Compensation Committee Charter
Revised August 2018
The Compensation Committee (the “Committee”) is charged with developing Kelly Services, Inc.’s (the “Company”) executive compensation philosophy and establishing and monitoring compensation programs designed with the following objectives:
- Align a significant portion of compensation with the achievement of multiple performance goals that motivate and reward executives based on Company, business unit, and individual performance results;
- Attract and retain world-class talent with the leadership abilities and experience necessary to develop and execute business strategies, achieve outstanding results, and build long-term shareholder value;
- Support the achievement of the Company’s vision and strategy;
- Create an ownership mindset that closely aligns the interests of management with those of shareholders; and
- Provide an appropriate balance between the achievement of both short- and long-term performance objectives, with clear emphasis on managing the sustainability of the business and mitigation of risk.
Organization and Authority
The Board of Directors (the “Board”), upon the recommendation of the Corporate Governance and Nominating Committee, shall appoint annually three or more of its members to serve as members of the Committee and shall designate the Chairman and Vice Chairman of the Committee from among the members of the Committee. The members of the Committee shall meet the independence requirements set forth in the Nasdaq Global Market (Nasdaq) listing standards and the regulations of the Securities and Exchange Commission (SEC) and the Internal Revenue Service, as applicable. Members of the Committee shall serve until their successors are duly elected and qualified or their earlier resignation or removal.
The Board may remove or replace any member from the Committee at any time for any reason.
The Committee shall meet at such times as the Committee shall consider appropriate to fulfill its responsibilities, but not less frequently than quarterly. A majority of the Committee shall constitute a quorum for the transaction of business and a vote of a majority of the members present at any meeting at which a quorum is present shall constitute the action of the Committee. Each member of the Committee present shall have one vote on each matter to be decided.
The Committee will keep a record of its meetings and report on them to the Board. The Committee may meet in person, by telephone or videoconference and may take action by written consent in lieu of meeting.
The Committee may delegate any of its responsibilities to (i) its Chairman, Vice Chairman, or a subcommittee comprised of one or more members of the Committee or (ii) one or more directors (whether or not such directors serve on the Committee) in each case as it deems appropriate; provided, however, that the Committee shall not delegate any power or authority required by law, regulation or listing standard to be exercised by the Committee as a whole.
The Committee shall evaluate its performance on an annual basis based on the responsibilities defined in its Charter and other criteria developed by the Corporate Governance and Nominating Committee.
The Committee shall review its Charter annually to ensure they have complied with their responsibilities and to propose changes to the Board for approval.
The Committee shall review its annual meeting calendar at least once per year and identify key priorities for the upcoming twelve months (to the extent these can be foreseen).
Duties and Responsibilities
- Design and administer executive compensation programs and policies that are aligned with the Company’s business and compensation objectives in order to: a) effectively attract and retain the executives necessary to successfully lead and manage the organization, b) fairly reward executives for performance, and c) align long-term value creation with awards and effective risk management. Review executive compensation program designs and corporate governance practices relative to market typical and best practices and approve modifications as needed.
- Annually establish performance objectives for the Chief Executive Officer (“CEO”); evaluate CEO performance and present such evaluation to the CEO, including consideration of ethical behavior, the extent to which achievement of established performance objectives shall affect compensation, and relative market comparisons; and determine and approve CEO compensation. The Chief Executive Officer shall not be present during the voting or deliberations on his/her compensation.
- Annually review and determine the compensation of the Company’s Senior Officers (Senior Vice President and above) and other individuals the Committee deems appropriate taking into consideration each individual’s performance including consideration of ethical behavior, relevant market comparisons, and the recommendations of the Chief Executive Officer. No Senior Officer may be present during voting or deliberations on his/her compensation.
- Annually, for potential Named Executive Officers (as defined by SEC regulations), determine corporate and business unit financial goals and establish the level of performance that must be achieved for each goal at threshold, target, and maximum award payout levels pursuant to the Company’s Short-Term Incentive Plan (“STIP”) and Equity Incentive Plan (“EIP”) for the Long-Term Incentive (“LTI”) Performance Awards and certify the attainment of such performance goals following completion of the applicable performance period, including for purposes of 162(m) of the Internal Revenue Code (“IRC”). The Tax Cuts and Jobs Act of 2017 eliminated the favorable status of performance awards under section 162(m), but future payouts from pre-existing arrangements that were executed for the 2016-2018 and 2017-2019 performance periods might remain eligible pursuant to transitional relief. Corporate measures and financial goals established annually by the Committee for the STIP and LTI Performance Awards are also applicable to all other Senior Officers. Approve the payment or vesting of such performance-based incentives to Named Executive Officers and all other Senior Officers, individually, consistent with the achievement of performance goals for each.
- Review, approve and when appropriate, recommend to the Board, the adoption, termination, or amendment of incentive compensation plans, equity based plans, tax qualified retirement and investment plans, supplemental benefit plans (including executive retirement plans), deferred compensation programs, perquisites/special benefits, severance plans, and employment, and separation agreements for Senior Officers. The Committee in its administration of these plans and agreements has the authority to amend these plans and agreements, except where it has delegated authority to make amendments to certain plans and agreements to the Senior Officers or administrators specified under the terms of the plans.
- Review the costs and benefits of the compensation arrangements they consider and approve for Senior Officers.
- Review and amend, as appropriate, the stock ownership guidelines for Senior Officers and at least annually review compliance with the guidelines. In addition, if there are non-compliance issues, the Committee has authority to pay earned cash incentive awards in restricted stock (units) or take other action as it deems appropriate to ensure timely compliance is achieved and maintained.
- Review the potential impact of regulatory requirements on the Company’s executive compensation programs and practices. Review disclosures and recommend changes as necessary or appropriate.
Incentive Compensation, Equity Grants, and Benefit Plans
- Annually establish corporate financial goals and the level of performance that must be achieved for each goal at threshold, target, and maximum payout levels pursuant to the Company’s STIP and Management Incentive Plan (“MIP”) for participants below Senior Officer, certify attainment of such performance goals following completion of the applicable performance period and approve payouts in the aggregate. Review plan metrics and payouts for all other incentive plans in the aggregate.
- Approve the grant of stock, stock options, restricted stock (units), other stock-based awards (such as performance shares (units)), and cash-denominated performance awards pursuant to the Company’s EIP, and the terms thereof, including:
- the award opportunities, vesting schedule, performance goals, exercisability and term, to the Company’s Senior Officers and other employees selected by the Committee to participate in such plans established for this group, namely the Company’s LTI Awards; and
- broad-based grants to employees below Senior Officer and review such individual awards made under delegated authority to other employees below Senior Officer.
Establish policy with respect to the timing of annual equity grants. Performance goals established by the Committee must be approved by the Board of Directors. Monitor compliance with all other terms of the EIP.
- Review, and when appropriate, recommend to the Board for approval, broad-based employee benefit plans for the Company, which includes the ability to adopt, amend, and terminate such plans.
Career Development and Succession Planning
- Approve the hiring of a Senior Officer of the Company or the promotion of any Officer to Senior Officer position including the related compensation package, the terms and conditions of employment, and any benefits that may be provided upon the cessation of employment.
- Review and approve Officer (Officer Vice President level) appointments and recommend such candidates to the Board for annual or ad hoc election as Officer, including new hires, and report to the Board all Officer resignations and terminations.
- Review and advise the Board concerning the Company’s management succession plans including plans for development of potential future Senior Officers and plans for succession in case of an unexpected disability or departure of a Senior Officer.
Executive Compensation Related Disclosures
- Annually review and discuss with management the Compensation Discussion and Analysis (“CD&A”) and recommend to the Board whether, based on that review and discussion, the CD&A should be included in the Company’s proxy statement for the Annual Meeting of Shareholders and incorporated by reference into the Company’s Form 10-K annual report. Approve the Compensation Committee Report required to be included in the Company's annual proxy statement.
- Oversee the Company’s submissions to shareholders on executive compensation matters, including review and recommend to the Board for approval the frequency with which the Company will conduct advisory votes on executive compensation (“Say on Pay Votes”), review and approve proposals regarding the Say on Pay Vote to be included in the Company’s proxy statement, and consider the results of the most recent advisory vote on executive compensation and other factors deemed relevant in discharging its responsibilities. Ensure proxy statement provides clear communications to shareholders about executive compensation programs.
- Review annually, reports on the Company’s compensation and benefits programs and practices as they impact all employees to determine whether they create risks that are reasonably likely to have a material adverse effect on the Company. Discuss at least annually the relationship between risk management policies and compensation practices and, as appropriate, consider compensation policies and practices that could mitigate risk. Review any material changes to the Company’s compensation and benefits plans as needed. Report to the Board of Directors its findings, including if any compensation program is reasonably likely to have a material adverse effect on the Company.
- Make all determinations under the Incentive Compensation Recovery (“Clawback”) Policy, including without limitation, (i) whether the policy should be applied to a particular payment or award, (ii) the amount of compensation to be repaid or forfeited by the covered Senior Officers and Officers, (iii) whether the covered Senior Officers and Officers should be provided an opportunity to respond to any claim of misconduct whether in writing or at a meeting, and (iv) the period of repayment and form of repayment.
- At least bi-annually, conduct a formal market review of director compensation practices and as determined appropriate, make recommendations to the Board regarding any change to directors’ compensation, including cash payments, equity-based awards, and other benefits. In considering directors’ compensation and other benefits, the Committee may take into consideration the relative responsibilities of directors in serving on the Board and its standing Committees and the status of the Board’s compensation in relation to similarly situated companies. Directors who are Company employees, as well as designated director representative of Persol Holdings Co., Ltd., shall not be compensated for their services as directors. The Committee will periodically review the design of the Non-Employee Director Deferred Compensation Plan.
- Review annually and determine the compensation of the Chairman of the Board, which is a non-Officer employee position. The determination of the Chairman’s compensation shall be based on the responsibilities of the Chairman and other factors deemed by the Committee to be relevant, including consideration of appropriate market comparisons.
- Review and amend, as appropriate, the stock ownership guidelines for the Board, and at least annually review compliance with the guidelines.
- The Committee has the authority, in its sole discretion, to retain or obtain the advice of any compensation consultant, independent legal counsel, or other advisor (collectively the “compensation advisor”) that its members deem necessary to assist them in carrying out their prescribed duties and is responsible for the selection and termination of these advisors.
- The Committee is directly responsible for the appointment, compensation, and oversight of the work of any retained compensation advisor.
- The Company must provide appropriate funding for the payment of reasonable compensation, as determined by the Committee, to retain compensation advisors.
- Before selecting any compensation advisor (excluding in house counsel) and annually thereafter, the Committee must take into account the following factors affecting the independence of the compensation advisor as required by the Exchange Act Rule 10C-1, as well as factors deemed relevant by Nasdaq in its listing standards as the same may be amended from time to time:
- the provision of other services to the Company by the entity that employs the compensation advisor;
- the amount of fees paid by the Company to the entity that employs the compensation advisor as a percentage of that entity’s total revenue;
- the policies and procedures of the entity that employs the compensation advisor that are designed to prevent of conflicts of interest;
- any business or personal relationship of the compensation advisor with any member of the Committee, other member of the Company’s Board of Directors, or Executive Officer;
- ownership by the compensation advisor of the Company’s common stock; and
- any business or personal relationship between the compensation advisor or the entity that employs the compensation advisor and a Senior Officer of the Company.
If a conflict of interest is assessed, the nature of the conflict and how it was addressed must be disclosed in the Company’s proxy statement, as required by SEC Regulation S-K Item 407(e)(3)(iii).
- The Committee is not required to implement or act consistently with the advice or recommendations of the compensation advisor, nor does the selection of a compensation advisor by the Committee affect its ability or obligation to exercise its own judgment in fulfillment of Committee duties.
- Carry out such other duties that may be delegated to the Committee by the Board from time to time.