Apollo Education Group logo

SEC Filings

DEF 14C
APOLLO EDUCATION GROUP INC filed this Form DEF 14C on 12/29/2014
Entire Document
 


RISK ASSESSMENT OF COMPENSATION PROGRAMS
On an annual basis, we perform a comprehensive review of the various compensation programs maintained throughout the organization to assess whether any of those programs encourage excessive risk taking that might create a material risk to our economic viability. This process includes our Human Resources department identifying our various compensation plans and programs, and evaluating their principal features, the potential risks posed to the Company and any mitigating factors, such as payment caps, internal processes for the review and validation of applicable performance measures and levels of attainment, and discretion maintained by the Company or other plan administrator to reduce and/or adjust payout amounts as warranted.
The Compensation Committee has reviewed our compensation plans and programs and their considerations and conclusions with respect to their risk assessment of the compensation programs maintained for our executive officers are set forth in the “Compensation Discussion and Analysis” section of this Information Statement.
Both the Company and the Compensation Committee believe that the following compensation plan design features safeguard against excessive risk taking:
Our cash and equity compensation structure is generally applied on a uniform basis throughout the organization.
Our management-level employees receive equity awards on a recurring basis. Those awards are either in the form of RSUs or a combination of stock option grants, RSUs and PSU awards that are settled in shares of our Class A Common Stock. Although stock options have the potential to encourage risk taking, all equity awards typically vest over a three to four year vesting period to encourage award recipients to focus on sustaining our long-term performance. In addition, equity awards are generally made on an annual basis, such that at any given time, our executive officers and other management-level employees typically have unvested awards outstanding that could decrease significantly in value if our business is not managed for the long-term.
We also have a PSU/performance cash bonus award program for key employees of Apollo Global and certain employees of the Company who are significantly involved in the business operations of that entity. The applicable performance-vesting condition for those awards is generally tied to an adjusted operating free cash flow metric measured at the Apollo Global level for the applicable performance period for the particular award. The Apollo Global awards are more leveraged than the Company’s PSU awards as the maximum payout level under the Apollo Global awards is 600% of target, whereas the maximum payout rate under the Company’s PSUs is set at either 200% or 300% of target. However, the more leveraged nature of the Apollo Global awards is not considered to pose a material adverse risk to the Company for the following reasons:
The awards are only made to a limited and select group of individuals within the organization.
There is a cap on both the maximum number of shares issuable and the maximum dollar amount payable on the awards, and such awards are expected to be made on an annual basis to the selected individuals so that they will eventually hold a number of outstanding awards under the program with different performance targets and vesting schedules. Excessive risk taking to earn a maximum return on one year’s award could jeopardize the potential return on the awards for other years.
The Apollo Global award payouts may be reduced by as much as 50% at the discretion of the Compensation Committee, as to executive officers with such awards, or the Chief Executive Officer, as to awards to non-executive officers.
Although most Apollo Global employees receive their long-term incentive awards solely or primarily in the form of such special PSUs and performance cash bonus awards, there are only a small number of employees who receive these Apollo Global awards compared to the overall number of employees who receive long-term incentive awards. Consequently, the aggregate grant-date value of these Apollo Global awards is relatively small in comparison to the aggregate grant-date value of the annual long-term incentive awards made to other individuals throughout the organization that are tied to our performance or the price of our Class A Common Stock.
For the limited number of Company employees who receive Apollo Global PSU/performance cash bonus awards, the total grant-date value of their annual long-term incentive award is allocated in accordance with a portfolio approach that directs the predominant portion of that value into equity awards tied to Company-level performance or the price of our Class A Common Stock. Accordingly, for our employees, the special Apollo Global PSU/performance cash bonus awards they receive do not comprise a significant component of their total equity compensation package.
Our overall compensation structure is not overly weighted toward short-term incentives and, for management-level employees, there is a significant long-term equity award component tied to the value of our Class A Common Stock. The short-term incentive programs we have implemented are subject to a dollar cap per individual tied to a percentage of their base salary. As a result, there is a meaningful limitation on the amount of compensation that can be generated from such short-term incentive programs, thereby mitigating the potential for excessive risk taking with respect to

32