Adtalem Global Education Inc.
|
(Name of Registrant as Specified In Its Charter)
|
|
|
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
|
☒ |
No fee required.
|
|
|
|
|
☐ |
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
|
|
|
|
|
|
1)
|
Title of each class of securities to which transaction applies:
|
|
|
|
|
2)
|
Aggregate number of securities to which transaction applies:
|
|
|
|
|
3)
|
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
|
|
|
|
|
4)
|
Proposed maximum aggregate value of transaction:
|
|
|
|
|
5)
|
Total fee paid:
|
|
|
|
☐ |
Fee paid previously with preliminary materials.
|
|
|
|
|
☐ |
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
|
|
|
|
|
|
1)
|
Amount Previously Paid:
|
|
|
|
|
2)
|
Form, Schedule or Registration Statement No.:
|
|
|
|
|
3)
|
Filing Party:
|
|
|
|
|
4)
|
Date Filed:
|
|
|
Issues Raised in the
ISS Report
|
Board Rationale for Executive Compensation
|
|
The CEO received a front-loaded equity award
|
ISS concludes that “investors place scrutiny on front-loaded awards given that they effectively lock in award magnitude over several years, limiting the Board’s ability to
meaningfully adjust future grant levels or performance criteria in the event of unforeseen events or changes in either performance or strategic focus.”
|
|
However, the Compensation Committee explicitly addressed this concern by:
|
||
◾ |
excluding time-vested restricted stock units from the grant, making it fully performance based;
|
|
◾ |
extending the vesting schedule beyond what had previously existed such that no portion of the award vested before year three – increasing the retention
value of the award and encouraging multi-year stretch goal setting; and
|
|
◾ |
committing to not award any equity grant to the CEO for fiscal year 2019.
|
|
While the ISS quantitative and qualitative tests evaluate CEO compensation in the context of a single fiscal year – to view Ms. Wardell’s compensation
in a single fiscal year under these circumstances, values form over substance. We believe it is more appropriate to evaluate her compensation in the context of, and including, the FY2019 cycle, in which there will be no equity grant (this
decision was memorialized in our proxy statement). Viewed on a normalized basis over the two-year cycle, Ms. Wardell’s compensation falls well within alignment parameters articulated by ISS. For example, with respect to two of the four ISS
parameters, Ms. Wardell’s compensation is nearly perfectly aligned with the parameters with or without normalization.
|
||
An illustration of the application of the ISS tests to a normalized view of Ms. Wardell’s compensation is set forth below as Exhibit A.
|
||
A portion of the performance shares may be earned based on either annual or multi-year performance
|
The performance goals in each year and in total are stretch goals and aligned with our strategic plan.
|
|
We set one year as well as three year average goals. We believe this feature drives continued focus on performance through the three year period, even
if one year of performance deteriorates.
|
||
The performance shares granted have a three year cliff vesting requirement. No portion of these awards will vest or be delivered to the CEO until the
end of the three year period.
|
◾ |
the pending divestitures of DeVry University and Carrington College, each of which are expected
to be completed in mid-year fiscal 2019;
|
◾ |
the resolution of the Federal Trade Commission and Department of Education matters; and
|
◾ |
significantly improved financial performance and total shareholder return (exceeding peers on a 1 and 3 year basis; during which Ms. Wardell has been
CEO) with a three-fold increase in our share price over the last 2.5 years
|
● |
Two of the four quantitative measures ISS uses to measure pay-for-performance connection [Relative Degree and Alignment (“RDA”) and Pay TSR
Alignment (“PTA”)] even without normalizing the CEO’s FY2018 LTI grant are at the lowest possible concern.
|
● |
The two remaining quantitative measures (Multiple of Median and Financial Performance Assessment) are reduced to Cautionary Low levels and more
moderate levels respectively when the LTI grant is normalized.
|
● |
Relative Degree of Alignment (“RDA”): which measures
three-year CEO pay (WITHOUT normalizing FY2018 CEO front-loaded grant) as compared to three-year Total Shareholder Return performance is
almost perfectly in sync. This suggests a strong pay-for-performance connection over three years.
|
● |
Multiple of Median (“MOM”): FY2018 CEO pay WITHOUT normalizing the front-loaded grant is 3.55 times higher than the peer group median which, according to ISS, raises a high concern. If
normalized, the CEO front-loaded grant for FY2018 CEO pay is 2.11 times the peer group median which brings the rating to a “Cautionary Low”.
|
● |
Absolute Pay-TSR Alignment (“PTA”): This rating,
which compares CEO pay and TSR performance trending over a five-year period, WITHOUT normalizing LTI, is rated the lowest possible concern
level. This shows a strong pay for performance alignment.
|
● |
Financial Performance Assessment (“FPA”): Adtalem’s three-year
financial performance across EBITDA Growth, ROIC, ROA and ROE ranks at the 25th percentile as compared to the ISS peer group. WITHOUT normalizing the FY2018 LTI grant. If normalized the FY2018 LTI grant results in Adtalem’s three-year average CEO pay going down to below the 70th percentile. Although at elevated concern, the alignment is better.
|
● |
In addition, ISS cites that CEO pay increased 80% year over year from FY2017 to FY2018 – that is without normalizing the LTI. As calculated and
disclosed on page 44 of the proxy statement, we recommend normalizing the LTI over two years (FY2018 and FY2019). Viewed in this manner, the year over year increase is 9.7%
|