elect to convert either 50% or 100% of these stock options to RSUs subject to one-year cliff vesting. The number of RSUs was determined by dividing the aggregate Black-Scholes value of the nonqualified stock options being exchanged by the value of an RSU. Equity awards granted upon an Annual Meeting that are subject to vesting will vest upon the dates of successive Annual Meetings.

Effective November 30, 2023, the annual equity grant to non-employee directors will increase to $280,000 (from $230,000) and the equity grant upon initial election to the Board will increase to $560,000 (from

 

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$460,000). We last adjusted non-employee director equity award values in fiscal 2014, and believe these adjustments are appropriate based on our review of peer group compensation levels. Our Program otherwise remains unchanged.

Director Stock Ownership Guidelines

Our policy requires non-employee directors to hold seven times the base annual retainer fee in share value to be owned within five years of initial election or appointment. All of the directors currently meet the stock ownership guidelines or are making acceptable progress to their applicable level.

Director and Officer Liability Insurance Policies

Directors are covered under our director and officer liability insurance policies for claims alleged in connection with their service as directors. We have entered into indemnification agreements with all of our directors agreeing to indemnify them to the fullest extent permitted by law for claims alleged in connection with their service as directors.

 

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DIRECTOR COMPENSATION FOR FISCAL 2023

The table below summarizes the compensation paid by the Company to each non-employee director for the fiscal year ended September 30, 2023.

 

Name

   Fees
Earned or
Paid in
Cash ($)(1)
    Stock
Awards
($)(10)(11)
    Option
Awards
($)(10)(12)
    Non-Equity
Incentive Plan
Compensation
($)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
    Total
($)
 

Fabiola R. Arredondo

     75,000 (2)      234,880                               309,880  

Braden R. Kelly

     100,000 (3)      265,605                               365,605  

James D. Kirsner

     100,000 (4)      265,605                               365,605  

Eva Manolis

     75,000 (5)      234,880                               309,880  

Marc F. McMorris

     75,000 (6)            230,694                         305,694  

Joanna Rees

     100,000 (7)            260,773                         360,773  

David A. Rey

     90,000 (8)      234,880                               324,880  

H. Tayloe Stansbury

     (9)      231,122       230,261                         461,383  

 

(1) 

All fees under this column represent fees paid to the directors under the Program described above. The Program anticipates fees commencing with the directors’ election year (February/March to February/March), whereas the compensation reported in this table is that paid during our fiscal year (October through September). Fees that are paid in cash are paid quarterly in arrears. Fees that, at the election of the director, are paid in stock options are paid in one annual grant upon the director’s election to the Board. As a result, when a director’s election with respect to receiving fees in cash or stock options changes from one year to the next, the director’s compensation disclosed in this column differs from the annual fees described under “Non-Employee Director Compensation” above. Messrs. Kirsner and McMorris, and Mses. Arredondo, Manolis and Rees made election changes during fiscal 2023.

 

(2) 

Represents the $75,000 in annual board and committee retainers which would have been paid in cash in quarterly installments following her re-election that were forgone by Ms. Arredondo to instead receive 295 stock options in one grant upon her re-election. The amount recognized for financial statement reporting purposes in fiscal 2023 with respect to such options, which was $75,198, is excluded from the “Option Awards” column.

 

(3) 

Represents $100,000 of the annual board, committee, independent chairman of the board and committee chair retainers paid to Mr. Kelly in cash in the third and fourth quarters of fiscal 2023.

 

(4) 

Represents $100,000 of the annual board, committee chair and committee retainers paid to Mr. Kirsner in cash in fiscal 2023.

 

(5) 

Represents $75,000 of the annual board and committee retainers paid in cash to Ms. Manolis in fiscal 2023.

 

(6) 

Represents the $75,000 in annual board and committee retainers which would have been paid in cash in quarterly installments following his re-election that were forgone by Mr. McMorris to instead receive 295 stock options in one grant upon his re-election. The amount recognized for financial statement reporting purposes in fiscal 2023 with respect to such options, which was $75,198, is excluded from the “Option Awards” column.

 

(7) 

Represents the $100,000 in annual board, committee chair and committee retainers which would have been paid in cash in quarterly installments following her re-election that were foregone by Ms. Rees to instead receive 394 stock options in one grant upon her re-election. The amount recognized for financial statement reporting purposes in fiscal 2023 with respect to such options, which was $100,435, is excluded from the “Option Awards” column.

 

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(8) 

Includes (i) $75,000 in annual board and committee retainers paid quarterly to Mr. Rey in cash during fiscal 2023, and (ii) $15,000 in annual board and committee retainers which would have been paid in cash in quarterly installments following his re-election that were forgone by Mr. Rey to instead receive 59 stock options in one grant upon his re-election. The amount recognized for financial statement reporting purposes in fiscal 2023 with respect to such options, which was $15,040, is excluded from the “Option Awards” column.

 

(9) 

Mr. Stansbury joined the Board on August 22, 2023, and did not have annual board and committee retainers paid in cash in fiscal 2023.

 

(10) 

The amounts in this column represent the aggregate grant date fair value of each award computed in accordance with FASB ASC Topic 718. For information on the assumptions used to calculate the value of the awards, refer to Note 15 of the Company’s Consolidated Financial Statements in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC.

 

(11) 

As of September 30, 2023, the RSU awards outstanding for each director are as follows: Ms. Arredondo —344; Mr. Kelly — 389; Mr. Kirsner — 389; Ms. Manolis — 344; Mr. McMorris — 0; Ms. Rees — 0; Mr. Rey — 344; and Mr. Stansbury — 274.

 

(12) 

As of September 30, 2023, the option awards outstanding for each director are as follows: Ms. Arredondo — 3,396; Mr. Kelly — 19,533; Mr. Kirsner — 715; Ms. Manolis — 11,695; Mr. McMorris — 8,638; Ms. Rees — 20,142; Mr. Rey — 16,862; and Mr. Stansbury — 745.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section describes our executive compensation philosophy, and the process by which our Leadership Development and Compensation Committee (“LDCC”) makes executive compensation decisions and pay decisions for our named executive officers.

Our named executive officers for fiscal 2023 consist of the following persons:

 

   

William Lansing, our Chief Executive Officer (our “CEO”);

 

   

Steven Weber, our Executive Vice President and Chief Financial Officer;

 

   

Michael McLaughlin, our former Executive Vice President and Chief Financial Officer;

 

   

Stephanie Covert, who served as our Executive Vice President, Software through November 2, 2023, and then in a non-executive officer position as the Company’s Vice President, Software Technology through December 31, 2023;

 

   

Mark Scadina, our Executive Vice President, General Counsel and Corporate Secretary; and

 

   

James Wehmann, our Executive Vice President, Scores.

Effective January 13, 2023, Mr. McLaughlin resigned from the Company for a new professional opportunity, and Steven Weber, who was our Vice President, Treasurer, Tax and Investor Relations, was appointed to serve as our Vice President, Interim Chief Financial Officer, until a permanent successor was appointed. Effective May 15, 2023, Mr. Weber was appointed our Executive Vice President and Chief Financial Officer.

Executive Summary

Fiscal 2023 Company Performance Highlights

During fiscal 2023, we again delivered record revenues and free cash flow as we continued to focus our strategy and pursue our long-term growth initiatives. We utilized our cash to enhance stockholder value through continued investments in FICO Platform initiatives and our stock repurchase program. Financial highlights and key measures of our performance that were determined at the beginning of the performance period by our LDCC and applied to determine the 2023 performance of our named executive officers are set forth below. See the

 

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“Determination of Compensation” section below for more details on the LDCC’s compensation decision-making process.

 

 

LOGO

 

(1) 

Adjusted EBITDA is a non-GAAP financial measure and is defined as GAAP net income, adjusted for certain items. See Appendix A to this proxy statement for a reconciliation of Adjusted EBITDA to GAAP net income, the most directly comparable GAAP financial measure.

Fiscal 2023 Executive Compensation Highlights

Our compensation program is aligned with our pay-for-performance philosophy, emphasizing variable and long-term incentive opportunities that align our named executive officers’ financial interests with those of our stockholders.

 

 

LOGO

 

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Our short-term cash incentive compensation plan funding is based on company performance, with individual awards linked closely to individual performance. In addition, the value of two-thirds of our named executive officers’ target long-term incentive opportunity is weighted towards performance-based equity vehicles, the value of which depends on achieving the Company’s financial performance targets and stock price performance.

For fiscal 2023:

 

   

Base salaries for fiscal 2023 remained flat, other than the increase in Mr. Weber’s base salary in connection with his appointment to Executive Vice President and Chief Financial Officer in May 2023.

 

   

The target level of short-term cash incentive awards for each executive officer, expressed as a percentage of annual base salary, remained unchanged in fiscal 2023 and used an equally-weighted combination of Adjusted EBITDA and Adjusted Revenue to drive sustainable top-line and bottom-line growth. For both measures, the LDCC set stretch target goals that required performance exceeding fiscal 2022 targets and actual performance. Our Adjusted Revenue and Adjusted EBITDA measures are discussed further below, and Adjusted EBITDA is reconciled to net income in Appendix A to this proxy statement.

 

 

LOGO

 

   

Our long-term equity incentive awards represent the large majority of executives’ total direct compensation opportunity consistent with our pay-for-performance philosophy, and we use a performance-weighted mix of performance share units (“PSUs”) and market share units (“MSUs”) together with time-based restricted stock units (“RSUs”), designed to ensure that our executive compensation program operates effectively across a wide variety of business scenarios.

 

   

The LDCC selected Adjusted Revenue and Adjusted EBITDA for the PSU performance metrics because it believes these measures best balance the delivery of steady growth against the investments we are making as we continue to pursue a strategic shift in the focus of the Software segment toward a cloud-based platform while preserving the value of legacy solutions. As a result, we are making significant investments in technology infrastructure and solution innovation which tend to sacrifice short-term performance on certain other measures (e.g., earnings per share) in favor of enabling longer-term stockholder value creation.

 

   

PSUs use a one-year performance period, enabling the LDCC to set rigorous goals for a time period over which it has reasonable visibility. Our relatively long sales cycle coupled with complexities linked to our strategic shift make goal setting over a longer-term performance period particularly challenging.

 

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To address the importance of longer-term performance measures, our MSUs measure relative total shareholder return (“rTSR”) performance over one-, two-, and three-year performance periods. See the discussion beginning on page 43 below for further discussion of our long-term incentive awards.

 

 

LOGO

 

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Named executive officers’ pay outcomes for fiscal 2023 demonstrate the strong pay and performance linkage of our program.

 

 

LOGO

 

(1) 

Dollar amounts shown for targeted value reflect actual base salary earned and target short- and long-term incentives for fiscal 2023. Amounts shown exclude (i) the Chief Executive Officer’s special performance-based retention and leadership continuity award discussed immediately below, which provides for a five-year performance period; and (ii) for Steven Weber, who served as Interim Chief Financial Officer from January 2023 until his appointment as Chief Financial Officer in May 2023, the amounts awarded to him in December 2022 (pursuant to a special award for retention purposes), January 2023 (in connection with his promotion to Interim Chief Financial Officer) and May 2023 (in connection with his promotion to Executive Vice President, Chief Financial Officer). Realized/realizable value reflects actual PSU results for fiscal 2023, actual MSU results for the one-year performance period that ended November 30, 2023, and target MSU values for the outstanding two- and three-year performance periods, in each case for the PSUs and MSUs granted in fiscal 2023.

 

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(2) 

Excludes our former Chief Financial Officer Michael McLaughlin, who forfeited his fiscal 2023 short- and long-term incentive awards upon his resignation in January 2023.

Chief Executive Officer Special Performance-Based Retention and Leadership Continuity Award

On June 5, 2023, the LDCC made a special performance-based retention and leadership continuity award to Mr. Lansing, our Chief Executive Officer. The approximately $30 million award at target was granted 50% in the form of 19,576 target number of MSUs and 50% in the form of 52,082 non-qualified stock options.

The LDCC’s intent in making this award was to secure Mr. Lansing’s continued leadership during the next five years as the Company pursues its market-leading software platform and scores business strategies. Mr. Lansing, who was age 65 at the time of the award, has guided the Company through transformative growth since his appointment as CEO in 2012. The strength of our TSR performance provides evidence of Mr. Lansing’s leadership contributions: Our one-year and three-year TSR position us at the 85th and 67th percentile of the Russell 3000 Index, respectively. Furthermore, during Mr. Lansing’s tenure the Company has achieved cumulative TSR performance versus the Russell 3000 Index that places the Company in the 99th percentile. He has provided invaluable leadership to the Company in terms of business vision, strategic execution, and in attracting and engaging top talent. While the LDCC regularly updates its succession plans and is focused on the importance of developing our internal talent, it believes that retaining and ensuring Mr. Lansing’s leadership over at least the next five years is critical to continuing to advance the Company’s strategies and to provide senior leadership team continuity, particularly as we continue the strategic shift within our Software segment toward a cloud-based platform. The LDCC believes that Mr. Lansing’s strategic vision is critical to FICO’s execution of this shift, which is pivotal to FICO’s long-term success, and to ensuring continued stability of our broader executive leadership team.

In light of these objectives, the LDCC conducted an extensive benchmarking analysis based on market data, with the assistance of its independent compensation consultant. Following review and consideration of various factors, including relevant industry data, market competition, and Mr. Lansing’s significant leadership contributions, the LDCC determined that this special award – which provides for an extended five-year performance period for the MSUs and five-year vesting period for the stock options, with no vesting prior to the initial three-year period and a holding requirement for all net shares issued until the end of the full five-year period – would best serve its leadership continuity and retention objectives. Absent extraordinary circumstances, the LDCC does not intend to make any additional special awards to Mr. Lansing during the five-year performance period of this special award. See the section entitled “CEO Special Performance-Based Retention and Leadership Continuity Award” below for the key terms of these MSUs and stock options.

Stockholder Advisory Vote on Named Executive Officer Compensation

At our last Annual Meeting of Stockholders held on March 1, 2023, we asked our stockholders to approve, by advisory vote, the compensation of our named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosures contained in our proxy statement for that Annual Meeting. The proposal was approved by our stockholders with approximately 83.4% of the votes cast being “for” approval. The LDCC regularly evaluates and adjusts the Company’s compensation policies and practices as it deems appropriate to advance the best interests of the Company and its stockholders, and the Company engages in periodic discussions with certain of its largest stockholders to obtain feedback on our compensation policies and practices.

In light of the continued support of our executive compensation program, policies, and practices by the significant majority of our stockholders at our last Annual Meeting, the LDCC largely maintained the existing compensation program, policies, and practices during fiscal 2023. In particular, as noted above, the LDCC believes our PSU one-year performance period is best-aligned to our present needs because it enables the LDCC to set rigorous goals for a time period over which it has reasonable visibility. Our relatively long sales cycle coupled with the complexities linked to the strategic shift underway make goal setting over a longer-term performance period particularly challenging. The LDCC believes that the MSU structure provides a complementary, multi-year view of performance that directly aligns pay outcomes with stockholders’ experience. It has also been intentional in its use of Adjusted Revenue and Adjusted EBITDA under both our short- and long-term incentive

 

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programs, given the criticality of these two metrics to our business. Importantly, the PSUs utilize meaningfully steeper upwards and downwards payout slopes than the short-term cash incentive plan, consistent with the LDCC’s desire to more heavily weight compensation opportunities toward variable, equity-based compensation opportunities, to strengthen the risk and reward profile of these awards.

The LDCC’s decisions made at the outset of fiscal 2024 reflect a continuation of this philosophy and program design, with close alignment between earnings opportunity and company performance. Specifically, our emphasis on long-term equity incentive awards continues and the long-term incentive program continues to reflect a strong emphasis on performance-based vehicles, with two-thirds of the value of annual equity awards made to our executive officers in fiscal 2024 involving performance-based vehicles. For fiscal 2024, the LDCC also retained Adjusted Revenue and Adjusted EBITDA as the two financial performance measures used to determine short-term cash incentive plan funding and PSU earnings, equally weighted at 50% each. With PSUs representing one-third of long-term equity incentive award value, the LDCC also continued to place one-third of long-term equity incentive award value on MSUs which are earned over one-, two-, and three-year performance periods based on relative total stockholder return versus the Russell 3000 Index.

Quality Pay Practices and Policies

Highlighted below are key practices and policies of our compensation program which reinforce our pay-for-performance philosophy, achieve our retention and motivation objectives, and align executive and stockholder interests.

 

 

LOGO

Determination of Compensation

LDCC Process

Members of executive management participate in the LDCC’s meetings at the LDCC’s request. Management’s role is to contribute input and analysis, which the LDCC considers in making its decisions. The LDCC is not bound by management’s recommendations, but the LDCC relies on the insights of our CEO and Chief Human Resources Officer in determining compensation for our executive officers, other than our CEO. The LDCC also consults with its independent compensation consultant during its review of executive officer compensation. Prior to making decisions on executive compensation, the LDCC refers to comprehensive statements and reports prepared by its compensation consultant and management that reflect the amount and elements of each executive officer’s target total direct compensation opportunity relative to competitive market practices.

The LDCC conducts an annual performance review of our CEO in connection with the determination of his compensation. As part of this process, one or more LDCC members and/or the Chairman of our Board of Directors meet with each senior executive to discuss our CEO’s performance using a structured interview approach. In addition, each Board member completes a written evaluation of our CEO and submits it to the LDCC. Based on these interviews and written evaluations, as well as on its own determinations regarding our

 

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CEO’s performance, the LDCC prepares a final performance review for our CEO. The LDCC then submits a recommendation for our CEO’s compensation to our Board of Directors for discussion. Following such discussion, the LDCC finalizes its determination of our CEO’s compensation and informs our CEO of such determination, together with the final performance review.

Compensation Peer Group

In connection with our fiscal 2023 executive compensation program, the LDCC reviewed summary reports prepared by its compensation consultant and by management reflecting current and proposed base salary, short-term cash incentive and equity award levels for our executive officers. Each element was analyzed relative to the Company’s compensation peer group. The peer group consisted of 20 companies that were selected as being similar in size to the Company and operating in the application software, data processing and outsourced services, research and consulting services, and financial exchanges and data sub-industries within the Global Industry Classification Standard taxonomy.

The 20 peer companies that were included in the analysis referenced by the LDCC when it set compensation for fiscal 2023 were as follows:

 

ACI Worldwide

  

Jack Henry & Associates

ANSYS

  

Manhattan Associates

Aspen Technology

  

MSCI

Black Knight

  

Palantir Technologies

Broadridge Financial Solutions

  

Pegasystems

Cadence Design Systems

  

PTC

DocuSign

  

Splunk

Equifax

  

TransUnion

FactSet Research Systems

  

Verisk Analytics

Guidewire Software

  

Zendesk

The composition of the compensation peer group is reviewed annually at a minimum, with adjustments made that the LDCC, with the assistance of its compensation consultant, believes are appropriate to maintain comparability within the employment marketplace and to reflect any mergers or acquisitions or significant size changes among the subject companies. CoreLogic and Nuance Communications were removed from the compensation peer group for fiscal 2023 as a result of their acquisitions.

Specific information with respect to the Company’s relative position follows, using values available at the time the compensation levels were being determined in November 2022:

 

    

Revenue

($ in millions)

   

Market

Capitalization

($ in millions)

 

Operating
Income
(Loss)

($ in millions)

   

Net Income

(Loss)

($ in millions)

   

One-Year
TSR

(%)

   

Three-Year
TSR

(%)

 

75th percentile of peer group

  $ 3,041         $20,815   $ 642       $ 592         -5%       18%  

50th percentile of peer group

  $ 1,924         $14,719   $ 386       $   378         -29%       6%  

25th percentile of peer group

  $ 1,500         $10,119   $ (105   $ (127     -40%       -5%  

Company

  $ 1,363         $11,893   $ 531       $ 369         4%       12%  

Percentile rank

    19%     30%     64%          48%          85%       67%  

The LDCC considered the peer group information in addition to company and individual performance when setting the compensation levels for our executive officers for fiscal 2023. The LDCC does not benchmark total compensation or individual elements of compensation to particular percentiles but aims to create competitive pay packages that reflect the Company’s performance and that are generally intended to deliver above market median compensation if long-term equity incentive awards pay out at or above target based on challenging required levels of performance.

 

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Use of Compensation Consultant

The LDCC retains an external, independent compensation consultant to assist it in analyzing our executive compensation program and assessing market levels of compensation. For fiscal 2023, the LDCC engaged Compensia, Inc. to provide competitive practice and market compensation data, advice regarding the design of compensation programs for our executive officers and non-employee directors, input regarding specific compensation actions for our executive officers (including the special performance-based retention and leadership continuity award to Mr. Lansing in June 2023) and analysis of the composition of our compensation peer group.

Compensation Consultant Conflict of Interest Analysis

The LDCC has considered the relationships that the compensation consultant it engaged in fiscal 2023 has had with the Company, the members of the LDCC and the Company’s executive officers, as well as the policies that the consultant has in place to maintain its independence and objectivity and has determined that no conflicts of interest arose from the work performed by such consultant.

Elements of Compensation

The fiscal 2023 executive compensation program consisted of three principal elements: (1) base salary; (2) short-term cash incentives; and (3) long-term equity incentives in the form of PSUs, MSUs, and RSUs.

 

Compensation Element

       

Purpose and Philosophy

Base Salary

     

•  Base salary provides our executive officers with financial stability and predictable cash flow.

     

•  Individual base salaries are determined by evaluating the executive officer’s role within the Company, experience, performance, and potential for development, as well as the base salaries of comparable roles within the peer group companies and the broader marketplace.

Short-Term Cash Incentives

     

•  Our short-term cash incentive plan rewards the achievement of annual Company and individual performance goals.

     

•  Target cash incentive payment amounts are expressed as a percentage of base salary determined with reference to the peer group companies and the broader marketplace.

     

•  Participants may earn between zero and 250% of their target cash incentive award opportunities, depending both upon Company and individual performance.

Long-Term Equity Incentives

     

•  Long-term equity incentive awards directly link a significant portion of each executive officer’s target total direct compensation to the market value of our common stock, while promoting retention through multi-year vesting and performance periods.

     

•  PSUs are earned based upon the extent to which annual Company financial performance targets are achieved with as few as zero and as many as 200% of the target PSUs eligible to be earned. Earned units are then subject to multi-year time-based vesting, promoting continued linkage to the market price of our common stock while also promoting retention.

     

•  MSUs are earned based on our relative total shareholder return measured over one-year, two-year, and three-year performance periods with as few as zero and as many as 200% of the target MSUs eligible to be earned.

     

•  RSUs represent a more stable equity-based compensation vehicle, ensuring linkage to the stock price performance of our common stock while promoting retention over a multi-year time-based vesting period.

 

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Base Salary in Fiscal 2023

None of our named executive officers received an increase in base salary as part of the Company’s annual year-end performance review and compensation process in November 2022. This conservative approach reflects the LDCC’s continued commitment to incentive compensation elements directly linked to the achievement of our target financial goals and the creation of stockholder value. In connection with Mr. Weber’s appointment to Executive Vice President and Chief Financial Officer in May 2023, the LDCC established his base salary at the same level as his predecessor, Mr. McLaughlin.

 

Named Executive Officer   

Fiscal 2023

Base Salary

    

Fiscal 2022

Base Salary

 

William Lansing

   $ 750,000      $ 750,000  

Steven Weber(1)

   $ 400,000        N/A  

Michael McLaughlin(2)

   $ 400,000      $ 400,000  

Stephanie Covert

   $ 500,000      $ 500,000  

Mark Scadina

   $ 400,000      $ 400,000  

James Wehmann

   $ 500,000      $ 500,000  

 

(1) 

Effective May 15, 2023, Mr. Weber was appointed Chief Financial Officer and his annual base salary was increased to $400,000. Prior to that date, Mr. Weber was Interim Chief Financial Officer beginning January 13, 2023, and prior to that served as the Company’s Vice President, Treasurer, Tax and Investor Relations, a non-executive officer position. Mr. Weber’s fiscal 2022 base salary is noted as not applicable, since he was not in an executive officer role during that year.

 

(2) 

Mr. McLaughlin’s employment terminated effective January 13, 2023.

Short-Term Cash Incentives in Fiscal 2023

We offer a short-term incentive opportunity in the form of cash incentive awards to our executive officers. For fiscal 2023, these incentive awards were paid from a single, centralized pool that supported short-term cash incentive payments to our executive officers and vice president-level leaders under our Management Incentive Plan (“MIP”) and to other eligible employees under our Broad-Based Incentive Plan (“BBIP”).

In fiscal 2023, the LDCC determined our named executive officers’ cash incentive payments using the framework set forth below (which was the same for our named executive officers and for all other participants in the MIP and BBIP):

 

     

Participant Target %

   =     

The percentage of each participant’s annual base salary that represents his or her target cash incentive award payment opportunity.

     

Company Performance Factor

   =     

A value ranging from 0 to 125% reflecting the extent to which the Company Adjusted Revenue and Adjusted EBITDA targets were achieved. The Company Performance Factor for fiscal year 2023 was equal to 125% of targeted funding approved by the LDCC at the beginning of the fiscal year.

     

Participant Performance Factor

   =     

A value ranging from 0 to 200%, reflecting the extent to which individual participant performance goals were achieved.

 

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LOGO

As an illustrative example, a participant with an annual base salary of $500,000, a Participant Target % of 50% of base salary, and a Participant Performance Factor of 100% would have earned $312,500 for fiscal 2023 based on our Company Performance Factor of 125% (compared to a target payment of $250,000).

The Participant Target % for each participant in the MIP is based on the Company’s desire to continue to emphasize long-term incentives and the LDCC’s review of market-competitive short-term compensation levels for executives in comparable roles at the peer group companies. As provided in their respective employment agreements, Mr. Lansing’s Participant Target % is 100% of his annual base salary, and the other named executive officers each have a Participant Target % of 50% of their annual base salary in effect at the end of fiscal 2023.

The LDCC establishes the size of the cash incentive pool by multiplying the aggregate amount of plan participants’ target-level awards by the Company Performance Factor, reflecting the extent to which Adjusted Revenue and Adjusted EBITDA targets were achieved. “Adjusted Revenue” means the Company’s GAAP Revenue as adjusted for any impact on revenues related to acquisitions, divestitures or other events deemed by the LDCC to have been out of management’s control or that may not be indicative of recurring business results and occurring in the measurement year. For fiscal 2023, the LDCC determined that no adjustments to the Company’s GAAP Revenue were warranted, and therefore Adjusted Revenue was the same as GAAP Revenue. “Adjusted EBITDA” is a non-GAAP financial measure and is defined as GAAP net income, adjusted for: interest expense, net; provision for income taxes; other expense (income), net; amortization of intangible assets; depreciation; stock-based compensation expense; and gain on product line asset sale, as further adjusted for any impact on revenues related to acquisitions, divestitures or other events deemed by the LDCC to have been out of management’s control or that may not be indicative of recurring business results and occurring in the measurement year. See Appendix A to this proxy statement for a reconciliation of Adjusted EBITDA to GAAP net income, the most directly comparable GAAP financial measure. The threshold, target, and maximum performance levels for each performance measure, along with the related Company Performance Factor, for fiscal 2023 were as follows:

 

Financial Metric
(Weighting)
  Threshold
Funding Level
  Mid-point
Funding Level
  Target
Funding Level
  Upside
Funding Level
  Maximum
Funding Level
  Actual
Performance

Adjusted Revenue (50%)

  $1,377.3
million
  $1,433.7
million
  $1,475.0
million
  $1,490.3
million
  $1,508.2
million
  $1,514.0
million

Adjusted EBITDA (50%)

  $681.7
million
  $726.2
million
  $743.9
million
  $753.2
million
  $765.2
million
  $780.8
million

Company Performance Factor

  25%   50%   100%   112.5%   125%   125%

In accordance with this calculation, a Company Performance Factor of 125% was applied to the cash incentive pool and uniformly affected payments made to all participants in the MIP and BBIP. This fiscal 2023 Company Performance Factor was slightly higher than in fiscal 2022, when above-target Company performance yielded a multiplier of 123.8%.

The Participant Performance Factor is a function of the extent to which individual performance goals are achieved. These goals can include Company-wide measures as well as business unit metrics and goals that are highly specific to the functions over which the individual has primary responsibility. Our CEO’s performance goals were established by the LDCC at the beginning of the fiscal year after considering input from each non-employee director, and our CEO’s individual annual performance evaluation was completed by the LDCC.

 

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Individual performance goals for our executive officers other than our CEO were established by our CEO, and annual performance evaluations for these executive officers were completed by our CEO and discussed with the LDCC. If an executive officer receives the lowest performance rating on a three-point scale (“Improvement Needed”), his or her Participant Performance Factor and resulting cash incentive payment may be as low as zero. Conversely, if an executive officer receives the highest overall performance rating (“Outstanding”), his or her Participant Performance Factor may be as high as 200%. Distribution guidelines applicable to these performance ratings ensure that participants in the short-term cash incentive plan are not all rated on the high or low end of the scale, but are instead distributed above and below the target levels. The LDCC may exercise discretion to make adjustments within the performance scale.

The Participant Performance Factor values for our named executive officers for fiscal 2023 (other than for Mr. McLaughlin, who forfeited his award upon departure during 2023), along with the key factors considered by the LDCC and our CEO, as applicable, in making these determinations, were as follows:

 

Named Executive

Officer

 

Participant

Performance

Factor

  Key Factors

William Lansing

  128%  

•  effective execution of strategic growth investments in both Scores and Software segments including people, technology, and market development

•  aligned executives through integrated goal setting and by driving accountability through performance-based incentives

•  leveraged talent as a strategic differentiator through targeted recruiting and highly selective hiring, workforce engagement and retention initiatives, and continued investment in professional development programs

Steven Weber

  110%  

•  transitioned to interim, followed by ongoing EVP-Chief Financial Officer role while effectively managing key priorities and deliverables

•  cultivated effective shareholder relations and understanding of our growth strategy

•  invested in and realigned key finance resources to meet evolving business needs

Stephanie Covert

  120%  

•  led the execution of Software segment priorities leading to outstanding revenue and net income growth, as well as a healthy new business pipeline

•  continued expansion of enterprise platform client sales and platform use cases

•  established multiple large partner relationships that will enable scalability and market expansion

Mark Scadina

  120%  

•  delivered highly effective client and partner contracting as well as strategic insights

•  effectively avoided, managed, and mitigated corporate risks

•  provided outstanding counsel to the Board and executive officers

James Wehmann

  120%  

•  effectively responded to regulatory and competitive challenges

•  achieved strong Scores segment revenue and net income growth despite interest rate headwinds

•  drove valuable innovation strengthening the future of our Scores business

 

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The combined effect of these inputs led to the following payments for the named executive officer participants under the MIP for fiscal 2023 performance, shown along with the target payment levels:

 

Named Executive Officer  

Target Payout

for Fiscal 2023

   

Amount Attributable

to Company

Performance Factor

   

Participant

Performance Factor

   

Actual Payout

for Fiscal 2023

 

William Lansing

  $ 750,000     $ 937,500       128   $ 1,200,000  

Steven Weber

  $ 200,000     $ 250,000       110   $ 275,000  

Stephanie Covert

  $ 250,000     $ 312,500       120   $ 375,000  

Mark Scadina

  $ 200,000     $ 250,000       120   $ 300,000  

James Wehmann

  $ 250,000     $ 312,500       120   $ 375,000  

Totals

  $ 1,650,000     $ 2,062,500           $ 2,525,000  

Long-Term Equity Incentives in Fiscal 2023

The third key element of our executive compensation program for fiscal 2023 was long-term equity incentives in the form of equity awards. This element of compensation is used to drive achievement of the Company’s financial targets while linking compensation to the market value of its common stock. The Company has chosen to emphasize long-term equity incentives in our executive compensation program to help ensure strong alignment with our stockholders over time. The following table sets forth the target value of each named executive officer’s fiscal 2023 long-term incentive awards.

 

Named Executive Officer   Annual PSUs     Annual MSUs     Annual RSUs     Total  

William Lansing(1)

  $ 6,733,333     $ 6,733,333     $ 6,733,333     $ 20,200,000  

Steven Weber(2)

  $     $     $ 320,000     $ 320,000  

Michael McLaughlin(3)

  $ 1,666,667     $ 1,666,667     $ 1,666,667     $ 5,000,000  

Stephanie Covert

  $ 2,000,000     $ 2,000,000     $ 2,000,000     $ 6,000,000  

Mark Scadina

  $ 1,333,333     $ 1,333,333     $ 1,333,333     $ 4,000,000  

James Wehmann

  $ 2,000,000     $ 2,000,000     $ 2,000,000     $ 6,000,000  

 

(1) 

Excludes the special performance-based retention and leadership continuity award granted to Mr. Lansing discussed under “CEO Special Performance-Based Retention and Leadership Continuity Award” below. Including that award, the target value of Mr. Lansing’s fiscal 2023 equity awards totaled $50,200,000.

 

(2) 

Excludes the special retention grant of RSUs and promotion grants of RSUs granted to Mr. Weber in connection with his service as Interim Chief Financial Officer and subsequent appointment as Chief Financial Officer, discussed under “Compensation Arrangements Relating to Fiscal 2023 Chief Financial Officer Succession” below. In total, the target value of Mr. Weber’s fiscal 2023 equity awards totaled $3,820,000.

 

(3) 

Mr. McLaughlin forfeited his fiscal 2023 long-term incentive awards upon his resignation in January 2023.

In determining the value of annual equity awards for fiscal 2023, the LDCC considered an analysis of competitive market data prepared by its compensation consultant and described above under “Determination of Compensation — Compensation Peer Group,” the individual performance of each executive officer, the need to reinforce positive levels of collaboration and teamwork across members of the executive team, and our retention objectives.

The competitive market data analysis for fiscal 2023 showed that peer group total direct compensation increased approximately 10% at each of the median and the 75th percentile, with the cash component increasing 8% at the median and decreasing 3% at the 75th percentile, and the long-term incentive value increasing 22% and 13% at the median and 75th percentile, respectively. Coupled with continued strong company performance, the strength of Mr. Lansing’s individual performance results and the LDCC’s desire to ensure his compensation is highly competitive and reflective of his personal performance and market value, this trend in peer group

 

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compensation data contributed to the LDCC’s decision to increase the target value of Mr. Lansing’s fiscal 2023 annual long-term incentive award to approximately $20 million. This target value does not include the special performance-based retention and leadership continuity award granted to Mr. Lansing in June 2023. The target value of the long-term incentive awards for other named executive officers was flat year-over-year, other than Mr. McLaughlin, who forfeited his award upon departure. For additional details, please see “Grants of Plan-Based Awards for Fiscal 2023.”

The amounts reported within the compensation tables following this Compensation Discussion & Analysis differ from the target amounts discussed here. The LDCC uses the average closing stock price during the 30-calendar day period ending on the 11th day prior to the date of grant for purposes of converting the intended target value awarded to share units, whereas the amounts reported in the compensation tables reflect the grant date fair value of each award in accordance with applicable accounting requirements. The LDCC considers the use of an averaging period to be best practice, to offset daily stock price volatility, and the 10-day period prior to the grant date provides our executive officers with a reasonable time period to decide what portion, if any, of the designated RSU value (discussed under “Restricted Stock Units” below) to exchange for non-qualified stock options using an economically equivalent value also tied to the 30-day average price.

To strongly align the interests of our executive officers and stockholders, we place two-thirds of annual long-term incentive value on performance-based vehicles in the form of PSUs and MSUs, considerably higher than the 52% average for our peer group. The proportion of each type of equity award granted as part of the annual long-term incentive award to our named executive officers (other than Mr. Weber due to his promotion) in fiscal 2023 is broken down as follows:

 

 

LOGO

Performance Share Units (“PSUs”). The PSUs granted in fiscal 2023 were earned on the basis of a one-year performance period, with any earned shares vesting on the first three anniversaries of the date of grant. The LDCC believes a one-year performance period enables it to set stretch goals based on a time period over which it has a reasonable line of sight. This is because market uncertainties make it difficult to accurately forecast our Adjusted Revenue and Adjusted EBITDA beyond one year. The LDCC believes the complexity of our major products linked to the strategic shift in focus for our Software segment, along with the business complexity of our major customers, yields a very long selling cycle, which in turn contributes significant uncertainty into our revenue stream and resulting EBITDA. Using a one-year performance period allows the LDCC to reward performance for a time period over which the Company has better visibility instead of creating goals over a longer term that are more likely to be problematic. In addition, requiring that any earned shares vest over an additional two years creates long-term alignment with our stockholders’ experience and satisfies our retention objectives.

 

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The maximum number of PSUs that could have been earned over the fiscal 2023 performance period by each named executive officer was specified in the applicable award agreement. In each case, the named executive officer could earn as little as 0% at or below threshold performance and as much as 200% of the target number of PSUs at maximum performance. The LDCC retains discretion to determine the actual number of PSUs that were earned, but, consistent with prior years, did not exercise any such discretion with respect to the fiscal 2023 PSUs. The earnings matrix for the fiscal 2023 PSU awards was:

 

Financial Metric

(Weighting)

 

Threshold

Performance

($ in millions)

   

Mid-point

Performance

($ in millions)

   

Target
Performance

($ in millions)

   

Upside
Performance

($ in millions)

   

Maximum

Performance

($ in millions)

   

Actual
Performance

($ in millions)

 

Adjusted Revenue (50%)

  $ 1,377.3     $ 1,433.7     $ 1,475.0     $ 1,490.3     $ 1,508.2     $ 1,514.0  

Adjusted EBITDA (50%)

  $ 681.7     $ 726.2     $ 743.9     $ 753.2     $ 765.2     $ 780.8  

PSUs Earned (as percentage of target)

    0%       50%       100%       150%       200%       200%  

The following table sets forth the target number of PSUs and the actual number of PSUs earned for fiscal 2023 performance that were settled for shares of our common stock for each named executive officer, other than Mr. McLaughlin, who forfeited his PSUs upon his employment termination:

 

Named Executive Officer

Target Number

of PSUs

Granted for

Fiscal 2023

Actual Number

of PSUs

Earned for

Fiscal 2023

William Lansing

  12,585   25,170

Steven Weber

  N/A   N/A

Stephanie Covert

  3,739   7,478

Mark Scadina

  2,493   4,986

James Wehmann

  3,739   7,478

One-third of the earned PSUs vested and were settled in shares of our common stock following the end of fiscal 2023 and two-thirds will vest over the next two fiscal years provided the named executive officer remains with the Company as of each vesting date or vesting of the PSUs continues pursuant to the terms of the applicable award agreement.

 

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Market Share Units (“MSUs”). The MSUs granted as part of the annual awards in fiscal 2023 (like those granted in fiscal 2022 and fiscal 2021) are earned based on the Company’s total shareholder return relative to the Russell 3000 Index over performance periods of one, two, and three years. The LDCC decided to measure performance over a total of three years to integrate a longer, multi-year performance period into the Company’s equity compensation program. The number of MSUs earned for each performance period is calculated as follows:

 

 

LOGO

The relative return factor for each performance period is determined based on the Company’s total shareholder return relative to the Russell 3000 Index for such performance period, as follows:

 

Relative TSR Performance (Fiscal 2021, 2022 and 2023)     Relative Return Factor    

+33.33% or greater

200%

+16.67%

150%

0%

100%

-12.5%

50%

-25% or less

0%

Generally, the Company’s relative TSR performance is calculated by taking the difference between our total shareholder return minus the Russell 3000 Index’s total shareholder return for the relevant performance period. Importantly, the MSU earnings slope for below-target performance is steeper than the slope for above-target performance, meaning that the penalty for under-performance is greater than the premium for over-performance.

The following table sets forth, for the applicable performance period that includes fiscal 2023 for each of the MSUs granted in fiscal 2023, 2022 and 2021, the Company’s TSR and the TSR of the Russell 3000 Index, which on a relative basis for each performance period exceeded the maximum rTSR goal, resulting in a relative return factor of 200%, for each such performance period:

 

Award     Performance Period         Total TSR of FICO         Russell 3000 Index     MSUs Earned
    (as a percentage of target)    

FY23 MSU

1-Year   94.19% 12.61% 200%

FY22 MSU

2-Year 142.53% -8.02% 200%

FY21 MSU

3-Year 112.44% 21.35% 200%

 

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The target number of MSUs and the number of shares of our common stock earned by each named executive officer for each of the three performance periods completed at the end of fiscal 2023 are as follows:

 

Named Executive Officer

Target Number

of FY23 MSUs

Subject to One-Year

Performance

Actual Number

of MSUs

Earned

William Lansing

  4,195   8,390

Steven Weber

  N/A   N/A

Stephanie Covert

  1,247   2,494

Mark Scadina

  831   1,662

James Wehmann

  1,247   2,494
Named Executive Officer

Target Number

of FY22 MSUs

Subject to Two-Year

Performance

Actual Number

of MSUs

Earned

William Lansing

  4,161   8,322

Steven Weber

  N/A   N/A

Stephanie Covert

  1,783   3,566

Mark Scadina

  1,189   2,378

James Wehmann

  1,783   3,566
Named Executive Officer

Target Number

of FY21 MSUs Granted

Subject to Three-Year

Performance

Actual Number

of MSUs

Earned(1)

William Lansing

  3,399   16,791

Steven Weber

  N/A   N/A

Stephanie Covert

  971   4,797

Mark Scadina

  971   4,797

James Wehmann

  1,457   7,197

 

(1) 

The actual number of MSUs granted in fiscal 2021 and earned in fiscal 2023 was calculated by multiplying the total number of target units in the applicable award agreement by the relative return factor for the relevant performance period, then subtracting the fiscal 2021 MSUs earned at the conclusion of the first and second performance periods. The total number of Mr. Lansing’s target fiscal 2021 MSUs was 10,196, and multiplying by the 200% relative return factor yielded 20,392 MSUs. Subtracting the 0 MSUs earned for the first performance period and the 3,601 MSUs earned for the second performance period yields the remaining 16,791 MSUs earned for the third performance period. The total number of Ms. Covert’s and Mr. Scadina’s target fiscal 2021 MSUs was 2,913 each, and multiplying by the 200% relative return factor yielded 5,826 MSUs each. Subtracting the 0 MSUs earned by each for the first performance period and the 1,029 MSUs earned by each for the second performance period yields the remaining 4,797 MSUs earned by each for the third performance period. The total number of Mr. Wehmann’s target fiscal 2021 MSUs was 4,370, and multiplying by the 200% relative return factor yielded 8,740 MSUs. Subtracting the 0 MSUs earned for the first performance period and the 1,543 MSUs earned for the second performance period yields the remaining 7,197 MSUs earned for the third performance period.

Restricted Stock Units (“RSUs”). The RSUs granted in fiscal 2023 provide a link to our stock price performance, as well as promote our retention objectives over a multi-year vesting period. Generally, the RSUs granted by the LDCC to executive officers vest in four equal annual installments beginning on the first anniversary of the grant date.

 

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As in prior fiscal years, the LDCC permitted our executive officers to exchange up to 100% of their annual time-vested RSUs for non-qualified stock options (“NQSOs”) on an economically equivalent basis, while maintaining the existing four-year annual vesting requirement. We have provided executives with this flexibility of choice since fiscal 2015 as a retention tool, as the LDCC believes that NQSOs provide attractive leverage to the recipient and permit the holder to determine when taxable income events occur via a decision to exercise their NQSOs. In fiscal 2023, however, none of our named executive officers elected to receive a NQSO in exchange for an RSU award.

CEO Special Performance-Based Retention and Leadership Continuity Award. As previously disclosed, on June 5, 2023, the LDCC granted a special performance-based retention and leadership continuity award to Mr. Lansing, divided equally between NQSOs and MSUs. The LDCC determined this award was necessary to address two critical objectives:

 

•  Recognize Mr. Lansing’s extraordinary performance, his guidance of the Company through transformative growth and the shareholder value he has created both in the near term and over his tenure, evidenced by our 85th percentile one-year and 99th percentile cumulative (2012 - 2023) TSR performance relative to the Russell 3000 Index, and incentivize continued outperformance over this next 5-year period.

  

•  Ensure Mr. Lansing’s retention and leadership continuity over the next 5+ years. The LDCC believes his invaluable leadership, business vision and strategic execution are critical to FICO’s execution of strategic shift within its Software segment toward a cloud-based platform while maintaining the value of its legacy products, and to ensuring continued stability of our broader executive leadership team.

Mr. Lansing’s special performance-based retention and leadership continuity award was not part of his fiscal 2023 annual compensation; however, it is reported in the Summary Compensation Table which requires its inclusion. Absent extraordinary circumstances, the LDCC does not intend to award him any additional special awards during the five-year performance period of this award. In structuring this award, the LDCC was focused on establishing a structure that achieved its key objectives while providing long-term alignment with shareholders’ interests. Accordingly, the key terms of the award – set forth below – incorporate performance and vest-

 

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ing periods that are two years longer than the annual long-term incentive awards and contain shareholder-friendly holding and forfeiture provisions:

 

Grant Details      

$30 million target award value (approximately $36.6 million grant date fair value) granted on June 5, 2023, comprised of 50% NQSOs and 50% MSUs. See “Grants of Plan-Based Awards for Fiscal 2023” for additional information.

 

The NQSOs have an exercise price of $791.50 per share, the closing price of our common stock on the grant date, and expire on June 4, 2030.

 

 

 

                               
Relative TSR
Thresholds for
MSUs
            Relative TSR Performance       Relative Return Factor              
 

+33.33% or greater

  200%             
 

+16.67%

  150%             
 

0%

  100%             
 

-12.5%

  50%             
 

-25% or less

  0%                 

Relative TSR Companies for MSUs

 

     

The MSUs earned will be based on our total shareholder return relative to the Russell 3000 Index.

 

 

MSU Performance Measurement Periods and Vesting      

Utilizes three equally divided performance periods over three years (Period 1), four years (Period 2) and five years (Period 3), each beginning on June 1, 2023. These performance periods are intentionally longer than our annual MSU award performance periods to more closely align with the retention and leadership continuity objective of this award.

 

Any earned MSUs during each performance period will vest on the applicable grant date anniversary immediately following the conclusion of the performance period (i.e., June 5, 2026, 2027 and 2028).

 

 

 

NQSO Vesting Period      

-   Three-fifths will vest on June 5, 2026

 

-   One-fifth will vest on June 5, 2027

 

-   One-fifth will vest on June 5, 2028

 

                
Holding and Forfeiture Provisions      

In alignment with the LDCC’s leadership continuity objective of this award:

 

-   No portion of either the MSUs or NQSOs vests prior to the third anniversary of grant. Further, Mr. Lansing must hold all shares received from earned MSUs and exercised NQSOs until the fifth anniversary of the grant date, except as necessary to cover taxes or pay the exercise price.

 

-   The terms of both the MSUs and NQSOs provide that if Mr. Lansing retires, his retirement will not entitle him to acceleration or continued vesting of the MSUs or NQSOs.

 

    

    

Compensation Arrangements Relating to Fiscal 2023 Chief Financial Officer Succession

Effective January 13, 2023, Michael McLaughlin, our then Executive Vice President and Chief Financial Officer, resigned from the Company for a new professional opportunity, and Steven Weber, who was our Vice President, Treasurer, Tax and Investor Relations, was appointed to serve as our Vice President and Interim Chief Financial Officer, until a permanent successor was appointed. Effective May 15, 2023, Mr. Weber was appointed our Executive Vice President and Chief Financial Officer, and the LDCC approved the terms of Mr. Weber’s compensation arrangements in connection with such promotion, including an annual base salary of $400,000 (which was

 

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Mr. McLaughlin’s base salary amount) and Mr. Weber’s continued annual incentive award target opportunity for fiscal 2023 at 50% of his base salary.

In addition to the annual grant of RSUs that Mr. Weber received in December 2022 in his previous position, in fiscal 2023 Mr. Weber received: (i) a special retention grant of RSUs with a value of $500,000 in December 2022 that cliff vests on the third anniversary of the grant date in alignment with the retention orientation of this award; (ii) a promotion grant of RSUs with a value of $1.0 million in January 2023 that vests in four equal annual installments beginning on the first anniversary of the grant date; and (iii) a promotion-based grant of RSUs in May 2023 with a value of $2.0 million that vests in four equal annual installments beginning on the first anniversary of the grant date. Beginning in fiscal 2024, Mr. Weber will participate in our long-term incentive program on the same basis as other named executive officers.

Compensation Arrangements Relating to Fiscal 2024 Management Changes

As previously disclosed, in connection with Ms. Covert’s transition to her role as Vice President, Software Technology, a non-executive officer position, the Company and Ms. Covert entered into a new Letter Agreement (the “Covert Letter Agreement”) with a term of November 2, 2023 through December 31, 2023, which replaced her previous letter agreement with us. Pursuant to the Covert Letter Agreement, Ms. Covert’s annual base salary remained unchanged from her previous compensation. As discussed above, Ms. Covert continued to participate in the MIP for fiscal year 2023, with her MIP award for fiscal year 2023 being $375,000, less applicable withholdings. Ms. Covert is not eligible to participate in the MIP for fiscal year 2024 or for any future fiscal year. Additionally, because Ms. Covert remained employed with the Company through December 10, 2023, the number of RSUs, MSUs and PSUs previously granted to her and scheduled to vest on or prior to December 10, 2023 vested subject to the terms of the applicable plans and respective grant agreements under which such RSUs, MSUs and PSUs were granted.

The Covert Letter Agreement also provided that upon the termination of Ms. Covert’s employment as a result of the expiration of the term on December 31, 2023, she would be entitled to the following pay and benefits: (i) a lump sum severance payment equal to three months of her final base salary, or $125,000, (ii) outplacement services for six months provided by the Company’s preferred provider at a cost not to exceed $3,350, and (iii) if elected, continuation of certain benefits pursuant to COBRA for 12 months, the cost of which is expected to total $16,800 over that time period. Such amounts were paid and provided following Ms. Covert’s termination on December 31, 2023, as set forth under “Potential Payments upon Termination or Change in Control” below.

Retirement Arrangements

We offer a Section 401(k) plan for all eligible employees. Under this program, our executive officers (like all of our eligible employees) can receive a Company matching contribution on amounts they contribute to the Section 401(k) plan as follows: 100% match of the first 3% of eligible compensation contributed by the executive officer, followed by a 50% match of the next 2% of eligible compensation contributed by the executive officer. Our executive retirement and savings plan allows our vice presidents and more senior executive officers to defer up to 25% of their base salary and 75% of their short-term cash incentive awards into an investment account. Amounts in this account are payable upon certain employment termination events as specified in the plan.

In November 2018, the LDCC approved the inclusion of retirement provisions in the award agreements for the equity awards granted to our executive officers beginning in December 2018. In May 2023, the LDCC amended the retirement qualification provisions in such award agreements. Such provisions allow for continued vesting of outstanding equity awards upon an executive officer’s retirement provided that (i) such executive officer (a) is 55 or older, (b) has at least 5 years of continuous service as an employee (which must be immediately preceding the date of termination), and (c) has served at least five cumulative years as an Executive Vice President of the Company (while both (b) and (c) must be satisfied, periods of time served as an Executive Vice President under (c) may also be counted toward the five years of continuous service requirement under (b)), and

 

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(ii) the sum of such executive officer’s age as of the date of his or her termination plus their years of service as an employee equals at least 75. In order to qualify for continued vesting, the executive officer must provide at least one year’s notice of his or her retirement and must also be available to provide service to the Company, if requested, during the continued vesting period. In addition, during the continued vesting period, the executive officer may not become employed by another entity or organization. The LDCC believes the retirement provisions help enhance retention of our executive officers, improve the executive transition process by ensuring sufficient time to plan for a successor, and ensure continued support from the former executive officer following retirement.

Because the LDCC’s intent in making the special performance-based retention and leadership continuity awards of MSUs and NQSOs to Mr. Lansing in June 2023 was to secure Mr. Lansing’s continued leadership during the next five years, the terms of those MSUs and NQSOs provide that if Mr. Lansing retires, his retirement will not entitle him to acceleration or continued vesting of those MSUs and NQSOs.

Other Compensation Arrangements

Our executive officers participate in our general employee benefit plans and programs, including health and dental benefits, on the same terms as all of our other full-time employees. We also pay the premiums for group life, accidental death and dismemberment, and business travel accident insurance for all eligible employees, including our executive officers, in a coverage amount based upon their base salary. We do not provide material perquisites.

Post-Employment Compensation Arrangements

Each of our named executive officers who is a current executive officer is party to a Letter Agreement that, among other things, provides for payments and benefits in the event of termination of employment by the Company without cause or by the executive officer for good reason, and a Management Agreement that provides for payments and benefits in the event of such a termination of employment in connection with a change in control of the Company. These agreements are described in detail later in this proxy statement.

The LDCC believes that these severance and change-in-control arrangements are meaningful recruitment and retention devices, are important components in a competitive compensation package for our named executive officers, and will mitigate concerns that the executive officers may have regarding their continued employment prior to or following a change in control of the Company, thereby allowing them to focus their undivided attention on advancing the interests of the Company and its stockholders. The change-in-control arrangements are “double-trigger” (that is, they require both a change in control of the Company and a termination of employment without cause or by the executive officer for good reason within 24 months of the change in control) and the named executive officers are not eligible to receive tax payments or gross-ups in connection with any change-in-control arrangement.

Equity Award Grant Processes

Equity awards granted to our named executive officers in fiscal 2023 were granted under the 2021 LTIP. Equity awards for all executive officers are approved by the LDCC. The LDCC has delegated authority to our CEO to approve the granting of equity awards to employees who are not executive officers, subject to certain parameters approved by the LDCC. The exercise price of stock options is set at fair market value of our common stock on the date of grant, with annual equity awards generally granted by the LDCC on a pre-determined day in December of each fiscal year.

Executive Stock Ownership Guidelines

Our Board of Directors has adopted stock ownership guidelines for our executive officers. Our CEO is required to own at least 100,000 shares of our common stock, and our Executive Vice Presidents are required to own shares valued at least five times their annual base salary. The guidelines provide that executive officers should achieve the stated guidelines within five years of appointment. As of the end of fiscal 2023, all of our executive officers had met or exceeded their required stock ownership level or were making acceptable progress to their required level.

 

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Executive Officer Incentive Compensation Recovery Policy

Effective October 2, 2023, our Board of Directors adopted a new Compensation Recovery Policy (the “Clawback Policy”) in accordance with the listing standards of the New York Stock Exchange. The Clawback Policy applies to all incentive-based compensation, which is any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure, received by our executive officers, including our named executive officers.

The Clawback Policy applies in the case of an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. The Clawback Policy provides that promptly following such an accounting restatement, the LDCC will determine the amount of the erroneously awarded compensation, which is the excess of the amount of incentive-based compensation received by current and former executive officers during the three completed fiscal years immediately preceding the required restatement date over the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts. The Company will provide each such executive officer with a written notice of such amount and a demand for repayment or return. If such repayment or return is not made within a reasonable time, the Clawback Policy provides that the Company will recover the erroneously awarded compensation in a reasonable and prompt manner using any lawful method, subject to limited exceptions as permitted by New York Stock Exchange listing standards.

No Hedging

Under the terms of our insider trading policy, the members of the Board of Directors, officers and employees may not buy or sell puts or calls on Company stock, trade options on any of the stock exchanges or futures exchanges relating to Company stock, enter into equity swaps, prepaid variable forward contracts, collars or exchange funds involving Company stock and other transactions that are designed to hedge or offset decreases in the price of Company stock.

Tax Matters

Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation of more than $1 million paid in any taxable year to certain current and former named executive officers. As a general matter, while the LDCC is mindful of the benefit to the Company of the full deductibility of compensation, it believes that it should maintain flexibility in compensating the Company’s executive officers in a manner that can best promote our corporate objectives.

Leadership Development and Compensation Committee Report

The LDCC has discussed and reviewed the “Compensation Discussion and Analysis” with management. Based upon this review and discussion, the LDCC recommended to our Board of Directors that the “Compensation Discussion and Analysis” be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K.

Submitted by the Leadership Development and Compensation Committee:

Joanna Rees, Chair

Fabiola R. Arredondo

Braden R. Kelly

Eva Manolis

 

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Leadership Development and Compensation Committee Interlocks and Insider Participation

No member of the LDCC serves or has served as an officer of the Company. No executive officer serves, or in the past has served, as a member of the board of directors or compensation committee of any entity that has any of its executive officers serving as a member of our Board of Directors or the LDCC.

Compensation Policies and Practices in Relation to Risk Management

The Company’s management and the LDCC are committed to continually assessing the structure of the Company’s compensation programs in the context of recognized best practices. Total compensation consists of a mix of fixed and variable elements, and among our executive officers a significant portion of their target total direct compensation comes in the form of long-term equity incentive awards that are earned over several years. The stock ownership guidelines in place for our executive officers also work to align their long-term interests with those of our stockholders.

Our short-term cash incentive plan applicable to both our executive officers and other employees is structured to reward achievement of diverse goals, some of which are tied to Company-wide performance and some of which are tied to business unit performance, but all of which are designed to benefit the Company and our stockholders on a long-term basis. In addition, the LDCC retains discretion to adjust awards under the short-term cash incentive plan if a payout determined under the formula is not appropriate in the circumstances, and award maximums or “caps” are in place to prevent windfalls. Finally, our system of internal controls places a strong focus on avoiding undue financial risk through rigorous review processes.

In light of the risk-limiting features of our compensation policies and practices, the Company has concluded that any risks arising from its compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.

 

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SUMMARY COMPENSATION TABLE

The following table summarizes all compensation earned in fiscal 2023, 2022 and 2021 by our named executive officers.

 

Name and Principal Position

  Fiscal
Year
    Salary
($)
    Bonus
($)
    Stock
Awards
($)(1)(2)
    Option
Awards
($)(3)
    Non-Equity
Incentive
Plan
($)(4)
    Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)(5)
    Total
($)
 

William Lansing

    2023       750,000             48,996,329       15,347,003       1,200,000             56,630       66,349,962  

Chief Executive Officer

    2022       750,000             16,942,011             1,200,000             21,770       18,913,781  
    2021       750,000             17,458,576             1,200,000             21,169       19,429,745  

Steven Weber(6)

    2023       305,577             4,079,517             275,000             24,098       4,684,192  

Executive Vice President and Chief Financial Officer

                 

Stephanie Covert(7)

    2023       500,000             8,231,522             375,000             44,200       9,150,722  

Executive Vice President, Software

   
2022
2021
 
 
   
480,769
400,000
 
 
   

 
 
   
7,261,057
4,987,921
 
 
   


 

 

   
375,000
350,000
 
 
   

 
 
   
9,866
10,180
 
 
   
8,126,692
5,748,101
 
 

Mark Scadina(8)

    2023       400,000             5,488,415             300,000             48,931       6,237,346  

Executive Vice President, General Counsel

    2022       400,000             4,841,157             300,000             30,084       5,571,242  

James Wehmann

    2023       500,000             8,231,522             375,000             12,456       9,118,978  

Executive Vice President, Scores

    2022       500,000             7,261,057             375,000             11,846       8,147,903  
    2021       500,000             7,482,737             375,000             11,646       8,369,383  

Michael McLaughlin(9)

    2023       124,615             6,859,967                         7,585       6,992,167  

Former Executive Vice President and Chief Financial Officer

    2022       400,000             4,841,157             275,000             27,570       5,543,727  
    2021       400,000             4,987,921             275,000             11,597       5,674,518  
                 
                 

 

(1) 

The amounts in the “Stock Awards” column represent the aggregate grant date fair value of each award granted during the fiscal year, computed in accordance with FASB ASC Topic 718, and do not reflect whether the named executive officer has actually realized a financial benefit from the award. For information on the assumptions used to calculate the value of the awards, refer to Note 15 of the Company’s Consolidated Financial Statements in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC.

 

(2) 

Stock Awards for fiscal 2023 include the grant date fair value of annual time-based RSU awards, PSU awards and MSU awards granted to executive officers on December 9, 2022 (except that Mr. Weber did not receive PSU or MSU awards since he did not become an executive officer until after the grant date of those types of awards), promotion time-based RSU awards to Mr. Weber on January 9, 2023 and May 15, 2023, a special retention award to Mr. Weber on December 9, 2022, and a special performance-based retention and leadership continuity MSU award to Mr. Lansing on June 5, 2023, all under the 2021 LTIP. See “Grants of Plan-Based Awards on page 57 for additional details on the retention awards.

 

  

The PSUs were tied to the achievement of certain performance goals during fiscal 2023, and the named executive officer must be an employee on the vesting dates of December 9th of 2023, 2024 and 2025 in order to realize the earned PSU value. The values included in the table for the PSUs are at target value, representing the probable outcome of the performance conditions as calculated at the time of grant. The maximum value of the award on the grant date, assuming the highest level of performance conditions achieved, would be

 

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$15,490,876 vs. target of $7,745,438 for Mr. Lansing; $4,602,336 vs. target of $2,301,168 for Ms. Covert; $3,068,634 vs. target of $1,534,317 for Mr. Scadina; $4,602,336 vs. target of $2,301,168 for Mr. Wehmann; and $3,835,484 vs. target of $1,917,742 for Mr. McLaughlin. The named executive officers earned 200% of their respective target award, resulting in 25,170 units for Mr. Lansing; 7,478 units for Ms. Covert; 4,986 units for Mr. Scadina; 7,478 units for Mr. Wehmann; and 0 units for Mr. McLaughlin due to the forfeiture of his PSUs as a result of his voluntary termination.

 

  

The MSUs were tied to the achievement of certain performance goals over three performance periods ending on November 30, 2023, 2024 and 2025. The named executive officers must be employed on the vesting dates of December 9th of 2023, 2024 and 2025 in order to realize the earned MSU value. The values included in the table for the MSUs are at target value, representing the probable outcome of the performance conditions as calculated at the time of grant. The maximum value of the award on the grant date, assuming the highest level of performance conditions achieved, would be $24,430,757 vs. target of $12,215,379 for Mr. Lansing; $7,258,372 vs. target of $3,629,186 for Ms. Covert; $4,839,562 vs. $2,419,781 for Mr. Scadina; $7,258,372 vs. target of $3,629,186 for Mr. Wehmann; and $6,048,966 vs. target of $3,024,483 for Mr. McLaughlin. Based on our total shareholder return of 27.89% for fiscal 2023, 200% of the MSUs granted in fiscal 2023 were earned at the conclusion of the first performance period ending on November 30, 2023. Mr. McLaughlin will not earn any MSUs due to the forfeiture of his awards as a result of his voluntary termination.

 

  

On June 5, 2023, Mr. Lansing received a special performance-based retention and leadership continuity award of MSUs tied to the achievement of certain performance goals over three performance periods, each beginning on June 1, 2023 and ending on each of May 31, 2026, 2027 and 2028. Mr. Lansing must be employed on the vesting dates of June 5th of 2026, 2027 and 2028 in order to receive any earned MSUs that were scheduled to vest on such date. The values included in the table for the MSUs are at target value, representing the probable outcome of the performance conditions as calculated at the time of grant. The maximum value of the award on the grant date, assuming the highest level of performance conditions achieved, would be $42,580,149 vs. target of $21,290,074.

 

(3) 

The amounts in the “Option Awards” column represent the grant date fair value, computed in accordance with FASB ASC Topic 718, of the special performance-based retention and leadership continuity award of non-qualified stock options granted to Mr. Lansing on June 5, 2023. None of the named executive officers elected to receive stock options in exchange for a portion of his or her RSU awards in any of the years shown. For information on the assumptions used to calculate the value of the stock options, refer to Note 15 of the Company’s Consolidated Financial Statements in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC.

 

(4) 

Represents amounts paid in the first quarter of fiscal 2024 based on performance during fiscal 2023 under our Management Incentive Plan.

 

(5) 

The amounts shown for fiscal 2023 are detailed in the supplemental table below entitled “All Other Compensation Table.”

 

(6) 

Effective January 13, 2023, Mr. Weber was named interim Vice President and Chief Financial Officer, and on May 15, 2023, Mr. Weber was promoted to Executive Vice President and Chief Financial Officer. As permitted by SEC rules, because fiscal 2023 was Mr. Weber’s first year as a named executive officer, the compensation paid to him prior to fiscal 2023 is not included in this table.

 

(7) 

Effective November 2, 2023, Ms. Covert transitioned from being an executive officer and her employment terminated effective December 31, 2023.

 

(8) 

As permitted by SEC rules, because fiscal 2022 was Mr. Scadina’s first year as a named executive officer, the compensation paid to him prior to fiscal 2022 is not included in this table.

 

(9) 

Effective January 13, 2023, Mr. McLaughlin voluntarily terminated his employment as Executive Vice President and Chief Financial Officer.

 

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All Other Compensation Table

 

Elements of All Other Compensation

   William
Lansing
     Steven
Weber
     Stephanie
Covert
     Mark
Scadina
     James
Wehmann
     Michael
McLaughlin
 

401(k) Match($)(1)

     13,200        12,761        10,212        12,200        12,210        7,585  

Life Insurance Premium($)(2)

     370        196        246        196        246         

Spousal Travel($)(3)

     25,259        7,839        24,365        23,811                

Tax Gross Up($)(4)

     12,201        3,301        9,376        12,724                

Other($)(5)

     5,600                                     

Total($)

     56,630        24,098        44,200        48,931        12,456        7,585  

 

(1) 

Represents the aggregate value of the Company’s cash contribution under the Fair Isaac Corporation 401(k) Plan during fiscal 2023.

 

(2) 

Represents the aggregate incremental cost for the named executive officer’s basic life insurance premium, which is offered to all employees at one times current salary.

 

(3) 

Represents amounts spent on commercial aircraft of the named executive officers’ spouses who were expected by the Company to attend certain Company events.

 

(4) 

Represents gross-up payments to offset imputed income for the cost of spousal travel. Company policy allows gross-ups only for required spousal travel and Company-paid relocation costs, when applicable.

 

(5) 

Represents tax preparation fees incurred by Mr. Lansing, as provided in his Letter Agreement.

 

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GRANTS OF PLAN-BASED AWARDS FOR FISCAL 2023

The following table summarizes grants of plan-based compensation awards made during fiscal 2023 to our named executive officers.

 

                                              All Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
    All Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/SH)
    Grant
Date Fair
Value of
Stock
and
Option
Awards
($)(9)
 

Name

  Grant
Date
    Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
    Estimated Future Payouts
Under Equity Incentive
Plan Awards
 
  Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 

William Lansing

      0       750,000       1,875,000                
    12/09/2022             0 (2)      12,585 (2)      25,170 (2)            12,215,379  
    12/09/2022             0 (3)      12,585 (3)      25,170 (3)            7,745,438  
    12/09/2022                   12,585 (4)          7,745,438  
    06/05/2023             0 (3)      19,576 (5)      39,152 (5)            21,290,074  
    06/05/2023                     52,082 (6)      791.60       15,347,003  

Steven Weber

      0       200,000       500,000                
    12/09/2022                   599 (4)           368,655  
    12/09/2022                   935 (7)           575,446  
    01/09/2023                   1,684 (4)          1,000,077  
    05/15/2023                   2,824 (8)          2,135,339  

Stephanie Covert

      0       250,000       625,000                
    12/09/2022             0 (2)      3,739 (2)      7,478 (2)            3,629,186  
    12/09/2022             0 (3)      3,739 (3)      7,478 (3)            2,301,168  
    12/09/2022                   3,739 (4)          2,301,168  

Mark Scadina

      0       200,000       500,000                
    12/09/2022             0 (2)      2,493 (2)      4,986 (2)            2,419,781  
    12/09/2022             0 (3)      2,493 (3)      4,986 (3)            1,534,317  
    12/09/2022                   2,493 (4)          1,534,317  

James Wehmann

      0       250,000       625,000                
    12/09/2022             0 (2)      3,739 (2)      7,478 (2)            3,629,186  
    12/09/2022             0 (3)      3,739 (3)      7,478 (3)            2,301,168  
    12/09/2022                   3,739 (4)          2,301,168  

Michael McLaughlin(10)

      0       200,000       500,000                
    12/09/2022             0 (2)      3,116 (2)      6,232 (2)            3,024,483  
    12/09/2022             0 (3)      3,116 (3)      6,232 (3)            1,917,742  
    12/09/2022                   3,116 (4)          1,917,742  

 

(1) 

The amounts shown in these columns represent the estimated threshold (or minimum), target, and maximum possible cash incentive awards for each of the named executive officers. Under our Management Incentive Plan, Mr. Lansing’s target amount is equal to 100% of his base salary and the target amount for each of the other named executive officers is equal to 50% of their base salary. The maximum amount in each case equals 2.5 times the target amount, which would result if the Company Performance Factor was 125% and the Participant Performance Factor was 200%. There is no threshold (or minimum) level of awards under the Management Incentive Plan. Additional detail regarding the determination of cash incentives to executives for fiscal 2023 is included above under “Compensation Discussion and Analysis.” Actual payments are set forth in the “Summary Compensation Table” above.

 

(2) 

Amounts shown reflect MSUs that were granted under our 2021 LTIP and are subject to the achievement of specific performance goals related to the Company’s total shareholder return relative to the Russell 3000 Index over performance periods of one, two and three years, approved by the LDCC, with no threshold (or minimum) levels of performance. On December 4, 2023, the LDCC certified that for all named executive officers, 200% of the target awards for the first performance period were earned for that tranche of awards eligible to vest on December 9, 2023. The remaining portion of the target awards may be earned subject to achievement of specific performance goals for the two- and three-year performance periods and then

 

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subsequently vest subject to the named executive officer’s continued Service as a Service Provider (as defined in the 2021 LTIP) through December 9, 2024 and December 9, 2025, respectively. These awards do not pay dividend equivalents.

 

(3) 

Amounts shown reflect PSUs that were granted under our 2021 LTIP and were subject to the achievement of specific performance goals related to adjusted revenue and adjusted EBITDA metrics approved by the LDCC, with no threshold (or minimum) levels of performance. For all named executive officers, 200% of the target awards were earned, one-third of the earned units vested on December 9, 2023, and the remaining two-thirds are scheduled to vest in two annual installments beginning December 9, 2024 (subject to the named executive officer’s continued Service as a Service Provider (as defined in the 2021 LTIP)). These awards do not pay dividend equivalents.

 

(4) 

Amounts shown reflects RSUs that were granted under our 2021 LTIP which vest in four equal increments on the first four anniversaries of the grant date subject to the named executive officer’s continued Service as a Service Provider (as defined in the 2021 LTIP). These awards do not pay dividend equivalents.

 

(5) 

Amounts shown reflect MSUs that were granted as a special performance-based retention and leadership continuity award to Mr. Lansing under our 2021 LTIP and are subject to the achievement of specific performance goals related to the Company’s total shareholder return relative to the Russell 3000 Index over performance periods of three, four and five years, approved by the LDCC, with no threshold (or minimum) levels of performance. The portion of the target awards may be earned subject to achievement of specific performance goals for the three-, four-, and five-year performance periods and then subsequently vest subject to Mr. Lansing’s continued Service as a Service Provider (as defined in the 2021 LTIP) through June 5, 2026, June 5, 2027, and June 5, 2028, respectively. This award does not pay dividend equivalents and will not continue to vest if Mr. Lansing retires prior to June 5, 2028. Shares of common stock that Mr. Lansing receives upon settlement of this earned MSU grant, other than shares that are sold or withheld satisfy tax obligations, must be retained by Mr. Lansing until June 5, 2028.

 

(6) 

Amount shown reflects non-qualified stock options that were granted as a special performance-based retention and leadership continuity award to Mr. Lansing under our 2021 LTIP and will vest and become exercisable as follows: three-fifths (3/5ths) of the options shall vest on the third anniversary of the grant date; one-fifth (1/5th) of the options shall vest on the fourth anniversary of the grant date; and the remaining one-fifth (1/5th) of the options shall vest on the fifth anniversary of the grant date. This grant will not be subject to acceleration of vesting if Mr. Lansing retires prior to June 5, 2028. Shares of common stock that Mr. Lansing receives from his exercise of the options, other than shares that are sold or withheld to pay the exercise price for the options or to satisfy tax obligations, must be retained by Mr. Lansing until June 5, 2028.

 

(7) 

Amount reflects RSUs that were granted under our 2021 LTIP to Mr. Weber which vest on the third anniversary of the grant date subject to his continued Service as a Service Provider (as defined in the 2021 LTIP). These awards do not pay dividend equivalents.

 

(8) 

Amount reflects RSUs that were granted under our 2021 LTIP to Mr. Weber upon his promotion to Chief Financial Officer which vest in four equal increments on the first four anniversaries of the grant date subject to his continued Service as a Service Provider (as defined in the 2021 LTIP). These awards do not pay dividend equivalents.

 

(9) 

Represents the grant date fair value of each MSU, PSU, RSU, or stock option, as applicable, computed in accordance with FASB ASC Topic 718. The values included in the table for the MSU and PSUs are at target value, representing the probable outcome of the performance conditions as calculated at the time of grant.

 

(10) 

Upon Mr. McLaughlin’s resignation from the Company, he forfeited his potential award under the Management Incentive Plan for fiscal 2023, as well as all of his outstanding equity awards, including those shown in this table.

 

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Table of Contents

Letter Agreements

The Company is or was a party to Letter Agreements with each of the named executive officers. The material provisions of such Letter Agreements related to the executive officers’ compensation arrangements are described below.

William Lansing

For each full fiscal year of the Company during the term of his Letter Agreement, Mr. Lansing will be eligible to receive a cash incentive award with a target value equal to 100% of his annual base salary at the rate in effect at the end of such fiscal year, pursuant to the Company’s Management Incentive Plan and the terms and conditions established by the LDCC from time to time.

If Mr. Lansing’s employment is terminated by the Company without Cause or if he voluntarily resigns for Good Reason (both as defined below) prior to the expiration of the term of the Letter Agreement, Mr. Lansing will be entitled to the following severance pay and benefits pursuant to the Letter Agreement: (i) a cash payment in an amount equal to two times the sum of (a) his annual base salary in effect on the last day of his employment (but in no event less than $675,000), plus (b) the annual cash incentive payment last paid to him before the termination of his employment, such cash payment to be made in a lump sum on the 70th day following Mr. Lansing’s separation from service, and (ii) continuation of certain benefits pursuant to COBRA for 18 months. Mr. Lansing’s receipt of severance pay and benefits would be conditioned on his execution of a release of claims against the Company, his compliance with the terms of any agreements in effect between him and the Company, his cooperation in the transition of his duties, and his agreement not to disparage the Company.

Mr. Lansing’s Letter Agreement also provides that the Company will reimburse him annually up to $25,000 related to financial planning and/or personal income tax preparation and accounting services.

Other Named Executive Officers (Other than Stephanie Covert)

For each full fiscal year of the Company during the term of each executive officer’s Letter Agreement, the executive officer will be eligible to receive a cash incentive award with a target equal to 50% of his or her annual base salary at the rate in effect at the end of such fiscal year, pursuant to the Company’s Management Incentive Plan and the terms and conditions established by the LDCC from time to time.

If an executive officer’s employment is terminated by the Company without Cause or if he or she voluntarily resigns for Good Reason (both as defined below) prior to the expiration of the term of his or her Letter Agreement, such executive officer will be entitled to the following severance pay and benefits pursuant to the Letter Agreement: (1) a cash payment in an amount equal to one times the sum of (a) his or her annual base salary in effect on the last day of employment, plus (b) the annual cash incentive payment last paid to him or her before the termination of employment, such cash payment to be made in a lump sum on the 70th day following his or her separation from service (subject to certain exceptions), and (2) continuation of certain benefits pursuant to COBRA for 12 months. The executive officer’s receipt of severance pay and benefits would be conditioned on his or her release of claims against the Company, compliance with the terms of any agreements in effect between such executive officer and the Company, his or her cooperation in the transition of his or her duties, and his or her agreement not to disparage the Company.

Mr. McLaughlin’s resignation, effective January 13, 2023, did not entitle him to any pay or benefits under his Letter Agreement, which also terminated on that date.

Stephanie Covert

In connection with Ms. Covert’s transition to her role as Vice President, Software Technology, a non-executive officer position, the Company and Ms. Covert entered into the new Covert Letter Agreement with a term of November 2, 2023 through December 31, 2023, which replaced her previous letter agreement with us. Pursuant to the Covert Letter Agreement, Ms. Covert’s annual base salary remained unchanged from her

 

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previous compensation, and she remained eligible to participate in our MIP for fiscal year 2023, with her award being $375,000, less applicable withholdings. Ms. Covert is not eligible to participate in the MIP for fiscal year 2024 or for any future fiscal year. Additionally, because Ms. Covert remained employed with us through December 10, 2023, the number of RSUs, MSUs and PSUs previously granted to her and scheduled to vest on or prior to December 10, 2023 vested subject to the terms of the applicable plans and respective grant agreements under which such RSUs, MSUs and PSUs were granted.

The Covert Letter Agreement also provided that upon the termination of Ms. Covert’s employment as a result of the expiration of the term on December 31, 2023, she would be entitled to the following pay and benefits: (i) a lump sum severance payment equal to three months of her final base salary, or $125,000, (ii) outplacement services for six months provided by the Company’s preferred provider at a cost not to exceed $3,350, and (iii) if elected, continuation of certain benefits pursuant to COBRA for 12 months, the cost of which is expected to total $16,800 over that time period. Such amounts were paid and provided following Ms. Covert’s termination on December 31, 2023, as set forth under “Potential Payments upon Termination or Change in Control” below.”

Definitions

In all of the Letter Agreements, “Cause” generally means a good faith determination by the Company of one or more of the following: (i) commission by the executive officer of a felony, (ii) an intentional act of fraud or material dishonesty connected with the executive officer’s employment with the Company or otherwise likely to cause the Company material harm, (iii) the executive officer’s willful failure or refusal to perform in all material respects his or her duties, or (iv) a material breach by the executive officer of the Company’s policies or codes of conduct or of another written agreement between the Company and the executive officer.

In Mr. Lansing’s Letter Agreement, “Good Reason” generally means that one of the following conditions occurs without his consent and the Company does not cure the condition after receiving notice of it: (i) a material diminution in Mr. Lansing’s status or position as Chief Executive Officer, (ii) a requirement that Mr. Lansing relocate to an office located more than 50 miles away from his current office location, (iii) a material breach by the Company of the terms of the Letter Agreement, or (iv) a failure by the Company to obtain agreement from any successor to assume the Letter Agreement.

In the other named executive officers’ Letter Agreements, “Good Reason” generally means that one of the following conditions occurs without the executive officer’s consent and the Company does not cure the condition after receiving notice of it: (i) a material reduction in the executive officer’s base salary, (ii) a material reduction in the executive officer’s annual cash incentive target expressed as a percentage of base salary, (iii) a requirement that the executive officer relocate to an office located more than 50 miles away from his or her current office location, (iv) a material breach by the Company of the terms of the Letter Agreement, or (v) a failure by the Company to obtain agreement from any successor to assume the Letter Agreement.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL 2023 YEAR END

The following table sets forth certain information with respect to outstanding equity awards held by our named executive officers at September 30, 2023. Mr. McLaughlin forfeited all outstanding equity awards upon his voluntary resignation effective January 13, 2023, and therefore did not hold any outstanding equity awards at September 30, 2023.

 

Name

                                      Stock Awards  
 

 

Option Awards

    Grant
Date
    Number
of
Shares
or
Units
of Stock
That
Have
Not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)(1)
 
  Grant
Date
    Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
    Equity
Incentive
Plan Awards:
Number of
Securities

Underlying
Unexercised
Unearned
Options
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
 

William Lansing

    12/10/2018       54,095                   185.05       12/09/2025       12/08/2019                          
    12/10/2019       7,337       2,445 (2)            354.18       12/09/2026       12/10/2019       1,918 (3)      1,665,841              
                                        12/10/2020       5,098 (3)      4,427,766              
                                        12/10/2020       6,798 (5)      5,904,267       16,791 (8)      14,583,487  
                                        12/10/2021       9,362 (3)      8,131,178              
                                        12/10/2021       16,253 (6)      14,116,218       16,644 (9)      14,455,813  
                                        12/09/2022       12,585 (3)      10,930,450              
                                        12/09/2022       25,170 (7)      21,860,900       6,292 (10)      5,464,791  
    06/05/2023             52,082 (11)            791.60       06/04/2030       06/05/2023                   9,788 (12)      8,501,172  

Steven Weber

    12/10/2018       1,327                   185.05       12/09/2025                                
                                        12/10/2019       219 (3)       190,208              
                                        12/10/2020       328 (3)       284,878              
                                        12/10/2021       602 (3)       522,855              
                                        12/09/2022       599 (3)       520,249              
                                        12/09/2022       935 (4)       812,076              
                                        01/09/2023       1,684 (3)      1,462,605              
                                        05/15/2023       2,824 (3)      2,452,729              

Stephanie Covert

                                        12/10/2019       438 (3)       380,416              
                                        08/25/2020       1,181 (3)      1,025,734              
                                        12/10/2020       1,456 (3)      1,264,580              
                                        12/10/2020       1,942 (5)      1,686,685       4,797 (8)      4,166,338  
                                        12/10/2021       4,012 (3)      3,484,542              
                                        12/10/2021       6,964 (6)      6,048,443       7,132 (9)      6,194,356  
                                        12/09/2022       3,739 (3)      3,247,434              
                                        12/09/2022       7,478 (7)      6,494,867       1,869 (10)      1,623,283  

Mark Scadina

    12/10/2018       7,367                   185.05       12/09/2025       12/10/2018                          
                                        12/10/2019       670 (3)       581,915              
                                        12/10/2020       1,456 (3)      1,264,580              
                                        12/10/2020       1,942 (5)      1,686,685       4,797 (8)      4,166,338  
                                        12/10/2021       2,675 (3)      2,323,318              
                                        12/10/2021       4,644 (6)      4,033,453       4,756 (9)      4,130,729  
                                        12/09/2022       2,493 (3)      2,165,245              
                                        12/09/2022       4,986 (7)      4,330,491       1,246 (10)      1,082,188  

James Wehmann

                                        12/10/2019       804 (3)       698,298              
                                        12/10/2020       2,184 (3)      1,896,870              
                                        12/10/2020       2,914 (5)      2,530,896       7,197 (8)      6,250,810  
                                        12/10/2021       4,012 (3)      3,484,542              
                                        12/10/2021       6,964 (6)      6,048,443       7,132 (9)      6,194,356  
                                        12/09/2022       3,739 (3)      3,247,434              
                                        12/09/2022       7,478 (7)