Waste Connections, Inc. (WCN)

FORM DEF 14A | Proxy Statement (definitive)
Apr. 5, 2019 4:06 PM
|
About: Waste Connections, Inc. (WCN)View as PDF
Waste Connections, Inc. (Form: DEF 14A, Received: 04/05/2019 16:09:50)

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. _____)

 

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W aste C onnections , I nc .

 

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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610 Applewood Crescent, 2 nd Floor
Vaughan, Ontario
Canada L4K 0E3
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  Dear Fellow Shareholders:  

 

You are cordially invited to attend the Annual and Special Meeting (the “Meeting”) of Shareholders of Waste Connections, Inc. (the “Company”) on Friday, May 17, 2019, at 8:00 a.m. (Central Time). The Meeting will be held at the Company’s principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380. Directions to the Meeting appear on the back cover of the accompanying Notice of Meeting and Management Information Circular and Proxy Statement.

 

“THANK YOU FOR YOUR ONGOING SUPPORT AND CONTINUED INTEREST IN WASTE CONNECTIONS.”

 

The matters to be acted upon are described in the accompanying Notice of Meeting and Management Information Circular and Proxy Statement. As always, we are looking forward to meeting our shareholders in person, and responding to any questions you may have about the Company.

YOUR VOTE IS VERY IMPORTANT.

 

Whether or not you plan to attend the Meeting, we urge you to vote and submit your proxy in order to ensure the presence of a quorum. You may do so pursuant to the instructions on your proxy card (including by returning your proxy card by mail or using the Internet or your telephone) if you are a registered shareholder or pursuant to the instructions you receive from your bank or broker (including by using the Internet or your telephone if your bank or broker provides such instructions). Voting by using the Internet or telephone, or by returning your proxy card in advance of the Meeting, does not preclude you from attending the Meeting.

 

Thank you for your ongoing support and continued interest in Waste Connections.

 

Very truly yours,

 

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Ronald J. Mittelstaedt

Chief Executive Officer and Board Chairman

April 2, 2019

 
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Notice of Annual and Special Meeting of Shareholders

 

MEETING INFORMATION

 

FRIDAY, MAY 17, 2019

 

8:00 a.m. Central Time

 

Waste Connections, Inc.

3 Waterway Square Place, Suite 110

The Woodlands, Texas 77380

 

The Annual and Special Meeting (the “Meeting”) of Shareholders of Waste Connections, Inc. (the “Company”) will be held on Friday, May 17, 2019, at 8:00 a.m. (Central Time). The Meeting will be held at the Company’s principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380, for the following purposes:

 

  1. To elect the directors of the Company, to hold office until the 2020 Annual Meeting of Shareholders of the Company or until their respective successors are duly elected or appointed, which is RECOMMENDED by our Board of Directors;  
  2. To approve on a non-binding, advisory basis the compensation of our named executive officers as disclosed in the Company’s management information circular and proxy statement in respect of the Meeting (“say on pay”), which is RECOMMENDED by our Board of Directors;  
  3. To approve the appointment of Grant Thornton LLP as our independent registered public accounting firm until the close of the 2020 Annual Meeting of Shareholders of the Company and authorize our Board of Directors to fix the auditor’s remuneration, which is RECOMMENDED by our Board of Directors;  
  4. To approve a special resolution empowering and authorizing the Board of Directors to fix the number of directors of the Company to be elected from time to time, allowing the Board of Directors to appoint one or more directors between annual meetings to hold office for a term expiring not later than the close of the next annual meeting of shareholders, which is RECOMMENDED by our Board of Directors;  
  5. To vote on a shareholder proposal requesting that the Board of Directors disclose to shareholders, among other matters, a formal written diversity policy and a report regarding the representation of women in the Company, which is OPPOSED by our Board of Directors; and  
  6. To transact such other business as may properly come before the Meeting or any adjournment or postponement thereof.  

 

Only registered holders of common shares in the capital of the Company (the “Common Shares”) at the close of business on March 21, 2019, the record date for the Meeting, are entitled to receive notice of and to vote at the Meeting or any adjournment or postponement thereof.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual and Special Meeting of Shareholders to be Held on May 17, 2019

 

This Notice of Meeting and the accompanying Management Information Circular and Proxy Statement and related soliciting materials in respect of the Meeting, our 2018 Annual Report, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada on February 14, 2019, are available at http://wasteconnections.investorroom.com.

 

Registered holders of Common Shares may vote their proxies by signing, dating and returning a proxy card or by using the internet or telephone pursuant to the instructions on your proxy card. If your Common Shares are held in the name of a bank or broker, you may be able to vote on the Internet or by telephone. Please follow the instructions on the form you receive. Voting by using the Internet or telephone, or by returning your proxy card in advance of the Meeting, does not preclude you from attending the Meeting.

 

Your vote is important. Whether or not you plan to attend the Meeting, we urge you to vote and submit your proxy as promptly as possible in order to ensure your representation at the Meeting.

 

By Order of the Board of Directors,

 

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Patrick J. Shea

Senior Vice President, General Counsel and Secretary

April 2, 2019

 

 

 

REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:
             
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INTERNET   BY TELEPHONE   BY MAIL   IN PERSON
Visit the website on your proxy card   Call the telephone number on your proxy card   Sign, date and return your proxy card in the enclosed envelope  

Attend the annual meeting in The Woodlands, Texas.

See page 4 for instructions on how to attend

             
Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you.
 

MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT FOR THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

 

About this Management Information Circular and Proxy Statement

 

We sent you this management information circular and proxy statement (this “proxy statement”) because our management is soliciting your proxy to vote your Common Shares (as defined below) at the Annual and Special Meeting (the “Meeting”) of Shareholders of Waste Connections, Inc. (“New Waste Connections” or the “Company”) to be held at the Company’s principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380 on May 17, 2019, at 8:00 a.m. (Central Time). This proxy statement includes information that we are required to provide to you under the rules of the U.S. Securities and Exchange Commission, or the SEC, and applicable corporate and securities laws in Canada, and that is designed to assist you in voting your common shares in the capital of the Company (“Common Shares”). Capitalized terms used but not defined in this proxy statement have the respective meanings ascribed thereto in the Explanatory Note.

 

We will bear the costs of soliciting proxies from our shareholders. In addition to soliciting proxies by mail, our directors, officers, employees, and agents, without receiving additional compensation, may solicit proxies by telephone, in person or in any other manner permitted by applicable laws.

 

Under the SEC rules and applicable Canadian securities laws that allow companies to furnish proxy materials to shareholders over the Internet, we have elected to deliver our proxy materials (defined below) to the majority of our shareholders over the Internet. This delivery process allows us to provide shareholders with the information they need electronically, which is more environmentally friendly and reduces our costs to print and distribute these materials. On or about April 5, 2019, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials (the “proxy notice”), containing instructions on how to access this proxy statement for the Meeting, our 2018 Annual Report to Shareholders, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (which we refer to collectively as the “proxy materials”), which was filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 14, 2019. The proxy notice also provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail. On or about April 5, 2019, we will also mail this proxy statement and a proxy card to certain shareholders.

 

We are permitted under applicable securities laws to deliver a single proxy notice to one address shared by two or more shareholders. This delivery method is referred to as “householding” and helps reduce our printing costs and postage fees. Under this procedure, we deliver a single package containing proxy notices to multiple shareholders who share an address. If you do not wish to participate in householding in the future, and prefer to receive separate proxy notices, please contact: Broadridge Financial Solutions, Attention Householding Department, 51 Mercedes Way, Edgewood, NY 11717, telephone 1-800-542-1061, in the United States, or 4 King Street West, Suite 500, Toronto, ON M5H IB6, telephone (416) 350-0999, in Canada. If you are currently receiving multiple proxy notices and wish to receive only one proxy notice for your household, please contact Broadridge Financial Services at the above applicable coordinates. If you wish to receive a separate copy of this proxy statement, our 2018 Annual Report to Shareholders, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, please send a written request to our Secretary or Investor Relations at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380.

 

Cautionary Note Regarding Forward-Looking Statements

 

This proxy statement contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 (“PSLRA”), including “forward-looking information” within the meaning of applicable Canadian securities laws. These forward-looking statements are neither historical facts nor assurances of future performance and reflect our current beliefs and expectations regarding future events and operating performance. These forward-looking statements are

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     i

 

often identified by the words “may,” “might,” “believes,” “thinks,” “expects,” “estimate,” “continue,” “intends” or other words of similar meaning. All of the forward-looking statements included in this proxy statement are made pursuant to the safe harbor provisions of the PSLRA and applicable securities laws in Canada. Forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in our filings with the SEC and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, which speak only as of the date of this proxy statement. We undertake no obligation to update the forward-looking statements set forth in this proxy statement, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

 

Currency Exchange Rate Data

 

Unless otherwise indicated, all dollar amounts in this proxy statement are expressed in U.S. dollars. The following table shows the average of the exchange rates for each period indicated. Except as indicated below, the information is based upon the average daily exchange rates provided by the Bank of Canada:

 

    Average rate (Bank of Canada) (1)
    CAD$ per     US$ per  
Year ended December 31,   US$1.00     CAD$1.00  
2014 (1)   $ 1.1047     $ 0.9052  
2015 (1)   $ 1.2788     $ 0.7820  
2016 (1)   $ 1.3248     $ 0.7548  
2017   $ 1.2986     $ 0.7701  
2018   $ 1.2957     $ 0.7718  
(1) The year-end average exchange rates for 2014, 2015 and 2016 are based upon the noon buying rates provided by the Bank of Canada. The Bank of Canada discontinued the publication of noon buying rates in 2017.

 

Explanatory Note

 

On June 1, 2016, pursuant to the terms of the Agreement and Plan of Merger dated as of January 18, 2016 (the “Merger Agreement”), Water Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of Progressive Waste Solutions Ltd., merged with and into Waste Connections US, Inc. (f/k/a Waste Connections, Inc.), a Delaware corporation (“Old Waste Connections”), with Old Waste Connections continuing as the surviving corporation and an indirect wholly-owned subsidiary of Waste Connections, Inc. (f/k/a Progressive Waste Solutions Ltd.), a corporation organized under the laws of Ontario, Canada (“New Waste Connections,” or the “Company”). The term “Progressive Waste acquisition” is used herein to refer to the transactions completed under the Merger Agreement, and the term “Progressive Waste” is used herein in the context of references to Progressive Waste Solutions Ltd. prior to the completion of the Progressive Waste acquisition on June 1, 2016.

 

Graphical Representations of Returns and Merger Accounting

 

This proxy statement contains several graphical representations of total shareholder return and dividend history, including shareholder returns compared to our Chief Executive Officer’s, or CEO’s, total direct compensation. For purposes of reading such graphical representations in this proxy statement, the Progressive Waste acquisition was accounted for as a reverse merger using the acquisition method of accounting and Old Waste Connections has been identified as the acquirer for accounting purposes. Accordingly, financial and certain other information of the Company in this proxy statement, and the words “we,” “our,” “ours,” and “us” used in the section titled “Company Highlights,” all refer to financial information of, or directly to, Old Waste Connections before completion of the Progressive Waste acquisition and the Company following completion of the Progressive Waste acquisition.

 

Information regarding shareholder and dividend returns refers to returns to shareholders of the Company after completion of the Progressive Waste acquisition on June 1, 2016, and to stockholders of Old Waste Connections prior to June 1, 2016. Note that all performance graphs included in this proxy statement are deemed to be “furnished” rather than “filed” (as such terms are used in the Securities Exchange Act of 1934, as amended) and are not to be deemed to be soliciting material under the proxy rules or incorporated by reference into any filing by the Company except to the extent that the Company specifically incorporates by reference such information or is otherwise required by applicable securities laws to incorporate by reference such information.

 

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PROXY SUMMARY

 

This summary highlights information described in more detail in this proxy statement pertaining to the Meeting. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

 

2019 Annual and Special Meeting of Shareholders

 

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Date and Time   Place   Mail Date
Friday, May 17, 2019,
at 8:00 a.m. (Central Time)
  Waste Connections, Inc.,
3 Waterway Square Place, Suite 110,
The Woodlands, Texas 77380
  April 5, 2019

Record Date

March 21, 2019

 

Voting Matters, Board Recommendations and Vote Required

 

At the Meeting, shareholders will be asked to vote on the following five proposals. Our Board of Directors’ recommendations on each of these proposals is set forth below.

 

  Proposal   Board Recommendation  
  Proposal 1 – Election of seven director nominees named in the proxy statement, each to hold office until the 2020 Annual Meeting of Shareholders of the Company, or until their respective successors are otherwise duly elected or appointed (Page 16).   FOR each director nominee  
  Proposal 2 – Approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers, or NEOs, as disclosed in this proxy statement (the “Say on Pay Proposal”) (Page 55).   FOR  
  Proposal 3 – Appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm until the close of the 2020 Annual Meeting of Shareholders of the Company and the authorization of the Board of Directors to fix the remuneration of the Company’s independent registered public accounting firm (Page 58).   FOR  
  Proposal 4 – Special resolution empowering and authorizing the Board of Directors to fix the number of directors of the Company to be elected from time to time, allowing the Board of Directors to appoint one or more directors between annual meetings to hold office for a term expiring not later than the close of the next annual meeting of shareholders (Page 60).   FOR  
  Proposal 5 – Shareholder proposal requesting that the Board of Directors disclose to shareholders, among other matters, a formal written diversity policy and report regarding the representation of women in the Company (the “Shareholder Proposal”) (Page 61).   AGAINST  

 

Proposal 1 – Election of Directors

 

The election of each director nominee may be approved by any one or more shareholders voting “FOR” each such director nominee ( i.e. , a plurality vote). You may either vote “FOR” or “WITHHOLD” your vote with respect to the election of each director nominee. If you vote “FOR” the election of a nominee, your vote will be cast accordingly. If you select “WITHHOLD” with respect to the election of a nominee, your vote will not be counted as a vote cast for the purposes of electing such nominee but will be considered in the application of the majority voting policy included in our Corporate Governance Guidelines and Board Charter. Pursuant to our majority voting policy, a “WITHHOLD” vote is considered a vote cast for purposes of the election of the director nominee and is equivalent to a vote against the nominee. See “Majority Voting for Directors” on page 12 of this proxy statement.

 

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Proposal 2 – Say on Pay Proposal

 

The Say on Pay Proposal may be approved by the affirmative vote of a simple majority (50 percent plus one) of the Common Shares present, either in person or by proxy, and entitled to vote (meaning that at least a simple majority of the votes cast must be “FOR” the Say on Pay Proposal in order for it to be approved). You may either vote “FOR” or “AGAINST,” or you may “WITHHOLD” from voting on, the Say on Pay Proposal.

 

Proposal 3 – Appointment of Auditor

 

The appointment of the Company’s proposed independent registered public accounting firm may be approved by any one or more shareholders voting “FOR” the Company’s proposed independent registered public accounting firm ( i.e. , a plurality vote). For purposes of this proposal, votes cast at the Meeting include only those votes cast “FOR” the appointment of the proposed independent registered public accounting firm. You may either vote “FOR” or “WITHHOLD” your vote with respect to the appointment of the proposed independent registered public accounting firm. If you vote “FOR” the appointment of the proposed independent registered public accounting firm, your vote will be cast accordingly. If you select “WITHHOLD,” your vote will not be counted as a vote cast for purposes of appointing the proposed independent registered public accounting firm.

 

Proposal 4 – Special Resolution Empowering and Authorizing the Board of Directors to Fix the Number of Directors

 

The special resolution empowering and authorizing the Board of Directors to fix the number of directors of the Company to be elected from time to time, allowing the Board of Directors to appoint one or more directors between annual meetings to hold office for a term expiring not later than the close of the next annual meeting of shareholders, must be approved by the affirmative vote of at least two-thirds (2/3) of the votes cast by the shareholders, either in person or by proxy, at the Meeting. You may either vote “FOR” or “AGAINST” the proposal.

 

Proposal 5 – Shareholder Proposal

 

The Shareholder Proposal may be approved by the affirmative vote of a simple majority (50 percent plus one) of the Common Shares present, either in person or by proxy, and entitled to vote (meaning that at least a simple majority of the votes cast must be “FOR” the Shareholder Proposal in order for it to be approved). You may either vote “FOR” or “AGAINST” the Shareholder Proposal. The Board of Directors is recommending that you vote AGAINST the Shareholder Proposal for the reasons set forth on pages 61 and 62 of this proxy statement.

 

Company Highlights

 

Waste Connections is the third largest solid waste services company in North America, providing waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the U.S. and Canada. Through our R360 Environmental Solutions subsidiary, we are also a leading provider of non-hazardous exploration and production, or E&P, waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the U.S. We also provide intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities.

 

Waste Connections delivered another year of strong performance in 2018, especially in light of the precipitous decline in recycled commodity values and increased inflationary pressures, as highlighted by the following:

 

Strong Operating Performance

 

  Revenue increased 6.3% from the prior year to $4.922 billion.  
  Net income attributable to the Company and net income attributable to the Company per share were $546.9 million and $2.07, respectively; adjusted net income attributable to the Company grew 16.9% from the prior year to $667.3 million and adjusted net income attributable to the Company per share increased 16.9% to $2.52.  
  Adjusted EBITDA increased 7.3% from the prior year to $1.566 billion, or 31.8% of revenue.  

 

  (1) We present adjusted net income, a non-GAAP financial measure, supplementally because it is one of the principal measures we use to evaluate and monitor the ongoing financial performance of our operations. We also present adjusted EBITDA, a non-GAAP financial measure, supplementally because it is widely used by investors as a performance and valuation measure in the solid waste industry. We also present adjusted free cash flow, a non-GAAP financial measure, supplementally because it is widely used by investors as a valuation and liquidity measure in the solid waste industry. These measures are not a substitute for, and should be used in conjunction with, GAAP financial measures. This section should be read in conjunction with information presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, under the heading “Non-GAAP Measures”, which includes a reconciliation of the non-GAAP financial measures used in this proxy statement to GAAP financial measures.  

 

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  Net cash provided by operating activities was $1.411 billion; adjusted free cash flow increased 15.2% from the prior year to $879.9 million, or 17.9% of revenue.  
  Our monthly safety-related incident rate decreased approximately 8% compared to the prior year, excluding the impact of acquisitions completed during the year.  
  We deployed approximately $546.1 million for capital expenditures and $1.032 billion for acquisitions to reinvest in and expand our business.  
  Our investment-grade credit rating profile improved during the year as Fitch Ratings, Inc. upgraded our credit rating to ‘BBB+’ and Moody’s Investors Services, Inc. initiated a ‘Baa2’ credit rating on the Company.  
  Our leverage ratio, as defined under our credit agreement, improved to 2.45x at year-end from 2.53x at the end of 2017, we completed a $500 million senior note public offering, and our cash balance was $319.3 million at year-end 2018, positioning the Company to fund future growth opportunities.  

 

Increased Return to Shareholders

 

  2018 was our 15 th consecutive year of positive total shareholder return (“TSR”). As illustrated below, our TSR significantly outperformed the S&P 500 Index (the “S&P 500”), the S&P/TSX 60 Index (“TSX 60”) and the Dow Jones U.S. Waste & Disposal Services Index (“DJ Waste Index”) for the one-year and five-year periods ended December 31, 2018.  

 

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  We increased our regular quarterly cash dividend by 14.3% to $0.16 per share on October 25, 2018. Since initiating our cash dividend in October 2010 and as illustrated below, our annual cash dividend has increased at a 15.6% compound annual growth rate (“CAGR”) since our first full year of quarterly distributions in 2011.  

 

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Corporate Governance Highlights

 

  Directors elected individually (page 16);  
  Majority voting policy for the election of our Directors (page 12);  
  Policy to separate CEO and Chairman of the Board of Directors, or Board Chairman, positions should our current CEO no longer serve as both (page 8);  

 

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  Having a strong, Lead Independent Director serve on the Board of Directors (page 8);  
  Annual Board of Directors and Committee evaluation processes (page 9);  
  Robust risk management program related to compensation (page 36);  
  Share ownership requirement for Directors, NEOs and other corporate officers (pages 15 and 33, respectively);  
  Regular executive sessions of only independent directors (page 8);  
  Director retirement policy (page 9); and  
  Code of Conduct and Ethics (page 5).  

 

Executive Compensation Program

 

The Company’s executive compensation program is designed to align the interests of senior management with shareholders by tying a significant portion of their compensation to the Company’s annual operating and financial performance, as well as longer-term shareholder returns. We believe that our pay-for-performance philosophy and the design of our executive compensation program strongly support, as shown above, an environment of continuous improvement and shareholder value creation. Best practices of our executive compensation program include the following:

 

  Approximately 71% of the target total direct compensation of our named executive officers, or NEOs, is variable and linked to the Company’s performance;  
  Payouts under the Company’s performance-based plans remain at the discretion of the Board of Directors and may be reduced even if targeted performance levels are achieved;  
  NEOs receive annual cash incentive bonus awards only if cash incentive bonus awards payable to other, non-executive employees have been made;  
  No guaranteed base salary increases, minimum bonuses or equity awards;  
  Conservative use of equity grants;  
  Inclusion of a relative TSR metric as a performance measure for Performance Share Units;  
  Stringent share ownership requirements;  
  Double-trigger change of control policy for our CEO and other NEOs;  
  No hedging or pledging of the Company’s securities;  
  Compensation clawback policy;  
  Independent executive compensation consultant retained by Compensation Committee;  
  Annual “Say on Pay” vote; and  
  Adoption of position descriptions for the Chairman of the Board of Directors, the lead independent director and the Chairs of the committees of the Board of Directors, as well as a position description for our CEO.  

 

For additional information, see the Executive Compensation and Compensation Risk Assessment sections of this proxy statement (starting at page 23 and page 36, respectively).

 

Financial Statements

 

A more detailed description of the Company’s fiscal year 2018 performance, including a reconciliation of non-GAAP financial measures and a graphical representation of the TSRs for the Company, the S&P 500, the TSX 60 and the DJ Waste Index, can be found on pages 70–72 and page 36, respectively, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 14, 2019, and available on our website at www.wasteconnections.com, on SEDAR at www.sedar.com, on EDGAR at www.sec.gov, and in print, free of charge, to any shareholder who requests in writing a copy by contacting our Secretary or Investor Relations at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380.

 

Vote Your Common Shares

 

Whether or not you plan to attend the Meeting, we urge you to vote and submit your proxy in order to ensure the presence of a quorum. You may do so pursuant to the instructions on your proxy card (including by returning your proxy card by mail or using the Internet or your telephone) if you are a registered shareholder or, pursuant to the instructions you receive from your bank or broker (including by using the Internet or your telephone if your bank or broker provides such instructions). Voting by using the Internet or telephone, or by returning your proxy card in advance of the Meeting, does not preclude you from attending the Meeting. Please refer to your proxy card or voting instruction form included with this proxy statement or to the “Voting and Revocation” section on page 2 of this proxy statement for more information on the voting methods available to you.

 

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TABLE OF CONTENTS       

 

  GENERAL INFORMATION 1
  Who May Vote 1
  Business of Meeting; What is Being Voted On 1
  Required Votes 1
  Broker Non-Votes 2
  Voting and Revocation 2
  How Proxies Work 3
  Quorum 4
  Attending in Person 4
  How to Contact our Transfer Agent 4
     
  CORPORATE GOVERNANCE 5
  Corporate Governance Guidelines 5
  Committees of the Board 5
  The Board’s Role in Risk Oversight 7
  Director Independence 7
  Board Leadership Structure 8
  Board Composition 9
  Majority Voting for Directors 12
  Director Orientation and Continuing Education 12
  Communications with the Board 13
  Shareholder Outreach 13
  Position Descriptions 13
  Executive Officer Diversity 13
     
  DIRECTOR COMPENSATION AND EQUITY OWNERSHIP 14
  Director Compensation 14
     
  PROPOSAL 1 — ELECTION OF DIRECTORS 16
  Public Company Board Memberships 20
  Bankruptcies and Insolvencies 20
     
  SHARE OWNERSHIP 21
  Share Ownership of Five Percent Shareholders 21
  Share Ownership of the Board of Directors and Corporate Officers 22
     
  EXECUTIVE COMPENSATION 23
  Compensation Discussion and Analysis 23
  Compensation Risk Assessment 36
     
  EXECUTIVE COMPENSATION TABLES 37
  Summary Compensation Table 37
  Grants of Plan Based Awards in Fiscal Year 2018 40
  Outstanding Equity Awards at 2018 Fiscal Year-End 41
  Shares Vested in Fiscal Year 2018 42
  Pension Benefits in Fiscal Year 2018 43
  Nonqualified Deferred Compensation in Fiscal Year 2018 43
  Equity Compensation Plan Information 45
  Potential Payments Upon Termination or Change in Control 46
     
  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 53
  2018 Related Party Transactions 53
     
  PROPOSAL 2 — ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION (“SAY ON PAY PROPOSAL”) 55
     
  AUDIT MATTERS 57
  Audit Committee Report 57
     
  PROPOSAL 3 — APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION OF THE BOARD OF DIRECTORS TO FIX THE REMUNERATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 58
  Grant Thornton LLP 59
  PricewaterhouseCoopers LLP 59
  Audit Committee Pre-Approval Policies and Procedures 59
     
  PROPOSAL 4 — APPROVAL OF A SPECIAL RESOLUTION EMPOWERING AND AUTHORIZING THE BOARD OF DIRECTORS TO FIX THE NUMBER OF DIRECTORS 60
     
  PROPOSAL 5 — SHAREHOLDER PROPOSAL 61
     
  OTHER INFORMATION 63
  Section 16(a) Beneficial Ownership Reporting Compliance 63
  Directors’ and Officers’ Indemnity Insurance 63
  Shareholder Proposals for 2020 Annual Meeting of Shareholders of the Company 63
  Availability of Documents; Annual Report to Shareholders on Form 10-K 64
  Other Business 64
  Approval 64
     
  APPENDIX A — CORPORATE GOVERNANCE GUIDELINES AND BOARD CHARTER A-1
     
  APPENDIX B — SUMMARY OF THE 2016 INCENTIVE AWARD PLAN B-1
 

GENERAL INFORMATION

 

Who May Vote

 

The record date (the “Record Date”) for determining the holders of Common Shares entitled to receive notice of and to vote at the Meeting is March 21, 2019. Only shareholders whose names have been recorded in our share register at the close of business on the Record Date will be entitled to receive notice of and to vote at the Meeting. As of the Record Date, 263,664,807 Common Shares were outstanding and entitled to vote. Each shareholder of record is entitled to one vote for each Common Share held by the shareholder.

 

Business of Meeting; What is Being Voted On

 

Shareholders will be voting (i) to elect the nominees for directors of the Company, (ii) in an advisory, non-binding capacity, to approve the compensation of our NEOs as disclosed in the “Executive Compensation” section of this proxy statement (“Say on Pay”); (iii) to approve the appointment of Grant Thornton LLP as auditors of the Company and to authorize the Board of Directors to fix the auditor’s remuneration; (iv) to approve a special resolution empowering and authorizing the Board of Directors to fix the number of directors of the Company to be elected from time to time, allowing the Board of Directors to appoint one or more directors between annual meetings to hold office for a term expiring not later than the close of the next annual meeting of shareholders; and (v) on the Shareholder Proposal. Our Board of Directors is recommending that shareholders vote “FOR” each of the nominees in proposal (i); “FOR” proposals (ii), (iii) and (iv); and “AGAINST” proposal (v).

 

In addition to the foregoing matters, the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2018, and the auditor’s report thereon, will be placed before the Meeting. No formal action will, or is required to, be taken at the Meeting with respect to our 2018 audited consolidated financial statements.

 

Our 2018 audited consolidated financial statements, and the auditor’s report thereon, were included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 14, 2019, and available on our website at http://wasteconnections.investorroom.com, on SEDAR at www.sedar.com, on EDGAR at www.sec.gov, and in print, free of charge, to any shareholder who requests in writing a copy by contacting our Secretary or Investor Relations at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380.

 

Required Votes

 

Proposal 1 – Election of Directors

 

The election of each director nominee may be approved by any one or more shareholders voting “FOR” each such director nominee ( i.e ., a plurality vote). For purposes of this proposal, votes cast at the Meeting include only those votes cast “FOR” the election of a director nominee. You may either vote “FOR” or “WITHHOLD” your vote with respect to the election of each director nominee. If you vote “FOR” the election of a nominee, your vote will be cast accordingly. If you select “WITHHOLD” with respect to the election of a nominee, your vote will not be counted as a vote cast for the purposes of electing such nominee but will be considered in the application of the majority voting policy included in our Corporate Governance Guidelines and Board Charter. See “Majority Voting for Directors” on page 12 of this proxy statement. Pursuant to our majority voting policy, a “WITHHOLD” vote is treated as a share present or represented and entitled to vote on the director nominee and has the same effect as a vote “against” the nominee.

 

WASTE CONNECTIONS, INC.   |  2019  PROXY STATEMENT     1

 

Proposal 2 – Say on Pay Proposal

 

The Say on Pay Proposal may be approved by the affirmative vote of a simple majority (50 percent plus one) of the Common Shares present, either in person or by proxy, and entitled to vote (meaning that at least a simple majority of the votes cast must be “FOR” the Say on Pay Proposal in order for it to be approved). You may either vote “FOR” or “AGAINST,” or you may “WITHHOLD” from voting on, the Say on Pay Proposal. For purposes of the Say on Pay Proposal, a “withhold” vote will have the same effect as a vote “AGAINST” the Say on Pay Proposal because those Common Shares are considered to be present and entitled to vote, but are not voted.

 

Proposal 3 – Appointment of Auditor

 

The appointment of the Company’s proposed independent registered public accounting firm may be approved by any one or more shareholders voting “FOR” the Company’s proposed independent registered public accounting firm ( i.e. , a plurality vote). For purposes of this proposal, votes cast at the Meeting include only those votes cast “FOR” the appointment of the proposed independent registered public accounting firm. You may either vote “FOR” or “WITHHOLD” your vote with respect to the appointment of the proposed independent registered public accounting firm. If you vote “FOR” the appointment of the proposed independent registered public accounting firm, your vote will be cast accordingly. If you select “WITHHOLD” your vote will not be counted as a vote cast for purposes of appointing the proposed independent registered public accounting firm.

 

Proposal 4 – Special Resolution Empowering and Authorizing the Board of Directors to Fix the Number of Directors

 

The special resolution empowering and authorizing the Board of Directors to fix the number of directors of the Company to be elected from time to time, allowing the Board of Directors to appoint one or more directors between annual meetings to hold office for a term expiring not later than the close of the next annual meeting of shareholders, must be approved by the affirmative vote of at least two-thirds (2/3) of the votes cast by the shareholders, either in person or by proxy, at the Meeting. You may either vote “FOR” or “AGAINST” the proposal.

 

Proposal 5 – Shareholder Proposal

 

The Shareholder Proposal may be approved by the affirmative vote of a simple majority (50 percent plus one) of the Common Shares present, either in person or by proxy, and entitled to vote (meaning that at least a simple majority of the votes cast must be “FOR” the shareholder proposal in order for it to be approved). You may either vote “FOR” or “AGAINST” the Shareholder Proposal.

 

The Board of Directors is recommending that you vote AGAINST this Shareholder Proposal for the reasons set forth on pages 61 and 62 of this proxy statement.

 

Broker Non-Votes

 

Broker non-votes are counted as present and entitled to vote at the Meeting for the purpose of establishing a quorum, but are not considered votes cast at the Meeting and will have no effect on the vote of any of the proposals to be considered at the Meeting. A broker non-vote occurs when a broker signs and returns a proxy but does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner.

 

Voting and Revocation

 

You may receive more than one proxy card and/or proxy notice depending on how you hold your Common Shares. You should complete and return each proxy card or other voting instruction request provided to you in accordance with the instructions provided therein.

 

WASTE CONNECTIONS, INC.   |  2019  PROXY STATEMENT     2

 

Registered Holders

 

If you are a registered holder of Common Shares as of the Record Date, you will be able to vote your proxy pursuant to the instructions on your proxy card, including by mail by signing, dating and mailing a proxy card in the postage-paid envelope provided, or by using the Internet or your telephone. You may also attend the Meeting and vote in person. Voting by using the Internet or telephone, or by returning your proxy card in advance of the Meeting, does not preclude you from attending the Meeting.

 

You are a registered shareholder if your name appears on your certificate or statement from the Direct Registration System representing your Common Shares. If this is the case, you may appoint someone else to vote for you as your proxy holder by using the enclosed form of proxy card. The persons named as proxies in such form of proxy card are the Executive Vice President and Chief Financial Officer of the Company and the Vice President, Deputy General Counsel and Assistant Secretary of the Company. However, you have the right to appoint any other person or company (who need not be a shareholder) to attend and act on your behalf at the Meeting. That right may be exercised by writing the name of such person or company in the blank space provided in the form of proxy card or by completing another proper form of proxy card or by using the Internet by following the instructions provided on your proxy card. Make sure that the person you appoint is aware that he or she is appointed and that this person attends the Meeting.

 

Even if you vote your Common Shares by mailing a proxy card, or by voting using the Internet or by telephone in accordance with the instructions on your proxy card, you may revoke your proxy and cast a new vote at the Meeting, if we are able to verify that you are a registered holder of Common Shares, by mailing a notice revoking the prior proxy and then voting in person. You may also change your vote before the Meeting by mailing another proxy card bearing a later date, by updating your vote using the Internet or telephone in accordance with the instructions on your proxy card, or by delivering a letter revoking the proxy card to our Secretary at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380. Computershare Investor Services must receive your revocation no later than 8:00 a.m. (Central Time) on May 16, 2019. The proxy card or your Internet or telephone voting instructions with the latest date properly submitted by you before voting is closed at the Meeting will be counted.

 

Shares Held in Street Name (Non-registered Holders)

 

If you have selected a broker, bank or other intermediary to hold your Common Shares rather than having them directly registered in your name with our transfer agent, Computershare Investor Services, you will receive instructions from your broker, bank or other intermediary on the procedure to follow to vote your Common Shares. Your broker, bank or other intermediary also may permit you to vote your proxy by telephone or the Internet. Please be aware that beneficial owners of Common Shares held by brokers, banks or other intermediaries may not vote their Common Shares in person at the Meeting unless they first obtain a written authorization to do so from their broker, bank or other intermediary and can only change or revoke previously issued voting instructions pursuant to instructions provided by their broker, bank or other intermediary. We urge you to vote by following the instructions of your broker, bank or other intermediary.

 

However, if you wish to vote in person at the Meeting, insert your own name in the space provided on the voting instruction form provided by your broker, bank or other intermediary to appoint yourself as proxy holder and follow the signature and return instructions of your broker, bank or other intermediary. Computershare Investor Services must receive your appointment no later than 8:00 a.m. (Central Time) on May 16, 2019. Non-registered shareholders who appoint themselves as proxy holders should present themselves at the Meeting to a representative of the Company. Other than appointing yourself as your own proxy holder, do not otherwise complete the voting instruction form sent to you as you will be voting at the Meeting.

 

Non-registered shareholders are either “objecting beneficial owners” or “OBOs,” who object to the disclosure by intermediaries of information about their ownership in the Company, or “non-objecting beneficial owners” or “NOBOs”, who do not object to such disclosure. The Company pays intermediaries to send proxy-related materials to OBOs and NOBOs.

 

How Proxies Work

 

Our Board of Directors is asking for your proxy. Giving us your proxy means that you authorize us to vote your Common Shares at the Meeting in the manner you direct. The Common Shares represented by your proxy will be voted or withheld from voting in accordance with your instructions on any ballot that may be called for and if you specify a choice with respect to any matter to be acted upon, your Common Shares will be voted accordingly. If you sign your proxy card or voting information form but do not give voting instructions, we will vote your Common Shares as follows:

 

FOR each of our director nominees;
   
FOR the non-binding, advisory proposal to approve the compensation of our NEOs, as disclosed in this proxy statement (also known as say on pay);

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     3

 
FOR the appointment of the independent registered public accounting firm and the authorizing of the Board of Directors to fix the auditor’s remuneration;
   
FOR the proposal seeking approval of a special resolution empowering and authorizing the Board of Directors to fix the number of directors of the Company to be elected from time to time, allowing the Board of Directors to appoint one or more directors between annual meetings to hold office for a term expiring not later than the close of the next annual meeting of shareholders; and
   
AGAINST the Shareholder Proposal.

 

You can choose to vote “FOR” or “WITHHOLD” from: (i) the election of any one or more of the persons nominated for election as directors; and (ii) the appointment of Grant Thornton LLP as our independent registered public accounting firm until the close of business of the 2020 Annual Meeting of Shareholders of the Company and the authorization of the directors to fix the auditor’s remuneration. You can choose to vote “FOR”, “AGAINST” or “WITHHOLD” on the approval, on a non-binding, advisory basis, of the compensation of our NEOs as disclosed in this proxy statement. You can choose to vote “FOR” or “AGAINST” the special resolution empowering and authorizing the Board of Directors to fix the number of directors of the Company to be elected from time to time, allowing the Board of Directors to appoint one or more directors between annual meetings to hold office for a term expiring not later than the close of the next annual meeting of shareholders. You can choose to vote “FOR” or “AGAINST” the approval of the Shareholder Proposal.

 

Quorum

 

In order to carry on the business of the Meeting, we must have a quorum at the Meeting. A quorum for the transaction of business at a meeting of shareholders of the Company consists of at least two persons present and each entitled to vote at the meeting and holding personally or representing as proxies, in the aggregate, 25% of the eligible vote.

 

Abstentions and broker non-votes are counted as present and entitled to vote at the Meeting for purposes of determining whether we have a quorum. A broker non-vote occurs when a broker signs and returns a proxy but does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner.

 

Attending in Person

 

Only shareholders, their proxy holders and our invited guests may attend the Meeting. If you plan to attend, please bring identification and, if you hold Common Shares in street name, you should bring your bank or broker statement showing your beneficial ownership of Common Shares in order to be admitted to the Meeting.

 

How to Contact our Transfer Agent

 

You can contact our transfer agent either by mail at Computershare Investor Services, 100 University Avenue, 8 th Floor, Toronto, Ontario M5J 2Y1, by telephone at 1-800-564-6253, by fax at 1-888-453-0330 or by internet in English at www-us.computershare.com/Investor/Contact?cc=ca&lang=en, or in French at www-us.computershare.com/Investor/Contact?cc=ca&lang=fr.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     4

 

CORPORATE GOVERNANCE

 

Corporate Governance Guidelines

 

As part of our ongoing commitment to good corporate governance, we have adopted, among other measures, a Corporate Governance Guidelines and Board Charter and charters for the Committees of the Board of Directors (other than the Executive Committee) to promote the effective functioning of our Board of Directors and its Committees, to promote the interests of the Company as a whole and to ensure a common set of expectations concerning how our Board of Directors, its Committees and management should perform their respective functions.

 

Code of Conduct and Ethics

 

We have also adopted a Code of Conduct and Ethics that applies to all of our directors, officers and employees. The Nominating and Corporate Governance Committee is responsible for ensuring the Company implements good corporate governance practices, including compliance with the Code of Conduct and Ethics. Directors who have, or may be reasonably perceived to have, a personal or related party interest in a transaction or agreement being contemplated by the Company are required to declare such interest at any meeting at which the matter is being considered and, when appropriate, will leave the meeting during discussion and abstain from voting on such matter.

 

Copies of our Corporate Governance Guidelines and Board Charter, our Code of Conduct and Ethics and our Committee charters are available on our website at http://wasteconnections.investorroom.com/corporate-governance. A copy of the Corporate Governance Guidelines and Board Charter is included as Appendix A to this proxy statement, and a copy of the Corporate Governance Guidelines and Board Charter and our Code of Conduct and Ethics may also be obtained, free of charge, by writing to the Secretary of Waste Connections, Inc., at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380.

 

Committees of the Board

 

Our Board of Directors has four standing committees: the Executive Committee, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Except for the Executive Committee, the committees are composed entirely of independent, non-employee directors.

 

Executive Committee

 

The Executive Committee, whose committee chairman is Mr. Ronald J. Mittelstaedt and whose other members are Messrs. Michael W. Harlan and Larry S. Hughes, is authorized to exercise, subject to limitations under applicable law, all of the powers and authority of the Board of Directors in managing our business and affairs, including approval, between meetings of the Board of Directors, of all divestitures by the Company in excess of $25.0 million and all acquisitions by the Company for cash or other non-equity consideration in excess of $25.0 million.

 

Audit Committee

 

The Board of Directors has a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee, whose chairman is Mr. Harlan and whose other members are Messrs. Hughes and Razzouk, advises our Board of Directors and management with respect to, among other matters, internal controls, financial systems and procedures, accounting policies and other significant aspects of the Company’s financial management. Pursuant to its charter, the Audit Committee selects the Company’s independent registered public accounting firm and oversees the arrangements for, and approves the scope of, the audits to be performed by the independent registered public accounting firm. The Board of Directors has determined that all of the members of the Audit Committee are “financially literate” within the meaning of NYSE listing standards and applicable Canadian securities laws. The Board of Directors has also determined that Mr. Harlan is an “audit committee financial expert” as defined under the SEC rules. The committee’s duties are discussed below under “Audit Committee Report.”

 

WASTE CONNECTIONS, INC.   |   2019  PROXY STATEMENT     5

 

Compensation Committee

 

The Compensation Committee, whose chairman is Mr. William J. Razzouk and whose other members are Ms. Susan “Sue” Lee and Mr. Edward E. “Ned” Guillet, is responsible for, among other matters, establishing our corporate officer compensation policies and administering such policies. Pursuant to its charter, the Compensation Committee studies, recommends and implements the amount, terms and conditions of payment of any and all forms of compensation for our directors, NEOs and other corporate officers; approves and administers any guarantee of any obligation of, or other financial assistance to, any officer or other employee; and approves the grant of restricted share units, share options, warrants and other forms of equity incentives to officers, employees and consultants. The Compensation Committee also makes recommendations to the Board of Directors concerning cash and equity-based compensation and benefits for non-management directors. See “Executive Compensation—Compensation Discussion and Analysis” for more information regarding compensation and the Compensation Committee.

 

Compensation Committee Interlocks and Insider Participation

 

In 2018, the Compensation Committee consisted of Ms. Lee and Messrs. Razzouk and Guillet. None of our executive officers served as a director or member of the compensation committee of another entity which had an executive officer that served as a director or member of our Compensation Committee. In addition, there are no other such potential Compensation Committee interlocks.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee, whose chairman is Mr. Guillet and whose other members are Messrs. Robert H. Davis and Harlan, is responsible for, among other matters, recommending director nominees to the Board of Directors, overseeing an annual self-evaluation process to assess the effectiveness of the Board of Directors and its committees, and developing and implementing corporate governance principles. See “Board Renewal; Board Performance Evaluation” for more information regarding the committee’s annual self-evaluation process.

 

Copies of the Audit Committee Charter, the Compensation Committee Charter and the Nominating and Corporate Governance Committee Charter, each of which our Board of Directors has adopted, are available on our website at http://wasteconnections.investorroom.com/corporate-governance. A copy of each charter may also be obtained, free of charge, by writing to the Secretary of Waste Connections, Inc., at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380.

 

Independence of Committee Members

 

In addition to the general requirements for the independent members of our Board of Directors described above, members of the Audit Committee and the Compensation Committee must also satisfy the additional independence requirements of the NYSE and applicable securities laws. These rules and laws, among other things, prohibit a member of the Audit Committee or the Compensation Committee, other than in his or her capacity as a member of such committee, the Board of Directors or any other committee of the Board of Directors, from receiving any compensatory fees from or being an affiliated person of the Company or any of its subsidiaries. As a matter of policy, the Board of Directors also applies this additional requirement to members of the Nominating and Corporate Governance Committee.

 

WASTE CONNECTIONS, INC.   |  2019  PROXY STATEMENT     6

 

Board and Committee Meeting Attendance

 

The Board of Directors held four meetings during 2018, all of which were regularly scheduled. None of the meetings were held telephonically. The Executive Committee did not meet during 2018. The Audit Committee met four times during 2018. The Compensation Committee met three times during 2018. The Nominating and Corporate Governance Committee met three times during 2018. Each director of Waste Connections attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served during 2018. The attendance record of each director for all Board of Directors and Committee meetings held during 2018 is set out below:

 

Name   Board   Executive
Committee
  Audit
Committee
  Compensation
Committee
  Nominating
and Corporate
Governance
Committee
Ronald J. Mittelstaedt   4/4   0/0   N/A   N/A   N/A
Robert H. Davis   4/4   N/A   N/A   N/A   3/3
Edward E. “Ned” Guillet   4/4   N/A   N/A   3/3   3/3
Michael W. Harlan   4/4   0/0   4/4   N/A   3/3
Larry S. Hughes   4/4   0/0   4/4   N/A   N/A
Susan “Sue” Lee   4/4   N/A   N/A   3/3   N/A
William J. Razzouk   4/4   N/A   4/4   3/3   N/A

 

The Board’s Role in Risk Oversight

 

The Board of Directors and its committees have an active role in overseeing management of the Company’s risks. The Board of Directors regularly reviews information from members of senior management regarding the Company’s safety performance, employee retention, financial performance, financial outlook, balance sheet, credit profile and liquidity, as well as the risks associated with each. The Board of Directors also receives reports from members of senior and regional management on areas of material risk to the Company, including market-specific, operational, legal, information technology, regulatory and strategic risks. The Audit Committee oversees management of financial, financial reporting and internal controls risk. The Compensation Committee assesses and monitors risks relating to the Company’s corporate officer compensation policies and practices. The Nominating and Corporate Governance Committee is responsible for overseeing the management of risks associated with the independence of the Board of Directors and potential conflicts of interest.

 

Director Independence

 

The Board of Directors has determined that each of Ms. Lee and Messrs. Davis, Guillet, Harlan, Hughes and Razzouk is “independent” within the meaning of the standards set forth in our Corporate Governance Guidelines and Board Charter, a copy of which is attached as Appendix A. Ronald J. Mittelstaedt is not “independent” within the meaning of the standards set forth in our Corporate Governance Guidelines and Board Charter because he is the CEO of the Company.

 

WASTE CONNECTIONS, INC.   |   2019  PROXY STATEMENT     7

 

Board Leadership Structure

 

The Board of Directors selects its chairman and the Company’s CEO in any way it considers to be in the best interests of the Company. The Board has determined that the Company is best served by having Ronald J. Mittelstaedt, the Company’s founder and CEO, also serve as Board Chairman. Mr. Mittelstaedt has held the positions of Board Chairman and CEO since January 1998. (1) In the event that Mr. Mittelstaedt no longer serves as both Board Chairman and CEO, our Corporate Governance Guidelines and Board Charter provides that the positions of Board Chairman and CEO be held by separate persons.

 

Lead Independent Director Responsibilities

 

Our Corporate Governance Guidelines and Board Charter requires that at each regularly scheduled meeting of the Board of Directors, the non-management directors meet separately, without management present, in executive session. The non-management directors may also meet without management present at other times as determined by the lead independent director. Furthermore, when the Board Chairman is an affiliated director or a member of the Company’s management, or when the independent directors determine that it is in the best interests of the Company, the independent directors will appoint from among themselves a lead independent director (the “lead independent director”). The Board of Directors has designated the chairman of the Audit Committee, Mr. Harlan, as the lead independent director. In addition to his other duties as a director and member of committees, the lead independent director will:

 

preside at all meetings of the Board of Directors at which the Board Chairman is not present;
   
preside over each meeting of non-management directors;
   
have the authority to call meetings of non-management directors;
   
help facilitate communication between the Board Chairman/CEO and the non-management directors;
   
advise with respect to the Board of Director’s agenda;
   
ensure that the Board of Directors is able to function independently of management;
   
serve as the leader of the Board of Directors on matters of corporate governance;
   
if requested by major shareholders, ensure his or her availability for direct communication;
   
ensure that all directors have an independent contact on matters of concern to them and ensure that the Board of Directors successfully discharges its fiduciary duties;
   
provide guidance on, and monitor, the independence of each director to ensure the independence of the Board of Directors;
   
provide leadership to the Board of Directors if circumstances arise in which the joint role of the Board Chairman and CEO may be, or may be perceived to be, in conflict;
   
ensure that functions delegated to committees of the Board of Directors are carried out as represented and results are reported to the Board of Directors;
   
work with the Board Chairman and CEO, including helping to review strategies, define issues, maintain accountability and build relationships;
   
in conjunction with the Nominating and Corporate Governance Committee, facilitate the review and assessment of individual director attendance and performance and the size, composition and overall performance of the Board of Directors and its committees;
   
in collaboration with the Board Chairman and the corporate secretary ensure that information requested by individual directors, the entire Board of Directors or committees of the Board of Directors is provided and meets their needs; and
   
together with the Board Chairman, ensure the directors are knowledgeable about their obligations to the Company and its securityholders, management and other stakeholders, and pursuant to applicable law.

 

If the Board Chairman is an independent director, then the duties for the lead independent director described above shall be part of the duties of the Board Chairman. As set forth in our Corporate Governance Guidelines and Board Charter, a majority of the members of our Board of Directors must be independent. For a director to be considered independent, the Board of Directors must determine that the director is “independent” within the meaning of (i) Section 1.4 of National Instrument 52-110 – Audit Committees of the Canadian Securities Administrators and (ii) Section 303A.02 of the Listed Company Manual of the NYSE, in each case as such laws or rules, as applicable, may be amended or replaced. In addition, for a director to be considered independent, the Board of Directors must determine that the director has no material relationship with the Company, provided that the direct or indirect ownership of any amount of the Company’s shares will not be deemed to constitute a material relationship. No director who is a former employee of the Company, is a former employee or affiliate of any current auditor of the Company or its subsidiaries, is a part of an interlocking directorate in which any NEO or other corporate officer of the Company serves on the compensation committee of another company that concurrently employs such director or has an immediate family member in any of the foregoing categories, can be independent until three years after such employment, affiliation or relationship has ceased.

 

(1) Mr. Mittelstaedt has served as Board Chairman and CEO of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Mr. Mittelstaedt founded Old Waste Connections in 1997, served as CEO and a director of Old Waste Connections since its formation, and was elected Chairman of Old Waste Connections in January 1998. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.

 

WASTE CONNECTIONS, INC.   |  2019  PROXY STATEMENT     8

 

The Board of Directors reviews all relationships of each director to assess whether any of them is a material relationship so as to impair that director’s independence. A “material relationship” means a direct or indirect commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship that is reasonably likely to affect the independent and objective judgment of the director in question, provided that the direct or indirect ownership of any amount of our shares is not deemed to constitute a material relationship. The following commercial or charitable relationships are not considered to be material relationships that would impair a director’s independence: if a director of the Company (a) is also an executive officer of another company that does business with the Company and the annual sales to, or purchases from, the Company are less than the greater of $1 million or two percent of the annual revenue of that other company; (b) is an executive officer of another company that is indebted to the Company, or to which the Company is indebted, and the total amount of either company’s indebtedness to the other is less than one percent of the total consolidated assets of that other company; or (c) serves as an officer, director or trustee of a charitable organization, and the Company’s discretionary charitable contributions to that organization are less than one percent of that organization’s total annual receipts. The Board of Directors reviews annually whether its members satisfy these applicable independence tests before any member stands for re-election to the Board of Directors.

 

Board Composition

 

Board Renewal

 

The Company does not limit the time a director can serve on the Board of Directors. While director term limits could potentially assist the Board of Directors in gaining fresh perspectives and meeting diversity objectives, imposing director term limits means that the Board of Directors may lose the contributions of longer serving directors who have developed a deeper knowledge and understanding of our business and have a demonstrated track record for guiding the Company through a long-term period of shareholder value creation.

 

The Board of Directors is of the view that there are a number of mechanisms of ensuring renewal of the Board of Directors without implementing director term limits, including the use of performance evaluations of the Board of Directors, mandatory retirement policies for directors, the identification of skills needed on the Board of Directors and succession planning. The Board of Directors has adopted a director retirement policy that provides that no director who is over the age of 75 at the expiration of his or her current term may be nominated to a new term. However, the Nominating and Corporate Governance Committee may determine that it would be in the best interests of the Company to ask a director to remain on the Board of Directors for an additional period of time beyond age 75, or to stand for re-election even if such director is over the age of 75. In February 2019, the Nominating and Corporate Governance Committee considered the nomination of Mr. Davis for election to the Board after his 75 th birthday, concluding that he continued to meet all of the other qualifications described above and that the Company would benefit from his continued service on the Board of Directors given his significant experience in the recycling industry, especially in light of recent disruptions in that industry. Accordingly, the Nominating and Corporate Governance Committee recommended to the Board of Directors that Mr. Davis be nominated for election as a director at the Meeting. After considering such recommendation and its reasoning, the Board of Directors determined that it was in the best interests of the Company to approve a one-time exception to the mandatory retirement age policy for Mr. Davis and to allow him to stand for re-election at the Meeting.

 

Board and Committee Performance Evaluation

 

The Board of Directors and each Committee perform an annual performance self-evaluation to assess, at a minimum, the effectiveness and adequacy of the meetings of the Board of Directors and its Committees, the adequacy and timeliness of information provided to the Board of Directors by the Company’s management, the diversity of experience of individual directors and the contributions of each director. The evaluation process is overseen by the Nominating and Corporate Governance Committee and includes questionnaires completed by each director that take into account observations from previous assessments, current topics, and other input from the Board of Directors. A complete set of responses is then reviewed by each committee and the Board of Directors. Based on feedback from the 2018 evaluation, the directors concluded that the Board of Directors and its committees functioned well together, and that the members of our Board of Directors were satisfied with the overall performance of the Board of Directors and its committees.

 

WASTE CONNECTIONS, INC.   |   2019  PROXY STATEMENT     9

 

Our Director Nomination Process

 

Our Board of Directors believes that directors must have the highest personal and professional ethics, integrity and values. They must be committed to representing the best interests of the Company and should be committed to serving on the Board of Directors for an extended period of time. They must have an objective perspective, practical wisdom, mature judgment and expertise, skills and knowledge useful to the oversight of our business. Our goal is a Board of Directors that represents diverse experiences at policy-making levels in business and other areas relevant to our activities, while encouraging a diversity of backgrounds, including with respect to gender, among the members of our Board of Directors. We have not adopted a target regarding the number of women on our Board of Directors because we believe that a less formulaic approach to board composition, together with a rigorous search for qualified candidates based on the above qualifications and criteria, will best serve our needs. Our Board of Directors believes it is paramount to maintain flexibility in the nominating process in order to ensure that the most qualified available candidates are selected as circumstances dictate and the needs of the Company evolve. In identifying suitable candidates for nomination to the Board of Directors, the Nominating and Corporate Governance Committee will consider candidates on merit using objective criteria and with due regard for the benefits of diversity on the Board of Directors, including the level of representation of women on the Board of Directors. The Board of Directors consists of seven directors, of which one is a woman, representing approximately 14.3% of the Board of Directors.

 

Our Board of Directors maintains a competency matrix to assess its composition. The following table summarizes the key experiences and skills represented on our Board of Directors:

 

    Director
Experience and Skills   Davis   Guillet   Harlan   Hughes   Lee   Mittelstaedt   Razzouk
Corporate Governance   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge
Public Company C-Suite       Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge
Strategy   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge
Mergers and Acquisitions       Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge
People, Training & Development       Click to enlarge           Click to enlarge   Click to enlarge    
Solid Waste Industry   Click to enlarge       Click to enlarge           Click to enlarge   Click to enlarge
Operations & Materials Management   Click to enlarge       Click to enlarge           Click to enlarge     Click to enlarge
Sales and Marketing   Click to enlarge       Click to enlarge           Click to enlarge   Click to enlarge
Finance/Accounting           Click to enlarge   Click to enlarge           Click to enlarge
Legal/Regulatory   Click to enlarge     Click to enlarge       Click to enlarge            
EH&S / Sustainability   Click to enlarge   Click to enlarge         Click to enlarge     Click to enlarge       Click to enlarge
Risk Management   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge
Information Technology           Click to enlarge               Click to enlarge
Diversity                                
Nationality   Canada               Click to enlarge   Click to enlarge        
United States   Click to enlarge   Click to enlarge   Click to enlarge           Click to enlarge   Click to enlarge
Age   Under 60           Click to enlarge           Click to enlarge    
60-70       Click to enlarge       Click to enlarge   Click to enlarge        
71+   Click to enlarge                       Click to enlarge
Gender   Male   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge       Click to enlarge   Click to enlarge
Female                   Click to enlarge        
Tenure   1-5 Years               Click to enlarge     Click to enlarge        
6-10 Years                            
11+ Years   Click to enlarge   Click to enlarge   Click to enlarge           Click to enlarge   Click to enlarge
Independence   Yes   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge   Click to enlarge       Click to enlarge
No                       Click to enlarge      

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     10

 

In addition to the foregoing qualities, the Nominating and Corporate Governance Committee will take a number of other factors into account in considering candidates as nominees for the Board of Directors, including the following: (i) whether the candidate is independent within the meaning of our Corporate Governance Guidelines and Board Charter; (ii) relevant business, academic or other experience; (iii) willingness and ability to attend and participate actively in Board and Committee meetings and otherwise to devote the time necessary to serve, taking into consideration the number of other boards on which the candidate serves and the candidate’s other business and professional commitments; (iv) potential conflicts of interest; (v) whether the candidate is a party to any adverse legal proceeding; (vi) the candidate’s reputation; (vii) specific expertise and qualifications relevant to any Committee that the candidate is being considered for, such as whether a candidate for the Audit Committee meets the applicable financial literacy or audit committee financial expert criteria; (viii) willingness and ability to meet our director’s equity ownership guidelines; (ix) willingness to adhere to our Code of Conduct and Ethics; (x) ability to interact positively and constructively with other directors and management; (xi) willingness to participate in a one-day new director orientation session; (xii) willingness to attend educational forums or workshops to enhance understanding of new and evolving governance requirements; and (xiii) the size and composition of the Board.

 

When seeking director candidates, the Nominating and Corporate Governance Committee may solicit suggestions from incumbent directors, management, third party advisors, business and personal contacts, and shareholders. The Nominating and Corporate Governance Committee may also engage the services of a third-party search firm to help identify and facilitate the screening and interview process of potential director nominees.

 

In 2019, the Nominating and Corporate Governance Committee intends to engage a third-party search firm to assist with its search for potential new directors and ensure potential nominees include diverse candidates.

 

After conducting an initial evaluation, the Nominating and Corporate Governance Committee will make arrangements for candidates it considers suitable to be interviewed by one or more members of the committee. Each candidate will be required to complete a standard directors’ and officers’ questionnaire, completed by all of the directors annually. The Nominating and Corporate Governance Committee may also ask the candidate to meet with members of our management. If the Nominating and Corporate Governance Committee believes that the candidate would be a valuable addition to the Board of Directors, it will recommend the candidate for nomination to the Board. Before recommending a sitting director to be nominated for re-election at an annual meeting of shareholders, the Nominating and Corporate Governance Committee will consider the director’s past performance and contribution to the Board of Directors.

 

The Nominating and Corporate Governance Committee will apply the criteria described above when considering candidates recommended by shareholders as nominees for the Board of Directors. In addition, any of our shareholders may nominate one or more persons for election as a director of the Company at any meeting of shareholders called for the purpose of electing directors if the shareholder complies with the notice, information and consent provisions contained in our By-law No. 1. Pursuant to our By-law No. 1, to be considered for inclusion in our proxy materials, notice of a shareholder’s nomination of a person for election to the Board of Directors (the “Notice”) must be received by the Secretary of the Company in writing at the address listed on the first page of this proxy statement for the Meeting not later than the close of business on the 30 th day before the date of the annual meeting of shareholders; except that, if the first public announcement made by the Company of the date of the annual meeting of shareholders (the “Notice Date”) is less than 50 days prior to the date of the annual meeting of shareholders, notice by the shareholder may be given not later than the close of business on the 10 th day following the Notice Date. In the case of a special meeting that is not also an annual meeting, the notice must be given not later than the 15 th day following the applicable Notice Date. The notice must contain and be accompanied by certain information as specified in our By-law No. 1 and set forth below, including information about the shareholder providing the notice and the proposed nominee(s) (the “Proposed Nominee”).

 

Shareholders making nominations must provide, among other things, information regarding each such shareholder’s:

 

name, business and residential address;
   
number of securities of the Company beneficially owned, or controlled or directed, directly or indirectly, by the shareholder or any other person with whom the shareholder is acting jointly or in concert with respect to the Company or any of its securities as of the record date for the meeting and the date of the proxy notice;
   
their interests in, or rights or obligations associated with, any agreements, arrangements or understandings, the purpose or effect of which is to alter, directly or indirectly, the person’s economic interest in a security of the Company or the person’s economic exposure to the Company;
   
full particulars of any proxy, contract, relationship, arrangement, agreement or understanding pursuant to which such person, or any of his or her affiliates or associates, or any person acting jointly or in concert with such person, has any interests, rights or obligations relating to the voting of any securities of the Company or the nomination of directors to the Board of Directors; and
   
any other information that would be required to be included in a dissident proxy circular or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to applicable law.
   
Additionally, shareholders nominating director candidates are required to disclose, among other things:
   
the name, age, business and residential address of the Proposed Nominee;
   
the principal occupation, business or employment of the Proposed Nominee, both presently and within the past five years;
   
whether the Proposed Nominee is a resident Canadian;

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     11

 
the number of securities of each class of securities of the Company or any of its subsidiaries beneficially owned, or controlled or directed, directly or indirectly, by the Proposed Nominee, as of the Record Date and the date of the proxy notice;
   
full particulars of any relationship, agreement, arrangement or understanding, including financial, compensation and indemnity related relationships, agreements, arrangements or understandings, between the Proposed Nominee and the shareholder, or any affiliates or associates of, or any person or entity acting jointly or in concert with, the Proposed Nominee or the shareholder, in connection with the Proposed Nominee’s nomination and election as a director of the Company; and
   
any other information that would be required to be included in a dissident proxy circular or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to applicable law. Such information must be promptly updated and supplemented so as to be accurate as of the Record Date.

 

We recommend that any shareholder wishing to nominate a director at an annual meeting of shareholders review a copy of our By-law No. 1.

 

Majority Voting for Directors

 

Our Corporate Governance Guidelines and Board Charter provides, in uncontested director elections, for our directors to be elected by the affirmative vote of a “majority of the votes cast” with respect to his or her election at a meeting of shareholders, and each incumbent director who receives more “WITHHOLD” votes than votes “FOR” in respect of his or her election must resign from the Board of Directors. A “majority of the votes cast” means that the number of shares voted “FOR” a director’s election exceeds 50% of the number of the total votes cast with respect to that director’s election. The total votes cast with respect to that director’s election will include votes “FOR” that director and “WITHHOLD” votes, but will exclude abstentions, broker non-votes, and failures to vote with respect to that director’s election. Upon receipt of such a tendered resignation, the Nominating and Corporate Governance Committee or the Board of Directors or another independent committee of the Board of Directors will make a determination as to whether to recommend that the Board of Directors accept or reject such resignation. The applicable committee is expected to recommend that the Board of Directors accept the resignation absent exceptional circumstances. The director who is the subject of such determination is not permitted to participate in the deliberations or decisions of the deciding committee.

 

The Company must promptly publicly disclose the decision(s) of the Board of Directors by a press release and a filing with the SEC and the applicable securities commissions or similar regulatory authorities in Canada. If the director’s tendered resignation is not accepted by the deciding committee or the director does not submit his or her resignation to the Board of Directors, such director will continue to serve until his or her successor is duly elected, or his or her earlier resignation or removal. If the director’s resignation is accepted by the deciding committee, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy.

 

Director Orientation and Continuing Education

 

The Company provides access to appropriate orientation programs, sessions or materials for new members of the Board of Directors for their benefit either prior to or within a reasonable period of time after their nomination or election to the Board of Directors, which include written materials and presentations by senior management regarding the directors’ legal and ethical responsibilities; our strategic plans, principal operating risks and financial statements; the material factors that affect our performance; the operation, significance and effects of incentive compensation programs and related party transactions; and other key policies and practices. Continuing education is provided through a number of opportunities, including visits to our operating locations, strategic and financial presentations by members of senior and regional management, and periodic presentations by outside experts on topics of interest. Directors are also encouraged, but not required, to participate in outside continuing education programs.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     12

 

Communications with the Board

 

Shareholders and other interested parties may communicate with the Board of Directors generally, with the non-employee directors as a group or with a specific director at any time by writing to the Board of Directors, the non-employee directors or a specific director, care of the Secretary, at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380. The Secretary will forward all communications to the Board of Directors, the non-employee directors or a specific director, as applicable, as soon as practicable after receipt without screening the communication. Shareholders and other interested parties are requested to provide their contact information and to state the number of Common Shares that they beneficially own in their communications to the Board of Directors. Because other appropriate avenues of communication exist for matters that are not of shareholder interest, such as general business complaints or employee grievances, shareholders and other interested parties are urged to limit their communications to the Board of Directors to matters that are of shareholder interest and that are appropriate for consideration by the Board of Directors.

 

Shareholder Outreach

 

We believe that our relationship with and accountability to shareholders are critical to our success. Engaging with our shareholders helps us to understand how they view us, to set goals and expectations for our performance, and to identify emerging issues that may affect our strategies, corporate governance, compensation practices or other aspects of our operations. Our shareholder and investor outreach includes investor road shows, analyst meetings and investor conferences. We also communicate with shareholders and other interested parties through various media, including our annual and quarterly reports, proxy statement and other SEC and Canadian securities filings, press releases and our website. Our conference calls for quarterly earnings releases and major corporate developments are open to all. These calls are available in real time and are also archived as webcasts on our website. Our CEO and Board Chairman, President, Chief Financial Officer and other senior management also regularly meet with investors to discuss our strategy, financial and business performance and to update investors on key developments.

 

Position Descriptions

 

Written position descriptions for the Board Chairman, the lead independent director and the Committee chairs, as well as a position description for the CEO of the Company, have been approved by the Board of Directors.

 

Executive Officer Diversity

 

We do not have a formal policy which specifies targets regarding the representation of women in executive officer positions. While we believe that diversity – including gender diversity – is an important consideration in determining the makeup of our executive team, and we consider the level of representation of women in our executive team when making executive officer appointments, it is only one of a number of factors (which include leadership capabilities, mature judgment, merit, talent, experience, expertise and strategic/innovative thinking) that are considered in selecting the best candidates for executive positions. We have three women in senior leadership roles, or 16% of our total senior leaders (which includes executive officers, as defined under applicable Canadian securities laws, and our Vice Presidents). Ten percent of our executive officers, as defined under applicable Canadian securities laws, are women.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     13

 

DIRECTOR COMPENSATION AND EQUITY OWNERSHIP

 

Annual Retainer and Equity Grants

 

All of our non-employee directors are paid an annual cash retainer and receive deferred share units, or DSUs. The amount of such director compensation is determined on an annual basis by the Board of Directors. A supplemental annual cash retainer is also paid to committee chairs. Directors who are officers or employees of the Company do not receive any compensation as directors or for attending meetings of the Board of Directors or its committees.

 

The Compensation Committee periodically engages its independent compensation consultant to review director compensation using the same peer group used to benchmark executive compensation. The principal features of the compensation received by our non-employee directors for fiscal year 2018 are described below.

       
Type of Fee      
Annual Cash Retainer   $ 100,000  
Committee Chair Cash Retainers:        
Audit   $ 25,000  
Compensation   $ 25,000  
Nominating & Corporate Governance   $ 15,000  
Target DSU/RSU Grant   CAD$ 210,000  

 

Directors may elect, irrevocably and in advance, to receive up to CAD$150,000 of their director grant in restricted share units, or RSUs, that are settled in Common Shares, with the remainder to be received in the form of DSUs. RSUs received in payment of the director grant vest in two equal installments on the grant date and the first anniversary of the grant date.

 

The following table provides compensation information for the year ended December 31, 2018, for each non-employee member of our Board of Directors.

                         
Name   Fees Earned
or Paid in
Cash ($) (1)
    Share
Awards
($) (1)(2)
    All Other
Compensation
($) (1)(3)
    Total ($) (1)  
Robert H. Davis     100,030       166,027       11,308       277,365  
Edward E. “Ned” Guillet     115,000       166,027       20,184       301,211  
Michael W. Harlan     125,030       166,027       7,747       298,804  
Larry S. Hughes     100,030       166,027       9,589       275,646  
Susan “Sue” Lee     100,030       166,027       11,278       277,335  
William J. Razzouk     125,030       166,027       16,411       307,468  
(1) Ms. Lee and Mr. Hughes received their compensation in Canadian currency. For purposes of this presentation, Canadian dollar amounts have been converted to U.S. dollars based on the Bank of Canada average rate of exchange for the period from January 1, 2018 to December 31, 2018, CAD$1.00 = US$0.7718.
(2) In February 2018, each of our non-employee directors received a grant of 1,683 RSUs with a grant date fair value of $118,601 and a grant of 673 DSUs with a grant date fair value of $47,426, each as shown in the “Share Awards” column. The amount shown for each non-employee director is the grant date fair value of the 2018 awards computed in accordance with generally accepted accounting principles in the U.S., excluding estimates of forfeitures related to service-based vesting conditions. A discussion of the fair value of share awards is set forth under Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 14, 2019.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     14

 
  The table below shows the aggregate number of unvested share awards (in the form of RSUs and DSUs) outstanding for each non-employee director as of December 31, 2018.

 

Name   Aggregate
Restricted Share
Unit Awards
Outstanding as
of December 31,
2018 (#)
    Aggregate
Deferred Share
Unit Awards
Outstanding as
of December 31,
2018 (#)
 
Robert H. Davis     841       1,460  
Edward E. “Ned” Guillet     841       1,460  
Michael W. Harlan     841       1,460  
Larry S. Hughes     841       6,851  
Susan “Sue” Lee     841       4,485  
William J. Razzouk     841       1,460  
(3) Directors may be reimbursed for expenses associated with the traveling to meetings of the Board of Directors and other Company-related events. This column reflects such amounts reimbursed during the year ended December 31, 2018.

 

Non-Employee Directors’ Equity Ownership

 

Non-employee directors of the Company are required to hold shares having a market value of at least $300,000, or three times the annual cash retainer. Non-employee directors have five years from the fiscal year-end following initial election to the Board of Directors to accumulate the share ownership prescribed by the guidelines. For purposes of the calculation, shares deemed “beneficially owned” by the non-employee directors within the meaning of the rules of the SEC, as well as DSUs or RSUs subject to time-based vesting held by the non-employee director, and vested or time-based unvested DSUs and RSUs or resulting shares deposited into a deferred compensation plan or arrangement, are included in the calculation of the amount of such individual’s ownership. As of the date of this proxy statement, all of our non-employee directors exceeded the requirements of our share ownership guidelines.

 

Non-employee directors held the following Common Shares, DSUs and unvested RSUs as of March 21, 2019, the Record Date for the Meeting.

 

    Common       Unvested       Equity Ownership
Name   Shares   DSUs   RSUs   Total   Guideline Met
Robert H. Davis   14,189   2,010   688   16,887   Click to enlarge
Edward E. “Ned” Guillet   61,173   2,010   688   63,871   Click to enlarge
Michael W. Harlan   19,463   2,010   688   22,161   Click to enlarge
Larry S. Hughes   8,957   7,401   688   17,046   Click to enlarge
Susan “Sue” Lee   9,229   5,035   688   14,952   Click to enlarge
William J. Razzouk   19,919   2,010   688   22,617   Click to enlarge

 

Directors’ Deferred Share Unit Plan

 

DSUs are notional units that have the same value as Common Shares, and therefore have the same upside and downside risk as to value, but do not give the holder voting or other shareholder rights. Awarding DSUs to directors serves to align the interests of non-executive directors with those of shareholders. DSUs are redeemed and settled for cash only when the non-executive director leaves the Board of Directors, and the redemption value of a DSU is equal to the market value of a Common Share at the date of redemption, less applicable withholdings.

 

Directors may elect, irrevocably and in advance, to receive all or part of their director and committee chair cash retainers either in cash or DSUs. They may also elect, irrevocably and in advance, to receive up to CAD$150,000 of their upcoming equity grants in RSUs that are settled in Common Shares, with the remainder of such compensation to be received in the form of DSUs. Notional DSUs are credited to an account for each director and held until the director leaves the Board of Directors.

 

DSUs earn dividend equivalents at the same rate as dividends are paid on Common Shares. DSU holders are credited with additional DSUs that are equivalent in value to the dividends declared on the Common Shares. Such additional DSUs are credited to each non-executive director’s account on each dividend payment date. The number of DSUs is calculated using the same rate as for the dividends paid on the Common Shares.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     15

 
PROPOSAL 1  ELECTION OF DIRECTORS

 

The Board of Directors is composed of seven directors. At the Meeting, you will be asked to elect all seven current directors to serve until the 2020 Annual Meeting of Shareholders of the Company or until their respective successors are duly elected or appointed.

 

The election of each director nominee may be approved by any one or more shareholders voting “FOR” each such director nominee ( i.e. , a plurality vote). You may either vote “FOR” or “WITHHOLD” your vote with respect to the election of each director nominee. If you vote “FOR” the election of a nominee, your vote will be cast accordingly. If you select “WITHHOLD” with respect to the election of a nominee, your vote will not be counted as a vote cast for the purposes of electing such nominee but will be considered in the application of the majority voting policy included in our Corporate Governance Guidelines and Board Charter. Pursuant to our majority voting policy, a “WITHHOLD” vote is considered a vote cast for purposes of the election of the director nominee and is equivalent to a vote against the nominee. Pursuant to the Company’s Corporate Governance Guidelines and Board Charter, each director of the Company must be elected by a “majority of the votes cast” with respect to his or her election. A “majority of the votes cast” means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Votes cast with respect to that director’s election will include votes to withhold authority, but will exclude abstentions, broker non-votes, and failures to vote with respect to that director’s election. See “Majority Voting for Directors” on page 12 of this proxy statement.

 

Proxies will be voted, unless otherwise indicated, for the election of all seven nominees to our Board of Directors. Proxies will be voted in a discretionary manner if any of the seven nominees is unable to serve.

 

For purposes of this section, references to the “Company” and the words “we,” “our,” “ours,” and “us” refer to Old Waste Connections prior to June 1, 2016, and New Waste Connections on and after June 1, 2016.

 

Click to enlarge THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE SEVEN NOMINEES TO THE BOARD OF DIRECTORS.

 

RONALD J. MITTELSTAEDT

CEO & BOARD CHAIRMAN

Waste Connections, Inc.

Age 55

Texas, U.S.A.

Director since:

September 1997 (1)

NOT Independent

  BOARD/COMMITTEE MEMBERSHIP: BOARD ATTENDANCE IN 2018: 100%
  Board  
  Executive Committee  
      COMMON SHARES OWNED OR CONTROLLED: 234,869
       
         

 

BIOGRAPHY:

 

Mr. Mittelstaedt has served as Chief Executive Officer and a director of the Company since its formation in 1997 (1) , and was elected Board Chairman in January 1998 (1) . Mr. Mittelstaedt also served as President of the Company from its formation through August 2004 (1) . Under Mr. Mittelstaedt’s leadership, the Company has become the third largest company in the North American solid waste and recycling industry, employing nearly 17,000 people across the U.S. and Canada. Mr. Mittelstaedt also established the RDM Positive Impact Foundation in 2004 to improve the lives of underprivileged and at-risk children. Prior to his career in the solid waste and recycling industry, he spent three years in the air freight industry. Mr. Mittelstaedt serves as a director for SkyWest, Inc. and is also a director for Pride Industries, a non-profit organization which provides manufacturing, supply chain, logistics and facilities services to public and private organizations nationwide, while creating jobs for people with disabilities. Mr. Mittelstaedt holds a bachelor’s degree in Business Economics from the University of California—Santa Barbara.

 

We believe that Mr. Mittelstaedt’s qualifications to serve on our Board of Directors include his extensive experience in the solid waste industry, including as our founder, our Chief Executive Officer and a director since the Company was formed in 1997 and our Board Chairman since 1998 (1) .

   
(1) Mr. Mittelstaedt has served as CEO and a director of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Mr. Mittelstaedt founded Old Waste Connections in 1997, served as CEO and a director of Old Waste Connections since its formation, and was elected Chairman of Old Waste Connections in January 1998. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     16

 
ROBERT H. DAVIS  
MANAGING PARTNER/PRESIDENT  
Rubber Recovery, Inc.  
Age 76   BOARD/COMMITTEE MEMBERSHIP: BOARD ATTENDANCE IN 2018: 100%
California, U.S.A.   Board  
Director since:   Nominating and Corporate Governance Committee  

June 2001 (2)

Independent

      COMMON SHARES OWNED OR CONTROLLED, INCLUDING DSUs: 16,199
         

BIOGRAPHY:

Mr. Davis has been the Managing Partner/President of Rubber Recovery Inc., a private, California-based scrap tire processing and recycling company, since July 2006. Mr. Davis is the conceptual founder and a member of the external advisory board of the Global Waste Research Institute at California Polytechnic State University, San Luis Obispo (“Cal Poly”). He served as President of Waste Systems International, Inc., a turnkey solid waste management systems provider of environmentally acceptable solutions to developing countries outside the U.S., from November 2007 to 2009. From 2007 to 2010, he was a member of the board of effENERGY LLC, an alternative energy company. Prior to acquiring his ownership interest in Rubber Recovery Inc., Mr. Davis was President, Chief Executive Officer and a Director of GreenMan Technologies, Inc., a publicly-traded tire shredding and recycling company, from 1997 to 2006. Prior to joining GreenMan, Mr. Davis served as Vice President of Recycling for Browning-Ferris Industries, Inc., from 1990 to 1997. With more than 40 years of experience in the solid waste and recycling industry, Mr. Davis has also held executive positions with Fibres International, Garden State Paper Company and SCS Engineers, Inc. Mr. Davis holds a B.S. degree in Mathematics from Cal Poly, has done graduate work at George Washington University in Solid Waste Management, and has engaged in continuing education at Stanford University Law School in Corporate Governance. In 2009, Mr. Davis was honored as Alumni of the Year for the College of Science/Mathematics at Cal Poly. Since 2008, Mr. Davis has served on the Dean’s Executive Advisory Committee for the College of Engineering, and since 2010, he has served on the Dean’s Executive Advisory Committee for the College of Science and Mathematics.

 

We believe that Mr. Davis’ qualifications to serve on our Board of Directors include his past experience on our Board of Directors (2) , his substantial experience in the solid waste and recycling industries, his considerable involvement in sustainability initiatives, his general experience with environmental matters, his government relations experience and his prior experience as a director of another publicly-traded company.

         
EDWARD E. “NED” GUILLET
CORPORATE DIRECTOR/CONSULTANT
 

Age 67

California, U.S.A.

Director since:

March 2007 (3)

Independent

  BOARD/COMMITTEE MEMBERSHIP: BOARD ATTENDANCE IN 2018: 100%
  Board  
  Compensation Committee  
  Nominating and Corporate Governance Committee  
       
      COMMON SHARES OWNED OR CONTROLLED, INCLUDING DSUs: 63,183

BIOGRAPHY:

Mr. Guillet has been an independent freelance human resources consultant since January 2007. From October 2005 until December 2006, he was Senior Vice President, Human Resources for the Gillette Global Business Unit of The Procter & Gamble Company, a position he held subsequent to the merger of Gillette with Procter & Gamble. From July 2001 until September 2005, Mr. Guillet was Senior Vice President and Chief Human Resources Officer and an executive officer of The Gillette Company, a global consumer products company. He joined Gillette in 1974 and held a broad range of leadership positions in its human resources department. Mr. Guillet has been a Director of CCL Industries Inc., the largest label company in the world providing innovative solutions to the Home & Personal Care, Food & Beverage, Healthcare & Specialty, Automotive, Electronic & Consumer Durables and Retail & Apparel markets worldwide, since 2008, where he also serves as the Chairman of the Board of Directors’ Human Resources Committee and as a member of its Nominating & Governance Committee. Mr. Guillet is a former member of Boston University’s Human Resources Policy Institute. He holds a B.A. degree in English Literature and Secondary Education from Boston College.

 

We believe that Mr. Guillet’s qualifications to serve on our Board of Directors include his past experience on our Board of Directors (3) , his substantial experience with human resources and personnel development matters, and the positions he has held with other publicly-traded companies (including a publicly-traded company in Canada).

   
(2) Mr. Davis has served as a director of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Mr. Davis served as a director of Old Waste Connections since June 2001. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.
(3) Mr. Guillet has served as a director of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Mr. Guillet served as a director of Old Waste Connections since March 2007. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     17

 

MICHAEL W. HARLAN
CHAIRMAN & CEO
TruHorizon Environmental Solutions

Age 58

Texas, U.S.A.

Director since:

May 1998 (4)

Independent

  BOARD/COMMITTEE MEMBERSHIP: BOARD ATTENDANCE IN 2018: 100%
  Board  
  Audit Committee  
  Executive Committee  
  Nominating and Corporate Governance Committee  
       
      COMMON SHARES OWNED OR CONTROLLED, INCLUDING DSUs: 21,473
         

BIOGRAPHY:

Mr. Harlan is the Chairman of the Board of Directors and Chief Executive Officer of Principal Environmental, L.L.C., doing business as TruHorizon Environmental Solutions, a company that provides environmental regulatory compliance services, and a position he has held since September 2013. Mr. Harlan joined the Board of Directors of Brewer Crane Holdings, LLC, in July 2018. Brewer Crane is a privately-held company that provides customers in Southern California with a wide range of crane, rigging, trucking, and construction services. Since September 2011, he has also served as President of Harlan Capital Advisors, LLC, a private consulting firm focused on advising companies on operational matters, strategic planning, mergers and acquisitions, debt and equity investments, and capital raising initiatives. Prior to forming Harlan Capital Advisors, Mr. Harlan held numerous positions at U.S. Concrete, Inc. (NASDAQ: USCR), a publicly-traded producer of concrete, aggregates and related concrete products, including most recently as its President and Chief Executive Officer from May 2007 until August 2011, and as a Director from June 2006 until August 2011. He has previously served on the Board of Directors for several public and private companies and currently serves on the University of Houston Honors College Advisory Board. Prior to founding U.S. Concrete in August 1998, Mr. Harlan held several senior financial positions with publicly-traded companies, including chief financial officer, treasurer and controller. Mr. Harlan began his career with an international public accounting firm. Mr. Harlan is a Certified Public Accountant and graduated magna cum laude from the University of Mississippi with a Bachelor of Accounting degree.

 

We believe that Mr. Harlan’s qualifications to serve on our Board of Directors include his past experience on our Board of Directors (4) , his substantial experience in the solid waste industry, his significant experience in accounting and financial matters, including his extensive experience as a certified public accountant, his substantial experience with growth-oriented companies, and his prior experience as a director of other publicly-traded companies.

         
LARRY S. HUGHES
CORPORATE DIRECTOR
         

Age 67

British Columbia, Canada

Director since:

May 2014 (5)

Independent

  BOARD/COMMITTEE MEMBERSHIP: BOARD ATTENDANCE IN 2018: 100%
  Board  
  Audit Committee  
  Executive Committee  
      COMMON SHARES OWNED OR CONTROLLED, INCLUDING DSUs: 16,358

BIOGRAPHY:

Mr. Hughes is a retired executive and former lawyer who currently provides consulting and advisory services. In June 2017, Mr. Hughes retired as an executive of West Fraser Timber Co. Ltd., an integrated wood products company headquartered in Vancouver, B.C. in Canada. West Fraser is a Canadian public company whose shares are listed for trading on the Toronto Stock Exchange. Mr. Hughes served as West Fraser’s Senior Vice-President from 2007 to 2011 with oversight of strategic planning, legal, environmental and safety matters. He served as Vice-President, Finance and Chief Financial Officer from 2011 to 2017 with oversight of financial and accounting matters as well as strategic planning, investor relations, corporate governance and pension matters. Prior to joining West Fraser Mr. Hughes had a successful 27-year career as a business lawyer in private practice in Vancouver. He joined the Board of Progressive Waste Solutions Ltd. in May of 2014 and continued as a director following the June 2016 merger with the Company (5) .

 

We believe that Mr. Hughes’ qualifications to serve on our Board of Directors include his past experience on our Board of Directors (5) , his significant experience in corporate financial, governance and legal matters, his experience with companies having operations in both the U.S. and Canada, and his experience as an officer of another publicly-traded company in Canada.

   
(4) Mr. Harlan has served as a director of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Mr. Harlan served as a director of Old Waste Connections since May 1998. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.
(5) Mr. Hughes has served as a director of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Mr. Hughes served as a director of Progressive Waste since May 2014. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     18

 
SUSAN “SUE” LEE
CORPORATE DIRECTOR  
         

Age 67

Alberta, Canada

Director since:

May 2014 (6)

Independent

  BOARD/COMMITTEE MEMBERSHIP: BOARD ATTENDANCE IN 2018: 100%
  Board  
  Compensation Committee  
      COMMON SHARES OWNED OR CONTROLLED, INCLUDING DSUs: 14,264

BIOGRAPHY:

Ms. Lee has been a corporate director since November 2011. She retired from Suncor Energy Inc. in April 2012, where she last served as Senior Vice-President, Human Resources and Communications. During her 16 years with Suncor, her responsibilities included executive compensation and succession planning, governance, merger strategy and integration, and stakeholder and government relations. Prior to joining Suncor, Ms. Lee had a 14-year career in human resources at TransAlta Corp. Ms. Lee has been a Director of Empire Company Limited, a food retailing business, since 2014, where she also serves as a member of the Board of Directors’ Human Resources Committee. Ms. Lee served as a Director of Bonavista Energy Corporation from November 2013 to December 2017 and as a Director of Progressive Waste Solutions Ltd. from May 2014 until May 2016 (6) . She has also served on a number of prominent boards in Canada, such as the Suncor Energy Foundation, Holcim Canada, Altalink, the University of Calgary Board of Governors and the Women’s Executive Network Top 100 Women Advisory Board. In 2007, Ms. Lee was an inaugural inductee into the Hall of Fame for Canada’s Top 100 Most Powerful Women.

 

We believe that Ms. Lee’s qualifications to serve on our Board of Directors include her past experience on our Board of Directors (6) , her substantial experience with human resources and talent management and development matters, her substantial experience in the energy industry, the positions she has held with other publicly-traded companies in Canada and her experience as a director of other publicly-traded companies in Canada.

         
WILLIAM J. RAZZOUK
CORPORATE DIRECTOR
 

Age 71

Florida, U.S.A.

Director since:

January 1998 (7)

Independent

  BOARD/COMMITTEE MEMBERSHIP: BOARD ATTENDANCE IN 2018: 100%
  Board  
  Audit Committee  
  Compensation Committee  
       
       
      COMMON SHARES OWNED OR CONTROLLED, INCLUDING DSUs: 21,929

BIOGRAPHY:

Mr. Razzouk has been a corporate director since October 2017. From March 2005 to October 2017, Mr. Razzouk served as the Chairman and a Director of Newgistics, Inc., a provider of intelligent order delivery and returns management solutions for direct retailers and technology companies, since March 2005. From March 2005 to December 2015, he also served as the President and Chief Executive Officer of Newgistics, Inc. From August 2000 to December 2002, he was a Managing Director of Paradigm Capital Partners, LLC, a venture capital firm in Memphis, Tennessee focused on meeting the capital and advisory needs of emerging growth companies. From September 1998 to August 2000, he was Chairman of PlanetRx.com, an e-commerce company focused on healthcare and sales of prescription and over-the-counter medicines, health and beauty products and medical supplies. He was also Chief Executive Officer of PlanetRx.com from September 1998 until April 2000. From April 1998 until September 1998, Mr. Razzouk owned a management consulting business and an investment company that focused on identifying strategic acquisitions. From September 1997 until April 1998, he was the President, Chief Operating Officer and a Director of Storage USA, Inc., a then publicly-traded (now private) real estate investment trust that owned and operated more than 350 mini storage warehouses. He served as the President and Chief Operating Officer of America Online from February 1996 to June 1996. From 1983 to 1996, Mr. Razzouk held various management positions at Federal Express Corporation, most recently as Executive Vice President, Worldwide Customer Operations, with full worldwide P&L responsibility. Mr. Razzouk previously held management positions at ROLM Corporation, Philips Electronics and Xerox Corporation. He previously was a Director of Fritz Companies, Inc., Sanifill, Inc., Cordis Corp., Storage USA, PlanetRx.com, America Online and La Quinta Motor Inns. Mr. Razzouk holds a Bachelor of Journalism degree from the University of Georgia.

 

We believe that Mr. Razzouk’s qualifications to serve on our Board of Directors include his past experience on our Board of Directors (7) , his significant experience in corporate financial matters, his experience in the solid waste industry, his substantial experience with growth-oriented companies, and his prior experience as a director of other publicly-traded companies.

   
(6) Ms. Lee has served as a director of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Ms. Lee served as a director of Progressive Waste since May 2014. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.
(7) Mr. Razzouk has served as a director of the Company since completion of the Progressive Waste acquisition on June 1, 2016. Prior to that date, Mr. Razzouk served as a director of Old Waste Connections since January 1998. See “Explanatory Note” for further information pertaining to the Progressive Waste acquisition.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     19

 

Public Company Board Memberships

 

Under the terms of our Corporate Governance Guidelines and Board Charter, directors who also serve as chief executive officers or in equivalent positions at any company should not serve on more than two boards of public companies in addition to our Board of Directors, and other directors should not serve on more than four other boards of public companies in addition to our Board of Directors.

 

Additionally, our Audit Committee Charter specifies that directors may not simultaneously serve on the audit committees of more than two other public companies unless our Board of Directors first determines such service will not impair the ability of the director to serve effectively on our Audit Committee.

 

The table below sets forth the other reporting issuers for which the Company’s directors serve as directors and the stock exchanges on which such issuers are listed.

 

Nominee Public Company Exchange
Ronald J. Mittelstaedt SkyWest, Inc. NASDAQ
Edward E. “Ned” Guillet CCL Industries Inc. TSX
Susan “Sue” Lee Empire Company Limited TSX

 

Bankruptcies and Insolvencies

 

Except as disclosed below, as of the date of this proxy statement, no director nominee is, or within the ten years prior to the date of this proxy statement, was: (a) a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (b) bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or has become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver manager or trustee appointed to hold the assets of the director nominee.

 

Michael W. Harlan, a director of the Company, served as President and Chief Executive Officer of U.S. Concrete, Inc. (NASDAQ: USCR), a publicly-traded producer of concrete, aggregates and related concrete products to all segments of the construction industry, from May 2007 until August 2011. From April 2003 until May 2007, Mr. Harlan served as Executive Vice President and Chief Operating Officer of U.S. Concrete, Inc. He also served as Chief Financial Officer of U.S. Concrete, Inc. from May 1999 until November 2004 after founding U.S. Concrete, Inc. in August 1998. Mr. Harlan served as a Director of U.S. Concrete, Inc. from June 2006 until August 2011. On April 29, 2010, U.S. Concrete, Inc. and certain of its subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware for relief under the provisions of Chapter 11 of Title 11 of the United States Code. The Chapter 11 cases were jointly administered under the caption In re U.S. Concrete, Inc., et al., Case No. 10-11407. On July 29, 2010, the United States Bankruptcy Court for the District of Delaware entered an order confirming the Joint Plan of Reorganization of U.S. Concrete, Inc. and its applicable subsidiaries and, after consummating the restructuring transactions contemplated by such plan, U.S. Concrete, Inc. emerged from Chapter 11 of Title 11 of the United States Code on August 31, 2010.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     20

 

SHARE OWNERSHIP

 

Share Ownership of Five Percent Shareholders

 

The following table shows ownership information for any person or company known by our directors and executive officers to beneficially own, or control or direct, directly or indirectly, 5% or more of the Common Shares. This information is presented as of March 21, 2019, the Record Date for the Meeting.

 

Name of Beneficial Owner Number of Outstanding
Common Shares
Beneficially Owned (1)
Percent
of Class
T. Rowe Price Associates, Inc. (2) 31,886,080 12.1%
The Vanguard Group (3) 24,892,301 9.44%
(1) Beneficial ownership is determined in accordance with the rules of the SEC. In general, a person who has voting power and/or investment power with respect to securities is treated as the beneficial owner of those securities. Except as otherwise indicated by footnote, the Company believes that the persons named in this table have sole voting and investment power with respect to the Common Shares shown.
(2) The share ownership of T. Rowe Price Associates, Inc. is based on a Schedule 13G/A filed with the SEC on February 14, 2019. T. Rowe Price Associates has sole voting power with respect to 10,120,272 Common Shares and sole dispositive power with respect to 31,886,080 Common Shares. The address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202.
(3) The share ownership of The Vanguard Group is based on a Schedule 13G/A filed with the SEC on February 11, 2019. The Vanguard Group has sole voting power with respect to 80,097 Common Shares and sole dispositive power with respect to 24,751,450 Common Shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     21

 

Share Ownership of the Board of Directors and Corporate Officers

 

The following table sets forth information known to the Company concerning Common Shares beneficially owned, as of March 21, 2019, the Record Date for the Meeting, by (i) each director of the Company; (ii) each named executive officer of the Company; and (iii) all corporate officers and directors of the Company as a group. These individuals, both individually and in the aggregate, own less than 1% of our outstanding Common Shares as of the Record Date for the Meeting.

 

Beneficial Owner (1)   Amount and
Nature of
Beneficial
Ownership (2)
  Vested Restricted
Share Units
Held Under
Nonqualified
Deferred
Compensation
Plan (3)
  Total
Ronald J. Mittelstaedt   139,120 (4)   95,749   234,869
Darrell W. Chambliss   109,100   37,569   146,669
Worthing F. Jackman   118,071     118,071
Edward E. “Ned” Guillet   61,173     61,173
Mary Anne Whitney   38,955     38,955
Patrick J. Shea   37,879     37,879
William J. Razzouk   19,919     19,919
Michael W. Harlan   19,463     19,463
Robert H. Davis   14,189     14,189
Susan “Sue” Lee   9,229     9,229
Larry S. Hughes   8,957     8,957
ALL CORPORATE OFFICERS AND DIRECTORS AS A GROUP (25 PERSONS)   780,449   134,397   914,846
(1) Beneficial ownership is determined in accordance with the rules of the SEC. In general, a person who has voting power and/or investment power with respect to securities is treated as the beneficial owner of those securities. Except as otherwise indicated by footnote, and subject to applicable community property laws, the Company believes that the beneficial owners of the Common Shares, based on information furnished by such owners, have sole investment power and voting power with respect to such shares.
(2) Common Shares subject to share options and/or warrants currently exercisable or exercisable within 60 days after March 21, 2019, Common Shares into which convertible securities are convertible within 60 days after March 21, 2019, and Common Shares which will become issuable within 60 days after March 21, 2019, pursuant to outstanding RSUs count as outstanding for computing the percentage beneficially owned by the person holding such share options, warrants, convertible securities and RSUs, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
(3) Executive officers of Old Waste Connections, in years prior to 2015, were able to voluntarily defer receipt of RSU grants under Old Waste Connections’ Nonqualified Deferred Compensation Plan, which plan was assumed by New Waste Connections on June 1, 2016 in connection with the Progressive Waste acquisition. The RSUs held under the Nonqualified Deferred Compensation Plan are not considered Common Shares that are beneficially owned for SEC disclosure purposes. The Company has included them in this table because they are similar to or track its Common Shares, they ultimately are settled in Common Shares, and they represent an investment risk in the performance of its Common Shares.
(4) Includes 139,120 Common Shares held by Mittelstaedt Enterprises, L.P., of which Mr. Mittelstaedt is a limited partner. Excludes 5,286 Common Shares held by the Mittelstaedt Irrevocable Trust dated 6/18/97 and 53,002 Common Shares held by RDM Positive Impact Foundation as to which Mr. Mittelstaedt disclaims beneficial ownership.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     22

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis (“CD&A”) provides a detailed description of our executive compensation philosophy and objectives, the elements of our executive compensation program, the key executive compensation decisions made under those programs for 2018, and the factors considered in making those decisions. This CD&A is intended to provide additional context and background for the compensation earned by and awarded to our NEOs. For 2018, our NEOs included the following individuals:

 

Ronald J. Mittelstaedt, CEO and Board Chairman;
   
Mary Anne Whitney, Senior Vice President and Chief Financial Officer;
   
Worthing F. Jackman, President;
   
Darrell W. Chambliss, Executive Vice President and Chief Operating Officer;
   
Patrick J. Shea, Senior Vice President, General Counsel and Secretary; and
   
Steven F. Bouck, former President.

 

On July 1, 2018, Mr. Jackman succeeded Mr. Bouck, who is transitioning into retirement, as President, and Ms. Whitney succeeded Mr. Jackman as Chief Financial Officer. Mr. Bouck, though no longer an officer of the Company, is included in this proxy statement as an NEO pursuant to applicable SEC disclosure requirements.

 

Executive Summary

 

The Company’s executive compensation program is designed to align the interests of senior management with shareholders by tying a significant portion of their compensation to the Company’s annual operating and financial performance, as well as longer term shareholder returns. We believe that our pay-for-performance philosophy and the design of our executive compensation program strongly support an environment of continuous improvement and shareholder value creation.

 

As illustrated below, our TSR significantly outperformed the S&P 500, the TSX 60 and the DJ Waste Index for the one-year and five-year periods ended December 31, 2018. In addition, in October 2018, we increased our regular quarterly cash dividend by 14.3% to $0.16 per share, the eighth consecutive year of double-digit growth in our cash dividend since its commencement in 2010.

 

Click to enlarge

 

For highlights of the Company’s fiscal year 2018 performance, see the Summary section of this proxy statement. A more detailed description of the Company’s fiscal year 2018 performance, including a reconciliation of non-GAAP financial measures and a graphical representation of TSR performance for the S&P 500, TSX 60 and the DJ Waste Index, can be found on pages 70-72 and page 36, respectively, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 14, 2019.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     23

 

Executive Compensation Program Best Practices

 

Our executive compensation program includes features which we believe drive performance and excludes features we believe do not serve our shareholders’ long-term interests. The table below highlights some of the “Best Practices” featured in our compensation program as well as the “Problematic Pay Practices” that we have excluded.

 

Pay for Performance   Our NEOs receive the majority (about 80% for the CEO and about 71% for other NEOs, excluding Mr. Bouck, in 2018) of their total direct compensation in performance-based compensation, which is contingent on Company and individual performance.
Relevant Performance Metrics   Our annual incentive and equity-based compensation programs include performance metrics meant to drive long-term shareholder value creation.
Recoupment Policy   We maintain a clawback policy that permits our Board of Directors to seek the forfeiture or repayment of certain incentive compensation paid to an NEO or other corporate officer in certain circumstances.
Annual Say on Pay   We provide our shareholders with an annual opportunity to vote, on an advisory basis, on the compensation of our NEOs.
Use of Peer Group Data and Tally Sheets   We utilize tally sheets annually when making executive compensation decisions, and periodically review compensation data relative to our comparator group of companies (the “Comparator Group”).
Share Ownership Guidelines   Our NEOs and other corporate officers are expected to hold Common Shares with a value equal to a multiple of their base salaries.
Conservative Use of Equity Grants   Our annual equity grants have averaged less than 0.35% of outstanding shares over the last five fiscal years.
Risk Assessment   Our corporate officers’ compensation program has been designed, and is periodically reviewed, to ensure that it does not encourage inappropriate risk-taking.
No Compensation Guarantees   Our NEO employment agreements do not provide for guaranteed base salary increases, minimum bonuses or annual equity awards.
No “Single Triggers”   Our CEO and other executive officers, as defined under applicable Canadian securities laws, have employment agreements that contain “double-trigger” change in control severance provisions.
No Dividends on Unvested Equity Awards   We do not pay ordinary dividends on unvested time-based equity awards. For our performance-based restricted share units (“PSUs”), dividend equivalents are paid in cash, without interest, only when and to the extent the PSUs are earned.
No Discounting, Re-pricing or Buyout Provisions   We expressly prohibit the discounting of share options and the re-pricing or cash buyouts of underwater share options.
No Hedging or Pledging of Securities   NEOs, other corporate officers and directors are prohibited from engaging in transactions designed to hedge against the economic risks associated with an investment in Common Shares or pledging Common Shares.

 

Pay for Performance Compensation Mix

 

The Company’s executive compensation program is designed to reward the NEOs and other corporate officers for achieving strong operational performance and delivering on the Company’s strategic initiatives, both of which are important to the long-term success of the Company. Based on the Company’s long term and consistent record of strong financial performance and superior shareholder returns, the Company’s compensation program has remained relatively unchanged over the years.

 

The Compensation Committee believes that a significant portion of the compensation of our NEOs should be aligned with our shareholders’ interests and directly linked to measurable performance. To evaluate the proportion of performance-based compensation for our NEOs, the Compensation Committee looks at recurring compensation by examining total direct compensation, or TDC, earned by our NEOs. TDC is calculated by adding base salary, actual cash annual incentives paid and the grant date fair value of share awards, each as reported in our Summary Compensation Table. It excludes indirect compensation reported under the “All Other Compensation” column of our Summary Compensation Table.

 

As illustrated below, At-Risk Compensation, comprised of cash annual incentives and equity-based compensation, made up approximately 80% of the TDC of our CEO, and 71% of the combined TDC of our other NEOs, excluding Mr. Bouck, in 2018.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     24

 

Click to enlarge

 

As described in the section “Compensation Discussion and Analysis — Role of Independent Compensation Consultant; Comparison Group Compensation Data”, a review by the Compensation Committee’s independent compensation consultant in late 2017 concluded that, in aggregate, the Company’s targeted total direct compensation for the NEOs was aligned with the 25 th percentiles of the Comparator Group. It was also noted that the Company’s annualized TSR was above the 75 th percentile for all measurement periods between one and ten years when compared to the Comparator Group.

 

In February 2019, after discussions with the Compensation Committee’s independent compensation consultant, the Compensation Committee reviewed the composition of the Comparator Group as a result of significant performance issues impacting certain companies within the Comparator Group and a merger between one peer group company. It again was noted, as shown below, that the Company’s annualized TSR was approximately at or above the 75 th percentile for all measurement periods between one and ten years when compared to the updated Comparator Group.

 

Click to enlarge

 

“Say on Pay” Proposal

 

The Company provides its shareholders with an opportunity to cast an annual advisory vote with respect to its NEO compensation as disclosed in the Company’s management information circular and proxy statement, or “Say on Pay” proposal (“Say on Pay”). At last year’s Annual and Special Meeting of Shareholders, more than 95% of the shares cast approved our NEO compensation program as described in last year’s management information circular and proxy statement. The Compensation Committee and the Company viewed these results as a strong indication that the Company’s shareholders support the executive compensation policies and practices of the Company.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     25

 

Recent Changes to Further Align Pay with Performance

 

In light of our shareholders’ support and the significant shareholder value creation over the years, the Compensation Committee decided to retain the core design of our executive compensation program for fiscal 2018. The Company’s management and Compensation Committee, with the input of the full Board of Directors and the Compensation Committee’s independent compensation consultant, has periodically reviewed our executive compensation program and made certain revisions over the years to further align pay with performance, including:

 

Applying a one-year performance-based condition to annual restricted share unit (“RSU”) grants to the Company’s NEOs and other corporate officers based on a threshold of free cash flow generation—a different metric from those used for annual incentives and PSU grants—that must be satisfied during the year in which the grant is made for such grants to then time-vest over a multi-year schedule;
   
Eliminating EBITA CAGR as a performance metric in our PSU program to address any potential concerns of proxy advisory firms that such a metric may be considered similar to the annual EBITDA target incorporated into our annual cash incentive bonus plan;
   
Applying free cash flow/share CAGR as a performance metric for payout on half of each executive’s PSUs, with the payout on the remaining half still tied to improvement in return on invested capital;
   
Applying relative TSR modifier as an additional performance metric to our PSU program; and
   
For 2019, increasing the percentage of each executive’s and other corporate officer’s long-term performance-based equity compensation (relative to annual performance-based RSU awards) so that PSUs now constitute at least 50% of total equity compensation.

 

For a detailed discussion of the Company’s equity-based compensation program, see “Long-Term Incentives: Equity-Based Compensation - Compesation Discussion and Analysis.”

 

In late 2017, the Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) to review our CEO’s compensation package in light of: (i) the Company’s increased size and complexity following the Progressive Waste acquisition; (ii) the Company’s superior TSR performance; and (iii) the Company’s targeted total direct compensation for the CEO, in aggregate, being 35%, or $2.35 million, below the 50 th percentile when compared to the Comparator Group.

 

As a result of this review and as disclosed in last year’s management information circular and proxy statement, on February 13, 2018, the Compensation Committee approved entering into a second amendment (the “Second Amendment”) to Mr. Mittelstaedt’s Separation Benefits Plan and Employment Agreement, dated February 13, 2012, as amended by that certain Amendment to Separation Benefits Plan and Employment Agreement, dated December 17, 2015 (the “CEO Separation Benefits Plan”). Pursuant to the terms of the Second Amendment, Mr. Mittelstaedt’s initial term of employment was extended until February 13, 2023. During that period, he will continue to serve as the Chairman of the Company’s Board of Directors and the Chief Executive Officer of the Company or, at his election, in the role of Executive Chairman of the Company’s Board of Directors. The Second Amendment provided for a grant to Mr. Mittelstaedt of a retention equity award having a grant date value of $9 million, subject to a three-year vesting schedule and a claw back provision if he voluntarily terminates his employment without Good Reason (as defined in the CEO Separation Benefits Plan) prior to February 13, 2023.

 

Given the claw back provision and the desire to otherwise maintain the CEO’s existing compensation program, the Compensation Committee views the $9 million retention equity award as additional compensation to the CEO spread over a five-year period, offsetting a majority of the current shortfall in the CEO’s targeted total direct compensation against the 50 th percentile of the Comparator Group. The Compensation Committee believes the equity award both further aligns the CEO’s compensation with shareholder interests and provides an additional incentive to retain the services of a CEO under whose leadership the Company has generated superior long-term shareholder returns. For 2018, the Compensation Committee maintained Mr. Mittelstaedt’s targeted total direct compensation similar to prior years and, for the fourth consecutive year, did not increase his base salary.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     26

 

CEO Pay-at-a-Glance

 

The compensation of our CEO is based on the same design elements and performance metrics that are applicable to our other NEOs. The following graph shows the relationship of our CEO’s TDC to our cumulative shareholder return indexed over the last five fiscal years. As illustrated below, we delivered total shareholder return of 167.1% over this period while the Compensation Committee’s decisions and changes to our executive compensation program increased the TDC of our CEO 95%, assuming the initial value of such grant, as previously discussed, is spread over a five-year period.

 

Click to enlarge

 

On a year-over-year basis, the TDC of our CEO increased 152.5% in 2018 due to the $9 million equity grant resulting from the Second Amendment discussed above. In 2018, the Company exceeded its financial performance targets, resulting in an overall achievement of 102.4% of the target opportunity for that fiscal year, as compared to 105.0% of the target opportunity in 2017. This year-over-year reduction in overall achievement resulted in a 35.8% decrease in annual cash incentive payment. Excluding the impact of the Second Amendment executed in 2018, our CEO’s TDC in 2018 decreased 14.0% over the prior year.

 

Our Compensation Philosophy and Objectives

 

The Compensation Committee’s philosophy with respect to the compensation of the NEOs does not differ materially from its philosophy regarding other executive and corporate officers. The Compensation Committee believes that compensation paid to NEOs should closely align with our performance on both a short-term and long-term basis, be linked to specific, measurable results intended to create value for shareholders and assist us in attracting and retaining key officers critical to our long-term success.

 

In establishing compensation for NEOs, the Compensation Committee’s objectives are to:

 

Attract and retain individuals with superior leadership ability and managerial talent by providing competitive compensation and rewarding outstanding performance;
   
Ensure that NEO compensation is aligned with our corporate strategies, business objectives and the long-term interests of our shareholders;
   
Provide an incentive to achieve key strategic and financial performance measures by linking incentive award opportunities to the achievement of performance measures in these areas;
   
Create an incentive for sustained growth; and
   
Provide a balanced approach to compensation policies and practices, which does not promote excessive risk-taking.

 

Our overall executive compensation program is structured to attract and retain highly qualified executive and corporate officers by paying them competitively and consistent with our success. We believe that the compensation structure should ensure that a significant portion of pay directly relates to the performance of our Common Shares and other factors that directly and indirectly influence shareholder value. Accordingly, our approach to compensation is to provide base salary, an annual performance-based incentive opportunity tied to goals that link NEO compensation to our annual operating and financial performance, and long-term equity grants intended to align NEO compensation with shareholder returns and financial performance over a longer period and to aid in retention. Each year, the Compensation Committee allocates total compensation for the Company’s NEOs between cash and equity based on comparisons with other companies and the Compensation Committee’s judgment.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     27

 

Approach to Compensation; Role of the Compensation Committee

 

The Compensation Committee has the primary authority for the consideration and determination of the cash and equity compensation we pay to our executive and corporate officers. The Compensation Committee also makes recommendations to the Board of Directors concerning cash and equity-based compensation and benefits for non-management directors. To aid the Compensation Committee, the CEO meets with the Compensation Committee and provides recommendations annually to the Compensation Committee regarding the compensation of the NEOs and other corporate officers, other than himself. However, the Compensation Committee is not bound to follow the CEO’s recommendations. Pursuant to its charter, the Compensation Committee has the authority to engage its own independent advisors to assist it in carrying out its duties. The Compensation Committee holds executive sessions not attended by any members of management or non-independent directors.

 

The Compensation Committee meets in the first quarter of each fiscal year to review and approve:

 

The achievement of financial performance goals for the prior fiscal year and, if applicable, a multi-year period;
   
Performance-based compensation, if earned, based on such achievement for the prior fiscal year and, if applicable, a multi-year period;
   
Annual equity-based compensation grants;
   
Financial goals for performance-based awards; and
   
The level and mix of NEO compensation for the current fiscal year.

 

In determining the base salary, performance-based compensation and long-term equity-based compensation levels for the NEOs, the Compensation Committee considers: (i) the compensation structure and practices of a comparator group of companies that it believes are the Company’s leading competitors in the solid waste industry; (ii) a comparator group of companies, most of which operate outside the solid waste industry, with comparable financial profiles; and (iii) its own judgment as to an appropriate level of compensation for a company of our size and financial performance. From time to time, the Compensation Committee uses compensation consultants and comparator group analyses from third parties to assess our compensation components. The Compensation Committee believes that achieving a +/- 10% range, over time, of median market Comparator Group target TDC for our existing NEOs is appropriate given their extensive experience, knowledge and their impact on the long-term success of the Company.

 

For 2018, the Compensation Committee considered a tally sheet that included, for each NEO and other corporate officer, current base salary, salary paid in 2017, bonus percentage, cash bonus paid for 2017, RSUs and PSUs granted in 2017, the dollar amount of 401(k) and Nonqualified Deferred Compensation Plan matches in 2017, payments and reimbursements for various expenses that could be considered perquisites, the value of unvested RSUs and PSUs as of the end of the year. In determining the amount of compensation for the NEOs, the Compensation Committee does not take into account amounts realized from prior equity-based compensation grants because the Compensation Committee seeks to provide compensation that takes into account the cost of replacing the NEOs on a market competitive basis and what is equitable based on our performance. We believe that, to some extent, appreciation reflected in the amounts realized from prior equity-based compensation grants confirms the Compensation Committee’s success in aligning compensation with our shareholders’ interests, thus validating our compensation philosophy.

 

We provide Mr. Mittelstaedt with greater compensation and benefits than the other NEOs to reflect his importance and value to us as well as the greater level of responsibility and risk faced by him as our CEO and Board Chairman. Mr. Mittelstaedt’s compensation also differs as a direct result of the Compensation Committee’s review of the comparator compensation data, and reflects the competitive nature of compensation paid to chief executive officers of companies within the Comparator Group. The Compensation Committee believes that Mr. Mittelstaedt’s competitive compensation package is important to reward, motivate and retain him as a highly valued chief executive whose leadership and strategic vision have helped create significant value for shareholders since the inception of Waste Connections.

 

Role of Independent Compensation Consultant; Comparison Group Compensation Data

 

The Compensation Committee periodically retains Pearl Meyer to provide it with market data and information regarding market practices and trends, assess the competitiveness of our executive compensation program, compare our performance relative to a Comparator Group, assist with the development of the Compensation Discussion and Analysis in this proxy statement, and provide analysis on our non-employee director compensation. The Compensation Committee retains Pearl Meyer directly, supervises all work assignments performed by the firm, and reviews and approves all work invoices received for payment. As required under Item 407(e)(3) of Regulation S-K, the Compensation Committee annually assesses whether the work of Pearl Meyer raises any conflict of interest. No conflict of interest was determined to exist with respect to Pearl Meyer’s services as a compensation consultant during the last fiscal year.

 

The Compensation Committee periodically analyzes the compensation practices of a Comparator Group to assess our competitiveness with the market. In doing so, it takes into account factors such as the relative size and financial performance of those companies and factors that differentiate us from them. Criteria used for establishing the Comparator Group include (i) organization size, with financial characteristics such as revenue, free cash flow, capital expenditures, EBITDA, market capitalization or enterprise value similar to those of the Company, (ii) country of domicile, including Canada and the United States, and (iii) industry, including companies in the environmental, facilities and diversified support services, transportation, oil and gas equipment and services, distribution and construction materials industries. Due to limited peers in Canada, the industry criteria was broader for Canadian companies.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     28

 

After discussions with Pearl Meyer, the Compensation Committee selected the following companies for the Comparator Group following the Progressive Waste acquisition:

 

Agrium Fastenal Martin Marietta Materials United Rentals
Canadian Pacific Railway HD Supply Holdings Potash Corporation Vulcan Materials Company
Cenovus Energy Iron Mountain Republic Services Waste Management
Cintas JB Hunt Transport Services Stericycle W.W. Grainger

 

The Compensation Committee independently retained Pearl Meyer in late 2017 to review the compensation of the Company’s NEOs against the Comparator Group. Relative to the Comparator Group, the Company’s trailing 12-month revenue, adjusted EBITDA, adjusted free cash flow and enterprise value as of September 30, 2017, was positioned at the 38 th percentile, 63 rd percentile, 50 th percentile and 75 th percentile, respectively. Based on its review of the Company’s compensation practices against the Comparator Group, Pearl Meyer concluded that, in aggregate, the Company’s targeted total direct compensation was aligned with the Comparator Group’s 25 th percentile. Pearl Meyer also noted that the Company’s annualized TSR was above the 75 th percentile for all measurement periods between one and ten years when compared to companies in the Comparator Group.

 

Elements of Compensation

 

The Compensation Committee believes that a significant portion of the compensation of our NEOs should align with our shareholders’ interests and be directly linked to performance. While the exact pay mix of our NEOs’ total compensation (base salary, annual incentives, and equity-based compensation) is not specifically determined, the Compensation Committee generally targets annual incentives and equity-based compensation for our NEOs to constitute between 70% and 80% of total direct compensation assuming target level payouts are achieved; this is consistent with market consensus data provided by Pearl Meyer in 2017. In aggregate for the NEOs, base salaries and target total cash compensation (base salaries plus annual incentives) were each above the 25 th percentile of the levels of compensation among Comparator Group executives and below the median of the levels of compensation among Comparator Group executives, and total direct compensation was aligned with the market 25 th percentile. The Compensation Committee has complete discretion to determine compensation levels.

 

BASE SALARY

 

Our compensation program includes base salaries to compensate the NEOs and other corporate officers for services rendered each year. Base salaries provide a secure base of compensation that is not dependent on our performance and is an amount that recognizes the role and responsibility of each NEO and other corporate officer, as well as such officer’s experience, performance and contributions. We also believe this element is beneficial in attracting and retaining high-performing and experienced corporate officers.

 

The Compensation Committee considers base salary increases for certain NEOs and other corporate officers annually. Base salary decisions generally reflect the Committee’s consideration of our Comparator Group data and subjective factors including an officer’s experience and past performance. For 2018, the Compensation Committee approved the following base salaries for our NEOs:

 

Name   2017
Base Salary
($)
  2018
Base Salary
($)
  %
Increase/
Decrease
Ronald J. Mittelstaedt   969,000   969,000  
Mary Anne Whitney   280,000   400,000   42.9%
Worthing F. Jackman   575,000   660,000   14.8%
Darrell W. Chambliss   500,000   515,000   3.0%
Patrick J. Shea   405,000   420,000   3.7%
Steven F. Bouck   660,000     50,000   -92.4%

 

Ms. Whitney’s base salary was increased to $400,000 upon her promotion to Chief Financial Officer on July 1, 2018; this was the initial step of a multi-year approach to increase her targeted total direct compensation to within a +/- 10% range of the median market Comparator Group. Mr. Jackman’s base salary was increased to $660,000 upon his promotion to President on July 1, 2018, and Mr. Bouck’s base salary was decreased to $50,000.

 

In determining 2019 base salaries for our NEOs, the Compensation Committee increased Messrs. Mittelstaedt, Chambliss and Shea’s base salaries 2.5%, effective February 1, 2019. Base salaries for Mr. Jackman and Ms. Whitney increased 5.0% and 10.0%, respectively, on February 1, 2019. Mr. Bouck’s base salary did not change for 2019.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     29

 

ANNUAL INCENTIVES: MANAGEMENT INCENTIVE COMPENSATION PROGRAM

 

Our compensation program includes an annual cash incentive award to reward NEOs and other corporate officers based on our performance and the individual executive’s contribution to that performance. Under our Management Incentive Compensation Program (the “MICP”), which is administered pursuant to our 2016 Incentive Award Plan (the “2016 Plan”), a summary of which is attached as Appendix B, each participant has an opportunity to earn an annual incentive based on a targeted percentage of the participant’s annual base salary for the year. The objective of the annual incentive is to provide participants an incentive to manage the Company to achieve financial performance targets based on budgeted revenue.

 

Under the MICP, the NEOs (excluding Mr. Bouck) and other corporate officers of the Company are eligible to receive annual incentives. In 2018, each NEO had the opportunity to earn up to 200% of such person’s target annual incentive based on our achievement of certain targeted levels of financial performance established by the Compensation Committee and (other than with respect to Mr. Mittelstaedt) based on the recommendations of the CEO.

 

The Compensation Committee adopted the performance targets for the fiscal year in February 2018. Our performance was compared to target levels of: (1) EBITDA, weighted at 20%; (2) operating income, or EBIT, weighted at 20%; (3) operating income as a percentage of revenue, or EBIT Margin, weighted at 30%; and (4) net cash provided by operating activities as a percentage of revenue, or CFFO Margin, weighted at 30%. Payouts are determined based on our weighted average achievement relative to each metric (the “multiplier”). Because the Compensation Committee believes the operating budget adopted by our Board of Directors is a compilation of stretch goals set for each operating location, the targeted performance goals reflect a percentage or factor of the final budget, consistent with the prior year, as set forth below:

 

    Original 2018
Budget
    2018
Factor
    2018 Targeted
Performance Goal
    Weight  
EBITDA   $    1,552.4M       96.5%           $ 1,498.0M       20%  
EBIT   $ 886.8M       96.5%     $ 855.8M       20%  
EBIT Margin     18.6%       N/A       18.0%       30%  
CFFO Margin     27.3%       97.5%       26.6%       30%  

 

The Compensation Committee establishes targeted performance goals at levels intended to be difficult but attainable. For example in 2015, 2016 and 2017, the Company achieved a weighted-average of 99.9%, 103.7% and 105.3%, respectively, of targeted performance goals. Although the average achievement for the three years ending 2017 was approximately 103.0%, as discussed earlier based on its review of the Company’s compensation practices against the Comparator Group, Pearl Meyer concluded in its 2017 review that, in aggregate, the Company’s targeted total direct compensation was aligned with the Comparator Group’s 25 th percentile, while the Company’s annualized TSR was above the 75 th percentile for all measurement periods between one and ten years when compared to companies in the Comparator Group.

 

Under the terms of the MICP, the Compensation Committee, in its complete and sole discretion, may adjust the targeted performance goals if an acquisition, significant new contract or extraordinary event results in a significant impact to the goals. For these purposes, the Compensation Committee determines operating income, or EBIT, primarily by adjusting for any gains or losses on disposal of assets, and determines EBITDA by adding depreciation, amortization and closure/post-closure accretion to operating income, both generally consistent with the Company’s approach to reporting non-GAAP measures in its earnings releases and filings with the SEC and applicable securities commissions or similar regulatory authorities in Canada. The Compensation Committee chose these measures of performance because they are widely used by investors as valuation measures in the solid waste industry and because the targeted goals encourage improving free cash flow and returns on invested capital.

 

For 2018, the target annual incentives as a percentage of salary for the NEOs, other than Mr. Bouck who is no longer eligible to receive an annual incentive payment, were as follows:

 

Name   Target Incentive
(as a % of Base Salary)
 
Ronald J. Mittelstaedt     115%  
Mary Anne Whitney     50%  
Worthing F. Jackman     80%  
Darrell W. Chambliss     75%  
Patrick J. Shea     50%  

 

The Company’s cumulative performance relative to target is calculated as a weighted average and treated as a multiplier. The multiplier is applied to the target payout so that if the Company achieved 100% of its targets, the participants would receive 100% of their annual incentives. Participants may earn from 0% up to a maximum of 200% of their targeted annual incentives, based on their position, in accordance with the following sliding scale, which illustrates the interpolation of payouts within the ranges:

 

% Target
Achievement
Target %
Multiplier
105% or Higher 200%
104% 180%
103% 160%
102% 140%
101% 120%

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      30

 
% Target
Achievement
Target %
Multiplier
100% 100%
99% 80%
98% 60%
97% 40%
96% 20%
95% 0%

 

Payments under this program are contingent on continued employment at the time of payout, subject to the terms of any applicable employment agreements.

 

2018 Adjusted Target Goals and Results

 

In February 2019, the Compensation Committee adjusted the targets and results for 2018 primarily to reflect the impact of acquisition-related items and loss on disposal of assets. Adjustments are generally consistent with the Company’s approach to reporting non-GAAP measures in its earnings releases and filings with the SEC and applicable securities commissions or similar regulatory authorities in Canada. Based on the calculations, the Company achieved a weighted-average of 102.4% of our NEOs’ targeted performance goals in 2018. Adjusted targeted performance goals and results and the corresponding target achievement percentages for 2018 were as follows:

 

    Adjusted
Target (1)
  Actual
Results (1)
  Actual
Results as %
of Target
  Weighting   Target
Achievement
 
EBITDA   $  1,547.3M   $  1,566.4M     101.2%     20%     20.2%  
EBIT   $ 881.8M   $ 872.9M     99.0%     20%     19.8%  
EBIT Margin     17.8%     17.8%     99.4%     30%     29.8%  
CFFO Margin     26.6%     26.6%     108.4%     30%     32.5%  
OVERALL ACHIEVEMENT                             102.4%  
(1) The Compensation Committee adjusted the targets and results for 2018 to reflect the impact of certain acquisition-related items and loss on disposal of assets.

 

Annual incentives earned for each participant were calculated pursuant to the interpolated sliding scale shown above. For 2018, annual incentives earned and paid as a percentage of each participant’s eligible base salary, as well as incentives paid as a percentage of incentives earned, are shown below. For Messrs. Mittelstaedt, Jackman and Chambliss, the Compensation Committee exercised its discretion to decrease their incentives paid as a percentage of incentives earned in order to reduce the outsized influence one performance metric, CFFO Margin, had on overall achievement.

 

Name Earned Incentive %
of Eligible Base
Salary (1)
  Paid Incentive %
of Eligible Base
Salary (1)
  Incentive Paid as
% Earned
 
Ronald J. Mittelstaedt 170.2%   144.0%   84.6%  
Mary Anne Whitney 74.0%   68.2%   92.1%  
Worthing F. Jackman 118.4%   98.1%   82.9%  
Darrell W. Chambliss 111.0%   97.1%   87.5%  
Patrick J. Shea 74.0%   71.4%   96.5%  
(1) Calculated based on the NEOs base salary in effect on February 1, 2019.

 

Further disclosure regarding the actual annual incentive amounts earned by the NEOs for 2018 under the MICP are located in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

 

In lieu of paying an annual incentive in cash, the Compensation Committee, in its complete and sole discretion, may choose to pay the annual incentive in RSUs issued under the 2016 Plan or any succeeding plan we adopt. All 2018 annual incentives paid pursuant to the MICP were paid in cash.

 

On February 12, 2019, the Compensation Committee certified the 2018 results for the MICP and the one-year RSU performance hurdle described below, and approved our 2019 MICP under the 2016 Plan.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      31

 

LONG-TERM INCENTIVES: EQUITY-BASED COMPENSATION

 

We believe that equity ownership in the Company ties executive compensation to the performance of Common Shares and creates an incentive for sustained growth, superior shareholder returns and employee retention. This investment provided to NEOs and other corporate officers coupled with multi-year vesting periods or performance-based metrics serves to enhance retention and corporate culture, both of which are instrumental to the future success of the Company and the long-term interests of our shareholders.

 

Each year, the Compensation Committee, after consultation with the CEO, assesses our performance and the performance of each of the NEOs and other corporate officers during the most recently completed fiscal year. Based on the Compensation Committee’s subjective review of the prior year’s performance and with a focus on maintaining a competitive market level of compensation, each NEO and other corporate officer receives a grant of RSUs and PSUs under the 2016 Plan.

 

The Compensation Committee believes that the use of RSU awards reduces the overall compensation cost to us compared to the cost of granting share options at levels intended to convey similar value, and offers our NEOs a competitive and more stable equity-based compensation. RSU awards provide our NEOs and other corporate officers with the opportunity to share in the success of the Company. RSU awards vest in equal increments annually over four years and three years for U.S. and Canadian employees, respectively. Upon vesting of the RSU awards, the participant receives Common Shares equal to the number of RSUs that vested (or, in our discretion, the cash equivalent), less any shares (or cash, if applicable) withheld and used to pay withholding taxes. There are no ordinary dividends paid on outstanding RSUs during the vesting period, and RSUs do not carry voting rights.

 

Beginning in 2015, grants of RSUs made to our NEOs and other corporate officers include a one-year performance hurdle based upon achievement of a target amount of free cash flow as a percentage of revenue, or FCF margin, for the fiscal year in which the grant is made. The Compensation Committee continues to believe this metric is a key driver of value creation. Only if we satisfy this performance target for the year in which the grant is made will such grants then continue to vest over a multi-year time-based schedule. Our NEOs’ 2018 annual RSU awards were granted on February 20, 2018.

 

In 2014, the Compensation Committee introduced performance-based restricted share units, or PSUs, which are awards subject to three-year performance hurdles to further enhance the link between executive compensation and our performance. Performance goals for the three-year performance period are recommended by management based on our historical performance, current projections and trends, and are established during the first quarter of the performance period. The Compensation Committee reviews management’s recommendations (including a discussion of associated risks), determines appropriate revisions, and once satisfied with the degree of difficulty associated with goal achievement, approves the goals for each performance period. The Compensation Committee seeks to establish goals such that the likelihood of missing the target goal is at least as high as the likelihood of achieving the target goal based on reasonable assumptions and projections at the time of grant.

 

For the annual award in February 2018, the amount of PSUs at target as a percentage of the total long-term incentives awarded to each participant comprised 35% of the total annual long-term incentives awarded. For the 2018-2020 performance period, each participant may earn between 25% and 200% of the target number of PSUs based on achievement of two metrics: a return on invested capital, or ROIC, improvement goal and a free cash flow per share growth goal, each weighted 50%. The Compensation Committee selected these metrics because it believes they are critical drivers of sustained value creation over the longer term and align with the interests of shareholders.

 

The table below shows the required achievement of ROIC improvement and free cash flow per share growth performance measures and the corresponding potential payouts under our PSUs granted in 2018.

 

  3-Year ROIC
Improvement
  3-Year Free Cash
Flow/Share CAGR
 
Threshold (50% payout) 125 basis points   8.0%  
Target (100% payout) 150 basis points   10.0%  
Maximum (200% payout) 200 basis points   12.5%  

 

In addition, a relative performance metric affects the number of PSU awards earned. Each participant can earn 112.5% of the achieved amount if the Company’s relative TSR measured against the S&P 500 companies is between the 50 th and 75 th percentile, and 125% of the achieved amount if the Company’s relative TSR measured against the S&P 500 companies is above the 75 th percentile.

 

At the end of a three-year performance period, the Compensation Committee will certify the performance results and percentage payout, as well as the resulting final number of PSUs earned by each participant, if any. There are no dividends paid on outstanding PSUs during the vesting period, but dividend equivalents on the number of PSUs that ultimately vest will accumulate and a dividend equivalent payment will be payable to each participant on the settlement date without interest. Upon vesting of the PSUs, in addition to receiving the number of Common Shares determined in accordance with the payout calculation, the participant will receive a cash payment equal in value to the total dividends that would have been paid on the number of Common Shares that vest. PSUs do not carry voting rights.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      32

 

While staying competitive with the market is an overall guideline, individual target opportunities may vary based on the Compensation Committee’s consideration of other factors, as discussed above. Target equity-based compensation awards in 2018 were approximately 230% of current base salary for Mr.  Mittelstaedt, 172.5% of current base salary for Messrs. Jackman, Chambliss and Bouck, and 143.75% of current base salary for Ms. Whitney and Mr. Shea. For 2018, the equity grants for the NEOs, excluding the RSU grant to Mr. Mittelstaedt in connection with the execution of the Second Amendment, were consistent with these targets, with RSUs constituting 65% of the total annual long-term incentives awarded, and PSUs the remaining 35% of such awards. See the “Grant of Plan Based Awards in Fiscal Year 2018” table for additional detail regarding equity awards granted to each of the NEOs in 2018.

 

For 2019, the total equity grants for Messrs. Mittelstaedt and Jackman were approximately 224.0% of their respective base salaries, for Mr. Chambliss the award was approximately 173.0% of his base salary, and for Mr. Shea and Ms. Whitney their awards were approximately 145.0% and 131.0%, respectively, of their base salaries. RSUs constituted 50% of the total equity grant awarded, and PSUs constituted the remaining 50%. Mr. Bouck is no longer eligible to receive equity grants.

 

Exercise of Discretion in Executive Compensation Decisions

 

As a risk mitigation provision, the Compensation Committee has complete discretion to withhold payment pursuant to any of our incentive compensation plans irrespective of whether we or the NEOs have successfully met the goals set under those plans. The Compensation Committee applied this negative discretion under our incentive compensation plans with respect to Messrs. Mittelstaedt, Jackman and Chambliss, as previously discussed, in order to reduce the outsized influence one performance metric, CFFO Margin, had on overall achievement in 2018.

 

Share Ownership Guidelines

 

To further align management and shareholder interests and discourage inappropriate or excessive risk-taking, our Board of Directors has established share ownership guidelines for our NEOs and other corporate officers. The current minimum ownership thresholds are as follows:

 

For the Chief Executive Officer, five times such individual’s base salary;
   
For the President, four times such individual’s base salary;
   
For Executive Vice Presidents, three times each such individual’s base salary;
   
For Senior Vice Presidents, two times each such individual’s base salary; and
   
For Vice Presidents, one times each such individual’s base salary.

 

Once a corporate officer has acquired a number of Common Shares that satisfies the ownership multiple then applicable to him or her, such number of shares then becomes his or her minimum ownership requirement (even if the officer’s salary increases or the fair market value of such Common Shares subsequently changes) until he or she is promoted to a higher level. Notwithstanding the foregoing, once an individual is determined to be in compliance with the share ownership guidelines as of the assessment date, he or she shall be deemed to remain in compliance, regardless of any subsequent share price fluctuations, as long as such individual maintains ownership of at least the same number of Common Shares as that required as of the assessment date for which he or she was previously compliant.

 

Each corporate officer is expected to attain the applicable share ownership threshold under the guidelines within five years following the later of (i) the first annual assessment with respect to such individual or (ii) the first annual compliance assessment at which a higher share ownership multiple becomes applicable to such individual (due to a promotion or otherwise). The five-year phase-in period is intended to permit gradual accumulation of the incremental ownership associated with a new or higher multiple. For purposes of the calculation, Common Shares deemed “beneficially owned” by the corporate officer within the meaning of the rules of the SEC, as well as RSUs subject to time-based vesting held by a corporate officer, and vested or time-based unvested RSUs or resulting shares deposited into a deferred compensation plan or arrangement, are included in the calculation of the amount of such individual’s ownership.

 

Timing of Equity Awards

 

The Compensation Committee generally makes annual grants of equity-based compensation to our executive and non-executive officers and other employees in February following the public release of year-end financial results and outlook for the upcoming year. This timing is optimal from the Compensation Committee’s standpoint for two reasons: first, the Compensation Committee has the financial results from the previous year; and second, management may notify employees of the annual grant award at or around the same time they typically notify employees of their cash annual incentive with respect to the previous year, which we typically pay in February.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      33

 

Other Benefits

 

We provide certain limited benefits to our employees, including the NEOs, to fulfill particular business purposes. In general, these benefits make up a very small percentage of total compensation for the NEOs.

 

401(K) PLAN

 

The NEOs are entitled to participate in a Company-sponsored 401(k) profit sharing plan on the same terms as all of our U.S. employees. For 2018, we made matching contributions of 50% of every dollar of a participating employee’s pre-tax and Roth contributions until the employee’s contributions equal six percent of the employee’s eligible compensation, subject to certain limitations imposed by the Internal Revenue Code, or the IRC. Employees are eligible to participate in the 401(k) plan beginning on the first day of the month following the completion of sixty days of employment. Our matching contributions for 2018 are subject to a four-year vesting schedule.

 

DEFERRED COMPENSATION PLAN

 

We provide NEOs and certain other highly compensated employees the opportunity to defer receiving income until after they terminate their employment. This offers tax advantages by deferring taxation on the deferred compensation until after termination. The plan mitigates the impact of certain limitations on maximum 401(k) plan contributions imposed by the IRC on our officers and other highly compensated employees. For 2018, we made a matching contribution of 50% of every dollar of a participating employee’s pre-tax eligible contributions until the employee’s contributions equal six percent of the employee’s eligible compensation, less the amount of any match we make on behalf of the employee under the Company-sponsored 401(k) plan. Matching contributions are subject to certain deferral limitations imposed by the IRC on 401(k) plans and, when made, are 100% vested. The deferred compensation plan is described under the heading “Nonqualified Deferred Compensation in Fiscal Year 2018.”

 

OTHER

 

We also offer a number of benefits to the NEOs pursuant to benefit programs that provide for broad-based employee participation. In addition to the 401(k) plan described above, the benefits include medical, prescription drugs, dental and vision insurance, long-term disability insurance, life and accidental death and dismemberment insurance, health and dependent flexible spending accounts, a cafeteria plan and employee assistance benefits. These generally available benefits do not specifically factor into decisions regarding an individual executive’s total compensation or equity-based compensation package. These benefits are designed to help us attract and retain employees as we compete for talented individuals in the marketplace, where such benefits are commonly offered. We also offer limited additional benefits to select employees, such as reimbursement of certain club dues and personal use of a private aircraft.

 

ANTI-HEDGING/PLEDGING POLICY

 

We have adopted a policy prohibiting executive officers and directors from engaging in transactions designed to hedge against the economic risks associated with an investment in Common Shares or pledging Common Shares. These individuals may not engage in the purchase or sale of put and call options, short sales and other hedging transactions designed to minimize the risk of owning Common Shares. In addition, these individuals may not pledge Common Shares as collateral.

 

CLAWBACK PROVISIONS

 

Our Board of Directors has adopted a Compensation Recoupment Policy (the “Clawback Policy”) to maintain and enhance a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. As more fully described in the Clawback Policy, which was filed as an exhibit to the Form 10-K we filed with the SEC and the securities commissions and similar regulatory authorities in Canada on February 14, 2018, the policy provides that if an accounting restatement occurs, the Board of Directors shall seek to require the forfeiture or repayment of incentive compensation paid to an NEO or other corporate officer during the three completed fiscal years preceding the date of the restatement that is in excess of the amount that would have been awarded to, vested and/or paid to the NEO or other corporate officer under the restatement if (i) the NEO or other corporate officer engaged in fraud or intentional misconduct that materially contributed to the need for the restatement, or (ii) a clawback is otherwise required by the applicable rules and regulations of the SEC or any national securities exchange on which the Company’s shares are listed. Although we may need to revise our Clawback Policy depending on the final recoupment rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), we believe this policy is a good governance practice that is beneficial for the Company even ahead of the final rules.

 

We also maintain numerous risk mitigating provisions in our compensation arrangements for the NEOs, which are described under the heading “Compensation Risk Assessment.” Examples include the Compensation Committee’s ability to exercise negative discretion to reduce annual incentive awards to zero, RSU grants which are determined based on the Company’s and the recipient’s performance, PSU grants which require achievement of multiple pre-determined goals over a three-year period before vesting, anti-hedging/anti-pledging policies, and share ownership requirements.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      34

 

Tax Deductibility Considerations

 

Section 162(m) of the IRC generally disallows an income tax deduction to publicly-traded corporations for compensation in excess of $1,000,000 paid for any fiscal year to the Company’s “covered employees,” defined in Section 162(m) as the CEO and the three other most highly compensated executive officers, other than the Chief Financial Officer. Pursuant to the 2017 Tax Cuts and Jobs Act, signed into law on December 22, 2017 (the “Tax Act”), for fiscal years beginning after December 31, 2017, the compensation of the Chief Financial Officer is also subject to the deduction limitation. For fiscal years beginning on or before December 31, 2017, Section 162(m) exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. Pursuant to the Tax Act, subject to certain transition rules, for fiscal years beginning after December  31, 2017, the performance-based compensation exception to the deduction limitations under Section 162(m) is no longer available. As a result, for fiscal years beginning after December 31, 2017, any compensation in excess of $1,000,000 paid to our executive officers may not be deductible. The Compensation Committee believes that the potential deductibility of the compensation payable under its incentive compensation plans and arrangements should be only one of a number of relevant factors taken into consideration in establishing those plans and arrangements for our executive officers and not the sole governing factor. For that reason, the Compensation Committee intends to structure its incentive compensation plans and arrangements in a manner similar to prior years, acknowledging that a portion of those compensation payments may not be deductible under Section 162(m), in order to assure appropriate levels of total compensation for our executive officers based on and aligned with the Company’s performance.

 

Severance and Change in Control Arrangements

 

The Compensation Committee believes that the Company’s current and Old Waste Connections’ historic successes are due in large part to the leadership, skills and performance of the NEOs, and that it is critical to maintain the stability of the Company by providing severance and change in control benefits in order to encourage NEO retention through a change in control. On February 13, 2012, Old Waste Connections entered into the CEO Separation Benefits Plan with Mr. Mittelstaedt, which has been amended three times, the most recent of which is discussed below, and a Separation Benefits Plan, which has been most recently restated on July 24, 2018 as discussed below, under which eligible executive officers, including our NEOs (other than Mr. Mittelstaedt), may receive certain severance and change in control benefits (the “Separation Benefits Plan,” and together with the CEO Separation Benefits Plan, the “Separation Benefits Plans”), both of which remained in effect following the completion of the Progressive Waste acquisition. The Separation Benefits Plan was amended on July 24, 2018 to: (i) amend the definitions and descriptions relating to cause, death, disability, and good reason, (ii) amend the benefits provided upon termination without cause, (iii) amend the indemnification provision, (iv) provide certain severance benefits to executives who are not NEOs, and (v) amend miscellaneous administrative provisions, including but not limited to amendments related to the Department of Labor’s new disability claims regulations. On October 17, 2018, the Company and Mr. Mittelstaedt entered into an amendment to the CEO Separation Benefits Plan, which amends the plan to align with the Separation Benefits Plan, including the amendments to such plan described above. A summary of the terms of the Separation Benefits Plans regarding severance and change in control are described below under “Potential Payments Upon Termination or Change in Control.”

 

Compensation Committee Report

 

The Compensation Committee of the Board of Directors has reviewed and discussed with management the “Compensation Discussion and Analysis” required by Item 402(b) of Regulation S-K. Based on the review and discussions referred to above, the Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be incorporated into both our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and this proxy statement.

 

This report is submitted on behalf of the Compensation Committee.

 

William J. Razzouk, Chairman
Edward E. “Ned” Guillet
Susan “Sue” Lee

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      35

 

Compensation Risk Assessment

 

We believe our compensation policies and practices do not present any risk that is reasonably likely to have a material adverse effect on the Company. We believe our approach to setting performance targets, evaluating performance, and establishing payouts does not promote excessive risk-taking. We believe that the components of our pay mix—base salary, annual cash incentive bonuses, and long-term equity grants—appropriately balance near-term performance improvement with sustainable long-term value creation.

 

We considered the following elements of our compensation policies and practices when evaluating whether such policies and practices encourage our employees to take unreasonable risks:

 

Annual performance targets are established by each operating location and region and on a Company-wide basis to encourage decision-making that is in the best long-term interests of both the Company and our shareholders;
   
We adjust performance targets to exclude the benefit or detriment of extraordinary events to ensure our employees are compensated on results within their control or influence;
   
We adjust performance targets to include certain acquisitions and new contracts not reflected in the originally approved operating budget in order to achieve targeted returns on deployed capital;
   
The use of four performance metrics in our annual cash incentive plan mitigates the incentive to overperform with respect to any particular financial metric at the expense of other financial metrics;
   
We set annual performance goals to avoid targets that, if not achieved, result in a large percentage loss of compensation;
   
Payouts under our performance-based plans remain at the discretion of our Board of Directors and may be reduced even if targeted performance levels are achieved;
   
Payouts under our performance-based plans can result in some compensation at levels below full target achievement, rather than an “all-or-nothing” approach;
   
Our NEOs receive annual cash incentive bonus awards only if cash incentive bonus awards payable to other employees have been made;
   
We have adopted a clawback policy which allows us to seek recovery of certain incentive cash and equity compensation if it is earned based on inaccurate financial statements;
   
We use RSUs rather than share options for equity awards because RSUs retain value even in a depressed market so that recipient employees are less likely to take unreasonable risks to get, or keep, share options “in-the-money”;
   
Equity-based compensation with time-based vesting over a multi-year schedule accounts for a time horizon of risk and ensures that participating employee interests are aligned with the long-term interests of our shareholders;
   
Share ownership guidelines require members of our Board of Directors and our NEOs and other corporate officers to maintain certain ownership levels in Common Shares, which aligns a portion of their personal wealth to the long-term performance of the Company;
   
We have adopted a policy that prohibits members of our Board of Directors and our NEOs and other corporate officers from engaging in transactions designed to hedge against the economic risks associated with an investment in Common Shares or pledging Common Shares; and
   
Our Compensation Committee periodically utilizes an independent compensation consultant that performs no other services for the Company.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      36

 

EXECUTIVE COMPENSATION TABLES

 

Summary Compensation Table

 

The following table summarizes the total compensation earned by each of our NEOs in 2018, 2017 and 2016.

 

Name and
Principal Position
  Year    Salary
($) (1)
   Bonus
($)
   Share
Based
Awards
($) (2)
   Option
Based
Awards
($)
   Non-Equity
Incentive Plan
Compensation
($)
  Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
  All Other
Compensation
($) (4)
  Total
($)
  Total
Excluding
Acquisition-
Related
Items
($)
 
Ronald J. Mittelstaedt   2018   946,638     11,269,773     1,430,000     45,872   13,692,283   13,692,283  
Chief Executive Officer   2017   946,638     2,228,662     2,228,700     37,774   5,441,774   5,441,774  
and Chairman   2016   969,000     2,036,120     3,423,294 (3)     5,533,034   11,961,448   4,974,513 (5)  
Mary Anne Whitney   2018 (6)   338,000     439,310     300,000     13,625   1,090,935   1,090,935  
Senior Vice President
and Chief Financial Officer
                                         
Worthing F. Jackman   2018   611,808     1,052,540     680,000     22,026   2,366,374   2,366,374  
President   2017   556,953     993,641     900,000     21,097   2,471,691   2,471,691  
    2016   524,081     825,012     1,536,000 (3)     1,375,095   4,260,187   2,131,356 (5)  
Darrell W. Chambliss   2018   501,615     904,271     500,000     16,408   1,922,294   1,922,294  
Executive Vice President and Chief Operating Officer   2017   486,452     864,800     772,500     15,046   2,138,798   2,138,798  
  2016   477,975     701,990     1,369,000 (3)     1,433,543   3,982,508   1,845,602 (5)  
Patrick J. Shea   2018   408,807     615,062     300,000     22,642   1,346,511   1,346,511  
Senior Vice President,   2017   393,178     582,316     280,000     22,433   1,277,937   1,277,937  
General Counsel and Secretary   2016   378,361     471,932     703,000 (3)     540,854   2,094,147   1,126,763 (5)  
Steven F. Bouck   2018 (7)   366,692     1,193,480         10,762   1,570,934   1,570,934  
Former President   2017   642,611     1,140,763     1,020,000     18,586   2,821,960   2,821,960  
    2016   636,055     956,317     2,292,000 (3)     1,402,309   5,286,681   2,469,263 (5)  

 

(1) Amounts shown reflect salary earned by the NEOs for each year indicated and reflect (i) increases that Messrs. Chambliss and Shea received on February 1, 2018, (ii) increases that Ms. Whitney and Mr. Jackman received on February 1 and July 1, 2018, and (iii) an increase and a decrease Mr. Bouck received on February 1 and July 1, 2018, respectively. Mr. Mittelstaedt did not receive a salary increase for 2018. Effective July 1, 2018, Ms. Whitney’s base salary was increased to $400,000 upon her promotion to Chief Financial Officer on July 1, 2018; this was the initial step of a multi-year approach to increase her targeted total direct compensation. Effective July 1, 2018, Mr. Jackman’s base salary was increased to $660,000 upon his promotion to President, and Mr. Bouck’s base salary was decreased to $50,000.
(2) Share based awards consist of (i) RSUs granted under the 2016 Plan and Old Waste Connections’ 2014 Incentive Award Plan, which was assumed by New Waste Connections on June 1, 2016 in connection with the completion of the Progressive Waste acquisition, and (ii) PSUs granted under the 2016 Plan. Amounts shown do not reflect compensation actually received by the NEO. Instead, the amounts shown are the grant date fair value of the awards computed in accordance with generally accepted accounting principles in the U.S., excluding estimates of forfeitures related to service-based vesting conditions. A discussion of the fair value of share awards is set forth under Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 14, 2019. The table below sets forth the details of the components that make up the fiscal year 2018 share awards for our NEOs. If the first-year performance hurdle is satisfied, annual RSU awards vest in four substantially equal annual installments beginning on the first anniversary of the grant date. As discussed in greater detail in “Compensation Discussion and Analysis – Recent Changes to Further Align Pay with Performance”, the Second Amendment provided for a grant to Mr. Mittelstaedt of a retention equity award having a grant date value of $9 million, subject to a three-year vesting schedule and a claw back provision if he voluntarily terminates his employment without Good Reason (as defined in the CEO Separation Benefits Plan) prior to February 13, 2023.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     37

 
    Components of Annual Share Awards  
        Value of   Value of  
    Value of Annual   Performance-Based   Retention Award of  
    Restricted Share   Restricted Share   Restricted Share  
    Units   Units   Units  
Name   ($)   ($)   ($)  
Ronald J. Mittelstaedt   1,475,430   794,408   8,999,935  
Mary Anne Whitney   285,544   153,766    
Worthing F. Jackman   684,123   368,417    
Darrell W. Chambliss   587,790   316,481    
Patrick J. Shea   399,776   215,286    
Steven F. Bouck   775,734   417,746    

 

(3) Amounts shown reflect annual incentive bonus awards earned by our NEOs under our MICP and awards earned by our NEOs under the Synergy Bonus Program, both of which were discussed and disclosed in our management information circular and proxy statement filed with the SEC and the securities commissions or similar regulatory authorities in Canada on April 12, 2017. The amounts shown for 2016 were paid on February 24, 2017. The table below sets forth the details of the components that make up the fiscal year 2016 Non-Equity Incentive Plan Compensation for our NEOs.

 

    Components of Fiscal Year 2016 Non-Equity Incentive Plan Compensation  
        Awards Under      
    Awards   Synergy Bonus      
    Under MICP   Program   Total  
Name   ($)   ($)   ($)  
Ronald J. Mittelstaedt   1,939,000   1,484,294   3,423,294  
Worthing F. Jackman   751,000   785,000   1,536,000  
Darrell W. Chambliss   653,000   716,000   1,369,000  
Patrick J. Shea   253,000   450,000   703,000  
Steven F. Bouck   862,000   1,430,000   2,292,000  

 

(4) We make available for business use to our NEOs and other employees a private aircraft. Our general policy is not to permit employees, including the NEOs, to use the aircraft for purely personal use. Occasionally, employees or their relatives or spouses, including relatives or spouses of the NEOs, may derive personal benefit from travel on our aircraft incidental to a business function, such as when an NEO’s spouse accompanies the officer to the location of an event the officer is attending for business purposes. For purposes of our Summary Compensation Table, we value the compensatory benefit to the officer at the incremental cost to us of conferring the benefit, which consists of additional catering and fuel expenses. In the example given, the incremental cost would be nominal because the aircraft would have been used to travel to the event, and the basic costs of the trip would have been incurred, whether or not the NEO’s spouse accompanied the officer on the trip. However, on the rare occasions when we permit an employee to use the aircraft for purely personal use, we value the compensation benefit to such employee (including NEOs) at the incremental cost to us of conferring the benefit, which consists of the average weighted fuel expenses, catering expenses, trip-related crew expenses, landing fees and trip-related hangar/parking costs. Since our aircraft is used primarily for business travel, the valuation excludes the fixed costs that do not change based on usage, such as pilots’ compensation, the lease expense of the aircraft and the cost of maintenance. Our valuation of personal use of aircraft as set forth in this proxy statement is calculated in accordance with SEC guidance, which may not be the same as valuation under applicable tax regulations.
   
  In 2018, All Other Compensation paid to our NEOs consisted of the following amounts:

 

 

        Company                          
        Contributions               Personal Use          
        Under   Life           of Corporate   Purely      
        Nonqualified   Insurance            Aircraft   Personal      
    Matching   Deferred   Premiums   Professional       Incidental   Use of   Total All  
    Contributions   Compensation   Paid by   Association       to Business   Corporate   “Other”  
    to 401(k)   Plan   Company (a)   Dues   Club Dues   Function   Aircraft   Compensation  
Name   ($)   ($)   ($)   ($)   ($)   ($)   ($)   ($)  
Ronald J. Mittelstaedt       4,127   1,117   8,593   675   45,872   60,384  
Mary Anne Whitney   6,831   2,419   4,206       169     13,625  
Worthing F. Jackman     9,250   3,924     8,593   259     22,026  
Darrell W. Chambliss   1,281   7,969   5,995   1,117     46     16,408  
Patrick J. Shea   4,125   5,125   2,976   1,752   8,593   71     22,642  
Steven F. Bouck   2,777     5,439   935   1,521   90     10,762  

 

(a) Amounts shown are paid by the Company in connection with life insurance policies made available to all participants in our Nonqualified Deferred Compensation Plan, including the NEOs.
   

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     38

 
(5) Amounts shown for 2016 exclude awards under the Synergy Bonus Program and excise tax gross-up payments, both of which were discussed and disclosed in our management information circular and proxy statement filed with the SEC and the securities commissions or similar regulatory authorities in Canada on April 12, 2017. The Synergy Bonus Program amounts were paid on February 24, 2017. In connection with the Progressive Waste acquisition, the NEOs were subject to an excise tax as the named executive officers of Old Waste Connections. The excise tax gross-up payment amounts represent the cost to Old Waste Connections of providing a gross-up payment with respect to that excise tax, which was payable on behalf of Old Waste Connections’ NEOs. These non-recurring payments resulted in no financial gain to the NEOs as the named executive officers of Old Waste Connections. The payments were made so that, on a net after-tax basis, the NEOs as the named executive officers of Old Waste Connections would be in the same position as if they had not been subject to the excise tax and put the NEOs as the named executive officers of Old Waste Connections in the same position as other equity compensation holders after the Progressive Waste acquisition. In addition to being disclosed in our management information circular and proxy statement filed with the SEC and the securities commissions or similar regulatory authorities in Canada on April 12, 2017, these payments were also disclosed in the proxy statement filed by Old Waste Connections with the SEC and by Progressive Waste with the securities commissions or other securities regulatory authorities in Canada on April 25, 2016, in connection with the advisory vote on compensatory arrangements, which was supported by proxy advisory firm ISS and approximately 85% of Old Waste Connections’ stockholders in the vote held on compensatory arrangements in connection with the stockholder meeting of Old Waste Connections held to approve the Progressive Waste acquisition.
   
  The table below sets forth the details of the Synergy Bonus Program amounts and the excise tax gross-up payments.

 

        Awards Under      
    Excise Tax Gross-Up   Synergy Bonus      
    Payment   Program   Total  
Name   ($)   ($)   ($)  
Ronald J. Mittelstaedt   5,502,641   1,484,294   6,986,935  
Worthing F. Jackman   1,343,831   785,000   2,128,831  
Darrell W. Chambliss   1,420,906   716,000   2,136,906  
Patrick J. Shea   517,384   450,000   967,384  
Steven F. Bouck   1,387,418   1,430,000   2,817,418  

 

(6) 2018 was the first year in which Ms. Whitney was a named executive officer.
(7) Effective July 1, 2018, Mr. Bouck stepped down as President of the Company.

 

CEO Pay Ratio

 

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the ratio of the annual total compensation, calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K (the “Annual Total Compensation”) of our median employee and the Annual Total Compensation of our CEO, Mr. Mittelstaedt.

 

For 2018, our last completed fiscal year, Mr. Mittelstaedt had 2018 annual total compensation of $13,665,549 as reflected in the Summary Compensation Table included in this proxy statement. For our median employee, we elected to use the employee who was determined to be the median employee in 2017 in accordance with the methodology described below, a commercial truck driver whose annual total compensation for 2018 was $54,624. The resulting ratio of our CEO’s pay to the pay of our median employee is approximately 250 to 1. Mr. Mittelstaedt’s total annual compensation included a retention equity award of $9,110,935, as reflected under the share-based award column in the Summary Compensation Table. For 2018, the annual total adjusted compensation for Mr. Mittelstaedt, excluding the retention equity award, was $4,554,614. The resulting ratio of our CEO’s adjusted pay to the pay of our median employee is approximately 83 to 1.

 

We have elected to disclose a supplemental ratio that includes the value of health and dental care benefits paid by the Company. Because these benefits are provided on a broad, non-discretionary basis, the value is not required to be reported in the Summary Compensation Table. However, if we were to add the value of these benefits, the total compensation of our CEO would increase by $18,975 and the total compensation of our median employee would increase by $18,231, and the resulting ratio of our CEO’s annual total compensation to the annual total compensation of our median employee would be approximately 188 to 1. Excluding the retention equity award described above, the resulting ratio would be 63 to 1.

 

As of December 31, 2018, our employee population consisted of 16,156 active employees, 7,830 of whom are commercial truck drivers. There were 13,483 employees located in the United States and 2,673 employees located in Canada. We applied a Canadian dollar to U.S. dollar exchange rate to the compensation paid in Canadian dollars based on the average exchange rate in 2018. We determined our median employee by examining 2018 W-2 box 5 amounts and foreign equivalent taxable income amounts for all of our full time and part time employees, excluding our CEO, who were employed by us on December 31, 2018. We did not include those employees on leave as of December 31, 2018. In addition, we did not include temporary agency employees whose compensation is determined by the agency and who are not considered our employees for purposes of the pay ratio calculation.

 

The pay ratios reported above are reasonable estimates calculated in a manner consistent with SEC rules, based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratios reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      39

 

Grants of Plan Based Awards in Fiscal Year 2018

 

The following table summarizes the amount of awards under the MICP and equity awards granted to our NEOs by the Company in 2018.

 

            Estimated Potential Payouts Under
Non-Equity Incentive Plan Awards (2)
  Estimated Future Payouts Under
Equity Incentive Plan Awards
  All Other Share
Awards: Number
  Grant Date
Fair Value
 
    Award   Grant   Threshold   Target   Maximum   Threshold   Target   Maximum   of Common
Shares or Units
  of Share
Awards
 
Name   Type (1)   Date   ($)   ($)   ($)   (#)   (#)   (#)   (#) (3)   ($) (4)  
Ronald J. Mittelstaedt   RSU   2/20/18               20,937   1,475,430  
    RSU   2/20/18                   8,999,935 (5)  
    PSU   2/20/18         2,818   11,273   28,182     794,408 (6)  
    MICP     222,870   1,114,350   2,228,700            
Mary Anne Whitney   RSU   2/20/18               4,052   285,544  
    PSU   2/20/18         545   2,182   5,455       153,766 (6)  
    MICP     40,000   200,000   400,000            
Worthing F. Jackman   RSU   2/20/18               9,708   684,123  
    PSU   2/20/18         2,091   5,228   13,070     368,417 (6)  
    MICP     105,600   528,000   1,056,000            
Darrell W. Chambliss   RSU   2/20/18               8,351   588,495  
    PSU   2/20/18         1,122   4,491   11,227     316,481 (6)  
    MICP     77,250   386,250   772,500            
Patrick J. Shea   RSU   2/20/18               5,673   399,776  
    PSU   2/20/18         763   3,055   7,637     215,286 (6)  
    MICP     42,000   210,000   420,000            
Steven F. Bouck   RSU   2/20/18               11,008   775,734  
    PSU   2/20/18         1,482   5,928   14,820     417,746 (6)  
    MICP                    

 

(1) “RSU” refers to restricted share units granted under the 2016 Plan. “PSU” refers to performance-based restricted share units granted under the 2016 Plan. “MICP” refers to cash awards made pursuant to our Management Incentive Compensation Program, which is administered pursuant to the 2016 Plan.
(2) In the case of the MICP, the target incentive amounts shown in this column reflect our annual incentive bonus plan awards under the MICP and represent the target awards pre-established as a percentage of salary. The maximum is the greatest payout which can be made if the pre-established maximum performance level is met or exceeded. Actual annual incentive bonus amounts earned by the NEOs for 2018 under the MICP are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
(3) Share awards consist of RSUs granted under the 2016 Plan on February 20, 2018. Assuming that the first-year performance hurdle is satisfied, which in the case of these grants it was, the RSUs vest in equal, annual installments over the four-year period following the date of grant, beginning on the first anniversary of the date of grant. See “Compensation Discussion and Analysis – Equity-Based Compensation” for more information regarding RSU awards.
(4) The value of a share award is based on the fair value as of the grant date of such award computed in accordance with generally accepted accounting principles in the U.S., excluding estimates of forfeitures related to service-based vesting conditions. A discussion of the fair value of share awards is set forth under Note 1 of the “Notes to Consolidated Financial Statements” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 14, 2019.
(5) As discussed in greater detail in “Compensation Discussion and Analysis – Recent Changes to Further Align Pay with Performance”, the Second Amendment provided for a grant to Mr. Mittelstaedt of a retention equity award having a grant date value of $9 million, subject to a three-year vesting schedule and a claw back provision if he voluntarily terminates his employment without Good Reason (as defined in the CEO Separation Benefits Plan) prior to February 13, 2023.
(6) Represents the range of possible awards of performance shares upon the vesting of PSUs granted in fiscal year 2018 under the 2016 Plan. Awards are capped at the maximum, and no awards will vest unless the pre-established threshold performance level is met or exceeded. The “Grant Date Fair Value of Share Awards” represents the value of PSUs based on the expected outcome as of the date of grant. This result is based on (i) achieving the target level of a return on invested capital, or ROIC; and (ii) achieving the target level of a free cash flow / share CAGR goal, each of which is weighted 50%. See “Equity-Based Compensation – Compensation Discussion and Analysis” for more information regarding PSU awards.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     40

 

Outstanding Equity Awards at 2018 Fiscal Year-End

 

The following table summarizes RSUs and other equity awards that have not vested and related information for each of our NEOs as of December 31, 2018.

 

            Share Awards  
                    Equity Incentive Plan   Equity Incentive Plan  
            Number of   Market Value of   Awards: Number of   Awards: Market or Payout  
            Shares or Units   Shares or Units   Unearned Shares, Units   Value of Unearned Shares,  
            That Have Not   That Have Not   or Other Rights That   Units or Other Rights That  
    Award   Grant   Vested   Vested   Have Not Vested   Have Not Vested  
Name   Type (1)   Date   (#)   ($) (7)   (#)   ($) (8)  
Ronald J. Mittelstaedt   RSU   02/12/15   16,672 (2)   1,237,896      
    RSU   02/11/16   26,365 (3)   1,957,601      
    RSU   02/24/17   18,661 (4)   1,765,129      
    RSU   02/20/18   20,937 (5)   1,554,572      
    RSU   02/20/18   127,713 (6)   9,482,690      
    PSU   02/24/17       13,398   994,802  
    PSU   02/20/18       11,273   837,020  
Mary Anne Whitney   RSU   02/12/15   2,239 (2)   166,246      
    RSU   02/11/16   3,589 (3)   266,483      
    RSU   02/24/17   2,696 (4)   200,178      
    RSU   02/20/18   4,052 (5)   300,861      
    PSU   02/24/17       1,935   143,674  
    PSU   02/20/18       2,182   162,014  
Worthing F. Jackman   RSU   02/12/15   6,613 (2)   491,015      
    RSU   02/11/16   10,682 (3)   793,139      
    RSU   02/24/17   8,320 (4)   617,760      
    RSU   02/20/18   9,708 (5)   720,819      
    PSU   02/24/17       5,973   443,495  
    PSU   02/20/18       5,228   388,179  
Darrell W. Chambliss   RSU   02/12/15   6,031 (2)   447,802      
    RSU   02/11/16   9,090 (3)   674,933      
    RSU   02/24/17   7,241 (4)   537,644      
    RSU   02/20/18   8,341 (5)   619,319          
    PSU   02/24/17       5,199   386,026  
    PSU   02/20/18       4,491   333,457  
Patrick J. Shea   RSU   02/12/15   3,927 (2)   291,580      
    RSU   02/11/16   6,110 (3)   453,668      
    RSU   02/24/17   4,876 (4)   362,043      
    RSU   02/20/18   5,673 (5)   421,220      
    PSU   02/24/17       3,501   259,949  
    PSU   02/20/18       3,055   226,834  

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     41

 
            Share Awards  
                    Equity Incentive Plan   Equity Incentive Plan  
            Number of   Market Value of   Awards: Number of   Awards: Market or Payout  
            Shares or Units   Shares or Units   Unearned Shares, Units   Value of Unearned Shares,  
            That Have Not   That Have Not   or Other Rights That   Units or Other Rights That  
    Award   Grant   Vested   Vested   Have Not Vested   Have Not Vested  
Name   Type (1)   Date   (#)   ($) (7)   (#)   ($) (8)  
Steven F. Bouck   RSU   02/12/15   8,026 (2)   595,931      
    RSU   02/11/16   12,383 (3)   919,438      
    RSU   02/24/17   9,551 (4)   709,162      
    RSU   02/20/18   11,008 (5)   817,344      
    PSU   02/24/17       6,858   509,207  
    PSU   02/20/18       5,928   440,154  

 

(1) “RSU” refers to restricted share units granted under either Old Waste Connections’ 2014 Incentive Award Plan or the 2016 Plan.
(2) Assuming that the first-year performance hurdle is satisfied, which in the case of these grants it was, the RSUs vest in equal installments on each of the first four anniversaries of the grant date of February 12, 2015.
(3) Assuming that the first-year performance hurdle is satisfied, which in the case of these grants it was, the RSUs vest in equal installments on each of the first four anniversaries of the grant date of February 11, 2016.
(4) Assuming that the first-year performance hurdle is satisfied, which in the case of these grants it was, the RSUs vest in equal installments on each of the first four anniversaries of the grant date of February 24, 2017.
(5) Assuming that the first-year performance hurdle is satisfied, which in the case of these grants it was, the RSUs vest in equal installments on each of the first four anniversaries of the grant date of February 20, 2018.
(6) As discussed in greater detail in “Compensation Discussion and Analysis – Recent Changes to Further Align Pay with Performance”, the Second Amendment provided for a grant to Mr. Mittelstaedt of a retention equity award having a grant date value of $9 million, subject to a three-year vesting schedule and a claw back provision if he voluntarily terminates his employment without Good Reason (as defined in the CEO Separation Benefits Plan) prior to February 13, 2023. The RSUs vest in three equal installments on each of the first three anniversaries of the grant date of February 20, 2018.
(7) Based on the closing price of Common Shares of $74.25 on the NYSE on December 31, 2018, the last trading day of the 2018 fiscal year.
(8) Represents unearned shares under the PSU awards granted in February 2017 and February 2018. Based on guidance provided by the SEC, the targeted potential number of shares for such grants has been assumed. The amounts shown include the full award for the performance period ending on December 31, 2019 and December 31, 2020. The PSUs will vest, if at all, within 15 business days following the date on which the determination by the Compensation Committee is made with respect to the achievement of the performance goals, but in no event shall the vesting be later than March 15, 2020 and March 15, 2021.

 

Shares Vested in Fiscal Year 2018

 

The following table summarizes each vesting of RSUs and related information for each of our NEOs on an aggregated basis during 2018.

 

    Share Awards
    Number of Shares   Value Realized  
    Acquired on Vesting   on Vesting  
Name   (#)   ($)  
Ronald J. Mittelstaedt   53,158   3,623,303  
Mary Anne Whitney   6,967   474,943  
Worthing F. Jackman   21,339   1,455,163  
Darrell W. Chambliss   19,018   1,297,024  
Patrick J. Shea   11,648   794,149  
Steven F. Bouck   25,624   1,747,324  

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT     42

 

Pension Benefits in Fiscal Year 2018

 

We do not sponsor any qualified or non-qualified defined benefit plans for any of our executive officers, including the NEOs.

 

Nonqualified Deferred Compensation in Fiscal Year 2018

 

The following table summarizes the participation of our NEOs during 2018 in our Nonqualified Deferred Compensation Plan, which is our only plan that provides for the deferral of compensation on a basis that is not tax-qualified.

 

Name   Executive
Contributions
in Last
Fiscal Year
($) (1)
    Registrant
Contributions
in Last
Fiscal Year
($) (1)
    Aggregate
Earnings in Last
Fiscal Year
($) (2)
    Aggregate
Withdrawals/
Distributions
($)
    Aggregate
Balance at
Last Fiscal
Year End
($) (3)
 
Ronald J. Mittelstaedt                 1,270,788             19,632,157  
Mary Anne Whitney     183,777       2,419       (42,261 )     (211,704 )     686,182  
Worthing F. Jackman     35,000       9,250       (10,987 )     (54,955 )     170,790  
Darrell W. Chambliss     40,000       7,969       23,813             4,340,472  
Patrick J. Shea     36,368       5,125       (37,962 )           428,378  
Steven F. Bouck     15,000             (31,971 )           1,909,891  
(1) Amounts in these columns represent base salary and cash annual incentive each NEO elected to defer and our annual matching contributions in lieu of matching contributions under our 401(k) plan. Contributions by an NEO are reported in the Summary Compensation Table under “Salary”, “Bonus” and/ or “Non-Equity Incentive Plan Compensation” and matching contributions we make to an NEO’s account are reported in the Summary Compensation Table under “All Other Compensation.” The Company does not make matching contributions on RSUs that were previously deferred into our Nonqualified Deferred Compensation Plan.
(2) Amounts in this column are not included in any other amounts disclosed in this proxy statement, as the amounts are not preferential earnings. Instead, earnings disclosed are determined by reference to the returns on one or more select mutual funds, as determined by the participant, that are also available for investment by the general public, or with regard to RSUs deferred into the Nonqualified Deferred Compensation Plan of Old Waste Connections (assumed by New Waste Connections on June 1, 2016 in connection with the Progressive Waste acquisition) in years prior to 2015, Common Shares. Beginning in 2015, participating employees were no longer permitted to defer RSU grants.
(3) Amounts shown in this column include the following amounts reported as compensation to the NEO in the Summary Compensation Table in either our or Old Waste Connections’ previous proxy statements or Annual Reports on Form 10-K:
  For Mr. Mittelstaedt, a total of $8,822,600 was reported (2005 to 2018);
  For Ms. Whitney, no amounts have previously been reported, as 2018 was the first year in which Ms. Whitney was an NEO.
  For Mr. Jackman, a total of $2,909,421 was reported (2005 to 2018);
  For Mr. Chambliss, a total of $1,660,710 was reported (2005 to 2018);
  For Mr. Shea, a total of $106,637 was reported (2015 to 2018) (2015 was the first year for which Mr. Shea was a named executive officer of Old Waste Connections); and
  For Mr. Bouck, a total of $1,759,395 was reported (2005 to 2018).

 

The NEOs and certain other highly compensated employees are entitled to participate in the Nonqualified Deferred Compensation Plan, which we put in place to mitigate the impact of our officers and other highly compensated employees being unable to make the maximum contribution permitted under the 401(k) plan due to certain limitations imposed by the IRC. The Nonqualified Deferred Compensation Plan allows an eligible employee to voluntarily defer receipt of up to 80% of the employee’s base salary, and up to 100% of bonuses and commissions and, prior to 2015, RSU grants made by Old Waste Connections and assumed by New Waste Connections on June 1, 2016, in connection with the completion of the Progressive Waste acquisition. Beginning in 2015, participating employees were no longer permitted to defer receipt of RSU grants. We make a matching contribution of 50% of every dollar of a participating employee’s pre-tax eligible contributions until the employee’s contributions equal six percent of the employee’s eligible compensation, less the amount of any match we make on behalf of the employee under the Company-sponsored 401(k) plan, and subject to certain deferral limitations imposed by the IRC on 401(k) plans. Our matching contributions are 100% vested when made. Except for RSUs that were previously deferred, the Company also credits an amount reflecting a deemed return to each participant’s deferred compensation account periodically, based on the returns of various mutual funds or measurement funds selected by the participant. RSUs that were previously deferred are credited as Common Shares, which had a 2018 annual rate of return of approximately 5.5%. The earnings on an employee’s deferred compensation may exceed or fall short of market rate returns, depending on the performance of the funds selected compared to the markets in general.

 

In addition, during 2017, the Company amended the Nonqualified Deferred Compensation Plan to allow any participant who has attained age 55, previously elected to defer RSUs, and also

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      43

 

elected to have his or her deferred RSUs distributed as a series of installment payments, to elect to have some or all of the portion of the participant’s account credited with RSUs instead credited with an investment in one or more of the measurement funds provided under the plan’s terms. The Company made this amendment to enable participants with deferred RSUs and who were approaching retirement age to diversify their investments within the plan.

 

The investment options offered by our plan administrator and their annual rates of return for the calendar year ended December 31, 2018, are set forth in the following table.

 

Name of Investment Option Rate of Return
in 2018
 
Invesco Mid Cap Core Equity -11.35%  
AllianceBern VPS Real Estate A -4.13%  
American Funds IS International 2 -13.13%  
American Century VP Mid Cap Value I -12.84%  
Franklin Rising Dividends Securities -5.07%  
Franklin Small Cap Value Securities CI2 -12.88%  
Goldman Sachs VIT Growth Opp -4.34%  
Ivy Funds VIP High Income -2.11%  
Janus Aspen Balanced Svc .43%  
M Capital Appreciation Fund -14.15%  
Oppenheimer International Growth -19.42%  
Pioneer Bond VCT Portfolio -.86%  
MFS Var Ins Tr II Intl Value SC -9.72%  
MFS VIT Value – SC -10.36%  
PIMCO VIT Real Return Admin -2.21%  
Van Eck VIP Trust Emerging Markets -23.49%  
Vanguard VIF Capital Growth -1.18%  
Dreyfus IP Small Cap Stock Index -8.97%  
T. Rowe Price Limited Term Bond 1.18%  
Van Eck VIP Tr Global Hard Assets I -28.28%  
Fidelity VIP Govt Money Market 1.65%  

 

Distributions from the Nonqualified Deferred Compensation Plan are automatically triggered by the occurrence of certain events. Upon termination of employment, a participant will receive a distribution from the plan in the form he previously selected—either in a lump sum or in annual installments over any period selected, up to fifteen years. Payments will commence within 60 days after the last day of the six-month period immediately following the termination date. If a participant becomes disabled, he will receive his entire account balance in a lump sum within 60 days of the date on which he became disabled. Upon the death of a participant during employment or while receiving his benefits under the plan following termination of employment, his unpaid account balance will be paid to his beneficiary in a lump sum within 60 days of the date the plan committee is notified of his death.

 

Participants also elect whether to receive a distribution of their entire account balance in a lump sum upon a change in control of the Company, as defined in the plan, or whether to have their account balance remain in the plan after a change in control. In the absence of such an election, a participant will receive a distribution after a change in control occurs. Participants may also choose to receive lump sum distributions of all or a portion of their account balances upon optional, scheduled distribution dates or upon an unforeseeable financial emergency. Optional distribution dates must be a January 1 (March 1 for deferred RSUs) that is at least three years after the end of the plan year in which the deferral election is made. Optional distributions may be postponed, subject to certain conditions specified in the plan. Distributions upon an unforeseeable financial emergency are also subject to certain restrictions specified in the plan.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      44

 

Equity Compensation Plan Information

 

The following is a summary of all of our equity compensation plans and individual arrangements that provide for the issuance of equity securities as compensation, as of December 31, 2018.

 

    (a)   (b)   (c)
Equity Compensation Plan Category   Number of securities to
be issued upon exercise
of outstanding warrants
and rights
    Weighted-average
exercise price of
outstanding warrants
and rights
    Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
 
Approved by shareholders (1)       2,052,234 (2)     $ 63.49 (3)       6,033,454 (4)  
Not approved by shareholders                  
TOTAL           $   (3)          
(1) Consists of the following plans approved by Old Waste Connections’ stockholders and Progressive Waste’s shareholders, as applicable, including the assumptions thereof by the Company: (a) the 2016 Plan; (b) the 2014 Incentive Award Plan of Old Waste Connections assumed by the Company on June 1, 2016; (c) the Third Amended and Restated 2004 Equity Incentive Plan of Old Waste Connections assumed by the Company on June 1, 2016; and (d) the Amended and Restated Share Option Plan adopted by Progressive Waste on July 22, 2009.
(2) Includes an aggregate of 1,251,937 RSUs, 532,086 PSUs, and 268,211 warrants.
(3) Excludes RSUs, PSUs and DSUs.
(4) The remaining 6,033,454 Common Shares reserved for issuance under the 2016 Plan will be issuable upon the exercise of future share option grants or warrants or pursuant to future restricted share, RSU or performance awards that vest upon the attainment of prescribed performance milestones or the completion of designated service periods. The board of directors of Old Waste Connections unanimously adopted resolutions in 2014 approving the reduction of the shares available for future issuance under the Third Amended and Restated 2004 Equity Incentive Plan to zero, and the Board of Directors and the Executive Committee of the Company unanimously adopted resolutions in 2016 and 2017 approving the reduction of shares available for future issuance under each of the 2014 Incentive Award Plan and the Amended and Restated Share Option Plan to zero, and as a result no further awards will be granted under the Third Amended and Restated 2004 Equity Incentive Plan, the 2014 Incentive Award Plan or the Amended and Restated Share Option Plan.

 

On June 1, 2016, the Board of Directors adopted the 2016 Plan, which was approved by Progressive Waste’s shareholders on May 26, 2016. On July 24, 2017, the Board of Directors approved certain housekeeping amendments to the 2016 Plan. On July 24, 2018, the Board of Directors approved certain additional housekeeping amendments to the 2016 Plan. None of the housekeeping amendment to the 2016 Plan require approval of the Company’s shareholders. A summary of the 2016 Plan is attached as Appendix B. The 2016 Plan, as amended, is administered by the Compensation Committee and provides that the aggregate number of Common Shares which may be issued from treasury pursuant to awards made under the 2016 Plan is 7,500,000 Common Shares, representing 2.85% (1) of our issued and outstanding Common Shares. Awards under the 2016 Plan may be made to employees, consultants and non-employee directors and may be made in the form of share options, warrants, restricted shares, RSUs, performance awards (which may be paid in cash, Common Shares, or a combination thereof), dividend equivalent awards (representing a right of the holder thereof to receive the equivalent value (which may be paid in cash or Common Shares) of dividends paid on Common Shares), and share payments (a payment in the form of Common Shares or a share option or other right to purchase Common Shares as part of a bonus, defined compensation or other arrangement). Non-employee directors are also eligible to be credited with DSUs, which represent the right to receive a cash payment or its equivalent in Common Shares (or a combination of cash and Common Shares), or which may at the time of grant be expressly limited to settlement only in cash and not in Common Shares.

 

As of December 31, 2018, DSUs, RSUs, PSUs and Warrants were the only forms of awards granted under the 2016 Plan. As of December 31, 2018, under the 2016 Plan, there were 9,546 DSUs outstanding, representing 0.004% of our Common Shares then issued and outstanding, 718,717 RSUs outstanding, representing 0.273% of our Common Shares then issued and outstanding, 355,056 PSUs outstanding, representing 0.135% of our Common Shares then issued and outstanding, 200,732 Warrants outstanding, representing 0.076% of our Common Shares then issued and outstanding, and 6,033,454 awards remained available for grant, representing 2.29% of our Common Shares then issued and outstanding.

 

The annual burn rate under the 2016 Plan for the fiscal years ended 2017 and 2018 was 0.253% and 0.268%, respectively. The annual burn rate is calculated as (x) the number of securities ( i.e. , DSUs, RSUs, PSUs and Warrants) granted thereunder during the applicable fiscal year, divided by (y) the weighted average number of shares outstanding in 2018, calculated in accordance with the CPA Canada Handbook.

 

(1) Based on 263,664,807 Common Shares outstanding as of the Record Date.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      45

 

Potential Payments upon Termination or Change in Control

 

Severance Arrangements in Effect in 2018

 

Our NEOs are entitled to certain payments and benefits upon qualifying terminations of employment and, in certain cases, a change in control under the Separation Benefits Plans. The following discussion describes the terms of these payments and benefits and the circumstances in which they will be paid or provided.

 

CEO SEPARATION BENEFITS PLAN

 

Mr. Mittelstaedt is eligible to receive severance benefits and change in control payments pursuant to the CEO Separation Benefits Plan. The current term under the CEO Separation Benefits Plan ends on February 13, 2023. During this term, Mr. Mittelstaedt will continue to serve as the Chairman of the Board and Chief Executive Officer of the Company and its subsidiaries, or, at his election and upon written notice to the Board, end his role as CEO and begin the role of Executive Chairman of the Company’s Board of Directors. The CEO Separation Benefits Plan provided for a retention equity award, with a value of $9 million on February 20, 2018 (the grant date), that is currently one-third vested (out of a three-year graded vesting schedule). The retention equity award includes a claw back provision if Mr. Mittelstaedt resigns without Good Reason (as defined in the CEO Separation Benefits Plan) prior to February 13, 2023.

 

Under the terms of the CEO Separation Benefits Plan, Mr.  Mittelstaedt is entitled to receive, upon a termination by us without “cause” (as defined), or resignation by Mr. Mittelstaedt for “good reason” (as defined) prior to a change in control (as defined) or upon a termination due to death or permanent disability: (i) a lump-sum cash payment equal to $7,500,000, payable on or within 60 days following the date of his termination; (ii) coverage under our group medical insurance of Mr. Mittelstaedt and his eligible dependents for three years following termination, provided that Mr. Mittelstaedt will be obligated to pay the Company for the employee-portion of the premiums for such coverage on an after-tax basis (the “Health Insurance Benefit”); (iii) accelerated vesting of all of Mr. Mittelstaedt’s outstanding but unvested time-based equity awards; (iv) the designated performance goals for Mr. Mittelstaedt’s performance-based equity awards shall be deemed to have been satisfied (and, for any award with different levels of potential payment, such performance shall be deemed to be at the target level), any remaining vesting conditions shall be deemed to be satisfied on Mr. Mittelstaedt’s date of termination and such awards shall be settled as soon as administratively practicable thereafter; and (v) with respect to any outstanding share options held by Mr. Mittelstaedt, an extended post-termination exercise period through the earlier of the fifth anniversary of Mr. Mittelstaedt’s date of termination or the expiration date of such share options pursuant to their original terms.

 

Upon a termination by us without cause or resignation by Mr. Mittelstaedt for good reason within two years after a change in control, Mr. Mittelstaedt is entitled to receive a lump-sum cash payment equal to $7,500,000, payable on or within 60 days following the date of his termination and the Health Insurance Benefit. Further, the CEO Separation Benefits Plan includes a so-called “best pay” provision where payments and benefits provided on account of a change in control shall be made to Mr. Mittelstaedt in full or in such lesser amount as would result in no portion of the payments being subject to an excise tax under Section 280G and Section 4999 of the IRC, whichever of the foregoing amounts is greater on an after-tax basis.

 

In consideration of the severance benefits under the CEO Separation Benefits Plan, Mr. Mittelstaedt must abide by certain restrictive covenants in the CEO Separation Benefits Plan, including a commitment by Mr. Mittelstaedt not to compete in restricted territory with our competitors and not to solicit our customers or employees (with a few limited exceptions with respect to certain of our executive officers) for 12 months following the date of Mr. Mittelstaedt’s termination of employment. Additionally, in the event of certain terminations of employment, Mr.  Mittelstaedt is eligible to receive an amount equal to $7,000,000 in a lump sum on the first anniversary of the date of his termination if the Company determines, in its discretion, to extend the post-termination restrictive covenant period from 12 months to 24 months after his termination of employment. As a condition to his receipt of any severance benefits, Mr. Mittelstaedt is required to release and waive (and not revoke) all claims against the Company and its subsidiaries, subject to certain exceptions.

 

On October 17, 2018, the Company and Mr. Mittelstaedt entered into an amendment to the CEO Separation Benefits Plan which, among other changes, amends (i) the definitions and descriptions relating to cause, death, disability, and good reason to align with the changes to the Separation Benefits Plan described in more detail below, (ii) the benefits provided upon termination without cause, (iii) the indemnification provision, and (iv) miscellaneous administrative provisions, including but not limited to amendments related to the Department of Labor’s new disability claims regulations.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      46

 

SEPARATION BENEFITS PLAN FOR OTHER NEOs

 

Our NEOs, other than Mr. Mittelstaedt, are eligible to receive certain separation benefits and change in control payments pursuant to the letter participation agreements under the Separation Benefits Plan that were entered into on August 30, 2018 with respect to Mr. Jackman and October 19, 2018 for our remaining NEOs. The participation letter agreement pursuant to the Separation Benefits Plan for Mr. Shea supersedes and replaces his prior employment agreement with Old Waste Connections entered into on February 1, 2008, as amended November 12, 2008.

 

Under the terms of the Separation Benefits Plan and their respective participation letter agreements, each of Messrs. Jackman and Chambliss are entitled to receive, upon a termination by us without “cause” or resignation by such NEO for “good reason” prior to a change in control: (i) a cash payment equal to $3,900,000 (for Mr. Jackman), $3,300,000 (for Mr. Chambliss), payable one-third on the termination date and, provided that the applicable NEO has complied with the non-competition and non-solicitation provisions of the Separation Benefits Plan, one-third on each of the first and second anniversaries of the termination date; (ii) full accelerated vesting of the applicable NEO’s outstanding but unvested time-based equity awards; (iii) the designated performance goals of the applicable NEO’s performance-based equity awards shall be deemed to have been satisfied (and, for any award with different levels of potential payment, such performance shall be deemed to be at the target level), any remaining vesting conditions shall be deemed to be satisfied on the NEO’s date of termination and such awards shall be settled as soon as administratively practicable thereafter; and (iv) with respect to any outstanding share options held by the applicable NEO, an extended post-termination exercise period through the earlier of the third anniversary of the termination date or the expiration of the original term of such share options. For Mr. Shea and Ms. Whitney, each are entitled to receive a cash payment equal to (i) then-current base salary, and (ii) an amount equal to the target bonus for the year in which the termination occurs, which is 50% of his or her base salary at the time of termination, payable in installments over the 12-month period following termination. The Company would also pay to Mr. Shea and Ms. Whitney an amount equal to the Company’s portion (but not the NEO’s portion) of the cost of medical, dental and other health plan insurance for the NEO (as well as the NEO’s spouse and children) at the rate in effect on the date of termination for a period of one year from the date of termination (the “NEO Health Insurance Benefit”). In addition, the Company would pay as incurred the NEO’s expenses, up to $15,000, associated with career counseling and resume development (the “Outplacement Benefit”). In addition, Mr. Shea and Ms. Whitney would each be entitled to full accelerated vesting of all of the NEO’s outstanding but unvested share options, if any, and other equity awards, including unvested RSUs, as well as an extended post-termination exercise period, with respect to any such share options, through the earlier of (A) the expiration of the term of such share options and rights or (B) the third anniversary of the date of termination. As a condition to an NEO’s receipt of any severance benefits under the Separation Benefits Plan, the NEO is required to release and waive (and not revoke) all claims against the WCI Group. The Separation Benefits Plan defines “WCI Group” as the Company, Old Waste Connections and each of their subsidiaries and affiliates.

 

Messrs. Jackman, Shea, and Chambliss and Ms. Whitney are also entitled to the foregoing benefits if such NEO’s employment is terminated as a result of the NEO’s death, except that the estate shall not receive the NEO Health Insurance Benefit or the Outplacement Benefit. In the event of a termination of employment due to disability, each of Messrs. Jackman and Chambliss are entitled to receive the benefits described above, to be paid onethird on the date of termination and, provided that the applicable NEO has complied with the non-competition and non-solicitation provisions of the Separation Benefits Plan, one-third on each of the first and second anniversaries of the date of termination. For Mr. Shea and Ms. Whitney, upon termination of employment due to disability, the NEO is entitled to receive the benefits described above for termination without cause with the exception of the Outplacement Benefit, to be paid in installments over a 12-month period post-termination.

 

Upon a termination by us without cause or resignation by the NEO for good reason within two years after a change in control, Messrs. Jackman, Shea, and Chambliss and Ms. Whitney are each entitled to receive the benefits described above for termination without cause, payable in a lump sum on or within 60 days following the date of termination. Further, the Separation Benefits Plan includes a so-called “best pay” provision where payments and benefits provided on account of a change in control shall be made to such participating NEOs in full or in such lesser amount as would result in no portion of the payments being subject to an excise tax under Section 280G and Section 4999 of the IRC, whichever of the foregoing amounts is greater on an after-tax basis.

 

In consideration of the above severance benefits, Messrs. Jackman, Shea, and Chambliss and Ms. Whitney must abide by certain restrictive covenants in the Separation Benefits Plan, including a commitment by the NEO not to compete with the Company in a restricted territory and not to solicit our customers or employees for 12 months following the date of such NEO’s termination of employment.

 

For purposes of the Separation Benefits Plans, “good reason” is generally defined as: (i) assignment to the NEO of duties inconsistent with and resulting in a diminution of the NEO’s position (including status, offices, titles, responsibilities and reporting requirements), authority, duties or responsibilities as they existed on the effective date of the Separation Benefits Plans; or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities; a substantial alteration in the title(s) of the NEO (so long as the existing corporate structure of the WCI Group is maintained); provided, however, that the NEO’s failure to be in the same position (including status, offices, titles, responsibilities and reporting requirements) with the ultimate parent of Old Waste Connections will constitute “good reason”; (ii) the relocation of the NEO’s principal place of employment to a location more than fifty (50) miles from its present

 

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location without the NEO’s prior approval; (iii) a material reduction by the Company in the NEO’s total annual cash compensation (base and bonus) without the NEO’s prior approval; (iv) on or after a change in control, a material reduction by the Company in the NEO’s total annual compensation (base, bonus, and equity opportunities) without the NEO’s prior approval; (v) a failure by the WCI Group to continue in effect, without substantial change, any benefit plan or arrangement in which the NEO was participating or the taking of any action by the WCI Group which would adversely affect the NEO’s participation in or materially reduce the NEO’s benefits under any benefit plan (unless such changes apply equally to all other management employees of the Company); (vi) any material breach by the Company of any provision of the Separation Benefits Plans without the NEO having committed any material breach of the NEO’s obligations thereunder, which breach is not cured within twenty (20) days following written notice thereof to Old Waste Connections of such breach; or (vii) the failure of the Company to obtain the assumption of the plan by any successor entity that causes the NEO to be employed by an entity that is not a member of the WCI Group.

 

For the purposes of the Separation Benefits Plans, “cause” is defined as: (i) a material breach of any of the terms of the agreement or any other agreement with the Company or any member of the WCI Group or any policy of the WCI Group; (ii) a breach of any of the provisions of the confidentiality, property, non-competition and non-solicitation provisions of the Separation Benefits Plan; (iii) gross negligence or willful misconduct of a material nature in connection with the performance of the NEO’s duties; (iv) conviction of (or pleading guilty or no contest or nolo contendere to) a felony; or (v) intentional act of dishonesty or misappropriation (or attempted misappropriation) of property belonging to the Company or any member of the WCI Group. For Messrs. Mittelstaedt, Jackman, and Chambliss, the Company shall provide written notice and a period to cure a failure or breach constituting cause. Further, for the purposes of the Separation Benefits Plans, a “change in control” is deemed to have occurred if:

 

there shall be consummated (a) any reorganization, liquidation or consolidation of the Company, or any merger or other business combination of the Company with any other corporation, other than any such merger or other business combination that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction; or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or
any person (as defined in Section 13(d) and 14(d) of the Exchange Act), shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the Company’s outstanding voting securities; or
during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board of Directors shall cease for any reason to constitute at least one-half of the membership thereof unless the election, or the nomination for election by the Company’s shareholders, of each new director was approved by a vote of at least one-half of the directors then still in office who were directors at the beginning of the period.

 

For the participation letter agreements under the Separation Benefits Plan for Ms. Whitney and Mr. Shea, “change in control” shall also include:

 

(i) any “person” (as defined in Section 13(d) and 14(d) of the Exchange Act), shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the outstanding voting securities of a subsidiary of the Company that owns all or substantially all of the WCI Group’s United States operations;
(ii) there is a reorganization, merger or other business combination of a subsidiary of the Company that owns all or substantially all of the WCI Group’s United States operations with any other corporation, other than any such merger or other combination that would result in the voting securities of the subsidiary outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the subsidiary or such surviving entity outstanding immediately after such transaction; or
(iii) there is a direct or indirect sale, lease, exchange or other transfer (in one transaction or a series of related transactions) by the WCI Group of all, or substantially all, of its United States operations.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      48

 

Potential Payments Tables

 

The following tables estimate the payments we would be obligated to make to each of our NEOs as a result of the NEO’s termination (including, in certain cases, in connection with a change in control of the Company) or resignation, assuming such termination or resignation occurred on December 31, 2018. We have calculated the estimated payments to meet SEC disclosure requirements. The estimated payments are not necessarily indicative of the actual amounts any of our NEOs would receive in such circumstances.

 

For illustrative purposes only, the tables assume that: (a) a termination or resignation of employment occurred on December 31, 2018, as applicable; and (b) the price per share of the Common Shares is $74.25, the closing price on December 31, 2018 on the NYSE, the last trading day of the 2018 fiscal year.

 

In addition to the amounts reflected in the tables, on termination of employment, all vested deferred compensation and other retirement benefits payable to the employee under benefit plans in which he then participated would be paid to the NEO in accordance with the provisions of the respective plans. These plans include our voluntary 401(k) plan and our Nonqualified Deferred Compensation Plan.

 

RONALD J. MITTELSTAEDT, CHIEF EXECUTIVE OFFICER AND BOARD CHAIRMAN

 

    Termination
for Cause or
by Employee
Without Good
Reason Not
Subject to
Optional
Restricted
Period
      Termination
for Cause or
by Employee
Without Good
Reason Subject
to Optional
Restricted
Period
      Termination
Without Cause,
on Disability or
by Employee For
Good Reason
Not Subject
to Optional
Restricted Period
      Termination
Without Cause,
on Disability or
by Employee
For Good
Reason Subject
to Optional
Restricted Period
      Termination
on Death
      Termination
in Connection
with Change
in Control
   
Base Salary   $ (1)     $ (1)     $ (5)     $ (5)     $ (5)     $ (5)  
Bonus     (2)       (2)       (6)       (6)       (6)       (6)  
Severance Payment            7,000,000 (4)       7,556,925 (7)       14,556,925 (9)       7,556,925 (7)       7,556,925 (7)  
Unvested Share Options, Restricted Share Units and Other Equity in Company     (3)       (3)       17,450,161 (8)       17,450,161 (8)       17,450,161 (8)       17,450,161 (10)  
TOTAL   $       $ 7,000,000       $ 25,007,086       $ 32,007,086       $ 25,007,086       $ 25,007,086    
(1) Reflects the employee’s base salary to the date of termination, paid in a lump sum, which is assumed to have been paid in full.
(2) Employee will forfeit his bonus for the year in which such a termination occurs.
(3) All of employee’s unvested share options, RSUs, PSUs and other equity awards will be forfeited upon such a termination.
(4) Reflects the payment owed pursuant to the CEO Separation Benefits Plan if the Company determines, in its discretion, to extend the post-termination restrictive covenant period from 12 months to 24 months after his termination of employment.
(5) Reflects that, in lieu of the employee’s base salary, the employee will receive a lump sum payment pursuant to the terms of the CEO Separation Benefits Plan, payable within 60 days of the date of termination.
(6) Reflects that, in lieu of the employee’s bonus, the employee will receive a lump sum payment pursuant to the terms of the CEO Separation Benefits Plan payable within 60 days of the date of termination.
(7) Reflects the sum of: (i) $7,500,000, and (ii) the employee’s Health Insurance Benefit.
(8) Reflects the immediate vesting of all of employee’s outstanding but unvested share options, RSUs. PSUs and other equity awards as of the date of termination. The exercisability of any such share options will be extended to the earlier of the expiration of the term of such share options or the fifth anniversary of the date of termination. No value for the extension was included since Mr. Mittelstaedt does not currently hold any share options.
(9) Reflects the sum of: (i) $7,500,000, (ii) the employee’s Health Insurance Benefit, and (iii) the payment owed pursuant to the CEO Separation Benefits Plan if the Company determines, in its discretion, to extend the post-termination restrictive covenant period from 12 months to 24 months after his termination of employment.
(10) Reflects the immediate vesting of all of employee’s outstanding but unvested share options, RSUs, PSUs and other equity awards as of the date of termination. Pursuant to the CEO Separation Benefits Plan, in the event of a change in control followed by a termination of Mr. Mittelstaedt’s employment by the Company without cause or by Mr. Mittelstaedt for good reason, in each case within two years of the change in control, outstanding but unvested RSUs and PSUs shall automatically vest in full, and the shares subject to those vested RSUs and PSUs shall be issued.

 

WASTE CONNECTIONS, INC.   |  2019 PROXY STATEMENT      49

 

MARY ANNE WHITNEY, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

 

    Termination
for Cause
      Termination
Without Cause
      Termination
on Disability
      Termination
on Death
      Termination
by Employee
      Termination
in Connection
with Change in
Control
   
Base Salary   $ (1)     $ 400,000       $ 400,000       $ 400,000       $ (1)     $ 400,000    
Bonus     (2)       200,000         200,000         200,000         (2)       200,000    
Severance             33,975 (4)       18,975 (5)       (5)               33,975 (4)  
Payment