DEF 14A: Xerox Holdings Corporation Outlines Executive Compensation and Governance Proposals in 2024 Proxy Statement

Sentiment:

Proxy Statement 11 April 2024 4:30 PM

Xerox Holdings Corporation's 2024 proxy statement details proposals for director elections, auditor ratification, executive compensation, and equity incentive plans, alongside corporate governance and social responsibility initiatives.

Better than expectedThe company's 2023 say-on-pay proposal received approximately 94.5% support, a significant improvement from the previous year.The company grew adjusted operating income $114 million year-over-year, to $389 million, and grew adjusted operating income margin 170 basis points on a year-over-year basis, to 5.6%.The company grew free cash flow $547 million year over year, to $649 million, exceeding our full-year guidance by nearly $50 million.

Summary

Xerox Holdings Corporation has released its 2024 proxy statement, outlining key proposals for the upcoming Annual Meeting of Shareholders.
Shareholders will vote on the election of ten directors, ratification of PricewaterhouseCoopers LLP as the independent auditor, and approval of the 2023 executive compensation.
The proxy statement also includes a proposal to approve the Xerox Holdings Corporation 2024 Equity and Performance Incentive Plan.
The Board of Directors recommends voting for all director nominees, the auditor ratification, and the executive compensation approval, but against shareholder proposals related to golden parachutes and director election resignation bylaws.
The company details its corporate social responsibility efforts, including a commitment to reaching net-zero emissions by 2040 and diversity and inclusion initiatives.
The proxy statement also covers corporate governance practices, director independence, and related-person transactions.
Executive compensation discussions include an analysis of compensation philosophy, peer benchmarking, and the link between pay and company performance.
The document provides information on securities ownership by directors, executive officers, and major shareholders.
The company's commitment to ESG is highlighted, with metrics included in senior management compensation criteria.
The proxy statement also addresses risk oversight, talent management, and community involvement.

Sentiment

Score: 7

Explanation: The document presents a balanced view, highlighting both positive achievements and ongoing challenges. The focus on strategic initiatives and shareholder engagement suggests a moderately positive outlook.

Positives

The company is committed to reaching net-zero emissions by 2040.
Xerox has a strong focus on diversity, inclusion, and belonging, with women making up approximately 26% of the workforce and 40% of the Executive Committee in 2023.
The company has a comprehensive Total Rewards program designed to attract, retain, and motivate a highly productive, global workforce.
Xerox encourages employee-driven philanthropy, with employees volunteering approximately 43,000 hours in 2023.
The company has a robust shareholder engagement program, actively seeking feedback and incorporating it into compensation decisions.
The company's 2023 say-on-pay proposal received approximately 94.5% support, a significant improvement from the previous year.
The company is implementing structural changes to simplify its business and reduce operating costs as part of its Reinvention strategy.
The company reduced total debt by approximately $450 million in 2023.
The company grew adjusted operating income $114 million year-over-year, to $389 million, and grew adjusted operating income margin 170 basis points on a year-over-year basis, to 5.6%.
The company grew free cash flow $547 million year over year, to $649 million, exceeding our full-year guidance by nearly $50 million.

Negatives

The company experienced a reduction of approximately 390 (2%) employees since December 31, 2022.
The total number of Day Away from Work Injury cases was 102 in 2023, compared to 77 in 2022.
Threshold performance levels were not met for any of the three financial metrics in the 2021 E-LTIP, resulting in no payout.
The company's industry has experienced a seismic shift, driven by continued digitalization, along with increased acceptance of a remote workforce.

Risks

The company faces risks associated with the successful implementation of its Reinvention strategy.
There are retention risks across key leadership positions due to consecutive years of zero or below-target incentive plan payouts, increased competition for talent, a new CEO, and a new business strategy.
The company faces reputational risk and has policies in place to ensure that all employees and other stakeholders are treated with dignity and respect.
The company faces the world's challenges such as climate change and human rights, and understand the role we play.

Future Outlook

Xerox expects its Reinvention strategy to deliver $300 million of annual adjusted operating income improvement above 2023 levels through 2026 and a return to double-digit adjusted operating income margins by 2026.

Management Comments

Transformation is never easy, and we need to align our compensation structure to reflect changes in our strategy and competitive environment.
We believe that the actions we took in 2023 will promote consistently strong leadership, sound decision-making, and results that are aligned with shareholders interests.
We are committed to: Accountability, Transparency, Robust Engagement, and Incorporation of Feedback.

Industry Context

The document acknowledges the seismic shift in the industry driven by digitalization and the increased acceptance of a remote workforce, which has influenced Xerox's Reinvention strategy.

Comparison to Industry Standards

The Compensation Committee reviews peer group compensation data as well as other third-party compensation surveys annually to ensure that our executive compensation programs are competitive.
The 2023 peer group included companies such as Applied Materials, Juniper Networks, Western Digital, CGI Group, Keysight Technologies, and Zebra Technologies.
The 2024 peer group includes companies such as CDW Corporation, Motorola Solutions, Trimble Inc., CGI Inc., NCR Corporation, Western Digital Corporation, Ciena Corporation, NetApp, Inc., Zebra Technologies Corporation, CommScope Holding Company, Inc., OpenText Corporation, Sanmina Corporation, Juniper Networks, Inc., Seagate Technology Holdings plc, Keysight Technologies, Inc., Teledyne Technologies Incorporated.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Executive Officer	John Visentin	Steven J. Bandrowczak	August 2022	Succession
Executive Vice President, President Americas	Joanne Collins Smee	NA	December 31, 2023	Role Elimination
Executive Vice President, Chief Corporate Development Officer and Chief Legal Officer	Louis J. Pastor	NA	April 28, 2023	Resignation
Executive Vice President, Chief Human Resources Officer	Suzan Morno-Wade	NA	April 1, 2024	Involuntary Termination

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Director Nomination Process	In January 2024, the Board retained Trewstar Corporate Board Services to assist it in identifying highly-qualified, diverse, and experienced candidates to join the Company's Board.	January 2024	Six non-executive director nominees standing for election in 2024 are new to the Board.
Director Compensation Program	In February 2024, the Board approved a new director compensation program. Under the new compensation program, Directors will receive their cash retainer and all committee fees in the form of cash paid on a quarterly basis in arrears. Each Director also will receive an annual equity retainer in the form of RSUs, unless they elect to receive new DSUs.	May 22, 2024	Beginning with the 2025-2026 Board service year, directors will have the option to elect to receive up to 100% of their cash compensation in the form of additional RSUs or DSUs, as applicable.
Compensation Recoupment Policy	The Company adopted the Compensation Recoupment Policy of Xerox Holdings Corporation (Recoupment Policy) on July 27, 2023, effective December 1, 2023. The Recoupment Policy is intended to comply with the requirements of Section 10D of the Securities Exchange Act of 1934 and Rule 10D-1 thereunder and Nasdaq Listing Rule 5608.	December 1, 2023	Under the terms of the Recoupment Policy, in the event of a restatement of our financial statements due to material non-compliance with any financial reporting requirement under applicable securities laws, the Compensation Committee shall take reasonably prompt action to cause the Company to recover the amount of any incentive compensation granted, awarded or paid to a covered person within the preceding 36-month period to the extent the value of such compensation was in excess of the amount of incentive compensation that would have been granted, awarded or paid had the financial statements been in compliance with the financial reporting requirements.
Officer Severance Program	In March 2024, the Compensation Committee approved an amendment and restatement of the Officer Severance Program (OSP), which was originally established effective July 2018 and subsequently amended effective January 2020, February 2021, and December 2022 (the Prior OSP, and, as amended and restated, the A&R OSP or the Officer Severance Program).	March 2024	Under the Officer Severance Program, an officer who is eligible to participate in the program due to a qualifying termination as defined therein will be entitled to receive: One year (two years for Mr. Bandrowczak) of severance paid over 12 months (24 months for Mr. Bandrowczak) and continuation of specified health and welfare benefits at active employee rates; Prorated annual incentive award for the year of termination; and At the Compensation Committees discretion, continued vesting of outstanding equity awards during the one-year (two-year for Mr. Bandrowczak) severance period.

Related Party Transactions

On September 28, 2023, the Company entered into a share purchase agreement with Carl Icahn and certain of his affiliates pursuant to which the Company repurchased an aggregate of approximately 34 million shares, at a price per share of $15.84 (the closing price per share on September 27, 2023, the last full trading day prior to the execution of the share purchase agreement), for an aggregate purchase price of approximately $542 million.

Stakeholder Impact

The company's actions aim to increase shareholder value through strategic initiatives and improved financial performance.
Employees are impacted by changes in compensation programs, talent management initiatives, and workforce development opportunities.
Customers benefit from the company's focus on delivering quality and excellence in all it does.
Communities benefit from the company's corporate social responsibility efforts and community involvement.

Next Steps

Shareholders are encouraged to vote on the proposals outlined in the proxy statement.
The Compensation Committee will consider the voting results as part of its ongoing review of the Company's executive compensation program.
The company will continue to implement its Reinvention strategy and monitor its progress.
The Board will continue to engage with shareholders and consider their feedback in future decisions.

Key Dates

Date	Description
January 26, 2021	Date of Nomination and Standstill Agreement between Xerox and Darwin Deason.
February 2022	The Board amended the Company's By-Laws to permit shareholders holding a combined 20% of the Company's voting stock to call a special meeting of shareholders.
March 2023	Effective March 2023 the holding requirement was the greater of ninety (90) days following termination, or as long as the NEO is aware of material non-public information.
May 2023	Kenneth S. Wilson is the current CEO and director of Jabil since May 2023.
September 28, 2023	The Company entered into a share purchase agreement with Carl Icahn and certain of his affiliates pursuant to which the Company repurchased an aggregate of approximately 34 million shares.
October 2023	The Technology Committee of the Board was dissolved in October 2023.
December 31, 2023	Joanne Collins Smee was involuntarily terminated from the Company on December 31, 2023.
February 2024	Effective February 2024, the holding requirement applies through the later of the end of the blackout period (if terminated during the blackout period) or as long as the NEO is aware of material non-public information.
April 1, 2024	Ms. Morno-Wade was involuntarily terminated from the Company on April 1, 2024.
April 11, 2024	The accompanying Proxy Statement is dated April 11, 2024 and is first being distributed to shareholders on or about April 11, 2024.
April 28, 2023	Louis J. Pastor resigned from his position with the Company on April 28, 2023 but continued to provide consulting services through December 31, 2023.
May 22, 2024	You are cordially invited to attend the 2024 Annual Meeting of Shareholders (Annual Meeting) of Xerox Holdings Corporation (Xerox), to be held at 9:00 a.m., Eastern Time, on Wednesday, May 22, 2024, at 501 Merritt 7 in Norwalk, Connecticut.

Keywords

executive compensation, corporate governance, proxy statement, shareholder meeting, director election, equity incentive plan, PricewaterhouseCoopers, ESG, sustainability, diversity, inclusion, Reinvention, risk management, stock ownership, golden parachutes, compensation recovery

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