def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
Filed by the Registrant þ
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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 |
H&R BLOCK, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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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
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Date Filed: |
One H&R Block Way
Kansas City, Missouri 64105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 14, 2011
The annual meeting of shareholders of H&R Block, Inc., a
Missouri corporation (the Company), will be held at
the Copaken Stage of the Kansas City Repertory Theatre in the
H&R Block Center located at One H&R Block Way (corner
of 13th Street and Walnut), Kansas City, Missouri, on Wednesday,
September 14, 2011, at 9:00 a.m. central time.
Shareholders attending the meeting are asked to park in the
H&R Block Center parking garage located beneath the
H&R Block Center (enter the parking garage from Walnut or
Main Street). The meeting will be held for the following
purposes:
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1.
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The election of ten directors to serve until the 2012 annual
meeting or until their successors are elected and qualified (See
page 4);
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2.
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The approval of an advisory proposal on the Companys
executive compensation (See page 53);
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3.
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The approval of an advisory vote on the frequency of future
advisory votes on the Companys executive compensation (See
page 53);
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4.
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The approval of an amendment to the 2008 Deferred Stock Unit
Plan for Outside Directors to increase the aggregate number of
shares of Common Stock issuable under the Plan by
600,000 shares, from 300,000 shares to
900,000 shares (See page 54);
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5.
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The approval of the material terms of performance goals for
performance shares issued pursuant to the 2003 Long-Term
Executive Compensation Plan (See page 56);
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6.
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The ratification of the appointment of Deloitte &
Touche LLP as the Companys independent accountants for the
fiscal year ending April 30, 2012 (See
page 57); and
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7.
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The transaction of any other business as may properly come
before the meeting or any adjournments thereof.
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The foregoing items of business are more fully described in the
proxy statement accompanying this notice. The Board of Directors
has fixed the close of business on July 12, 2011 as the
record date for determining shareholders of the Company entitled
to notice of and to vote at the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, WE
URGE YOU TO VOTE YOUR SHARES VIA THE TOLL-FREE TELEPHONE
NUMBER OR OVER THE INTERNET, AS PROVIDED IN THE ENCLOSED
MATERIALS. IF YOU REQUESTED A PROXY CARD BY MAIL, YOU MAY SIGN,
DATE AND MAIL THE PROXY CARD IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors
ANDREW J. SOMORA
Secretary
Kansas City, Missouri
August 2, 2011
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August 2, 2011
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Dear Fellow Shareholder,
Please join me at our 2011 Annual Meeting of Shareholders on
Wednesday, September 14, in Kansas City, Missouri, where we
will be asking you to vote on and to support some important
issues for our Company.
We are pleased to have our new senior leadership team in
attendance at this Annual Meeting, as well as four exceptional
new director nominees up for election along with the rest of the
members of our Board.
Bill Cobb became our new CEO in mid-May and enabled a smooth
management transition because of the in-depth familiarity that
he was able to bring to the position from having served on your
Board over the past year. Your Board believes that Bills
extensive background in marketing and the Internet and financial
industries, as well as his significant experience as a senior
executive at other public companies, will provide stable and
strong leadership for your Company to move forward successfully
after a challenging period. We recognize that the past few years
have been marked by several executive changes. Therefore, your
Board is especially pleased that Bill has committed to lead
H&R Block for at least the next five years, and we have
accordingly designed his compensation incentives to retain him
for an extended period of time.
We thank Alan Bennett, who decided to step down as CEO earlier
this year after having led the Company through a very successful
2011 tax season. Alan made considerable contributions to the
Company, acting as our CEO on two different occasions over the
last four years.
We are delighted to have identified and to be adding four
exceptional new Board nominees for election by our shareholders
this year Paul Brown, Marvin Ellison, Vicky Reich
and Jim Wright. As you will see in the discussion at pages 6-11
in the proxy statement, each of these individuals brings
experience and skills which complement the resources provided by
the continuing members of the Board. I hope that you will join
me in voting for each of these highly regarded individuals.
Our new directors will fill vacancies occasioned by the
departure of four directors. Richard Breeden, our former
Chairman, resigned from our Board this past April. Alan Bennett,
Len Lauer and Ed Shaw have decided not to stand for re-election
at this years Annual Meeting. These individuals have
provided invaluable counsel while serving on your Board and the
Boards Committees. We are grateful for their many
contributions and wish them all well.
As your new Chairman, Im excited to work with Bill Cobb
and our senior leadership team, and to lead the Board of a
company that has such a strong and vibrant brand.
As you review these materials, please note the emphasis that
your Board is placing on a
pay-for-performance
culture at H&R Block. Starting at the top, Bill Cobbs
compensation arrangements are heavily weighted to stock versus
cash, thus aligning his interests directly with those of all
shareholders. More broadly, the stock compensation of our entire
senior management team will now include a substantial long-term
performance-based component. Beginning with the stock grants
made this June, 30% of the grant will be determined by a formula
based both on meeting annual performance targets for the next
three years and by total shareholder return over the entire
three-year period. Going forward, our compensation programs will
be driven increasingly by long-term value considerations.
For those attending the Annual Meeting, we look forward to
reviewing with you our major Company developments over the past
year and sharing with you our plans for the future. If you plan
to attend, please see the section entitled May I Attend
The Meeting? on page 3 of the proxy statement for
instructions.
Whether or not you expect to attend the Annual Meeting, it is
important that your shares be represented. We urge you to vote
your shares via the toll-free telephone number, over the
Internet, or by mail, as provided in the enclosed materials.
Thank you again for your support. We are very optimistic about
the prospects for our Company and are confident that we have the
leadership in place to capture the opportunities that lie ahead.
Robert A. Gerard
Chairman of the Board
TABLE OF CONTENTS
H&R BLOCK, INC.
PROXY STATEMENT
FOR THE 2011 ANNUAL MEETING OF
SHAREHOLDERS
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
The Board of Directors (the Board of Directors or
Board) of H&R Block, Inc., a Missouri
corporation (H&R Block or the
Company) solicits the enclosed proxy for use at the
annual meeting of shareholders of the Company to be held at
9:00 a.m. central time, on Wednesday, September 14,
2011, at the Copaken Stage of the Kansas City Repertory Theatre
in the H&R Block Center located at One H&R Block Way
(corner of 13th Street and Walnut), Kansas City, Missouri. This
proxy statement contains information about the matters to be
voted on at the meeting and the voting process, as well as
information about our directors and executive officers.
WHY DID I
RECEIVE A NOTICE IN THE MAIL REGARDING THE INTERNET AVAILABILITY
OF PROXY MATERIALS INSTEAD OF A FULL SET OF PRINTED PROXY
MATERIALS?
Pursuant to rules adopted by the Securities and Exchange
Commission (SEC) in 2007, the Company is making this
Proxy Statement and its 2011 Annual Report available to
shareholders electronically via the Internet. On or before
August 5, 2011, we mailed to our shareholders of record the
Important Notice Regarding the Availability of Proxy
Materials for the Shareholder Meeting to be held on
September 14, 2011 (the Notice). All
shareholders will be able to access this Proxy Statement and our
2011 Annual Report on the website referred to in the Notice or
request to receive printed copies of the proxy materials.
Instructions on how to access the proxy materials on the
Internet or request a printed copy may be found in the Notice.
HOW CAN I
ELECTRONICALLY ACCESS THE PROXY MATERIALS?
The Notice will provide you with instructions on how to view our
proxy materials for the annual meeting on the Internet. The
website on which you will be able to view our proxy materials
will also allow you to choose to receive future proxy materials
electronically by email, which will save us the cost of printing
and mailing documents to you. If you choose to receive future
proxy statements by email, you will receive an email next year
with instructions containing a link to the proxy voting site.
Your election to receive proxy materials by email will remain in
effect until you terminate it.
HOW CAN I
OBTAIN A FULL SET OF PRINTED PROXY MATERIALS?
The Notice will provide you with instructions on how to request
to receive printed copies of the proxy materials. You may
request printed copies up until one year after the date of the
meeting.
WHAT AM I
VOTING ON?
You are voting on six items of business at the annual meeting:
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The election of ten directors to serve until the 2012 annual
meeting or until their successors are elected and qualified;
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The approval of an advisory proposal on the Companys
executive compensation;
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The approval of an advisory vote on the frequency of future
advisory votes on the Companys executive compensation;
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The approval of an amendment to the 2008 Deferred Stock Unit
Plan for Outside Directors to increase the aggregate number of
shares of Common Stock issuable under the Plan by
600,000 shares, from 300,000 shares to
900,000 shares;
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The approval of the material terms of the performance goals for
performance shares issued pursuant to the 2003 Long-Term
Executive Compensation Plan; and
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The ratification of the appointment of Deloitte &
Touche LLP as the Companys independent accountants for the
fiscal year ending April 30, 2012.
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WHO IS
ENTITLED TO VOTE?
Shareholders of record as of the close of business on
July 12, 2011 are entitled to vote at the annual meeting.
Each share of H&R Block Common Stock is entitled to one
vote.
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WHAT ARE
THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS?
Our Board of Directors recommends that you vote your shares
FOR the proposed slate of directors named in this
proxy standing for election to the Board, 1 YEAR for
the frequency of future advisory votes on the Companys
executive compensation, and FOR the other listed
proposals, as seen in the following example:
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1. Election of Directors:
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Nominees
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1a. Paul J. Brown
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1b. William C. Cobb
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1c. Marvin R. Ellison
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1d. Robert A. Gerard
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1e. David B. Lewis
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1f. Victoria J. Reich
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1g. Bruce C. Rohde
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1h. Tom D. Seip
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1i. Christianna Wood
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1j. James F. Wright
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For
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Against
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Abstain
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2. The approval of an advisory proposal on the
Companys executive compensation.
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1 Year
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2 Years
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3 Years
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Abstain
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3. The approval of an advisory vote on the frequency of
future advisory votes on the Companys executive
compensation.
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For
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Against
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Abstain
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4. The approval of an amendment to the 2008 Deferred Stock
Unit Plan for Outside Directors to increase the aggregate number
of shares of Common Stock issuable under the Plan by
600,000 shares, from 300,000 shares to
900,000 shares.
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For
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Against
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Abstain
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5. The approval of the material terms of performance goals
for performance shares issued pursuant to the 2003 Long-Term
Executive Compensation Plan.
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For
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Against
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Abstain
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6. The ratification of the appointment of
Deloitte & Touche LLP as the Companys
independent accountants for the fiscal year ending
April 30, 2012.
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WHAT IS
THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF
RECORD AND AS A BENEFICIAL OWNER?
If your shares are registered directly in your name with the
Companys transfer agent, Wells Fargo Shareowner Services
(known as a registered shareholder), you are
considered, with respect to those shares, the shareholder
of record, and the Notice was sent to you directly by the
Company. If you are a shareholder of record, you may vote in
person at the annual meeting.
If your shares are held in a stock brokerage account or by a
bank or other nominee, you are considered the beneficial
owner of shares held in street name, and that organization
forwarded the Notice to you. As the beneficial owner, you have
the right to direct your broker, bank or nominee holding your
shares how to vote and are also invited to attend the annual
meeting. However, since you are not a shareholder of record, you
may not vote these shares in person at the annual meeting unless
you bring with you a legal proxy from the shareholder of record.
2
HOW DO I
VOTE?
If you are a registered shareholder, there are four ways
to vote:
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By going to the Internet Website www.proxyvote.com and
following the instructions provided (you will need the Control
Number from the Notice you received);
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By calling the toll-free telephone number indicated on your
proxy card or voting instruction card (you will need the Control
Number from the Notice you received);
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If you requested printed copies of the proxy materials by mail,
you can vote by signing, dating and returning the accompanying
proxy card; or
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In person by written ballot at the annual meeting.
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Your shares will be voted as you indicate. If you do not
indicate your voting preferences, the appointed proxies (Robert
A. Gerard, Bruce C. Rohde, and David Baker Lewis) will vote your
shares FOR Items 1, 2, 4, 5, and 6, and for ONE YEAR with
respect to Item 3. If your shares are owned in joint names,
all joint owners must vote by the same method and if joint
owners vote by mail, all of the joint owners must sign the proxy
card.
If your shares are held in a brokerage account in your
brokers name (this is called street name), you may
also vote as set forth above, and your broker or nominee should
vote your shares as you have directed. Again, you must have a
legal proxy from the shareholder of record in order to vote the
shares in person at the annual meeting.
If your shares are held through the H&R Block Retirement
Savings Plan, you may also vote as set forth above, except
that Plan participants may not vote their Plan shares in person
at the annual meeting. If you provide voting instructions by
Internet, telephone or written proxy card, Fidelity Management
Trust Company, the Plans Trustee, should vote your
shares as you have directed. If you do not provide specific
voting instructions, the Trustee will vote your shares in the
same proportion as shares for which the Trustee has received
instructions. Please note that you must submit voting
instructions to the Trustee by no later than September 9,
2011 at 11:59 p.m. eastern time in order for your shares to
be voted by the Trustee at the Annual Meeting.
MAY I
ATTEND THE MEETING?
All shareholders, properly appointed proxy holders, and invited
guests of the Company may attend the annual meeting.
Shareholders who plan to attend the meeting must present a valid
photo identification. If you hold your shares in street name,
please also bring proof of your share ownership, such as a
brokers statement showing that you owned shares of the
Company on the record date of July 12, 2011, or a legal
proxy from your broker or nominee (a legal proxy is required if
you hold your shares in street name and you plan to vote in
person at the annual meeting). Shareholders of record will be
verified against an official list available at the registration
area. The Company reserves the right to deny admittance to
anyone who cannot adequately show proof of share ownership as of
the record date.
WHAT ARE
BROKER NON-VOTES AND HOW ARE THEY COUNTED?
Broker non-votes occur when nominees, such as brokers and banks
holding shares on behalf of the beneficial owners, are
prohibited from exercising discretionary voting authority for
beneficial owners who have not provided voting instructions.
Brokers and other nominees may vote without instruction only on
routine proposals. On non-routine
proposals, nominees cannot vote without instructions from the
beneficial owner, resulting in so-called broker
non-votes. The proposal to ratify Deloitte &
Touche LLP as the Companys independent accountants is the
only routine proposal. All other proposals are non-routine. If
you hold your shares with a broker or other nominee, they will
not be voted on these proposals unless you give voting
instructions. Broker non-votes are counted in determining a
quorum but are not counted for purposes of determining the
number of shares present in person or represented by proxy on a
voting matter.
MAY I
CHANGE MY VOTE?
You may revoke your proxy and change your vote at any time
before the final vote at the annual meeting. You may vote again
on a later date on the Internet or by telephone (only your
latest Internet or telephone proxy submitted prior to the annual
meeting will be counted), or by signing and returning a new
proxy card or voting instruction form with a later date, or by
attending the annual meeting and voting in person. However, your
attendance at the annual meeting will not automatically revoke
your proxy unless you vote again at the annual meeting or
specifically request in writing that your prior proxy be revoked.
3
WHAT VOTE
IS REQUIRED TO APPROVE EACH PROPOSAL?
For all matters to be voted upon at the annual meeting,
shareholders may vote for, against, or
abstain on such matters, except for Item 3 for
which shareholders may vote 1 year,
2 years, 3 years, or
abstain.
For all matters to be voted upon at the annual meeting, the
affirmative vote of a majority of shares present in person or
represented by proxy, and entitled to vote on the matter, is
necessary for election or approval. The votes on Item 2 and
3 are non-binding advisory votes only.
Shares represented by a proxy that directs that the shares
abstain from voting are deemed to be represented at the meeting
as to that matter, and have the same effect as a vote against
the proposals. Proxies marked abstain on Item 3 (the
frequency proposal) will not be counted as a vote for any
option. Broker non-votes have no impact on any proposal.
DO
SHAREHOLDERS HAVE CUMULATIVE VOTING RIGHTS WITH RESPECT TO THE
ELECTION OF DIRECTORS?
No. Shareholders do not have cumulative voting rights with
respect to the election of directors.
WHAT
CONSTITUTES A QUORUM?
As of the record date, 305,642,373 shares of the
Companys Common Stock were issued and outstanding. A
majority of the outstanding shares entitled to vote at the
annual meeting, represented in person or by proxy, will
constitute a quorum. Abstentions and broker non-votes will be
included for quorum purposes.
WHAT DOES
IT MEAN IF I RECEIVE MORE THAN ONE IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON SEPTEMBER 14,
2011?
It means your shares are held in more than one account. You
should vote all your shares.
HOW MUCH
DID THIS PROXY SOLICITATION COST?
The costs of this proxy will include the expense of preparing
the proxy solicitation materials for the annual meeting and
mailing the Notice and, as applicable, the proxy solicitation
materials for such meeting. Following the mailing of these
materials, directors, officers and employees of the Company may
solicit proxies by telephone, fax or other personal contact;
such individuals will not receive compensation or reimbursement
for such actions. Additionally, the Company has retained
Georgeson Inc. to assist in the solicitation of proxies on
behalf of the Board of Directors for a fee of $30,000 plus
reimbursement of reasonable expenses. Further, brokers and other
custodians, nominees and fiduciaries will be requested to
forward the Notice and printed proxy materials to their
principals, and the Company will reimburse them for the expense
of doing so.
WHAT IS
THE COMPANYS WEB ADDRESS?
The Companys home page is www.hrblock.com. The
Companys filings with the SEC are available free of charge
via a link from this website.
WILL ANY
OTHER MATTERS BE VOTED ON?
As of the date of this proxy statement, our management knows of
no other matter that will be presented for consideration at the
meeting other than those matters discussed in this proxy
statement. If any other matters properly come before the meeting
and call for a vote of the shareholders, validly executed
proxies in the enclosed form will be voted in accordance with
the recommendation of the Board of Directors.
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ITEM 1
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ELECTION
OF DIRECTORS
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The Companys Amended and Restated Articles of
Incorporation (the Articles) and Amended and
Restated Bylaws (the Bylaws) provide that the number
of directors to constitute the Board of Directors shall not be
fewer than 7 nor more than 12, with the exact number to be fixed
by a resolution adopted by the affirmative vote of a majority of
the entire Board. The Articles and Bylaws also provide that all
of the directors shall be elected at each annual meeting of
shareholders to hold office until the next succeeding annual
meeting of shareholders or until such directors successor
has been elected and qualified, and subject to prior death,
resignation, retirement or
4
removal from office of a director. Any vacancy on the Board may
be filled by a majority of the surviving or remaining directors
then in office.
At the annual meeting of shareholders to be held on
September 14, 2011, ten directors will be elected to hold
office until the next annual meeting of shareholders or until
their successors are elected and shall have qualified. The Board
has nominated Paul J. Brown, William C. Cobb, Marvin R. Ellison,
Robert A. Gerard, David Baker Lewis, Victoria J. Reich, Bruce C.
Rohde, Tom D. Seip, Christianna Wood and James F. Wright for
election as directors of the Company.
DIRECTOR
NOMINATION PROCESS
The entire Board of Directors is responsible for nominating
members for election to the Board and for filling vacancies on
the Board that may occur between annual meetings of the
shareholders. The Governance and Nominating Committee is
responsible for identifying, screening and recommending
candidates to the entire Board for Board membership. The
Governance and Nominating Committee works with the Board to
determine the appropriate characteristics, skills and experience
for the Board as a whole and its individual members. In
evaluating the suitability of individual Board members, the
Board takes into account many factors such as general
understanding of various business disciplines (e.g.,
marketing, finance, information technology), the Companys
business environment, educational and professional background,
ability to work well with other Board members, analytical
ability and willingness to devote adequate time to Board duties.
The Board evaluates each individual in the context of the Board
as a whole with the objective of retaining a group with diverse
and relevant experience that can best perpetuate the
Companys success and represent shareholder interests
through sound judgment.
The Governance and Nominating Committee may seek the input of
the other members of the Board and management in identifying
candidates who meet the criteria outlined above. In addition,
the Governance and Nominating Committee may use the services of
consultants or a search firm. The Committee will consider
recommendations by the Companys shareholders of qualified
director candidates for possible nomination by the Board.
Shareholders may recommend qualified director candidates by
writing to the Companys Corporate Secretary, H&R
Block, Inc., One H&R Block Way, Kansas City, Missouri
64105. Submissions should include information regarding a
candidates background, qualifications, experience, and
willingness to serve as a director. Based on a preliminary
assessment of a candidates qualifications, the Governance
and Nominating Committee may conduct interviews with the
candidate and request additional information from the candidate.
The Committee uses the same process for evaluating all
candidates for nomination by the Board, including those
recommended by shareholders. The Companys Bylaws permit
persons to be nominated as directors directly by shareholders
under certain conditions. To do so, shareholders must comply
with the advance notice requirements outlined in the
Shareholder Proposals and Nominations section of
this proxy statement.
Diversity
Although there is no formal policy on diversity of director
nominees, both the Board of Directors and the Governance and
Nominating Committee believe that diversity of skills,
perspectives and experiences among Board members, in addition to
the factors discussed above, promotes improved monitoring and
evaluation of management on behalf of the shareholders and
produces more creative thinking and solutions by the Board. The
Governance and Nominating Committee considers, though not
exclusively, the distinctive skills, perspectives and
experiences that candidates who are diverse in gender, ethnic
background, geographic origin and professional experience have
to offer.
New
Directors
The Board nominated our new director candidates based on a
determination that they would make significant contributions to
the overall strength of the Board and its diverse set of
abilities, following an evaluation of each of their particular
skill sets, knowledge base and experience. These directors were
identified by search firm Spencer Stuart, drawing upon a variety
of sources including shareholders, Board members and employees,
and were recommended to our Governance and Nominating Committee.
SELECTING
AND EVALUATING OUR NOMINEES
When evaluating potential director nominees, the Governance and
Nominating Committee considers each individuals
professional expertise and educational background in addition to
their general qualifications. The Governance and Nominating
Committee works with the Board to determine the appropriate mix
of backgrounds and experiences that would establish and maintain
a Board that is strong in its collective knowledge, allowing the
5
Board to fulfill its
responsibilities and best perpetuate our long-term success and
represent our shareholders interests.
The Governance and Nominating Committee regularly communicates
with the Board to identify backgrounds, qualifications,
professional experiences and areas of expertise that impact our
business that are particularly desirable for our directors to
possess to help meet specific Board needs, including:
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n
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Financial industry knowledge, which is vital in
understanding and reviewing our strategy, including the
acquisition of businesses that offer complementary products or
services;
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n
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Operating experience as current or former executives,
which gives directors specific insight into, and expertise that
will foster active participation in, the development and
implementation of our operating plan and business strategy;
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n
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Executive leadership experience, as directors who have
served in significant leadership positions possess strong
abilities to motivate and manage others and to identify and
develop leadership qualities in others;
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n
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Accounting and financial expertise, which enables
directors to analyze our financial statements, capital structure
and complex financial transactions and oversee our accounting
and financial reporting process;
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n
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Enterprise risk oversight experience, which contributes
to our identification and development of possible areas of
concern and maintaining an efficient and productive
company; and
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n
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Public company board and corporate governance experience
at large publicly traded companies, which provides directors
with a solid understanding of their extensive and complex
oversight responsibilities and furthers our goals of greater
transparency, accountability for management and the Board, and
protection of shareholder interests.
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The following table highlights each director nominees
specific skills, knowledge and experience that the Governance
and Nominating Committee relied upon when determining whether to
nominate the individual for election. A particular nominee may
possess other skills, knowledge or experience even though they
are not indicated below.
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Financial
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Enterprise
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Governance/
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Industry
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Operating
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Executive
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Accounting/
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Risk
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Public
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Knowledge
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Experience
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Leadership
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Financial
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Oversight
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Company
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Paul J. Brown
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ü
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ü
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ü
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William C. Cobb
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ü
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ü
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ü
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ü
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ü
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Marvin R. Ellison
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ü
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Robert A. Gerard
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ü
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ü
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ü
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ü
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ü
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ü
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David Baker Lewis
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ü
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ü
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ü
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ü
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Victoria J. Reich
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ü
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ü
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ü
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ü
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Bruce C. Rohde
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ü
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ü
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ü
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ü
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ü
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Tom D. Seip
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ü
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ü
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ü
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ü
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ü
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ü
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Christiana Wood
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ü
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ü
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ü
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James F. Wright
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ü
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ü
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ü
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ü
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The Board believes that all the director nominees are highly
qualified. As the table shows, the director nominees have
significant leadership experience, knowledge and skill that
qualify them for service on our Board, and as a group represent
diverse views, experiences and backgrounds. All director
nominees satisfy the criteria set forth in our Guidelines and
possess the personal characteristics that are essential for the
proper and effective functioning of the Board. Each
nominees biography below contains additional information
regarding his or her experiences, qualifications and skills.
The number of shares of Common Stock beneficially owned by each
nominee for director is listed under the heading Security
Ownership of Directors and Management on page 58.
DIRECTOR
NOMINEES
Our Board currently has nine directors, and is nominating ten
directors for election to the Board. All Board members are
subject to annual election. Shareholders elected six of the
current directors at the 2010 Annual Meeting. Alan M. Bennett
has decided not to stand for re-election as he is no longer an
independent director under New York Stock Exchange (NYSE)
listing standards due to his service as President and Chief
Executive Officer of
6
the Company. Len J. Lauer and L. Edward Shaw, Jr. have
decided not to stand for re-election due to the demands of other
business and professional obligations. The following pages
present information regarding each director nominee, including
information about each nominees professional experience,
educational background and qualifications that led the Board to
nominate him or her for election. The following also includes
information about all public company directorships each nominee
currently holds.
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Paul J. Brown
Age 44
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Professional Experience
Mr. Brown is President, Brands and Commercial Services
for Hilton Worldwide. He joined Hilton Worldwide in his current
position in 2008. Prior to that, he was with Expedia Inc. for
four years, most recently serving as President, Expedia North
America and Expedia Inc. Partner Services Group. From 2001
through 2005, Mr. Brown was a Partner with
McKinsey & Co. in their London and Atlanta offices.
Earlier in his career, he was Senior Vice President of Brand
Services for Intercontinental Hotels Group, a Manager with the
Boston Consulting Group, Inc. and a Senior Consultant with
Andersen Consulting.
Education
Mr. Brown received a Bachelors Degree in Management
from Georgia Institute of Technology in 1989 and earned a
Masters of Business Administration Degree from the Kellogg
Graduate School of Management, Northwestern University in
1994.
Other Boards and Appointments
Mr. Brown is also a Director of Borders Group, Inc.,
where he is a member of the Audit Committee.
Director Qualifications
Mr. Brown brings to the Board significant operations,
financial management and brand management experience.
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William C. Cobb
President and Chief
Executive Officer
Director since 2010
Age 54
Committees:
Finance
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Professional Experience
Mr. Cobb has served as President and Chief Executive
Officer of H&R Block, Inc. since May 2011. Mr. Cobb
retired from eBay, Inc. in 2008, having worked there from
November 2000 to March 2008, where he most recently served as
President of eBay Marketplaces North America for four years and
before that held several senior management positions, including
Senior Vice President and General Manager of eBay International
and Senior Vice President of Global Marketing. Prior to joining
eBay, Inc., he held various marketing and executive positions,
including Chief Marketing Officer at YUM! Brands (formerly
Pepsico/Tricon) where he worked from
1987-2000.
Education
Mr. Cobb holds a B.S. in Economics from the Wharton
School of the University of Pennsylvania and a M.B.A. from the
Kellogg School of Management at Northwestern University.
Other Boards and Appointments
Mr. Cobb was previously a Director of Och-Ziff Capital
Management Group LLC
(2008-2011),
Orbitz Worldwide, Inc.
(2008-2011)
and Pacific Sunwear of California, Inc.
(2008-2011).
Mr. Cobb also currently serves on the advisory board of the
Kellogg School of Management at Northwestern University and the
non-profit Bay Harbor Foundation.
Director Qualifications
Mr. Cobb brings to the Board intimate knowledge of the
Companys daily operations as the Companys Chief
Executive Officer, an extensive background in marketing and the
internet industry, as well as significant experience as a senior
executive at various public companies.
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7
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Marvin R. Ellison
Age 46
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Professional Experience
Mr. Ellison has been Executive Vice
President U.S. Stores of The Home Depot, Inc. since
August 2008. From January 2006 through August 2008, he served as
President Northern Division. From August 2005
through January 2006, he served as Senior Vice
President Logistics and from October 2004 through
August 2005 he served as Vice President Logistics.
From June 2002 through October 2004, he served as Vice
President Loss Prevention of The Home Depot, Inc.
From 1987 until June 2002, Mr. Ellison held various
management and executive level positions with Target
Corporation, a general merchandise retailer. His final position
with Target was Director, Assets Protection.
Education
Mr. Ellison earned a Business Administration Degree in
Marketing from the University of Memphis and a Master of
Business Administration from Emory University.
Other Boards and Appointments
None.
Director Qualifications
Mr. Ellison brings to the Board many years of
experience in the retail industry, which have included
operations, executive leadership and risk management and
oversight responsibilities.
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Robert A. Gerard
Chairman of the
Board of Directors
Director since 2007
Age 66
Committees:
Chair,
Governance and
Nominating
Finance
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Professional Experience
Mr. Gerard is the General Partner and investment
manager of GFP, L.P., a private investment partnership. From
2004 to 2011, Mr. Gerard was Chairman of the Management
Committee and Chief Executive Officer of Royal Street
Communications, LLC, a licensee, developer and operator of
telecommunications networks in Los Angeles and Central Florida.
From 1974 to 1977, Mr. Gerard served in the United States
Department of the Treasury, completing his service as Assistant
Secretary for Capital Markets and Debt Management. From 1977
until his retirement in 1991, he held senior executive positions
with the investment banking firms Morgan Stanley &
Co., Dillon Read & Co., and Bear Stearns.
Education
Mr. Gerard is a graduate of Harvard College and holds
MA and JD degrees from Columbia University.
Other Boards and Appointments
Mr. Gerard is a Director of Gleacher &
Company, Inc. where he serves as Chair of the Executive
Compensation Committee and a member of the Committee on
Directors and Corporate Governance.
Director Qualifications
Mr. Gerard brings to the Board extensive experience in
the financial services industry and many years of business
experience in senior management and finance.
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8
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David B. Lewis
Director since 2004 Age 67 Committees: Chair, Audit Governance and Nominating
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Professional Experience
Mr. Lewis is senior shareholder and former Chairman and
CEO of Lewis & Munday, a Detroit-based legal firm with
offices in New York City, Washington, D.C. and Seattle.
Education
Mr. Lewis received a Bachelor of Arts from Oakland
University, a Master of Business Administration from the
University of Chicago and a Juris Doctor from the University of
Michigan School of Law.
Other Boards and Appointments
Mr. Lewis is also a Director of The Kroger Company,
where he is a member of the Public Responsibilities and Finance
Committees, and STERIS Corp., where he is a member of the Audit
Committee. He was previously a Director of Conrail, Inc.,
LG&E Energy Corp., M.A. Hanna, TRW, Inc., and Comerica,
Inc.
Director Qualifications
Mr. Lewis brings to the Board prior experience as the
chairman of four public company audit committees, his law
practice and business background, experience on the boards of
other public companies, and knowledge of finance and financial
services.
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Victoria J. Reich
Age 53
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Professional Experience
Ms. Reich served as the Senior Vice President and Chief
Financial Officer of United Stationers Inc. from June 2007 until
July 2011. Prior to that, Ms. Reich spent ten years with
Brunswick Corporation where she most recently was President of
Brunswick European Group from 2003 until 2006. She served as
Brunswicks Senior Vice President and Chief Financial
Officer from 2000 to 2003 and as Vice President and Controller
from 1996 until 2000. Before joining Brunswick, Ms. Reich
spent 17 years at General Electric Company where she held
various financial management positions.
Education
Ms. Reich holds a B.S. in Applied Mathematics and
Economics from Brown University.
Other Boards and Appointments
Ms. Reich is a Director of Ecolab Inc., where she is a
member of the Audit and Finance Committees.
Director Qualifications
Ms. Reich brings to the Board extensive financial
management experience, operational experience and executive
leadership abilities.
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9
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Bruce C. Rohde
Director since 2010 Age 62 Committees: Compensation Finance
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Professional Experience
Mr. Rohde has served in multiple roles with ConAgra
Foods, Inc. since 1984, including General Counsel, President,
Vice Chairman, Chairman and Chief Executive Officer, retiring
from that role in 2005 as Chairman and CEO Emeritus.
Mr. Rohde is the Managing Partner of Romar Capital Group
and Of Counsel to the Hunkins Newton Law Firm. He holds many
court admissions and also holds a certified public accountant
certificate.
Education
Mr. Rohde holds two degrees from Creighton University,
a Bachelor of Science Degree in Business Administration, and a
Juris Doctor, cum laude.
Other Boards and Appointments
Mr. Rohde serves as Lead Director at
Gleacher & Company, Inc., where he also serves as
Chairman of the Governance and Nominating Committee and as a
member of the Audit and Compensation Committees. He is Chairman
of Creighton University Board of Directors, on Harvard
Universitys Private and Public, Scientific, Academic and
Consumer Food Policy Committee, as a Presidential Appointee to
the National Infrastructure Advisory Council and a Director of
Preventive Medicine Research Institute.
Director Qualifications
Mr. Rohde brings to the Board senior executive
leadership experience from a large public company perspective,
including service in the roles of Chairman, Vice Chairman, Lead
Director, and CEO, as well as a diverse background in law,
finance, accounting and operational management, and experience
as a board member of other public companies.
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Tom D. Seip
Director since 2001 Age 61 Committees: Compensation Governance and Nominating
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Professional Experience
Mr. Seip currently serves as the managing member of
Way Too Much Stuff LLC and Ridgefield Farm LLC, all private
investment vehicles. He served as the President, Chief Executive
Officer and Director of Westaff, Inc., Walnut Creek, California,
a temporary staffing services company, from May 2001 until
January 2002. Mr. Seip was employed by Charles
Schwab & Co., Inc., San Francisco, California,
from January 1983 until June 1998 in various positions,
including Chief Executive Officer of Charles Schwab Investment
Management, Inc. from 1997 until June 1998 and Executive Vice
President- Retail Brokerage from 1994 until 1997.
Education
Mr. Seip received a Bachelor of Arts Degree from
Pennsylvania State University and participated in the Doctoral
Program in Developmental Psychology at the University of
Michigan.
Other Boards and Appointments
Mr. Seip is also Chairman of the Board of Trustees of
the Neuberger Berman Mutual Funds, New York.
Director Qualifications
Mr. Seip brings to the Board useful financial insight
and skills based on his extensive experience in investment
management, financial product development, and management of
branch office networks. Mr. Seip also has significant
experience with the governance of public companies.
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Christianna Wood
Director since 2008 Age 51 Committees: Audit Compensation
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Professional Experience
Ms. Wood is the Chairman of the Board of the
International Corporate Governance Network (ICGN).
She is also the Chief Executive Officer of Gore Creek Capital
Ltd., an investment management consulting company based in
Golden, Colorado. Ms. Wood served as the Chief Executive
Officer of Capital Z Asset Management, the largest dedicated
sponsor of hedge funds, from 2008 through July 2009. Previously,
she was the Senior Investment Officer for the Global Equity unit
of the California Public Employees Retirement System
(CalPERS) for five years. Prior to CalPERS, Ms. Wood served
as a Principal of several investment management
organizations.
Education
Ms. Wood obtained a Bachelor of Arts Degree from Vassar
College and a Masters of Business Administration Degree in
Finance from New York University.
Other Boards and Appointments
Ms. Wood is a Trustee of Vassar College where she
serves on the Investment, Audit and Social Responsibility
Committees of the Vassar College Board of Trustees. She is a
member of the Board of the International Securities Exchange and
was previously a member of the Public Company Accounting
Oversight Board (PCAOB) Standard Advisory Group
(2006-2008)
and the International Auditing and Assurance Standards Board
(IAASB) Consultative Advisory Group
(2006-2009).
Director Qualifications
Ms. Wood brings to the Board a broad finance and
corporate governance background, including experience as a
senior investment officer for a large retirement fund and as
Chairman of the ICGN. She has significant experience in
accounting and financial matters. Through her prior service as
an investment manager, Ms. Wood has had significant
experience in the application of portfolio risk management
techniques.
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James F. Wright
Age 61
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Professional Experience
Mr. Wright has been Chairman of the Board and Chief
Executive Officer of Tractor Supply Company since November 2007,
where he previously served as President and Chief Executive
Officer from 2004 to November 2007 and as President and Chief
Operating Officer from 2000 through 2004. Mr. Wright
previously served as President and Chief Executive Officer of
Tire Kingdom, a tire and automotive services retailer, from May
1997 to June 2000.
Education
Mr. Wright attended the University of
Wisconsin-Oshkosh.
Other Boards and Appointments
Mr. Wright was a Director of Spartan Stores from 2002
through August 2011, where he served as Lead Director from
2006-2011,
Chairman of the Corporate Governance Committee from
2006-2011,
as a member of the Compensation Committee from
2006-2011,
and as Chairman of the Compensation Committee from
2003-2006.
He also serves on the Board and as a member of the Executive
Committee of the National Retail Federation, the worlds
largest retail trade assocation.
Director Qualifications
Mr. Wright brings to the Board many years of experience
in executive leadership at public companies along with
experience at other public company boards and knowledge of
retail operations.
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Unless otherwise instructed, the proxy holders will vote the
proxy cards received by them for each of the nominees named
above. All nominees have consented to serve if elected. The
Board of Directors has no reason to believe that any of the
nominees would be unable to accept the office of director. If
such contingency should arise, it is the intention of the
proxies to vote for such person or persons as the Board of
Directors may recommend.
11
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEES NAMED ABOVE, AND PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors is responsible for managing the property
and business affairs of the Company. The Board of Directors
reviews significant developments affecting the Company and acts
on matters requiring Board approval. During the 2011 fiscal
year, the Board of Directors held 11 meetings and the standing
Board committees held 22 meetings. Each of the incumbent
directors attended at least 90% of the aggregate total number of
meetings of the Board of Directors and Board committees of which
he or she was a member.
The standing committees of the Board are the Audit Committee,
the Compensation Committee, the Finance Committee, and the
Governance and Nominating Committee. The Companys
Corporate Governance Guidelines, Code of Business Ethics and
Conduct, the Board of Directors Independence Standards and
charters for the Audit, Compensation, and Governance and
Nominating Committees are available on the Companys
website at www.hrblock.com under the Company link
and then under the heading Investor Relations and
then under Corporate Governance. These documents are
also available in print to shareholders upon written request to:
Corporate Secretary, H&R Block, Inc., One H&R Block
Way, Kansas City, Missouri 64105. Set forth below is a
description of the duties of each committee and its members.
The members of the Audit Committee are Mr. Lewis
(Chairman), Mr. Shaw and Ms. Wood. Mr. Cobb was a
member of the Audit Committee during fiscal year 2011 and until
he became an employee of H&R Block Management, LLC, a
subsidiary of the Company, on May 2, 2011. On that date
Mr. Cobb ceased to be independent, and hence was no longer
eligible to serve as a member of the Audit Committee. The
functions of the Committee are described in the Audit Committee
Charter and include making recommendations to the Board of
Directors with respect to the appointment of the Companys
independent accountants, evaluating the independence and
performance of such accountants, reviewing the scope of the
annual audit, and reviewing and discussing with management and
the independent accountants the audited financial statements and
accounting principles. See the Audit Committee
Report on page 17. All of the members of the Audit
Committee are independent under regulations adopted by the SEC,
NYSE listing standards and the Board of Directors Independence
Standards. The Board has determined that Mr. Lewis and
Ms. Wood are audit committee financial experts, pursuant to
the criteria prescribed by the SEC. The Audit Committee held 8
meetings during fiscal year 2011.
The members of the Compensation Committee are
Mr. Shaw (Chairman), Ms. Wood and Messrs. Lauer,
Rohde and Seip. The functions of the Compensation Committee
primarily include reviewing and approving the compensation of
the executive officers of the Company and its subsidiaries,
recommending to the Board of Directors the compensation of the
Companys Chief Executive Officer, and administering the
Companys long-term incentive compensation plans. See the
Compensation Discussion and Analysis beginning on
page 19. All of the members of the Compensation Committee
are independent under the NYSE listing standards and the Board
of Directors Independence Standards. The Compensation Committee
held 7 meetings during fiscal year 2011.
The members of the Finance Committee are Mr. Gerard
(acting Chairman) and Messrs. Bennett, Cobb and Rohde. The
primary duties of the Finance Committee are to provide advice to
management and the Board of Directors concerning the financial
structure of the Company, the funding of the operations of the
Company and its subsidiaries, and the investment of Company
funds. The Finance Committee held 4 meetings during fiscal year
2011.
The members of the Governance and Nominating Committee
are Mr. Gerard (Chairman) and Messrs. Lewis and
Seip. The Governance and Nominating Committee is responsible for
corporate governance matters, the initiation of nominations for
election as a director of the Company, the evaluation of the
performance of the Board of Directors, and the determination of
compensation of outside directors of the Company. All of the
members of the Governance and Nominating Committee are
independent under the NYSE listing standards and the Board of
Directors Independence Standards. The Governance and Nominating
Committee held 3 meetings during fiscal year 2011.
12
DIRECTOR
COMPENSATION
The Board considers and determines outside director compensation
each year, taking into account recommendations from the
Governance and Nominating Committee. The Governance and
Nominating Committee formulates its recommendation based on its
review of director compensation practices at other companies.
The Governance and Nominating Committee may delegate its
authority to such subcommittees as it deems appropriate in the
best interest of the Company and its shareholders. Management
assists the Governance and Nominating Committee in its review by
accumulating and summarizing market data pertaining to director
compensation levels and practices. The following table describes
the compensation paid to our outside directors in fiscal year
2011:
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Amount
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Compensation Element
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(annual except for meeting
fees)
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Annual
Retainer(1)
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$40,000
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Annual Retainer
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$100,000 in deferred stock units
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Non-Executive Chairman of the Board Fee
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$150,000 in deferred stock units
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Chair Fee Audit Committee
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$15,000
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Chair Fee Compensation, Governance and
Nominating, and Finance Committees
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$10,000
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Board Meeting
Fee(2)
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$2,000 per meeting
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Committee Meeting
Fee(3)
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$1,200 per meeting
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(1) Paid
in four quarterly installments.
(2) Subject
to a maximum of ten Board meetings per year.
(3) Subject
to a maximum of ten Committee meetings per year per Committee.
Deferred
Stock Unit Plan
Deferred stock units (DSUs) are granted to outside
Directors pursuant to the 2008 Deferred Stock Unit Plan for
Outside Directors (the 2008 Stock Unit Plan). The
2008 Stock Unit Plan was approved by the Governance and
Nominating Committee and the Board of Directors on June 11,
2008, and was approved by the Companys shareholders on
September 4, 2008. The 2008 Stock Unit Plan provides for
the grant of DSUs to directors of the Company or its
subsidiaries who are not employees of the Company or any of its
subsidiaries. The Plan specifies that the Board of Directors may
make grants of DSUs to outside directors in its sole discretion.
The number of DSUs credited to an outside directors
account pursuant to an award is determined by dividing the
dollar amount of the award by the average current market value
per share of the Companys Common Stock for the ten
consecutive trading dates ending on the date the DSUs are
granted to the outside director. The current market value
generally is the closing sales price as reported on the NYSE. If
an outside director terminates service with the Company for
reason other than death, DSUs will be paid to such outside
director, in shares of Common Stock, in one lump sum on the six
month anniversary date of the termination of service. If an
outside director dies prior to the payment in full of all
amounts due such outside director under the 2008 Stock Unit
Plan, the balance of the outside directors DSU account
will be paid to the outside directors beneficiary, in
shares of Common Stock, within 90 days following the
outside directors death. Currently, the maximum number of
shares of Common Stock that may be paid out under the 2008 Stock
Unit Plan is 300,000.
On September 30, 2010, $100,000 in value of DSUs for the
one-year period beginning September 30, 2010 were approved
for Ms. Wood and Messrs. Breeden, Cobb, Gerard, Lauer,
Lewis, Rohde, Seip and Shaw. The grant date of these awards was
November 1, 2010. In addition, on September 30, 2010,
Mr. Rohde was awarded DSUs with an aggregate value of
$18,056, and Mr. Cobb was awarded DSUs with an aggregate
value of $14,772, for the period beginning on the date of each
of their respective appointments to the Board of Directors and
ending on September 29, 2010. The grant date of these
awards was also November 1, 2010. On September 30,
2010, $150,000 in value of DSUs was approved for
Mr. Breeden for serving as the non-executive Chairman of
the Board for the one year period ending September 29,
2010, and $150,000 in value of DSUs was approved for
Mr. Breeden for serving as the non-executive Chairman of
the Board for the period beginning September 30, 2010. The
grant date of these awards was also November 1, 2010.
13
The Company also provides to its non-employee directors free
business travel insurance in connection with Company-related
travel. In addition, the H&R Block Foundation will match
gifts by non-employee directors to any qualified
not-for-profit
organization on a
dollar-for-dollar
basis up to an annual aggregate limit of $5,000 per director per
calendar year.
The Board has adopted stock ownership guidelines regarding stock
ownership by Board members. The Board member ownership
guidelines provide for non-employee directors to own shares of
the Companys Common Stock with an aggregate value
generally exceeding five times the annual cash retainer paid to
them.
DIRECTOR COMPENSATION TABLE
The following table sets forth total director compensation for
non-employee directors for fiscal year 2011.
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Fees Earned or
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Stock
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Option
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All Other
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Paid in Cash
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Awards
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Awards
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Compensation
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Name
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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Total($)
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Alan M.
Bennett(5)
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22,000
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-
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-0-
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5,478
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27,478
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Thomas M.
Bloch(6)
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27,733
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-
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-0-
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3,750
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31,483
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Richard C.
Breeden(7)
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71,400
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416,540
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-0-
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5,000
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492,940
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William C.
Cobb(8)
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45,867
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119,518
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-0-
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5,000
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170,385
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Robert A. Gerard
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78,400
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104,135
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-0-
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5,000
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187,535
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Len J.
Lauer(9)
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75,800
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104,135
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-0-
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3,500
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183,435
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David B. Lewis
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88,200
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104,135
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-0-
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5,000
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197,335
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Bruce C.
Rohde(10)
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46,800
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122,937
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-0-
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5,000
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174,737
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Tom D. Seip
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77,000
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104,135
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-0-
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5,000
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186,135
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L. Edward Shaw,
Jr.(11)
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83,000
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104,135
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-0-
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5,000
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192,135
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Christianna Wood
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78,000
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104,135
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-0-
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9,000
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191,135
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(1)
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This column includes, as applicable, the annual directors
retainers, meeting fees for each Board and committee meeting
attended and committee chairman fees for fiscal year 2011.
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(2)
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The dollar amounts represent the grant date fair value under
FASB ASC Topic 718, Stock Compensation (FASB
718) for deferred stock units awarded during fiscal year
2011 to the outside director. These deferred stock unit awards
are fully vested in that they are not subject to forfeiture;
however, no shares underlying a particular award will be issued
until six months following the date the Director ends his or her
service on the Board. The grant date fair value of an award is
computed in accordance with FASB 718 utilizing assumptions
discussed in Item 8, Note 14 Stock-Based
Compensation to the Companys consolidated financial
statements in the
Form 10-K
for the year ended April 30, 2011, as filed with the SEC.
As of April 30, 2011, the following deferred stock units
were outstanding: Mr. Bennett 10,211;
Mr. Breeden 61,817; Mr. Cobb
10,508; Mr. Gerard 24,035;
Mr. Lauer 24,035; Mr. Lewis
24,035; Mr. Rohde 10,808;
Mr. Seip 24,035; Mr. Shaw
24,035; and Ms. Wood 20,144.
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(3)
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No stock options to purchase the Companys Common Stock
were granted to individuals while serving as outside directors
during fiscal year 2011. As of April 30, 2011, the
following stock options were outstanding:
Mr. Bennett 1,150,000 (150,000 granted to
Mr. Bennett for his prior service as interim Chief
Executive Officer of the Company, and 1,000,000 granted to him
in connection with his appointment as President and CEO of the
Company on July 7, 2010); Mr. Bloch
60,000; Mr. Breeden 37,595;
Mr. Cobb 0; Mr. Gerard 0;
Mr. Lauer 16,000; Mr. Lewis
24,000; Mr. Rohde 0; Mr. Seip
48,000; Mr. Shaw 0; and
Ms. Wood 0.
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(4)
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This column represents the H&R Block Foundation matching
amount on contributions to 501(c)(3) organizations on a calendar
year basis. For amounts over $5,000, this amount includes
matching contributions that occurred in the 2010 calendar year
and in the 2011 calendar year (all within fiscal year 2011).
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(5)
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Mr. Bennett was a non-employee director of the Company
until July 7, 2010, when he was appointed President and
Chief Executive Officer of the Company. Mr. Bennett is not
standing for re-election to the Board at the annual meeting.
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(6)
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Mr. Bloch did not stand for re-election at the
Companys 2010 Annual Meeting, and therefore ceased to be a
director of the Company on September 30, 2010.
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(7)
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Mr. Breeden resigned from the Board of Directors effective
April 18, 2011. Pursuant to the governing documents of
Breeden Partners and related investment funds (Breeden
Companies), compensation received by Mr. Breeden for
service as a director of the Company was turned over to the
investment funds. Mr. Breeden had no interest in such
compensation other than to the extent of his pro rata ownership
interest in the investment funds.
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(8)
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Mr. Cobb was elected to the Board of Directors effective
August 9, 2010.
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(9)
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Mr. Lauer is not standing for re-election to the Board at
the annual meeting.
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(10) |
Mr. Rohde was elected to the Board of Directors
effective July 27, 2010.
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14
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(11) |
Prior to July 31, 2010, Mr. Shaw was employed by the
Breeden Companies. Pursuant to the Breeden Companies
governing documents, compensation received by Mr. Shaw for
service as a director of the Company was required to be turned
over to the investment funds. Mr. Shaw had no interest in
such compensation other than to the extent of his pro rata
ownership interest in the investment funds. On July 31,
2010, Mr. Shaw ceased to be employed as a Senior Managing
Director of the Breeden Companies and became a Senior Advisor to
the Breeden Companies. In this capacity, Mr. Shaw is no
longer required to turn over compensation to the Breeden
Companies from the Company for service as a director.
Mr. Shaw is not standing for re-election to the Board at
the annual meeting.
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CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
Our Board of Directors operates under Corporate Governance
Guidelines (the Guidelines) to assist the Board in
exercising its responsibilities. The Guidelines reflect the
Boards commitment to monitor the effectiveness of policy
and decision-making both at the Board level and management
level, with a view to enhancing shareholder value over the long
term. The Guidelines also assure that the Board will have the
necessary authority and practices in place to review and
evaluate the Companys business operations as needed and to
make decisions that are independent of the Companys
management. The Guidelines are not intended to be a static
statement of the Companys policies, principles and
guidelines, but are subject to continual assessment and
refinement as the Board may determine advisable or necessary in
the view of the best interests of the Company and its
shareholders.
Retirement
and Tenure Policy
The Companys Articles and Bylaws provide that no director
may serve as a member of the Board for a period that extends
beyond the twelfth annual shareholders meeting following the
annual meeting at which such director was first elected to the
Board. Additionally, the Guidelines provide that a director must
retire from the Board at the next annual meeting following such
directors 75th birthday.
Independent
Chairman
It is the Boards policy, and the Companys Articles
require, that the Chairman of the Board be an independent
director who has not previously served as an executive officer
of the Company. As Chairman, Mr. Gerard leads all meetings
of the Board, including executive sessions of the non-employee
directors held at each regular meeting of the Board.
Substantial
Majority of Board is Independent
As further described in the Guidelines, the Board believes that
a substantial majority of the Board should consist of directors
who are independent under the NYSE listing standards. As
described below, seven of the Boards nine current
directors are independent directors within the meaning of the
Companys Board of Directors Independence Standards (the
Independence Standards) and the NYSE listing
standards.
The NYSE listing standards provide that a director does not
qualify as independent unless the Board affirmatively determines
that the director has no material relationship with the Company.
The listing standards permit the Board to adopt and disclose
standards to assist the Board in making determinations of
independence. Accordingly, the Board has adopted the
Independence Standards to assist the Board in determining
whether a director has a material relationship with the Company.
Independent
Board Standards
In June 2011, the Board conducted an evaluation of director
independence regarding the current directors and nominees for
director, based on the Independence Standards and the NYSE
listing standards. In connection with this review, the Board
evaluated commercial, charitable, consulting, familial and other
relationships between each director or immediate family member
and the Company and its subsidiaries. As a result of this
evaluation, the Board affirmatively determined that
Messrs. Gerard, Lauer, Lewis, Rohde, Seip and Shaw and
Ms. Wood were independent, and that Messrs. Bennett
and Cobb were not independent. Upon their respective nominations
to the Board in July 2011, the Board affirmatively determined
that Messrs. Brown, Ellison and Wright and Ms. Reich
were independent.
15
Code of
Ethics
All directors, officers and employees of the Company must act
ethically and in accordance with the policies comprising the
H&R Block Code of Business Ethics and Conduct (the
Code). The Code includes guidelines relating to the
ethical handling of actual or potential conflicts of interest,
compliance with laws, accurate financial reporting, and
procedures for promoting compliance with, and reporting
violations of, the Code. The Company intends to post any
amendments to or waivers of the Code (to the extent applicable
to the Companys Chief Executive Officer, Chief Financial
Officer or Principal Accounting Officer) on our website.
Succession
Planning
The Board recognizes the importance of effective executive
leadership to H&R Blocks success. The Companys
Board is actively engaged and involved in talent management. The
Board discusses the talent pipeline for specific critical roles.
High potential leaders are given exposure and visibility to
Board members through formal presentations and informal events.
More broadly, the Board is regularly updated on key talent
indicators for the overall workforce, including climate,
diversity, recruiting and development programs.
BOARD
LEADERSHIP STRUCTURE
The Companys Articles require that the Chairman of the
Board not simultaneously be Chief Executive Officer or President
of the Company, not have previously served as an executive
officer of the Company, and be an independent director pursuant
to the NYSE listing standards. As such, the Board is led by an
independent Chairman, currently Mr. Gerard. In addition,
the Companys Guidelines require that independent directors
constitute a substantial majority of the Board.
Messrs. Bennett and Cobb are the only two members of the
Board who are not independent.
BOARD
ACCOUNTABILITY
We strongly believe that our current Board structure creates a
better balance in leadership and accountability, as the
functions of Chief Executive Officer and Board Chairman are
significantly different. In addition to balancing
responsibilities, this structure enhances the accountability of
the Chief Executive Officer to the Board and strengthens the
Boards independence from management. In addition,
separating the roles of Board Chairman and Chief Executive
Officer allows the Chief Executive Officer to focus his efforts
on running our business and managing the Company in the best
interests of our shareholders. At the same time, Mr. Gerard
as Chairman handles the separate responsibilities of Board and
Committee scheduling, Board agendas and other Board
organizational tasks, as well as serving on occasion as
spokesman for the Board.
COMMUNICATIONS
WITH THE BOARD
Shareholders and other interested parties wishing to communicate
with the Board of Directors, the non-management directors, or
with an individual Board member concerning the Company may do so
by writing to the Board, to the non-management directors, or to
the particular Board member, and mailing the correspondence to:
Corporate Secretary, H&R Block, Inc., One H&R Block
Way, Kansas City, Missouri 64105. Please indicate on the
envelope whether the communication is from a shareholder or
other interested party. All such communications will be
forwarded to the director or directors to whom the communication
is addressed. In addition, Mr. Gerard and other Board
members have made and make themselves available for consultation
and direct communication with significant shareholders.
DIRECTOR
ATTENDANCE AT ANNUAL MEETINGS
Although the Company has no specific policy regarding director
attendance at its annual meeting, all directors are encouraged
to attend. Board and Committee meetings are held immediately
following the annual meeting. All of the Companys then
current directors attended last years annual meeting.
BOARDS
ROLE IN RISK OVERSIGHT
Management is responsible for the Companys day to day risk
management activities, and the Board has oversight
responsibility for managing risk, focusing on the adequacy of
the Companys risk management and mitigation processes. In
fulfilling this oversight role, the Board works with the
Companys Chief Executive Officer
16
and Chief Financial Officer to determine the Companys risk
tolerance and works to ensure that management is identifying,
evaluating, and managing the overall risk profile of the Company.
In addition to the discussion of risk at the Board level, the
Boards standing committees also focus on risk exposure as
part of their on-going responsibilities:
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n
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The Audit Committee is responsible for the oversight of risk
policies and processes relating to the Companys financial
statements and financial reporting processes. The Companys
Audit Services Department assists the Audit Committee and the
Board in its oversight of risk management by ensuring key risks
are included in the audit plan, providing objective assurance to
the Board on the effectiveness of risk management processes, and
reviewing the management of key risks.
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n
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The Finance Committee is responsible for reviewing and approving
the plans and strategies with respect to financing transactions,
acquisitions and dispositions, and other transactions involving
financial risks. It regularly reviews the Companys
earnings and free cash flow, its sources and uses of liquidity,
compliance with financial covenants and applicable regulatory
capital requirements, and uses of the Companys cash.
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n
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The Compensation Committee is responsible for reviewing the
Companys compensation policies and practices and the
relationship between the Companys risk management policies
and practices, corporate strategy and compensation policies and
practices.
|
Each of the committee chairs regularly reports to the full Board
concerning the activities of the committee, the significant
issues it has discussed, and the actions taken by that committee.
The Company has also established a Risk Management Committee to
support the Board and senior management in fulfilling their
oversight responsibilities. The Risk Management Committee
reports to the Chief Financial Officer and is made up of key
management-level employees. The Companys risk management
team and Risk Management Committee assists the Board in its
oversight of risk management by creating and facilitating a
process to identify, prioritize, monitor and report on risks and
mitigation strategies, overseeing regular reporting of risks to
the Board, identifying additional risk mitigation strategies as
appropriate, and monitoring emerging risks.
AUDIT
COMMITTEE REPORT
The Companys management is responsible for preparing
financial statements in accordance with generally accepted
accounting principles and the financial reporting process,
including the Companys disclosure controls and procedures
and internal control over financial reporting. The
Companys independent registered public accountants are
responsible for (i) auditing the Companys financial
statements and expressing an opinion as to their conformity to
accounting principles generally accepted in the United States
and (ii) auditing managements assessment of the
Companys internal control over financial reporting and
expressing an opinion on such assessment. The Audit Committee of
the Board of Directors, composed solely of independent
directors, meets periodically with management, the
Companys independent registered public accountants and the
internal auditor to review and oversee matters relating to the
Companys financial statements, internal audit activities,
disclosure controls and procedures and internal control over
financial reporting and non-audit services provided by the
independent accountants.
The Audit Committee has reviewed and discussed with management
and Deloitte & Touche LLP (Deloitte), the
Companys independent registered public accountants, the
Companys audited financial statements for the fiscal year
ended April 30, 2011. The Audit Committee has also
discussed with Deloitte the matters required to be discussed by
the Statement on Auditing Standards No. 61, as amended
(AICPA, Professional Standards, Vol. 1, AU section 380), as
adopted by the Public Company Accounting Oversight Board in
Rule 3200T, relating to communication with audit
committees. In addition, the Audit Committee has received from
Deloitte the written disclosures and the letter required by
applicable requirements of the Public Company Accounting
Oversight Board regarding Deloittes communications with
the Audit Committee concerning independence; has discussed with
Deloitte their independence from the Company and its management;
and has considered whether Deloittes provision of
non-audit services to the Company is compatible with maintaining
the auditors independence.
17
Based on the reviews and discussions referred to above, the
Audit Committee recommended to the Board of Directors of the
Company that the Companys audited financial statements be
included in the Annual Report on
Form 10-K
for the fiscal year ended April 30, 2011, for filing with
the SEC.
AUDIT COMMITTEE
David Baker Lewis, Chairman
L. Edward Shaw, Jr.
Christianna Wood
AUDIT
FEES
The following table presents fees for professional services
rendered by Deloitte for the audit of the Companys annual
financial statements for the years ended April 30, 2011 and
2010, and fees billed for other services rendered by Deloitte
for such years. Fees disclosed below include fees actually
billed and expected to be billed for services relating to the
applicable fiscal year.
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Fiscal
Year
|
|
|
2011
|
|
|
2010
|
Audit fees
|
|
|
$3,132,405
|
|
|
$3,680,062
|
|
|
|
|
|
|
|
Audit-related fees
|
|
|
122,090
|
|
|
119,805
|
|
|
|
|
|
|
|
Tax fees
|
|
|
177,458
|
|
|
249,572
|
|
|
|
|
|
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
|
$3,431,953
|
|
|
$4,049,439
|
|
|
|
|
|
|
|
Audit Fees consist of fees for professional services rendered
for the audit of the Companys financial statements and
review of financial statements included in the Companys
quarterly reports and services normally provided by the
independent auditor in connection with statutory and regulatory
filings or engagements.
Audit-Related Fees are fees for assurance and related services
that are reasonably related to the performance of the audit or
review of the Companys financial statements or that are
traditionally performed by the independent auditor. Amounts
included above consist of fees incurred relating to comfort
letter procedures for registration statement filings and other
audit-related services.
Tax Fees consist of fees for the preparation of original and
amended tax returns, claims for refunds and tax payment-planning
services for tax compliance, tax planning, tax consultation and
tax advice. Amounts included above consist of fees incurred
relating to transfer pricing studies and other tax advisory
services.
All other fees are fees billed for professional services that
were not the result of an audit or review.
The Audit Committee has adopted policies and procedures for
pre-approving audit and non-audit services performed by the
independent auditor so that the provision of such services does
not impair the auditors independence. Under the Audit
Committees pre-approval policy, the terms and fees of the
annual audit engagement require specific Audit Committee
approval. Other types of service are eligible for general
pre-approval. Unless a type of service to be provided by the
independent auditor has received general pre-approval, it will
require specific Audit Committee pre-approval. In addition, any
proposed services exceeding pre-approved cost levels will
require specific pre-approval by the Audit Committee.
General pre-approval granted under the Audit Committees
pre-approval policy extends to the fiscal year next following
the date of pre-approval. The Audit Committee reviews and
pre-approves services that the independent auditor may provide
without obtaining specific Audit Committee pre-approval on an
annual basis and revises the list of general pre-approved
services from time to time. In determining whether to
pre-approve audit or non-audit services (regardless of whether
such approval is general or specific pre-approval), the Audit
Committee will consider whether such services are consistent
with the SECs rules on auditor independence. The Audit
Committee will also consider whether the independent auditor is
best positioned to provide the most
18
effective and efficient service and
whether the service might enhance the Companys ability to
manage or control risk or improve audit quality. All such
factors will be considered as a whole and no one factor should
necessarily be determinative. The Audit Committee will also
consider the relationship between fees for audit and non-audit
services in deciding whether to pre-approve any such services.
The Audit Committee may determine for each fiscal year the
appropriate ratio between fees for Audit Services and fees for
Audit-Related Services, Tax Services and All Other Services.
The Audit Committee may delegate pre-approval authority to one
or more of its members. The member or members to whom such
authority is delegated shall report any pre-approval decisions
to the Audit Committee at its next scheduled meeting.
The Audit Committee has concluded that the provision of
non-audit services provided to the Company by its independent
accountant during the 2011 fiscal year was compatible with
maintaining the independent accountants independence.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTION
We are committed to increasing shareholder value through the
execution of specific strategies for our businesses that will
provide profitable growth. Superior performance by our executive
officers and management team is essential to achieving that
goal. To that end, we have designed our executive compensation
program to attract, retain, motivate and reward a
high-performing executive team.
For the fiscal year ended April 30, 2011, our named
executive officers (NEOs) consisted of the following:
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Officers
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Title
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Alan M.
Bennett(1)
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President and Chief Executive Officer
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Jeffrey T. Brown
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Senior Vice President and Chief Financial Officer
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C. E. Andrews
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President, RSM McGladrey, Inc.
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Philip L. Mazzini
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President, Retail Tax Services of HRB Tax Group, Inc.
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Robert J. Turtledove
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Senior Vice President and Chief Marketing Officer
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Former Officer
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Title
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Russell P.
Smyth(2)
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Former President and Chief Executive Officer
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(1)
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Mr. Bennett resigned as
President and Chief Executive Officer of the Company effective
May 16, 2011. Mr. Bennett will remain as a
non-executive employee of the Company through July 31, 2011
and as a Director of the Company until the Companys Annual
Shareholder Meeting in September 2011.
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(2)
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Mr. Smyth resigned as
President, Chief Executive Officer and as a Director of the
Company effective July 7, 2010.
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EXECUTIVE
SUMMARY
Our executive compensation decisions are influenced by a variety
of factors with the overarching goals of linking pay with
performance and creating alignment between management and
shareholders interests. To that end, we strive to link
executive compensation closely to changes in shareholder value
as well as the attainment of financial, operational and
strategic goals that we believe are critical drivers of
sustained value creation over the longer term.
When determining the type and amount of executive compensation,
we emphasize the direct elements of pay (cash
compensation base salary and annual
incentives as well as long-term, equity-based
compensation) as opposed to other, more indirect pay programs
(i.e., executive benefits and perquisites). We combine these
components in a manner we believe delivers the appropriate
reward for contributing to current business results, while at
the same time motivating our executives to enhance future
business results. We determine the mix
19
between cash compensation and
long-term, equity-based compensation based on what we believe
will motivate our executive team to achieve both our short-term
and long-term business objectives while factoring in market
competitiveness relative to our peer group.
It is the intent of the management and the Board of Directors to
continue to increase the percentage of executive compensation
that is based on long-term Company performance, and as the
Companys business plan evolves we anticipate increasing
our focus on longer-term, multi-year measurement of performance
in the overall compensation program.
FISCAL
YEAR 2011 RESULTS
For fiscal year 2011, the Company reported net income from
continuing operations of $419.4 million, or $1.35 per
share; in fiscal year 2010 these figures were
$488.9 million and $1.46 per share respectively. Total
revenues for fiscal year 2011 were $3.8 billion, down 2.6%
compared to the prior year. Adjusted (non-GAAP) income from
continuing operations for fiscal 2011 was $470.6 million,
essentially flat to adjusted net income in the prior year.
Adjusted earnings per share increased 7% to $1.52, due to a
decline in weighted shares outstanding as a result of our fiscal
year 2011 share repurchases.
Tax
Services
The Tax Services segment reported fiscal year 2011 pretax income
of $767.5 million compared to $867.4 million reported
in fiscal year 2010. Adjusting for special items, the
segments pretax income was $829.9 million,
essentially flat to the prior year. Adjusted pretax margin for
the segment improved to 28.5%, compared with a pretax margin of
27.9% in the prior year, as a result of cost savings achieved
through reductions in force and the office network.
Fiscal year 2011 segment revenues declined 2.1% to
$2.9 billion. This decline was primarily attributable to
the strategic sale of 280 company owned locations to
franchisees, as well as lower revenues stemming from our
inability to offer refund anticipation loans this tax season.
Total U.S. tax returns prepared by H&R Block in fiscal
year 2011 grew 6.5 percent, or 1.3 million returns.
Total retail returns prepared grew 3.6 percent, while the
net average retail fee per tax return prepared declined
3.3 percent. Total digital tax returns prepared increased
13.5 percent, led by growth of 28.7 percent in online
filings.
Overall, we achieved our highest level of U.S. tax client
growth since 2001. Additionally, we also reversed years of
market share declines and have built a solid pipeline of new and
younger clients.
RSM
McGladrey
In fiscal year 2011, this segment pretax income of
$49.0 million was down 16.5% compared to fiscal year 2010.
Adjusting for legal charges related to settlement of certain
litigation, fiscal year 2011 pretax income was
$77.3 million and the pretax margin was 9.3%. This compares
to adjusted pretax income of $88.2 million and pretax
margin of 10.3% in the prior year. Fiscal year 2011 segment
revenues fell 3.6% to $829.8 million.
Corporate
Corporate operations include corporate support department costs,
as well as net interest margin and other gains/losses associated
with H&R Block Banks mortgage portfolio. Corporate
operations reported a pretax loss of $139.5 million in
fiscal year 2011 compared to a loss of $141.9 million in
the prior year.
While operational results in fiscal year 2011 slipped relative
to the prior fiscal year as a result of the broad economic
recession and the settlement of certain legal issues, the
Compensation Committee believes that overall performance was
strong in light of the challenging environment the Company faced
in fiscal year 2011.
20
EXECUTIVE
COMPENSATION PRACTICE
The table below highlights our current compensation
practices both the practices we believe drive
performance and the practices we have not implemented because we
do not believe they would serve our shareholders long-term
interests.
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Executive
Compensation Practices We
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Our
Executive Compensation Practices:
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Have
Not Implemented:
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(What We
Do)
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(What We
Dont Do)
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We tie pay to performance. We set clear financial goals for
corporate and business unit performance and differentiate based
on individual performance against pre-set objectives.
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We do not have employment contracts except for the President and
Chief Executive Officer.
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We review market data relative to our Peer Group when making
executive compensation decisions.
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We mitigate undue risk, including utilizing caps on potential
payments, clawback provisions, reasonable retention provisions,
performance targets, and robust Board and management processes
to identify risk.
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We do not believe any of the Companys compensation
programs create risks that are reasonably likely to pose a
material adverse impact to the Company
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We have reasonable post-employment and change in control
provisions that apply to all executive officers.
Generally, our award agreements for equity grants provide for
accelerated vesting of awards after a change in control only if
an employee is also terminated within a stated period of time
following the change in control (a double-trigger).
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Except for certain provisions in Mr. Bennetts and Mr.
Cobbs agreements, we do not have separate change in
control agreements or excise tax gross-ups. In the future we
intend to refrain from providing excise tax gross-up provisions
relating to a change in control and Mr. Cobbs employment
agreement does not include such a provision.
We do not have a supplemental executive retirement plan that
provides extra benefits to the NEOs.
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We provide only minimal perquisites that have a sound benefit to
the Companys business.
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We do not provide significant additional benefits to executive
officers that differ from those provided to all other employees.
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We have adopted best practice share ownership guidelines.
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We do not reprice underwater stock options.
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Our Compensation Committee benefits from the use of an outside,
independent compensation consulting firm.
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Our general policy is that the Compensation Committee does not
allow its compensation consulting firm to provide any other
services to the Company.
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ELEMENTS
OF COMPENSATION SUMMARY
The table below summarizes the elements and objectives of our
fiscal year 2011 compensation program for executive officers,
including NEOs. In general, our pay package contains a mix of
elements based on the executives individual performance
and the Companys performance against specific
pre-established annual financial and operational performance
goals.
For those awards based on the Companys performance, our
specific decisions around setting performance goals and other
actions impacting executive compensation focus on certain areas
that we believe are critical value drivers of the business,
including: revenue, earnings or EBITDA (earnings before
interest, taxes, depreciation and amortization), client growth
and retention, and number of tax returns prepared. The actual
performance goals vary
21
from year to year based upon the
business environment and those goals that are identified as
being more important for a particular year.
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Component
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Purpose
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Characteristics
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Discussion
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Base Salary
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Reward for level of responsibility, experience, and sustained
individual performance.
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Fixed cash component based on role, experience, performance and
market data.
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page 26
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Short-Term
Incentive
(STI)
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Reward for achieving pre-established annual goals.
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A targeted STI award is designed to tie directly to our business
plan and provide competitive total cash opportunities.
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page 27
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Long-Term
Incentive
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Reward for multi-year performance that enhances shareholder
value.
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Equity-based compensation is designed to support multiple
objectives. For fiscal year 2011, the award was delivered
through a combination of time-based restricted stock and stock
options. For fiscal year 2012, the award consists of a
combination of restricted stock, stock options and performance
shares. Mr. Andrews long-term incentive is primarily cash based.
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page 30
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Perquisites
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Allows executives to assume their roles without incurring
economic costs due to their transition to the Company, thereby
supporting our attraction and retention objectives.
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Benefits are below the market median for our Peer Group.
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page 34
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Retirement
Benefits
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Provide an appropriate level of income replacement upon
retirement.
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A 401(k) plan with matching Company contributions generally
available to all employees and capped based on applicable IRS
limits.
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page 33
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Deferred
Compensation
Benefits
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Allows executives to defer compensation on a more tax-efficient
basis, thereby supporting our attraction and retention
objectives.
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Executives can elect to defer base salary and bonus. There are
no matching employer contributions.
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page 34
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Executive
Severance
Plan
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Encourage executives to act in the best interest of
stockholders, support attraction and retention objectives and
ensure the orderly succession of talent.
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Contingent in nature; most elements are payable only if a
NEOs employment is terminated without cause or after a
change in control. Provides for cash severance and equity
vesting.
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page 46
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In the past several years, the Company has gone through a
challenging period in which it has had relatively high turnover
in the CEO position. In fiscal year 2011, the Company relied
more heavily than usual on stock options as a component of
executive compensation, based in part on these transitions, and
in part on the difficulty in establishing long-term performance
metrics for our evolving business portfolio. As described below,
we have hired a new CEO that we believe will provide stable and
strong leadership, nominated new Directors who will contribute
to our executive oversight and business development, and
continued to revise our compensation practices to ensure strong
alignment between pay and performance.
22
RELATIONSHIP
BETWEEN COMPANY PERFORMANCE AND EXECUTIVE COMPENSATION
It is our goal to link executive pay to Company performance, and
in recent years we have increasingly taken significant steps
towards achieving that goal. The chart below provides a summary
of the recent revisions we have made to our compensation
practices in an effort to move towards alignment of pay with
performance:
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Fiscal
Year
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Revised
Compensation Practices
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2009
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Institution of a claw-back
policy in the event of a restatement of Company financials,
allowing the Board to seek reimbursement for payments to
executives made greater than those that would have been made
based on the restated financials (more discussion of which can
be found on page 33).
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Voluntary adoption of the Say on Pay
vote, enabling shareholders to vote on our compensation packages.
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2010
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Revised long-term equity award
methodology to ensure that both value and number of shares
granted are reviewed annually to balance share price volatility
with competitiveness of award.
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Instituted a double trigger
on any acceleration of equity awards that result from a
Change in Control of the Company.
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Eliminated the Companys match
under the H&R Block Deferred Compensation Plan for
Executives.
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Agreed to eliminate employment contracts
with senior executives other than the current CEO and
implemented uniform severance arrangements for senior executives
with consistent limits on maximum remuneration. In general, the
Companys severance plans are less generous than the
employment contracts they replaced.
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2011
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Changed the Companys stock
ownership guidelines to reflect the more common practice of
determining ownership levels as a multiple of base pay;
additionally, executives are now required to hold any net equity
that vests or is exercised until ownership requirements are
achieved.
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2012
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Shifted the equity mix for fiscal year
2012 executive long-term incentive compensation grants to 30%
performance shares, 50% stock options and 20% restricted stock
primarily to reduce the emphasis on stock options and increase
the focus on specific operational metrics and total shareholder
return versus the market.
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Introduced a new performance shares plan
in which the number of shares earned, if any, will depend on
performance against specified goals over three separate
12-month
performance periods with cliff vesting of earned
shares at the end of the
36-month
period.
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Adopted goals for the new performance
share plan that align with those of the annual incentive plan to
create a balanced focus on the most critically important drivers
of long-term sustainable shareholder value.
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At the conclusion of
Mr. Bennetts contract on July 31, 2011 (more
discussion of which can be found on page 45), the Company
will no longer provide tax
gross-ups
for its executives.
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As discussed below, we have recently gone through a CEO
transition, hiring William C. Cobb to serve as our President and
Chief Executive Officer. In an effort to revise our executive
compensation program to help maintain stability in the
leadership of our Company, we have designed a program with
substantial emphasis placed on long-term compensation, which
ties the compensation of our executives to the long-term growth
of the Company and creates the necessary incentives to attract
and maintain top quality executive talent going forward. The
following is a more detailed discussion of the process by which
the Company hired Mr. Cobb and created his compensation
package.
23
RESIGNATION
OF ALAN M. BENNETT AS PRESIDENT AND CHIEF EXECUTIVE OFFICER AND
EMPLOYMENT OF WILLIAM C. COBB AS PRESIDENT AND CHIEF EXECUTIVE
OFFICER
After the Board became aware in the spring of 2011 that
Mr. Bennett was considering retiring as President and Chief
Executive Officer of the Company following the 2011 tax season,
the Board identified Mr. Cobb as a potential successor to
Mr. Bennett. The Board then began discussions with
Mr. Cobb, a member of the Board of Directors and an
experienced senior executive with the desired background to lead
the Company, regarding potential terms of an employment
agreement in the event Mr. Bennett retired. Ultimately,
Mr. Bennett informed the Company that he was going to
retire as President and Chief Executive Officer of the Company
effective May 16, 2011. As a result, the Board asked
Mr. Cobb to become President and Chief Executive Officer of
the Company. Following further discussions and negotiation with
Mr. Cobb regarding terms of employment,
Mr. Cobbs Employment Agreement to serve as the
Companys President and Chief Executive Officer following
Mr. Bennetts retirement was recommended by the
Compensation Committee and approved by the Board of Directors on
April 25, 2011.
Mr. Cobbs Agreement was designed to induce
Mr. Cobb to become President and Chief Executive Officer
and to provide stability to the Company by providing
Mr. Cobb with long-term incentives to remain as President
and Chief Executive Officer for an extended period of time. In
light of the Companys recent history with relatively high
turnover at the CEO position, the Board considered it important
to the future of the Company to design a compensation package
that included these long-term incentives.
In order to effect a smooth transition from Mr. Bennett to
Mr. Cobb, the Directors approved a Transition Agreement
with Mr. Bennett regarding the provision of
Mr. Bennetts transition and consulting services. The
Transition Agreement does not amend or otherwise modify the
terms of Mr. Bennetts Employment Agreement. For more
information on this Transition Agreement, please see
page 60.
WILLIAM
C. COBB EMPLOYMENT AGREEMENT
Mr. Cobbs Employment Agreement, dated April 27,
2011, provides for the following:
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n
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Five year term, included continued nomination for election to
the Companys Board of Directors while serving as the
President and Chief Executive Officer of the Company.
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n
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Base salary of $950,000, with a sign-on bonus of $900,000,
repayable if he terminates his employment prior to
November 16, 2011 without Good Reason (as defined below).
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n
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Participation in the Companys short-term incentive
compensation program with a target award equal to 125% of base
salary.
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n
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A stock option to purchase 606,470 shares of the
Companys Common Stock at $17.48 per share (the
Option Grant), which was the fair market value of
the stock on the grant date (May 2, 2011). The Option Grant
will expire ten years from the date of grant, or five years
following Mr. Cobbs termination, whichever is
earlier, unless otherwise forfeited due to failure to satisfy
the vesting requirements as described below. Mr. Cobb has
also been granted 128,720 restricted shares of the
Companys Common Stock (the Restricted Stock
Grant and together with the Option Grant, the Equity
Grants).
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n
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The Equity Grants will vest and become exercisable in three
equal installments on December 24 of each of 2011, 2012 and 2013
and will vest in full if Mr. Cobb resigns for Good Reason,
or upon Mr. Cobbs death or disability. In the event
of a change in control of the Company, the Equity Grants will
vest in full if the continuing entity fails to assume or replace
them with new, equivalent value awards. If the Equity Grants are
assumed by the continuing entity, vesting will continue under
the normal schedule and accelerate in full only if Mr. Cobb
subsequently resigns for Good Reason or is involuntarily
terminated without Cause (as defined below).
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n
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Participation in the Companys 2003 Long-Term Executive
Compensation Plan, with a long-term equity incentive award
valued at no less than $4,500,000 for fiscal year 2012.
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n
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Reimbursement of Mr. Cobbs relocation expenses in
relation to the relocation of his family to the greater Kansas
City area as provided under the Companys standard
executive relocation policy.
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n
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Severance benefits if Mr. Cobb resigns for Good Reason or
is involuntarily terminated without Cause, consisting of:
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n
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Accrued and unpaid base salary and vacation;
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24
|
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n
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Any annual bonus earned but unpaid with respect to a fiscal year
ending prior to the termination date;
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n
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A lump-sum cash payment equal to the sum of Mr. Cobbs
base salary plus target annual bonus;
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n
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Payment to Mr. Cobb on a monthly basis for 18 months
following the termination date of his COBRA premium payments
attributable to continued participation in the Companys
standard health care program; and
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n
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Any performance bonus related to the year in which the
termination occurs prorated for the number of days of
Mr. Cobbs employment during such year.
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n
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Severance benefits if Mr. Cobb resigns for Good Reason or
is involuntarily terminated without Cause during the
120 day period preceding or the 24 month period
following a change in control of the Company. These benefits are
the same as those listed above, except:
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n
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The lump sum cash payment shall include a payment equal to twice
Mr. Cobbs base salary, not equal to it;
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n
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Payment to Mr. Cobb of a lump-sum cash payment equal to
24 months of COBRA premium payments, not 18 months in
installments;
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n
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There shall be full and immediate vesting of the Equity
Grants; and
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n
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Mr. Cobbs severance may be reduced to the amount that
will provide him the best net after-tax position.
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n
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The following constitute Cause:
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n
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Commission, through gross negligence or willful misconduct, of
an act materially and demonstrably detrimental to the Company;
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n
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Commission of any act of dishonesty or breach of trust resulting
in material personal gain or enrichment at the expense of the
Company;
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n
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Uncured material violation of the confidentiality or restrictive
covenant provisions of the agreement; or
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n
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Inability of Mr. Cobb or the Company to participate in any
activity subject to governmental regulation and material to the
business of the Company solely as the result of any action or
inaction by Mr. Cobb.
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n
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The following constitute Good Reason:
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n
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A material diminution in base salary or target bonus opportunity;
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n
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A material breach by the Company; or
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n
|
A relocation or material diminution in status, duties or
authority (including reporting to anyone other than the Board of
Directors).
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n
|
Mr. Cobb will be subject to the following post-employment
restrictive covenants: non-hire,
non-solicitation
and non-compete for one year following his last day of
employment; non-disparagement of the Company for two years
following his last day of employment; and non-disclosure of
proprietary information in perpetuity.
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EXECUTIVE
COMPENSATION BENCHMARKS AND TARGETS
The Compensation Committee works with external compensation
consultants to define the appropriate market for executive
compensation and benchmark our executive compensation program
against that market each year. We benchmark pay relative to a
specific group of peer companies (the Peer Group)
based on publicly disclosed information. We also review pay data
from multiple survey sources, reflective of general industry pay
levels for companies of relevant size based on market
capitalization and total revenue for each of the NEOs. For
fiscal year 2011, these survey sources were the Hewitt TCM
Executive Survey and the Towers Perrin CDB Executive Survey. The
Compensation Committee reviews summary survey/peer group data to
confirm that the market references are appropriate for our
business and the industries in which we compete for executive
talent.
Our philosophy is for targeted total compensation (base pay plus
targeted annual incentive plus long-term incentive grant values)
to approximate over time the size-adjusted market median rate
with a significant portion of pay tied to performance. On an
individual basis, specific officers may have targeted total pay
above or below
25
market median to reflect factors such as experience, role,
performance, etc. The Compensation Committee generally sets
performance objectives so that targeted total compensation
levels can be achieved only when targeted business performance
objectives are met. Consequently, actual pay realized by
executives will vary above or below the targeted level based on
the degree to which specific performance objectives are attained.
For a more detailed explanation of our methodology in
calculating our compensation packages, please see the
Compensation Methodology and Calculation section on page 34.
ELEMENTS
OF EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program consists of the following
elements: base salary, short-term incentives, long-term
incentives and benefits and perquisites. Each of our
compensation elements fulfills one or more of our objectives of
attracting, retaining, motivating and rewarding a
high-performing executive team. These elements are evaluated by
our Compensation Committee, which has authority to approve
certain matters and makes recommendations to the Board regarding
matters requiring Board approval (such as the compensation of
our CEO and certain actions under plans in which the CEO
participates). The Board takes these recommendations into
account in making determinations.
It is the intent of the management and the Board of Directors to
continue to increase the percentage of executive compensation
that is based on long-term Company performance, and as the
Companys business plan evolves we anticipate increasing
our focus on longer-term, multi-year measurement of performance
in the overall compensation program.
The chart below shows the fiscal year 2011 mix of base salary,
short-term and long-term incentive (based on amounts shown in
the Summary Compensation Table on page 40) for our CEO
and the average for our other NEOs (excluding Mr. Smyth).
Mr. Bennetts short-term incentive includes his
sign-on bonus of $900,000.
BASE
SALARY
We establish base salaries at levels designed to enable us to
attract and retain talented executives and to reward these
executives for consistent high performance over a sustained time
period. We determine executive base salaries based on the
executives role, experience and individual performance, as
well as market data for similar positions among comparable
companies within our industry.
26
For fiscal year 2011, base salaries for our NEOs were as follows:
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|
|
|
|
|
|
|
|
Fiscal
Year
|
|
|
% Increase
from
|
NEO
|
|
2011
Salary
|
|
|
Fiscal Year
2010
|
|
Officers
|
|
|
|
|
|
|
Alan M. Bennett
|
|
$
|
950,000
|
|
|
n/a
|
Jeffrey T. Brown
|
|
|
360,000
|
|
|
35.6%
|
C. E. Andrews
|
|
|
525,000
|
|
|
0.0%
|
Philip L. Mazzini
|
|
|
400,000
|
|
|
48.1%
|
Robert J. Turtledove
|
|
|
300,000
|
|
|
0.0%
|
Former Officer
|
|
|
|
|
|
|
Russell P. Smyth
|
|
|
950,000
|
|
|
n/a
|
Mr. Bennetts base salary for fiscal year 2011 was
determined during the negotiation of his employment agreement.
On May 1, 2010, while Mr. Brown was still serving as
the Companys Controller, he became the Companys
interim Chief Financial Officer, but did not receive an increase
in his base salary at that time. Mr. Brown was ultimately
appointed the Chief Financial Officer on September 20,
2010, at which time his base salary was increased to reflect his
promotion from Controller and interim Chief Financial Officer to
Chief Financial Officer. Mr. Mazzini was appointed
President, Retail Tax Services of HRB Tax Group, Inc., on
August 31, 2010, at which time his base salary was
increased to reflect his promotion from one of three Area
Presidents of Retail Tax Services to the President of Retail Tax
Services.
At their May 2011 meeting, the Compensation Committee approved
the following fiscal year 2012 base salaries for our NEOs who
are currently executive officers, effective July 1, 2011:
|
|
|
|
|
|
|
Fiscal
Year
|
|
% Increase
from
|
NEO
|
|
2012
Salary
|
|
Fiscal Year
2011
|
|
Officers
|
|
|
|
|
Jeffrey T. Brown
|
|
$387,000
|
|
7.5%
|
C. E. Andrews
|
|
525,000
|
|
0.0%
|
Philip L. Mazzini
|
|
440,000
|
|
10.0%
|
Robert J. Turtledove
|
|
322,500
|
|
7.5%
|
The salary increases for Messrs. Brown, Mazzini and
Turtledove reflect both a general market increase and
recognition for their performances in fiscal year 2011. The
resulting salaries for Messrs. Brown and Mazzini are
positioned well below the market median for similar roles,
reflecting the fact that they were recently appointed to their
new positions. Mr. Andrews did not receive a salary
increase for fiscal year 2012 in light of RSM McGladreys
fiscal year 2011 performance and because his salary is
well-positioned relative to the market.
SHORT-TERM
INCENTIVE COMPENSATION
Our short-term incentive (STI) compensation program
is designed to reward executives for achieving pre-established
annual financial and operational goals. The financial
performance goals are based on our fiscal year business plan.
They are proposed by the CEO in consultation with other senior
executives, and then reviewed by the Compensation Committee and,
after any changes that are considered appropriate, are
recommended to the Board for approval. These financial
performance goals in general are tied directly to the business
plan. Threshold and maximum performance goals are set below and
above the target goals to establish an appropriate relationship
between actual performance and changes in pay. STI target
opportunities for our NEOs (as specified below) are intended to
place a significant portion of our NEOs annual cash
compensation at risk with Company performance, thereby aligning
our NEOs compensation with shareholder interests. These
target opportunities are also intended to provide competitive
total compensation opportunities within our pay positioning
context discussed above.
The CEOs STI target opportunity is significantly higher
than the other NEOs because the CEOs duties and
responsibilities are substantially more extensive than the other
NEOs. Also, to ensure alignment with
27
shareholders, a larger portion of the CEOs annual cash
opportunity is variable. Mr. Bennetts target
opportunity was set under the terms of his employment agreement,
which included a minimum STI payment for fiscal year 2011 of
$700,000. The minimum guarantee was deemed necessary by the
Board as part of an overall compensation package intended to
recruit and attract Mr. Bennett to serve as our President
and Chief Executive Officer. To ensure that the guarantee did
not diminish Mr. Bennetts incentive to meet or exceed
the Companys performance goals, the guaranteed amount was
set at slightly less than 60% of his target opportunity.
We pay STI compensation following completion of our fiscal year,
and generally pay STI compensation only to the extent the
Company (or the applicable business unit) has met the applicable
threshold financial and strategic performance objectives. Prior
to payment, the Compensation Committee reviews and approves the
STI compensation payouts for senior executives, and recommends
the CEOs STI compensation payout to the Board for
approval. STI compensation payouts for fiscal year 2011 would
(i) be zero if the previously established threshold
performance objectives were not met or (ii) range from 25%
to 175% of the targeted award based on actual performance
against the objectives (or zero to 200% for Mr. Andrews).
STI compensation payouts are paid in cash up to 150% of the
targeted award opportunity. Payouts in excess of this level, if
any, are delivered in restricted shares of our Common Stock
under terms and restrictions identical to those of restricted
stock awarded as long-term incentive compensation as described
below. This approach is intended to support our retention
objectives and enhance the alignment between management and
shareholders by retaining a portion of the earned compensation
at risk in the form of Company stock. The amount of restricted
stock awarded is calculated by dividing the cash value of the
applicable incentive compensation by the last reported closing
price for our Common Stock as of the later of June 30 or the
third trading day following our announcement of earnings for the
most recently completed fiscal year (the date on which we
historically have awarded restricted stock each year).
Actions
Pertaining to Fiscal Year 2011 STI Compensation
In July 2010, the Compensation Committee recommended and the
Board approved the fiscal year 2011 STI performance criteria and
objectives for our corporate-level NEOs (Mr. Bennett
and Mr. Brown):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criteria
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Weight
|
|
H&R Block Net Earnings from Continuing Operations (in
millions)
|
|
|
$419.5
|
|
|
|
$477.6
|
|
|
|
$535.7
|
|
|
|
55%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Segment (Retail, Digital and
International) Clients (in thousands)
|
|
|
22,836
|
|
|
|
23,282
|
|
|
|
23,729
|
|
|
|
45%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These criteria were selected for Mr. Bennett and
Mr. Brown because they represented the key business drivers
of shareholder value for fiscal year 2011. The balance was
weighted slightly more towards net earnings from continuing
operations because this metric best reflects the performance of
the Company as a whole and therefore is the key driver of
sustainable shareholder value creation.
The performance criteria for Mr. Mazzini and
Mr. Turtledove for fiscal year 2011 were set as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criteria
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Weight
|
|
H&R Block Pretax Earnings (excluding RSM McGladrey,
International and non-core lines
of business) (in millions)
|
|
|
$562.4
|
|
|
|
$641.6
|
|
|
|
$720.8
|
|
|
|
60%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail and Digital Clients
(in thousands)
|
|
|
19,727
|
|
|
|
20,278
|
|
|
|
20,830
|
|
|
|
40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These criteria were selected for Mr. Mazzini and
Mr. Turtledove because the Compensation Committee
determined that based on their positions, their performance
criteria and objectives should be more closely
28
aligned with U.S. tax client
results and related pretax earnings. The balance was weighted
slightly more to pretax earnings because this metric is a key
driver of long term growth for the tax business.
As President of RSM McGladrey, the Committee determined that
Mr. Andrews STI performance criteria should be linked
to both Company and RSM results. Accordingly, his 2011 criteria
were set as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criteria
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Weight
|
|
H&R Block Net Earnings from Continuing Operations (in
millions)
|
|
|
$419.5
|
|
|
|
$477.6
|
|
|
|
$535.7
|
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSM Pretax Earnings (in millions)
|
|
|
$90.0
|
|
|
|
$96.4
|
|
|
|
$112.5
|
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSM Revenue (in millions)
|
|
|
$839.2
|
|
|
|
$862.0
|
|
|
|
$884.7
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below shows the target-level payouts and actual awards
under our fiscal year 2011 STI program for our NEOs:
|
|
|
|
|
|
|
NEO
|
|
(Target % of
Base Salary)
|
|
Target
Opportunity
|
|
Actual
Award
|
|
Officers
|
|
|
|
|
|
|
Alan M. Bennett
|
|
125%
|
|
$1,187,500
|
|
$1,151,875
|
Jeffrey T. Brown
|
|
60%
|
|
216,000
|
|
209,520
|
C. E. Andrews
|
|
80%
|
|
420,000
|
|
42,000
|
Philip L. Mazzini
|
|
60%
|
|
240,000
|
|
304,800
|
Robert J. Turtledove
|
|
50%
|
|
150,000
|
|
190,500
|
Former Officers
|
|
|
|
|
|
|
Russell P. Smyth
|
|
n/a
|
|
n/a
|
|
n/a
|
For fiscal year 2011, Mr. Bennett and Mr. Brown
received STI compensation of 97% of their targeted payout
amounts primarily because one of their performance criteria,
H&R Block net earnings from continuing operations, was only
slightly above the threshold performance goal while the number
of retail, digital and international clients served in the Tax
Segment was at the maximum performance goal. Mr. Mazzini
and Mr. Turtledove received fiscal year 2011 STI
compensation payouts of 127% of their targeted amounts because
not only were pretax earnings close to the target performance
goal but also because the number of U.S. retail and digital
tax clients served during fiscal year 2011 was at the maximum
performance goal. Mr. Andrews fiscal year 2011 STI
payout was 10% of his targeted amount because only one of his
three performance criteria, H&R Block net earnings from
continuing operations, slightly exceeded the threshold
performance goal for payment.
Actions
Pertaining to Fiscal Year 2012 STI Compensation
At their June 2011 meetings, the Compensation Committee
recommended and the Board approved fiscal year 2012 target STI
opportunities for our senior executives including the following
current NEOs as follows:
|
|
|
|
|
|
|
Target
Opportunity
|
|
Target
Opportunity
|
NEO
|
|
(as a % of
Base Salary)
|
|
($ based on
% of Base Salary)
|
|
William C. Cobb
|
|
125%
|
|
$1,187,500
|
Jeffrey T. Brown
|
|
60%
|
|
232,200
|
C. E. Andrews
|
|
80%
|
|
420,000
|
Philip L. Mazzini
|
|
70%
|
|
308,000
|
Robert J. Turtledove
|
|
50%
|
|
161,250
|
Mr. Cobbs fiscal year 2012 target opportunity of 125%
of his base salary was set under the terms of his employment
agreement. Mr. Mazzinis target opportunity for fiscal
year 2012 was increased from 60% to 70% of base salary to make
his target opportunity closer to the market median and to
reflect his strong performance in his first year as the
President of Retail Tax Services.
29
The methodology utilized by the Board to determine payouts for
fiscal year 2012 STI is commonly referred to as a plan
within a plan approach. Under this methodology, a specific
STI funding trigger, or threshold level of
performance, was approved by the Board at its June 2011 meeting.
Achievement of this threshold, which was set at a specified
level of H&R Block net earnings from continuing operations,
results in potential funding of the bonuses for the current NEOs
at the maximum payout level. Failure to achieve the threshold
level of H&R Block net earnings from continuing operations
will result in no payouts under the STI plan for fiscal year
2012. Assuming the threshold is attained, the actual payouts
will depend on performance against a separate set of performance
goals and payouts will range from 0% to 200% of each current
NEOs target STI opportunity. The H&R Block net
earnings from continuing operations funding trigger was set in
June to ensure that the payouts under the STI plan will be fully
deductible by the Company as performance-based
compensation under Internal Revenue Code
Section 162(m). The setting of the detailed performance
metrics will be completed prior to the start of tax season. This
timing is especially appropriate due to the seasonal nature of
the tax business, which delivers the majority of the
Companys revenues in the last four months of the
Companys fiscal year. Given this seasonality, the optimal
planning cycle for the Company is generally in the summer and
early fall. This methodology allows STI performance metrics to
be set after the planning cycle but before the start of the next
tax season.
LONG-TERM
INCENTIVE COMPENSATION
Our long-term incentive compensation is designed to support
multiple objectives, including (a) aligning
managements interests with those of shareholders,
(b) tying compensation to the attainment of long-term
operating goals and strategic initiatives, thereby mitigating
incentive for management to pursue short-term objectives at the
expense of long-term priorities, (c) ensuring that realized
compensation reflects changes in shareholder value over the
long-term, and (d) attracting and retaining highly skilled
executives.
Our long-term incentive compensation is largely equity based and
is awarded at the Boards discretion, taking into account
the Compensation Committees recommendations. We
historically have awarded equity-based compensation on an annual
basis as of the later of June 30 or the third trading day
following our announcement of earnings for the most recently
completed fiscal year; however, for fiscal year 2011, those
equity-based compensation awards were made on October 1,
2010, after shareholder approval of an amendment to the 2003
Long-Term Executive Compensation Plan to increase the aggregate
number of shares issuable under the Plan. From time to time we
award equity-based compensation as part of an employment offer
or promotion or, in certain limited instances, as a special
award. The amount of equity-based compensation awarded is based
on the executives level of job responsibility, long-term
potential and individual and Company performance. The award
amount is also guided by market data for positions of similar
scope and responsibility.
In fiscal year 2011, our NEOs (except for Messrs. Bennett
and Andrews, as discussed below) received a mix of equity-based
compensation consisting of approximately 80% of value in stock
options and 20% of value in time-based restricted stock. We
weighted the mix of equity-based compensation so that our NEOs
received a greater portion of long-term incentive compensation
in stock options to ensure that payouts from our equity programs
strongly reflect changes in shareholder value. The portion
delivered in time-based restricted shares was primarily intended
to serve as a retention tool, which the Committee viewed as
especially important during fiscal year 2011 as a result of our
CEO transition.
The forms of long-term compensation awarded in fiscal year 2011
pursuant to our 2003 Long-Term Executive Compensation Plan were
as follows:
Stock
Options
Option exercise prices are set at the closing price of the stock
on the date of grant and the options generally expire after ten
years. Stock options awarded in fiscal year 2011 generally vest
in one-fourth annual increments beginning on the one year
anniversary of the grant date. Awards granted in prior years
generally vest in one-third annual increments beginning on the
one year anniversary of the grant date. Prior to vesting, stock
options may not be transferred and are in most cases forfeited
upon cessation of employment. We have not re-priced previously
granted options.
30
Restricted
Stock
Prior to the lapse of restrictions, restricted stock may not be
transferred and is in most cases forfeited upon cessation of
employment. Restricted stock recipients do not receive cash
dividends on any unvested restricted stock grants, except for
those grants made prior to fiscal year 2011. Restricted stock
recipients may vote unvested restricted stock shares at
shareholder meetings. Restricted stock grants awarded in fiscal
year 2011 vest in one-fourth annual increments beginning on the
one year anniversary of the grant date. Grants made prior to
fiscal year 2011 (and those made in fiscal year 2012), generally
vest in one-third annual increments on the one year anniversary
of the grant date.
Performance
Cash
Pursuant to Mr. Andrews offer letter dated
June 5, 2009, he was provided with (i) an initial
target long-term performance cash award in fiscal year 2010 and
(ii) the right to receive annual long-term performance cash
award opportunities each subsequent fiscal year. The initial
performance cash award and the right to receive subsequent
annual performance cash award opportunities were granted on
Mr. Andrews date of hire and were deemed instrumental
in attracting him to the Company.
Mr. Andrews fiscal year 2011 long-term performance
cash award opportunity of $640,000 provided him with the
opportunity to earn a payout in the range of 0%-300% of the
target award based on RSM McGladreys cumulative earnings
over a three-year performance period, as follows:
(i) maximum long-term performance cash payout (300% of
target) for cumulative earnings for fiscal years
2011-2013 of
at least $396.8 million, (ii) target long-term
performance cash payout (100% of target) for cumulative earnings
for fiscal years
2011-2013 of
at least $351.7 million, and (iii) no long-term
performance cash payout for cumulative earnings for fiscal years
2011-2013 of
less than $316.5 million. We believe that using a
performance metric specific to RSM McGladrey for this purpose is
more appropriate than using a corporate level performance metric
because Mr. Andrews responsibilities, as President of
RSM McGladrey, relate exclusively to RSM McGladrey and not to
the Companys other businesses.
Mr. Andrews long-term performance cash award
opportunity vests after three years (pursuant to performance
against the RSM McGladrey cumulative earnings objective) and
will be pro-rated if Mr. Andrews employment is
terminated before the end of the three-year performance period.
The award opportunity will be linearly interpolated for
performance between the minimum and maximum payouts described
above.
For fiscal 2011, our NEOs (except for Mr. Smyth) were
granted stock options and restricted stock in the following
amounts (see above for details regarding Mr. Andrews
long-term performance cash award):
|
|
|
|
|
|
|
|
|
|
|
Award
|
|
Stock
|
|
Exercise
|
|
Shares of
|
Officers
|
|
Value
($)(1)
|
|
Options
|
|
Price(2)
|
|
Restricted
Stock
|
|
Alan M. Bennett
|
|
$2,500,000
|
|
1,000,000
|
|
$14.37
|
|
|
Jeffrey T. Brown
|
|
257,201
|
|
88,155
|
|
$12.59
|
|
6,355
|
C. E. Andrews
|
|
728,591
|
|
44,075
|
|
$12.59
|
|
|
Philip L. Mazzini
|
|
257,201
|
|
88,155
|
|
$12.59
|
|
6,355
|
Robert J. Turtledove
|
|
144,675
|
|
49,585
|
|
|
|
3,575
|
|
|
|
(1)
|
|
Represents the accounting grant
date fair value of stock options and restricted stock under FASB
Topic 718, Stock Compensation.
|
(2)
|
|
Stock option exercise prices vary
due to different grant dates, as discussed below.
|
Mr. Bennetts stock options were negotiated in
connection with his hiring on July 7, 2010, and had a grant
date of July 12, 2010. Pursuant to Mr. Bennetts
notice of termination of his employment agreement based upon his
retirement, Mr. Bennetts stock options will expire
five years following his termination date of July 31, 2011,
and became fully vested on July 11, 2011.
Mr. Bennetts stock options are exercisable as to
one-fourth of the shares on each anniversary of the grant date.
31
The stock options and restricted stock awarded to
Messrs. Brown, Andrews, Mazzini and Turtledove had a grant
date of October 1, 2010, and will vest in one-fourth annual
increments beginning on the first anniversary of the grant date.
ADJUSTMENTS
TO LONG-TERM COMPENSATION PROGRAM
In June 2012, the Compensation Committee adjusted the long-term
compensation program for fiscal year 2012 awards, as follows:
|
|
|
|
n
|
Shifting the mix of equity based compensation to: 30%
performance shares, 20% restricted stock and 50% options.
|
|
|
n
|
Adopted a new performance share plan for executive officers
utilizing performance metrics we believe are critical value
drivers of the business that will further enhance the alignment
between management and shareholder interests, as described
below. The number of performance shares earned by an executive,
if any, will depend on performance against specified goals over
three separate
12-month
performance periods, and earned shares will be deferred and
subject to cliff vesting based on continued
employment at the end of the entire
36-month
performance period.
|
|
|
n
|
Adopted
3-year
vesting for stock options and restricted stock grants to align
with the performance share plan and tie the equity-based
compensation opportunity more closely with the Companys
evolving
3-year
strategic plan.
|
The charts below highlight the changes in the long-term
incentive mix from 2011 to 2012.
|
|
|
|
2011
Long-Term Incentive Mix
|
Stock Options
|
|
|
Restricted Stock
|
80%
|
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
2012
Long-Term Incentive Mix
|
Stock Options
50%
|
|
|
Performance Shares
30%
|
|
|
Restricted
Stock
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under the new performance share plan, a targeted number of
performance shares will be awarded annually as of the later of
June 30 or the third trading day following our announcement of
earnings for the most recently completed fiscal year. Under the
plan:
|
|
|
|
n
|
A participating executive has the opportunity to earn a
performance share payout of 0% to 200% of the target number of
shares, based on performance against pre-established performance
metrics (and subject to the award modifier discussed below).
|
|
|
n
|
Performance is measured over three separate twelve-month
performance periods, with the average results for the three
performance periods determining the number of performance shares
earned. This amount is subject to potential modification of up
to plus or minus 25% based on the Companys total
shareholder return (TSR) over the entire three-year
period relative to the S&P 500. As a result of the TSR
modification, the resulting maximum award could be as high as
250% of the target award but only if the maximum performance
goals were met in each of three twelve-month performance periods
and TSR over the entire three-year period equals or exceeds the
80th percentile.
|
|
|
n
|
The operational performance metrics for the first of the three,
twelve-month performance periods are H&R Block revenue and
EBITDA, weighted equally.
|
|
|
n
|
Vesting of earned shares, if any, occurs at the end of the
three-year performance period, subject to the following:
(a) an executive will forfeit their award if they are
terminated for cause or voluntarily terminate employment prior
to vesting; and (b) an executive will receive a pro-rata
portion of their award based on death, disability, retirement or
involuntary termination without cause prior to vesting.
|
32
|
|
|
|
n
|
Performance shares are settled upon vesting using shares of our
Common Stock and do not pay dividends during the vesting period.
Instead, dividend equivalents are carried as fractional
performance shares and, if the performance shares vest, they are
settled as additional shares of Common Stock in proportion to
the number of performance shares that vested (and therefore
dividends are not paid on performance shares that are not
earned).
|
|
|
n
|
Unvested performance shares do not carry voting rights; shares
earned through achievement of performance objectives carry
voting rights once the shares are paid out in common stock.
|
The Compensation Committee adopted the performance share plan to
increase the focus on specific operational metrics and relative
TSR. The Committee believes this is an important directional
shift. The Company is adopting a three-year business planning
cycle and it is expected that future performance share awards
will have three-year performance metrics based on this cycle.
In conjunction with the adoption of the performance share plan,
the Committee substituted performance shares for stock options,
reducing stock options from 80% to 50% of the long-term
incentive compensation awards for fiscal year 2012.
In June 2012, our current NEOs were awarded long-term incentive
compensation grants as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
|
Award
|
|
Stock
|
|
Performance
|
|
Restricted
|
|
|
|
|
Value
|
|
Options
|
|
Shares
|
|
Stock
|
|
Performance
|
Officers
|
|
($)(1)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
Cash ($)
|
|
William C. Cobb
|
|
$4,500,000
|
|
694,445
|
|
77,320
|
|
56,110
|
|
-
|
Jeffrey T. Brown
|
|
500,000
|
|
77,160
|
|
8,590
|
|
6,235
|
|
-
|
C. E. Andrews
|
|
750,000
|
|
46,295
|
|
-
|
|
-
|
|
$600,000
|
Philip L. Mazzini
|
|
700,000
|
|
108,025
|
|
12,025
|
|
8,730
|
|
-
|
Robert J. Turtledove
|
|
300,000
|
|
46,295
|
|
5,155
|
|
3,740
|
|
-
|
|
|
|
|
(1)
|
Represents the accounting grant date fair value of restricted
stock under FASB Topic 718, Stock Compensation, and
the Black Scholes value of stock options.
|
Under the terms of Mr. Cobbs Employment Agreement,
Mr. Cobb was to receive a long-term incentive compensation
grant for fiscal year 2012 valued at not less than $4,500,000.
This grant value was determined during the negotiation of
Mr. Cobbs Employment Agreement and future awards will
be determined by the Board based on the recommendation of the
Committee that reflect his performance and other appropriate
factors. Mr. Bennett was not awarded a long-term
compensation grant for fiscal year 2012 because of his
retirement as President and Chief Executive Officer of the
Company effective May 16, 2011. The values of the fiscal
year 2012 long-term incentive compensation grants have increased
from fiscal year 2011 for the NEOs (except for Mr. Andrews)
to better position them relative to the market and to reflect
the strong fiscal year 2011 performance.
The fiscal year 2012 performance metrics specified above were
selected because we believe they are critical drivers of
sustained value creation over the longer term.
COMPENSATION
CLAW-BACK POLICY
In the event of a restatement of our financial results, the
Board has the authority to seek reimbursement of any portion of
performance-based or incentive compensation paid, vested or
awarded in any previous year that is greater than would have
been paid or awarded if calculated based on the restated
financial results. It is the policy of the Board that it will
seek such reimbursement in the event any such situation should
arise.
BENEFITS
We provide certain benefits to all full-time employees such as:
employer matching contributions to our qualified retirement
plan; an employee stock purchase plan that permits purchases of
our Common Stock at a discount; life insurance; and health and
welfare benefit programs. Benefits for executives generally are
the same as benefits for all other full-time employees, except
that executive officers and certain key employees may
participate in our executive life insurance plan and our
deferred compensation plan. We believe our executive benefit
program is conservative relative to market practice, which is
consistent with our philosophy to emphasize the direct elements
of our executive compensation program.
33
In order to attract and retain executives, we offer an executive
life insurance plan that provides death benefits up to three
times the participating executives salary. The death
benefits are payable to beneficiaries designated by the
participating executives.
Our deferred compensation plan is designed to build retirement
savings by offering participants the opportunity to defer salary
and short-term incentive compensation. Gains or losses are
posted to a participants account pursuant to his or her
selection of various investment alternatives. The plan benefits
are paid following termination of employment, with a six month
delay to fully comply with Internal Revenue Code
(IRC) Section 409A, except in cases of
disability or hardship. This plan does not provide for any
Company match into the deferred compensation plan but does
provide for restoration benefits of our qualified 401(k) plan
should executives be limited under IRC Section 401(a)(17)
limits on compensation taken into account under the 401(k) plan.
PERQUISITES
We generally provide minimal perquisites to our executive
officers and therefore believe our overall executive perquisites
are well below the market median relative to our Peer Group.
These perquisites consist primarily of free tax preparation
services at local H&R Block offices.
In connection with hiring Mr. Bennett, we agreed to provide
him with the following perquisites on a tax grossed
up basis for the six month period beginning July 7,
2010 (the effective date of his election as President and Chief
Executive Officer): (i) reasonable and customary furnished
housing and rental car expense while in Kansas City in
connection with the Companys business and (ii) use of
the Companys Net Jet share for one round trip per week
between Mr. Bennetts Connecticut or Florida
residences and Kansas City. These provisions were implemented in
order to encourage Mr. Bennett to immediately assume the
role of President and Chief Executive Officer following the
unexpected resignation of Mr. Smyth. The provisions were
deemed appropriate to ensure that Mr. Bennett would not
incur economic costs attributable to commuting to and from our
corporate headquarters, thereby assuring that he was available
continuously and able to immediately engage in leading the
Company upon his hire.
COMPENSATION
METHODOLOGY AND CALCULATION
PEER
GROUP
The Compensation Committee reviews the Peer Group annually and
revises it as circumstances warrant. The Peer Group of companies
used in fiscal year 2011 remained unchanged from the
30 companies used in fiscal year 2010. The Compensation
Committee originally identified this Peer Group utilizing an
objective process to identify service-oriented companies (as
opposed to companies in manufacturing, energy, financial
services, health care, materials, utilities, media and gaming
categories) of relevant size. More specifically, we identified
members of the S&P 1500 that fall within service-oriented
categories under the Global Industry Classification Standards
(GICS) and then narrowed this group to the
30 companies immediately adjacent to us in terms of annual
revenue
and/or
market capitalization (15 larger and 15 smaller), subject to
certain additional constraints. The resulting Peer Group
represented a broad spectrum of companies in service and
service-related industries. The Peer Group for fiscal year 2011
consisted of the following companies:
|
|
|
|
|
Peer Group 2011
|
Sherwin-Williams Co.
|
|
Affiliated Computer Services
|
|
Abercrombie & Fitch
|
Carmax Inc.
|
|
Darden Restaurants
|
|
Cintas
|
PetSmart Inc.
|
|
Advance Auto Parts
|
|
Molex
|
Western Union Co.
|
|
Dicks Sporting Goods Inc.
|
|
American Eagle Outfitters
|
Avery Dennison
|
|
Fidelity National Information Services
|
|
Tiffany & Co.
|
Autozone
|
|
Wyndham Worldwide
|
|
Apollo Group Inc.
|
Starwood Hotels & Resorts
|
|
Cognizant Technology Solutions Corp.
|
|
Expedia
|
Pitney Bowes
|
|
Hewitt Associates Inc.
|
|
OReilly Automotive
|
Dollar Tree Inc.
|
|
Iron Mountain Inc.
|
|
Robert Half
|
Ross Stores
|
|
Fiserv
|
|
Intuit Inc.
|
For fiscal year 2012, the Compensation Committee revised the
Peer Group using a screening process that focused more on the
nature of the Companys business. This approach was
intended to eliminate companies that
34
might be in service or service-related industries but which have
clearly different operating models such as lodging,
restaurant and specialty retail that may employ
different compensation philosophies and attract different types
of talent. We endeavor to identify companies with greater
comparability to our core businesses, including tax and
professional services, retail banking and consulting services
and products. The revised approach resulted in a peer group of
18 companies with median revenue of approximately
$4 billion. It consists of the following companies:
|
|
|
|
|
Peer Group 2012
|
Aon
|
|
DST Systems
|
|
Intuit Inc.
|
Apollo Group
|
|
Equifax
|
|
MasterCard
|
Automatic Data Processing
|
|
Fidelity National Information Services
|
|
Robert Half International
|
CA
|
|
First American Financial Corp.
|
|
Unisys
|
Cognizant Technology Solutions
|
|
Fiserv
|
|
Willis Group Holdings
|
Convergys
|
|
Garmin
|
|
Yahoo!
|
Relative to this revised peer group, the fiscal year 2012
targeted total compensation for our executive officers was
between the 25th percentile and market median.
USE OF
EXTERNAL CONSULTANTS
The Compensation Committee retains Frederic W. Cook &
Co., Inc. (Frederic Cook) as its external
compensation consultant for objective advice and assistance on
executive compensation matters. Frederic Cook advised the
Committee on issues pertaining to executive compensation,
including the assessment of market based compensation levels,
the selection of our Peer Group, our pay positioning relative to
the market, the mix of pay, incentive plan design, and other
executive employment matters. Frederic Cook provided its advice
based in part on prevailing and emerging market practices, as
well as our specific business context. In fiscal year 2011,
Frederic Cook performed no other services for the Company. It is
the general policy of the Board that external compensation
consultants for the Compensation Committee must be independent
and serve the Compensation Committee exclusively, and may not
perform any other services for the Company at any time. Frederic
Cook performs no other services for the Company.
EXECUTIVE
EVALUATION PROCESS
Our Compensation Committee reviews our CEOs performance
each year against the financial, strategic and individual
objectives established previously by the Board of Directors.
Based upon its review and with assistance from its external
compensation consultant, the Compensation Committee makes
recommendations to the Board of Directors regarding the
CEOs compensation. The Board then determines the
CEOs compensation, taking into account the Compensation
Committees recommendation and their own review of the
CEOs performance. The CEO does not play a role in
determining his own compensation, other than discussing his
annual performance review with the Chairman of the Board.
For more detailed information on our CEO transition, please see
the summary on page 24.
Mr. Bennett was hired in fiscal year 2011 following his
previously successful tenure as interim President and Chief
Executive Officer from December 2007 to August 2008. His
compensation for fiscal year 2011 was established during the
course of negotiating his employment agreement, and thus was not
subject to our normal CEO evaluation process.
Mr. Bennetts fiscal year 2011 short-term incentive
compensation bonus was subject to Company performance (as
discussed below), but as a result of his appointment as CEO
after the fiscal year had commenced, was guaranteed at a minimum
level.
Mr. Smyth resigned prior to the Compensation Committee and
the Board conducting the evaluation process for his fiscal year
2011 compensation.
William C. Cobb was elected as the Companys CEO effective
May 16, 2011 and his target compensation for fiscal year
2012 was established during the course of negotiating his
employment agreement. Under the terms of Mr. Cobbs
employment agreement, Mr. Cobb was provided with a fiscal
year 2012 minimum $4,500,000 long-term compensation grant;
however his short-term incentive compensation bonus for fiscal
year 2012 is not guaranteed and will depend on the
Companys performance against specific goals established by
the Compensation Committee.
35
Our Compensation Committee assesses the performance of other
executive officers and approves the compensation of such
officers, taking into account recommendations of the CEO and
input from its external compensation consultant. Our CEO and
senior vice president of human resources assist the Compensation
Committee in reaching compensation decisions regarding
executives other than the CEO and the senior vice president of
human resources. In addition, the CEO (with input from other
senior executives) develops recommendations for the Boards
approval regarding performance goals under our short-term
incentive compensation program. Executive officers do not play a
role in determining their own compensation, other than
discussing their annual performance reviews with their
supervisor and, in the case of the CEO, making recommendations
for the Boards approval regarding performance goals under
our variable compensation program.
ANNUAL
COMPENSATION PROGRAM REVIEW
Our Compensation Committee annually reviews all components of
compensation for our CEO and other executive officers. This
review encompasses all forms of compensation, including base
salary, short-term incentives, long-term incentives, and other
benefits, as well as amounts pursuant to retirement and
non-qualified deferred compensation plans. As a part of this
process, the Compensation Committee also reviews tally sheets of
executive termination costs for each of these executive
officers, including potential payments upon any change of
control. Based on the fiscal year 2011 review, we believe
our executive termination costs are reasonable and below the
median relative to our Peer Group. Further information regarding
payments upon a change of control and other termination
scenarios is provided on page 49.
Although non-binding, the Compensation Committee and the Board
consider the results of the most recent shareholder advisory
vote on executive compensation or
say-on-pay
vote in determining compensation policies and decisions
concerning our executives.
OTHER
AWARDS
We occasionally offer sign-on awards as a means to attract
executives. These awards are typically offered in negotiating
employment terms and generally are in the form of cash,
guaranteed short-term incentive bonuses in the initial year of
employment, or grants of long-term equity-based compensation,
including stock options or restricted stock. In connection with
recruiting and attracting Mr. Bennett to serve as the
Companys President and Chief Executive Officer in July
2010, Mr. Bennett was provided with a stock option grant
(as discussed above) and a cash sign-on bonus of $900,000 on
July 18, 2010. Additionally, in connection with recruiting
and attracting Mr. Cobb to serve as the Companys
President and Chief Executive Officer upon
Mr. Bennetts retirement, Mr. Cobb was provided
with the following (as discussed above): (i) a stock option
to purchase 606,470 shares of the Companys Common
Stock; (ii) 128,720 restricted shares of the Companys
Common Stock; (iii) a cash sign-on bonus of $900,000; and
(iv) the right to receive a long-term equity compensation
award valued at no less than $4,500,000 for fiscal year 2012.
STOCK
OWNERSHIP GUIDELINES
We believe that our executive officers should have a significant
financial stake in the Company to ensure that their interests
are aligned with those of our shareholders. To that end, we have
adopted stock ownership guidelines that define ownership
expectations for certain executive officers. Under these
guidelines, executive officers are expected to own shares at
certain minimum levels within five years of employment taking
into account direct and indirect ownership of shares and share
equivalents, vested stock options and restricted stock held in
Company plans.
During fiscal year 2011, we modified our stock ownership
guidelines to move away from a fixed number of share ownership
requirement to the more common practice of determining ownership
levels as a multiple of base
36
pay. In addition, beginning in fiscal year 2011, executives are
now required to hold any equity that vests or is exercised (net
of taxes) until ownership requirements are met. The required
levels are as follows:
|
|
|
Officer
Title
|
|
Share
Requirement
|
|
CEO
|
|
5x Base Salary
|
Chief Financial Officer
|
|
3x Base Salary
|
General Counsel
|
|
3x Base Salary
|
Retail Tax President
|
|
3x Base Salary
|
All Other NEOs
|
|
2x Base Salary
|
Of our current NEOs, Mr. Andrews has attained the ownership
target and Messrs. Brown, Mazzini and Turtledove are
progressing toward attaining the targets. In instances where an
executive fails to attain the target ownership level within five
years, our CEO may require the executive to utilize net cash
bonuses to purchase shares or shift the mix of equity awards
until the guidelines are satisfied. The Compensation Committee
and our CEO annually review each executives progress
toward meeting the stock ownership guidelines.
ACCOUNTING
FOR STOCK-BASED COMPENSATION
We recognize stock-based compensation expense for the issuance
of stock options, restricted stock, and performance shares, as
well as stock purchased under our employee stock purchase plan
pursuant to FASB Accounting Standards Codification Topic 718
(formerly referred to as FAS 123(R)), Share-Based
Payment. Under this accounting methodology, we recognize
stock-based compensation expense for the issuance of stock
options, restricted stock, performance shares and shares under
our employee stock purchase plan on a straight-line basis over
applicable vesting periods.
TAX
CONSIDERATIONS
We believe it is in our shareholders best interest to
maximize tax deductibility when appropriate. Section 162(m)
of the IRC limits to $1 million our federal income tax
deduction for compensation paid to any of our NEOs (other than
our Chief Financial Officer), subject to certain exceptions,
including for performance-based compensation. We have designed
the H&R Block Executive Performance Plan and portions of
our equity-based compensation so that such compensation would be
deductible under Section 162(m), although individual
exceptions may occur when the Compensation Committee and Board
believe it is in our shareholders best interest, balancing
tax efficiency with long-term strategic objectives. If necessary
to comply with Section 162(m), certain compensation matters
will be approved by the Companys outside
directors, as such term is defined under Section 162(m).
EMPLOYMENT,
TERMINATION OF EMPLOYMENT AND SEVERANCE
ARRANGEMENTS
EMPLOYMENT
AGREEMENTS
Beginning in fiscal year 2010, the Company made the decision to
eliminate employment agreements for executives, except for the
President and Chief Executive Officer position, and to
standardize employment terms under other comprehensive
agreements. Consistent with this decision, during fiscal year
2011, only Mr. Bennett and Mr. Smyth were parties to
employment agreements with a subsidiary of the Company. These
employment agreements are described beginning on page 45.
EMPLOYMENT
ARRANGEMENTS
Mr. Andrews and Mr. Turtledove have employment
arrangement with subsidiaries of the Company, the terms of which
are contained within their respective offer letters. Additional
information about these offer letters is set forth on
page 46.
EXECUTIVE
SEVERANCE PLAN
In connection with the Companys movement from executive
employment agreements to standardized employment terms and
agreements, in May 2009, the Company adopted the H&R Block
Executive Severance Plan (Executive Severance Plan).
Information regarding the Executive Severance Plan is included
on page 46.
37
Messrs. Brown, Andrews, Mazzini and Turtledove are
participants in the Executive Severance Plan.
Messrs. Bennett and Smyth did not participate in the
Executive Severance Plan as the terms of their severance
arrangements were included in their respective employment
agreements.
The Executive Severance Plan is intended to support a variety of
objectives, including (a) standardization of severance
policy among the senior officers, which ensures internal parity,
simplifies internal administration, and mitigates negotiation at
hire and termination, and (b) attracting and retaining
highly skilled executives by protecting them from the short-term
economic consequences associated with unexpected termination of
employment in the absence of cause. Based on a review of
competitive data and advice from the Compensation
Committees independent consultant, we believe the benefits
our NEOs would receive under various severance scenarios are
very conservative relative to the market but sufficient to
support the above objectives.
CHANGE OF
CONTROL PROVISIONS
Change of control provisions for our NEOs, except for
Mr. Bennett (as discussed below), are set forth in the
Executive Severance Plan, discussed on page 47. We provide
these change of control benefits as a means to
attract and retain talented executives, who could have other job
alternatives that may appear more attractive absent these
benefits. In addition, by providing financial protection in the
event that a transaction results in the loss of employment, the
change of control program helps to ensure the independence and
objectivity of our executives when reviewing potential
transactions. The Executive Severance Plan does not provide for
any gross-up
payments to offset tax liabilities that result from change of
control payments. All payments under the Executive Severance
Plan require both a change of control and the subsequent loss of
employment by the NEO (considered a double trigger).
In addition, in connection with equity awards granted pursuant
to our 2003 Long-Term Executive Compensation Plan, our current
NEOs have entered into award agreements with the Company that
contain provisions accelerating the vesting of equity awards
upon certain changes of control and the subsequent loss of
employment following the business transaction (considered a
double trigger). We use this double
trigger equity acceleration policy to protect against the
loss of retention power following a change in control and to
avoid windfalls, both of which would occur if vesting
accelerated automatically as a result of a transaction. Equity
acceleration following a change of control under the award
agreements is discussed on page 47.
Mr. Bennetts employment agreement provided that in
the event of a change in control of the Company prior to
July 7, 2011, Mr. Bennett was eligible to receive a
tax gross-up
payment in the event that it was determined that he received an
excess parachute payment under applicable IRS rules. This
payment was intended only to restore excise taxes and would not
provide additional compensation to restore ordinary income
taxes. In addition, it was applicable only if the total
parachute payment exceeds the amount under which no excise tax
would apply by at least $100,000. If the total parachute payment
exceeded this level by less than $100,000,
Mr. Bennetts benefits would have been reduced to
avoid the excise tax. Following Mr. Smyths
resignation as President and Chief Executive Officer of the
Company, the Board determined that it was desirable to appoint a
new Chief Executive Officer promptly so that planning for the
2011 tax season could be continued without interruption. The
Board also concluded that Mr. Bennetts extensive
knowledge of the Companys business derived from his prior
experience as interim Chief Executive Officer in
2007-2008
and his continuing service on the Companys Board of
Directors made him well suited for the position. Because of the
manner in which excise taxes are determined under IRS rules, the
Board recognized that Mr. Bennett would have been more
likely to face potential excise taxes if a change in control
occurred shortly after his hire, and that such a consequence
could create an economic disincentive to assume the role of
President and Chief Executive Officer or to support potential
transactions that may be in shareholders best interests.
Consequently, the Board believed that the provision of a limited
tax gross-up
was appropriate in light of these circumstances and for several
other reasons, including (i) the fact that the
gross-up
would only have applied if the total value of change in control
payments exceeded by at least $100,000 the IRS safe
harbor (i.e., the amount of parachute payment below which
no excise tax would apply), and (ii) the limited time and
scope of Mr. Bennetts
gross-up
relative to typical
gross-up
provisions.
The Company has historically avoided the use of excise tax
gross-up
provisions relating to a change in control and has no
gross-up
obligations in place with respect to any other executive
officers, including Mr. Cobb, who assumed the role of
President and Chief Executive Officer as of May 16, 2011.
Mr. Bennetts
gross-up
provision provided potential benefits substantially reduced from
gross-up
provisions used by many other companies. Most importantly,
Mr. Bennetts
gross-up
provisions were scheduled to expire approximately one year from
the date of Mr. Bennetts hire (July 7, 2011),
compared to the multi-year terms or indefinite expiration dates
used by many
38
other companies. As a result of Mr. Bennetts
retirement on May 16, 2011, the
gross-up
provision is no longer applicable and there are no other
executives who have a similar benefit. Consistent with the
Companys historical practice, in the future we intend to
refrain from providing excise tax
gross-up
provisions relating to a change in control.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis. Based on
its review and discussion with management, the Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in the Companys 2011
proxy statement.
COMPENSATION COMMITTEE
L. Edward Shaw, Jr., Chairman
Len J. Lauer
Bruce C. Rohde
Tom D. Seip
Christianna Wood
RISK
ASSESSMENT IN COMPENSATION PROGRAMS
With the assistance of Frederic Cook, the Company has assessed
its broad-based and executive compensation programs to determine
if the programs provisions and operations create undesired
or unintentional risk of a material nature. Our risk assessment
included two work streams one focused on reviewing
areas of enterprise risk and the other focused on identifying
compensation design risk. Our enterprise risk analysis examined
the types and magnitudes of risks the business areas present to
the Company. Our compensation design risk analysis examined the
potential risks in the design of our performance-based
compensation arrangements. With respect to each
performance-based compensation plan, we identified and assessed
the risk profile of the plan. Finally, we evaluated on a
combined basis the results of the enterprise and compensation
risk assessments, on a
business-by-business
basis. As a result of our analysis, we believe that our
compensation policies and practices do not create inappropriate
or unintended material risk to the Company as a whole, and that,
consequently, our compensation policies and practices do not
create risks that are reasonably likely to have a material
adverse effect on the Company.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors serve on the Compensation
Committee of the Board of Directors: L. Edward Shaw, Jr.
(Chairman), Len J. Lauer, Bruce C. Rohde, Jr. Tom D. Seip,
and Christianna Wood. No director serving on the Compensation
Committee during fiscal year 2011 (a) was or was formerly
an officer or employee of the Company or any of its
subsidiaries, or (b) had any relationships requiring
disclosure in the proxy statement.
39
SUMMARY
COMPENSATION TABLE
The following table sets forth for the fiscal year ended
April 30, 2011 the compensation paid to or earned by the
Companys principal executive officer and principal
financial officer, each of the Companys three highest paid
executive officers (other than the principal executive officer
and principal financial officer) who were serving as an
executive officer of the Company at the end of such fiscal year,
and one additional executive officer (Russell P. Smyth) who
served as the Companys principal executive officer during
a portion of the fiscal year ended April 30, 2011
(collectively, the Named Executive Officers or
NEOs).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
|
|
Fiscal
|
|
|
Salary
|
|
|
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
|
Name and Principal
Position
|
|
|
Year(1)
|
|
|
($)(2)
|
|
|
Bonus(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
($)(6)
|
|
|
($)(7)
|
|
|
Total ($)
|
Alan M. Bennett,
Chief Executive
Officer(8)
|
|
|
2011
|
|
|
773,674
|
|
|
1,600,000
|
|
|
-
|
|
|
2,500,000
|
|
|
451,875
|
|
|
348,091
|
|
|
5,673,640
|
|
Jeffrey T. Brown,
Chief Financial
Officer(9)
|
|
|
2011
|
|
|
320,326
|
|
|
-
|
|
|
80,009
|
|
|
177,192
|
|
|
209,520
|
|
|
22,003
|
|
|
809,050
|
|
C.E. Andrews,
President, RSM McGladrey,
Inc.(10)
|
|
|
2011
2010
|
|
|
525,000
451,635
|
|
|
-
336,000
|
|
|
-
-
|
|
|
88,591
199,670
|
|
|
42,000
-
|
|
|
18,844
20,201
|
|
|
674,435
1,007,506
|
|
Philip L. Mazzini,
President, Retail Tax
Services of HRB Tax Group,
Inc.(9)
|
|
|
2011
|
|
|
348,296
|
|
|
5,652
|
|
|
80,009
|
|
|
177,192
|
|
|
304,800
|
|
|
24,415
|
|
|
940,364
|
|
Robert J. Turtledove,
Senior Vice President and
Chief Marketing
Officer(10)
|
|
|
2011
2010
|
|
|
300,000
212,500
|
|
|
-
-
|
|
|
45,009
200,012
|
|
|
99,666
-
|
|
|
190,500
-
|
|
|
19,577
44,533
|
|
|
654,752
457,045
|
|
Russell P. Smyth,
|
|
|
2011
|
|
|
334,659
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
53,609
|
|
|
388,268
|
Former Chief Executive
|
|
|
2010
|
|
|
950,000
|
|
|
-
|
|
|
520,038
|
|
|
1,781,419
|
|
|
-
|
|
|
30,967
|
|
|
3,282,424
|
Officer(11)
|
|
|
2009
|
|
|
712,500
|
|
|
783,750
|
|
|
-
|
|
|
3,480,000
|
|
|
-
|
|
|
289,978
|
|
|
5,266,228
|
|
|
|
(1)
|
Compensation for fiscal year 2009 and/or 2010 is included for
only those NEOs who were also named executive officers of the
Company for such fiscal year(s).
|
(2)
|
Messrs. Brown, Andrews and Mazzini each deferred a portion
of their fiscal year 2011 salaries under the Deferred
Compensation Plan for Executives, which is included in the
Nonqualified Deferred Compensation Table on page 44 of this
proxy statement. Each of the Named Executive Officers other than
Mr. Smyth contributed a portion of their salary to the
Companys 401(k) savings plan, the H&R Block
Retirement Savings Plan.
|
(3)
|
In accordance with the terms of Mr. Bennetts
employment agreement to serve as the Companys President
and Chief Executive Officer effective July 7, 2010:
(i) Mr. Bennett was paid a $900,000 cash sign-on bonus
on July 18, 2010; and (ii) Mr. Bennett was
provided with a minimum guaranteed short-term incentive
compensation bonus for fiscal year 2011 of $700,000. In June
2010, Mr. Mazzini was recognized as one of the
Companys top 100 performers and was awarded
with an incentive trip valued at $5,652.
|
(4)
|
This column represents the grant date fair value under FASB ASC
Topic 718, Stock Compensation (FASB 718)
for restricted shares of the Companys Common Stock granted
during fiscal year 2011, as well as prior fiscal years, pursuant
to the Companys 2003 Long-Term Executive Compensation
Plan. The grant date fair value of a restricted stock award is
computed in accordance with FASB 718 utilizing assumptions
discussed in Item 8, Note 14 Stock-Based
Compensation to the Companys consolidated financial
statements in the
Form 10-K
for the year ended April 30, 2011, as filed with the SEC.
During fiscal year 2011, Mr. Smyth forfeited 28,095
restricted shares of the Companys Common Stock granted in
fiscal year 2010 with a grant date fair value of $520,038
(calculated in accordance with the foregoing assumptions).
|
(5)
|
This column represents the grant date fair value under FASB ASC
Topic 718, Stock Compensation (FASB 718)
for stock options granted during fiscal year 2011, as well as
prior fiscal years, pursuant to the Companys 2003
Long-Term Executive Compensation Plan. The grant date fair value
of a stock option award is computed in accordance with FASB 718
utilizing assumptions discussed in Item 8, Note 14
Stock-Based Compensation to the Companys
consolidated financial statements in the
Form 10-K
for the year ended April 30, 2011, as filed with the SEC.
During fiscal year 2011, Mr. Smyth forfeited the following:
(i) 506,085 stock options granted in fiscal year 2010 with
a grant date fair value of $1,781,419; and (ii) 900,000
stock options granted in fiscal year 2009 with a grant date fair
value of $3,480,000 (in each case calculated in accordance with
the foregoing assumptions).
|
(6)
|
This column represents amounts awarded and earned under the
Companys short-term incentive compensation program, as
discussed on page 27 of this proxy statement.
Mr. Bennett earned a fiscal year 2011 short-term incentive
compensation award of $1,151,875, but, as discussed in footnote
3 above, $700,000 of this award was guaranteed and was therefore
included in the Bonus column of this table.
|
(7)
|
For fiscal year 2011, these figures include the following:
(a) the insurance premiums paid by the Company with respect
to term life insurance maintained by the Company for the benefit
of each of the Named Executive Officers of $808
(Mr. Bennett), $381
|
40
|
|
|
(Mr. Brown), $276
(Mr. Andrews), $410 (Mr. Mazzini), $360
(Mr. Turtledove), and $190 (Mr. Smyth);
(b) payment by the Company for participation in the
Companys group legal plan of $29 (Mr. Brown), $29
(Mr. Mazzini), and $5 (Mr. Smyth); (c) the
Companys matching contributions under the Companys
Deferred Compensation Plan for Executives of $1,981
(Mr. Brown), and $2,665 (Mr. Mazzini); (d) the
Companys matching contributions under the H&R Block
Retirement Savings Plan (RSP) of $24,500
(Mr. Bennett), $13,904 (Mr. Brown), $11,812
(Mr. Andrews), $14,333 (Mr. Mazzini), and $12,250
(Mr. Turtledove); (e) restricted stock dividends of
$2,986 (Mr. Brown), $2,271 (Mr. Mazzini), $5,770
(Mr. Turtledove), and $4,214 (Mr. Smyth); (f) the
economic value of the death benefit provided by the
Companys Executive Survivor Plan (ESP) of
$6,049 (Mr. Bennett), $2,722 (Mr. Brown), $2,906
(Mr. Andrews), $1,836 (Mr. Mazzini), $1,197
(Mr. Turtledove), and $5,354 (Mr. Smyth) (the imputed
income reported from the ESP represents the portion of the
premium paid by the Company pursuant to the ESP that is
attributable to term life insurance coverage for the executive
officer; the ESP provides only an insurance benefit with no cash
compensation element to the executive officer);
(g) reimbursement of the cost of Mr. Andrews
annual physical examination ($3,850); (h) payment by the
Company on Mr. Bennetts behalf of the incremental
cost for personal use of the Companys Net Jet aircraft
share by Mr. Bennett for one round trip per week between
Mr. Bennetts personal residences and Kansas City for
the first six months of Mr. Bennetts employment as
President and Chief Executive Officer of the Company effective
July 7, 2010 ($236,519) (this incremental cost includes
variable costs incurred as a result of personal flight activity,
such as hourly charges for each flight, fuel charges, applicable
taxes and miscellaneous fees; it excludes non-variable costs,
such as the Companys monthly management fee and insurance
fees); (i) payment by the Company on
Mr. Bennetts behalf of Mr. Bennetts
housing expenses in Kansas City, Missouri for the first six
months of Mr. Bennetts employment as President and
Chief Executive Officer of the Company effective July 7,
2010 ($20,035); (j) payment by the Company on
Mr. Bennetts behalf of Mr. Bennetts lease
for an automobile in Kansas City, Missouri for the first six
months of Mr. Bennetts employment as President and
Chief Executive Officer of the Company effective July 7,
2010 ($5,491); (k) tax
gross-ups
provided to Mr. Bennett by the Company related to
Mr. Bennetts imputed income resulting from payments
by the Company on Mr. Bennetts behalf for
(i) his personal use of the Companys Net Jet aircraft
share ($9,649), (ii) his housing expenses in Kansas City,
Missouri ($10,380), and (iii) his automobile lease expense
($4,245); and (l) relocation expenses paid on behalf of
Mr. Bennett ($30,415) and Mr. Mazzini ($2,871); and
(m) vacation pay to Mr. Smyth ($43,846).
|
|
|
(8)
|
Mr. Bennett was appointed President and Chief Executive
Officer of the Company effective July 7, 2010 pursuant to
an employment agreement with an indirect subsidiary of the
Company that provided for certain benefits and compensation
reflected in this table. Summaries of Mr. Bennetts
employment agreement and Mr. Bennetts subsequent
retirement as President and Chief Executive Officer of the
Company effective May 16, 2011 are set forth below under
Employment Agreements, Change of Control and Other Arrangements,
beginning on page 45.
|
(9)
|
Messrs. Brown and Mazzini are participants in the
Companys Executive Severance Plan, a summary of which is
set forth below under Employment Agreements, Change of Control
and Other Arrangements on page 46.
|
|
|
(10)
|
In connection with the hiring of Messrs. Andrews and
Turtledove in fiscal year 2010, we included certain information
regarding their initial compensation in their respective offer
letters. Additionally, Messrs. Andrews and Turtledove are
participants in the Companys Executive Severance Plan.
Additional information about these offer letters and the
Executive Severance Plan is set forth below under Employment
Agreements, Change of Control and Other Arrangements on
page 46.
|
(11)
|
Mr. Smyth was appointed President and Chief Executive
Officer of the Company effective August 1, 2008 pursuant to
an employment agreement with an indirect subsidiary of the
Company that provided for certain benefits and compensation
reflected in this table. Summaries of Mr. Smyths
employment agreement and Mr. Smyths subsequent
resignation as President and Chief Executive Officer of the
Company effective July 7, 2010 are set forth below under
Employment Agreements, Change of Control and Other Arrangements,
beginning on page 45.
|
41
GRANTS OF
PLAN-BASED AWARDS TABLE
The following table provides information about non-equity
incentive plan awards, equity incentive plan awards, and stock
awards granted to our Named Executive Officers during the fiscal
year ended April 30, 2011. The compensation plans under
which the grants in the following table were made are described
on pages 30 through 33 in this proxy statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
|
|
|
Estimated Future
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive
|
|
|
Payouts Under Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards
|
|
|
Incentive Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
or Base
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Securities
|
|
|
Price of
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option
|
|
|
of Stock and
|
Name of
|
|
|
Grant
|
|
|
Approval
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options
|
|
|
Awards
|
|
|
Option
|
Executive
|
|
|
Date
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)(1)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
Awards($)
|
Bennett
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Sign-On
Bonus(2)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
900,000
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
-STI
Award(3)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
296,875
|
|
|
|
|
1,187,500
|
|
|
|
|
1,662,500
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
-LTI
Award(4)
|
|
|
|
7/12/10
|
|
|
|
|
7/07/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1,000,000
|
|
|
|
|
$14.37
|
|
|
|
|
2,500,000
|
|
Brown
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-STI
Award(3)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
54,000
|
|
|
|
|
216,000
|
|
|
|
|
378,000
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
-LTI
Award(4)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
6,355
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
80,009
|
|
-LTI
Award(4)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
88,155
|
|
|
|
|
$12.59
|
|
|
|
|
177,192
|
|
Andrews
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-STI
Award(3)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
4,200
|
|
|
|
|
420,000
|
|
|
|
|
735,000
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
-LTI
Award(4)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
44,075
|
|
|
|
|
$12.59
|
|
|
|
|
88,591
|
|
-LTI
Award(5)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
640,000
|
|
|
|
|
1,920,000
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Mazzini
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-STI
Award(3)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
60,000
|
|
|
|
|
240,000
|
|
|
|
|
420,000
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
-LTI
Award(4)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
6,355
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
80,009
|
|
-LTI
Award(4)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
88,155
|
|
|
|
|
$12.59
|
|
|
|
|
177,192
|
|
Turtledove
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-STI
Award(3)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
37,500
|
|
|
|
|
150,000
|
|
|
|
|
262,500
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
-LTI
Award(4)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
3,575
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
45,009
|
|
-LTI
Award(4)
|
|
|
|
10/01/10
|
|
|
|
|
7/21/10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
49,585
|
|
|
|
|
$12.59
|
|
|
|
|
99,666
|
|
Smyth(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts represent restricted shares
of the Companys Common Stock granted pursuant to the 2003
Long-Term Executive Compensation Plan.
|
(2) |
|
Mr. Bennett was paid a cash
sign-on bonus on July 18, 2010 pursuant to the terms of his
employment agreement to serve as the Companys President
and Chief Executive Officer effective July 7, 2010.
|
(3) |
|
Amounts represent the potential
value of the payouts under the Companys short-term
incentive (STI) compensation programs. Actual fiscal
year 2011 STI payout amounts are included in the Summary
Compensation Table on page 40.
|
(4) |
|
Amounts represent awards made
pursuant to the 2003 Long-Term Executive Compensation Plan.
|
(5) |
|
Amounts represent the potential
payouts of Mr. Andrews long-term performance cash
award granted pursuant to the 2003 Long-Term Executive
Compensation Plan.
|
(6) |
|
Mr. Smyth resigned as
President and Chief Executive Officer of the Company effective
July 7, 2010. He did not receive any equity or non-equity
incentive plan awards during fiscal year 2011.
|
42
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table summarizes the equity awards made to our
Named Executive Officers which are outstanding as of
April 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Equity Incentive Plan
|
|
|
|
Awards: Market or
|
|
|
|
|
Securities
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
|
Market Value
|
|
|
|
Awards: Number of
|
|
|
|
Payout Value of
|
|
|
|
|
Underlying
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
Units of Stock
|
|
|
|
of Shares or
|
|
|
|
Unearned Shares,
|
|
|
|
Unearned Shares,
|
|
|
|
|
Unexercised
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
Option
|
|
|
|
Option
|
|
|
|
That Have
|
|
|
|
Units of Stock
|
|
|
|
Units or Other Rights
|
|
|
|
Units or Other Rights
|
|
Name of
|
|
|
Options (#)
|
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
|
Exercise
|
|
|
|
Expiration
|
|
|
|
Not Vested
|
|
|
|
That Have Not
|
|
|
|
That Have Not Vested
|
|
|
|
That Have Not Vested
|
|
Executive
|
|
|
Exercisable
|
|
|
|
Unexercisable(1)
|
|
|
Options (#)
|
|
|
|
Price ($)
|
|
|
|
Date
|
|
|
|
(#)(2)
|
|
|
|
Vested ($)
|
|
|
|
(#)
|
|
|
|
($)
|
|
Bennett
|
|
|
|
-
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
|
$14.37
|
|
|
|
|
7/31/16
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
150,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$19.46
|
|
|
|
|
12/03/12
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Brown
|
|
|
|
-
|
|
|
|
88,155
|
|
|
|
-
|
|
|
|
|
$12.59
|
|
|
|
|
10/01/20
|
|
|
|
|
10,521
|
|
|
|
|
$181,908
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
6,666
|
|
|
|
13,334
|
|
|
|
-
|
|
|
|
|
$16.89
|
|
|
|
|
7/02/19
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
10,711
|
|
|
|
5,356
|
|
|
|
-
|
|
|
|
|
$21.81
|
|
|
|
|
7/03/18
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
4,475
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$23.37
|
|
|
|
|
6/30/17
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
3,725
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$23.86
|
|
|
|
|
6/30/16
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Andrews
|
|
|
|
-
|
|
|
|
44,075
|
|
|
|
-
|
|
|
|
|
$12.59
|
|
|
|
|
10/01/20
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
20,291
|
|
|
|
40,584
|
|
|
|
|
|
|
|
|
$17.33
|
|
|
|
|
7/01/19
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Mazzini
|
|
|
|
-
|
|
|
|
88,155
|
|
|
|
-
|
|
|
|
|
$12.59
|
|
|
|
|
10/01/20
|
|
|
|
|
9,715
|
|
|
|
|
$167,972
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
13,333
|
|
|
|
26,667
|
|
|
|
-
|
|
|
|
|
$16.89
|
|
|
|
|
7/02/19
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
6,253
|
|
|
|
3,127
|
|
|
|
-
|
|
|
|
|
$25.56
|
|
|
|
|
9/02/18
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
7,023
|
|
|
|
3,512
|
|
|
|
-
|
|
|
|
|
$21.81
|
|
|
|
|
7/03/18
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
8,950
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$23.37
|
|
|
|
|
6/30/17
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
5,795
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$23.86
|
|
|
|
|
6/30/16
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
3,540
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$29.18
|
|
|
|
|
6/30/15
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$23.52
|
|
|
|
|
11/29/14
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Turtledove
|
|
|
|
-
|
|
|
|
49,585
|
|
|
|
-
|
|
|
|
|
$12.59
|
|
|
|
|
10/01/20
|
|
|
|
|
12,452
|
|
|
|
|
$215,295
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Smyth(3)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
(1) |
|
Unvested stock options with an
expiration date of October 1, 2020 vest in one-fourth
increments on October 1, 2011, October 1, 2012,
October 1, 2013 and October 1, 2014. Unvested stock
options with an expiration date of July 2, 2019 vest in
one-half increments on July 2, 2011 and July 2, 2012.
Unvested stock options with an expiration date of July 1,
2019 vest in one-half increments on July 1, 2011 and
July 1, 2012. Unvested stock options with an expiration
date of September 2, 2018 vest on September 2, 2011.
Unvested stock options with an expiration date July 3, 2018
vest on July 3, 2011. Mr. Bennetts 1,000,000
stock options with an expiration date of July 31, 2016,
vest on July 11, 2011; provided that, these options become
exercisable in four equal annual installments beginning on
July 12, 2011.
|
(2) |
|
Unvested restricted shares of the
Companys Common Stock vest as follows:
Mr. Brown 6,355 shares vest in one-fourth
increments on October 1, 2011, October 1, 2012,
October 1, 2013 and October 1, 2014; 2,975 shares
vest in one-half increments on July 2, 2011 and
July 2, 2012; 280 shares vest on October 1, 2011;
and 911 shares vest on July 3, 2011;
Mr. Mazzini 6,355 shares vest in
one-fourth increments on October 1, 2011, October 1,
2012, October 1, 2013 and October 1, 2014;
2,231 shares vest on July 2, 2012; 555 shares
vest on September 2, 2011; and 574 shares vest on
July 3, 2011; Mr. Turtledove
3,575 shares vest in one-fourth increments on
October 1, 2011, October 1, 2012, October 1, 2013
and October 1, 2014; 8,877 shares vest in one-third
increments on September 1, 2011, September 1, 2012 and
September 1, 2013.
|
(3) |
|
Mr. Smyth resigned as
President and Chief Executive Officer of the Company effective
July 7, 2010. In connection with his resignation,
Mr. Smyth forfeited all of his vested (299,998) and
unvested (1,106,087) stock options, and unvested restricted
shares of the Companys Common Stock (28,095) at that time.
|
43
OPTION
EXERCISES AND STOCK VESTED TABLE
The following table summarizes the value realized by the Named
Executive Officers upon option award exercises and stock award
vesting during the fiscal year ended April 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized on
|
Name of Executive
|
|
|
Acquired on
Exercise (#)
|
|
|
Exercise ($)
|
|
|
Acquired on Vesting
(#)
|
|
|
Vesting ($)
|
Bennett
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Brown
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
2,962
|
|
|
|
|
44,527
|
|
|
Andrews
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Mazzini
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1,698
|
|
|
|
|
24,652
|
|
|
Turtledove
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
2,958
|
|
|
|
|
38,277
|
|
|
Smyth
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
NON-QUALIFIED
DEFERRED COMPENSATION TABLE
The following table summarizes our Named Executive
Officers compensation under the H&R Block Deferred
Compensation Plan for Executives during fiscal year 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
|
|
|
Aggregate
|
|
|
|
Name of
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Aggregate Earnings
|
|
|
Withdrawals/
|
|
|
Aggregate Balance
|
Executive
|
|
|
Last FY
($)(1)
|
|
|
Last FY
($)(2)
|
|
|
in Last FY
($)(3)
|
|
|
Distributions ($)
|
|
|
at Last FYE
($)(4)
|
Bennett
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Brown
|
|
|
|
13,899
|
|
|
|
|
1,981
|
|
|
|
|
4,179
|
|
|
|
|
-
|
|
|
|
|
37,759
|
|
|
Andrews
|
|
|
|
8,750
|
|
|
|
|
-
|
|
|
|
|
284
|
|
|
|
|
-
|
|
|
|
|
9,034
|
|
|
Mazzini
|
|
|
|
25,833
|
|
|
|
|
2,665
|
|
|
|
|
15,868
|
|
|
|
|
-
|
|
|
|
|
110,142
|
|
|
Turtledove
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Smyth
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
(1) |
|
Amounts in this column reflect
salary deferrals by the Named Executive Officers in fiscal year
2011. These amounts are also included in the Salary
column of the Summary Compensation Table.
|
(2) |
|
Amounts in this column represent
Company contributions during fiscal year 2011. These amounts are
also reflected in the All Other Compensation column
of the Summary Compensation Table.
|
(3) |
|
The amounts in this column are not
included in the Summary Compensation Table because they are not
above-market or preferential earnings on deferred compensation.
|
(4) |
|
Amounts in this column include,
among other things, Named Executive Officer contributions and
Company contributions previously reflected in Summary
Compensation Tables included in the Companys proxy
statements for the fiscal years ended April 30, 2009 (filed
with the SEC on August 12, 2009) and April 30,
2010 (filed with the SEC on August 13, 2010) to the
extent any such Named Executive Officer was included in the
Companys Summary Compensation Table for such fiscal
year(s).
|
H&R
BLOCK DEFERRED COMPENSATION PLAN FOR EXECUTIVES
The Company provides the H&R Block Deferred Compensation
Plan, a non-qualified plan (the DC Plan), to
employees who meet certain eligibility requirements. The DC Plan
is intended to pay, out of the general assets of the Company, an
amount substantially equal to the deferrals and Company
contributions, adjusted for any earnings or losses.
Participants can elect to defer from 0% to 100% of eligible base
salary and eligible commissions and up to 100% of annual bonus
on a before tax basis. The Company does not match contributions
to the DC Plan.
44
The DC Plan offers various investment options (that mirror those
available under the Companys Retirement Savings Plan) to
participants, including a fixed rate option and Company stock.
Participant deferrals are credited to a bookkeeping account that
is administered by Fidelity Investments. Earnings are credited
to the participants accounts based on the investment
options selected by each participant. Participants may change or
reallocate their investments at any time.
Participants can elect to receive in-service payments or
lump-sum or monthly payments over one to 15 years following
termination from service or disability. The DC Plan provides
that the payments following termination shall not be made before
a date that is six months after the termination date to comply
with IRC Section 409A.
Amounts deferred, if any, under the DC Plan by Named Executive
Officers are included in the Salary column of the
Summary Compensation Table.
EMPLOYMENT
AGREEMENTS, CHANGE OF CONTROL AND OTHER ARRANGEMENTS
Alan M.
Bennett Employment Agreement
Alan M. Bennett entered into an Employment Agreement with
H&R Block Management, LLC (HRB), an indirect
subsidiary of the Company, effective July 7, 2010 (the
Bennett Agreement), to serve as the Companys
President and Chief Executive Officer following the resignation
of Russell P. Smyth. The Bennett Agreement includes the
following: a base salary of $950,000; participation in the
Companys short-term incentive compensation plan with a
target incentive award equal to 125% of base salary and a
minimum guaranteed award for fiscal year 2011 of $700,000; a
cash sign-on bonus of $900,000; and a stock option to purchase
1,000,000 shares of the Companys Common Stock with an
exercise price of $14.37 per share (the fair market value of the
stock on the grant date). Mr. Bennett will also receive on
a tax grossed up basis for up to six months
following the effective date of his election as President and
Chief Executive Officer: (i) reasonable and customary
furnished housing and rental car expense while in Kansas City in
connection with the Companys business; and (ii) use
of the Companys Net Jet share for Mr. Bennett and his
family for one round trip per week between
Mr. Bennetts primary residences and Kansas City. The
Company will also provide Mr. Bennett with other customary
health and employment benefits.
The Bennett Agreement provides that it may be terminated
(i) by either party at any time for any reason upon
90 days prior written notice, (ii) by HRB for
cause or disability (as each term is
defined in the footnotes to the Potential Payments Upon
Termination or Change of Control Table on pages 49 through 51 of
this proxy statement), and (iii) by Mr. Bennett for
good reason (as defined in the footnotes to the
Potential Payments Upon Termination or Change of Control Table
on page 50 of this proxy statement) upon 30 days
prior written notice. If the Bennett Agreement is terminated
(w) on account of Mr. Bennetts death or
disability, (x) by the Company for
cause, (y) by the Company other than for
cause or disability, or (z) by
Mr. Bennett for good reason (as defined in the
footnotes to the Potential Payments Upon Termination or Change
of Control Table on page 50 of this proxy statement), HRB
is obligated to provide to Mr. Bennett those compensation
and benefits set forth in the Potential Payments Upon
Termination or Change of Control Table on page 49.
The Bennett Agreement contains the following post-termination
restrictions on Mr. Bennett: (i) one-year
non-solicitation of employees; and (ii) one-year
non-solicitation of customers.
On April 25, 2011, Mr. Bennett provided notice that he
was retiring as President and Chief Executive Officer of the
Company, effective May 16, 2011. Under the terms of the
Bennett Agreement, Mr. Bennett is entitled to receive the
payments and other benefits included under the Death,
Disability or Retirement column in the Potential Payments
Upon Termination or Change of Control table on page 49.
Russell
P. Smyth Employment Agreement
During fiscal year 2011, Russell P. Smyth was subject to an
Employment Agreement with HRB dated July 19, 2008 (the
Smyth Agreement). Pursuant to the Smyth Agreement,
Mr. Smyth was to serve as the President and Chief Executive
Officer of the Company for the period commencing August 1,
2008 and ending on July 31, 2011. The Smyth Agreement
provided for, among other things, a base salary of $950,000;
participation in the Companys short-term incentive
compensation plan with a minimum guaranteed bonus for fiscal
year 2009 of 110% of Mr. Smyths base salary
(pro-rated based on actual base salary earned by Mr. Smyth
during fiscal year 2009); an option to purchase
900,000 shares of the Companys Common Stock at
certain exercise prices granted on August 6, 2008;
reimbursement of reasonable moving and relocation expenses
(grossed up to cover any related income tax
45
liability); a $200,000 lump-sum cash relocation payment; and
other fringe benefits as may be provided from time to time.
The Smyth Agreement included a provision that it may be
terminated by either party at any time for any reason upon
60 days prior written notice. Mr. Smyth resigned
as President and Chief Executive Officer of the Company
effective July 7, 2010. In connection with his resignation,
Mr. Smyth terminated the Smyth Agreement under the above
provision, forfeited all unvested equity awards and did not
receive any severance payments.
The Smyth Agreement contained the following post-termination
restrictions on Mr. Smyth: (i) two-year
non-solicitation of employees, (ii) two-year
non-solicitation of customers, (iii) two-year
non-competition, and (iv) two-year non-disparagement. If
Mr. Smyth violates these restrictions, HRB may, subject to
certain conditions, seek to recover or require reimbursement of
short-term incentive compensation, equity compensation awards
and/or
severance payments.
Employment
Offer Letters
In connection with their hiring during fiscal year 2010, the
Company provided offer letters to Mr. Andrews and
Mr. Turtledove, setting forth certain terms of their
initial compensation. Additionally, Mr. Andrews and
Mr. Turtledove each participate in the Executive Severance
Plan, as discussed below.
Mr. Andrews offer letter is dated June 5, 2009.
He is entitled to receive an annual salary of $525,000, with
annual reviews of performance and salary consistent with Company
practices. He is entitled to participate in the RSM short-term
incentive compensation program with a target incentive equal to
80% of his base salary. He must be employed on the last
regularly scheduled work day of a fiscal year to be eligible for
payment and the award is prorated if he has not been employed
for the full term period. On the first trading day of the month
following his employment, he received a long-term incentive
award with a total value of approximately $750,000, split
25%/75% between options to purchase shares of the Companys
Common Stock and a long-term performance cash award. He is
entitled to participate in the Companys Deferred
Compensation Plan and Executive Survivor Plan, and other
benefits plans generally available to Company executives.
Mr. Turtledoves offer letter is dated July 29,
2009. He is entitled to receive an annual salary in the amount
of $300,000, with annual reviews of performance and salary
consistent with Company practices. He is entitled to participate
in the Companys short-term incentive compensation plan
with a target incentive equal to 50% of his base salary. On the
first trading day of the month following his employment, he
received a long-term incentive award consisting of restricted
stock with a total value of approximately $200,000. He is
entitled to participate in the Companys Deferred
Compensation Plan and the Executive Survivor Plan, and other
benefits plans generally available to Company executives.
H&R
Block Executive Severance Plan
In May of 2009, the Compensation Committee recommended and the
Board of Directors approved the H&R Block Executive
Severance Plan (the Executive Severance Plan).
Messrs. Brown, Andrews, Mazzini and Turtledove participate
in the Executive Severance Plan.
Severance Benefits. Under the terms of the
Executive Severance Plan, if a participant incurs a Qualifying
Termination or a Change in Control Termination (each as defined
below), he or she is entitled to receive the following benefits:
(i) a lump sum severance amount equal to the
participants monthly compensation multiplied by the
participants years of service; (ii) a severance
enhancement equal to a specified percentage of the
participants monthly compensation multiplied by the
participants years of service; and (iii) an amount
equal to the participants COBRA subsidy multiplied by 12,
if the participant was enrolled in the Companys applicable
health, dental and vision benefits on the termination date. The
Company will also provide reasonable out-placement assistance
for a period not to exceed 15 months. The participant is
entitled to a pro-rata award of any amounts payable under the
Companys short-term incentive compensation plan, based
upon the participants actual performance and the
attainment of goals established as determined by the Board. The
participant is also entitled to a pro-rata award of any
outstanding performance shares granted under the 2003 Long-Term
Executive Compensation Plan as of the termination date.
Equity Awards. If a participant incurs a
Qualifying Termination, then: (i) a participant shall
become vested in any stock options and restricted stock awards
outstanding on July 11, 2010 that would have vested during
the
46
12-month
period following the separation date; and (ii) a
participant shall forfeit any stock options and restricted stock
awards granted after July 11, 2010 that are not vested as
of the separation date.
If a participant incurs a Change in Control Termination then the
participant becomes vested in all outstanding stock options and
restricted stock awards.
Release. The participant is required to sign
a release agreement in order to receive severance benefits.
Repayment and Clawback. If the Company is
required to restate financial statements or the participant
violates the provisions of any confidentiality, non-competition
or similar agreements with the Company, the Board may recover or
require reimbursement of benefits under the Executive Severance
Plan.
Definitions. Qualifying
Termination means the involuntary separation from service
by the Company under circumstances not constituting Cause (as
defined below), but does not include the elimination of the
participants position where the participant was offered a
comparable position with the Company or with a party that
acquires any assets from the Company or the redefinition of
participants position to a lower compensation rate or
grade.
Change in Control Termination means a
participants Qualifying Termination or Good Reason (as
defined below) termination, in either event within
24 months immediately following a Change in Control. Change
in Control under the Executive Severance Plan is defined below
in footnote 4(b) to the Potential Payments Upon Termination or
Change of Control Table on page 50.
Cause is defined as any of the following unless, if
capable of cure, such events are fully corrected in all material
respects by the participant within ten (10) days after the
Company provides notice of the occurrence of such event:
|
|
|
|
(i)
|
A participants misconduct that materially interferes with
or materially prejudices the proper conduct of the business of
the Company;
|
|
|
(ii)
|
A participants commission of an act materially and
demonstrably detrimental to the good will of the Company;
|
|
|
(iii)
|
A participants commission of any act of dishonesty or
breach of trust resulting or intending to result in material
personal gain or enrichment of the participant at the expense of
the Company;
|
|
|
(iv)
|
A participants violation of any non-competition,
non-solicitation, confidentiality or similar restrictive
covenant under any employment-related agreement, plan or policy
with respect to which the participant is a party or is
bound; or
|
|
|
(v)
|
A participants conviction of, or plea of nolo contendere
to, a misdemeanor involving an act of moral turpitude or a
felony.
|
Good Reason is defined as a separation from service
within 24 months immediately following a Change in Control
which is initiated by the participant upon one or more of the
following occurrences:
|
|
|
|
(i)
|
A material diminution in the participants base
compensation;
|
|
|
(ii)
|
A material diminution in the participants authority,
duties, or responsibilities;
|
|
|
(iii)
|
A material change in the geographic location at which the
participant must perform the services; or
|
|
|
(iv)
|
Any other action or interaction that constitutes a material
breach by the Company of any written employment-related
agreement between the participant and the Company.
|
Equity
Award Agreements
In connection with equity award grants, our executives enter
into equity award agreements that include provisions for the
acceleration of vesting or forfeiture, as applicable, of any
outstanding equity grant in the event of a Qualifying
Termination or Qualifying Termination following a Change in
Control (each as defined under the Executive Severance Plan).
Under either of these termination scenarios, any outstanding
equity grants for our NEOs will be treated in accordance with
the Executive Severance Plan, except (i) for
Mr. Bennett as discussed below, and (ii) the fiscal
year 2009 stock option grants to Mr. Brown and
Mr. Mazzini shall vest upon a Change in Control without any
subsequent termination.
47
Our equity award agreements for executives (except for
Mr. Bennett) also include a retirement provision that
accelerates the vesting of outstanding equity grants if the
executive retires more than one year after the related grant
date. Retirement under these equity agreements is defined as an
individuals voluntary termination of employment at or
after reaching age 65.
Mr. Bennett entered into an equity award agreement in
connection with his July 12, 2010 stock option grant. This
award agreement provides for accelerated vesting of the stock
option in the event of a Change in Control, a termination by
Mr. Bennett for Good Reason, a termination by the Company
without Cause, or upon Mr. Bennetts death, Disability
or Retirement (as each such term is defined under the Bennett
Agreement and included in the footnotes to the Potential
Payments Upon Termination or Change of Control Table on
page 51 of this Proxy Statement).
48
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The following table summarizes the potential payments our Named
Executive Officers (excluding Mr. Smyth) would receive in
the event of termination or a change of control of the Company.
The agreements and arrangements which govern these payments are
described in more detail above under Employment Agreements,
Change of Control and Other Arrangements. This table assumes the
relevant triggering event occurred on April 30, 2011.
As discussed above, Mr. Smyth resigned as President and
Chief Executive Officer of the Company effective July 7,
2010. In connection with his resignation, Mr. Smyth
forfeited all unvested equity awards and did not receive any
severance payments. Following Mr. Smyths resignation,
Mr. Bennett was appointed President and Chief Executive
Officer of the Company effective July 7, 2010. The amounts
shown below are what could have been paid to Mr. Bennett
under various scenarios pursuant to the Bennett Agreement.
Mr. Bennett retired as President and Chief Executive
Officer of the Company effective May 16, 2011 and will
receive the payments and other benefits disclosed under the
Death, Disability or Retirement column below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Other
|
|
|
|
Termination After
|
|
|
|
Death, Disability
|
|
|
|
|
than for
Cause(1)(2)
or
|
|
|
|
Change of Control
|
|
|
|
or Retirement
|
|
Name of Executive
|
|
|
Good
Reason(3)
($)
|
|
|
|
($)(2)(4)
|
|
|
|
($)(5)
|
|
Bennett
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (salary plus short-term
incentive)(6)
|
|
|
|
1,175,000
|
|
|
|
|
1,175,000
|
|
|
|
|
-
|
|
|
Restricted Stock (lapse of restrictions)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Stock Options (vesting
accelerated)(7)
|
|
|
|
2,920,000
|
|
|
|
|
2,920,000
|
|
|
|
|
2,920,000
|
|
|
Performance Shares
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Health and Welfare Plan Benefits
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Outplacement Services
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Brown(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (salary plus short-term incentive)
|
|
|
|
576,000
|
|
|
|
|
576,000
|
|
|
|
|
-
|
|
|
Restricted Stock (lapse of restrictions)
|
|
|
|
46,303
|
|
|
|
|
181,908
|
|
|
|
|
-
|
|
|
Stock Options (vesting accelerated)
|
|
|
|
2,667
|
|
|
|
|
419,662
|
|
|
|
|
-
|
|
|
Performance Shares
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Health and Welfare Plan Benefits
|
|
|
|
13,038
|
|
|
|
|
13,038
|
|
|
|
|
-
|
|
|
Outplacement Services
|
|
|
|
15,000
|
|
|
|
|
15,000
|
|
|
|
|
-
|
|
|
Andrews(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (salary plus short-term incentive)
|
|
|
|
945,000
|
|
|
|
|
945,000
|
|
|
|
|
-
|
|
|
Restricted Stock (lapse of restrictions)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Stock Options (vesting accelerated)
|
|
|
|
-
|
|
|
|
|
207,153
|
|
|
|
|
-
|
|
|
Performance Cash
|
|
|
|
588,333
|
|
|
|
|
588,333
|
|
|
|
|
588,333
|
|
|
Health and Welfare Plan Benefits
|
|
|
|
16,402
|
|
|
|
|
16,402
|
|
|
|
|
-
|
|
|
Outplacement Services
|
|
|
|
15,000
|
|
|
|
|
15,000
|
|
|
|
|
-
|
|
|
Mazzini(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (salary plus short term-incentive)
|
|
|
|
640,000
|
|
|
|
|
640,000
|
|
|
|
|
-
|
|
|
Restricted Stock (lapse of restrictions)
|
|
|
|
19,520
|
|
|
|
|
167,972
|
|
|
|
|
-
|
|
|
Stock Options (vesting accelerated)
|
|
|
|
5,333
|
|
|
|
|
424,995
|
|
|
|
|
-
|
|
|
Health and Welfare Plan Benefits
|
|
|
|
13,038
|
|
|
|
|
13,038
|
|
|
|
|
-
|
|
|
Outplacement Services
|
|
|
|
15,000
|
|
|
|
|
15,000
|
|
|
|
|
-
|
|
|
Turtledove(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (salary plus short-term incentive)
|
|
|
|
450,000
|
|
|
|
|
450,000
|
|
|
|
|
-
|
|
|
Restricted Stock (lapse of restrictions)
|
|
|
|
51,161
|
|
|
|
|
215,295
|
|
|
|
|
-
|
|
|
Stock Options (vesting accelerated)
|
|
|
|
-
|
|
|
|
|
233,050
|
|
|
|
|
-
|
|
|
Health and Welfare Plan Benefits
|
|
|
|
13,095
|
|
|
|
|
13,095
|
|
|
|
|
-
|
|
|
Outplacement Services
|
|
|
|
15,000
|
|
|
|
|
15,000
|
|
|
|
|
-
|
|
|
|
|
|
(1)
|
|
Applies to Mr. Bennett under
the Bennett Agreement. Applies to Mr. Brown,
Mr. Andrews, Mr. Mazzini and Mr. Turtledove under
the Executive Severance Plan. Cause under the
Bennett Agreement refers to any one or more of the following
grounds: (i) Mr. Bennetts commission of an act
materially and demonstrably detrimental to the good will of the
Company or any affiliate, which act constitutes gross negligence
or willful misconduct by Mr. Bennett in the performance of
his material duties to the Company or any affiliate;
(ii) Mr. Bennetts commission of any act of
dishonesty or breach of trust resulting or intending to result
in material personal gain or enrichment of Mr. Bennett at
the expense of the Company or any affiliate;
(iii) Mr. Bennetts violation of certain
covenants related to confidentiality, non-hiring of employees
and non-solicitation of customers; or (iv) the inability of
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49
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the Company or any affiliate to
participate in any activity subject to government regulation and
material to the Companys or any affiliates business
solely as a result of any action or inaction by
Mr. Bennett. The definition of Cause under the
Executive Severance Plan is described above under Employment
Agreements, Change of Control and Other Arrangements.
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(2)
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Payments to Mr. Brown,
Mr. Andrews, Mr. Mazzini and Mr. Turtledove would
be made pursuant to the terms of the Executive Severance Plan
and various equity award agreements described above under
Employment Agreements, Change of Control and Other Arrangements.
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(3)
|
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Applies only to Mr. Bennett
under the provisions of the Bennett Agreement. Termination for
Good Reason under the Bennett Agreement refers to
any one or more of the following grounds unless cured within
30 days of receipt of notice thereof: (i) a material
diminution in Mr. Bennetts base compensation;
(ii) relocation of Mr. Bennetts location of
employment outside of the Kansas City, Missouri metropolitan
area; (iii) Retirement (as defined in footnote 5(a) below);
(iv) a material diminution in Mr. Bennetts
status, duties or authority, authority as President and Chief
Executive Officer of the Company, or a requirement to report to
anyone other than the Companys Board of Directors; or
(v) any other action or inaction that constitutes a
material breach by HRB of the Bennett Agreement.
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(4)
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(a) Under the Bennett
Agreement, if Mr. Bennett terminates for Retirement
following a Change in Control (as defined below) of the Company,
Mr. Bennett would be entitled to those payments set forth
in the table.
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Under the Bennett Agreement, a
Change in Control means:
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(i) Any one
person, or more than one person acting as a group, acquires
ownership of stock of the Company that, together with stock held
by such person or group, constitutes more than 50% of the total
fair market value or total voting power of the stock of the
Company. If any one person, or more than one person acting as a
group, is considered to own more than 50% of the total fair
market value or total voting power of the stock of the Company,
the acquisition of additional stock by the same person or
persons shall not be considered to cause a change in the
ownership of the corporation. An increase in the percentage of
stock owned by any one person, or persons acting as a group, as
a result of a transaction in which the Company acquires its
stock in exchange for property will be treated as an acquisition
of stock;
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(ii) Any one
person, or more than one person acting as a group, acquires (or
has acquired during the
12-month
period ending on the date of the most recent acquisition by such
person or persons) ownership of stock of the Company possessing
35% or more of the total voting power of the stock of the
Company. If any one person, or more than one person acting as a
group, is considered to effectively control a corporation within
the meaning of Treasury
Regulation Section 1.409A-3(i)(5)(vi),
the acquisition of additional control of the corporation by the
same person or persons is not considered to cause a change in
the effective control of the corporation;
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(iii) A majority
of members of the Board is replaced during any
12-month
period by directors whose appointment or election is not
endorsed by two-thirds (2/3) of the members of the Board before
the date of such appointment or election;
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(iv) Any one
person, or more than one person acting as a group, acquires (or
has acquired during the
12-month
period ending on the date of the most recent acquisition by such
person or persons) assets from the Company that have a total
gross fair market value equal to or more than 50% of the total
gross fair market value of all of the assets of the Company
immediately before such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets
of the Company, or the value of the assets being disposed of,
determined without regard to any liabilities associated with
such assets. Notwithstanding the foregoing, there is no Change
in Control event under the Bennett Agreement when there is a
transfer to an entity that is controlled by the shareholders of
the Company immediately after the transfer. A transfer of assets
by the Company is not treated as a change in the ownership of
such assets if the assets are transferred to: (w) a
shareholder of the Company (immediately before the asset
transfer) in exchange for or with respect to its stock;
(x) an entity, 50% or more of the total value or voting
power of which is owned, directly or indirectly, by the Company;
(y) a person, or more than one person acting as a group,
that owns, directly or indirectly, 50% or more of the total
value or voting power of all the outstanding stock of the
Company; or (z) an entity, at least 50% of the total value
or voting power of which is owned, directly or indirectly, by a
person described in (y) above; or
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(v) The completion
of a reorganization, merger or consolidation of the Company, in
each case, unless following such reorganization, merger or
consolidation, the shareholders who were the beneficial owners
of the voting securities of the Company immediately prior to
such reorganization, merger or consolidation continue to
beneficially own, directly or indirectly, more than 50% of the
then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such
reorganization, merger or consolidation in substantially the
same proportion as their ownership, immediately prior to such
reorganization, merger or consolidation, of the voting
securities of the Company entitled to vote generally in the
election of directors. Persons who are considered to be acting
as a group within the meaning of Sections 13(d)(3) and
14(d)(2) of the Exchange Act and IRC Section 409A, will be
considered to be acting as a group.
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(b) Under the Executive
Severance Plan, a Change in Control means:
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|
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|
(i) Any one
person, or more than one person acting as a group, acquires
ownership of stock of the Company that, together with stock held
by such person or group, constitutes more than 50% of the total
fair market value or total voting power of the stock of the
Company. If any one person, or more than one person acting as a
group, is considered to own more than 50% of the total fair
market value or total voting power of the stock of the Company,
the acquisition of additional stock by the same person or
persons shall not be considered to cause a change in the
ownership of the corporation. An increase in the percentage of
stock owned by any one person, or persons acting as a group, as
a result of a transaction in which the Company acquires its
stock in exchange for property will be treated as an acquisition
of stock;
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50
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|
(ii) Any one
person, or more than one person acting as a group, acquires (or
has acquired during the
12-month
period ending on the date of the most recent acquisition by such
person or persons) ownership of stock of the Company possessing
35% or more of the total voting power of the stock of the
Company. If any one person, or more than one person acting as a
group, is considered to effectively control a corporation within
the meaning of Treasury
Regulation Section 1.409A-3(i)(5)(vi),
the acquisition of additional control of the corporation by the
same person or persons is not considered to cause a change in
the effective control of the corporation;
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(iii) A majority
of members of the Board is replaced during any
12-month
period by directors whose appointment or election is not
endorsed by two-thirds (2/3) of the members of the Board before
the date of such appointment or election; or
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|
(iv) Any one
person, or more than one person acting as a group, acquires (or
has acquired during the
12-month
period ending on the date of the most recent acquisition by such
person or persons) assets from the Company that have a total
gross fair market value equal to or more than 50% of the total
gross fair market value of all of the assets of the Company
immediately before such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets
of the Company, or the value of the assets being disposed of,
determined without regard to any liabilities associated with
such assets. Notwithstanding the foregoing, there is no Change
in Control event under the Executive Severance Plan when there
is a transfer to an entity that is controlled by the
shareholders of the Company immediately after the transfer. A
transfer of assets by the Company is not treated as a change in
the ownership of such assets if the assets are transferred to:
(a) a shareholder of the Company (immediately before the
asset transfer) in exchange for or with respect to its stock;
(b) an entity, 50% or more of the total value or voting
power of which is owned, directly or indirectly, by the Company;
(c) a person, or more than one person acting as a group,
that owns, directly or indirectly, 50% or more of the total
value or voting power of all the outstanding stock of the
Company; or (d) an entity, at least 50% of the total value
or voting power of which is owned, directly or indirectly, by a
person described in (c) above.
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|
The benefits which may be paid
under the Executive Severance Plan in connection with a Change
in Control are described above under Employment Agreements,
Change of Control and Other Arrangements.
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|
|
|
(c) Equity acceleration under
our equity award agreements is described above under Employment
Agreements, Change of Control and Other Arrangements.
|
|
(5)
|
|
(a) Under the Bennett
Agreement, in the event of Mr. Bennetts death or
Disability, Mr. Bennett is entitled to the following:
(i) a lump-sum payment equal to one-half of his base salary
and, if unpaid, his minimum fiscal year 2011 guaranteed
short-tem incentive compensation of $700,000; and
(ii) including in the case of his Retirement, full vesting
of his outstanding stock options granted July 12, 2010.
Disability under the Bennett Agreement means
Mr. Bennetts absence from his responsibilities with
HRB on a full-time basis for 130 business days in any
consecutive 12 months as a result of incapacity due to
mental or physical illness or injury. Under the Bennett
Agreement, Retirement is defined as termination
(i) after Mr. Bennett reaches age 61 on
July 11, 2011, or (ii) after the occurrence of a
Change in Control under the Bennett Agreement.
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|
(b) Equity acceleration for
restricted stock and stock options under the terms of our
Executive Severance Plan and equity award agreements upon the
Retirement of Mr. Brown, Mr. Andrews, Mr. Mazzini
or Mr. Turtledove is described above under Employment
Agreements, Change of Control and Other Arrangements. Under the
Executive Severance Plan and the award agreements,
Retirement means voluntary termination at or after
reaching age 65. Upon Mr. Andrews death,
disability or Retirement, he will also be entitled to a pro-rata
award of any outstanding performance cash opportunity.
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(6)
|
|
Under the Bennett Agreement, in the
event of a termination by HRB other than for Cause,
Mr. Bennett for Good Reason, or upon
Mr. Bennetts death or Disability, Mr. Bennett is
entitled to the following (i) a lump-sum payment equal to
one-half of his base salary and, if unpaid, his minimum fiscal
year 2011 guaranteed short-tem incentive compensation of
$700,000; and (ii) including in the case of Retirement,
full vesting of his outstanding stock options granted
July 12, 2010.
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(7)
|
|
Under the Bennett Agreement, in the
event of Mr. Bennetts death, Disability or
Retirement, Mr. Bennett is entitled to full vesting of his
outstanding stock options granted July 12, 2010.
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51
EQUITY
COMPENSATION PLANS
The following table provides information about the
Companys Common Stock that may be issued upon the exercise
of options, warrants and rights under all of the Companys
existing equity compensation plans as of April 30, 2011. As
of April 30, 2011, the Company had three stock-based
compensation plans: the 2003 Long-Term Executive Compensation
Plan (the 2003 Plan), the 2008 Deferred Stock Unit
Plan for Outside Directors, and the 2000 Employee Stock Purchase
Plan. In addition, the 1999 Stock Option Plan for Seasonal
Employees, which provided for awards of nonqualified options to
certain employees, was terminated effective December 31,
2009, except for outstanding awards thereunder. The shareholders
have approved all of the Companys current stock-based
compensation plans. The shareholders approved the 2003 Plan in
September 2002 to replace the 1993 Long-Term Executive
Compensation Plan (the 1993 Plan), effective
July 1, 2003. The 1993 Plan terminated at that time, except
with respect to outstanding awards thereunder. The shareholders
had approved the 1993 Plan in September 1993 to replace the 1984
Long-Term Executive Compensation Plan, which terminated at that
time except with respect to outstanding options thereunder. The
shareholders approved the 2008 Deferred Stock Unit Plan in
September 2008 to replace the 1989 Stock Option Plan for Outside
Directors, except with respect to outstanding awards thereunder.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Number of securities
remaining
|
|
|
|
Number of securities to be
|
|
|
average
|
|
|
available for future issuance
under
|
|
|
|
issued upon exercise of
|
|
|
exercise price of
|
|
|
equity compensation plans
|
|
|
|
outstanding options,
|
|
|
outstanding options,
|
|
|
excluding securities reflected
in
|
|
|
|
warrants, and rights
|
|
|
warrants, and rights
|
|
|
column (A)
|
|
Plan Category
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
Equity compensation plans
approved by security holders
|
|
|
10,650,000
|
|
|
$
|
18.71
|
|
|
|
11,476,000
|
|
Equity compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,650,000
|
|
|
$
|
18.71
|
|
|
|
11,476,000
|
|
52
ITEM 2 THE
APPROVAL OF AN ADVISORY PROPOSAL ON THE COMPANYS
EXECUTIVE COMPENSATION
We believe that our compensation programs and policies reflect
an overall pay for performance culture which is strongly aligned
to the interests of our shareholders. We are committed to
developing a mix of incentive compensation programs that will
reward success in achieving the Companys financial
objectives and growing value for shareholders, and continuing to
refine these incentives to maximize Company performance. In
accordance with federal law, the Board is providing H&R
Blocks shareholders with an annual opportunity to endorse
or not endorse our executive compensation program, commonly
known as a Say on Pay proposal.
The Compensation Committee of the Board has overseen the
development of a compensation program designed to achieve pay
for performance and alignment with shareholder interests, as
described more fully in the Compensation Discussion and
Analysis beginning on page 19. The compensation
program was designed in a manner that we believe delivers
appropriate recognition in compensation for contributing to
current business results, while at the same time motivating and
retaining executives to enhance future business results.
For the reasons discussed above in the Compensation Discussion
and Analysis section (page 19), the Board recommends that
shareholders vote in favor of the following Say on
Pay resolution:
Resolved, that the shareholders approve the overall
executive pay for performance compensation policies and
procedures employed by the Company, as disclosed pursuant to the
compensation disclosure rules of the Securities and Exchange
Commission, as described in the Compensation Discussion and
Analysis and the tabular disclosure regarding named executive
officer compensation (together with the accompanying narrative
disclosure) in this Proxy Statement.
Because your vote is advisory, it will not be binding upon the
Board. However, the Compensation Committee will take into
account the outcome of the vote when considering future
executive compensation arrangements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE PAY FOR PERFORMANCE COMPENSATION
POLICIES AND PROCEDURES EMPLOYED BY THE COMPENSATION COMMITTEE,
AS DISCLOSED PURSUANT TO THE COMPENSATION DISCLOSURE
RULES OF THE SECURITIES AND EXCHANGE COMMISSION, AS
DESCRIBED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE
TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICER
COMPENSATION (TOGETHER WITH THE ACCOMPANYING NARRATIVE
DISCLOSURE) IN THIS PROXY STATEMENT, AND PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE SO VOTED IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY.
ITEM 3 THE
APPROVAL OF AN ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY
VOTES ON THE COMPANYS EXECUTIVE COMPENSATION
In accordance with certain provisions of the Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act) and
Section 14A of the Securities Exchange Act of 1934, the
Company is required to include in this proxy statement a
separate non-binding vote on whether a non-binding vote on
executive compensation (Say on Pay) should occur every one, two
or three years. You have the option to vote for any one of the
three options, or to abstain on the matter.
Our Board of Directors has determined that an annual advisory
vote on executive compensation is the best approach for the
Company, and indeed the Companys current Amended and
Restated Bylaws, as previously approved by the shareholders,
state that it is the Companys practice to provide the
shareholders with this opportunity on an annual basis.
Although the advisory vote is non-binding, the Board of
Directors will take into account the outcome of the vote when
making future decisions about the frequency of holding an
advisory vote on executive compensation.
53
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ONCE
EVERY YEAR AS THE FREQUENCY WITH WHICH SHAREHOLDERS ARE PROVIDED
AN ADVISORY VOTE ON THE COMPANYS EXECUTIVE
COMPENSATION.
ITEM 4 THE
APPROVAL OF AN AMENDMENT TO THE 2008 DEFERRED STOCK UNIT PLAN
FOR OUTSIDE DIRECTORS TO INCREASE THE AGGREGATE NUMBER OF
SHARES OF COMMON STOCK ISSUABLE UNDER THE PLAN BY 600,000
SHARES, FROM 300,000 SHARES TO 900,000 SHARES
THE
PROPOSAL
The Board of Directors has adopted an amendment to the 2008
Deferred Stock Unit Plan for Outside Directors, as amended (the
2008 Stock Unit Plan), to increase by 600,000 the
aggregate number of shares the Company is authorized to issue
under the Plan. As more fully described below, this would
increase the number of shares authorized to be issued under the
2008 Stock Unit Plan from 300,000 to 900,000.
BACKGROUND
The 2008 Stock Unit Plan was approved by the Board of Directors
of the Company on June 8, 2008, to replace the 1989 Stock
Option Plan for Outside Directors. The 2008 Stock Unit Plan was
approved by the shareholders of the Company on September 4,
2008, and became effective on such date.
The 2008 Stock Unit Plan is designed to advance the interests of
H&R Block and its shareholders by attracting, retaining and
rewarding experienced and qualified directors who are not
employees of H&R Block, while creating further incentives
for these directors to maintain a long-term, strategic outlook
for H&R Block. Because outside directors will receive
grants of deferred stock units under the 2008 Stock Unit Plan,
but will not receive shares of Common Stock until their service
terminates, the units will contribute to the directors
long-term commitment to H&R Blocks financial
performance, both in terms of revenue and earnings growth.
Currently, the 2008 Stock Unit Plan authorizes the Company to
issue up to 300,000 shares of Common Stock pursuant to
awards made under the Plan. There are approximately
42,000 shares currently remaining for future grants under
the 2008 Stock Unit Plan. Under the proposed amendment, the
aggregate number of shares authorized for issuance under the
2008 Stock Unit Plan would be increased by 600,000 shares,
to a total of 900,000 shares. If the amendment is passed by
the shareholders, this increase should provide sufficient shares
for grants through fiscal year 2015 based on past and
anticipated grants.
The Board of Directors must equitably adjust the number of
deferred stock units in the account of each outside director as
the Board deems necessary and appropriate to prevent dilution or
enlargement of the rights of the outside directors resulting
from any stock dividend, stock split, or combination or
reclassification of shares. If H&R Block becomes a party to
any merger, consolidation, major acquisition for stock,
reorganization or liquidation, the Board of Directors shall make
arrangements it deems advisable with respect to outstanding
deferred stock units, including but not limited to, the
substitution of new deferred stock units for any deferred stock
unit then outstanding, the assumption of such deferred stock
units, and the termination of or payment for such deferred stock
units. The number of shares available under the 2008 Stock Unit
Plan is also subject to adjustment upon the occurrence of any
transaction or event described above, as set forth in the 2008
Stock Unit Plan.
MATERIAL
FEATURES OF THE 2008 STOCK UNIT PLAN
The material features of the 2008 Stock Unit Plan are summarized
below. The only aspect of the Plan being changed by the proposed
amendment is the number of shares available for issuance. All
other provisions of the 2008 Stock Unit Plan described herein
would remain as already in effect. The summary is qualified in
its entirety by reference to the specific provisions of the 2008
Stock Unit Plan, as proposed to be amended, the full text of
which is set forth as Appendix A to this proxy statement.
ADMINISTRATION
The 2008 Stock Unit Plan is administered by the Board of
Directors. The Board of Directors has the full power and
authority to interpret and administer the 2008 Stock Unit Plan
in a manner consistent with the 2008 Stock Unit Plans
provisions, including the power to determine which outside
directors will be granted deferred stock units under the 2008
Stock Unit Plan, and the timing and size of awards to be made
under the 2008 Stock Unit Plan.
54
H&R Block maintains individual deferred stock unit accounts
for each outside director. These accounts are maintained solely
for accounting purposes and do not require segregation of any
H&R Block assets.
ELIGIBILITY
Only members of the Board of Directors of H&R Block or any
of its subsidiaries who are not employees of H&R Block or
its subsidiaries are eligible to participate in the 2008 Stock
Unit Plan. As of July 31, 2011, there were eight eligible
participants on the Board.
SHARES AVAILABLE
UNDER THE 2008 STOCK UNIT PLAN
Subject to adjustment as provided in the 2008 Stock Unit Plan,
the maximum number of shares of Common Stock that are currently
authorized for issuance under the 2008 Stock Unit Plan shall not
exceed, in the aggregate, 300,000 shares.
GRANT OF
DEFERRED STOCK UNITS TO OUTSIDE DIRECTORS
Deferred stock units are granted by the Board of Directors, in
its sole and absolute discretion, from time to time during the
continuance of the 2008 Stock Unit Plan.
CREDITS
The number of deferred stock units credited to an outside
directors account pursuant to an award is determined by
dividing the dollar amount of the award by the average current
market value per share of Common Stock for the ten consecutive
trading dates ending on the date the deferred stock units are
granted to the outside director. The current market value
generally is the closing sales price as reported on the NYSE or,
in the absence of reported sales on the relevant date, the
closing sales price on the immediately preceding date on which
the sales were reported. Dividend equivalents are also earned on
all deferred stock units and are recorded in the account of each
outside director.
VESTING
Each deferred stock unit granted under the 2008 Stock Unit Plan
is vested upon award.
TRANSFERABILITY
Deferred stock units granted under the 2008 Stock Unit Plan may
not be transferred or assigned; provided, however, that a
recipient who was granted an award in consideration for serving
as the Companys non-executive Chairman of the Board may
transfer or assign an award to an entity that is or was a
shareholder of the Company at any time during which the
recipient served as the Companys non-executive Chairman of
the Board (a Shareholder Entity) if (i) the
recipient is affiliated with the manager of the investments made
by such Shareholder Entity or otherwise serves on the
Companys Board of Directors at the Shareholder
Entitys direction or request, and (ii) pursuant to
the Shareholder Entitys governance documents or any
regulatory, contractual or other requirement, any consideration
the recipient may receive as compensation for serving as a
director of the Company must be transferred, assigned,
surrendered or otherwise paid to the Shareholder Entity.
TIMING
AND METHOD OF PAYOUT
If an outside director terminates service with H&R Block
and all related companies for reason other than death, deferred
stock units will be paid to such outside director, in shares of
Common Stock, in one lump sum on the six month anniversary date
of the termination of service. If an outside director dies prior
to the payment in full of all amounts due such outside director
under the 2008 Stock Unit Plan, the balance of the outside
directors deferred stock unit account will be paid to the
outside directors beneficiary, in shares of Common Stock,
within 90 days following the outside directors death.
FUNDING
OF DEFERRED STOCK UNITS
The 2008 Stock Unit Plan is payable solely from the general
assets of H&R Block. Interests in the 2008 Stock Unit Plan
will be subject to H&R Block creditors.
55
AMENDMENT,
MODIFICATION AND TERMINATION
The Board of Directors may amend, modify, supplement, suspend or
terminate the 2008 Stock Unit Plan, provided that no amendment,
supplement, modification, suspension or termination of the 2008
Stock Unit Plan may materially adversely affect any award
previously made under the 2008 Stock Unit Plan without the
consent of the affected outside director. No amendment,
modification or supplement to the 2008 Stock Unit Plan may
increase the number of shares that may be issued under the 2008
Stock Unit Plan or change the termination date of the 2008 Stock
Unit Plan without the approval of H&R Blocks
shareholders. The Board may grant deferred stock units until
September 4, 2018, on which date the 2008 Stock Unit Plan
will terminate except with respect to outstanding deferred stock
units which shall remain in effect until they have been paid out
according to their terms.
APPROVAL
REQUIREMENTS
The affirmative vote of a majority of shares present in person
or represented by proxy, and entitled to vote on this proposal,
is necessary for the approval of the amendment to the 2008 Stock
Unit Plan. Shares represented by a proxy that directs that the
shares abstain from voting on the proposal are deemed to be
represented at the meeting as to that matter, and have the same
effect as a vote against the proposal. Broker non-votes will
have no effect on the outcome of the vote for this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE AMENDMENT TO THE 2008
DEFERRED STOCK UNIT PLAN FOR OUTSIDE DIRECTORS. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED IN THE
ABSENCE OF INSTRUCTIONS TO THE CONTRARY.
ITEM 5 THE
APPROVAL OF THE MATERIAL TERMS OF PERFORMANCE GOALS FOR
PERFORMANCE SHARES ISSUED PURSUANT TO THE 2003 LONG-TERM
EXECUTIVE COMPENSATION PLAN
INTRODUCTION
As discussed in the Compensation Discussion and Analysis, the
Company will implement in fiscal year 2012 a revised
performance-based long-term incentive program that provides for
performance shares (Performance Shares) to be issued
to senior executives pursuant to the 2003 Long-Term Executive
Compensation Plan (the 2003 Plan) in addition to
restricted stock and stock options. You are being asked to
approve the material terms of the performance goals for the
Performance Shares. This approval is required under Internal
Revenue Service regulations to permit the Company to deduct for
federal income tax purposes the payment of Performance Shares to
certain executive officers. We are not asking you to approve any
amendments to the 2003 Plan.
The Company generally seeks to preserve its ability to claim tax
deductions for compensation paid to executives to the greatest
extent practicable. Section 162(m) of the IRC limits the
Companys federal income tax deduction for compensation
paid in a taxable year to an individual who, on the last day of
the taxable year, was (i) the chief executive officer or
(ii) among the three other highest-compensated executive
officers whose compensation is reported in the Summary
Compensation Table. Qualified performance-based
compensation, which can include compensation from
performance shares, is not subject to this deduction limit and
is thus fully deductible if certain conditions are met. One of
these conditions is shareholder approval of the material terms
of the performance goals under which the compensation is paid.
As a result, the Company is seeking shareholder approval of the
performance goals for Performance Shares so that compensation
paid in Performance Shares is deductible for federal income tax
purposes to the extent it is qualified performance-based
compensation. If shareholders do not approve the material
terms of the performance goals, the Company may still award
Performance Shares, but a portion of the compensation paid to
certain executive officers may not be deductible for federal
income tax purposes.
DESCRIPTION
OF PERFORMANCE SHARES
Performance Shares will vest after three years, subject to
pre-established performance objectives. An executive can earn
from 0% to 200% of the target number of Performance Shares
awarded, subject to an overall award modifier of plus or minus
25% based on total shareholder return relative to the S&P
500 over the related three-year performance period. Performance
Shares reflect a face value equal to the market value of the
Companys stock price and are paid out in Company Common
Stock at vesting. Performance Shares do not pay dividends during
the
56
vesting period. Instead, any dividend equivalents are carried as
fractional Performance Shares until vesting. Performance Shares
do not carry voting rights while they are unvested, but will
carry voting rights once they are paid in out in shares of the
Companys Common Stock upon achievement of performance
objectives.
MATERIAL
TERMS OF THE PERFORMANCE GOALS
The material terms of the performance goals for Performance
Shares consist of (i) the class of employees eligible to
receive Performance Shares, (ii) the business criteria on
which the performance goals are based and (iii) the maximum
number of shares of the Companys Common Stock that can be
awarded under the 2003 Plan during any calendar year.
The Companys key senior executives comprise the class of
employees eligible to receive Performance Shares. This group
consists generally of the Companys Chief Executive
Officer, Company-level and subsidiary-level presidents, senior
vice presidents, and other executives who are leaders of the
Companys key strategic business units.
The business criteria on which performance goals are based
consist of one or more of the following: (a) revenue;
(b) total number of clients; (c) number of new
clients; (d) client retention rate; (e) total returns
prepared; (f) market share; (g) earnings before
interest, taxes, depreciation and amortization
(EBITDA); (h) EBITDA margin percentage;
(i) pretax earnings; (j) earnings per share (diluted);
(k) operating cash flow; (l) free cash flow;
(m) return on assets; (n) return on invested capital;
(o) return on equity; and (p) economic profit. These
business criteria need not be the same with respect to all
executives and may be established based on measurements for the
Company as a whole or for its various groups, divisions,
subsidiaries, strategic business units, products or services,
product or service groups or geographic areas, may be set in
terms of change over the same measure for a prior period of
time, and may be based on performance in comparison to
performance by unrelated businesses or indices specified by the
Committee.
The 2003 Plan limits the aggregate maximum number of shares of
the Companys Common Stock that can be awarded in any one
calendar year to any individual recipient under the 2003 Plan to
1,000,000 shares, whether such awards are in the form of
common stock, restricted stock, stock options, incentive stock
options, stock appreciation rights, performance rights,
Performance Shares, or other rights that may be granted under
the 2003 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE MATERIAL TERMS OF
PERFORMANCE GOALS FOR PERFORMANCE SHARES ISSUED PURSUANT TO
THE 2003 LONG-TERM EXECUTIVE COMPENSATION PLAN. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED IN THE
ABSENCE OF INSTRUCTIONS TO THE CONTRARY.
ITEM 6 RATIFICATION
OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche
LLP (Deloitte) as independent accountants to audit
the Companys financial statements for the fiscal year
ending April 30, 2012. A representative of Deloitte is
expected to attend the annual meeting to respond to appropriate
questions and will have an opportunity to make a statement if
they so desire. For additional information regarding the
Companys relationship with Deloitte, please refer to the
Audit Committee Report above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP, AND PROXIES SOLICITED BY THE
BOARD OF DIRECTORS WILL BE SO VOTED IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY.
57
INFORMATION
REGARDING SECURITY HOLDERS
Security
Ownership of Directors and Management
The following table shows as of June 1, 2011 the number of
shares of Common Stock beneficially owned by each director and
nominee for election as director, by each of the Named Executive
Officers, and by all directors and executive officers as a
group. The number of shares beneficially owned is determined
under rules of the SEC. The information is not necessarily
indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes any shares as to
which the individual has either sole or shared voting power or
investment power and also any shares that the individual has the
right to acquire within 60 days through the exercise of any
stock option or other right. Unless otherwise indicated in the
footnotes, each person has sole voting and investment power with
respect to shares set forth in the following table.
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Number of Shares
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Share Units
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Beneficially
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and Share
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Percent
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Name
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Owned(1)
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Equivalents(2)
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Total
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of Class
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C.E. Andrews
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55,582
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0
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55,582
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*
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|
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|
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Alan M. Bennett
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405,000
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10,211
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415,211
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*
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|
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|
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Jeffrey T. Brown
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59,720
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(3)
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0
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|
|
|
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|
|
59,720
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|
|
*
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|
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|
|
|
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|
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Paul J. Brown
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0
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0
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|
|
|
|
|
|
0
|
|
|
|
|
*
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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William C. Cobb
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133,720
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(4)
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10,508
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144,228
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*
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Marvin R. Ellison
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0
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0
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|
0
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*
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Robert A. Gerard
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6,000
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24,035
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|
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30,035
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*
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Len J. Lauer
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26,000
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24,035
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50,035
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*
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David B. Lewis
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28,000
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24,035
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52,035
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*
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Philip L. Mazzini
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81,772
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(5)
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|
|
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0
|
|
|
|
|
|
|
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|
|
81,772
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|
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|
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*
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Victoria J. Reich
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0
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0
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0
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*
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Bruce C. Rohde
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0
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10,808
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10,808
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*
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|
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Tom D. Seip
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|
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56,437
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|
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24,035
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|
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|
|
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|
|
80,472
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|
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*
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|
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|
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L. Edward Shaw,
Jr.(6)
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|
|
|
0
|
|
|
|
|
|
|
|
24,035
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|
|
|
|
|
|
|
|
|
24,035
|
|
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*
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Russell P.
Smyth(7)
|
|
|
|
1,009
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
1,009
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Turtledove
|
|
|
|
14,420
|
|
|
|
(8)
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
14,420
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christianna Wood
|
|
|
|
12,580
|
|
|
|
|
|
|
|
20,144
|
|
|
|
|
|
|
|
|
|
32,724
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F. Wright
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|