2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 448 MSA SAFETY, INC. NASDAQ, INC. NEW YORK COMMUNITY BANCORP, INC. ORACLE COMPENSATIONDISCUSSIONANDANALYSIS (CONTINUED) TheCommitteebelievesthatthesecomponents,takenasawhole,provideanattractivecompensationpackagethataligns withtheCompany’sannualandlong-termgoalsandenablestheCompanytoattract,retainandmotivatesuperiorexecutive talent.Asameansofmitigatingrisk,theCommitteehasadoptedpoliciessuchasshareownershipguidelines,whichrequire executivestomaintainacertainlevelofownershipofMSAstock,andacompensationrecoupmentpolicythatprovidesthe Committee with the ability to recoup certain awards previously paid or earned based on financial results that were later restated downward, and discretionary authority held by the Committee that allows modification of any payouts from any plan,intheeventofanyothermisconductthatcausesfinancialharmtotheCompany. Performance-Based Incentives. TheCommittee believesthatasignificantportion ofaNamedOfficer’s compensationshould be delivered through performance-based incentive compensation components. The Committee has identified meaningful financialandshareholderperformanceobjectivesthatalignwiththebusiness,aremeasurable,andareusedbymanagement on a day-to-day basis to pursue its business strategy. The Committee has chosen the following measures for use in the Company’sincentivearrangementsthatsupportandalignwiththeCompany’sbusinessstrategy: PERFORMANCEMEASURE ANNUALCASH INCENTIVEPLAN LONG-TERM INCENTIVEPLAN RATIONALEFORUSE StockPrice X Indicatorofshareholdervaluecreation TotalShareholderReturn X Indicatorofshareholdervaluecreation RevenueGrowth X Encouragesbothorganicsalesgrowthandsales growthbyacquisition NetIncome X Encouragesbottom-lineprofitability OperatingMarginPercentage X X Encouragesoperatingprofitabilityandexpense management GrossProfitMarginPercentage X Promotesprocessefficiency NetSales–FallProtection X Encouragesactivitiestopromotethesuccessofa criticalacquisition WorkingCapitalasa PercentageofSales X Encouragesactivitiesthatincreasethecash availableforinvestmentinthebusiness,dividends, anddebtrepayment In summary, the Committee believes that the best way to reward executives is to combine a program of cash incentives (basedonannualfinancialperformancegoals)withstockincentives(basedonincreasesintheCompany’sstockpriceand,in part,onperformanceversuslong-termfinancialperformancemetrics). TheCompany’s incentive plans(annualandlong-term) aretargeted to reward executives atthemiddle(50 th percentile)of themarketforachievingexpectedortargetedperformancelevels.Forexample,ourannualincentiveplanisdesignedtopay abovethetargetedleveland,therefore,abovethemiddleofthemarketiftheCompany’sperformanceexceedsourgoalsand expectations, up to a cap upon maximum performance. If the Company’s performance falls below our goals and expectations, the annual incentive plan is designed to pay below the targeted level. If actual performance falls below a certain threshold level, our annual incentive plan is designed to pay nothing. This variable aspect of our annual incentive arrangement is also present in our long-term incentive plan. For instance, a significant portion of our long-term incentive planconsists of performance stock units. At thedateof grant, atargetnumberofsharesisestablishedbasedontheshare valueatthetimeoftheawardandpresentdollarvalueofthecompensationintendedtobedelivered.Ultimatelythenumber of shares awarded at the end of the performance period varies based on the achievement of corporate goals. Our performance-basedrestrictedstockunitsalsoincorporateaperformancethresholdbelowwhichnopaymentsaremade.The 2016 and 2017 equity grants under the long-term incentive plan remain unvested, thereby providing the Company with importantretentionbenefits. 18 Named Executive Officer Compensation 65 » business unit objectives,which are defined business unit-specific goals (financial and strategic) that contribute to the company’s short and long-term performance. Operating income (run rate) and net revenues are the company’s primarymeasures of short-term business success and key drivers of long-term stockholder value. Targets for operating income (run rate) and net revenues are set at the beginning of each year, as part of the company’s annual budgeting process and are subject to adjustment for transactions and other extraordinary events. The employee engagement objectives are established at the beginning of the year by theManagement Compensation Committee and/or theBoard to focus the executive team on certain enterprise initiatives. Business unit objectives also are established at the beginning of the year and are subject to adjustment for transactions and other extraordinary events. The business unit objectives consist offinancial and strategic objectives specific to the business unit. The Management Compensation Committee and/or theBoard set the business unit objectives to reflect the key responsibilities of each executive and incent focus on particular objectives in2017. In lieu of business unit objectives, ourPresident and CEO had strategic objectives relating to the entire organization. We set goals at levelswhere themaximum payoutwould be difficult to achieve and beyond budget assumptions. The following table shows eachNEO’s performance objectives for2017 and the relativeweighting of these objectives. NamedExecutiveOfficer Corporate Operating Income (RunRate) CorporateNet Revenues Employee Engagement BusinessUnit FinancialObjectives Nasdaq/Business Unit Strategic Objectives AdenaT.Friedman 50% 25% 5% 0% 20% MichaelPtasznik 45% 10% 5% 5% 35% EdwardS.Knight 40% 10% 5% 5% 40% Bradley J.Peterson 40% 10% 5% 15% 30% ThomasA.Wittman 10% 10% 5% 50% 25% PotentialPayouts Payouts are determined after the end of the year and are based on the sum of (i) actual performance under each corporate objective and (ii) actual performance against an executive’s business unit/strategic objectives. Each goal applicable to theNEOs for2017 had aminimum, target andmaximum performance level. The annual cash incentive award payments for our executives are based on the achievement of pre- established, quantifiable performance goals. PerformanceOptions–KeyFeatures The Performance Options are intended to be the sole long-term incentive awards for Mr. Ellison, Ms. Catz, Mr. Hurd and Mr.Kurianoverthenextfiveyears.ThePerformanceOptionshavethefollowingkeyfeatures: • 17.5 million Performance Options were awarded to each of Mr. Ellison, Ms. Catz and Mr. Hurd, and 14 millionPerformanceOptionswereawardedtoMr.Kurian • NoadditionalequityawardsareexpectedtobegrantedtotheseNEOsforfiveyears,until2022atthe earliest • Each individual’s award is divided into seven equal tranches eligible to be earned based on stock price, marketcapitalizationandoperationalperformancegoals • Thestockprice,marketcapitalizationandoperationalperformancegoalsmustbeachievedwithinafive- yearperformanceperiodfortheoptionstobeearned • Unearned tranches will be forfeited at the end of the five-year performance period (or earlier if the NEO’semploymentwithOracleterminates) Any Performance Options earned will expire if unexercised eight years from the initial grant date or earlier if the NEO’s employmentwithOracleterminates. PerformanceOptions–Metrics The Performance Optionsare divided into seven equal tranches that are eligible tobeearned basedontheattainment of rigorous performance goals within five years of the date of grant (if the NEO remains employed through the applicable vestingdate).Performancemeasuredagainstthegoalswillbeevaluatedannually. 1Tranche(1/7th) maybeearnedbasedonachievementofa stockprice goal • Oracle’saveragestockpricefor30 calendardaysmustequalorexceed$80 inorderforthetranchetobeearned 6Tranches(6/7ths) maybeearnedbasedonachievementof both (1) marketcapitalization goalsand(2) operational goals • Onegoalofeachtype(marketcapitalizationandoperational)mustbesatisfiedin orderforatranche(i.e.,1/7thoftheaward)tobeearned • Ifmarketcapitalizationgoal(s)aresatisfiedbutnooperationalgoal(s)are satisfied(orviceversa),thennotranchewillbeearneduntilsubsequent achievementoftheothergoaltypeoccurs SixMarketCapitalizationGoals • IncreaseOracle’smarketcapitalizationfromabaseline marketcapitalizationof$207billionby: • $16.6billion • $33.3billion • $50billion • $66.6billion • $83.3billion • $100billion • Sharesissuedinconnectionwithamaterialacquisition willbeexcludedfromthecalculationofmarket capitalization SixOperationalGoals • BecomethelargestenterpriseSaaScompanyasmeasuredbyan independentthirdpartyreport • Attain$20billioninnon-GAAPtotalcloudrevenuesinafiscalyear • Attain$10billioninnon-GAAPtotalSaaSrevenuesinafiscalyear • Attain$10billioninnon-GAAPtotalPaaSandIaaSrevenuesina fiscalyear • Attainnon-GAAPSaaSgrossmarginof80% • Maintainnon-GAAPPaaS/IaaSgrossmarginofatleast30%for threeofthefivefiscalyearsintheperformanceperiod Intheeventofachangeincontrol,anyunvestedtranchessubjecttomarketcapitalizationgoalsandoperationalgoalswill be earned to the extent any unmatched market capitalization goals have been met. The unvested tranche subject to the stockpricegoalwillonlybeearnedifthestockpricegoalisachievedpriortothechangeincontrol. 30 2017AnnualMeetingofStockholders EXECUTIVECOMPENSATION Thefollowingtablesidentifythefinancialmetricsweusedin2017forourshort-termandlong-termincentive programsandprovidesourrationalefortheuseofeachmetricinthecontextofourstrategicplan.PleaseseeAnnexAfor areconciliationofnon-GAAPmeasurespresentedbelow. Short-TermIncentiveProgramMetrics: PerformanceMetric HowWeDefineIt WhyWeUseIt ReturnonAverageTangibleAssets (ROATA) Netincomeasapercentageofaverage tangibleassets. Showstheprofitabilityofourassets bymeasuringhoweffectively managementisdeployingourassets togenerateapositivereturn. EfficiencyRatio Non-interestexpensebeforeforeclosed propertyexpense,amortizationof intangiblesandgoodwillimpairments asapercentageofnetinterestincome andnon-interestincome,excluding gainsfromsecuritiessalesand non-recurringitems. Showshoweffectivelywemanage ourexpensesanduseourresources tocreaterevenue.Webelieve efficientuseofourresources, particularlygivenouracquisition strategy,isasignificantcompetitive advantage. Long-TermIncentiveProgramMetrics: PerformanceMetric HowWeDefineIt WhyWeUseIt NetCharge-offsasaPercentageof AverageLoansandLeases Loansandleaseschargedoff,netof recoveries,asapercentageofaverage loans,netofaverageguaranteedloans andleases. Providesasolidmeasureofourloan qualityandtheeffectivenessofour riskmanagementcontrols.Asa highlyregulatedbusiness,havinga strongcreditcultureminimizesriskto ourbusinessandshareholdervalue. ReturnonAverageTangible CommonEquity(ROATCE) Netincome,adjustedfortax-effected amortizationofintangibles,asa percentofaveragetangiblecommon equity. Providesastrongmeasureofthe effectivenessofourcapital deploymentstrategiesovertime. ➣ 2017Incentive Program Fundingand Award Opportunities Awardopportunitiesunderour2017short-andlong-termincentiveprogramsweresetbytheCompensation Committeebasedoncompetitivemarketpracticesandweredefinedasapercentageofeachexecutive’sbasesalaryat thebeginningoftheyear.Withrespecttoboththeshort-andlong-termprograms,theCommitteecalculatedthe Company’srankonapercentilebasisrelativetothepeergroupforeachperformancemetric.Theaverageoftherankings wasthenassessedtodeterminethepotentialfundinglevelfortheincentiveawards. Thefollowingtablepresentsamatrixofthepossibleprogramfundinglevelsfor2017basedontheaverageof theCompany’spercentilerankingsoverthedesignatedmetricsrelativetothepeergroup: 2017IncentivePlanFunding AveragePercentileRanking RelativetothePeerGroup PlanFundingLevel (2017Short-and-Long-TermIncentivePrograms) Lessthan25th 0 25th Threshold Median Target Above75th Maximum Page29