SCHEDULE 14A
INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §
240.14a-12
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Strayer Education, Inc.
(Name
of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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¨
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which
transaction applies:
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(2)
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Aggregate number of securities to which
transaction applies:
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(3)
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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):
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(4)
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Proposed maximum aggregate value of
transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary
materials.
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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.
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(1)
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Amount previously Paid:
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(2)
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Form, Schedule or Registration Statement
No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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STRAYER EDUCATION,
INC.
2303 Dulles Station Boulevard
Herndon, Virginia 20171
(703) 561-1600
Dear Fellow Stockholder:
You are cordially invited to attend the 2017 Annual Meeting of
Stockholders of Strayer Education, Inc. (the
“Corporation”), to be held at
8:00 a.m. (ET) on
Tuesday, May 2, 2017,
at the Corporation’s
headquarters, 2303 Dulles Station Boulevard, Herndon, Virginia,
20171.
At this year’s meeting, you will be asked:
•
To elect ten directors from the nominees named in the attached
proxy statement;
•
To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation’s independent registered public accounting
firm;
•
To conduct an advisory vote on the compensation of the named
executive officers;
•
To conduct an advisory vote on the frequency of stockholder votes
on executive compensation; and
•
To consider any other matters that may properly come before the
meeting.
This booklet is the formal notice of the meeting, and proxy
statement. The proxy statement tells you about the agenda,
procedures and rules of conduct for the meeting. Importantly, it
also describes how your Board operates, gives information about
director candidates, and provides information about the
Corporation, including our compensation practices.
Your vote is important. We encourage you to cast your vote over the
Internet, by telephone, or by completing and returning the enclosed
proxy card before the meeting so that your shares will be
represented and voted at the meeting even if you cannot attend in
person.
We look forward to seeing you at the 2017 Annual Meeting of
Stockholders.
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Sincerely,
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ROBERT S. SILBERMAN
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Chairman of the Board
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March 16, 2017
Attachment: Financial Summary
FINANCIAL
SUMMARY
While all of our historical financial reports and SEC filings are
available online, we know it is also helpful to owners to have
basic financial and operating data at hand as they analyze material
in the Proxy Statement. Below are the Selected Financial Data
tables for the five years ended December 31, 2016 from our 2016
Annual Report. The tables provide key information on revenues,
profitability, returns, balance sheet strength, and capital
allocation.
1
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(Dollar and share amounts in thousands, except per share
data)
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Income Statement Data:
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Revenues
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$
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561,979
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$
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503,600
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$
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446,041
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$
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434,437
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$
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441,088
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Costs and expenses:
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Instruction and educational support
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300,098
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310,446
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236,303
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234,097
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241,026
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Marketing
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71,864
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75,426
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66,495
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70,084
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79,025
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Admissions advisory
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26,374
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20,390
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16,661
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16,304
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17,832
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General and administration
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50,056
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64,637
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44,835
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44,254
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45,733
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Total costs and expenses
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448,392
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470,899
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364,294
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364,739
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383,616
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Income from operations
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113,587
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32,701
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81,747
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69,698
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57,472
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Investment and other income
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4
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2
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117
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283
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462
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Interest expense
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4,616
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5,419
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5,248
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3,850
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642
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Income before income taxes
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108,975
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27,284
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76,616
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66,131
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57,292
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Provision for income taxes
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43,045
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10,859
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30,260
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26,108
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22,490
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Net income
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$
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65,930
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$
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16,425
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$
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46,356
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$
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40,023
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$
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34,802
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Net
income per share:
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Basic
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$
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5.79
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$
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1.55
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$
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4.39
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$
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3.78
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$
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3.28
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Diluted
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$
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5.76
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$
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1.55
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$
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4.35
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$
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3.73
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$
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3.21
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Weighted average shares outstanding:
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Basic
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11,390
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10,584
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10,561
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10,588
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10,610
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Diluted
(a)
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11,440
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10,624
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10,650
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10,740
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10,845
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Other
Data:
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Depreciation and amortization
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$
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23,973
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$
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35,563
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$
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20,630
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$
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18,104
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$
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17,817
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Stock-based compensation expense
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$
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5,464
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$
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9,291
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$
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9,453
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$
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10,213
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$
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10,767
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Capital expenditures
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$
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24,733
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$
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8,726
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$
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6,902
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$
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12,692
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$
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13,161
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Cash dividends per common
share (paid)
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$
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4.00
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$
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—
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$
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—
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$
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—
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$
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—
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Average enrollment
(b)
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49,323
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43,969
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40,254
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40,450
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41,556
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Campuses
(c)
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97
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100
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79
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76
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74
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Full-time employees
(d)
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2,019
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1,485
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1,455
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1,401
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1,542
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(In
thousands)
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Balance Sheet Data:
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Cash, cash equivalents and marketable
securities
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$
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47,517
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$
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94,760
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$
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162,283
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$
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106,889
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$
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129,245
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Working capital
(e)
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46,631
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82,182
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140,316
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74,761
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100,704
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Total assets
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227,792
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254,266
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307,815
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248,434
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298,696
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Long-term debt
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121,875
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118,750
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112,500
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—
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—
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Other long-term liabilities
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21,905
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51,456
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46,248
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47,987
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50,483
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Total liabilities
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186,804
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215,364
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215,083
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105,578
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110,322
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Total stockholders’ equity
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40,988
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38,902
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92,732
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142,856
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188,374
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STRAYER EDUCATION, INC.
2303 Dulles Station Boulevard
Herndon, Virginia 20171
(703) 561-1600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 2017 Annual Meeting of Stockholders of Strayer Education, Inc.
(the “Corporation”), will be held at the
Corporation’s headquarters,
2303 Dulles Station
Boulevard, Herndon, Virginia, 20171, on Tuesday, May 2, 2017, at
8:00 a.m.
for the following purposes:
1.
To
elect ten directors to the Board of Directors from the nominees
named in the attached proxy statement to serve for a term of one
year or until their respective successors are elected and
qualified.
2.
To
ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation’s independent registered public accounting firm
for the fiscal year ending December 31, 2017.
3.
To
conduct an advisory vote on the compensation of the named executive
officers.
4.
To
conduct an advisory vote on the frequency of stockholder votes on
executive compensation.
5.
To
consider and act upon such other business as may properly come
before the meeting.
THIS NOTICE IS BEING
SENT TO COMMON STOCKHOLDERS OF RECORD AS OF MARCH 3, 2017. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO CAST
YOUR VOTE OVER THE INTERNET, BY TELEPHONE, OR TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN
THE ENCLOSED STAMPED ENVELOPE.
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By Order of the Board of Directors
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Viet
D. Dinh
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Secretary
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Herndon, Virginia
March 16, 2017
STRAYER EDUCATION, INC.
2303 Dulles Station Boulevard
Herndon, VA 20171
(703) 561-1600
PROXY STATEMENT
Annual Meeting of Stockholders
May 2, 2017
This Proxy Statement is being furnished to holders of the common
stock of Strayer Education, Inc. (the “Corporation”),
2303 Dulles Station Boulevard, Herndon, Virginia 20171, in
connection with the solicitation on behalf of the Board of
Directors of the Corporation (the “Board”) of proxies
to be voted at the 2017 Annual Meeting of Stockholders (the
“Annual Meeting”). The Annual Meeting will be held at
8:00 a.m. local time on Tuesday, May 2, 2017, at the
Corporation’s headquarters located at 2303 Dulles Station
Blvd., Herndon, Virginia 20171.
The cost of soliciting proxies will be borne by the Corporation.
Copies of solicitation material may be furnished to brokers,
custodians, nominees and other fiduciaries for forwarding to
beneficial owners of shares of the Corporation’s common
stock, and normal handling charges may be paid for such forwarding
service. Solicitation of proxies may be made by the Corporation by
mail or by personal interview, telephone and facsimile by
directors, officers and other management employees of the
Corporation, who will receive no additional compensation for their
services. The Corporation has also retained Alliance Advisors, LLC
to provide proxy solicitation services for a fee of approximately
$24,000, plus reimbursement of its out-of-pocket expenses.
Any stockholder submitting a proxy pursuant to this solicitation
may revoke it at any time prior to the Annual Meeting by giving
written notice of such revocation to the Secretary of the
Corporation at the Corporation’s headquarters at 2303 Dulles
Station Blvd., Herndon, Virginia 20171, providing a later dated
proxy, or by attending the meeting and voting in person.
Attending the Annual
Meeting will not automatically revoke a stockholder’s prior
proxy.
We began mailing this proxy statement, the Notice of Annual Meeting
of Stockholders and the enclosed proxy card on or about March 16,
2017 to all stockholders entitled to vote. At the close of business
on March 3, 2017, there were 11,159,884 shares of the common stock
of the Corporation outstanding and entitled to vote at the meeting.
Only common stockholders
of record on March 3, 2017 will be entitled to vote at the
meeting
, and each share will have one vote.
Voting
Information
At the Annual Meeting votes will be counted by written ballot. A
majority of the shares entitled to vote will constitute a quorum
for purposes of the Annual Meeting. Under the Corporation’s
By-laws, to be elected at the Annual Meeting, a nominee for
election to the Board of Directors must receive more votes cast for
his or her election than votes cast against his or her election.
Ratification of the appointment of the Corporation’s
independent registered public accounting firm, approval of the
advisory vote on the compensation of our named executive officers
and approval of any other business which may properly come before
the Annual Meeting, or any adjournments thereof, will require the
affirmative vote of a majority of the votes cast at the Annual
Meeting. With respect to the frequency of the advisory vote on
executive compensation, the choice receiving the greatest number of
votes — every year, every two years or every three years
— will be the frequency that stockholders will be deemed to
have approved. Abstentions and broker non-votes will have no effect
on the outcome of any matter at the Annual Meeting, including the
election of directors. Proposals 2, 3 and 4 are advisory only, and
as discussed in more detail below, the voting results are not
binding, although the Board of Directors will consider the results
of such proposals.
You may cast your vote over the Internet, by telephone, or by
completing and returning the enclosed proxy card. Proxies properly
executed and received by the Corporation prior to the meeting and
not revoked, will be voted as directed therein on all matters
presented at the meeting. In the absence of specific direction from
a stockholder, proxies will be voted for the election of all named
director nominees, in favor of Proposals 2 and 3, and for the
choice of one (1) year for Proposal 4. If a proxy indicates that
all or a portion of the shares represented by such proxy are not
being voted with respect to a particular proposal, such non-voted
shares will not be considered present and entitled to vote on such
proposal, although such shares may be considered present and
entitled to vote on other proposals and will count for the purpose
of determining the presence of a quorum.
1
The Board of Directors of the Corporation has adopted a corporate
governance policy concerning the “holdover” of any
director not elected by a majority vote in an uncontested election.
Any director who fails to receive the requisite majority vote would
be required to promptly offer his or her resignation and the Board,
following the recommendation of the Nominating and Corporate
Governance Committee, would have up to 90 days to decide whether to
accept such offer, during which time the director nominee would
continue to serve on the Board as a “holdover”
director. A copy of this policy is available on our website at
www.strayereducation.com
.
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDERS MEETING TO BE HELD ON MAY 2, 2017
The proxy statement, Form 10-K and Annual Report to Stockholders
are available at
www.strayereducation.com/overview.cfm
.
PROPOSAL 1
Election of Directors
We are requesting that the stockholders elect a Board of Directors
of ten members at the Annual Meeting.
The Nominating and Corporate Governance Committee (the
“Nominating Committee”) considers many factors when
evaluating candidates for the Board. The most important are true
independence, business savvy, a stockholder orientation, and
genuine interest in the Corporation. By true independence we mean
the willingness to challenge a forceful, talented CEO and
management team with a good track record when something is wrong or
foolish. People with this trait are both very valuable and hard to
find; they are inevitably of the highest character and integrity.
Commercial or business savvy is also crucial — without it all
the other great traits are of little help. The Board does not have
a specific policy regarding diversity. However, the Nominating
Committee does strive for the Board to be comprised of directors
with a variety of experience and personal backgrounds. The
Nominating Committee considers the prospective director’s
skills, specialized expertise, level of education, business
experience, broad-based business acumen, experience at strategy
development and policy-setting, and direct ownership of the
Corporation’s shares. The Nominating Committee focuses on the
prospective director’s understanding that maintaining the
high academic quality of Strayer University is central to
maintaining and growing the Corporation’s value. (It is
perhaps obvious, though worth noting, that the criteria for service
on Strayer University’s Board of Trustees, while sharing some
of the same criteria as the Corporation, are different and that it
is important to have some individuals who can sit on both Boards
effectively.) Depending upon the current needs of the Board,
certain factors may be weighed more or less heavily by the
Nominating Committee.
In considering candidates for the Board, the Nominating Committee
considers the entirety of each candidate’s credentials and
does not have any specific minimum qualifications that must be met.
However, the Nominating Committee does believe that all members of
the Board should have the highest character and integrity; a track
record of working constructively with others; sufficient time to
devote to Board matters; and no conflict of interest that would
interfere with performance as a director. In addition, the
Nominating Committee believes that the ability of individual Board
members to work constructively together is a key element of Board
effectiveness.
The Nominating Committee will entertain recommendations from common
stockholders that are submitted in writing to the Corporation,
provided that such common stockholders (i) beneficially own more
than 5% of the Corporation’s common stock or (ii) have
beneficially owned more than 1% of the Corporation’s common
stock for at least one year. Stockholders meeting such criteria may
recommend candidates for consideration by the Nominating Committee
by writing to Mr. Viet D. Dinh, Corporate Secretary, Strayer
Education, Inc., 2303 Dulles Station Blvd., Herndon, Virginia
20171, giving the candidate’s name, contact information,
biographical data and qualifications, as well as any evidence that
the stockholder satisfies the criteria set forth above. All such
recommendations will be treated confidentially and brought to the
attention of the Nominating Committee in a timely fashion. The
Nominating Committee does not evaluate candidates differently based
on who has made the proposal or recommendation.
Once it has been determined
that a candidate meets the Board’s criteria on paper, there
is a selection process which includes, but is not limited to,
background and reference checks and interviews with not only the
Nominating Committee but other board members, executive management
and other professionals such as the Corporation’s auditors or
outside counsel, as deemed necessary. Stockholders who wish to
formally nominate a director for election at an annual meeting of
the stockholders of the Corporation must also comply with the
Corporation’s By-laws regarding stockholder proposals and
nominations. See “Stockholder Proposals” contained in
this proxy statement.
2
It is intended that the votes represented by the proxies will be
cast for the election as directors, for a term of one year or until
their successors are chosen and qualified, of the persons listed
below.
The Board of Directors
recommends that stockholders vote “for” the nominees
listed below.
Each of the nominees is currently a director
of the Corporation. Mr. Fick was elected to the Board on October
25, 2016. The Executive Chairman introduced Mr. Fick to the
Company. The Nominating and Corporate Governance Committee
thereafter considered his educational, business, and service
background and recommended Mr. Fick to the full Board. The
following table and text presents information as of the date of
this proxy statement concerning persons nominated for election as
directors of the Corporation.
Nominees for Common Stock Directors
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Year
first
elected to
Strayer Board
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Robert S. Silberman,
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59
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—
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2001
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Executive Chairman
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Dr.
John T. Casteen, III,
(a)(b)
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73
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Nominating
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2011
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Director
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Dr.
Charlotte F. Beason,
(b)
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69
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Nominating
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1996
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Director
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William E. Brock,
(b)
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86
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Compensation
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2001
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Director
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Nathaniel C. Fick,
(b)
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39
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Audit
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2016
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Director
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Robert R. Grusky
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(b)
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59
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Nominating
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2001
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Director
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|
|
|
|
|
|
|
Karl
McDonnell,
|
|
50
|
|
—
|
|
2011
|
Chief Executive Officer &
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd
A. Milano,
(b)
|
|
64
|
|
Compensation
|
|
1996
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G.
Thomas Waite, III,
(b)
|
|
65
|
|
Audit
|
|
1996
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
David Wargo,
(b)
|
|
63
|
|
Compensation
|
|
2001
|
Director
|
|
|
|
Audit
|
|
|
3
|
|
Mr.
Robert S. Silberman
was named
Strayer’s Executive Chairman of the Board in 2013. He was
Chairman of the Board from February 2003 to 2013 and Chief
Executive Officer from March 2001 to 2013. From 1995 to 2000, Mr.
Silberman served in a variety of senior management positions at
CalEnergy Company, Inc., including as President and Chief Operating
Officer. From 1993 to 1995, Mr. Silberman was Assistant to the
Chairman and Chief Executive Officer of International Paper
Company. From 1989 to 1993, Mr. Silberman served in several senior
positions in the U.S. Department of Defense, including as Assistant
Secretary of the Army. Mr. Silberman has been a director of Strayer
since March 2001. He serves on the Board of Directors of Covanta
Holding Company, Par Petroleum Corporation, and 21
st
Century Fox. Mr. Silberman is a member of the Council on Foreign
Relations. Mr. Silberman holds a bachelor’s degree in history
from Dartmouth College and a master’s degree in international
policy from The Johns Hopkins University. Mr. Silberman has been a
driving force behind the evolution of the Corporation. He leads the
Board with a deep appreciation of the Corporation’s history,
a focused strategic vision for its future, and a broad
understanding of the economic, regulatory, and demographic factors
affecting the Corporation. The Nominating Committee believes that
based on his experience and expertise in business management,
leadership of large organizations, financial management, public
policy, governmental affairs, academic policy, educational
leadership, and stewardship of stockholder capital, Mr. Silberman
should serve as a director of the Corporation.
|
|
|
|
|
|
Dr.
John T. Casteen, III
is the
President Emeritus and University Professor at the University of
Virginia, where he teaches courses in literature, cultural history,
and public policy. He served as President of the University of
Virginia from 1990 through 2010. He was President of the University
of Connecticut from 1985 to 1990. From 1982 to 1985, Dr. Casteen
served as the Secretary of Education for the Commonwealth of
Virginia. Dr. Casteen is on the board of directors of Altria, Inc.
Dr. Casteen also is a director of a number of charitable and
privately-held business entities, including ECHO 360 and the
Jamestown-Yorktown Foundation. He has chaired the boards of both
the College Entrance Examination Board and the Association of
American Universities. Dr. Casteen has been a member of the Board
since 2011, is Chair of the Nominating Committee of the Board and
currently serves as the Presiding Independent Director. Dr. Casteen
holds a bachelor’s degree, master’s degree and a Ph.D.
in English from the University of Virginia, as well as several
honorary degrees, including degrees from the Universities of Athens
(Greece) and Edinburgh (Scotland) and two community colleges in
Virginia. Dr. Casteen’s record of leadership in higher
education and business will help the Board in building and
maintaining the quality of Strayer University. The Nominating
Committee believes that based on his experience and expertise in
education leadership, educational policy, academic affairs and
government affairs, Dr. Casteen should serve as a director of the
Corporation.
|
|
|
|
|
|
Dr.
Charlotte F. Beason
is a
consultant in education and health care administration. She was
Executive Director of the Kentucky Board of Nursing from 2005 to
2012. From 2000 to 2003, Dr. Beason was Chair and Vice Chair of the
Commission on Collegiate Nursing Education (an autonomous agency
accrediting baccalaureate and graduate programs in nursing). From
1988 to 2004, Dr. Beason was with the Department of Veterans
Affairs, first as Director of Health Professions Education Service
and the Health Professional Scholarship Program, and then as
Program Director, Office of Nursing Services. Dr. Beason has served
on the Board since 1996 and is a member of the Nominating
Committee. She is also Chairwoman of the Strayer University Board
of Trustees. Dr. Beason holds a bachelor’s degree in nursing
from Berea College, a master’s degree in psychiatric nursing
from Boston University and a doctorate in clinical psychology and
public practice from Harvard University. Dr. Beason’s record
of leadership in education, accreditation, and public
administration provides the Board with insight and experience in
building and maintaining the quality of Strayer University. The
Nominating Committee believes that based on her experience and
expertise in academic matters, educational policy, organizational
administration, and governmental affairs, Dr. Beason should serve
as a director of the Corporation.
|
4
|
|
Senator William E. Brock
is the Founder and Chairman of the Brock Offices, a firm
specializing in international trade, investment and human
resources. From 1985 to 1987, Senator Brock served in the
President’s Cabinet as the U.S. Secretary of Labor, and from
1981 to 1985, as the U.S. Trade Representative. Senator Brock
previously served as a Member of Congress and subsequently as U.S.
Senator for the State of Tennessee. Senator Brock is a member of
the Board of Directors of On Assignment, Inc. and ResCare, Inc.,
and is a Senior Counselor and Member of the Board of Trustees of
the Center for Strategic and International Studies, where he chairs
the International Policy Roundtable. In the past five years,
Senator Brock has also served on the Board of Directors of Catalyst
Health Solutions, Inc. Senator Brock has been a member of the Board
since 2001 and is a member of the Compensation Committee. He holds
a bachelor’s degree in commerce from Washington and Lee
University. Senator Brock’s experience as a legislator,
senior Cabinet officer, and business leader provides the Board with
an unparalleled understanding of the legislative and regulatory
process. The Nominating Committee believes that based on his
experience and expertise in public policy, government affairs,
business management and corporate governance, Senator Brock should
serve as a director of the Corporation.
|
|
|
|
|
|
Mr.
Nathaniel C. Fick
is the Chief
Executive Officer of Endgame, a technology firm focusing on
cybersecurity. He previously served as a Captain in the United
States Marine Corps leading infantry and reconnaissance units in
combat in Afghanistan and Iraq. His book about that experience,
“One Bullet Away,” was a New York Times bestseller, a
Washington Post “Best Book of the Year,” and one of the
Military Times’ “Best Military Books of the
Decade.” Mr. Fick is a graduate of Dartmouth College, the
Harvard Kennedy School, and the Harvard Business School, and serves
as a Trustee of Dartmouth College. Mr. Fick was elected to the
Board in 2016, and serves on the Audit Committee. The Nominating
Committee believes that based on his experience and expertise in
leadership, cybersecurity, and his educational background, Mr. Fick
should serve as a director of the Corporation.
|
|
|
|
|
|
Mr.
Robert R. Grusky
is the Founder
and has been the Managing Member of Hope Capital Management, LLC,
an investment manager, since 2000. He co-founded New Mountain
Capital, LLC, a private equity firm, in 2000 and was a Principal
and Member from 2000 to 2005, and has been a Senior Advisor since
then. From 1998 to 2000, Mr. Grusky served as President of RSL
Investments Corporation. From 1985 to 1997, with the exception of
1990 to 1991 when he was on a leave of absence to serve as a White
House Fellow and Assistant for Special Projects to the Secretary of
Defense, Mr. Grusky served in a variety of capacities at Goldman,
Sachs & Co., first in its Mergers & Acquisitions Department
and then in its Principal Investment Area. He also serves on the
Board of Directors of AutoNation, Inc. In the past five years, he
has also served on the Board of Directors of AutoZone, Inc. Mr.
Grusky has served on the Board since 2001 and is a member of the
Nominating Committee. He holds a bachelor’s degree in history
from Union College and a master’s degree in business
administration from Harvard University. Mr. Grusky’s keen
understanding of the financial markets and his extensive experience
as an investment manager and executive are tremendous assets to the
Board. The Nominating Committee believes that based on his
experience and expertise in financial markets, capital allocation,
strategic planning, accounting and audit functions, and public
policy, Mr. Grusky should serve as a director of the
Corporation.
|
|
|
|
|
|
Mr.
Karl McDonnell
was named Chief
Executive Officer in May 2013 and has served as President and Chief
Operating Officer since 2006. Mr. McDonnell served as Chief
Operating Officer of InteliStaf Healthcare, Inc., one of the
nation’s largest privately-held healthcare staffing firms.
Prior to his tenure at InteliStaf, he served as Vice President of
the Investment Banking Division at Goldman, Sachs & Co. Mr.
McDonnell has held senior management positions with several Fortune
100 companies, including The Walt Disney Company. Mr. McDonnell has
served on the Board since 2011. Mr. McDonnell holds a
bachelor’s degree from Virginia Wesleyan College and a
master’s degree in business administration from Duke
University. The Nominating Committee believes that based on his
experience and expertise in general management, leadership of large
organizations, financial management and human capital development,
Mr. McDonnell should serve as a director of the
Corporation.
|
5
|
|
Mr.
Todd A. Milano
is President
Emeritus and Ambassador of Central Penn College, where he served as
President and Chief Executive Officer from 1989 to 2012. Mr. Milano
has served on the Board since 1996 and is a member of the
Compensation Committee of the Board. As a member of the Strayer
University Board of Trustees since 1992, he has chaired the
University’s Presidential Search Committees. Mr. Milano holds
a bachelor’s degree in industrial management from Purdue
University. Having served on the Board for more than 20 years, Mr.
Milano knows the Corporation’s business, history, and culture
of quality education. He is a leader in higher education and uses
his experience to provide critical input into the
Corporation’s operations and management. The Nominating
Committee believes that based upon his experience and expertise in
academic affairs, educational management, accrediting activities
and organizational leadership, Mr. Milano should serve as a
director of the Corporation.
|
|
|
|
|
|
Mr.
G. Thomas Waite, III
has been
Treasurer and Chief Financial Officer of the Humane Society of the
United States since 1997 and prior to that served as Controller
beginning in 1993. In 1992, Mr. Waite was the Director of
Commercial Management of The National Housing Partnership. Mr.
Waite has served on the Board since 1996, is Chair of the Audit
Committee, and is a former member of the Strayer University Board
of Trustees. Mr. Waite holds a bachelor’s degree in commerce
from the University of Virginia and is a Certified Public
Accountant. Mr. Waite is a leader in philanthropy and the
non-profit sector, which is the Corporation’s indispensable
partner in fulfilling our mission of providing quality education to
working adults. His experience as a chief financial officer brings
to the Board a seasoned voice in matters of accounting and
governance that is a tremendous asset to the Board and the
committees on which he serves. The Nominating Committee believes
that based on his experience and expertise in financial matters,
accounting and audit, and educational management, Mr. Waite should
serve as a director of the Corporation.
|
|
|
|
|
|
Mr.
J. David Wargo
has been President
of Wargo and Company, Inc., an investment management company, since
1993. Mr. Wargo is a co-founder and was a Member of New Mountain
Capital, LLC, from 2000 to 2008, and was a Senior Advisor there
from 2008 to 2011. From 1989 to 1992, Mr. Wargo was a Managing
Director and Senior Analyst of The Putnam Companies, a Boston-based
investment management company. From 1985 to 1989, Mr. Wargo was a
partner and held other positions at Marble Arch Partners. Mr. Wargo
is also a Director of Liberty Global PLC, Liberty Broadband
Corporation, Discovery Communications, Inc. and Liberty TripAdvisor
Holdings, Inc. Mr. Wargo has served on the Board since 2001 and is
Chair of the Compensation Committee and a member of the Audit
Committee. Mr. Wargo holds a bachelor’s degree in physics and
a master’s degree in nuclear engineering, both from the
Massachusetts Institute of Technology. He also holds a
master’s degree in management science from the Sloan School
of Management, which is the business school of the Massachusetts
Institute of Technology. Mr. Wargo is an expert in markets and
governance and has extensive experience in developing and managing
businesses. His broad-based knowledge of transactions and
investments brings to the Board strong leadership, which is further
enhanced by his experience on the boards of other respected
publicly traded companies. The Nominating Committee believes that
based on his experience and expertise in financial matters,
accounting and audit, financial markets, capital allocation, and
strategic planning, Mr. Wargo should serve as a director of the
Corporation.
|
6
Director Compensation
Director compensation is designed to:
•
Align with long-term stockholder interests;
•
Ensure the Corporation can attract and retain outstanding director
candidates who meet the criteria outlined in this proxy
statement;
•
Recognize the time commitments necessary to oversee the
Corporation; and
•
Support the independence of thought required of a good
director.
The Nominating Committee reviews non-employee director compensation
regularly and the resulting recommendations are presented to the
full Board for discussion and approval. Current director
compensation is as follows:
•
Annual Retainer
. Each eligible director is paid an annual
fee of $150,000. Of this amount, at least 50% (or $75,000) of the
annual fee must be paid in shares of restricted stock of the
Corporation. Restricted stock is issued to directors on the date of
the Annual Meeting as part of their annual retainer. The restricted
shares vest over three years, with one-third of the shares vesting
each year on the date of the Annual Meeting. Directors may choose
to receive the remaining 50% of their annual retainer ($75,000) in
either restricted stock or in cash, paid in quarterly installments.
In the event any director retires or resigns from the Board, the
Board of Directors may, in its discretion, waive the remaining
vesting period(s) for all or any portion of unvested restricted
shares, provided that the departing Director has served at least
five years on the Board of Directors of the Corporation.
•
Additional Fees
. The Audit Committee Chair and the Presiding
Independent Director receive an additional annual fee of $10,000.
Members of the Audit Committee receive an additional annual fee of
$5,000. The Board may also approve additional fees for other
board-related service.
•
Reimbursement of Expenses
. Directors are reimbursed for
out-of-pocket expenses incurred in connection with their attendance
at Board and Committee meetings.
As described above, a significant portion of director compensation
is paid in restricted stock to align director compensation with the
long term interests of stockholders. While on the Board,
non-employee directors receive the same cash dividends on
restricted shares as a holder of common stock should they be
declared and paid in the future.
The following table sets forth compensation for each non-employee
director for the fiscal year ended December 31, 2016. Messrs.
Silberman and McDonnell do not receive any additional compensation
for their service as directors of the Corporation. Their
compensation is reflected in the “Summary Compensation
Table” set forth below in this proxy statement.
Director Compensation Table
|
|
Fees
Earned or
Paid in Cash
($)
|
|
|
|
|
Dr. Charlotte F. Beason
|
|
75,000
|
|
75,000
|
|
150,000
|
William E. Brock
|
|
75,000
|
|
75,000
|
|
150,000
|
Dr. John T. Casteen, III
|
|
85,000
|
|
75,000
|
|
160,000
|
Nathaniel C. Fick
(b)
|
|
—
|
|
37,500
|
|
37,500
|
Robert R. Grusky
|
|
65,000
|
|
75,000
|
|
140,000
|
Todd A. Milano
|
|
37,500
|
|
110,000
|
|
147,500
|
G. Thomas Waite, III
|
|
85,000
|
|
75,000
|
|
160,000
|
J. David Wargo
|
|
77,500
|
|
75,000
|
|
152,500
|
7
The following table sets forth the number of outstanding stock
awards held by each non-employee director at December 31, 2016.
Outstanding Stock Awards Table
|
|
Shares of
Unvested
Restricted
Stock (#)
|
Dr. Charlotte F. Beason
|
|
3,128
|
William E. Brock
|
|
3,128
|
Dr. John T. Casteen, III
|
|
3,128
|
Nathaniel C. Fick
|
|
570
|
Robert R. Grusky
|
|
3,663
|
Todd A. Milano
|
|
4,949
|
G. Thomas Waite, III
|
|
3,128
|
J. David Wargo
|
|
3,128
|
Board Leadership Structure
Our Board is comprised of independent members, as independence is
defined under the NASDAQ Listing Standards, along with our
Executive Chairman and our Chief Executive Officer. The leadership
structure of the Corporation has varied over time as the demands of
the business, the composition of the Board, and the ranks of our
senior executives changed, and the Board has utilized this
flexibility to establish the most appropriate structure at any
given time. We operate with a Chairman of the Board separate from
the Chief Executive Officer.
In 2013 Dr. Casteen was
appointed Presiding Independent Director, who runs the Board in the
Chairman’s absence. The Presiding Independent Director
presides at meetings of the Board of Directors without the
Executive Chairman and the CEO present at least quarterly (at each
regularly scheduled Board meeting) and solicits candid feedback on
the Executive Chairman’s and the CEO’s performance. The
Presiding Independent Director serves as the principal liaison on
Board issues between the independent directors and the Executive
Chairman and has the authority to:
•
Call meetings of the independent directors,
•
Ensure the quality, quantity and timeliness of information to the
Board, and
•
Consult and communicate with stockholders.
Risk Oversight
The Board of Directors is ultimately responsible for the risk
management of the Corporation; the CEO is the “Chief Risk
Officer.” The Board reviews and approves all annual budgets,
major uses of capital, major projects, and University expansion
plans. Two members of the Board of Directors also serve as members
of the governing body (the Board of Trustees) of the
Corporation’s chief asset: Strayer University. The Board of
Trustees is made up of nine trustees, including five trustees who
are unaffiliated with the Corporation, two trustees who are
independent members of the Corporation’s Board of Directors,
one trustee who previously was an officer of the Corporation, and
the President of Strayer University who serves as an ex officio
member. The Board of Directors oversees, but generally defers to
the University’s Board of Trustees on issues related to
academic affairs and quality, including specifically the rate of
the University’s growth and expansion.
The Board and its Compensation Committee continually evaluate the
Corporation’s strategy, activities, and in particular
compensation policies and practices, to protect against
inappropriate risk taking. Any compensation program that seeks to
pay managers for performance on behalf of owners carries some risk
of overzealous performance. But paramount in the
Corporation’s compensation program is an unwavering
requirement that executive conduct conform to applicable legal,
regulatory, and ethical business standards. Based on its evaluation
and the views of advisors, the Compensation Committee believes that
the Corporation’s executive compensation program, as
described in the Compensation Discussion and Analysis section
below, does not encourage inappropriate risk taking and that the
Corporation has in place a strong culture, organization structure,
and compliance policies to manage operational risk effectively.
8
In addition, the Audit Committee oversees management of financial
risk and our Code of Business Conduct, including monitoring
conflicts of interest, and the Nominating Committee oversees the
Corporation’s corporate governance, such as director
independence. In performing these functions, each Committee of the
Board of Directors has full access to management, as well as the
ability to engage advisors. The Board is kept abreast of the
Committees’ risk oversight and other activities through
regular reports by each Committee Chair to the full Board of
Directors.
Board Committees
The Board of Directors has established an Audit Committee, a
Compensation Committee and a Nominating Committee, each composed
entirely of independent directors. The current Committee membership
is as follows:
Committee Memberships
|
|
|
|
|
G. Thomas Waite, Chair
|
|
J. David Wargo, Chair
|
|
Dr. John T. Casteen, III, Chair
|
Nathaniel C. Fick
|
|
William E. Brock
|
|
Dr. Charlotte F. Beason
|
J. David Wargo
|
|
Todd A. Milano
|
|
Robert R. Grusky
|
Audit Committee.
For the year ended December 31, 2016, the Audit Committee was
composed of Messrs. Waite (Chair), Milano, and Grusky until May 3,
2016; Messrs. Waite (Chair), Milano and Wargo from May 3, 2016
until October 25, 2016; and thereafter, the Audit Committee was
composed of Messrs. Waite (Chair), Fick, and Wargo. The Audit
Committee met six times during 2016, including two telephonic
meetings.
The Audit Committee assists the Board in its oversight of the
quality and integrity of our accounting, auditing, and reporting
practices. The Committee performs a variety of tasks, including
being directly responsible for the appointment (subject to advisory
stockholder ratification), compensation, and oversight of the
Corporation’s independent registered public accounting firm.
The Audit Committee also, among other things, reviews the
Corporation’s accounting policies and reviews the
Corporation’s unaudited quarterly earnings releases and
periodic filings with the Securities and Exchange Commission (the
“SEC”) that include financial statements, and regularly
reports to the Board of Directors. The Audit Committee relies on
the expertise and knowledge of management, the internal auditor,
and the independent auditors in carrying out its oversight
responsibilities.
The Audit Committee has a written charter, which was last amended
on February 2, 2016, and restated on February 14, 2017. The
Corporation will provide a copy of the Audit Committee charter to
any person without charge, upon request. Persons wishing to make
such a request should contact Daniel W. Jackson, Executive Vice
President and Chief Financial Officer, 2303 Dulles Station Blvd.,
Herndon, VA 20171, (703) 561-1600. In addition, the Audit Committee
charter is available on the Corporation’s website,
www.strayereducation.com.
The Board of Directors has determined that all of the members of
the Audit Committee are independent, as independence is defined
under the NASDAQ Listing Standards and Rule 10A-3(b)(1) of the
Securities Exchange Act of 1934 (the “1934 Act”). The
Board of Directors has determined that each of Messrs. Waite and
Wargo qualify as an “audit committee financial expert,”
as defined by SEC rules, based on their education, experience, and
background.
A report of the Audit Committee is included below in this proxy
statement.
Compensation Committee.
For the year ended December 31, 2016, the Compensation Committee
was composed of Messrs. Wargo (Chair), Brock, and Johnson until May
3, 2016; thereafter, the Compensation Committee was composed of
Messrs. Wargo (Chair), Brock, and Milano.
The Compensation Committee is responsible for evaluating, and
recommending to the full Board for approval, the compensation of
the Executive Chairman, the Chief Executive Officer and other
officers of the Corporation. The Compensation Committee is
responsible for determining compensation policies and practices,
changes in compensation and benefits for management, employee
benefits, and all other matters relating to employee compensation,
including matters relating to stock-based compensation, subject to
the approval of the Board.
9
The Compensation Committee has the authority to retain and
terminate any compensation consultant to be used by it to assist in
the evaluation of director and executive compensation. During 2016
approximately $10,000 was paid to Lockton Companies, LLC to
benchmark compensation for the CEO and CFO positions. The
Compensation Committee may form and delegate any of its authority
to one or more subcommittees as it deems appropriate. For a
discussion of the role of the Executive Chairman and the CEO in
determining or recommending the amount or form of executive
compensation, see “Compensation Discussion and
Analysis” below. The Compensation Committee met twice during
2016.
The Compensation Committee has adopted a written charter, which was
last amended on February 2, 2016, and restated on February 14,
2017, and a copy of which the Corporation will provide to any
person without charge, upon request. Persons wishing to make such a
request should contact Daniel W. Jackson, Executive Vice President
and Chief Financial Officer, 2303 Dulles Station Blvd., Herndon, VA
20171, (703) 561-1600. In addition, the Compensation Committee
charter is available on the Corporation’s website,
www.strayereducation.com.
The Board has determined that all of the members of the
Compensation Committee are independent, as independence is defined
under the NASDAQ Listing Standards. The Board also has determined
that all of the members of the Compensation Committee qualify as
“non-employee” directors as defined by SEC rules and
“outside directors” as defined by the Internal Revenue
Code of 1986.
Nominating Committee.
For the year ended December 31, 2016, the Nominating Committee was
composed of Dr. Casteen (Chair), Dr. Beason, and Mr. Milano until
May 3, 2016; thereafter, the Nominating Committee was composed of
Dr. Casteen (Chair), Dr. Beason, and Mr. Grusky. The Nominating
Committee is responsible for establishing qualifications for
potential directors, considering and recommending prospective
candidates for Board membership, recommending the Board committee
structure, making recommendations as to director independence,
developing and monitoring the Corporation’s corporate
governance principles, and recommending director compensation. The
Nominating Committee met three times during 2016.
The Nominating Committee has a written charter, which was last
amended July 26, 2011, and restated on February 14, 2017. The
Nominating Committee charter will be made available to any person
upon request without charge. Persons wishing to make such a request
should contact Daniel W. Jackson, Executive Vice President and
Chief Financial Officer, 2303 Dulles Station Blvd., Herndon, VA
20171, (703) 561-1600. In addition, the Nominating Committee
charter is available on the Corporation’s website,
www.strayereducation.com.
The Board has determined that all of the members of the Nominating
Committee are independent, as independence is defined under the
NASDAQ Listing Standards.
Compensation Committee Interlocks and Insider Participation
During fiscal year 2016, the Compensation Committee was composed of
Messrs. Wargo (Chair), Brock, and Johnson until May 3, 2016;
thereafter, the Compensation Committee was composed of Messrs.
Wargo (Chair), Brock, and Milano. No member of the Compensation
Committee was, during fiscal year 2016, an officer or employee of
the Corporation or was formerly an officer of the Corporation, or
had any relationship requiring disclosure by the Corporation as a
related party transaction under applicable SEC rules. No executive
officer of the Corporation served on any board of directors or
compensation committee of any other company for which any of the
Corporation’s directors served as an executive officer at any
time during fiscal year 2016.
Attendance at Meetings and Director Independence
The Board of Directors met six times during 2016, including two
telephonic meetings. Each director attended at least 75% of the
meetings of the Board and the meetings of the Board Committees on
which he or she served as a member in 2016. At each regularly
scheduled meeting of the Board, the independent directors met in
executive session. The Board’s Presiding Independent
Director, currently Dr. Casteen, presides at these executive
sessions. The Corporation encourages all incumbent directors and
director nominees to attend each annual meeting of stockholders.
All directors serving at the time attended last year’s
meeting, with the exception of Mr. Wargo and Dr. Casteen.
10
The Board of Directors consists of a majority of independent
directors, as independence is defined under the NASDAQ Listing
Standards. The Board of Directors has determined that all members
of the Board of Directors, except for Messrs. Silberman and
McDonnell, are independent under these standards.
Code of Business Conduct
The Board of Directors adopted a Code of Business Conduct in
February 2004, meeting the requirements of Section 406 of the
Sarbanes-Oxley Act of 2002 and applicable NASDAQ requirements. The
Code of Business Conduct was last amended on February 2, 2016, and
includes, among other things, provisions prohibiting directors,
officers and employees from: insider trading; investing in
Corporation-based derivative securities, including options,
warrants or similar rights whose value is derived from the value of
an equity security; short selling the Corporation’s
securities; and trading in the Corporation’s securities on a
short-term basis. The Corporation will provide to any person
without charge, upon request, a copy of such Code of Business
Conduct. Persons wishing to make such a request should contact
Daniel W. Jackson, Executive Vice President and Chief Financial
Officer, 2303 Dulles Station Blvd., Herndon, VA 20171, (703)
561-1600. In addition, the Code of Business Conduct is available on
the corporate website,
www.strayereducation.com
.
In the event that the Corporation makes any amendment to, or grants
any waiver from, a provision of the Code of Business Conduct that
applies to the Corporation’s principal executive officer,
principal financial officer, principal accounting officer,
controller, or certain other senior officers and requires
disclosure under applicable SEC rules, the Corporation intends to
disclose such amendment or waiver and the reasons for the amendment
or waiver on the Corporation’s website,
www.strayereducation.com or, as required by NASDAQ, file a Current
Report on Form 8-K with the SEC reporting the amendment or
waiver.
Stockholder Communication with Directors
The Corporation has a process for stockholders to send
communications to the Board of Directors. Any stockholder that
wishes to communicate with the Board of Directors may do so by
submitting correspondence in writing to the Board, in care of Viet
D. Dinh, Corporate Secretary, Strayer Education, Inc., 2303 Dulles
Station Blvd., Herndon, VA 20171, (703) 561-1600. The mailing
envelope must contain a clear notation indicating that the enclosed
letter is a “Stockholder-Board Communication.” All such
letters must identify the author as a stockholder. All
correspondence from stockholders that (i) beneficially own more
than 5% of the Corporation’s common stock or (ii) have
beneficially owned more than 1% of the Corporation’s common
stock for at least one year will be forwarded to the Board without
prior review. In addition, Stockholder-Board communications from
all other stockholders will be reviewed by the Chief Executive
Officer and the Secretary of the Corporation and will be forwarded
to the Board as appropriate.
Section 16(a) Beneficial Ownership Reporting Compliance
The 1934 Act requires the Corporation’s directors, executive
officers and 10% stockholders to file reports of beneficial
ownership of equity securities of the Corporation and to furnish
copies of such reports to the Corporation. Based on a review of
such reports, and upon written representations from certain
reporting persons, the Corporation believes that, during the fiscal
year ended December 31, 2016, all such filing requirements were
met, other than a Form 3 for Mr. Fick, which was filed on November
7, 2016, one business day after the due date for such filing.
11
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
ownership of the Corporation’s common stock as of March 3,
2017 (except as otherwise indicated), by each person known by
management of the Corporation to be the beneficial owner of more
than five percent (5%) of the outstanding shares of the
Corporation’s common stock, each of the Corporation’s
directors and director nominees, its Executive Chairman, CEO, and
three other named executive officers and all executive officers and
directors as a group. The information presented in the table is
based upon the most recent filings with the SEC by those persons or
upon information otherwise provided by those persons to the
Corporation. The percentages reflected in the table for each
beneficial owner are calculated based on the number of shares of
common stock outstanding on the record date plus those shares of
common stock that are subject to options held by the applicable
beneficial owner that are currently exercisable or exercisable
within sixty days of March 3, 2017 and those shares of common stock
issuable upon the vesting of restricted stock united held by the
applicable beneficial owner within sixty days of March 3, 2017.
|
|
Common
Stock
Beneficially
Owned
(a)
|
|
Common
Stock
Issuable within
60 days
|
|
|
|
|
Stockholders:
|
|
|
|
|
|
|
|
|
|
T Rowe Price Associates, Inc.
(b)
|
|
1,911,637
|
|
0
|
|
1,911,637
|
|
17.1
|
%
|
BlackRock Institutional Trust Company,
N.A.
(c)
|
|
1,219,573
|
|
0
|
|
1,219,573
|
|
10.9
|
%
|
The Vanguard Group
(d)
|
|
1,121,619
|
|
0
|
|
1,121,619
|
|
10.1
|
%
|
Marshfield Associates, Inc.
(e)
|
|
746,088
|
|
0
|
|
746,088
|
|
6.7
|
%
|
Directors:
|
|
|
|
|
|
|
|
|
|
Robert S. Silberman
|
|
271,781
|
|
100,000
|
|
371,781
|
|
3.3
|
%
|
Dr. Charlotte F. Beason
|
|
12,868
|
|
0
|
|
12,868
|
|
*
|
|
William E. Brock
|
|
7,249
|
|
0
|
|
7,249
|
|
*
|
|
Dr. John T. Casteen, III
|
|
7,967
|
|
0
|
|
7,967
|
|
*
|
|
Nathaniel C. Fick
|
|
570
|
|
0
|
|
570
|
|
*
|
|
Robert R. Grusky
|
|
11,484
|
|
0
|
|
11,484
|
|
*
|
|
Karl McDonnell
|
|
193,864
|
|
0
|
|
193,864
|
|
1.7
|
%
|
Todd A. Milano
|
|
19,763
|
|
0
|
|
19,763
|
|
*
|
|
G. Thomas Waite, III
|
|
11,459
|
|
0
|
|
11,459
|
|
*
|
|
J. David Wargo
(f)
|
|
9,418
|
|
0
|
|
9,418
|
|
*
|
|
Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
Brian W. Jones
|
|
38,047
|
|
0
|
|
38,047
|
|
*
|
|
Daniel W. Jackson
|
|
50,947
|
|
0
|
|
50,947
|
|
*
|
|
Thomas J. Aprahamian
|
|
13,913
|
|
0
|
|
13,913
|
|
*
|
|
All
Executive Officers and Directors (13 persons)
|
|
649,330
|
|
100,000
|
|
749,330
|
|
6.7
|
%
|
12
EXECUTIVE COMPENSATION
The following discussion summarizes our executive compensation
program for our named executive officers (“NEOs”). For
2016, our NEOs were:
|
|
|
Robert S. Silberman
|
|
Executive Chairman
|
Karl McDonnell
|
|
Chief Executive Officer &
Director
|
Daniel W. Jackson
|
|
Chief Financial Officer
|
Brian W. Jones
|
|
President, Strayer University
|
Thomas J. Aprahamian
|
|
Chief Accounting Officer
|
COMPENSATION DISCUSSION
AND ANALYSIS
Executive Summary
The Corporation’s executive compensation program is designed
to drive performance and align the long-term interests of
management and our stockholders. Academic quality is the
cornerstone of this program, and ultimately advances all other key
metrics. The Corporation’s policies on compensation,
consistent with Department of Education regulations, seek to reward
achievement of financial and academic goals, both of which are
driven by the success of our academic programs. The following chart
highlights key policies and objectives behind the
Corporation’s development, review, and approval of NEO
compensation:
COMPENSATION
OBJECTIVES
Align Interests
|
|
The Corporation seeks to align the thinking of
our executives and directors with those of our stockholders. It
does so by adopting a compensation program that incentivizes
student success, financial performance, and regulatory compliance.
Each of these goals is ultimately advanced by a focus on academic
quality and the student experience. The Corporation also aligns
long term interests by requiring share ownership for all Board
members and executives at the Senior Vice President level and
above.
|
|
|
|
Attract and Retain Talent
|
|
The Corporation sets compensation at levels
sufficient to attract and retain highly qualified and productive
personnel. There are three major components of overall
compensation: salary, non-equity incentive compensation, and equity
grants. In order to better pay for performance, the Committee
generally sets target salary at or below the midpoint of comparable
companies, and profit sharing targets (both cash and equity) at or
above the midpoint of comparable companies.
|
|
|
|
Pay for Performance
|
|
In making decisions on whether, and at what
level, to fund non-equity incentive compensation each year, the
Compensation Committee looks at whether the Corporation met certain
performance objectives determined annually by the Board of
Directors. These objectives consist of both quantitative financial
metrics (comprising up to 75% of target payout) and qualitative
academic metrics (comprising up to 25% of target payout). The
Compensation Committee sets threshold, target, and maximum levels,
which achieve a 50%, 100%, and 150% potential target payout,
respectively, with reductions or increases corresponding to the
percentage of target achieved between these ranges.
|
13
The Corporation increases value and accountability through the
following best practices:
|
|
|
ü
Limit discretion by setting clear quantitative metrics for
non-equity incentive compensation, with target payouts as a
percentage of base salary for all named executive
officers
|
|
X No compensation decisions for our NEOs without
oversight of independent directors
|
ü
Set CEO compensation where at least 50% of target annual
compensation is performance-based
|
|
X No hedging or other investments in derivatives
of the Corporation
|
ü
Include robust performance-based criteria for the vesting
of equity grants to named executive officers
|
|
X No excise tax gross-ups upon change in
control
|
ü
Include double trigger change-in-control vesting provisions
for equity awards
|
|
X No stock option re-pricing
|
ü
Clawback profit sharing and equity grants based on
performance metrics that were incorrectly calculated or for
misconduct leading to a restatement
|
|
X No perquisites
|
ü
Use a representative and relevant peer group to guide
compensation
|
|
X No executive pensions or supplemental
executive retirement plan (SERP)
|
Compensation Policies and Objectives
In accordance with the Compensation Committee charter, the
Corporation employs the following general policies in determining
executive compensation:
•
The Corporation believes that compensation of the
Corporation’s key executives should be sufficient to attract
and retain highly qualified and productive personnel, as well as to
enhance productivity and encourage and reward superior
performance.
•
It is the policy of the Corporation that the three primary
components of the Corporation’s compensation package for
named executive officers (salary, non-equity incentive
compensation, and equity grants) be considered in the aggregate. In
other words, the total compensation of our executive officers
should be appropriate to their contributions, and the amount of
each component should take into account the size of their total
compensation package, even if one individual component is larger or
smaller than industry average.
•
Consistent with Department of Education regulations, the
Corporation seeks to reward achievement of specific corporate goals
by executing for named executive officers a non-equity incentive
compensation plan with specific, pre-defined corporate goals and
target payouts as a percentage of salary, and equity compensation
with a required vesting period and robust performance-based vesting
criteria.
•
The criteria used by the Compensation Committee in deciding
whether, or at what level, to pay non-equity incentive compensation
is whether the Corporation met certain performance objectives set
annually by the Board. The Compensation Committee makes these
assessments based on the Corporation’s annual financial
statements, which are audited by the Corporation’s
independent auditing firm, PricewaterhouseCoopers LLP. Each year
the corporate objectives used to determine profit sharing
eligibility for executives are chosen by the Board of Directors
from criteria which were approved by the stockholders of the
Corporation. Criteria were approved most recently by stockholders
at its annual meeting on May 5, 2015.
•
One of the Corporation’s guiding principles is that officers
and directors think like owners. To this end, the Corporation
adopted a requirement that within three years of hiring, promotion
or being appointed to the Board, senior officers and members of the
Board of Directors own shares equal to the amounts shown in the
table below. The Board reviews compliance with this policy
consistent with historic share ownership, market price
fluctuations, and other factors.
14
|
|
|
Executive Chairman
|
|
5x Annual Salary
|
Chief Executive Officer
|
|
5x Annual Salary
|
Executive Vice President
|
|
3x Annual Salary
|
Senior Vice President
|
|
2x Annual Salary
|
Board of Directors
|
|
3x Annual Retainer
|
•
In determining compensation levels at the Corporation for 2016, the
Compensation Committee compares executive compensation at the
Corporation to that of ten publicly traded companies which own
education assets. These companies are: American Public Education,
Inc., Apollo Education Group, Bridgepoint Education, Capella
Education Company, Career Education Corporation, DeVry Education,
Grand Canyon Education, Inc., K12, Inc., Lincoln Education
Services, and Universal Technical Institute. The Compensation
Committee also compares executive compensation at the Corporation
to companies in other industries that are similar in revenue,
market capitalization, and growth profile.
•
The Compensation Committee generally sets salary targets at or
below the midpoint of comparable companies, and incentive
compensation targets (both non-equity and stock-based) at or above
the midpoint of comparable companies. This mix of compensation
ensures that a greater proportion of executive pay is based on
actual performance of the Corporation. If, in the Board’s
judgment, the midpoint or upper quartile calculations of the
comparable companies yield too high a compensation level, the Board
will not match these levels, but instead will make reasoned
judgments to lower the Corporation’s executive compensation
to levels it deems more appropriate.
Stockholder Outreach
The Corporation values our stockholders’ opinions on the
effectiveness of our compensation program. At the 2016 Annual
Meeting of Stockholders, approximately 75% of the votes cast were
cast in favor of the advisory resolution to approve the 2015
compensation for the Corporation’s named executives. The
Corporation believes this vote reflected general stockholder
approval of its overall pay practices and the absence of any
practices that stockholders consider problematic. But, we can
always do better, and the Corporation took a number of steps to
enhance our compensation program based on stockholder
expectations:
•
Engaged stockholders to receive more and continuing feedback on our
compensation program.
•
Established a non-equity incentive compensation plan for all NEOs,
with target payouts as a percentage of base salary, replacing
discretionary bonuses.
•
Added new, robust performance criteria for the vesting of all
performance-based equity awards granted in 2017 and thereafter.
•
Provided more visibility into the actual performance objectives
established by the Board.
•
Provided additional disclosures regarding the objectives and
targets used to make determinations on compensation.
Accordingly, while the Compensation Committee generally continued
to apply the same principles in determining the amounts and types
of executive compensation for 2016, the Corporation has included
additional disclosures on 2016 compensation target payouts for our
NEOs (see “2016 Compensation Decisions” below). The
Compensation Committee values stockholder feedback provided through
the vote and stockholder outreach, and will continue to consider
the results of the vote and these views in the future.
Who Determines Compensation?
Each year the Corporation’s Board of Directors sets a number
of goals and objectives, including both financial and academic
criteria. From these, the Compensation Committee designates certain
quantitative and qualitative goals to set the performance
expectations for non-equity incentive compensation. Quantitative
financial metrics make up 75% of performance-based pay, and
qualitative academic metrics, although no less important, comprise
25% of such pay. For the quantitative goals, the Compensation
Committee sets a target range that, if met, would result in a 100%
target performance payout. If actual performance is above the
range, the performance payout is up to 150%
15
of the target payout. The Compensation Committee also sets
threshold levels. If actual performance is below the target but
above the threshold level, non-equity incentive compensation is
reduced to correspond to the percentage of target achieved. Thus,
as discussed further below in the “2016 Compensation
Decisions” section, the Compensation Committee established
the performance payouts for 2016 at 75% of target because the
Corporation’s performance exceeded threshold levels but did
not fully meet the target range of the quantitative metrics. The
Compensation Committee retains discretion to reduce such pay even
further. For example, in 2012, the Corporation did not pay any
bonuses because the Corporation did not achieve its goals and
objectives.
In accordance with the Compensation Committee charter, compensation
for the Corporation’s Executive Chairman and its CEO is
determined by the Compensation Committee subject to approval of the
Corporation’s Board of Directors (excluding the Executive
Chairman and the CEO, who are also directors). In making its
determination on Executive Chairman and CEO compensation, the
Compensation Committee reviews a number of factors, including but
not limited to:
•
The Corporation’s achievement of annual goals and objectives,
both quantitative and qualitative, set by the full Board of
Directors in the preceding year,
•
The long term performance of the Corporation, and
•
CEO compensation level at comparable companies.
For the other named executive officers, the Compensation Committee
reviews, approves, and recommends to the full Board compensation
based on:
•
Performance of the executive officers in light of relevant goals
and objectives approved by the Compensation Committee and
the annual goals and objectives established by the
Board in the preceding year,
•
Executive compensation level at comparable companies, and
•
The recommendations of the Executive Chairman and the CEO.
The Executive Chairman and the CEO provide recommendations for
executive officer compensation (other than themselves) to the
Compensation Committee based on a review and analysis of each
officer’s performance and contributions to the Corporation.
While the Compensation Committee considers the recommendations of
the Executive Chairman and the CEO with respect to these elements
of compensation, the Compensation Committee independently evaluates
the recommendations for purposes of making its recommendations to
the full Board.
The Compensation Committee meets in the beginning of each year to
review financial performance, to determine non-equity incentive
compensation for the just completed fiscal year, to consider equity
awards, and to set executive officer salaries for the next fiscal
year. The Committee meets again during the year as may be required
to address compensation and equity grant issues for new officers
and directors, to make equity grants as long-term compensation, and
to make other determinations or recommendations with respect to
employee benefit plans and related matters.
Identification and Analysis of 2016 Compensation
Programs
During 2016, the Corporation’s executive compensation program
included salary, non-equity incentive compensation and long-term
compensation in the form of restricted stock awarded under the
Corporation’s 2015 Equity Compensation Plan.
•
Salary
— Salaries for executives other than the
Executive Chairman and the CEO are reviewed, approved, and
recommended to the full Board annually by the Compensation
Committee upon recommendation of the Executive Chairman and the
CEO. The Executive Chairman’s and the CEO’s salaries
are specified in their employment agreements (see “Employment
Agreements with Mr. Silberman and Mr. McDonnell” and
“Potential Payments upon Termination or Change in
Control” sections below), and are annually reviewed and
approved by the Compensation Committee and the full Board of
Directors.
•
Non-Equity Incentive Compensation
— Non-equity
incentive compensation for our named executive officers is
determined each year by our Board of Directors upon the
recommendation of the
16
Compensation Committee. In determining whether and how much to
recommend such non-equity incentive compensation, the Compensation
Committee determines whether and to what extent the Corporation has
achieved its annual corporate objectives for the year, compares
that achievement against specific, pre-determined performance
criteria, and calculates the payout relative to target.
As befits a Corporation whose main operating asset is a 125-year
old University holding the highest possible academic accreditation,
these annual corporate objectives include a number of academic
measures, as well as non-financial operational targets and
financial measures. Of course, even if the Corporation achieves all
of its academic, operational, and financial objectives in a given
year, in the event of a breach in regulatory, legal, or ethical
business standards, the Compensation Committee may eliminate the
payment of non-equity incentive compensation for that year.
Although the stock price of the Corporation may fluctuate during
the year, the Board strongly believes that management’s
responsibility is to create an enduring increase in the long-term
value of the Corporation. By achieving its annual corporate
objectives, management will necessarily increase the long-term
value of the Corporation, and generate sustainable long-term
increases in owner’s value. Each year the Board selects those
annual corporate objectives from among criteria approved by the
stockholders of the Corporation. For 2016, the objectives were
chosen from those approved by stockholders in May of 2015 as part
of the 2015 Equity Compensation Plan, which amended and restated
the 2011 Plan. While the Board believes that each of the various
annual corporate objectives is relevant to the determination of
executive compensation, the achievement of any one annual corporate
objective would not, in and of itself, result in a specific amount
of non-equity incentive compensation being paid to our named
executive officers. In determining the goals, the Board sets the
targets at levels that are realistic, but not certain.
The target non-equity incentive compensation for the Executive
Chairman and the Chief Executive Officer is established by their
employment agreements at 125% of base salary. For 2016, the
Compensation Committee set target non-equity incentive compensation
for the other named executive officers based on its evaluation of
expectations for the positions held and the executives’
ultimate ability to influence the outcomes desired. For the Chief
Financial Officer, the Compensation Committee set target non-equity
incentive compensation at 75% of base salary. As the primary
officer responsible for the Company’s budget, Mr. Jackson is
best positioned to ensure the proper balance between revenue and
expenditures, and thus a larger portion of his annual compensation
should be tied to performance measures.
The Committee set Mr. Jones’ target non-equity incentive
compensation at 50% of base salary. As the leader of the
Company’s primary asset, Strayer University, Mr. Jones’
focus should be on qualitative academic measures, as established by
the Board of Directors of the Corporation and the Board of Trustees
of the University. The Committee therefore set his target
non-equity incentive compensation at a lower percentage of base
salary to ensure that decisions affecting the University are made
based on academic quality and student success, and not simply on
short-term financial considerations. For the same reasons, the
performance measures for Mr. Jones include additional academic
metrics not included in pay-for-performance metrics for other NEOs.
Finally, the Compensation Committee set the target non-equity
incentive compensation for the Chief Accounting Officer at 25% of
base salary. The Committee determined that while the Chief
Accounting Officer, like the Chief Financial Officer, plays an
important role in ensuring that financial objectives are met, it
wanted also to ensure proper and conservative judgment on financial
controls and reporting. A smaller proportion of annual compensation
based on financial performance measures for the Chief Accounting
Officer reduces risks associated with financial controls and
reporting. See “Summary Compensation” and “2016
Compensation Decisions” for more information regarding profit
sharing awards for 2016.
•
Profit-sharing for Other Senior Executives
—
Consistent with Department of Education regulations, the
Corporation has established a profit-sharing plan for senior
executives who are not named executive officers but who
nevertheless meaningfully contribute to the success of Strayer
University and the financial health of the Corporation. Such
profit-sharing, both in cash and in equity, is determined each year
by the Compensation Committee based on recommendations from the
Executive Chairman and CEO. In determining whether and how much to
recommend such profit-sharing, the Compensation
17
Committee determines whether and to what extent the Corporation has
achieved its annual corporate objectives for the year, the
individual contribution of each executive to such achievement, and
other criteria such as comparable market pay and retention
priorities.
•
Equity-based Compensation Programs
— As discussed
above, the Corporation believes it should, subject to achievement
of certain academic, operational, financial, and individual
objectives, make annual equity grants in order to retain, motivate,
and align the interests of those key executive officers with
stockholders.
Equity awards under this program are only made after the
Compensation Committee and full Board of Directors have completed
their analysis of both corporate and individual performance
described in the previous section on profit sharing. For our Chief
Executive Officer, we believe that at least 50% of his or her
target total annual compensation should be performance-based in the
form of equity grants of restricted stock with at least a four year
cliff vest. Prior to 2017, all performance-based grants included
performance measures related to maintaining all required regulatory
approvals and Strayer University’s regional accreditation.
Given the recent regulatory environment in which Strayer University
operated, this criteria was both reasonably uncertain and of
paramount importance to both the short-term and long-term viability
of the Corporation. In 2017, the Compensation Committee added new
performance criteria for the vesting of equity awards to named
executive officers. Those new criteria include maintaining Strayer
University’s 90/10 ratio below 80%, and its Cohort Default
Rates below the national average for proprietary institutions
which, for the most recently calculated cohort, was 15%. The 90/10
ratio prohibits a proprietary institution from deriving more than
90% of revenues from Title IV funds; by setting Strayer
University’s maximum at 80% for equity vesting purposes, the
Corporation incentivizes named executive officers to diversify
revenue sources and minimize any risk of jeopardizing Title IV
funds. The Cohort Default Rate is the federally mandated measure of
student defaults on Title IV loans based on a three-year cohort and
institutions may lose eligibility to participate in some or all
Title IV programs if for three consecutive fiscal years 30% or more
of its students default on payments. Setting the maximum at below
the average for proprietary schools helps ensure continued
eligibility for Title IV funds for the University, while at the
same time recognizing industry or nationwide conditions that may
cause the rates to fluctuate year-to-year. These additional, robust
criteria therefore serve the multiple purposes of improving student
success, ensuring regulatory compliance, and enhancing the
intrinsic value of the Corporation for its stockholders.
We view our equity as very valuable and are reluctant to issue it.
This means that we only grant restricted stock or stock options to
employees and directors as compensation when we believe we are
getting fair value (in terms of their service) in return.
Our restricted stock agreements with employees contain clawback
provisions. If the Corporation is required to prepare an accounting
restatement due to the material noncompliance of the Corporation,
as a result of misconduct, with any financial reporting requirement
and the employee engaged in that misconduct knowingly failed to
prevent the misconduct or was grossly negligent in preventing the
misconduct, the employee is required to reimburse the Corporation
the amount of payment in settlement of the award earned or accrued
during the 12-month period following the filing of the financial
document that contained information affected by the material
noncompliance. In addition, if the Corporation is required to
prepare an accounting restatement, then the employee must forfeit
any cash or stock received in connection with the award if any
amount of the award was explicitly based on the achievement of
pre-established performance goals that were later determined, as a
result of the accounting restatement, not to have been
achieved.
•
Perquisites and Other Personal Benefits
— The
Corporation does not offer any perquisites. The Corporation does
reimburse relocation expenses including tax gross-ups, when
applicable. This reimbursement is offered to officers hired from a
different location to encourage prospective executives to relocate
for the Corporation’s benefit.
•
Employment Agreements with Mr. Silberman and Mr. McDonnell
— Robert S. Silberman, the Corporation’s Executive
Chairman, has an employment agreement with the Corporation which
had an initial term of approximately three years (ending on
December 31, 2004), and thereafter, automatically extended for
successive one-year periods unless either the Corporation or Mr.
Silberman provided
18
timely notice to the contrary. Mr. Silberman’s employment
agreement was amended on May 2, 2013, in connection with his
transition from Chief Executive Officer to Executive Chairman, and
then again in April 24, 2014. Under the agreement, as amended, Mr.
Silberman’s term of employment is six years, and is renewable
thereafter for one year terms unless the Corporation or Mr.
Silberman provides notice otherwise. The amended agreement provides
for a base salary of $665,000 per annum (subject to annual
increases for at least cost of living adjustments). Mr. Silberman
is also eligible to receive a target non-equity incentive
compensation payment of at least 125% of base salary, for each of
the fiscal years during which he is employed, upon meeting certain
corporate and financial goals annually approved by the Board. In
the event of termination without cause, the employment contract
also provides for the payment of three years base salary, three
years of medical benefits, and all stock awards shall immediately
vest. The employment agreement provides for a double trigger change
of control termination clause, wherein if Mr. Silberman’s
termination is without cause within six months of the effective
date of the change of control or there occurs a material reduction
in Mr. Silberman’s authority, function, duties or
responsibilities which causes Mr. Silberman’s resignation
within six months of the change of control, he is entitled to the
same payments and benefits as in a termination without cause, plus
an amount equal to three times the latest annual non-equity
incentive compensation award paid to him prior to the event of
termination. Mr. Silberman is not entitled to a gross-up payment
for any excise taxes imposed on termination payments.
The Corporation also entered into an employment agreement on May 2,
2013 with Karl McDonnell, in connection with his promotion to Chief
Executive Officer (he did not previously have an employment
agreement), and amended that agreement on April 24, 2014. Under the
employment agreement, as amended, Mr. McDonnell’s term of
employment is six years and is renewable thereafter for one year
terms unless the Corporation or Mr. McDonnell provides notice
otherwise. Under the agreement Mr. McDonnell will receive a base
salary of $665,000 per annum (subject to annual increases for at
least cost of living adjustments). Mr. McDonnell is also eligible
to receive a target non-equity incentive compensation amount of
125% of base salary for each fiscal year during which he is
employed, upon meeting certain corporate and financial goals
annually approved by the Board. In addition, Mr. McDonnell’s
employment agreement provides for an annual restricted share grant,
conditioned upon applicable performance criteria as may be
established by the Compensation Committee and with a four-year
cliff vest, with a target value equivalent to $2,000,000. Mr.
McDonnell is not entitled to a gross-up payment for any excise
taxes which may be imposed on termination payments, and his
employment agreement contains a double trigger termination clause
identical to the clause in Mr. Silberman’s employment
agreement, discussed above.
•
Retirement and Deferred Compensation Plans
— The
Corporation maintains a retirement plan (the “401(k)
Plan”) intended to qualify under Sections 401(a) and 401(k)
of the Internal Revenue Code of 1986, as amended. The 401(k) Plan
is a defined contribution plan that covers all eligible full-time
and part-time employees of the Corporation of at least 21 years of
age. The Corporation, in its discretion, matches employee
contributions up to a maximum authorized amount under the plan. In
2016, the Corporation matched 50% of employee deferrals up to a
maximum of 3% of the employee’s annual salary. The
Corporation offers this plan to enable and encourage its employees
to save for their retirement in a tax advantageous way. The
Corporation also maintains an Employee Stock Purchase Plan (the
“Employee Purchase Plan”). The purpose of the Employee
Purchase Plan is to enable eligible full-time employees of the
Corporation, through payroll deductions, to purchase shares of its
common stock at a 10% discount from the prevailing market price
from time to time. The Corporation offers this plan to encourage
stock ownership by its employees.
2016 Compensation Decisions
The compensation policies and objectives outlined above formed the
basis for the Compensation Committee’s recommendation, and
the Board’s determination, of 2016 compensation for the Chief
Executive Officer and the NEOs. Each component, and the overall
compensation package, for named executive officers reflected the
Corporation’s philosophy of paying for performance based on
corporate and personal achievements in 2016.
Salary
: As in years past and consistent with our pay policy
and objectives, the salary for our Chief Executive Officer in 2016
was below the average of our peer companies. Likewise, salaries for
other named executive officers
19
were at or below the midpoint. In 2016, Mr. McDonnell and Mr.
Silberman received their contractual increase in base salary of
1.7%. This was the first salary increase Mr. Silberman had received
since 2008, and the first increase Mr. McDonnell had received since
2013, as each had previously declined their contractual salary
increases. Absent those voluntary declinations, both
executives’ salaries would have compounded significantly
based on their contractual terms. Although the Committee noted its
appreciation on behalf of stockholders for their forbearances, the
Committee did not take into account the prior declinations in
setting their base salaries.
Non-equity Incentive Compensation
: At the start of each
year, the Compensation Committee sets specific goals upon which it
would evaluate pay-for-performance in the upcoming year. Those
goals are comprised of quantitative financial objectives, which
account for 75% of the pay-for-performance evaluation, and
qualitative academic measures, which account for the remaining 25%.
The Compensation Committee sets a range of quantitative metrics for
named executive officers which, if met, would yield a 100% payout
of non-equity incentive compensation targets, a threshold range
which would yield a 50% payout, and a maximum range that would
yield a payout at 150% of target levels. Achievement of levels
among threshold, target and maximum levels leads to a corresponding
percentage of payout above or below the target. Target payout for
the CEO and Executive Chairman is 125% of base salary, 75% of base
salary for the Chief Financial Officer, 50% of base salary for the
University’s President, and 25% of base salary for the Chief
Accounting Officer.
For 2016, the Compensation Committee set quantitative financial
objectives for Revenue, EBIT, and Net Income (with each metric
weighted equally at 25%); and qualitative academic and operational
objectives (weighted also at 25%) to include acquiring a software
coding business, completing Strayer University’s
accreditation self-study, adding Strayer University
corporate/institutional partners, and maintaining academic and
financial metrics to comply with Federal regulatory requirements
such as cohort default rates and the 90/10 ratio.
After the conclusion of the fiscal year, the Compensation Committee
evaluated the achievement of both the quantitative metrics and the
qualitative goals. The Compensation Committee determined that the
Company outperformed Revenue, EBIT, and Net Income at the
“Threshold” level (50% payout), but did not fully
achieve the “Target” level (100% payout). Accordingly,
the Compensation Committee calculated the percentage of
“Target” level achieved to determine the final payout
level for each goal. As indicated in the chart below, Revenue was
achieved at 92.6% of target; EBIT at 58.2% of target; and Net
Income at 58% of target. Each of these components comprised 25% of
total non-equity incentive compensation calculations. The
Compensation Committee further determined that the Corporation met
or exceeded all of its qualitative academic and operational
objectives, including the successful acquisition of the New York
Code and Design Academy, submitting the reaccreditation self-study
in December of 2016, a cohort default rate of 11.3% (at the
national average for all colleges and universities), and a 90/10
ratio of 73% for 2015. The satisfaction of these qualitative
academic goals collectively comprised 25% of the
pay-for-performance calculation. Mr. Jones, as the University
President, also met all additional qualitative academic objectives
as predetermined by the Corporation’s Board of Directors and
Strayer University’s Board of Trustees.
Although the Committee
appreciates that the Corporation’s overall financial
performance depends on a number of regulatory and market factors,
its overarching philosophy of pay for performance and adherence to
predetermined criteria dictates non-equity incentive compensation
at below target payouts. By the same token, the Company’s
exceptional performance on academic and compliance goals in the
midst of an adverse regulatory environment indicates full credit
(25%) for qualitative academic and operational metrics. Combining
the performance on the quantitative and qualitative metrics, the
calculated percentage of target was 77.2%, and the Compensation
Committee exercised negative discretion to set performance-based
compensation at 75% of target amounts.
The chart below shows the breakdown of the financial and academic
goals for 2016, and the calculations of the Compensation Committee
in making its pay-for-performance determinations for our CEO and
NEOs:
|
|
|
|
|
|
|
|
|
|
|
|
2016
Calculated
% of Target
|
Revenue
(in thousand $)
|
|
25
|
%
|
|
$
|
430,000
|
|
$
|
443,000
|
|
$
|
480,000
|
|
$
|
441,088
|
|
92.6
|
%
|
EBIT
(in thousand $)
|
|
25
|
%
|
|
$
|
56,000
|
|
$
|
65,000
|
|
$
|
77,550
|
|
$
|
57,472
|
|
58.2
|
%
|
Net
Income (in thousand $)
|
|
25
|
%
|
|
$
|
34,000
|
|
$
|
39,000
|
|
$
|
47,500
|
|
$
|
34,802
|
|
58.0
|
%
|
Academic
|
|
25
|
%
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Achieved
|
|
100.0
|
%
|
Total
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77.2
|
%
|
20
Based on this information, coupled with the evaluation of
individual performance during the course of the year, payouts to
NEOs were as follows:
|
|
Annual
Target as
a Percentage of
Base Salary
|
|
2016
Target
Award
Opportunity
|
|
|
|
2016
Award as
% of Base Salary
|
Robert
S. Silberman
|
|
125%
|
|
|
$
|
845,000
|
|
$
|
635,000
|
|
94%
|
|
Karl
McDonnell
|
|
125%
|
|
|
$
|
845,000
|
|
$
|
635,000
|
|
94%
|
|
Daniel
W. Jackson
|
|
75%
|
|
|
$
|
262,500
|
|
$
|
200,000
|
|
57%
|
|
Brian
W. Jones
|
|
50%
|
|
|
$
|
200,000
|
|
$
|
150,000
|
|
38%
|
|
Thomas
J. Aprahamian
|
|
25%
|
|
|
$
|
71,250
|
|
$
|
55,000
|
|
19%
|
|
Equity-based Compensation
: The Corporation views its equity
as very valuable, and is reluctant to issue it given the dilutive
effect on existing stockholders. In any given year equity grants
will generally not be awarded if the Corporation fails to achieve
the quantitative and qualitative goals as outlined above, but
neither does the achievement of those goals dictate that grants
must be made. Instead, the Compensation Committee determines the
grant of equity for NEOs, and at what level, based on the NEOs
contributions to having achieved those corporate goals, coupled
with the Corporation’s desire to retain, motivate, and align
the interests of those key executive officers with
stockholders’ interest.
In February 2016, after the Compensation Committee and Board
evaluated the achievement of the previous fiscal year’s goals
(both the quantitative and qualitative goals were achieved at
target) in making determinations on named executive officer
long-term incentive equity grants. The Board awarded Mr. McDonnell
a restricted share equity grant at his contractual target level of
$2,000,000, which vests in four years subject to the achievement of
performance criteria established by the Compensation Committee.
Also in February 2016, Mr. Jones received a restricted share equity
grant of $600,000, Mr. Jackson received a restricted share equity
grant of $500,000, and Mr. Aprahamian received a restricted share
equity grant of $150,000. These grants are all performance based
and cliff vest after four years subject to the achievement of
performance criteria as established by the Compensation
Committee.
Additionally, Mr. Silberman received a grant of deferred restricted
stock units, with a value of $2,533,500 on the grant date. These
restricted stock units do not vest until February 2019, and are
subject to the achievement of performance criteria as established
by the Compensation Committee. Further, delivery of any vested
deferred restricted stock units will be deferred in accordance with
Treasury Regulation section 1.409A-2(b)(7)(i).
Performance criteria related to the vesting of grants made to the
named executive officers in 2016 consist of maintaining all
required regulatory approvals and Strayer University’s
regional accreditation with the Middle States Commission on Higher
Education. Given the regulatory environment in which Strayer
University operated, the Compensation Committee determined that the
criteria were both reasonably uncertain and of paramount importance
to both the short-term and long-term viability of the Corporation.
This regulatory environment has resulted in the Department of
Education requiring various institutions of higher education to
post significant letters of credit and to adopt heightened cash
monitoring; accrediting agencies putting institutions on probation,
and in some instances revoking accreditation; and the complete
revocation of Title IV eligibility from some institutions. The
performance criteria incentivized executive officers to ensure that
the University’s ability to educate and our students’
ability to finance their education with federal funds are not
jeopardized, even as regulatory risks increased for proprietary
institutions of higher education. For the same reasons, as
described in “Identification and Analysis of 2016
Compensation Programs,” the Compensation Committee in 2017
enhanced the performance criteria by adopting two additional
metrics: (1) maintaining the University’s 90/10 percentage
below 80%, and (2) maintaining the University’s cohort
default rate below the national average of proprietary
institutions.
Recoupment Policy
The Corporation has adopted a Recoupment Policy that requires each
executive officer, as so designated under Rule 3b-7 of the
Securities Exchange Act of 1934, as amended, to acknowledge and
agree that any award, including all cash profit sharing
compensation, non-equity incentive compensation, or equity-based compensation, will be repaid should a
“Triggering Event” occur. A Triggering Event is defined
in the Recoupment Policy as a decision by the Audit Committee to
effect an accounting restatement of the Corporation’s
previously published financial statements caused by material
non-compliance by the Company with any financial reporting
requirement due to fraud, misconduct, negligence,
21
or lack of sufficient oversight on the part of any executive
officer, or a decision by the Compensation Committee that one or
more performance metrics used for determining previously paid
incentive compensation was incorrectly calculated and, if
calculated correctly, would have resulted in a lower payment to one
or more executive officers.
Impact of Tax and Accounting Treatment
Under Section 162(m) of the Internal Revenue Code of 1986, as
amended and applicable Treasury regulations, no deduction is
allowed for annual compensation in excess of $1 million paid by a
publicly traded corporation to its chief executive officer and the
three other highest compensated executive officers (other than the
chief financial officer). Under those provisions, however, there is
no limitation on the deductibility of “qualified
performance-based compensation.” In general, the
Corporation’s policy is to maximize the extent of tax
deductibility of executive compensation under the provisions of
Section 162(m) so long as doing so is compatible with its
determination as to the most appropriate methods and approaches for
the design and delivery of compensation to the Corporation’s
executive officers.
Summary
Compensation
The following table sets forth all compensation awarded to the
Corporation’s named executive officers for the fiscal years
ended December 31, 2014, 2015, and 2016.
Summary Compensation
Table
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan
Compensation
(b)
|
|
|
|
All
Other
Compensation
(d)
|
|
|
Robert
S. Silberman,
|
|
2016
|
|
$
|
676,000
|
|
$
|
—
|
|
$
|
635,000
|
|
$
|
2,533,500
|
|
$
|
2,130
|
|
$
|
3,846,630
|
Executive
Chairman
|
|
2015
|
|
$
|
665,000
|
|
$
|
835,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,975
|
|
$
|
1,503,975
|
|
|
2014
|
|
$
|
665,000
|
|
$
|
835,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,900
|
|
$
|
1,503,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl
McDonnell,
|
|
2016
|
|
$
|
676,000
|
|
$
|
—
|
|
$
|
635,000
|
|
$
|
2,000,000
|
|
|
3,975
|
|
$
|
3,314,975
|
Chief
Executive Officer &
|
|
2015
|
|
$
|
665,000
|
|
$
|
835,000
|
|
$
|
—
|
|
$
|
2,000,000
|
|
$
|
3,975
|
|
$
|
3,503,975
|
Director
|
|
2014
|
|
$
|
665,000
|
|
$
|
835,000
|
|
$
|
—
|
|
$
|
2,000,000
|
|
$
|
3,900
|
|
$
|
3,503,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
W. Jackson,
|
|
2016
|
|
$
|
350,000
|
|
$
|
—
|
|
$
|
200,000
|
|
$
|
500,000
|
|
$
|
3,975
|
|
$
|
1,053,975
|
Executive
Vice President &
|
|
2015
|
|
$
|
312,500
|
|
$
|
225,000
|
|
$
|
—
|
|
$
|
500,000
|
|
$
|
3,975
|
|
$
|
1,041,475
|
Chief
Financial Officer
(e)
|
|
2014
|
|
$
|
260,000
|
|
$
|
120,000
|
|
$
|
—
|
|
$
|
150,000
|
|
$
|
3,900
|
|
$
|
533,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
W. Jones,
|
|
2016
|
|
$
|
400,000
|
|
$
|
—
|
|
$
|
150,000
|
|
$
|
600,000
|
|
$
|
3,975
|
|
$
|
1,153,975
|
President,
Strayer
|
|
2015
|
|
$
|
360,577
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
610,577
|
University
(f)
|
|
2014
|
|
$
|
300,000
|
|
$
|
100,000
|
|
$
|
—
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
J. Aprahamian,
|
|
2016
|
|
$
|
285,000
|
|
$
|
—
|
|
$
|
55,000
|
|
$
|
150,000
|
|
$
|
3,975
|
|
$
|
493,975
|
Senior
Vice President &
|
|
2015
|
|
$
|
270,000
|
|
$
|
75,000
|
|
$
|
—
|
|
$
|
300,000
|
|
$
|
3,975
|
|
$
|
648,975
|
Chief
Accounting Officer
(g)
|
|
2014
|
|
$
|
244,000
|
|
$
|
75,000
|
|
$
|
—
|
|
$
|
100,000
|
|
$
|
3,900
|
|
$
|
422,900
|
22
In each of 2016, 2015, and 2014, All Other Compensation is
comprised of the Corporation’s match of contributions to a
401(k) plan only. The table below sets forth this information by
named executive officer for the fiscal years ended December 31,
2014, 2015, and 2016.
Supplemental All Other
Compensation Table
|
|
|
|
Corporation’s
401(k) Match
|
|
|
|
Total
All Other
Compensation
|
Robert S. Silberman,
|
|
2016
|
|
$
|
2,130
|
|
$
|
—
|
|
$
|
2,130
|
Executive Chairman
|
|
2015
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
|
|
2014
|
|
$
|
3,900
|
|
$
|
—
|
|
$
|
3,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl McDonnell,
|
|
2016
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
Chief Executive Officer &
Director
|
|
2015
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
|
|
2014
|
|
$
|
3,900
|
|
$
|
—
|
|
$
|
3,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel W. Jackson,
|
|
2016
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
Executive Vice President &
|
|
2015
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
Chief Financial Officer
|
|
2014
|
|
$
|
3,900
|
|
$
|
—
|
|
$
|
3,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian W. Jones,
|
|
2016
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
President, Strayer University
|
|
2015
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
2014
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas J. Aprahamian,
|
|
2016
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
Senior Vice President &
|
|
2015
|
|
$
|
3,975
|
|
$
|
—
|
|
$
|
3,975
|
Chief Accounting Officer
|
|
2014
|
|
$
|
3,900
|
|
$
|
—
|
|
$
|
3,900
|
23
Grants of Plan-Based
Awards
The following table sets forth grants of plan-based awards to the
Corporation’s named executive officers for the fiscal year
ended December 31, 2016.
Grants of Plan-Based
Awards Table
|
|
|
|
Estimated
future payouts under non-
equity incentive plan awards
|
|
All
Stock
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares of
Stock or Units
(#)
|
|
Grant
Date
Fair Value of
Stock Awards
($)
|
|
|
Robert
S. Silberman,
|
|
2/2/2016
|
|
|
|
|
|
|
|
50,000
|
(a)
|
|
2,533,500
|
|
2/10/2019
|
Executive
Chairman
|
|
—
|
|
422,500
|
|
845,000
|
|
1,267,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl
McDonnell,
|
|
2/2/2016
|
|
|
|
|
|
|
|
39,471
|
(b)
|
|
2,000,000
|
|
2/2/2020
|
Chief
Executive Officer & Director
|
|
—
|
|
422,500
|
|
845,000
|
|
1,267,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
W. Jackson,
|
|
2/2/2016
|
|
|
|
|
|
|
|
9,868
|
(b)
|
|
500,000
|
|
2/2/2020
|
Executive
Vice President &
Chief Financial Officer
|
|
—
|
|
131,250
|
|
262,500
|
|
393,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
W. Jones,
|
|
2/2/2016
|
|
|
|
|
|
|
|
11,841
|
(b)
|
|
600,000
|
|
2/2/2020
|
President,
Strayer University
|
|
—
|
|
100,000
|
|
200,000
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
J. Aprahamian,
|
|
2/2/2016
|
|
|
|
|
|
|
|
2,960
|
(c)
|
|
150,000
|
|
2/2/2020
|
Senior
Vice President &
Chief Accounting Officer
|
|
—
|
|
35,625
|
|
71,250
|
|
106,875
|
|
|
|
|
|
|
|
24
Outstanding Equity
Awards at Fiscal Year-End
The following tables set forth outstanding option and stock awards
of the Corporation’s named executive officers as of December
31, 2016.
Outstanding Option
Awards Table at Fiscal Year-End
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
|
Option
Exercise
Price
($)
|
|
|
|
|
|
Intrinsic Value
of Stock
Options at
12/31/16
($)
|
Robert S. Silberman,
|
|
100,000
|
|
2/15/13
|
|
$
|
51.95
|
|
2/15/15
|
|
2/14/21
|
|
$
|
2,868,000
|
(a)
|
Executive Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl McDonnell,
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Chief Executive Officer &
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel W. Jackson,
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Executive Vice President & Chief Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian W. Jones,
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
President, Strayer University
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas J. Aprahamian,
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Senior Vice President &
Chief Accounting Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Outstanding Stock Awards
Table at Fiscal Year-End
|
|
Restricted
Stock/
Restricted Stock
Unit Award
Date
|
|
Number of
Shares or Units
of Stock That
Have Not Vested
(#)
|
|
Market Value of
Shares of Stock
at 12/31/16 That
Have Not Vested
($)
|
|
Restricted Stock
Vesting Date
|
Robert S. Silberman,
|
|
3/22/13
|
|
200,000
|
(a)
|
|
16,126,000
|
|
2/10/19
|
Executive Chairman
|
|
2/2/16
|
|
50,000
|
(b)
|
|
4,032,000
|
|
2/10/19
|
|
|
|
|
|
|
|
|
|
|
Karl McDonnell,
|
|
2/14/12
|
|
6,491
|
(c)
|
|
523,000
|
|
2/14/17
|
Chief Executive Officer &
Director
|
|
5/2/13
|
|
43,659
|
(d)
|
|
3,520,000
|
|
5/2/17
|
|
|
5/6/14
|
|
46,674
|
(e)
|
|
3,763,000
|
|
5/6/18
|
|
|
5/5/15
|
|
40,867
|
(f)
|
|
3,295,000
|
|
5/5/19
|
|
|
2/2/16
|
|
39,471
|
(g)
|
|
3,183,000
|
|
2/2/20
|
|
|
|
|
|
|
|
|
|
|
Daniel W. Jackson
|
|
2/14/12
|
|
1,298
|
(c)
|
|
105,000
|
|
2/14/17
|
Executive Vice President &
|
|
2/12/13
|
|
16,057
|
(h)
|
|
1,295,000
|
|
2/12/18
|
Chief Financial Officer
|
|
2/19/14
|
|
4,458
|
(i)
|
|
359,000
|
|
2/19/18
|
|
|
2/4/15
|
|
7,128
|
(j)
|
|
575,000
|
|
2/4/19
|
|
|
2/2/16
|
|
9,868
|
(g)
|
|
796,000
|
|
2/2/20
|
|
|
|
|
|
|
|
|
|
|
Brian W. Jones
|
|
2/12/13
|
|
12,042
|
(h)
|
|
971,000
|
|
2/12/18
|
President, Strayer University
|
|
2/19/14
|
|
7,429
|
(i)
|
|
599,000
|
|
2/19/18
|
|
|
2/2/16
|
|
11,841
|
(g)
|
|
955,000
|
|
2/2/20
|
|
|
|
|
|
|
|
|
|
|
Thomas J. Aprahamian
|
|
2/14/12
|
|
606
|
(c)
|
|
49,000
|
|
2/14/17
|
Senior Vice President &
|
|
2/12/13
|
|
1,204
|
(h)
|
|
97,000
|
|
2/12/18
|
Chief Accounting Officer
|
|
2/19/14
|
|
2,972
|
(i)
|
|
240,000
|
|
2/19/18
|
|
|
2/4/15
|
|
4,277
|
(j)
|
|
345,000
|
|
2/4/19
|
|
|
2/2/16
|
|
2,960
|
(k)
|
|
239,000
|
|
2/2/20
|
26
Option Exercises and
Stock Vested Table
None of the named executive officers exercised stock options or had
stock awards vest during the fiscal year ended December 31,
2016.
Potential Payments upon
Termination or Change in Control
Mr. Silberman and Mr. McDonnell are the only named executive
officers with employment contracts, and both agreements provide for
a double-trigger change of control termination clause. In the event
that Mr. Silberman is terminated by the Corporation without cause,
he is entitled to receive a lump sum payment of three years’
salary, which would currently total $2.0 million, and all stock
awards shall immediately vest. If Mr. Silberman is terminated
without cause within six months of a change of control, or there
occurs a material reduction in his authority, function, duties or
responsibilities which cause his resignation within six months of a
change of control, Mr. Silberman is entitled to receive a lump sum
payment of three times his annual salary plus three times his
latest previous annual non-equity incentive compensation award
actually paid. (A change in control is defined in the contract as
acquisition of more than 50% of the voting stock of the Corporation
or the acquisition of combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of
directors, completion of a merger or other business combination
resulting in a change in control of more than 50% of the voting
stock of the Corporation, election of a substantially different
Board of Directors or approval by stockholders of a complete
liquidation or dissolution of the Corporation.) Consistent with the
agreement with Mr. Silberman in effect since 2001, Mr. Silberman is
entitled to three years of medical benefits following termination
(estimated cost of $45,000). Mr. Silberman is not entitled to a
gross-up payment for any excise taxes which may be imposed on
termination payments. The agreement also contains covenants
restricting Mr. Silberman from competing with the Corporation for
six years after his termination of employment and requires Mr.
Silberman to keep confidential the Corporation’s proprietary
information.
In the event that Mr. McDonnell is terminated by the Corporation
without cause, he is entitled to receive a lump sum payment of
three years’ salary (which would currently total $2.0
million), three years’ medical benefits, and all restricted
stock awards shall immediately vest unless provided otherwise in
the agreement applicable to such restricted awards. If Mr.
McDonnell is terminated without cause within six months of a change
of control, or there occurs a material reduction in his authority,
function, duties or responsibilities which cause his resignation
within six months of a change of control, Mr. McDonnell is entitled
to the same payments and benefits as in a termination without
cause, plus three times his latest previous annual non-equity
incentive compensation award actually paid. (A change in control is
defined in the same manner as in Mr. Silberman’s employment
agreement.) Mr. McDonnell is not entitled to a gross-up payment for
any excise taxes which may be imposed on termination payments. The
agreement also contains covenants restricting Mr. McDonnell from
competing with the Corporation for six years after his termination
of employment and requires Mr. McDonnell to keep confidential the
Corporation’s proprietary information.
For all named executive officers, stock options and restricted
stock awards made prior to 2013 vest immediately upon the
occurrence of a change in control of the Corporation as defined in
their respective stock option or restricted stock agreements.
Change in control is defined in substantially the same way as in
Mr. Silberman’s contract. For any stock options and
restricted awards made in 2013 and thereafter, the options and
awards vest in connection with a change in control only if such
change in control results in termination, defined as (1)
termination of employment by the Corporation without cause within
six months of the effective date of the change in control or (2)
the occurrence of a material reduction in the officers’
authority, functions, duties or responsibilities which causes the
executives’ resignation from the Corporation within six
months of the effective date of the change in control.
The valuation of the acceleration that would have been made for
stock-based awards had there been a change in control at the
closing price of $80.63 of the Corporation’s common stock at
December 31, 2016 is set forth below. Awards made prior to 2013
would accelerate with only a change in control, and those made
after 2013 would accelerate with a change in control plus a
termination or constructive termination.
27
|
|
Value
Realized
Upon Vesting
Due to Change
in Control
($)
|
|
Value
Realized
Upon Vesting
Due to Change
in Control with
Termination
($)
|
Robert S. Silberman
|
|
—
|
|
23,026,000
|
Karl McDonnell
|
|
523,000
|
|
14,284,000
|
Daniel W. Jackson
|
|
105,000
|
|
3,130,000
|
Brian W. Jones
|
|
—
|
|
2,525,000
|
Thomas J. Aprahamian
|
|
49,000
|
|
970,000
|
Securities Authorized
for Issuance Under Equity Compensation Plans
Set forth in the table below is information pertaining to
securities authorized for issuance under the Corporation’s
equity compensation plans as of December 31, 2016. There are
options and restricted stock units but no warrants existing under
these plans.
Equity Compensation Plan
Information
as of December 31, 2016
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
(a)
|
|
Weighted
average exercise
price of
outstanding
options,
warrants and
rights
(b)
|
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column(a))
(c)
|
Equity compensation plans previously approved by
security holders
|
|
|
|
|
|
|
|
|
2015 Equity Compensation Plan which replaced the
2011 Equity Compensation Plan as amended
|
|
50,000
|
|
|
—
|
|
|
332,982
|
2011 Equity Compensation Plan which replaced the
1996 Stock Option Plan as amended
|
|
300,000
|
|
$
|
51.95
|
(1)
|
|
—
|
Equity compensation plans not previously
approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
Total
|
|
350,000
|
|
$
|
51.95
|
|
|
332,982
|
28
COMPENSATION COMMITTEE
REPORT
The Compensation Committee of the Strayer Education, Inc. Board of
Directors is currently composed of three directors — Messrs.
Wargo (Chair), Brock and Milano. Prior to May 3, 2016, the
Compensation Committee was composed of Messrs. Wargo (Chair),
Brock, and Johnson. Between February 2, 2016, the date of the last
Compensation Committee Report, and January 19, 2017, the
Compensation Committee met twice.
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis section with management and,
based on the review and discussion, the Committee recommended to
the Board to include this information in the Corporation’s
Annual Report on Form 10-K and proxy statement.
Compensation
Committee:
J. David Wargo, Chair
William E. Brock
Todd A. Milano
AUDIT COMMITTEE
REPORT
The Audit Committee of the Strayer Education, Inc. (the
“Corporation”) Board of Directors is composed of three
directors, all of whom are independent, as independence is defined
under the NASDAQ Listing Standards and Rule 10A-3(b)(1) of the 1934
Act. For the year ended December 31, 2016, the Audit Committee was
composed of Messrs. Waite (Chair), Milano, and Grusky until May 3,
2016; Messrs. Waite (Chair), Milano and Wargo from May 3, 2016
until October 25, 2016; and thereafter the Audit Committee was
composed of Messrs. Waite (Chair), Fick, and Wargo. The Audit
Committee operates under a written charter first adopted in 2001,
which is currently reviewed annually and which has periodically
been subsequently revised by the Committee to reflect regulatory
developments.
The function of the Audit Committee is oversight. The management of
the Corporation is responsible for the preparation, presentation
and integrity of the Corporation’s financial statements.
Management is responsible for maintaining appropriate accounting
and financial reporting policies and internal controls and
procedures that provide for compliance with accounting standards
and applicable laws and regulations.
The independent auditors are responsible for planning and carrying
out a proper audit of the Corporation’s annual financial
statements, reviews of the Corporation’s quarterly financial
statements prior to the filing of each quarterly report on Form
10-Q, and other procedures.
In connection with this responsibility, during 2016 the Audit
Committee met and held discussions with management six times
together with the independent registered public accounting firm.
The Audit Committee reviewed and discussed the audited financial
statements with management. At least quarterly, as a matter of
practice, the Audit Committee, in addition to the agenda with all
present, meets separately with management, internal audit, and
PricewaterhouseCoopers LLP, and in executive session of itself.
Management represented to the Audit Committee that the
Corporation’s consolidated financial statements were prepared
in accordance with generally accepted accounting principles, and
the Audit Committee reviewed and discussed the consolidated
financial statements with management and, independently with
PricewaterhouseCoopers LLP. The Committee also discussed with
PricewaterhouseCoopers LLP the matters covered by Public Company
Accounting Oversight Board Auditing Standard No. 16,
Communications with
Audit Committees
.
During the year 2016, management conducted the documentation,
testing and evaluation of the Corporation’s system of
internal control over financial reporting in response to the
requirements set forth in Section 404 of the Sarbanes-Oxley Act of
2002 and related regulations. The Audit Committee was kept apprised
of the progress of the evaluation and provided oversight during the
process. In connection with this oversight, the Audit Committee
received periodic updates provided by management and
PricewaterhouseCoopers LLP at each regularly scheduled Audit
Committee meeting. At the conclusion of the process, management
provided the Audit Committee with a report on the effectiveness of
the Corporation’s internal control over financial reporting.
The Audit Committee also reviewed the report of management
contained in the Corporation’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2016 filed with the SEC, as well
as PricewaterhouseCoopers LLP’s Report of Independent
Registered Public Accounting Firm (included in the
Corporation’s Annual Report on Form 10-K). This report of
PricewaterhouseCoopers LLP related to its audit of (i) the
consolidated financial statements and (ii) the effectiveness
29
of internal control over financial reporting. The Audit Committee
continues to oversee the Corporation’s efforts related to its
internal control over financial reporting.
The Audit Committee has received from PricewaterhouseCoopers LLP
the written disclosures and the letter required by the applicable
standards of the Public Company Accounting Oversight Board
regarding communications with the Audit Committee concerning the
independence of PricewaterhouseCoopers LLP and has discussed with
PricewaterhouseCoopers LLP its independence. PricewaterhouseCoopers
LLP advised the Committee that there were no disagreements with
management regarding the preparation of the Corporation’s
financial statements or the conduct of the annual audit.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements for the year 2016 be included in the
Corporation’s annual report on Form 10-K for the year ended
December 31, 2016, filed with the SEC, and that
PricewaterhouseCoopers LLP be retained as the Corporation’s
independent registered public accounting firm for the fiscal year
2017.
Audit Committee:
G. Thomas Waite, III, Chair
Nathaniel C. Fick
J. David Wargo
Certain Transactions
with Related Parties
The Corporation had no transactions with related parties during the
fiscal year ended December 31, 2016 that would need to be disclosed
pursuant to Item 404 of Regulation S-K. The Corporation prohibits
conflict of interest activities by any director or officer, or
persons related thereto, unless specifically approved in advance
and in writing by the General Counsel, CEO, and Audit Committee of
the Board of Directors after full disclosure of all aspects of the
activity. A conflict of interest is defined generally to include
situations where a person (i) has a private interest that
materially conflicts or interferes with the interests of the
Corporation, (ii) has a material personal interest that will impair
the person’s ability to perform his or her work objectively
and effectively, or (iii) derives a material personal benefit as a
result of the person performing services for the Corporation. Among
the other circumstances that may be considered conflicts of
interest, any engagement in a personal business transaction
involving the Corporation for profit or gain will be considered a
conflict of interest requiring advance approval under the Code of
Business Conduct. The Corporation’s policy prohibiting
conflict of interest activities is further described in the Code of
Business Conduct.
30
PROPOSAL 2
Ratification of
Appointment of Independent Registered Public Accounting
Firm
The Audit Committee and the Board of Directors have appointed
PricewaterhouseCoopers LLP to serve as the Corporation’s
independent registered public accounting firm for the fiscal year
ending December 31, 2017. PricewaterhouseCoopers LLP has acted as
the Corporation’s independent registered public accounting
firm for the fiscal year ended December 31, 2016. Representatives
of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if
they desire and to respond to appropriate questions. Although
stockholder ratification of the appointment of auditors is not
required as a technical matter, the appointment of
PricewaterhouseCoopers LLP is being submitted for ratification as a
matter of good corporate practice in order that the Audit Committee
may take into consideration the views of stockholders on this
matter. The ratification of the appointment of
PricewaterhouseCoopers LLP requires the approval of a majority of
the votes cast at the Annual Meeting.
The Board of Directors
recommends a vote for the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Corporation’s independent
registered public accounting firm for the fiscal year ending
December 31, 2017.
Principal Accounting
Fees and Services
Set forth below are the services rendered and related fees billed
by PricewaterhouseCoopers LLP for 2015 and 2016:
|
|
|
|
|
Audit
Fees
|
|
|
|
|
|
|
Audit of consolidated financial
statements
|
|
$
|
789,980
|
|
$
|
979,500
|
Tax
Fees
|
|
|
|
|
|
|
Preparation of corporate tax returns
|
|
|
92,620
|
|
|
88,100
|
Other tax compliance/tax advice
|
|
|
75,445
|
|
|
18,568
|
All
Other Fees
|
|
|
|
|
|
|
License fee for accounting tools
|
|
|
1,800
|
|
|
1,800
|
|
|
$
|
959,845
|
|
$
|
1,087,968
|
It is the Audit Committee’s policy to pre-approve all audit
and non-audit related services provided by the Corporation’s
independent registered public accounting firm. All of the services
described above were pre-approved by the Corporation’s Audit
Committee.
31
PROPOSAL 3
Advisory Vote on the
Compensation of the Named Executive Officers
This proposal, commonly known as a “Say on Pay”
proposal, allows our stockholders to express their opinions
regarding the decisions of the Compensation Committee on the prior
year’s annual compensation to the named executive officers.
Stockholders vote, on an advisory basis, to approve, reject or
abstain from the compensation of our named executive officers. This
vote does not address any specific item of compensation, but rather
the overall compensation of our named executive officers and our
compensation philosophy, policies and practices, as disclosed in
this proxy statement.
As discussed in the Compensation Discussion and Analysis section of
this proxy statement, the objectives of our compensation program
are, among other things:
•
To ensure compliance with applicable regulatory, legal and ethical
business standards,
•
To attract and retain highly qualified and productive
individuals,
•
To reward superior contribution to the long term performance of the
Corporation,
•
To encourage officers and directors to think like owners and align
their interests accordingly.
Your advisory vote will serve as an additional tool to guide the
Board of Directors and the Compensation Committee in continuing to
align the Corporation’s executive compensation with the best
interests of the Corporation and its stockholders.
The affirmative vote of a majority of votes cast at the Annual
Meeting is required for approval of this proposal. This proposal
will be presented at the Annual Meeting as a resolution in
substantially the following form:
RESOLVED, that the compensation paid to the Corporation’s
named executive officers, as disclosed pursuant to Item 402 of
Regulation S-K, including the Compensation Discussion and Analysis,
compensation tables and narrative discussion, is hereby
APPROVED.
Although the final vote is advisory in nature and therefore is not
binding on us, does not affect past executive compensation, and
creates no additional fiduciary obligations, the Board and
Compensation Committee intend to consider carefully the voting
results of this proposal when making future compensation decisions
for our named executive officers.
The Board of Directors
believes that our compensation program achieves our objectives
outlined above, and therefore recommends a vote “for”
this proposal.
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PROPOSAL 4
Advisory Vote on the
Frequency of Stockholder Votes on Executive Compensation
Our stockholders have an opportunity to cast an advisory vote on
the frequency with which we conduct an advisory stockholder vote on
our executive compensation. This proposal, commonly known as a
“Say When on Pay” proposal, allows stockholders to
indicate their preference as to whether we seek an advisory vote on
executive compensation every one, two, or three years.
Our stockholders last voted on a similar proposal in 2011, with the
majority voting to hold the advisory vote on executive compensation
every year. The Board continues to believe that it is preferable to
conduct an advisory vote on executive compensation every year for
several reasons. First, we think that our owners should have a say
in how our executives are paid. Second, as explained in the section
entitled “Compensation Discussion and Analysis”, we
encourage directors and officers to think like stockholders and
focus on the long term value of the Corporation. Finally, we
believe that stockholders should have a means of expressing their
views on executive compensation other than the annual vote on the
election of directors. Of course, please contact us whenever you
have something, anything, on your mind about the Corporation and
not just when we hold a vote on a particular matter. Stockholders
wanting to express their views to the Board should feel free to use
the process put in place to assist such communications described
under the caption “Stockholder Communication with
Directors.”
You may cast your vote on your preferred voting frequency by
selecting the option of holding an advisory vote on executive
compensation every year, as recommended by the board of directors,
every two (2) years, or every three (3) years, or you may
abstain.
Your vote is not intended to approve or disapprove the
recommendation of the Board of Directors. The choice receiving the
greatest number of votes — every year, every two years or
every three years — will be the frequency that stockholders
will be deemed to have approved.
Although the final vote is advisory and therefore not binding, we
will carefully consider the voting results of this proposal. Your
Board and Compensation Committee value the opinions of all of our
stockholders and, unless there are overriding considerations which
we will explain, we will abide by the outcome of this vote when
making future decisions on the frequency with which we hold an
advisory vote on executive compensation.
The Board of Directors
recommends that an advisory vote to approve the compensation of our
named executive officers be held every year.
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Stockholder
Proposals
All stockholder proposals intended to be considered for inclusion
in the Corporation’s proxy material for the 2018 Annual
Meeting of Stockholders must be received by the Corporation no
later than November 16, 2017 and must comply with all applicable
SEC and other rules.
Under the Corporation’s Bylaws, if a stockholder wishes to
present an item of proper business at the 2018 Annual Meeting of
Stockholders (other than a proposal submitted for inclusion in the
Corporation’s proxy statement pursuant to SEC rules), the
stockholder must give advance written notice to the
Corporation’s Secretary at 2303 Dulles Station Blvd.,
Herndon, Virginia 20171, not less than 90 days nor more than 120
days before the first anniversary of the date of this proxy
statement. As a result, any notice given by a stockholder pursuant
to these provisions in our Bylaws must be received no earlier than
November 16, 2017 and no later than December 16, 2017. Such notice
must include all of the information required by the
Corporation’s Bylaws.
Householding of Proxy
Materials
The SEC has adopted rules that permit companies and intermediaries
(e.g., brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy
statement addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially
means extra convenience for stockholders and cost savings for
companies.
This year, a number of brokers with account holders who are our
stockholders will be “householding” our proxy
materials. A single proxy statement will be delivered to multiple
stockholders sharing an address unless contrary instructions have
been received from the affected stockholders. Once you have
received notice from your broker that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate proxy statement and annual report,
please notify your broker.
You may also request an additional proxy statement and annual
report by sending a written request to:
Strayer Education, Inc.
Attn: Daniel W. Jackson
Executive Vice President & Chief Financial Officer
2303 Dulles Station Boulevard
Herndon, Virginia 20171
(703) 561-1600
Stockholders who currently receive multiple copies of the proxy
statement at their addresses and would like to request
“householding” of their communications should contact
their brokers.
Other Matters
The Corporation knows of no other matters to be presented for
action at the Annual Meeting other than those mentioned above.
However, if any other matters should properly come before the
meeting, it is intended that the persons named in the accompanying
proxy card will vote on such matters in accordance with their best
judgment.
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