Cboe Global Markets Inc
For the period ended May 16, 2024. Filed Apr 4, 2024.
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What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
May 16, 2024 · Filed Apr 4, 2024
Contents
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between compensation actually paid (as determined in accordance with Item 402(v)) to our principal executive officer (“PEO”) and average compensation actually paid to our non-PEO NEOs and certain financial performance of the Company. This information is a reasonable estimate calculated in a manner consistent with Item 402(v) of Regulation S-K and there can be no assurances that some of the amounts reported will ever be realized. For information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to “Executive Compensation–Compensation Discussion and Analysis.”
| · · · · · · · · · · Value Of Initial Fixed $100Investment Based On: · · | ||||||||||||||
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| Year · SummaryCompensationTable TotalFor PEO(Tomczyk) (1) · CompensationActuallyPaid To PEO(Tomczyk) (2) · SummaryCompensationTable TotalFor PEO(Tilly) (1) · CompensationActuallyPaid To PEO(Tilly) (2) · AverageSummaryCompensationTable Total ForNon-PEO NEOs(3) · AverageCompensationActuallyPaid To Non-PEO NEOs (4) · TotalShareholderReturn (5) · PeerGroupTotalShareholderReturn (6) · Net Income(7)(in millions) · AdjustedEBITDA (8)(in millions) | ||||||||||||||
| 2023 | | $8,366,510 | | $9,420,432 | $9,403,311 | $6,889,839 | $3,255,931 | $5,156,162 | $158.37 | $137.61 | $758 | $1,245 | ||
| 2022 | | | — | | | — | $11,915,247 | $14,520,578 | $4,096,611 | $4,865,964 | $109.69 | $112.11 | $234 | $1,136 |
| 2021 | | | — | | | — | $10,646,558 | $16,085,506 | $3,188,615 | $4,608,036 | $112.12 | $142.25 | $527 | $987 |
| 2020 | | | — | | | — | $9,062,411 | $4,706,224 | $2,600,752 | $1,566,348 | $78.83 | $109.59 | $467 | $875 |
| (1) | The dollar amounts reported in this column are the amounts of total compensation reported for Messrs. Tomczyk or Tilly in connection with their service as CEO of the Company during each corresponding year, as applicable, in the “Total” column of the SCT. Refer to “Executive Compensation – Summary Compensation—Summary Compensation Table.” |
| (2) | The dollar amounts reported in this column represent the amount of “compensation actually paid” to Messrs. Tomczyk or Tilly, respectively, for the years during which they served as CEO, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the actual amount of compensation earned by or paid to either individual during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to each individual’s total compensation as reported in the SCT for each year to determine Messrs. Tomczyk’s and Tilly’s respective compensation actually paid for that year as computed pursuant to Item 402(v). |
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|---|---|---|
| Fredric J. Tomczyk | | Year |
| Amount Deducted or Added (1) · 2023 | ||
| Subtract stock and option awards reported in SCT | | $-7,150,104 |
| Add fair value of stock and option awards granted in covered fiscal years, valued at year-end, that are outstanding and unvested as of the end of the covered fiscal years | | $8,155,728 |
| Add/Subtract stock and option awards granted in prior fiscal years that were unvested at the end of covered fiscal years, the change in fair value from the end of prior fiscal years to end of covered fiscal years | | $— |
| Add stock and option awards that were granted and vested in the same year, the fair value as of the vesting date (2) | | $— |
| Add/Subtract stock and option awards granted in prior fiscal years that vested during covered fiscal years, the changes in fair value from the end of prior covered fiscal years to vesting dates | | $19,273 |
| Add dividends paid on unvested shares/units and stock options in the covered fiscal year | | $29,025 |
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| Cboe Global Markets 2024 Proxy Statement | 89 |
| · · · · · · · · · | |||||
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| Edward T. Tilly · · Year | |||||
| Amount Deducted or Added (1) · · 2023 · 2022 · 2021 · · 2020 | |||||
| Subtract stock and option awards reported in SCT | | $-7,398,497 | $-6,193,018 | $-5,348,882 | $-4,700,084 |
| Add fair value of stock and option awards granted in covered fiscal years, valued at year-end, that are outstanding and unvested as of the end of the covered fiscal years | | $2,641,722 | $6,681,376 | $8,067,733 | $3,089,476 |
| Add/Subtract stock and option awards granted in prior fiscal years that were unvested at the end of covered fiscal years, the change in fair value from the end of prior fiscal years to end of covered fiscal years | | $5,677,007 | $2,325,770 | $2,563,384 | $-3,062,317 |
| Add stock and option awards that were granted and vested in the same year, the fair value as of the vesting date (2) | | $168,750 | $42,091 | $51,826 | $130,740 |
| Add/Subtract stock and option awards granted in prior fiscal years that vested during covered fiscal years, the changes in fair value from the end of prior covered fiscal years to vesting dates | | $122,708 | $-345,779 | $17,833 | $125,425 |
| For awards granted in prior fiscal years that were forfeited during covered fiscal years, subtract the fair value of forfeited awards determined at end of prior fiscal years | | $-3,814,963 | $— | $— | $— |
| Add dividends paid on unvested shares/units and stock options in the covered fiscal year | | $89,801 | $94,891 | $87,053 | $60,573 |
| (1) | The assumptions used to calculate the values for each RSU and PSU award included in the calculation of “compensation actually paid” did not differ materially from those used to calculate the grant date fair value for such awards. For each PSU-TSR, we used a Monte Carlo model and made appropriate adjustments to the grant date assumptions to reflect changes in the stock price volatility, actual relative TSR and stock price performance, and risk-free interest rates as of the relevant measurement date. For each PSU-EPS, we based the valuation on the probable outcome of earnings per share during the awards’ performance periods as of the last day of the fiscal year. |
| (2) | The dollar amounts reported in this row include dividend equivalent units awarded from the reinvestment of dividend equivalents on PSUs. The dividend equivalent units are subject to the same terms regarding vesting, forfeiture, and distribution as the applicable PSUs. |
| (3) | The dollar amounts reported in this column represent the average of the amounts reported for the Company’s NEOs as a group (excluding Messrs. Tomczyk and Tilly) in the “Total” column of the SCT in each applicable year. The names of each of the NEOs (excluding Messrs. Tomczyk and Tilly) included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2023, Messrs. Schell, Howson, and Isaacson and Mses. Griebenow and Clay; (ii) for 2022, Messrs. Schell, Howson, Isaacson, and Sexton; (iii) for 2021, Messrs. Schell, Howson, Isaacson, and Sexton; and (iv) for 2020, Messrs. Schell, Howson, Isaacson, and Bryan Harkins. |
| (4) | The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the NEOs as a group (excluding Messrs. Tomczyk and Tilly), as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group (excluding Messrs. Tomczyk and Tilly) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the NEOs as a group (excluding Messrs. Tomczyk and Tilly) for |
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| 90 | Cboe Global Markets 2024 Proxy Statement |
each year to determine the compensation actually paid as computed pursuant to Item 402(v), using the same methodology described above in Note 2. Numbers may not foot due to rounding.
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| Sd · · · · · · · · · | |||||
| · · Year | |||||
| Average Amount Deducted or Added (1) · · 2023 · 2022 · 2021 · · 2020 | |||||
| Subtract average stock and option awards reported in SCT | | $-1,953,534 | $-2,141,846 | $-1,479,798 | $-1,137,627 |
| Add average fair value of stock and option awards granted in covered fiscal years, valued at year-end, that are outstanding and unvested as of the end of the covered fiscal years | | $2,474,877 | $2,341,864 | $2,231,984 | $747,786 |
| Add/Subtract average stock and option awards granted in prior fiscal years that were unvested at the end of covered fiscal years, the change in fair value from the end of prior fiscal years to end of covered fiscal years | | $1,673,107 | $626,640 | $629,577 | $-589,383 |
| Add average for stock and option awards that were granted and vested in the same year, the fair value as of the vesting date (2) | | $28,066 | $7,703 | $6,952 | $5,442 |
| Add/Subtract average stock and option awards granted in prior fiscal years that vested during covered fiscal years, the changes in fair value from the end of prior covered fiscal years to vesting dates | | $27,534 | $-91,526 | $6,552 | $-76,806 |
| For awards granted in prior fiscal years that were forfeited during covered fiscal years, subtract the fair value of forfeited awards determined at end of prior fiscal years | | $-376,095 | $— | $— | $— |
| Add average dividends paid on unvested shares/units and stock options in the covered fiscal year | | $26,276 | $26,518 | $24,153 | $16,185 |
| (1) | The assumptions used to calculate the values for each RSU and PSU award included in the calculation of “compensation actually paid” did not differ materially from those used to calculate the grant date fair value for such awards. For each PSU-TSR, we used a Monte Carlo model and made appropriate adjustments to the grant date assumptions to reflect changes in the stock price volatility, actual relative TSR and stock price performance, and risk-free interest rates as of the relevant measurement date. For each PSU-EPS, we based the valuation on the probable outcome of earnings per share during the awards’ performance periods as of the last day of the fiscal year. |
| (2) | The dollar amounts reported in this row include dividend equivalent units awarded from the reinvestment of dividend equivalents on PSUs. The dividend equivalent units are subject to the same terms regarding vesting, forfeiture, and distribution as the applicable PSUs. |
| (5) | The cumulative TSR amounts reported in this column are calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period (here, December 31, 2019). |
| (6) | The cumulative peer group TSR amounts reported in this column represent the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the customized peer group included in our Annual Report on Form 10-K that includes CME Group Inc., Intercontinental Exchange Inc., and Nasdaq, Inc. |
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| Cboe Global Markets 2024 Proxy Statement | 91 |
| (7) | The dollar amounts reported in this column represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. |
| (8) | The dollar amounts reported in this column represent adjusted EBITDA, which is a non-GAAP measure used by the Company and reconciliations to GAAP measures are provided in Appendix A. While the Company uses numerous financial and nonfinancial performance measures for the purpose of evaluating performance for the Company’s compensation programs, the Company has determined that adjusted EBITDA is the financial performance measure that, in the Company’s reasonable assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to company performance. |
Financial Performance Measures
As described in greater detail in “Executive Compensation–Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for performance philosophy. The most important financial performance measures used by the Company, listed in alphabetical order, to link compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance were as follows:
Financial Performance Measures
Adjusted EBITDA
Net Revenue
3-Year Adjusted EPS
3-Year Relative TSR Compared to S&P 500
Analysis of the Information Presented in the Pay versus Performance Table
As described in more detail in the section “Executive Compensation–Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. Approximately 25% of the value of total compensation awarded to the NEOs consists of amounts determined under the Company short-term incentive compensation program and approximately 60% of the value of total compensation awarded to the NEOs is long-term incentive compensation generally comprised of equity awards, including RSUs and/or PSUs.
While the Company utilizes several performance measures to align executive compensation with Company performance, all of those Company measures are not presented in the Pay versus Performance table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with compensation that is actually paid (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year.
Description of Relationship Between Compensation Actually Paid to our NEOs and Each Financial Metric Presented in the Pay versus Performance Table
In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table.
Compensation Actually Paid and Cumulative TSR
As demonstrated by the following graph, the amount of compensation actually paid to Messrs. Tomczyk and Tilly and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Messrs. Tomczyk and Tilly) is generally aligned with the Company’s cumulative TSR over the 4 years presented in the table. The alignment of compensation actually paid with the Company’s
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| 92 | Cboe Global Markets 2024 Proxy Statement |
cumulative TSR over the period presented is because a significant portion of the compensation actually paid to Messrs. Tomczyk and Tilly and to the other NEOs is comprised of equity awards. As described in more detail in the section “Executive Compensation—Compensation Discussion and Analysis,” approximately 60% of the value of total compensation awarded to the NEOs is comprised of equity awards, including RSUs and/or PSUs.
Compensation Actually Paid and Net Income
As demonstrated by the following table, the amount of compensation actually paid to Messrs. Tomczyk and Tilly and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Messrs. Tomczyk and Tilly) is generally aligned with the Company’s net income. While the Company does not use net income as a performance measure in the overall executive compensation program, the measure of net income is generally correlated with the measures net revenue, adjusted EBITDA, and adjusted EPS, which the Company does use for setting goals in the Company’s short-term incentive compensation program and any PSUs that are awarded to the NEOs. In 2022, net income was negatively impacted due to the impairment of goodwill recognized in the Digital reporting unit. This recognized goodwill impairment charge on the Cboe Digital asset, formerly known as Eris Digital Holdings, LLC, which was acquired in 2022, was adjusted out for purposes of our adjusted EBITDA performance to allow for a more comparable measure of actual performance against our pre-established adjusted EBITDA goal that was based on the 2022 annual budget that was developed prior to, and does not include, the impairment. The Compensation Committee and the Board of Directors applied negative discretion to reduce applicable individual performance payouts due to this recognized goodwill impairment charge, which contributed to lower compensation actually paid with respect to 2022. As described in more detail in the section “Executive Compensation—Compensation Discussion and Analysis,” approximately 25% of the value of total
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| Cboe Global Markets 2024 Proxy Statement | 93 |
compensation awarded to the NEOs consists of amounts determined under the Company short-term incentive compensation program.
Compensation Actually Paid and Adjusted EBITDA
As demonstrated by the following graph, the amount of compensation actually paid to Messrs. Tomczyk and Tilly and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Messrs. Tomczyk and Tilly) is generally aligned with the Company’s adjusted EBITDA over the 4 years presented in the table. As described above, the Company has determined that adjusted EBITDA is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance. The Company utilizes adjusted EBITDA when setting goals in the Company’s short-term incentive compensation program. As described in more detail in the section “Executive Compensation—Compensation Discussion and Analysis,” approximately 25% of the value of total compensation awarded to the NEOs consists of amounts determined under the Company short-term
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| 94 | Cboe Global Markets 2024 Proxy Statement |
incentive compensation program and approximately 60% of the value of total compensation awarded to the NEOs is comprised of equity awards, including RSUs and/or PSUs.
Cumulative TSR of the Company and Cumulative TSR of the Peer Group
As demonstrated by the following graph, the Company’s cumulative TSR over the 4 year period presented in the table was 58%, while the cumulative TSR of the peer group presented for this purpose was 38% over the 4 years presented in the table. The Company’s cumulative TSR underperformed the peer group in 2020, generally matched the performance of the peer group in 2021, outperformed the peer group in 2022, and outperformed the peer group in 2023, representing the Company’s increased financial performance and execution of its growth strategy as compared to the companies comprising the peer group. For more information regarding the Company’s performance and the companies that the Compensation Committee considers when determining compensation, refer to “Executive Compensation—Compensation Discussion and Analysis.”
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| Cboe Global Markets 2024 Proxy Statement | 95 |
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