UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
x | Preliminary Proxy Statement |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
¨ | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to §240.14a-12 |
CARNIVAL CORPORATION
CARNIVAL plc
(Name of Registrants as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1) | Title of each class of securities to which transaction applies: |
2) | Aggregate number of securities to which transaction applies: |
3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
4) | Proposed maximum aggregate value of transaction: |
5) | Total fee paid: |
¨ | Fee paid previously with preliminary materials. |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1) | Amount previously paid: |
2) | Form, Schedule or Registration Statement No.: |
3) | Filing Party: |
4) | Date Filed: |
NOTICE OF 2015 ANNUAL MEETINGS OF
SHAREHOLDERS AND PROXY STATEMENT
Meeting Date:
Tuesday, April 14, 2015
At 2:00 p.m. (BST)
Meeting Place:
Church House Conference Centre
Deans Yard
Westminster, London SW1P 3NZ
United Kingdom
February 20, 2015
MICKY ARISON
Chairman of the Boards
To our Shareholders:
It is my pleasure to invite you to attend our joint annual meetings of shareholders at Church House Conference Centre, Deans Yard, Westminster, London SW1P 3NZ, United Kingdom on Tuesday, April 14, 2015. The meetings will commence at 2:00 p.m. (BST), and although there are technically two separate meetings (the Carnival plc meeting will begin first), shareholders of Carnival Corporation may attend the Carnival plc meeting and vice-versa. We plan to continue to rotate the location of the annual meetings between the United Kingdom and the United States each year in order to accommodate shareholders on both sides of the Atlantic.
We are also pleased to offer an audio webcast of the annual meetings at www.carnivalcorp.com or www.carnivalplc.com.
Details regarding the matters to be voted on are contained in the attached notices of annual meetings of shareholders and proxy statement. Because of the DLC arrangement, all voting will take place on a poll (or ballot).
Your vote is important. We encourage you to vote by proxy, even if you plan to attend the meeting.
The boards of directors consider voting in favor of Proposals 1 through 17 to be in the best interests of Carnival Corporation & plc and its shareholders. Accordingly, the boards of directors unanimously recommend that you cast your vote FOR Proposals 1 through 17.
Thank you for your ongoing interest in, and continued support of, Carnival Corporation & plc.
Sincerely,
Micky Arison
3655 N.W. 87th Avenue
Miami, Florida 33178
NOTICE OF ANNUAL MEETING OF CARNIVAL CORPORATION SHAREHOLDERS
DATE |
Tuesday, April 14, 2015 |
TIME |
2:00 p.m. (BST), being 9:00 a.m. (EDT) |
The Carnival Corporation annual meeting will start directly following |
the annual general meeting of Carnival plc.
PLACE |
Church House Conference Centre |
Deans Yard
Westminster, London SW1P 3NZ
United Kingdom
WEBCAST |
www.carnivalcorp.com or www.carnivalplc.com |
ITEMS OF BUSINESS |
Election of nine directors named in the proxy statement |
1. | To re-elect Micky Arison as a director of Carnival Corporation and as a director of Carnival plc; |
2. | To re-elect Sir Jonathon Band as a director of Carnival Corporation and as a director of Carnival plc; |
3. | To re-elect Arnold W. Donald as a director of Carnival Corporation and as a director of Carnival plc; |
4. | To re-elect Richard J. Glasier as a director of Carnival Corporation and as a director of Carnival plc; |
5. | To re-elect Debra Kelly-Ennis as a director of Carnival Corporation and as a director of Carnival plc; |
6. | To re-elect Sir John Parker as a director of Carnival Corporation and as a director of Carnival plc; |
7. | To re-elect Stuart Subotnick as a director of Carnival Corporation and as a director of Carnival plc; |
8. | To re-elect Laura Weil as a director of Carnival Corporation and as a director of Carnival plc; |
9. | To re-elect Randall J. Weisenburger as a director of Carnival Corporation and as a director of Carnival plc; |
Other items of business |
10. | To re-appoint the UK firm of PricewaterhouseCoopers LLP as independent auditors for Carnival plc and to ratify the selection of the U.S. firm of PricewaterhouseCoopers LLP as the independent registered certified public accounting firm for Carnival Corporation; |
11. | To authorize the Audit Committee of Carnival plc to agree the remuneration of the independent auditors of Carnival plc; |
12. | To receive the UK accounts and reports of the directors and auditors of Carnival plc for the year ended November 30, 2014 (in accordance with legal requirements applicable to UK companies); |
13. | To approve the fiscal 2014 compensation of the named executive officers of Carnival Corporation & plc (in accordance with legal requirements applicable to U.S. companies); |
14. | To approve the Carnival plc Directors Remuneration Report for the year ended November 30, 2014 (in accordance with legal requirements applicable to UK companies); |
15. | To approve the giving of authority for the allotment of new shares by Carnival plc (in accordance with customary practice for UK companies); |
16. | To approve the disapplication of pre-emption rights in relation to the allotment of new shares by Carnival plc (in accordance with customary practice for UK companies); |
17. | To approve a general authority for Carnival plc to buy back Carnival plc ordinary shares in the open market (in accordance with legal requirements applicable to UK companies desiring to implement share buy back programs); and |
18. | To transact such other business as may properly come before the meeting. |
RECORD DATE |
You are entitled to vote your Carnival Corporation shares if you were a shareholder at the close of business on February 13, 2015. |
MEETING ADMISSION |
Attendance at the meeting is limited to shareholders and their duly appointed proxies or corporate representatives. Each attendee may be asked to present valid government-issued picture identification, such as a drivers license or passport. Shareholders holding shares in brokerage accounts (under a street name) will need to bring a copy of a brokerage statement reflecting share ownership as of the record date (February 13, 2015). Due to security measures, all bags will be subject to search, and all persons who attend the meeting will be subject to a metal detector and/or a hand wand search. We will be unable to admit anyone who does not comply with these security procedures. |
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VOTING BY PROXY |
Please submit a proxy as soon as possible so that your shares can be voted at the meeting in accordance with your instructions. For specific instructions, please refer to the Questions and Answers beginning on page 9 of this proxy statement and the instructions on your proxy card. |
On behalf of the Board of Directors
ARNALDO PEREZ
General Counsel & Secretary
Carnival Corporation is continuing to take advantage of U.S. Securities and Exchange Commission (SEC) rules that allow it to deliver proxy materials over the Internet. Under these rules, Carnival Corporation is sending its shareholders a one-page notice regarding the Internet availability of proxy materials instead of a full set of proxy materials, unless they previously requested to receive printed copies. If you receive this one-page notice, you will not receive printed copies of the proxy materials unless you specifically request them. Instead, this notice tells you how to access and review on the Internet all of the important information contained in the proxy materials. This notice also tells you how to submit your proxy card on the Internet and how to request to receive a printed copy of the proxy materials. All Carnival Corporation shareholders are urged to follow the instructions in the notice and submit their proxy promptly. If you receive a printed copy of the proxy materials, the accompanying envelope for return of the proxy card requires no postage. Any shareholder attending the meeting in London, United Kingdom may personally vote on all matters that are considered, in which event the previously submitted proxy will be revoked.
Notice and electronic delivery of this proxy statement and accompanying proxy card are being provided on or about March 5, 2015.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETINGS TO BE HELD ON APRIL 14, 2015:
THIS PROXY STATEMENT AND THE CARNIVAL CORPORATION & PLC ANNUAL REPORT ARE AVAILABLE AT
www.carnivalcorp.com and www.carnivalplc.com
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THIS NOTICE OF ANNUAL GENERAL MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN ANY DOUBT AS TO ANY ASPECT OF THE PROPOSALS REFERRED TO IN THIS DOCUMENT OR AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD IMMEDIATELY CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORIZED UNDER THE UK FINANCIAL SERVICES AND MARKETS ACT 2000.
IF YOU HAVE SOLD OR OTHERWISE TRANSFERRED ALL YOUR SHARES IN CARNIVAL PLC, PLEASE SEND THIS DOCUMENT AND THE ACCOMPANYING DOCUMENTS TO THE PURCHASER OR TRANSFEREE OR TO THE STOCKBROKER, BANK OR OTHER AGENT THROUGH WHOM THE SALE OR TRANSFER WAS EFFECTED FOR TRANSMISSION TO THE PURCHASER OR TRANSFEREE.
(incorporated and registered in England and Wales under number 4039524)
Carnival House
100 Harbour Parade
Southampton SO15 1ST
United Kingdom
NOTICE OF ANNUAL GENERAL MEETING OF CARNIVAL PLC SHAREHOLDERS
NOTICE IS HEREBY GIVEN that an ANNUAL GENERAL MEETING of Carnival plc will be held at Church House Conference Centre, Deans Yard, Westminster, London SW1P 3NZ, United Kingdom on Tuesday, April 14, 2015 at 2:00 p.m. (BST), being 9:00 a.m. (EDT), for the purpose of considering and, if thought fit, passing the resolutions described below:
| Proposals 1 through 15 will be proposed as ordinary resolutions. For ordinary resolutions, the required majority is more than 50% of the combined votes cast at this meeting and Carnival Corporations annual meeting. |
| Proposals 16 and 17 will be proposed as special resolutions. For special resolutions, the required majority is not less than 75% of the combined votes cast at this meeting and Carnival Corporations annual meeting. |
Re-election of nine directors named in this proxy statement
1. | To re-elect Micky Arison as a director of Carnival Corporation and as a director of Carnival plc. |
2. | To re-elect Sir Jonathon Band as a director of Carnival Corporation and as a director of Carnival plc. |
3. | To re-elect Arnold W. Donald as a director of Carnival Corporation and as a director of Carnival plc. |
4. | To re-elect Richard J. Glasier as a director of Carnival Corporation and as a director of Carnival plc. |
5. | To re-elect Debra Kelly-Ennis as a director of Carnival Corporation and as a director of Carnival plc. |
6. | To re-elect Sir John Parker as a director of Carnival Corporation and as a director of Carnival plc. |
7. | To re-elect Stuart Subotnick as a director of Carnival Corporation and as a director of Carnival plc. |
8. | To re-elect Laura Weil as a director of Carnival Corporation and as a director of Carnival plc. |
9. | To re-elect Randall J. Weisenburger as a director of Carnival Corporation and as a director of Carnival plc. |
Re-appointment and remuneration of Carnival plc auditors and ratification of Carnival Corporation auditors
10. | To re-appoint the UK firm of PricewaterhouseCoopers LLP as independent auditors of Carnival plc and to ratify the selection of the U.S. firm of PricewaterhouseCoopers LLP as the independent registered certified public accounting firm of Carnival Corporation. |
11. | To authorize the Audit Committee of the board of directors of Carnival plc to agree the remuneration of the independent auditors of Carnival plc. |
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Accounts and Reports
12. | To receive the UK accounts and the reports of the directors and auditors of Carnival plc for the year ended November 30, 2014. |
Executive Compensation
13. | To approve the fiscal 2014 compensation of the named executive officers of Carnival Corporation & plc (in accordance with legal requirements applicable to U.S. companies). |
Directors Remuneration Report
14. | To approve the Carnival plc Directors Remuneration Report as set out in the annual report for the year ended November 30, 2014. |
Allotment of shares
15. | THAT the directors of Carnival plc be and they are hereby authorized to allot shares in Carnival plc and to grant rights to subscribe for or convert any security into shares in Carnival plc: |
(a) | up to a nominal amount of $119,549,058 (such amount to be reduced by the nominal amount allotted or granted under paragraph (b) below in excess of such sum); and |
(b) | up to a nominal amount of $239,098,117 (such amount to be reduced by any allotments or grants made under paragraph (a) above) in connection with an offer by way of a rights issue: |
(i) | to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and |
(ii) | to holders of other equity securities as required by the rights of those securities or as the directors of Carnival plc otherwise consider necessary, |
and so that the directors of Carnival plc may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter, such authorities to apply until the end of next years Carnival plc annual general meeting (or, if earlier, until the close of business on July 13, 2016) but, in each case, during this period Carnival plc may make offers and enter into agreements which would, or might, require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after the authority ends and the directors of Carnival plc may allot shares or grant rights to subscribe for or convert securities into shares under any such offer or agreement as if the authority had not ended.
Disapplication of pre-emption rights
16. | THAT, subject to Proposal 15 passing, the directors of Carnival plc be given power to allot equity securities (as defined in the UK Companies Act 2006 (the Companies Act 2006)) for cash under the authority given by that resolution and/or to sell ordinary shares held by Carnival plc as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such power to be limited: |
(a) | to the allotment of equity securities and sale of treasury shares for cash in connection with an offer of, or invitation to apply for, equity securities (but in the case of the authority granted under paragraph (b) of Proposal 15, by way of a rights issue only): |
(i) | to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and |
(ii) | to holders of other equity securities, as required by the rights of those securities, or as the directors of Carnival plc otherwise consider necessary, |
and so that the directors of Carnival plc may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and
(b) | in the case of the authority granted under paragraph (a) of Proposal 15 and/or in the case of any sale of treasury shares for cash, to the allotment (otherwise than under paragraph (a) above) of equity securities or sale of treasury shares up to a nominal amount of $17,932,359, |
such power to apply until the end of next years annual general meeting (or, if earlier, until the close of business on July 13, 2016) but, in each case, during this period Carnival plc may make offers, and enter into agreements, which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the directors of Carnival plc may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended.
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General authority to buy back Carnival plc ordinary shares
17. | THAT Carnival plc be and is generally and unconditionally authorized to make market purchases (within the meaning of Section 693(4) of the Companies Act 2006) of ordinary shares of $1.66 each in the capital of Carnival plc provided that: |
(a) | the maximum number of ordinary shares authorized to be acquired is 21,605,252; |
(b) | the minimum price (exclusive of expenses) which may be paid for an ordinary share is $1.66; |
(c) | the maximum price which may be paid for an ordinary share is an amount (exclusive of expenses) equal to the higher of (1) 105% of the average middle market quotation for an ordinary share, as derived from the London Stock Exchange Daily Official List, for the five business days immediately preceding the day on which such ordinary share is contracted to be purchased and (2) the higher of the last independent trade and the highest current independent bid on the London Stock Exchange at the time the purchase is carried out; and |
(d) | unless previously revoked or renewed, this authority shall expire on the earlier of (i) the conclusion of the annual general meeting of Carnival plc to be held in 2016 and (ii) 15 months from the date of this resolution (except in relation to the purchase of ordinary shares, the contract of which was entered into before the expiry of such authority). |
By Order of the Board |
Registered Office: | |
|
Carnival House 100 Harbour Parade Southampton SO15 1ST United Kingdom | |
Arnaldo Perez Company Secretary February 20, 2015 |
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Voting Arrangements for Carnival plc Shareholders
Carnival plc shareholders can vote in either of two ways:
| by attending the meeting and voting in person or, in the case of corporate shareholders, by corporate representatives; or |
| by appointing a proxy to attend and vote on their behalf, using the proxy form enclosed with this notice of annual general meeting. |
Voting in person
If you come to the annual general meeting, please bring the attendance card (attached to the enclosed proxy form) with you. This will mean you can register more quickly.
In order to attend and vote at the annual general meeting, a corporate shareholder may appoint one or more individuals to act as its representative. The appointment must comply with the requirements of Section 323 of the Companies Act 2006. Each representative should bring evidence of their appointment, including any authority under which it is signed, to the meeting. If you are a corporation and are considering appointing a corporate representative to represent you and vote your shareholding in Carnival plc at the annual general meeting, you are strongly encouraged to pre-register your corporate representative to make registration on the day of the meeting more efficient. In order to pre-register, please fax your Letter of Representation to Carnival plcs registrars, Equiniti Limited, on 01903 833168 from within the United Kingdom or +44 1903 833168 from elsewhere. Please note that this fax facility should be used only for pre-registration of corporate representatives and not for any other purpose.
Voting by proxy
A shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy to exercise all or any of their rights to attend, speak and vote in his or her stead. A proxy need not be a shareholder of Carnival plc. A shareholder may appoint more than one proxy provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. To appoint more than one proxy, please follow the notes contained in the proxy form. A person who is nominated to enjoy information rights in accordance with Section 146 of the Companies Act 2006, but who is not a shareholder, is not entitled to appoint a proxy.
If you are a person nominated to enjoy information rights in accordance with Section 146 of the Companies Act 2006 you may have a right under an agreement between you and the member by whom you were nominated to be appointed, or to have someone else appointed, as a proxy for the meeting. If you have no such right, or you have such a right but do not wish to exercise it, you may have a right under such an agreement to give instructions to the member as to the exercise of voting rights.
To be effective, a duly completed proxy form and the authority (if any) under which it is signed, or a notarially certified copy of such authority, must be deposited (whether delivered personally or by post) at the offices of Carnival plcs registrars, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, United Kingdom as soon as possible and in any event no later than 2:00 p.m. (BST) on April 12, 2015. Alternatively, a proxy vote may be submitted via the internet in accordance with the instructions set out on the proxy form.
In the case of joint registered holders, the signature of one holder on a proxy card will be accepted and the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be determined by the order in which names stand on the register of shareholders of Carnival plc in respect of the relevant joint holding.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclears specifications and must contain the information required for such instructions, as described in the CREST Manual, which can be viewed at www.euroclear.com. The message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuers agent (ID RA19) by the latest time(s) for receipt of proxy appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuers agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
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Carnival plc may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Shareholders who are entitled to vote
Carnival plc, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only those shareholders registered in the register of members of Carnival plc at 6:00 p.m. (BST) on April 12, 2015 shall be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time. Changes to the entries on the register of members after 6:00 p.m. (BST) on April 12, 2015 shall be disregarded in determining the rights of any person to attend or vote at the meeting.
Any shareholder attending the meeting has the right to ask questions. Carnival plc must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of Carnival plc or the good order of the meeting that the question be answered.
Documents available for inspection
Copies of all service agreements (including letters of appointment) between each director and Carnival plc will be available for inspection during normal business hours on any weekday (public holidays excluded) at the registered office of Carnival plc from the date of this notice until and including the date of the meeting and at the place of the meeting for at least 15 minutes prior to and during the meeting.
* * *
There are 17 Proposals that require shareholder approval at the annual meeting this year. The directors unanimously recommend that you vote in favor of Proposals 1 through 17 (inclusive) and encourage you to submit your vote using one of the voting methods described herein. Submitting your voting instructions by any of these methods will not affect your right to attend the meeting in person should you so choose.
Web site materials
This proxy statement and other information required by Section 311A of the Companies Act 2006 have been posted on our Web site at www.carnivalcorp.com and www.carnivalplc.com.
Under Section 527 of the Companies Act 2006, shareholders meeting the threshold requirements set out in that section have the right to require Carnival plc to publish on a Web site a statement setting out any matter relating to: (i) the audit of Carnival plcs accounts (including the auditors report and the conduct of the audit) that are to be laid before the annual general meeting; or (ii) any circumstance connected with an auditor of Carnival plc ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with Section 437 of the Companies Act 2006. Carnival plc may not require the shareholders requesting any such Web site publication to pay its expenses in complying with Sections 527 or 528 of the Companies Act 2006. Where Carnival plc is required to place a statement on a Web site under Section 527 of the Companies Act, it must forward the statement to Carnival plcs auditor not later than the time when it makes the statement available on the Web site. The business which may be dealt with at the annual general meeting includes any statement that Carnival plc has been required under Section 527 of the Companies Act 2006 to publish on a Web site.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information concerning the share ownership of (1) all persons known by us to be the beneficial owners of more than 5% of the 592,688,153 shares of Carnival Corporation common stock and trust shares of beneficial interest in the P&O Princess Special Voting Trust outstanding as of January 20, 2015, (2) all persons known by us to be the beneficial owners of more than 5% of the 216,052,515 ordinary shares of Carnival plc outstanding as of January 20, 2015, 31,964,084 of which are directly or indirectly owned by Carnival Corporation and have no voting rights, (3) each of our executive officers named in the Summary Compensation Table which appears elsewhere in this proxy statement, (4) each of our directors and (5) all directors and executive officers as a group.
Micky Arison, Chairman of the board of each of Carnival Corporation and Carnival plc, certain other members of the Arison family and trusts for their benefit (collectively, the Principal Shareholders), beneficially own shares representing approximately 28.6% of the voting power of Carnival Corporation and approximately 21.8% of the combined voting power of Carnival Corporation & plc and have informed us that they intend to cause all such shares to be voted in favor of Proposals 1 through 17. The table below begins with ownership of the Principal Shareholders.
The number of shares beneficially owned by each entity, person, director or executive officer is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares that the individual would have the right to acquire as of March 21, 2015 (being 60 days after January 20, 2015) through the exercise of any stock option (Vested Options) and the vesting of restricted share units (RSUs).
Beneficial Ownership Table
Name and Address Beneficial Owners or Identity of Group(1) |
Amount and Nature of Beneficial Ownership of Carnival Corporation Shares and Trust Shares* |
Percentage of Carnival Corporation Common Stock |
Amount and Nature of Beneficial Ownership of Carnival plc Ordinary Shares |
Percentage of Carnival plc Ordinary Shares |
Percentage of Combined Voting Power** | ||||||||||||||||||||
Micky Arison |
138,271,621 | (2)(3) | 23.32 | % | 0 | * | ** | 17.8 | % | ||||||||||||||||
MA 1994 B Shares, L.P. |
95,736,445 | (2)(4) | 16.2 | % | 0 | * | ** | 12.3 | % | ||||||||||||||||
MA 1994 B Shares, Inc. |
95,736,445 | (2)(4) | 16.2 | % | 0 | * | ** | 12.3 | % | ||||||||||||||||
Artsfare 2005 Trust No. 2 |
37,580,930 | (2)(5)(11) | 6.3 | % | 0 | * | ** | 4.8 | % | ||||||||||||||||
c/o SunTrust Delaware Trust Company 1011 Centre Road, Suite 108 Wilmington, DE 19805 |
|||||||||||||||||||||||||
Verus Protector, LLC |
37,580,930 | (2)(5) | 6.3 | % | 0 | * | ** | 4.8 | % | ||||||||||||||||
Two Alhambra Plaza, Suite 1040 Coral Gables, FL 33134 |
|||||||||||||||||||||||||
Richard L. Kohan |
37,582,930 | (2)(6) | 6.3 | % | 0 | * | ** | 4.8 | % | ||||||||||||||||
Two Alhambra Plaza, Suite 1040 Coral Gables, FL 33134 |
|||||||||||||||||||||||||
MBA I, L.P. |
900,000 | (2)(7) | * | ** | 0 | * | ** | * | ** | ||||||||||||||||
c/o SunTrust Delaware Trust Company 1011 Centre Road, Suite 108 Wilmington, DE 19805 |
|||||||||||||||||||||||||
Artsfare 2003 Trust |
932,439 | (2)(7)(8)(14) | * | ** | 0 | * | ** | * | ** | ||||||||||||||||
c/o SunTrust Delaware Trust Company 1011 Centre Road, Suite 108 Wilmington, DE 19805 |
|||||||||||||||||||||||||
TAMMS Management Corporation |
32,439 | (2)(8)(14) | * | ** | 0 | * | ** | * | ** | ||||||||||||||||
c/o SunTrust Delaware Trust Company 1011 Centre Road, Suite 108 Wilmington, DE 19805 |
|||||||||||||||||||||||||
James M. Dubin |
34,319,462 | (2)(9) | 5.8 | % | 0 | * | ** | 4.4 | % | ||||||||||||||||
c/o Madison Place Partners, LLC One Madison Place Harrison, NY 10528 |
|||||||||||||||||||||||||
John J. ONeil |
29,364,216 | (2)(10)(13) | 5.0 | % | 0 | * | ** | 3.8 | % | ||||||||||||||||
c/o Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019 |
|||||||||||||||||||||||||
SunTrust Delaware Trust Company |
38,180,930 | (2)(11) | 6.4 | % | 0 | * | ** | 4.9 | % | ||||||||||||||||
1011 Centre Road, Suite 108 Wilmington, DE 19805 |
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Name and Address Beneficial Owners or Identity of Group(1) |
Amount and Nature of Beneficial Ownership of Carnival Corporation Shares and Trust Shares* |
Percentage of Carnival Corporation Common Stock |
Amount and Nature of Beneficial Ownership of Carnival plc Ordinary Shares |
Percentage of Carnival plc Ordinary Shares |
Percentage of Combined Voting Power** | ||||||||||||||||||||
JMD Delaware, Inc. |
4,954,246 | (2)(4)(12) | * | ** | 0 | * | ** | * | ** | ||||||||||||||||
Knight Protector, Inc. |
29,364,216 | (2)(13) | 5.0 | % | 0 | * | ** | 3.8 | % | ||||||||||||||||
Northern Trust Corporation |
35,561,779 | (15) | 6.0 | % | 0 | * | ** | 4.6 | % | ||||||||||||||||
Arnold W. Donald |
129,780 | (16) | * | ** | 0 | * | ** | * | ** | ||||||||||||||||
David Bernstein |
66,526 | * | ** | 0 | * | ** | * | ** | |||||||||||||||||
Alan Buckelew |
128,461 | (17) | * | ** | 0 | * | ** | * | ** | ||||||||||||||||
Gerald R. Cahill |
79,201 | * | ** | 0 | * | ** | * | ** | |||||||||||||||||
Michael Thamm |
0 | * | ** | 11,956 | (18) | * | ** | * | ** | ||||||||||||||||
Sir Jonathon Band |
17,147 | * | ** | 0 | * | ** | * | ** | |||||||||||||||||
Richard J. Glasier |
45,299 | (19) | * | ** | 0 | * | ** | * | ** | ||||||||||||||||
Debra Kelly-Ennis |
0 | * | ** | 0 | * | ** | * | ** | |||||||||||||||||
Sir John Parker |
32,916 | * | ** | 10,004 | (20) | * | ** | * | ** | ||||||||||||||||
Stuart Subotnick |
33,405 | * | ** | 0 | * | ** | * | ** | |||||||||||||||||
Laura Weil |
30,118 | * | ** | 0 | * | ** | * | ** | |||||||||||||||||
Randall J. Weisenburger |
83,609 | * | ** | 0 | * | ** | * | ** | |||||||||||||||||
Capital World Investors |
51,818,532 | (21) | 8.7 | % | 0 | * | ** | 6.7 | % | ||||||||||||||||
333 South Hope Street Los Angeles, CA 90071 |
|||||||||||||||||||||||||
AXA S.A. |
0 | * | ** | 10,627,443 | (22) | 5.7 | % | 1.4 | % | ||||||||||||||||
25 Avenue Matignon 75008 Paris France |
|||||||||||||||||||||||||
BlackRock, Inc. |
0 | * | ** | 15,651,916 | (23) | 8.5 | % | 2.0 | % | ||||||||||||||||
55 East 52nd Street New York, NY 10022 |
|||||||||||||||||||||||||
Schroders plc |
0 | * | ** | 9,758,601 | (22) | 5.3 | % | 1.3 | % | ||||||||||||||||
c/o Schroders Investment Management Ltd. 31 Gresham Street London EC2V 7QA United Kingdom |
|||||||||||||||||||||||||
EuroPacific Growth Fund |
0 | * | ** | 9,745,000 | (24) | 5.3 | % | 1.3 | % | ||||||||||||||||
333 South Hope Street Los Angeles, CA 90071 |
|||||||||||||||||||||||||
All directors and executive officers as a group (20 persons) |
139,167,630 | (25) | 23.5 | % | 64,797 | (26) | * | ** | 18 | % |
* | As part of the establishment of the DLC arrangement, Carnival plc issued a special voting share to Carnival Corporation, which transferred such share to the trustee of the P&O Princess Special Voting Trust (the Trust), a trust established under the laws of the Cayman Islands. Trust shares of beneficial interest in the Trust were transferred to Carnival Corporation. The trust shares represent a beneficial interest in the Carnival plc special voting share. Immediately following the transfer, Carnival Corporation distributed such trust shares by way of a dividend to holders of shares of Carnival Corporation common stock. Under a pairing agreement, the trust shares of beneficial interest in the Trust are paired with, and evidenced by, certificates representing shares of Carnival Corporation common stock on a one-for-one basis. In addition, under the pairing agreement, when a share of Carnival Corporation common stock is issued to a person after the implementation of the DLC arrangement, a paired trust share will be issued at the same time to such person. Each share of Carnival Corporation common stock and the paired trust share may not be transferred separately. The Carnival Corporation common stock and the trust shares (including the beneficial interest in the Carnival plc special voting share) are listed and trade together on the New York Stock Exchange under the ticker symbol CCL. Accordingly, each holder of Carnival Corporation common stock is also deemed to be the beneficial owner of an equivalent number of trust shares. |
** | As a result of the DLC arrangement, on most matters that affect all of the shareholders of Carnival Corporation and Carnival plc, the shareholders of both companies effectively vote together as a single decision-making body. Combined voting is accomplished through the special voting shares that have been issued by each company. |
*** | Less than one percent. |
(1) | The address of each natural person named, unless otherwise noted, is 3655 N.W. 87 Avenue, Miami, Florida 33178. The address of all entities, unless otherwise noted, is 1201 North Market Street, Wilmington, Delaware 19899. |
(2) | The Principal Shareholders and others have filed a joint statement on Schedule 13D with respect to the shares of Carnival Corporation common stock held by such persons. Each Principal Shareholder may be deemed to own the shares of common stock held by all other Principal Shareholders. |
(3) | Includes (i) 4,954,246 shares of common stock held by the various Arison family trusts, (ii) 95,736,445 shares of common stock held by MA 1994 B Shares, L.P. and (iii) 37,580,930 shares of common stock held by the Artsfare 2005 Trust No. 2 by virtue of the authority granted to Mr. Arison under the last will of Ted Arison. Mr. Arison does not have an economic interest in the shares of common stock held by Artsfare 2005 Trust No. 2. |
(4) | MA 1994 B Shares, L.P. (MA 1994, L.P.) owns 95,736,445 shares of common stock. The general partner of MA 1994, L.P. is MA 1994 B Shares, Inc. (MA 1994, Inc.), which is wholly-owned by the Nickel 1994 B Trust, a trust established for the benefit of Mr. Arison and members of his family (the B Trust). The sole limited partner of MA 1994, L.P. is the B Trust. Under the terms of the instrument governing the B Trust, Mr. Arison has the sole right to vote and direct the sale of the common stock indirectly held by the B Trust. By virtue of the limited partnership agreement of MA 1994, L.P., MA 1994, Inc. may be deemed to beneficially own all such 95,736,445 shares of common stock. By virtue of Mr. Arisons interest in the B Trust and the B Trusts interest in MA 1994, L.P., Mr. Arison may be deemed to beneficially own all such 95,736,445 shares of common stock. The trustee of the B Trust is JMD Delaware, Inc., a corporation wholly-owned by James M. Dubin. |
(5) | Verus Protector, LLC is the protector of Artsfare 2005 Trust No. 2. Verus Protector, LLC has shared voting and dispositive power with respect to the shares of common stock held by Artsfare 2005 Trust No. 2. |
(6) | By virtue of being the sole member of Verus Protector, LLC, Mr. Richard L. Kohan may be deemed to own the aggregate of 37,580,930 shares of common stock beneficially owned by such entity, as to which he disclaims beneficial ownership. Mr. Kohan owns 1,000 shares of common stock directly and owns 1,000 shares of common stock indirectly by virtue of such shares owned by Mr. Kohans wife. |
(7) | MBA I, L.P. (MBA I) owns 900,000 shares of common stock. The Artsfare 2003 Trust owns a controlling interest in MBA I; therefore, the Artsfare 2003 Trust is deemed to beneficially own all such 900,000 shares of common stock. |
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(8) | TAMMS Management Corporation holds 32,439 shares of common stock (TAMMS Corp.). TAMMS Corp. is wholly-owned by the Artsfare 2003 Trust. |
(9) | By virtue of being the sole shareholder of JMD Delaware, Inc. and a 50% shareholder of Knight Protector, Inc., Mr. Dubin may be deemed to own the aggregate of 34,318,462 shares of common stock beneficially owned by such entities, as to which he disclaims beneficial ownership. Mr. Dubin owns 1,000 shares of common stock directly. |
(10) | By virtue of being a 50% shareholder of Knight Protector, Inc., Mr. ONeil may be deemed to own the aggregate of 29,364,216 shares of common stock beneficially owned by such entity, as to which he disclaims beneficial ownership. |
(11) | SunTrust Delaware Trust Company acts as trustee for the Artsfare 2005 Trust No. 2 and the Dozer Trust. |
(12) | JMD Delaware, Inc. is a Delaware corporation wholly owned by Mr. James Dubin. JMD Delaware, Inc. acts as trustee of various Arison family trusts and has shared dispositive power over the shares of common stock held by certain of such trusts. |
(13) | Knight Protector, Inc. acts as protector of the Eternity Four Trust. As protector of the Eternity Four Trust, Knight Protector, Inc., has shared dispositive power and sole voting power with respect to the 29,364,216 shares of common stock held by Eternity Four Trust. |
(14) | The Artsfare 2003 Trust owns a controlling interest in MBA 1 (see Note 7 above) and is the sole shareholder of TAMMS Corp., (see Note 8 above). By virtue of its controlling interested in MBA I, the Artsfare 2003 Trust is deemed to beneficially own 900,000 shares of common stock held directly by MBA I and by virtue of its ownership of TAMMS Corp., the Artsfare 2003 Trust is deemed to beneficially own 32,439 shares of common stock. |
(15) | Northern Trust Company of Delaware acts as trustee for the Eternity Four Trust and beneficially owns all of the 29,364,216 shares of common stock held by Eternity Four Trust. In addition, according to the Schedule 13G filed by Northern Trust Corporation on February 13, 2014, it beneficially owns an additional 6,197,563 shares of common stock. |
(16) | Includes (i) 10,000 Vested Options and (ii) 1,807 shares held by The Arnold W. Donald Revocable Trust UAD 5/26/98. |
(17) | Includes 17,151 Vested Options. |
(18) | Includes 5,700 Vested Options. |
(19) | Includes 20,000 Vested Options. |
(20) | Includes 7,000 shares held by Whitefoord Limited on behalf of GHM Trustees Limited, the trustee for Sir John Parkers Fixed Unapproved Restricted Retirement Scheme. |
(21) | As reflected in separate Schedule 13G, filed on February, 7, 2014 with the SEC. Capital World Investors, reported sole voting power and sole dispositive power over 51,818,532 shares of common stock as a result of acting as an investment advisor to various investment companies. |
(22) | Based on notifications to Carnival plc of interests of 3% or more in the voting rights of Carnival plc as required by the Disclosure and Transparency Rules of the UK Listing Authority. |
(23) | As reflected in separate Schedule 13G, filed on January 22, 2015 with the SEC. BlackRock, Inc., reported sole voting power over 14,049,057 shares of common stock and sole dispositive power over 15,651,916 shares of common stock. |
(24) | As reflected in separate Schedule 13G, filed on February, 12, 2014 with the SEC. EuroPacific Growth Fund, reported sole voting power over 9,745,000 shares of common stock as a result of acting as an investment company registered under the Investment Company Act of 1940. |
(25) | Includes 72,151 Vested Options. |
(26) | Includes 20,609 Vested Options. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3, 4 and 5 and amendments thereto furnished to Carnival Corporation and Carnival plc during and with respect to their most recent fiscal year and upon written representations from persons known to us to be subject to Section 16 of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) (a reporting person), all reporting persons filed on a timely basis reports required by Section 16(a) of the Exchange Act during and with respect to the year ended November 30, 2014.
RE-ELECTION OF DIRECTORS
The DLC arrangement requires the boards of Carnival Corporation and Carnival plc to be identical. Shareholders are required to approve the election or re-election of directors to each board. There are nine nominees for election or re-election to each board of directors. Each nominee currently serves as a director of both companies. All nominees for director are to be elected or re-elected to serve until the next annual meeting and until their successors are elected.
With respect to each nominee set forth below, the information presented includes such persons age, the year in which such person first became a director, any other position held with Carnival Corporation and Carnival plc, such persons principal occupations during at least the past five years, any directorships held by such nominee in public or certain other companies over the past five years and the nominees qualifications, including particular areas of expertise, to serve as a director.
The Nominating & Governance Committees conducted performance evaluations on the members of our boards of directors serving during fiscal 2014 and reported the results to the boards. The boards determined that each nominee was an effective and committed member of the boards.
As of the date of this proxy statement, 22% of the members of the boards are women (being two of nine members). The boards have expressed their intent to fill future board vacancies with female candidates, where skill set and relevant experience for the particular vacancy can be met to achieve a target of 25% female by the end of 2015. This is consistent with the aspirational target for FTSE 100 boards recommended in the Davies Review published in the UK in February 2011, entitled Women on Boards.
Accordingly, the boards of directors unanimously recommend a vote FOR the re-election of each of the following nominees:
1. | Micky Arison, age 65, has been Chairman of the board of directors of Carnival Corporation since 1990 and a director since 1987. He became a director and Chairman of the board of directors of Carnival plc in 2003. He was Chief Executive Officer of Carnival Corporation (formerly known as Carnival Cruise Lines) from 1979 to 2013 and was Chief Executive Officer of Carnival plc from 2003 to 2013. |
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Mr. Arisons qualifications to serve on the boards include his decades of leadership experience with Carnival Corporation & plc, as well as in-depth knowledge of our business, our history and the cruise industry, all gained through more than 40 years of service with our companies.
2. | Sir Jonathon Band, age 65, has been a director of Carnival Corporation and Carnival plc since 2010. He served in the British Navy from 1967 until his retirement in 2009, having served as First Sea Lord and Chief of Naval Staff, the most senior officer position in the British Navy, until 2009. He has been a non-executive director of Lockheed Martin UK Limited since May 2010. |
Sir Jonathons qualifications to serve on the boards include his extensive experience in maritime and security matters gained through his 42 years of service with the British Navy. He also brings an international perspective of company and industry matters.
3. | Arnold W. Donald, age 60, has been a director of Carnival Corporation since 2001 and a director of Carnival plc since 2003. He has been President and Chief Executive Officer of Carnival Corporation & plc since 2013. He was President and Chief Executive Officer of The Executive Leadership Council, a professional network of African-American executives of major U.S. companies, from 2010 to 2012. He previously served as President and Chief Executive Officer of the Juvenile Diabetes Research Foundation International from 2006 to 2008. From 2000 to 2005, Mr. Donald was the Chairman of the Board of Merisant Company, a manufacturer and marketer of tabletop sweetener products, including the Equal® and Canderel® brands. From 2000 to 2003, he was also the Chief Executive Officer of Merisant Company. From 1998 to 2000, he was Senior Vice-President of Monsanto Company, a company which develops agricultural products and consumer goods, and President of its nutrition and consumer sector. Prior to that he was President of Monsanto Companys agricultural sector. He has been a member of the boards of directors of Bank of America Corporation since January 2013 and Crown Holdings, Inc. since July 1999. He was a member of the board of Oil-Dri Corporation of America from December 1997 to January 2013 and The Laclede Group, Inc. from January 2003 to January 2014. |
Mr. Donalds qualifications to serve on the boards include his broad leadership and other executive skills gained through his prior executive leadership experience with a Fortune-100 science-based research and development, manufacturing and marketing company, a privately-held company with global operations, and as head of a large international research-based not-for-profit corporation. He also has broad experience in corporate governance, having served as a director, past and present, of a number of other publicly-traded companies.
4. | Richard J. Glasier, age 69, has been a director of Carnival Corporation and Carnival plc since 2004. From 2002 to 2005, Mr. Glasier was President of Argosy Gaming Company, an owner and operator of casinos, and its Chief Executive Officer from 2003 until 2005. From 1995 to 2002, Mr. Glasier was Executive Vice President and Chief Financial Officer of Royal Caribbean Cruises Ltd. |
Mr. Glasiers qualifications to serve on the boards include significant cruise industry experience as a senior financial officer of a major cruise line, as well as his managerial and corporate governance expertise acquired as the chief executive officer of a New York Stock Exchange-listed operator of hotels and casinos, as well as a director of other public companies.
5. | Debra Kelly-Ennis, age 58, has been a director of Carnival Corporation and Carnival plc since 2012. She was President and Chief Executive Officer of Diageo Canada, Inc., a subsidiary of Diageo plc, a global spirits, wine and beer company, from 2008 to 2012. From 2005 to 2008, she was Chief Marketing Officer for Diageo North America Inc., another subsidiary of Diageo plc. Ms. Kelly-Ennis has also held marketing, sales and general management positions with leading companies such as RJR/Nabisco, Inc., The Coca-Cola Company, General Motors Corporation and Grand Metropolitan PLC. She has been honored as one of the Top 100 Most Powerful Women in Canada in 2012, 2011, 2010 and 2009 and was named Leading Chief Executive Officer in 2010 by the Toronto Human Resources Professional Association. She has been a member of the board of directors of Altria Group, Inc. since February 2013, Hertz Global Holdings, Inc. since May 2013 and Pulte Group, Inc. since September 1997. |
Ms. Kelly-Enniss qualifications to serve on the boards include her extensive marketing and practical managerial experience gained through 30 years working with consumer brand corporations, as well as many years of public company board experience.
6. | Sir John Parker, age 72, has been a director of Carnival Corporation since 2003 and a director of Carnival plc since 2000, having served as Deputy Chairman of Carnival plc from 2002 to 2003. He was the non-executive Chairman of National Grid plc from October 2002 until January 2012. He has been Vice Chairman of DP World Limited since February 2005 and a director of Anglo American plc since July 2009, serving as its Chairman since August 2009. He has also been a non-executive director of Airbus Group N.V. (formerly known as European Aeronautic Defence and Space Company EADS N.V.) since October 2007. From May 2007 to August 2009 he served as non-executive chairman of Mondi plc. He was formerly Senior Non-Executive Director of the Court of the Bank of England, a non-executive director of GKN plc, Brambles Industries plc and BG Group plc, Chairman of Babcock International Group plc, RMC Group plc and P&O Group plc, a President of the Royal Institution of Naval Architects, a member of the Prime Ministers Business Council for Britain and Chancellor of the University of Southampton. He was President of the Royal Academy of Engineering from 2011 until 2014. Sir John Parker has been a member of the General Committee of Lloyds Register of Shipping since 1983 and was Chairman of its Technical Committee from 1993 until 2002. |
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Sir Johns qualifications to serve on the boards include his extensive international background and wealth of corporate experience. His past and present service as a non-executive director of a number of listed UK companies provides the boards with invaluable knowledge and insight with respect to UK corporate governance policies and practices. In addition, Sir John, as a qualified naval architect and former head of a major shipbuilding company, is very experienced in the design, construction and operation of ships.
7. | Stuart Subotnick, age 73, has been a director of Carnival Corporation since 1987 and a director of Carnival plc since 2003. Mr. Subotnick has been President and Chief Executive Officer of Metromedia Company, a privately held diversified Delaware general partnership, since 2010, having previously served as its general partner and Executive Vice President since 1986. He was a member of the board of directors of AboveNet, Inc. from July 1997 to July 2012. |
Mr. Subotnicks qualifications to serve on the boards include his significant experience in financing, investing and general business matters, as well as his past experience with us, which are important to the boards when reviewing our investor relations, assessing potential financings and strategies, and otherwise evaluating our business decisions.
8. | Laura Weil, age 58, has been a director of Carnival Corporation and Carnival plc since 2007. She was the Executive Vice President and Chief Operating Officer of New York & Company, Inc., a womans apparel and accessories retailer, from June 2012 to August 2014, having served it as an Executive Consultant since February 2012. Ms. Weil was the Chief Executive Officer of Ashley Stewart LLC, a privately held retailer, from 2010 to 2011. Ms. Weil was the Chief Executive Officer of Urban Brands, Inc., a privately held apparel retailer, from 2009 to 2010. Urban Brands, Inc. filed for Chapter 11 bankruptcy protection in September 2010. Ashley Stewart LLC, the retail chain operated by Urban Brands, Inc., emerged from bankruptcy in October 2010. Ms. Weil was the Chief Operating Officer and Senior Executive Vice President of AnnTaylor Stores Corporation, a womens apparel company, from 2005 to 2006. From 1995 to 2005, she was the Chief Financial Officer and Executive Vice President of American Eagle Outfitters, Inc., a clothing retailer. |
Ms. Weils qualifications to serve on the boards include her extensive financial, information technology and operating skills developed over many years as an investment banker and senior financial operating executive. Ms. Weil also brings significant experience in global e-commerce and consumer strategies from her leadership experience with a multi-billion dollar New York Stock Exchange-listed retailer.
9. | Randall J. Weisenburger, age 56, has been a director of Carnival Corporation and Carnival plc since 2009. Mr. Weisenburger is the Managing Member of Mile26 Capital LLC, a private investment firm. He was the Executive Vice President and Chief Financial Officer of Omnicom Group Inc., a Fortune-250 global advertising, marketing and corporate communications company, from 1998 to September 2014. Mr. Weisenburger has been a director of Valero Energy Corporation since January 2011. |
Mr. Weisenburgers qualifications to serve on the boards include his broad leadership and operational skills gained as a senior executive of a large multi-national corporation and his extensive financial and accounting skills acquired as an investment banker and senior financial operating executive.
RE-APPOINTMENT AND REMUNERATION OF INDEPENDENT AUDITORS FOR CARNIVAL PLC AND RATIFICATION OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM FOR CARNIVAL CORPORATION
The Audit Committee of the board of directors of Carnival plc has selected the UK firm of PricewaterhouseCoopers LLP as Carnival plcs independent auditors for the year ending November 30, 2015, subject to the approval of our shareholders. The Audit Committee of the board of directors of Carnival Corporation has selected the U.S. firm of PricewaterhouseCoopers LLP as Carnival Corporations independent registered certified public accounting firm for the year ending November 30, 2014. Representatives of both the U.S. and UK firms of PricewaterhouseCoopers LLP will be present at the annual meetings, will have an opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions from shareholders.
This resolution would re-appoint PricewaterhouseCoopers LLP as the independent auditors of Carnival plc until the conclusion of the next general meeting at which Carnival plcs annual accounts and reports are laid. It is a requirement of Section 489(2) of the Companies Act 2006 that Carnival plc appoint its independent auditors at a general meeting at which its annual accounts and reports are laid. You are also being asked to authorize the Audit Committee of Carnival plc to determine the remuneration of PricewaterhouseCoopers LLP as independent auditors of Carnival plc.
Although ratification by our shareholders of the appointment of an independent certified public accounting firm for Carnival Corporation is not legally required, our boards of directors believe that such action is desirable. If our shareholders do not approve Proposal 11, the Audit Committees will consider the selection of another accounting firm for 2016 and future years.
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The boards of directors unanimously recommend a vote FOR the re-appointment of the UK firm of PricewaterhouseCoopers LLP as Carnival plcs independent auditors for the 2015 fiscal year, the authorization of the Audit Committee of Carnival plc to agree the remuneration of PricewaterhouseCoopers LLP and the ratification of the selection of the U.S. firm of PricewaterhouseCoopers LLP as Carnival Corporations independent registered certified public accounting firm for the 2015 fiscal year.
RECEIPT OF ACCOUNTS AND REPORTS OF CARNIVAL PLC
The directors of Carnival plc are required by the Companies Act 2006 to present the financial statements, the UK statutory Directors Report, the UK statutory Strategic Report and the auditors report relating to those accounts to the Carnival plc shareholders. Accordingly, the directors of Carnival plc lay before the annual meetings the Carnival plc accounts and the reports of the directors and auditors for the year ended November 30, 2014, which have been approved by and signed on behalf of Carnival plcs board of directors and will be delivered to the Registrar of Companies in the UK following the annual meetings. Shareholders are voting to approve receipt of these documents, as UK law does not require shareholder approval of the substance and content of these documents. The UK statutory Directors Report is attached to this proxy statement as Annex A and the UK statutory Strategic Report is included within the Carnival plc consolidated IFRS financial statements. The full accounts and reports of Carnival plc will be available for inspection prior to and during the annual meetings.
The boards of directors unanimously recommend a vote FOR the receipt of the accounts and reports of Carnival plc for the year ended November 30, 2014.
AN ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and pursuant to Section 14A of the Exchange Act, our shareholders are being provided with an advisory (non-binding) vote to approve our executive compensation. Although the vote is advisory and is not binding on the boards, the Compensation Committees will take into account the outcome of the vote when considering future executive compensation decisions. We refer to this non-binding advisory vote as the say-on-pay vote.
The say-on-pay vote is required to be offered to our shareholders at least once every three years. Two years ago, our shareholders recommended that we provide them with the opportunity to provide their say-on-pay vote each year and our boards have accepted that recommendation.
The boards are committed to corporate governance best practices and recognize the significant interest of shareholders in executive compensation matters. The Compensation Committees seek to balance short-term and longer-term compensation opportunities to enable Carnival Corporation & plc meets short-term objectives while continuing to produce value for its shareholders over the long-term. They also promote a compensation program designed to attract, motivate and retain key executives. As discussed in the Compensation Discussion and Analysis, the Compensation Committees believe that our current executive compensation program directly links executive compensation to our performance and aligns the interests of our named executive officers with those of our shareholders. For example:
| Our compensation philosophy places more emphasis on variable elements of compensation (such as annual cash bonuses and equity-based compensation) than fixed remuneration. |
| In accordance with the Compensation Committees focus on long-term shareholder return, they approved performance-based share grants for the named executive officers. The grants vest zero to 200% based upon the extent to which annual earnings before income and taxes (EBIT), as adjusted for certain fuel price changes, for each of the three fiscal years in the 2014-2016 performance cycle exceeds specified performance goals, and return on invested capital (ROIC) exceeds a specified performance goal at the end of the three-year performance cycle and as modified up or down by up to 25% at the end of the three year performance cycle for the Carnival Corporation & plcs total shareholder return (TSR) rank relative to the Peer Group (defined below). |
| To further promote long-term shareholder alignment, we require our named executive officers to meet and maintain stock ownership requirements. |
| The Compensation Committees review the position of each element of total direct compensation relative to the competitive market, and use the range of total direct compensation levels in the competitive market to assess the extent to which the compensation provided to the named executive officers is generally consistent with that offered by the competitive market to their named executive officers. |
| Carnival Corporation & plc does not offer U.S. executives excise tax gross-up protections. |
We encourage you to read our Compensation Discussion and Analysis contained within this proxy statement for a more detailed discussion of our compensation policies and procedures.
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Our shareholders have the opportunity to vote for or against, or to abstain from voting, on the following resolution:
Resolved, that the shareholders approve the compensation of our named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC (which disclosure shall include the Compensation Discussion and Analysis, the compensation tables, and any related material disclosed in this proxy statement).
The above referenced disclosures appear at pages 33 to 60 of this proxy statement.
The boards of directors unanimously recommend a vote FOR approval of the compensation of our named executive officers as disclosed pursuant to the compensation disclosure rules of the SEC (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and any related material disclosed in this proxy statement).
APPROVAL OF CARNIVAL PLC DIRECTORS REMUNERATION REPORT
In accordance with Sections 439 and 440 of the Companies Act 2006 and Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 (the LMCG Regulations), shareholders are voting to approve adoption of the Carnival plc Directors Remuneration Report. The Carnival plc Directors Remuneration Report is in two parts. Part I also constitutes the Compensation Discussion and Analysis as required by regulations promulgated by the SEC, and includes information that Carnival plc is required to disclose in accordance with the LMCG Regulations. Part II of the Carnival plc Directors Remuneration Report is set forth as Annex B to this proxy statement and includes the additional information that Carnival plc is required to disclose in accordance with the LMCG Regulations, including certain information which has been audited for the purposes of the Carnival plc Annual Report.
The boards of directors unanimously recommend a vote FOR the approval of the Carnival plc Directors Remuneration Report.
APPROVAL OF THE GRANT OF AUTHORITY TO ALLOT NEW CARNIVAL PLC SHARES
AND THE DISAPPLICATION OF PRE-EMPTION RIGHTS APPLICABLE TO THE ALLOTMENT OF NEW CARNIVAL PLC SHARES
Summary. Proposal 15 authorizes the directors of Carnival plc to issue, until the next annual general meeting of Carnival plc (or, if earlier, until the close of business on July 13, 2016), a maximum number of Carnival plc ordinary shares (or to grant rights to subscribe for or convert any securities into ordinary shares up to a maximum aggregate amount) without further shareholder approval. Proposal 16 authorizes the directors of Carnival plc to issue (or sell any ordinary shares which Carnival plc elects to hold in treasury), until the next annual general meeting of Carnival plc (or, if earlier, until the close of business on July 13, 2016), a maximum number of Carnival plc ordinary shares for cash without first offering them to existing shareholders in accordance with the pre-emption rights that would otherwise be applicable. As is the case with many UK companies, these resolutions are proposed each year as the directors believe occasions may arise from time to time when it would be beneficial for shares to be allotted without shareholder approval and for shares to be allotted for cash without making a pre-emptive offer. The Carnival plc directors have no current commitments or plans to allot additional shares of Carnival plc.
Discussion. Under Article 30 of the Articles of Association of Carnival plc, the directors have, for a prescribed period, unconditional authority to allot ordinary shares in Carnival plc up to an aggregate nominal amount known as the allotment amount.
The power to implement the authority provided by Article 30 is sought each year by the proposal of an ordinary resolution to establish the prescribed period and the allotment amount. By passing this ordinary resolution, shareholders are authorizing the board of Carnival plc to issue, during the prescribed period, a maximum number of shares having an aggregate nominal value equal to the allotment amount, without further shareholder approval. In the absence of such approval, the issuance of any additional shares would require shareholder approval.
Under Article 31 of the Articles of Association of Carnival plc, the directors have, for the same prescribed period referred to above, power to allot a small number of ordinary shares for cash without making a pre-emptive offer to existing shareholders up to an aggregate nominal amount known as the disapplication amount.
The power to implement the authority provided by Article 31 is sought each year by the proposal of a special resolution to establish the disapplication amount. By passing this special resolution, shareholders are authorizing the board of Carnival plc to issue, during the prescribed period, an amount of shares having an aggregate nominal value equal to the disapplication amount, for cash without first offering them to existing shareholders of Carnival plc.
The Third Amended and Restated Articles of Incorporation of Carnival Corporation do not contain equivalent provisions and holders of Carnival Corporation shares do not have pre-emption rights. Accordingly, no action is required in respect of the ability of Carnival Corporation to allot shares or to disapply pre-emption rights.
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In common with many UK companies, resolutions to renew the prescribed period and re-establish the allotment amount and the disapplication amount are normally proposed each year as the directors believe occasions may arise from time to time when it would be beneficial for shares to be allotted and for shares to be allotted for cash without making a pre-emptive offer. This is the purpose of Proposal 15 (an ordinary resolution) and Proposal 16 (a special resolution). As usual, the prescribed period is the period from the passing of the resolutions until the next annual general meeting (or, if earlier, until the close of business on July 13, 2016).
Guidelines issued by the Association of British Insurers, whose member insurance companies are some of the largest institutional investors in UK listed companies, require the allotment amount to be limited to one-third of the issued ordinary share capital (except in the case of a rights issue). By reference to Carnival plcs issued ordinary share capital on January 20, 2015, the maximum allotment amount is $119,549,058, which is equal to 72,017,505 new Carnival plc ordinary shares, being one third of the amount of the issued ordinary share capital (excluding treasury shares).
In line with guidance issued by the Association of British Insurers, paragraph (b) of Proposal 15 would give the directors of Carnival plc authority to allot ordinary shares or grant rights to subscribe for or convert any securities into ordinary shares in connection with a rights issue in favor of ordinary shareholders up to an aggregate nominal amount equal to $239,098,117 (representing 144,035,010 ordinary shares), as reduced by the nominal amount of any shares issued under paragraph (a) of Proposal 15. However, if they do exercise the authorities given to them if Proposals 15 and 16 are passed, the directors intend to follow the Association of British Insurers recommendations concerning their use (including as regards the directors standing for election or re-election in certain cases). This amount (before any reduction) represents approximately two-thirds of the issued ordinary share capital (excluding treasury shares) of Carnival plc as at January 20, 2015.
Guidelines issued by the Pre-emption Group, a group comprising representatives of UK listed companies, investment institutions and corporate finance practitioners and formed under the support of the London Stock Exchange to monitor the operation of the Guidelines, recommend that a resolution to disapply the statutory pre-emption rights provided by UK company law should be limited to an amount of equity securities not exceeding 5% of the nominal value of the companys issued ordinary share capital. By reference to Carnival plcs issued ordinary share capital on January 20, 2015, the maximum disapplication amount is $17,932,359, which is equal to 10,802,626 new Carnival plc ordinary shares. In respect of this aggregate nominal amount, the directors of Carnival plc confirm their intention to follow the provisions of the Pre-emption Groups Statement of Principles regarding cumulative usage of authorities within a rolling three-year period where the Principles provide that usage in excess of 7.5% should not take place without prior consultation with shareholders.
In summary, if Proposals 15 and 16 were passed, the extent of the authority of the directors to allot new Carnival plc ordinary shares for cash on terms which would be dilutive to the existing shareholdings of Carnival plc shareholders, without shareholder approval, would be limited to 10,802,626 new Carnival plc ordinary shares, being 5% of the issued ordinary share capital of Carnival plc at January 20, 2015. The directors have no current commitments or plans to allot additional shares of Carnival plc. Furthermore, the adoption of Proposals 15 and 16 would have no material effect on the ability of Carnival plc to undertake or defend against a takeover attempt.
The boards of directors have authorized the repurchase of up to 19.2 million Carnival plc ordinary shares and the repurchase of up to 32.8 million shares of Carnival Corporation common stock under Stock Swap programs. We use the Stock Swap programs in situations where we can obtain an economic benefit because either Carnival Corporation common stock or Carnival plc ordinary shares are trading at a price that is at a premium or discount to the price of Carnival plc ordinary shares or Carnival Corporation common stock, as the case may be. Any realized economic benefit under the Stock Swap programs is used for general corporate purposes. As of the date of this proxy statement, no Carnival plc shares are held by Carnival plc in treasury.
In the event Carnival Corporation common stock trades at a premium to Carnival plc ordinary shares, we may elect to issue and sell shares of Carnival Corporation common stock through a sales agent, from time to time at prevailing market prices in ordinary brokers transaction, and use the sale proceeds to repurchase Carnival plc ordinary shares in the UK market on at least an equivalent basis. Based on authorizations provided by the boards of directors in October 2008, Carnival Corporation was authorized to issue and sell up to 19.2 million of its common stock in the U.S. market.
In the event Carnival Corporation common stock trades at a discount to Carnival plc ordinary shares, we may elect to sell existing ordinary shares of Carnival plc, with such sales made by Carnival Corporation or Carnival Investments Limited, a subsidiary of Carnival Corporation, through a sales agent from time to time at prevailing market prices in ordinary broker transactions, and use the sale proceeds to repurchase shares of Carnival Corporation common stock in the U.S. market on at least an equivalent basis. Based on an authorization provided by the boards of directors in January 2013, Carnival Corporation or Carnival Investments Limited was authorized to sell up to 32.8 million Carnival plc ordinary shares in the UK market.
The boards of directors unanimously recommend a vote FOR the approval of limits on the authority to allot Carnival plc shares and the disapplication of pre-emption rights for Carnival plc.
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GENERAL AUTHORITY TO BUY BACK CARNIVAL PLC ORDINARY SHARES
The boards of directors have authorized the repurchase of up to an aggregate of $1 billion of Carnival Corporation common stock and Carnival plc ordinary shares subject to certain restrictions (the Repurchase Program). The Repurchase Program does not have an expiration date and may be discontinued by our boards of directors at any time.
At January 20, 2015, the remaining availability under the Repurchase Program was $975 million. We may repurchase shares of Carnival Corporation common stock or Carnival plc ordinary shares under the Repurchase Program, in addition to repurchases made with net proceeds resulting from the Stock Swap programs described above.
Shareholder approval is not required for us to buy back shares of Carnival Corporation, but is required under the Companies Act 2006 for us to buy back shares of Carnival plc. Accordingly, last year Carnival Corporation and Carnival plc sought and obtained shareholder approval to effect market purchases of up to 21,569,788 ordinary shares of Carnival plc (being approximately 10% of Carnival plcs ordinary shares in issue). During fiscal 2014, no ordinary shares have been purchased under the Repurchase Program and the Stock Swap Program and through January 20, 2015. Carnival Corporation & plc treats any such purchases made by Carnival Corporation or Carnival Investments Limited under the Repurchase Program or the Stock Swap Programs as if they were made by Carnival plc under the Carnival plc share buy back authority. That approval expires on the earlier of (i) the conclusion of Carnival plcs 2015 annual general meeting or (ii) October 13, 2015. Shareholder approval to effect market purchases (within the meaning of Section 693(4) of the Companies Act 2006) of up to 21,605,252 ordinary shares of Carnival plc (being 10% of Carnival plcs ordinary shares in issue as of January 20, 2015) is being sought.
The boards of directors confirm that the authority to purchase Carnival plcs shares under the Repurchase Program and the Stock Swap program will only be exercised after careful consideration of prevailing market conditions and the position of Carnival plc. In particular, the program will only proceed if we believe that it is in the best interests of Carnival Corporation, Carnival plc and their shareholders generally. The boards of directors are making no recommendation as to whether shareholders should sell any shares in Carnival plc and/or Carnival Corporation.
If the boards of directors exercise the authority conferred by Proposal 17, we would have the option of holding the shares in treasury, or cancelling them. Shares held in treasury can be re-sold for cash, used for employee share plans or later cancelled. The boards of directors think it prudent to maintain discretion as to dealing with the purchased shares. As of the date of this proxy statement, no Carnival plc shares are held by Carnival plc in treasury.
The boards of directors consider that any buy back of Carnival plc shares may include the purchase of its American Depositary Shares (ADSs), each representing one ordinary share of Carnival plc, with a subsequent cancellation of the underlying ADSs. If the underlying ADSs are so cancelled, Carnival plc will either cancel or hold in treasury the ordinary share represented by such ADSs.
The minimum price (exclusive of expenses) which may be paid for each Carnival plc ordinary share is $1.66, and the maximum price which may be paid is an amount (exclusive of expenses) equal to the higher of (i) 105% of the average middle market quotations for an ordinary share, as derived from the London Stock Exchange Daily Official List, for the five business days immediately preceding the day on which such ordinary share is contracted to be purchased; and (ii) the higher of the price of the last independent trade and the highest current independent bid on the London Stock Exchange at the time the purchase is carried out.
As of January 20, 2015, there are options outstanding to subscribe for 222,174 ordinary shares and Carnival plc has issued 917,339 RSUs, which represent in the aggregate less than 1% of Carnival plcs issued share capital. If 21,605,252 ordinary shares of Carnival plc were purchased by Carnival plc and cancelled, these options and RSUs would represent in the aggregate less than 1% of Carnival plcs issued share capital.
The authority to purchase Carnival plc ordinary shares will expire at the conclusion of the Carnival plc annual general meeting in 2016 or on July 13, 2016, whichever is earlier (except in relation to any purchases of shares the contract for which was entered before the expiry of such authority).
The boards of directors unanimously recommend a vote FOR the general authority to buy back Carnival plc ordinary shares.
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BOARD STRUCTURE AND COMMITTEE MEETINGS
Independence of Board Members
The boards of directors have determined that each of the following directors is an independent director in accordance with the corporate governance rules of the New York Stock Exchange as a result of having no material relationship with Carnival Corporation & plc other than (1) serving as a director and board committee member, (2) receiving related fees as disclosed in this proxy statement and (3) having beneficial ownership of Carnival Corporation and/or Carnival plc securities as disclosed in the section of this proxy statement entitled Stock Ownership of Certain Beneficial Owners and Management: Sir Jonathon Band, Richard J. Glasier, Debra Kelly-Ennis, Sir John Parker, Stuart Subotnick, Laura Weil and Randall J. Weisenburger.
Micky Arison, the former Chief Executive Officer of Carnival Corporation & plc, currently serves as the Chairman of the boards. Stuart Subotnick has been elected by our independent directors to serve as the Presiding Director. Mr. Subotnick also acts as the senior independent director under the UK Corporate Governance Code. As Presiding Director, Mr. Subotnick has broad authority and responsibility over board governance and operations, including oversight of the annual appraisal of the Chairmans performance as leader of the boards. We believe that this structure is appropriate for Carnival Corporation & plc because it gives the boards the benefit of independent oversight, while retaining deep knowledge of our business, history and industry.
Board Meetings
During the year ended November 30, 2014, the board of directors of each of Carnival Corporation and Carnival plc held a total of six meetings. Each Carnival Corporation director and each Carnival plc director attended either telephonically or in person at least 75% of all Carnival Corporation & plc board of directors and applicable committee meetings held during the period that he or she served.
Our Corporate Governance Guidelines provide that our non-executive directors will meet privately in executive session at least quarterly. The Presiding Director presides at these meetings.
All board members are expected to attend our annual meetings of shareholders. At the 2014 annual meetings, all of the board members of each company were in attendance.
Board Committees
The boards delegate various responsibilities and authority to different board committees. The committees regularly report on their activities and actions to the full boards. The board of directors of each of Carnival Corporation and Carnival plc has established standing Audit; Compensation; Executive; Health, Environmental, Safety & Security (HESS); and Nominating & Governance Committees, which are comprised of the same directors for each company. A majority of the directors of each company and all of the members of the Audit Committee, Compensation Committee, HESS Committee and Nominating & Governance Committee of each company are independent (as defined by the listing standards of the New York Stock Exchange, SEC rules and the UK Corporate Governance Code). In addition, all members of the Audit Committees and Compensation Committees meet the heightened independence criteria applicable to directors serving on those committees under SEC rules and New York Stock Exchange listing standards.
The membership and function of each committee is described below. Our Corporate Governance Guidelines and copies of the charters of our Audit, Compensation, HESS and Nominating & Governance Committees are available under the Corporate Governance section of our website at www.carnivalcorp.com and www.carnivalplc.com. Each committee periodically reviews its charter in light of new developments in applicable regulations and may make additional recommendations to the boards to reflect evolving best practices. Each committee can engage outside experts, advisers, and counsel to assist the committee in its work.
The current committee members are as follows:
Committees | ||||||||||
Name |
Audit | Compensation | Executive | HESS | Nominating & Governance | |||||
Micky Arison |
| | Chair | | | |||||
Sir Jonathon Band |
| | | X | | |||||
Arnold W. Donald |
| | X | | | |||||
Richard J. Glasier |
Chair | X | | | X | |||||
Debra Kelly-Ennis |
| | | X | | |||||
Sir John Parker |
| | | Chair | X | |||||
Stuart Subotnick |
X | | X | | Chair | |||||
Laura Weil |
X | X | | | | |||||
Randall J. Weisenburger |
X | Chair | | | X | |||||
Number of committee meetings/consent actions in fiscal 2014 |
13 | 6 | 6 | 5 | 4 |
Audit Committees. The Audit Committees assist the boards in their general oversight of our financial reporting, internal controls and audit functions, and are responsible for the appointment, retention, compensation, and oversight of the work of our independent auditors and our independent registered certified public accounting firm. The board of directors of Carnival Corporation has determined that Mr. Glasier is both independent and an audit committee financial expert, as defined by SEC rules. In addition, the board of directors of Carnival plc has determined that Mr. Glasier has recent and relevant financial experience for the purposes of the UK Corporate Governance Code. The boards determined that each member of the Audit Committees has sufficient knowledge in
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reading and understanding the companys financial statements to serve on the Audit Committees. The responsibilities and activities of the Audit Committees are described in detail in Report of the Audit Committees and the Audit Committees charter.
Compensation Committees. The Compensation Committees have authority for reviewing and determining salaries, performance-based incentives, and other matters related to the compensation of our executive officers, and administering our stock incentive plans, including reviewing and granting equity-based grants to our executive officers and other employees. The Compensation Committees also review and determine various other compensation policies and matters, including making recommendations to the boards with respect to the compensation of the non-executive (non-employee) directors, incentive compensation and equity-based plans generally, and administering the employee stock purchase plans. For more information on the responsibilities and activities of the Compensation Committees, including the committees processes for determining executive compensation, see Compensation Discussion and Analysis, Executive Compensation, and the Compensation Committees charter.
Executive Committees. The Executive Committees may exercise the authority of the full board between board meetings, except to the extent that the board has delegated authority to another committee or to other persons, and except as limited by applicable law.
HESS Committees. The HESS Committees review and recommend policies relative to the protection of the environment and the health, safety and security of employees, contractors, guests and the public. The HESS Committees also supervise and monitor health, environmental, safety, security and sustainability policies and programs and review with management significant risks or exposures and actions required to minimize such risks. For more information on the responsibilities and activities of the HESS Committees, see the HESS Committees charter.
Nominating & Governance Committees. The Nominating & Governance Committees review and report to the boards on a periodic basis with regard to matters of corporate governance. The Nominating & Governance Committees also review and assess the effectiveness of our Corporate Governance Guidelines, make recommendations to the boards regarding proposed revisions to these guidelines, and make recommendations to the boards regarding the size and composition of the boards and their committees. For more information on the responsibilities and activities of the Nominating & Governance Committees, see Nominations of Directors, Procedures Regarding Director Candidates Recommended by Shareholders and the Nominating & Governance Committees charter.
Additional information with respect to Carnival plcs corporate governance practices during the 2014 fiscal year is included in the Carnival plc Corporate Governance Report attached to this proxy statement as Annex C.
Risk Oversight
The boards of directors have overall responsibility for the Carnival Corporation & plc Enterprise Risk Management (ERM) Program, which assesses, monitors and identifies mitigation enhancement for key risks facing our companies. The boards of directors receive both written and oral reports on the ERM Program at least twice each year and provide guidance on the direction and reporting of the ERM Program.
Our boards use their committees to assist in their risk oversight function as follows:
| Our Audit Committees are responsible for oversight of our financial controls and compliance activities. The Audit Committees also oversee managements processes to identify and quantify the material risks facing Carnival Corporation & plc. In connection with its risk oversight role, the Audit Committees regularly meet privately with representatives from our independent registered certified public accounting firm, the Chief Audit Executive and the General Counsel. |
| Our Compensation Committees are responsible for oversight of risk associated with our executive compensation structure, policies and programs. |
| Our HESS Committees are responsible for oversight of risk associated with the health, environment, safety and security of employees, contractors, guests and the public. |
| Our Nominating and Governance Committees are responsible for oversight of risk associated with board processes and corporate governance. |
Each committee chairman presents this information to the full boards for review.
Discussions with the boards regarding the Carnival Corporation & plc strategic plan, consolidated business results, capital structure, and other business related activities include a discussion of the risks associated with the particular item under consideration. This oversight includes briefings by management, review of audit results and corrective actions, and results of risk assessment and risk monitoring activities.
The boards believe that the structure and assigned responsibilities provides the appropriate focus, oversight and communication of key risks faced by our companies.
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Compensation Risk Assessment
In 2011, Carnivals management, in conjunction with the Compensation Committees independent compensation consultant, Frederic W. Cook & Co., Inc. (FWC), conducted a thorough review of our compensation programs, including those programs in which our named executive officers participate, to determine if aspects of those programs contribute to excessive risk-taking. Based on the findings from this review and a reassessment conducted in 2014, the Compensation Committees continue to believe that our compensation policies and practices do not encourage excessive risk-taking and are not reasonably likely to have a material adverse effect on Carnival Corporation & plc.
To reach this conclusion, key elements of our compensation programs were assessed to determine if they exhibited excessive risk. These elements included pay mix (cash vs. equity) and pay structure (short vs. long-term focus), performance metrics, performance goals and ranges, the degree of leverage, incentive maximums, payment timing, incentive adjustments, use of discretion and stock ownership requirements. Our assessment reinforced the Compensation Committees belief that our compensation programs are not contributing to excessive risk-taking, but instead contain many features and elements that help to mitigate risk. For example:
| Pay Structure: Our compensation programs emphasize both short and long-term performance through our annual bonus program (delivered in cash) and through the delivery of long-term incentives (equity) in a balanced approach (approximately 50% through base salary and bonus and 50% in long-term equity grants). The mix of our pay program is intended to motivate management to consider the impact of decisions on shareholders in the short, intermediate and long-term. |
| Incentive Limits: Our annual cash bonus plans do not allow for unlimited payouts. Cash bonus awards cannot exceed 200% of target levels. The performance-based share grants made in 2014 limits the payouts to 200% of target, inclusive of the impact of the TSR modifier, if applicable. |
| Performance-based Share Grants: To strengthen the relationship between pay and performance, our long-term incentive plans include performance-based share grants. Since 2011 a portion of the long-term equity grants has been in the form of performance-based share grants. Performance-based share grants will have no value unless Carnival Corporation & plc achieves pre-determined performance targets over a three-year period. Further, all restricted share and RSU grants vest at the end of three years, rather than vesting ratably on an annual basis. |
| Performance Measurement: For corporate officers, the performance measurement used when determining their annual cash bonus is based on the performance of Carnival Corporation & plc. For officers of our operating units, the performance measurements used when determining their bonus is based 50% on the performance of their operating unit, with the remaining balance being based on the performance of Carnival Corporation & plc to enable a continued focus on the overall success of Carnival Corporation & plc. |
| Stock Ownership Guidelines: All of our senior executives who are designated as reporting officers under Section 16 of the Exchange Act (each a Section 16 Officer), including our named executive officers, are subject to a Stock Ownership Policy which specifies target ownership levels of Carnival Corporation and Carnival plc shares for each Section 16 Officer expressed in terms of the value of the equity holdings (including unvested restricted shares and RSUs) as a multiple of each Section 16 Officers base salary. In 2014, the Stock Ownership Policy was amended to require that Section 16 Officers retain at least 50% of the share awards received after deducting the exercise price (of stock options) and withholding taxes, until their target ownership level is achieved. |
| Clawback Policy: The Carnival Corporation 2011 Stock Plan (which was approved by shareholders in 2011) and the Carnival plc 2014 Employee Share Plan (which was approved by shareholders in 2014) contains a clawback policy, which authorizes us to recover incentive-based compensation granted under that plan in the event Carnival Corporation & plc is required to restate its financial statements due to fraud or misconduct. In 2014, the management incentive plans used to determine annual cash bonuses were amended to also include a clawback policy. |
| Adjustments and Discretion: There are no predetermined adjustments under the short-term incentive plans, and the Compensation Committees may use their discretion to make such adjustments as they deem appropriate in determining awards, thereby helping to mitigate windfall payments not anticipated or warranted. |
Corporate Governance Guidelines
Our Corporate Governance Guidelines address various governance issues and principles, including director qualifications and responsibilities, access to management personnel, director compensation, director orientation and continuing education and annual performance evaluations of the boards and directors. Our Corporate Governance Guidelines are posted on our website at www.carnivalcorp.com and www.carnivalplc.com.
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Succession Planning
Our boards believe that planning for the succession of our Chief Executive Officer is an important function. Our decentralized structure enhances our succession planning process. At the corporate level, a highly-skilled management team oversees a collection of cruise brands. At both the corporate and brand levels, we continually strive to foster the professional development of senior management. As a result, Carnival Corporation & plc has developed a very experienced and strong group of leaders, with their performance subject to ongoing monitoring and evaluation, as potential successors to our Chief Executive Officer.
The boards and the Nominating & Governance Committees are responsible for succession planning (including emergency succession planning). The independent non-executive directors meet with the Chief Executive Officer at least annually to plan for the succession of the Chief Executive Officer (including plans in the event of an emergency). During those sessions, the Chief Executive Officer discusses his recommendations of potential successors, along with an evaluation and review of any development plans for such individuals. As provided in our Corporate Governance Guidelines, the Nominating and Governance Committees will, when appropriate, make recommendations to the boards with respect to potential successors to the Chief Executive Officer. All members of the boards will work with the Nominating & Governance Committees to see that qualified candidates are available and that development plans are being utilized to strengthen the skills and qualifications of the candidates. When assessing the qualifications of potential successors to the Chief Executive Officer, the boards and the Nominating & Governance Committees will take into account our business strategy as well as any other criteria they believe are relevant.
Nominations of Directors
Carnival Corporation and Carnival plc are two separate legal entities and, therefore, each has a separate board of directors, each of which in turn has its own Nominating & Governance Committee. As the DLC arrangement requires that there be identical boards of directors, the Nominating & Governance Committees make one set of determinations in relation to both companies.
The Nominating & Governance Committees actively seek individuals qualified to become board members and recommend to the boards the nominees to stand for election as directors at the annual meetings of shareholders or, if applicable, at a special meeting of shareholders.
When evaluating prospective candidates for director, regardless of the source of the nomination, the Nominating & Governance Committees will consider, in accordance with their charter, such factors as they deem appropriate, including, but not limited to:
| the candidates judgment; |
| the candidates skill; |
| diversity considerations; |
| the candidates experience with businesses and other organizations of comparable size; |
| the interplay of the candidates experience with the experience of other board members; and |
| the extent to which the candidate would be a desirable addition to the boards and any committees of the boards. |
Our Corporate Governance Guidelines dictate that diversity should be considered by the Nominating and Governance Committees in the director identification and nomination process. This means that the Nominating and Governance Committees seek nominees who bring a variety of business backgrounds, experiences and perspectives to the boards. The boards believe that the backgrounds and qualifications of the directors, considered as a group, should provide a broad diversity of experience, professions, skills, geographic representations, knowledge and abilities that will allow the boards to fulfill their responsibilities.
The Nominating & Governance Committees will also use their best efforts to see that the composition of the boards adheres to the independence requirements applicable to companies listed for trading on the New York Stock Exchange and the London Stock Exchange. The Nominating & Governance Committees may consider candidates proposed by management, but are not required to do so. Other than the foregoing, there are no stated minimum criteria for director nominees.
The Nominating & Governance Committees identify nominees by first evaluating the current members of the boards willing to continue in service. Current members of the boards with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the boards with that of obtaining a new perspective. If any member of the boards does not wish to continue in service or if the Nominating & Governance Committees or the boards decide not to re-nominate a member for re-election, the Nominating & Governance Committees identify the desired skills and experience of a new nominee in light of the criteria above. Current members of the Nominating & Governance Committees and the boards are polled for suggestions as to individuals meeting the criteria of the Nominating & Governance Committees. The Nominating and Governance Committees may engage a third party search firm to identify or evaluate or assist in identifying potential nominees.
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Procedures Regarding Director Candidates Recommended by Shareholders
The Nominating & Governance Committees will also consider shareholder recommendations of qualified director nominees when such recommendations are submitted in accordance with the procedures below. In order to have a nominee considered by the Nominating & Governance Committees for election at the 2016 annual meetings, a shareholder must provide the same information as is required for director nominations set forth in Carnival Corporations by-laws. Specifically, the shareholder must submit his or her recommendation in writing to the attention of our Secretary at our headquarters no later than seven days nor earlier than 42 days prior to the 2016 annual shareholders meetings. Any such recommendation must include, in addition to any other requirements specifically set forth in Carnival Corporations and Carnival plcs governing documents:
| the name and address of the candidate; |
| a brief biographical description, including his or her occupation and service on boards of directors of any public company or registered investment company for at least the last five years; |
| a statement of the particular experience, qualifications, attributes or skills of the candidate, taking into account the qualification requirements set forth above; and |
| the candidates signed consent to serve as a director if elected and to be named in the proxy statement. |
Once we receive the recommendation, we will deliver to the candidate a questionnaire that requests additional information about the candidates independence, qualifications and other matters that would assist the Nominating & Governance Committees in evaluating the candidate, as well as certain information that must be disclosed about the candidate in our proxy statement or other regulatory filings, if nominated. Candidates must complete and return the questionnaire within the time frame provided to be considered for nomination by the Nominating & Governance Committees.
Communications between Shareholders or Interested Parties and the Boards
Shareholders or interested parties who wish to communicate with the boards, the Presiding Director, the non-executive directors as a group or any individual director should address their communications to the attention of the Secretary of Carnival Corporation and Carnival plc at 3655 N.W. 87th Avenue, Miami, Florida 33178. The Secretary will maintain a log of all such communications, promptly forward to the Presiding Director those which the Secretary believes require immediate attention, and also periodically provide the Presiding Director with a summary of all such communications and any responsive actions taken. The Presiding Director will notify the boards or the chairs of the relevant board committees as to those matters that he believes are appropriate for further action or discussion.
Code of Business Conduct and Ethics
Carnival Corporation and Carnival plcs Code of Business Conduct and Ethics applies to all employees and members of the boards of Carnival Corporation and Carnival plc and provides guiding principles on areas such as identifying and resolving conflicts of interest. Our Code of Business Conduct and Ethics is posted on our website at www.carnivalcorp.com and www.carnivalplc.com. The Code of Business Conduct and Ethics may be amended periodically to remain in line with best practices.
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During fiscal 2014, our non-executive directors were entitled to receive an annual retainer of $40,000 per year, an attendance fee per board meeting of $5,000 ($2,000 if the meeting is attended by telephone), equity compensation, as further described below, and reimbursement for travel, meals and accommodation expenses attendant to their board membership. For purposes of calculating fees, a board or committee meeting of Carnival Corporation and a concurrent or related board or committee meeting of Carnival plc constitute a single meeting. We do not provide retirement benefits or other benefits to our non-executive directors. We reimburse directors for travel expenses incurred for spouses or partners when we request that they attend a special event. Any amount reimbursed for spousal or partner travel is reported below in the Director Compensation for Fiscal 2014 table. For fiscal 2014, the Presiding Director received an additional retainer of $20,000 per annum. In addition, non-executive directors receive additional compensation for serving as chairman or a member of a board committee. Board members who are employed by us do not receive additional compensation for their services as a member of the boards of directors.
During fiscal 2014, the retainer and meeting attendance fees for the board committees were as follows:
Retainer | Attendance Fee | |||||||||||||||
Chair | Member | In Person | By Telephone | |||||||||||||
Audit Committees |
$ | 23,000 | $ | 7,500 | $ | 3,000 | $ | 1,500 | ||||||||
Compensation Committees |
$ | 23,000 | $ | 3,750 | $ | 2,500 | $ | 1,250 | ||||||||
Executive Committees |
| $ | 3,750 | | | |||||||||||
HESS Committees |
$ | 23,000 | $ | 7,500 | $ | 3,000 | $ | 1,500 | ||||||||
Nominating & Governance Committees |
$ | 10,000 | $ | 3,750 | $ | 2,500 | $ | 1,250 |
The boards of directors are committed to attracting and retaining a highly diverse, experienced and capable group of non-executive directors. To that end, the compensation program for the non-executive directors is evaluated annually by the Compensation Committees to ensure it is competitive. The Compensation Committees determined, based upon analysis and recommendations provided by FWC, that the pay level and structure in effect for fiscal 2014 merited modification. As such, in January 2015, the board approved the following changes to the non-executive director compensation program:
| Eliminated all board and committee meeting attendance fees; |
| Eliminated all committee member retainers; |
| Increased committee chair retainers as follows: |
Ø | Audit, Compensation and HESS Committees chairs retainer increased from $23,000 to $30,000, and |
Ø | Nominating & Governance Committees chair retainer increased from $10,000 to $15,000 |
| Increased the annual retainer from $40,000 to $110,000; and |
| Increased the Presiding Director retainer from $20,000 to $25,000 |
Non-executive directors receive payment of their earned retainer and meeting fees in quarterly installments. Annual retainers are pro-rated so that adjustments can be made during the year. Unearned portions of cash retainers are forfeited upon termination of service.
Non-executive directors receive annual share grants under the Carnival Corporation 2011 Stock Plan. In April 2014, the non-executive directors received grants with a dollar value equal to $120,000. As a result, a grant of 3,215 Carnival Corporation restricted shares was made to each non-executive director re-elected on April 17, 2014 based on the closing price of a share on the date re-elected of $37.32. It is anticipated that the non-executive directors re-elected at the April 2015 shareholders meeting will be awarded an annual share grant with a dollar value equal to $160,000, which increased amount was determined based upon the analysis and recommendations provided by FWC.
Grants under the Carnival Corporation 2011 Stock Plan are released from restriction on the third anniversary of the grant date (and are not forfeitable provided the director has served at least a full year). Grants of restricted shares have the same rights with respect to dividends and other distributions as all other outstanding shares of Carnival Corporation common stock. Generally, non-executive directors will receive their annual grants initially upon their election to the boards and subsequently at the time of their annual re-election to the boards.
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Director Compensation for Fiscal 2014
The following table details the total compensation earned by our non-executive directors in fiscal 2014. Compensation for our executive director who is a named executive officer, Mr. Donald, is reflected in the section entitled Summary Compensation Table, which follows the Compensation Discussion and Analysis. Board members who are employed by us do not receive additional compensation for their services as a member of the boards of directors.
Name |
Fees Earned or Paid in Cash(1) ($) |
Stock Awards(2)(3) ($) |
All
Other Compensation(4) ($) |
Total ($) |
||||||||||||
Sir Jonathon Band |
85,000 | (5) | 119,984 | 16,454 | 221,438 | |||||||||||
Howard S. Frank(6) |
| | 69,495 | 69,495 | ||||||||||||
Richard J. Glasier |
142,500 | 119,984 | 11,329 | 273,813 | ||||||||||||
Debra Kelly-Ennis |
83,000 | 119,984 | 9,287 | 212,271 | ||||||||||||
Sir John Parker |
114,250 | 119,984 | 3,697 | 237,931 | ||||||||||||
Stuart Subotnick |
128,750 | 119,984 | 4,555 | 253,289 | ||||||||||||
Laura Weil |
113,250 | 119,984 | | 233,234 | ||||||||||||
Randall J. Weisenburger |
140,250 | 119,984 | 4,555 | 264,789 |
(1) | Refer to the table above describing the board committee membership. |
(2) | No stock option grants were made in fiscal 2014. Represents the grant date fair value, assuming no risk of forfeiture of the grants of Carnival Corporation restricted shares granted in fiscal 2014, calculated in accordance with Accounting Standards Codification Topic 718, Stock Compensation (ASC 718). In April 2014, each of the non-executive directors received a grant of 3,215 restricted shares based on the closing price of a share on April 17, 2014, the date they were re-elected, of $37.32. The restricted shares granted in 2014 vest on the third anniversary of the grant date. The restricted shares granted to non-executive directors also vest in full upon the death or disability of the director, and continue to vest in accordance with the original vesting schedule and are not forfeited if a director ceases to be a director for any other reason after having served as a director for at least one year. All of the directors who received grants served for all of fiscal 2014. |
(3) | The aggregate number of Carnival Corporation and Carnival plc restricted shares, RSUs and options (all of which are exercisable) outstanding at November 30, 2014 are as follows: |
Name |
Unvested Restricted Shares |
Unvested RSUs | Unexercised Options | ||||||||||||
Sir Jonathon Band |
10,666 | 0 | 0 | ||||||||||||
Howard S. Frank |
127,522 | 0 | 0 | ||||||||||||
Richard J. Glasier |
10,666 | 0 | 20,000 | ||||||||||||
Debra Kelly-Ennis |
3,215 | 7,451 | 0 | ||||||||||||
Sir John Parker |
10,666 | 0 | 0 | ||||||||||||
Stuart Subotnick |
10,666 | 0 | 0 | ||||||||||||
Laura Weil |
10,666 | 0 | 0 | ||||||||||||
Randall J. Weisenburger |
10,666 | 0 | 0 |
(4) | Represents reimbursement of expenses associated with spousal or partner travel and the incremental cost of cruise benefits. For Mr. Frank, also includes the cost of a watch given to him upon his retirement and the incremental cost of private medical/health insurance costs and premiums for Mr. Frank and his spouse. |
(5) | Exclusive of value added tax. |
(6) | Mr. Frank was not nominated for re-election at the April 2014 annual general meeting. As a result, his term ended on April 17, 2014. |
The following policies also apply to our non-executive directors:
| Stock Ownership Policy. The stock ownership policy for non-executive directors was amended in 2014 to provide that all non-executive directors are required to own shares (inclusive of unvested restricted shares, RSUs and shares in a trust beneficially owned by the director) of either Carnival Corporation common stock or Carnival plc ordinary shares with a value equal to four times the cash retainer. New directors must achieve this requirement no later than five years from the date of their initial election to the boards by the shareholders. Each of the non-executive directors has already achieved this board-mandated requirement. |
| Product Familiarization. All non-executive directors are encouraged to take a cruise for up to 14 days per year for product familiarization and pay a fare of $35 per day for such cruises. In addition, guests traveling with the non-executive director in the same stateroom are charged a fare of $35 per day. All other charges associated with the cruise (e.g., air fares, fuel supplements, fees, taxes and other charges, hotel service charges, ground transfers and tours) are the responsibility of the non-executive director. |
Carnival plc
Additional information with respect to Carnival plcs compensation and reimbursement practices during fiscal 2014 for non-executive directors is included in Part II of the Carnival plc Directors Remuneration Report, which is attached as Annex B to this proxy statement.
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COMPENSATION DISCUSSION AND ANALYSIS
and
CARNIVAL PLC DIRECTORS REMUNERATION REPORT PART I
INTRODUCTION
Carnival Corporation and Carnival plc are separate legal entities (together referred to in this report as Carnival Corporation & plc) and each company has its own board of directors and Compensation Committee. However, as is required by the agreements governing the dual listed company (DLC) arrangement, the boards of directors and members of the committees of the boards, including the Compensation Committees, are identical and there is a single senior management team.
Carnival Corporation and Carnival plc are subject to disclosure regimes in the U.S. and UK. While some of the disclosure requirements are the same or similar, some are very different. As a result, the Carnival plc Directors Remuneration Report is in two parts. The information contained in this Part I constitutes the Compensation Discussion and Analysis as required by regulations promulgated by the SEC, and includes information that Carnival plc is required to disclose in accordance with the Sections 439 and 440 of the Companies Act 2006 and Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended (the LMCG Regulations). Part II of the Carnival plc Directors Remuneration Report is set forth as Annex B to this proxy statement and includes the additional information that Carnival plc is required to disclose in accordance with Section 439A of the Companies Act 2006 and the LMCG Regulations, including certain information that has been audited for the purposes of the Carnival plc Annual Report.
Parts I and II of the Carnival plc Directors Remuneration Report are in compliance with the LMCG Regulations, the UK Corporate Governance Code published in September 2012 by the UK Financial Reporting Council (the UK Corporate Governance Code), the UK Companies Act 2006 and the Listing Rules of the UK Listing Authority. Both Parts I and II form part of the Annual Report of Carnival plc for the year ended November 30, 2014.
Pursuant to rules promulgated by the SEC and the LMCG Regulations, this Compensation Discussion and Analysis reviews the compensation of the following named executive officers of Carnival Corporation & plc (the NEOs):
Name | Title | |
Arnold W. Donald |
President and Chief Executive Officer | |
David Bernstein |
Chief Financial Officer | |
Alan Buckelew |
Chief Operations Officer | |
Gerald R. Cahill |
Former President and Chief Executive Officer of Carnival Cruise Lines | |
Michael Thamm |
Chief Executive Officer of the Costa Group, which includes Costa Cruises, AIDA Cruises and, through November 2014, Ibero Cruises |
EXECUTIVE SUMMARY
Our executive compensation program is designed to reward financial results and effective strategic leadership through use of both short-term rewards and long-term incentives and to promote alignment of the financial interests of our executive officers with our shareholders. We seek to provide total direct compensation that allows us to be competitive in the labor markets where we compete for executive talent, adjusted as necessary to take into consideration factors including the senior executives performance, experience and responsibilities. We believe our compensation programs performance measures align the interests of our shareholders and senior executives by linking actual pay to operating performance and shareholder outcomes.
SHAREHOLDER ENGAGEMENT
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, at the 2014 annual shareholders meeting, our shareholders provided an advisory (non-binding) vote on the fiscal 2013 compensation of our NEOs, which is referred to as the say-on-pay vote. The fiscal 2013 compensation program of our NEOs, as disclosed pursuant to the compensation disclosure rules of the SEC (including the Compensation Discussion and Analysis, the compensation tables, and any related material disclosed in the proxy statement) received the support of 58.4% of the shares on the say-on-pay proposal. As part of the Compensation Committees oversight of Carnival Corporation & plcs executive compensation programs, their commitment to ensure that Carnival Corporation & plcs executive compensation programs are effective in achieving its key objectives, and in response to these results, the Compensation Committees engaged in outreach efforts with our major shareholders to gather feedback regarding our executive compensation program. We reached out to 25 of our top shareholders and requested meetings to discuss our executive compensation practices. We ultimately received positive responses from, and held one-on-one conversations with, approximately half representing approximately 44% of our outstanding shares. The purpose of these discussions, which included meetings between the shareholders and the Chairman of our Compensation Committees, the Chairman of the Boards, the Chief Executive Officer or the Chief Financial Officer and our Vice President of Investor Relations, was to gain insight and perspective on our executive compensation programs and policies. Based in part on the feedback from these engagements, and with feedback, advice and recommendations on the compensation best practices from its independent external compensation consultant, Frederic W. Cook & Co., Inc. (FWC), the Compensation
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Committees approved several changes to the NEOs pay program for fiscal 2014 and will continue to evaluate the executive compensation programs and policies for future years.
HIGHLIGHTS OF EXECUTIVE COMPENSATION PROGRAM CHANGES
| Annual Incentive Bonus Programs |
Ø | Eliminated guaranteed minimum bonus payments. |
Ø | Increased enterprise-wide performance component of the funding formula for brand CEOs to drive strategic goals enterprise-wide. |
Ø | Increased emphasis on performance in health, environment, safety and security (HESS) by strengthening the degree to which it impacts bonus payouts. |
Ø | Revised approach used to set Operating Income Targets that resulted in a 5.1% higher fiscal 2014 Operating Income Target performance requirement than would have resulted using the prior approach. |
Ø | Added clawback features that require reimbursement of all or a portion of bonus payments received by the participant if a participants wrongdoing results in a material restatement of our financial statements. |
| Long-Term Equity Programs |
Ø | Added a return on invested capital (ROIC) metric to the annual performance-based share grants to provide for payouts based on the achievement of multiple financial metrics and not a single metric. |
Ø | Approved a special performance-based equity grant to certain senior executives that is tied to the achievement of strong total shareholder return (TSR) improvement over the next three years. |
| Stock Ownership Policy for Section 16 Officers |
Ø | Amended the policy to require that Section 16 Officers retain at least 50% of any net share-based awards received until their target ownership is achieved. |
FISCAL 2014 COMPANY PERFORMANCE
We experienced strong financial and operating performance in fiscal 2014. Our solid operational and financial performance in fiscal 2014 reflects senior leaderships focus on executing our business strategies effectively to achieve our goals. This focus enabled us to deliver value to our shareholders in fiscal 2014, through our efforts to improve as we continue to address the challenges faced in past years and build for future success.
Fiscal 2014 Financial Results and Achievements
Ø | Increased operating income by 32.5% to $1.79 billion, |
Ø | Continued to generate strong cash from operations of $3.4 billion in fiscal 2014 compared to $2.8 billion in fiscal 2013, |
Ø | Increased diluted non-GAAP earnings per share by 24.0% to $1.96, |
Ø | Continued a corporate-wide vessel enhancement program to improve emergency power capabilities, introduced new and enhanced fire safety technology and increased the level of operating redundancies, |
Ø | Introduced a number of innovative product enhancement initiatives, including a shipboard hybrid wireless network, |
Ø | Progressed in the emerging Asian cruise region by more than doubling our presence in China, launched our first season of cruising originating from Japan homeports, |
Ø | Continued successful fuel conservation initiatives, which have allowed us to reduce the rate of fuel consumption by more than 24% compared to fiscal 2007, |
Ø | Furthered our environmental efforts by successfully testing a new exhaust gas cleaning system technology that exceeds stricter air emissions standards, as well as mitigating higher fuel costs on our ships, |
Ø | Reduced CO2 emissions from shipboard operations by 20%, and |
Ø | Initiated plans to build a new state-of-the-art campus for our world-class maritime training and research facility, and |
Ø | Made significant changes to our leadership team, work processes and incentive programs to encourage and enable us to more efficiently collaborate, coordinate and communicate with each other, thus further optimizing our operations. |
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FISCAL 2014 NEO COMPENSATION TARGET PAY MIX
The compensation elements for our NEOs consist of base salary, an annual cash bonus and equity-based compensation. We have reinforced our commitment to strengthening the link between pay and performance for our executive officers through inclusion of variable compensation components. Our philosophy is to place greater emphasis on performance-based pay elements.
Consistent with our philosophy regarding the importance of pay for performance, approximately 86% of Mr. Donalds fiscal 2014 compensation consists of variable, performance-based annual cash bonuses and equity-based compensation. The Other NEOs compensation consists of 81% variable, cash bonuses and equity-based compensation. Further evidencing our commitment to the pay for performance philosophy, no payout was made for the fiscal 2012-2014 performance-based equity grant since the threshold EPS performance goal was not achieved.
The Other NEOs fiscal 2014 equity-based compensation percentage includes a special future performance-based equity grant. Mr. Donald received a special performance-based equity grant in fiscal 2013, which is not reflected in the chart above.
2014 CEO COMPENSATION COMPONENTS
Base Salary |
Remained unchanged for fiscal 2014. | |
Annual Incentive Plan |
An annual bonus aligned with Carnival Corporation & plcs fiscal 2014 financial performance. In fiscal 2014, Carnival Corporation & plcs operating income increased 32.5% from fiscal 2013. As a result, the annual cash bonus awarded to Mr. Donald was 147.6% of his target bonus for fiscal 2014. | |
Annual PBS Grant |
40% of annual equity-based compensation. PBS grant provides a future compensation opportunity based on weighted EBIT and ROIC performance goals over a three-year period (2014-2016), as modified for our TSR rank relative to the Peer Group, with payout contingent on continued service. | |
Annual TBS Grant |
60% of annual equity-based compensation. TBS grant is subject to three-year vesting condition. The ultimate value of the shares is subject to stock price fluctuation during the vesting period which further aligns compensation with shareholder outcomes. |
Comparison of Fiscal 2014 and Fiscal 2013 CEO Total Direct Compensation (TDC)
Mr. Donalds total direct compensation decreased by 2.5% in fiscal 2014, primarily due to the one-time special PBS grant offset by a higher cash bonus in fiscal 2014 due to a full year of service.
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(1) | Fiscal 2013 Salary reflects Mr. Donalds base salary for fiscal 2013 as if he had served for the full year, to better represent the year-over-year change. |
(2) | Fiscal 2013 equity-based compensation includes a special one-time PBS grant of $3,000,000 made to Mr. Donald as disclosed in last years proxy statement and a guaranteed bonus payment for fiscal 2013, both made under the terms of his employment agreement. |
OVERALL PHILOSOPHY AND OBJECTIVES
The objectives of the Compensation Committees with respect to executive compensation are to create competitive compensation packages that provide both short-term rewards and long-term incentives for positive individual and corporate performances and to ensure the alignment of the financial interests of our executive officers and our shareholders. To help strengthen that linkage, the Compensation Committees philosophy is to place appropriate emphasis on the variable elements of compensation, such as the annual cash bonus and equity-based compensation. The Compensation Committees seek to provide total direct compensation for each NEO that is competitive for the market (as described below under Competitive Market (Peer Group) Comparison), adjusted as necessary to take into consideration a particular NEOs individual circumstances, as applicable (including the NEOs performance, experience and responsibility).
Most of our executive officers are located in the U.S., with others based in Europe. As a global entity, it is challenging to establish consistent compensation practices across geographic and operating company units that satisfy the particular requirements of all jurisdictions and local market demands. Since the largest presence of executive officers is in the U.S., our compensation policies primarily reflect U.S. market practices. However, the Compensation Committees seek to incorporate UK compensation principles, including those contained in the UK Corporate Governance Code, as far as practicable.
OVERVIEW OF TOTAL DIRECT COMPENSATION FOR 2014 AND COMPARISON TO 2013
Total Cash Compensation. Annual changes in total cash compensation for Carnival Corporation & plcs senior management team, including the NEOs, take into account changes in operating income as measured at the enterprise-wide and/or operating company levels. Other considerations impacting cash compensation include changes in responsibility, market pay positioning and comparisons to other Carnival Corporation & plc executives with similar responsibility levels.
The table below shows target and actual cash compensation for fiscal 2014 compared to target and actual cash compensation for fiscal 2013. Annual cash bonuses increased in fiscal 2014 from fiscal 2013, consistent with our improved operating performance.
Fiscal 2013 | Fiscal 2014 | |||||||||||||||||||||||||||||
NEO |
Salary Plus Target Bonus |
Salary Plus Actual Bonus |
Salary Plus Target Bonus |
Salary Plus Actual Bonus |
Change from Fiscal 2013 Salary Plus Actual Bonus |
Change from Fiscal 2013 Salary Plus Target Bonus | ||||||||||||||||||||||||
Arnold W. Donald (actual prorated)(1) |
$ | 1,541,667 | $ | 1,541,667 | $ | 3,650,000 | $ | 4,911,400 | 218.6 | % | 136.8 | % | ||||||||||||||||||
Arnold W. Donald (annualized)(2) |
$ | 3,700,000 | $ | 3,700,000 | $ | 3,650,000 | $ | 4,911,400 | 32.7 | % | (1.4 | %) | ||||||||||||||||||
David Bernstein |
$ | 1,205,000 | $ | 912,200 | $ | 1,575,000 | $ | 2,005,000 | 119.8 | % | 30.7 | % | ||||||||||||||||||
Alan Buckelew(3) |
N/A | N/A | $ | 1,925,000 | $ | 2,350,000 | N/A | N/A | ||||||||||||||||||||||
Gerald R. Cahill |
$ | 1,931,250 | $ | 1,364,750 | $ | 1,931,250 | $ | 2,428,250 | 77.9 | % | 0.0 | % | ||||||||||||||||||
Michael Thamm(4) |
| 1,600,000 | | 1,150,000 | | 1,600,000 | | 1,950,000 | 69.6 | % | 0.0 | % |
(1) | Reflects Mr. Donalds base salary from July (five months) and bonus payment for fiscal 2013 pursuant to his employment agreement. |
(2) | Reflects Mr. Donalds base salary and bonus payment for fiscal 2013 as if he had served for the full year, to better represent the year-over-year change. |
(3) | Mr. Buckelew is an NEO for the first time in 2014. |
(4) | Mr. Thamms base salary and bonus is payable in euros. For fiscal 2013, his base salary and target bonus is equivalent to $2,112,000 and his base salary and actual bonus is equivalent to $1,518,000 when converted to U.S. dollars at the average exchange rate for fiscal 2013 of $1.32:1. For fiscal 2014, his base salary and target bonus is equivalent to $2,144,000 and his base salary and actual bonus is $2,613,000 when converted to U.S. dollars at the average exchange rate for fiscal 2014 of $1.34:1. |
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Total Direct Compensation. In addition to the annual cash bonuses, individual equity grants (both the TBS grants and the PBS grants) take into account the scope of the NEOs responsibilities and the NEOs performance and long-term retention considerations. The PBS grants provide compensation only to the extent specified performance targets are achieved over a three-year performance period. The changes in total direct compensation in fiscal 2014 from fiscal 2013 reflect primarily the same factors that explain the year-over-year change in NEO cash compensation.
The table below compares each NEOs year-over-year change in total direct compensation (salary, annual cash bonus and equity grants), both including and excluding the special PBS grant described below.
Including Special PBS Grant | Excluding Special PBS Grant | ||||||||||||||||||||||||
NEO |
Fiscal 2013 Total Direct Compensation |
Fiscal 2014 Total Direct Compensation |
Change from Fiscal 2013 Total Direct Compensation |
Fiscal 2014 Total Direct Compensation |
Change from Fiscal 2013 Total Direct Compensation | ||||||||||||||||||||
Arnold W. Donald |
$ | 8,041,667 | (1) | $ | 8,411,400 | 4.6% | N/A | N/A | |||||||||||||||||
David Bernstein |
$ | 1,842,200 | $ | 4,230,000 | 129.6% | $ | 3,230,000 | 75.3 | % | ||||||||||||||||
Alan Buckelew(2) |
N/A | $ | 4,925,000 | N/A | $ | 3,925,000 | N/A | ||||||||||||||||||
Gerald R. Cahill |
$ | 2,849,750 | $ | 4,997,000 | 75.3% | $ | 3,997,000 | 40.3 | % | ||||||||||||||||
Michael Thamm(3) |
| 2,132,920 | | 4,457,797 | 109.0% | | 2,953,136 | 38.5 | % |
(1) | Includes a special one-time PBS grant made to Mr. Donald under the terms of his employment agreement as disclosed in last years proxy statement. |
(2) | Mr. Buckelew is an NEO for the first time in 2014. |
(3) | Mr. Thamms base salary and bonus is payable in euros. His total direct compensation is equivalent to $2,815,454 for fiscal 2013 when converted to U.S. dollars at the average exchange rate for fiscal 2013 of $1:32: 1. His total direct compensation is equivalent to $5,973,448 for fiscal 2014 when converted to U.S. dollars at the average exchange rate for fiscal 2014 of $1.34: 1. The Carnival plc restricted share units granted to Mr. Thamm are denominated in sterling. Because Mr. Thamm is compensated in euros, the value of the Carnival plc restricted share units granted for: (a) fiscal 2013 has been converted from sterling into euros based on the January 14, 2014 grant date exchange rate of 1.20:£1 and the July 16, 2013 grant date exchange rate of 1:16:£:1; and (b) fiscal 2014 has been converted from sterling into euros based on the December 27, 2013 grant date exchange rate of 1.20:£1, the January 12, 2015 grant date exchange rate of 1.28:£1, and the April 16, 2014 grant date exchange rate of 1.21:£1. |
The fiscal 2013 and fiscal 2014 compensation values included in the above table reflect the fair value of TBS grants made in January 2014 (granted in fiscal 2014 based upon fiscal 2013 performance) and January 2015 (granted in fiscal 2015 based upon fiscal 2014 performance), respectively. Under SEC disclosure rules, TBS grants that were not made until fiscal 2015 do not appear in the Grants of Plan-Based Awards in Fiscal 2014 table or the Summary Compensation Table for fiscal 2014, even though these grants are compensation for fiscal 2014. Instead, the grants made in January 2014 (based on 2013 performance) appear in the Summary Compensation Table for fiscal 2014. However, the Compensation Committees believe that the TBS grants made in fiscal 2015 are properly considered as part of the NEOs compensation for fiscal 2014 performance (in the same way that bonuses paid in fiscal 2015 are treated as compensation for fiscal 2014 performance). Because PBS grants depend on future performance, the Compensation Committees believe that the PBS grants (unlike the TBS grants) should be considered as compensation for the fiscal year in which they are granted, which is how such values are reflected in the table above.
With respect to the special PBS grant made to each of the NEOs in fiscal 2014 other than Mr. Donald (as described in more detail below), the value included in the table is the grant value approved by the Compensation Committees. This value is different than the grant date fair value as determined for financial accounting purposes, which is required under SEC rules to be included in the Summary Compensation Table and the Grants of Plan-Based Awards in Fiscal 2014 table.
PROCESS FOR MAKING COMPENSATION DETERMINATIONS
The Compensation Committees determine the compensation policy and the compensation payable to all of our executive officers, including Carnival Corporation & plcs Chief Executive Officer and Chief Financial Officer. The Compensation Committees interact
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with the management of Carnival Corporation & plc on compensation issues primarily through communications, meetings and discussions with Mr. Donald, the Chairman of the Boards of Directors and the Chief Human Resources Officer, who also attend meetings of the Compensation Committees as requested by the Compensation Committees. As part of the fiscal 2014 annual compensation determination process, Mr. Donald and the Chairman of the Boards of Directors recommended to the Compensation Committees key initiatives and goals for Carnival Corporation & plc at the beginning of each year. After the fiscal year was completed, Mr. Donald and the Chairman of the Boards of Directors reviewed with the Compensation Committees the results of those initiatives, progress towards goals and other material items relating to overall Carnival Corporation & plc performance. The compensation for the NEOs was then determined by the Compensation Committees using their discretion to evaluate the individual performance of the NEOs and the overall performance of Carnival Corporation & plc.
The Compensation Committees believe that the incentive structure for senior management does not raise environmental, social or governance risks by inadvertently motivating irresponsible behavior, and that risks arising from Carnival Corporation & plcs compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on Carnival Corporation & plc. Please refer to the section of the proxy statement entitled Compensation Risk Assessment for additional information.
Compensation Consultant
The Compensation Committees have engaged a consultant from FWC to assist in their annual review of our executive and director compensation programs. The Compensation Committees believe that FWC provided objective advice to the Compensation Committees.
During fiscal 2014, a consultant from FWC attended meetings of the Compensation Committees and provided FWCs views on proposed actions by the Compensation Committees.
In accordance with the New York Stock Exchange rules relating to compensation consultant independence in accordance with the provision of Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Compensation Committees have determined that FWC and their consultants are independent after taking into consideration the factors set forth in the New York Stock Exchange rules. Pursuant to the foregoing factors, the Compensation Committees have determined that FWCs work raised no conflicts of interest.
Peer Group Characteristics
The Compensation Committees perform an annual review of the compensation practices of certain other publicly-listed companies with the assistance of its consultant when determining each element of NEO compensation. This annual market assessment consists of an analysis of top officer pay at a group of publicly-listed peer companies listed below (the Peer Group). Based on the recommendations of FWC, the Compensation Committees approved the Peer Group before the annual assessment commenced. The Peer Group used when assessing the fiscal 2014 compensation for the NEOs, which remains unchanged from fiscal 2013, consisted of 13 U.S. publicly-listed companies comparable to Carnival Corporation & plc across one or more of the following factors: revenue, market capitalization, operating income, total assets, reported full-time employees, nature of business and complexity of business; and reflect a balanced group of media, entertainment, consumer goods and services and retailing companies. Notwithstanding the use of this Peer Group, the Compensation Committees believe there are no public companies that are directly comparable to Carnival Corporation & plc in terms of comparing executive officer pay. The only direct peers are Norwegian Cruise Line Holdings Ltd. and Royal Caribbean Cruises Ltd., which are substantially smaller corporations with significantly less revenue than Carnival Corporation & plc. The other selected companies have some characteristics similar to Carnival Corporation & plc, but they also have some significant differences.
Current Peer Group Companies
Colgate-Palmolive Company |
Starbucks Corporation | |
Macys, Inc. |
Starwood Hotels & Resorts Worldwide, Inc. | |
General Mills, Inc. |
Target Corporation | |
Marriott International, Inc. |
The DIRECTV Group, Inc. | |
McDonalds Corporation |
The Walt Disney Company | |
NIKE, Inc. |
Yum! Brands, Inc. | |
Royal Caribbean Cruises Ltd. |
Competitive Market (Peer Group) Comparison
Annually, the Compensation Committees independent consultant conducts a competitive market review to assist the Compensation Committees in their assessment of the NEOs competitive positioning of total compensation relative to the markets in which Carnival Corporation & plc competes for executive talent. FWC conducted a competitive market assessment on behalf of the Compensation Committees for fiscal 2014. The Compensation Committees reviewed our aggregate NEO total compensation in comparison to the
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competitive market, which consists of the Peer Group as well as third-party surveys that reflect a broad database pool of hundreds of companies. The Compensation Committees were not provided with the identities of the companies in the surveys generally (or of the subsets of companies which had data for relevant comparable positions). As applicable, any utilized survey data was combined with the data for the Peer Group to produce a consolidated aggregated competitive market range for total direct compensation.
These analyses suggest that, in the aggregate, total direct compensation levels for Carnival Corporation & plcs NEOs are competitively positioned. Consistent with the approach that the Compensation Committees take in reviewing each element of total direct compensation, the Compensation Committees utilize these analyses to assess the extent to which the compensation provided to the NEOs is generally consistent with that offered by companies with whom Carnival Corporation & plc competes for executive level talent. The Compensation Committees do not use these analyses to peg any particular element of compensation (or total compensation) to any specific targeted Peer Group level.
NEO COMPENSATION DESIGN AND ELEMENTS
The compensation elements for our NEOs consist of base salary, an annual cash bonus, equity-based compensation, retirement benefits and perquisites.
The compensation practices for each of our NEOs vary in order to reflect the organizational structure of Carnival Corporation & plc. Three of our NEOs (Messrs. Donald, Bernstein and Buckelew) had company-wide roles during fiscal 2014 and two of our NEOs (Messrs. Cahill and Thamm) were chief executive officers of one or more operating units during fiscal 2014. As a result, the compensation practices for these two groups are different. For example, the annual cash bonuses for the NEOs with company-wide roles are based primarily on company-wide operating income. Conversely, and in order to more closely align pay results with their performance, the annual cash bonuses of the NEOs who are chief executive officers of operating units are weighted 50% on the operating unit operating income and 50% on the company-wide performance. The benefits and perquisites and certain elements of the equity-based awards vary among the NEOs to reflect local market practices where an NEO resides.
In determining the amount of any particular compensation element, the Compensation Committees consider the impact of such an element on total compensation (and thus, indirectly each element affects the amount paid in respect of other elements of compensation). For example, the Compensation Committees consider the amount of the base salary and annual bonus that may be earned by an NEO when granting an equity award. However, the annual bonus and equity-based compensation awards are set independently on the basis of dollar values (and are not set or determined as a fixed percentage of base salary).
Base Salaries
A. | General |
Base salaries are intended to provide a level of fixed compensation that reflects each NEOs level of responsibility. Base salaries for fiscal 2014 of our NEOs are reported in the Summary Compensation Table. The Compensation Committees annually review each NEOs performance and may increase the base salary of each NEO in their discretion if merited by performance or other market factors necessary to attract and retain our executives.
Salaries for fiscal 2014 were established for NEOs in January 2014 after performance results for the prior fiscal year were available. Mr. Donald reviewed the annual competitive market analysis provided by the consultant, as well as individual and operating unit performance, and provided the Compensation Committees with recommended salaries for each NEO. The recommendations included a review of each NEOs individual performance for the prior fiscal year.
B. | 2014 Base Salaries and Analysis |
At the beginning of fiscal 2014, Mr. Donald recommended to the Compensation Committees that there be no increase in the base salaries for the NEOs for fiscal 2014, other than for Mr. Bernstein (which is consistent with the lack of increase provided to other members of senior management). Mr. Donald recommended that Mr. Bernstein receive an increase to his base salary for fiscal 2014 to reflect his increased responsibilities overseeing Carnival Corporation & plcs global casino operations. The Compensation Committees accepted Mr. Donalds recommendations.
As a result, the base salaries for fiscal 2014 were as follows:
NEO |
Fiscal 2013 Base Salary |
Fiscal 2014 Base Salary |
Percentage Increase (%) | ||||||||||||
Arnold W. Donald |
$ | 1,000,000 | (1) | $ | 1,000,000 | 0 | |||||||||
David Bernstein |
$ | 595,000 | $ | 675,000 | 13.4 | ||||||||||
Alan Buckelew |
N/A | $ | 825,000 | N/A | |||||||||||
Gerald R. Cahill |
$ | 798,250 | $ | 798,250 | 0 | ||||||||||
Michael Thamm |
| 700,000 | (2) | | 700,000 | (2) | 0 |
(1) | Reflects the annual base salary if Mr. Donald had served as President and Chief Executive Officer for all of fiscal 2013. As noted in the Summary Compensation Table, Mr. Donalds actual base salary was pro-rated from July 3, 2013 for a total of $416,667. |
(2) | Mr. Thamms base salary is payable in euros. His base salary is equivalent to $924,000 for fiscal 2013 when converted into U.S. dollars at the average exchange rate for fiscal 2013 of $1.32:1 and $938,000 for fiscal 2014 when converted into U.S. dollars at the average exchange rate for fiscal 2014 of $1.34:1. |
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Annual Cash Bonuses
A. | General |
The performance-related annual cash bonus is the most significant cash compensation feature of our executive compensation program. In fiscal 2014, each NEOs target bonus comprised the majority of their respective total cash compensation opportunity, supporting Carnival Corporation & plcs objective to emphasize pay for performance. Annual cash bonus payments are intended to reward short-term individual, corporate, and operating unit performance results and achievements. The emphasis on the annual cash bonus as compared to base salary allows Carnival Corporation & plc greater flexibility in rewarding favorable individual and overall company performance.
B. | 2014 Annual Cash Bonuses and Analysis |
For fiscal 2014, the annual cash bonuses for NEOs were determined in accordance with the annual bonus programs described below.
The Corporate Plan |
Messrs. Donald, Bernstein and Buckelew, who have enterprise-wide roles, participate in the Carnival Corporation & plc Management Incentive Plan for the CEO, COO and CFO (the Corporate Plan). The Corporate Plan is designed to focus the attention of these NEOs on achieving outstanding performance results as reflected by income from the operations of Carnival Corporation & plc as well as other relevant measures.
Under the Corporate Plan, the Corporation Operating Income Target and target bonus for each participant is established by the Compensation Committees for each plan year. Corporation Operating Income is defined in the plan to mean the non-U.S. Generally Accepted Accounting Principles (Non-GAAP) net income of Carnival Corporation & plc excluding interest income and expense, other non-operating income and expense and income taxes as reported by Carnival Corporation & plc for the plan year.
The Corporation Operating Income Target for each year is established by the Compensation Committees taking into account historical performance, investor guidance, company/industry growth, Carnival Corporation & plcs annual plan, consultation with management and such other factors as the Compensation Committees deem appropriate. In January 2014, the Compensation Committees set the Corporation Operating Income Target for fiscal 2014 at $1,614,030,000, which was approximately 5.1% more than the actual adjusted Corporation Operating Income achieved in fiscal 2013. The Compensation Committees believed that this target represented a challenging performance goal and was meaningfully higher than the actual results for fiscal 2013. Historically, the Compensation Committees set the Corporation Operating Income Target by reference to the Carnival Corporation & plcs December earnings guidance. For fiscal 2014, however, the Compensation Committees chose to set the Corporation Operating Income Target at a level that was 5% greater than it would have been had this historical practice been followed for fiscal 2014. The Compensation Committees elected to change the target-setting methodology to ensure that an appropriate Corporation Operating Income Target was established, which may not always be the result with the application of the historic formulaic approach.
Under the Corporate Plan, the preliminary bonus amount payable depends upon the amount of Corporation Operating Income achieved as compared to the Corporation Operating Income Target as follows:
Plan Provisions | ||||||
Corporation Operating Income (in thousands) |
Performance Level (% of Target Achievement) |
Payout Percentage(1) | ||||
<$1,210,523 |
Below Threshold (<75%) | 0% | ||||
$1,210,523 |
Threshold (75%) | 50% | ||||
$1,614,030 |
Target (100%) | 100% | ||||
$2,017,538 |
Maximum (125%) | 200% |
(1) | The payout curve includes three different slopes as follows: (a) between Threshold and Target, (b) between Target and 105% performance and (c) between 105% and Maximum. Payouts between these points are calculated using interpolation. |
In January 2014, the Compensation Committees set the fiscal 2014 target bonuses under the Corporate Plan at $2,650,000 for Mr. Donald, $900,000 for Mr. Bernstein and $1,100,000 for Mr. Buckelew. These amounts were established by the Compensation Committees after taking into consideration the competitive market analysis (described above), historical bonus payout levels, the more challenging Corporation Operating Income Target established by the Compensation Committees for fiscal 2014, the elimination of any minimum guaranteed bonus under the Corporate Plan and the Compensation Committees philosophy to place greater emphasis on performance-based pay elements.
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Mr. Donalds annual bonus for fiscal 2013 had been fixed pursuant to his employment agreement. Mr. Bernsteins fiscal 2014 target bonus represented a 47.5% increase from his fiscal 2013 target bonus, reflecting his increased responsibilities overseeing global casino operations as well as the Compensation Committees desire to align his target cash compensation closer to the market median.
Following the end of fiscal 2014, the Compensation Committees confirmed preliminary funding bonus amounts for the NEO participants based on the actual Corporation Operating Income results achieved during fiscal 2014. Under the terms of the Corporate Plan, the Compensation Committees then considered other factors deemed relevant to the performance of Carnival Corporation & plc. One such factor is our HESS performance, as determined by the HESS Committees. To make this annual determination, the HESS Committees meet regularly with members of the Maritime Policy Department and senior management to review an extensive analysis of each brands and Carnival Corporation & plcs enterprise-wide performance in HESS-related areas tracked throughout the course of the fiscal year. Based on its review of these factors, the Compensation Committees approved adjustments to actual Corporation Operating Income for fiscal 2014 to take into account the effects of ship impairments, gains and losses on ship sales, restructuring expenses, multi-employer pension plan expenses for pre-DLC employee service benefits and HESS performance. After taking all of these adjustments into consideration (and with no specific weight applied to any one factor), the Compensation Committees certified an adjusted Corporation Operating Income amount for fiscal 2014 that was 112.7% of the fiscal 2014 Corporation Operating Income Target. This figure was also 18.4% higher than the Corporation Operating Income for fiscal 2013 (which was also determined taking into account similar adjustments), and resulted in a preliminary bonus equal to 147.6% of a participants target bonus.
The adjusted Corporation Operating Income, performance levels and resulting actual performance level payouts for fiscal 2014 as approved by the Compensation Committees were as follows:
Actual Results and Payout | ||||
Adjusted Fiscal 2014 |
Actual |
Actual | ||
$1,818,528 |
112.7% | 147.6% |
Mr. Donald made recommendations to the Compensation Committees for all NEO cash bonuses except for his own. The recommendations included a subjective review of the applicable fiscal year overall performance of each NEO. Mr. Donald also submitted his self-assessments to the Compensation Committees summarizing his own activities and results as compared to his goals, as well as Carnival Corporation & plcs overall performance.
Final bonus amounts were then determined by the Compensation Committees, taking into account Mr. Donalds recommendations and input from FWC. In making their determinations, including whether to vary bonuses from the amount determined under the bonus schedule included in the Corporate Plan, the Compensation Committees considered the factors summarized in the Executive Summary above, in addition to the competitive market compensation for each NEO and its subjective overall assessment of individual NEO performance in fiscal 2014. After taking into account the factors referred to above, together with an assessment of the individual performance of each of Messrs. Donald, Bernstein and Buckelew, the Compensation Committees determined their final bonus amounts as follows:
NEO |
Fiscal 2014 Target Bonus |
Actual 2014 Payout Percentage |
Fiscal 2014 Actual Bonus |
Fiscal 2013 Actual Bonus |
Change from Fiscal 2013 Actual Bonus | |||||||||||||||||||
Arnold W. Donald |
$ | 2,650,000 | x | 147.6% | = | $ | 3,911,400 | $ | 1,125,000 | (1) | 247.7% | |||||||||||||
David Bernstein |
$ | 900,000 | x | 147.8% | = | $ | 1,330,000 | $ | 317,200 | 319.3% | ||||||||||||||
Alan Buckelew |
$ | 1,100,000 | x | 138.6% | = | $ | 1,525,000 | N/A | N/A |
(1) | Pursuant to the terms of his employment agreement, Mr. Donald received a fixed payment of $1,125,000 for his 2013 bonus, to reflect the portion of the year during which he served as President and Chief Executive Officer. |
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The Brand Management Plan |
Messrs. Cahill and Thamm participated in the Carnival Corporation & plc Brand Management Incentive Plan (the Brand Management Plan). The Brand Management Plan is designed to focus the attention of the employees of our cruise brands on achieving outstanding performance results as reflected in the operating income of the brand or group of brands they work for and the operating income of Carnival Corporation & plc, as well as other relevant measures.
Bonus funding under the Brand Management Plan for these NEOs is calculated by reference to a bonus schedule that calibrates the respective weighted Brand Operating Income Target (50%) and Corporation Operating Income Target (50%) for the fiscal 2014 plan year with the target bonus. The performance range in the bonus schedule is similar to the schedule in the Corporate Plan and ranges from 75% to 125% of the Operating Income Targets with results at less than 75% producing a preliminary bonus amount equal to zero, at 75% producing a preliminary bonus amount equal to 50% of the target bonus, 100% of the target bonus producing a preliminary bonus amount equal to 100% of the target bonus and at 125% or more producing a preliminary bonus amount equal to 200% of the target bonus. Results between threshold and target, between target and 105% performance and between 105% and maximum are calculated using interpolation. Importantly, for fiscal 2014 and future years, the Compensation Committees eliminated any minimum guaranteed bonus under any of the annual bonus programs applicable to the NEOs, including Messrs. Cahill and Thamm.
Under the Brand Management Plan, Brand Operating Income means the Non-GAAP net income of the respective brand (or group of brands) excluding interest income and expense and other non-operating income and expense and income taxes, as reported by the brand (or group of brands) for the plan year. The Brand Operating Income Target for each year is established by the Compensation Committees taking into account historical performance, company/industry growth, the brands or brand groups annual plan, consultation with management and such other factors as the Compensation Committees deem appropriate. The Brand Operating Income Targets and the actual Brand Operating Income achieved for fiscal 2014 were measured using a constant fuel price per ton. The Corporation Operating Income Target and Corporation Operating Income for fiscal 2014 are as described above for the Corporate Plan.
The Compensation Committees considered the attainment of each brands Brand Operating Income Target for fiscal 2014 to be achievable but challenging given each brands fiscal 2013 performance. The fiscal 2014 Brand Operating Income Target for Carnival Cruise Lines (applicable to Mr. Cahill) and the Costa Group (applicable to Mr. Thamm) were approximately 13.9% and 60.2%, respectively, more than the actual adjusted Brand Operating Income achieved in fiscal 2013. The Compensation Committees believed that these targets represented challenging performance goals and were both meaningfully higher than the actual results for fiscal 2013.
For fiscal 2014, the Compensation Committees established the target bonus for Messrs. Cahill and Thamm at $1,133,000 and 900,000, respectively, representing no increase from their fiscal 2013 target bonus opportunities.
Following the end of fiscal 2014, the Compensation Committees confirmed funding bonus amounts for Messrs. Cahill and Thamm based on the actual Brand Operating Income for their applicable brand, adjusted to reflect the impact of constant (prior year) fuel prices on fuel expense, and the actual Corporation Operating Income results achieved during fiscal 2014. As with the Corporate Plan, under the terms of the Brand Management Plan, the Compensation Committees then considered other factors deemed relevant to the performance of each brand. Based on its review of these factors, the Compensation Committees approved adjustments to each brands Brand Operating Income for fiscal 2014 to take into account the effects of ship impairments, gains and losses on ship sales, restructuring expenses and HESS performance. After taking all of these adjustments into consideration (and with no specific weight applied to any one factor), the Compensation Committees certified an adjusted Brand Operating Income amount for Carnival Cruise Lines for fiscal 2014 that was 111.7% of its 2014 Brand Operating Income Target and for the Costa Group that was 110.4% of its 2014 Brand Operating Income Target. When these fiscal 2014 brand results were combined with the adjusted Corporate Operating Income results described above, the result was preliminary funding for Messrs. Cahill and Thamm, equal to 143.9% and 138.9% of their respective target bonuses.
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After taking into account the factors and adjustments referred to above, together, with an assessment of the individual performance of each of Messrs. Cahill and Thamm, the Compensation Committees determined their final bonus amounts as follows:
NEO |
Fiscal 2014 Target Bonus |
Actual 2014 Payout Percentage |
Fiscal 2014 Actual Bonus |
Fiscal 2013 Actual Bonus |
Change from Fiscal 2013 Actual Bonus | |||||||||||||||
Gerald R. Cahill |
$ | 1,133,000 | x | 143.9% | = | $ | 1,630,000 | $ | 566,500 | 187.7% | ||||||||||
Michael Thamm(1) |
| 900,000 | x | 138.9% | = | | 1,250,000 | | 450,000 | 177.8% |
(1) | Mr. Thamms fiscal 2014 bonus is payable in euros. His bonus is equivalent to $594,000 for fiscal 2013 when converted into U.S. dollars at the average exchange rate for fiscal 2013 of $1.32:1 and $1,675,000 for fiscal 2014 when converted into U.S. dollars at the average exchange rate for fiscal 2014 of $1.34:1. |
Equity-Based Compensation
A. | General |
The Compensation Committees award equity-based compensation to NEOs to provide long-term incentives and align management and shareholder interests. The Compensation Committees believe that a significant percentage of compensation should be equity-based, rather than paid in cash. The equity-based compensation program is designed to recognize scope of responsibilities, reward demonstrated performance and leadership, motivate future superior performance and align the interests of the executive with our shareholders. There are two different types of equity grants made to our NEOs and other key executives within Carnival Corporation & plc: PBS grants and TBS grants. PBS grants provide for performance-based vesting criteria and align our senior management teams long-term compensation opportunities with Carnival Corporation & plcs long-term performance. In addition, the value of TBS grants (as well as PBS grants) appreciates or depreciates based on the trading price of our shares and thus these awards also serve to link pay and performance.
Our equity-based compensation grants are made pursuant to the Carnival Corporation 2011 Stock Plan, the Carnival plc 2005 Employee Share Plan or the Carnival plc 2014 Employee Share Plan, which have been approved by Carnival Corporation & plcs shareholders. Messrs. Donald, Bernstein, Buckelew and Cahill receive equity grants under the Carnival Corporation 2011 Stock Plan. Mr. Thamm received equity grants under the Carnival plc 2005 Employee Share Plan during fiscal 2014 and under the Carnival plc 2014 Employee Share Plan during fiscal 2015.
The specific equity grants made to NEOs reflect the desire of the Compensation Committees to have a substantial portion of compensation be in the form of equity-based compensation. The number and form of equity grants made annually to our NEOs are determined both in the discretion of the Compensation Committees and pursuant to certain agreements with certain NEOs. Existing ownership levels are not a factor in award determinations, as the Compensation Committees do not want to discourage executives from holding significant amounts of Carnival Corporation and Carnival plc shares.
The number of equity grants made to the NEOs other than Mr. Donald in 2014 was determined by the Compensation Committees after reviewing the recommendation of Mr. Donald and the Chairman of the Boards of Directors, the other elements of the NEOs current year compensation, and taking into account the position and role of the NEO, his individual performance in the preceding fiscal year and historically, and his perceived future value to Carnival Corporation & plc. The Compensation Committees also review the competitive market assessment for long-term incentive compensation provided by the consultant to confirm that the value of an NEOs aggregate equity-based compensation and total direct compensation remains generally competitive. As discussed previously in Overview of Total Direct Compensation for 2014 and Comparison to 2013, individual equity grants are not directly linked to operating income results or other company or individual performance from the prior year. Similar to the approach taken for the other NEOs, the number of equity grants made to Mr. Donald was determined by the Compensation Committees after consultation with their compensation consultant, in accordance with his employment agreement entered into when he was recruited and taking into account his role, performance, perceived future value and competitive market position.
B. | Disclosure and the Timing of Equity-Based Compensation |
The Compensation Committees met in April 2014 to determine the PBS grants made as part of the equity-based compensation for key executives in fiscal 2014.
While the size of the TBS grant made to each NEO at the beginning of each fiscal year is influenced by the NEOs experience and long-term prior performance, the vesting of these grants made to the NEOs is not subject to performance criteria. Although the TBS grants are not solely based on the preceding fiscal years performance, the Compensation Committees believe that discussion of these equity-based compensation awards made after a fiscal year end is important to an understanding of overall NEO compensation for the preceding fiscal year. Thus, in the next section of this Compensation Discussion and Analysis, the Compensation Committees discuss not only the TBS grants made in early fiscal 2015, but also the TBS grants made in early fiscal 2014 (which were discussed previously in last years proxy statement but first appear in the Summary Compensation Table and Grants of Plan-Based Awards in Fiscal 2014 table in this years proxy statement).
The Compensation Committees determined the number of PBS and TBS grants to make to the NEOs and all other participants based on the value of the shares rather than based on share numbers. Basing equity grants on value facilitates comparisons to external market references and also to other forms of remuneration such as salaries, bonuses and benefits. Value-based equity grants help Carnival Corporation & plc more effectively manage stock compensation expense.
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C. | Special PBS Grant Made to NEOs (other than Mr. Donald) |
Mr. Donald has made significant changes to the senior leadership team as well as the structure in which they work to jointly direct the operations and strategies of our brands across the entire corporation. The fundamental objective of this new focus is to leverage the scale of our worldwide businesses with the goal to profitably grow our cruise business and increase our return on invested capital, reaching double digit returns in the next three to four years, while maintaining a strong balance sheet. In order to incentivize and focus the NEOs during this critical transition period to achieve these broader goals beyond the individual brands or departments for which they have responsibility and strengthen the alignment between compensation opportunities and shareholder outcomes over the next three years, the Compensation Committees granted a special PBS grant to Messrs. Bernstein, Buckelew, Cahill, and Thamm with a target value of $1,000,000 each. This value was determined to be an appropriate incentive after taking into consideration the overall compensation of the NEOs, as well as the potential accounting expense associated with the awards. Mr. Donald received a special PBS award in fiscal 2013 so did not participate in this grant. The special PBS grant is entirely performance-based and the ultimate value is contingent upon Carnival Corporation & plcs TSR over the next three years. The Compensation Committees believe that these special PBS awards provide the NEOs with meaningful upside tied explicitly to shareholder outcomes, create alignment among the NEOs and Mr. Donald, and are reasonable in size taking into account the target total direct compensation opportunities afforded to the NEOs in fiscal 2014.
The special PBS grant requires an absolute TSR condition that is linked to Carnival Corporation & plcs TSR as follows:
TSR over 3 years |
Less than 5% per year |
Between 5% and 17% per year |
17% per year or greater | |||
Vesting |
0% | At 5%, 0.2x the shares initially granted will vest increasing by 0.2x for each additional 0.5% TSR so the multiple becomes 5x at 17% |
5x the initial number of shares awarded subject to a cap that the number of shares be reduced to such shares as have a value equal to $8 million if, at the end of the performance period, they would then be worth more than $8 million |
While dividends are taken into account in assessing the TSR calculation, the shares that vest do not accrue any dividends over the performance period. TSR is calculated using the 90-day average stock price as of December 27, 2013 of $35.11 for the awards based on Carnival Corporation shares and £21.96 for the awards based on Carnival plc shares and the 90-day average stock price as of December 27, 2016. At the end of the three-year performance period, 50% of the earned shares will immediately vest and the other 50% will vest 12 months later, if the NEO continues to be employed with us.
In the event of departure before the end of the performance period, the special PBS grant will generally lapse, except in certain situations identified in the special PBS grant agreement in which case the shares shall vest in respect of the target level (generally subject to pro-rating for the period actually worked). In the event of a change in control, the shares shall vest according to the performance condition pro-rated through the change in control date.
D. | Annual PBS Grants |
The PBS grants made to the NEOs and other key executives in fiscal 2014 vest zero to 200% of target based upon the extent to which (1) EBIT, as adjusted for certain fuel price changes, for each of the three fiscal years in the 2014-2016 performance cycle and (2) ROIC for the single three-year performance cycle, exceed specified performance goals, as modified up or down by up to 25% at the end of the three year performance cycle for Carnival Corporation & plcs TSR rank relative to the Peer Group. Under the terms of the award, the EBIT result is weighted 75% and ROIC result is weighted 25%. If the TSR modifier increase applies, the maximum payout would be 200% of target. The EBIT and ROIC targets will be disclosed at the end of the performance period (as these targets are deemed strategic and commercially sensitive).
The Compensation Committees believe that growth in EBIT is a critical measure of Carnival Corporation & plcs ability to maintain and grow earnings over time. The grants further align an increasing proportion of the total compensation of key members of our management team (approximately 94 senior managers worldwide, including the NEOs) with the long-term growth of Carnival Corporation & plc. The Compensation Committees believe the inclusion of PBS grants into the compensation program for the NEOs demonstrates the Compensation Committees continued focus on pay for performance and strengthens our commitment to aligning management compensation with shareholder outcomes.
The Compensation Committees approved the PBS grants to the NEOs after an evaluation of current market practice, the aggregate market positioning of total direct compensation, and the Compensation Committees focus on increasing alignment between our NEOs pay outcomes and Carnival Corporation & plcs long-term performance.
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The PBS grants made to the NEOs in April 2014 were as follows:
NEO |
Target PBS Grants (#) |
Grant Date Fair Value of PBS Grants(1) | ||||||||
Arnold W. Donald |
38,314 | $ | 1,427,993 | |||||||
David Bernstein |
11,631 | $ | 433,497 | |||||||
Alan Buckelew |
15,736 | $ | 586,493 | |||||||
Gerald R. Cahill |
12,828 | $ | 478,110 | |||||||
Michael Thamm |
13,015 | | 354,192 | (2) |
(1) | The grant date fair value of the PBS grants is calculated in accordance with Accounting Standards Codification Topic 718, Stock Compensation (ASC 718). |
(2) | The PBS grants made to Mr. Thamm are based on Carnival plc shares denominated in sterling. Because Mr. Thamm is compensated in euros, the value of the PBS grants made to Mr. Thamm has been converted from sterling into euros based on the April 16, 2014 grant date exchange rate of 1.21:£1. |
E. | TBS Grants Made During Fiscal 2015 |
All individuals who received awards during fiscal 2015 under the Carnival Corporation 2011 Stock Plan and the Carnival plc 2014 Employee Share Plan, including the NEOs, receive restricted shares or RSUs that cliff vest after three years, such vesting being in conformity with the UK Corporate Governance Code.
The Compensation Committees approved the equity-based awards to the NEOs after consideration of recommendations received from Mr. Donald and the Chairman of the Boards of Directors, as well as reviewing the scope of the NEOs responsibilities and the NEOs performance and long-term retention considerations. The TBS grants for the NEOs in January 2015 were as follows:
NEO |
TBS
Grants Restricted Shares/RSUs (#) |
Grant Date Fair Value of TBS Grants(1) | ||||||||
Arnold W. Donald |
45,366 | $ | 2,099,992 | |||||||
David Bernstein |
17,282 | $ | 799,984 | |||||||
Alan Buckelew |
21,602 | $ | 999,957 | |||||||
Gerald R. Cahill |
23,763 | $ | 1,099,989 | |||||||
Michael Thamm |
16,552 | | 648,944 |
(1) | The grant date fair value of the TBS grants is calculated by reference to the price of Carnival Corporation common stock on the New York Stock Exchange on the date of grant. The TBS grants made to Mr. Thamm are based on Carnival plc shares denominated in sterling. Because Mr. Thamm is compensated in euros, the value of the TBS grants made to Mr. Thamm has been converted from sterling into euros based on the January 12, 2015 exchange rate of 1.28:£1. |
F. | TBS Grants Made During Fiscal 2014 |
TBS grants made during January 2014 were previously discussed in detail in our 2014 proxy statement. However, as discussed above, due to SEC disclosure rules, the grant date fair value of the grants detailed below are included in this proxys Summary Compensation Table and Grants of Plan-Based Awards in Fiscal 2014 table.
All participants in the Carnival Corporation 2011 Stock Plan and the Carnival plc 2005 Employee Share Plan, including the NEOs, received restricted shares or RSUs that cliff vest after three years, such vesting being in conformity with the UK Corporate Governance Code.
The Compensation Committees approved the TBS to the NEOs after consideration of recommendations received from Mr. Donald and the Chairman of the Boards of Directors as well as reviewing the scope of the NEOs responsibilities, the NEOs performance and long-term retention considerations. The TBS grants approved for the NEOs in January 2014 were as follows:
NEO |
TBS
Grants Restricted Shares/RSUs (#) |
Grant Date Fair Value of TBS Grants(1) | ||||||||
Arnold W. Donald |
50,578 | $ | 2,099,999 | |||||||
David Bernstein |
14,932 | $ | 619,977 | |||||||
Alan Buckelew |
18,545 | $ | 769,988 | |||||||
Gerald R. Cahill |
26,493 | $ | 1,099,989 | |||||||
Michael Thamm(2) |
20,870 | | 647,387 |
(1) | The grant date fair value of the TBS grants is calculated by reference to the price of Carnival Corporation common stock on the New York Stock Exchange on the date of grant. The TBS grants made to Mr. Thamm are based on Carnival plc shares denominated in sterling. Because Mr. Thamm is compensated in euros, the value of the TBS grants made to Mr. Thamm has been converted from sterling into euros based on the January 14, 2014 exchange rate of 1.20:£1. |
The TBS grants during fiscal 2014 are shown in the Grants of Plan-Based Awards in Fiscal 2014 table and are included in the Outstanding Equity Awards at 2014 Fiscal Year-End table, and the grant date fair value of those shares is reflected in the Summary Compensation Table.
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Perquisites and Other Compensation
The NEOs are provided various perquisites believed by the Compensation Committees to be representative of common practices for executives in their respective countries. Some of Mr. Donalds and Mr. Thamms perquisites and other benefits are provided pursuant to terms of their employment agreements. The Compensation Committees, with the assistance of a consultant, review perquisites provided to the NEOs on a periodic basis and take into account each NEOs particular circumstances and overall level of compensation, and believe that perquisites provided by Carnival Corporation & plc continue to be an appropriate element of the overall compensation package used to attract and retain such officers.
The Compensation Committees have approved a policy to establish procedures and controls as to the authorized use of aircraft owned or chartered by Carnival Corporation & plc (the Aircraft). According to the policy, the Aircraft can only be used for business purposes. Guests may accompany these executives when traveling. The Compensation Committees have also agreed to allow Mr. Donald to use the Aircraft a maximum of 30 hours of personal use so long as the incremental cost to Carnival Corporation & plc does not exceed $200,000 per year. Once that threshold is reached, Mr. Donald will reimburse us for those costs. The Compensation Committees determined that the Aircraft usage policy and levels of usage and costs were consistent with those offered by large multinational companies like Carnival Corporation & plc.
The perquisites received by each NEO in fiscal 2014, as well as their incremental cost to Carnival Corporation & plc, are reported in the Summary Compensation Table and its accompanying footnotes.
POST-EMPLOYMENT COMPENSATION OBLIGATIONS
Carnival Corporation & plc does not have any change of control agreements that provide cash severance to our NEOs upon a change of control of Carnival Corporation & plc, with the exception of the employment agreement with Mr. Donald. Carnival Corporation & plc does not have employment agreements with any of our NEOs that provide cash severance benefits in connection with the termination of an executives employment, with the exception of employment agreements with Mr. Donald and Mr. Thamm.
Mr. Donalds employment agreement, which is consistent with U.S. norms, provides for a three-year term, commencing October 14, 2013. If Mr. Donald wishes to leave prior to the end of the three-year term, he would generally need to give at least 60 days written notice. In the event of his earlier termination by Carnival Corporation & plc without cause or by Mr. Donald for good reason (each as defined in his employment agreement), the employment agreement provides for compensation of one years base salary and target bonus for the year of termination. In the event of termination in connection with or following a change of control, the multiple would be two times. Mr. Donald would also be entitled to continuation of his benefits in kind for a period of up to 18 months.
If Mr. Donald is terminated for cause or Mr. Donald gives notice without good reason (each as defined in his employment agreement), he will not be entitled to the above sums and will receive any accrued but unpaid salary and other benefits. He will not be entitled to receive a bonus in respect of the year of termination (and will only be entitled to a bonus for any year which has been completed prior to his termination). Any equity-based awards will be subject to the plan under which they were issued and the associated award agreements.
Mr. Thamms employment agreement provides that he is generally entitled to an amount equal to one years base salary and bonus as compensation for his agreement not to engage in competition with us. The Compensation Committees believe that the severance benefits provided to Mr. Thamm under his employment agreement are reasonable and in accordance with market practice in Italy. During 2014, the Compensation Committees entered into an amendment of Mr. Thamms employment contract, primarily for the parties to agree that Mr. Thamm will participate in the Brand Management Incentive Plan beginning in fiscal 2014.
Upon termination of employment for certain circumstances or upon a change of control, our NEOs may be entitled to receive accelerated vesting of equity grants. Under the terms of the Carnival Corporation 2011 Stock Plan and the Carnival plc 2014 Employee Share Plan, however, the default provision upon a change in control would provide only for a double trigger acceleration of equity grants (such that no acceleration would occur unless the participants employment were subsequently terminated by Carnival Corporation & plc (or its successor) without cause). These benefits are provided under the terms of the plans pursuant to which the equity grants were awarded and under individual agreements with certain NEOs. However, none of the NEOs are entitled to receive any tax gross-up payments in respect of their severance benefits or accelerated equity grants. The benefits that our NEOs may be eligible to receive in connection with the termination of their employment or upon a change of control are described in detail in this proxy statement under the heading Potential Payments Upon Termination or Change of Control.
The Compensation Committees believe that these arrangements are reasonable and encourage an executive to comply with post-termination non-compete and other restrictive covenants and to cooperate with us both before and after their employment is terminated.
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Pensions and Deferred Compensation Plans
As part of the overall compensation program, Carnival Corporation & plc operates various group pension programs for certain of its executives. Under the Carnival Corporation pension programs, base salaries and annual cash bonuses were used to determine pension benefits.
Until January 1, 2009, Mr. Cahill received retirement benefits under the Carnival Corporation Nonqualified Retirement Plan for Highly Compensated Employees (the Retirement Plan). In light of the application of Section 457A of the U.S. Internal Revenue Code, the present value of any annual accruals after fiscal 2008 earned by eligible and participating employees (including participating NEOs) under the Retirement Plan are currently payable. See the information regarding defined benefit retirement plan benefits for each of the NEOs in the Pension Benefits in Fiscal 2014 table. The benefit formula for these plans is described in the narrative immediately following this table.
Until January 1, 2009, Mr. Buckelew received retirement benefits under the Princess Cruises Supplemental Senior Executive Retirement Plan (the Princess SERP). As a result of the application of Section 457A, Mr. Buckelews benefit under the Princess SERP was frozen as of December 31, 2008 and he has not accrued any additional benefits under the Princess SERP since that date.
In addition, until January 1, 2009, Messrs. Bernstein and Cahill also participated in the Carnival Corporation Fun Ship Nonqualified Savings Plan (the Savings Plan), which is a nonqualified defined contribution plan whereby certain executives may defer salary and/or bonus amounts into the Savings Plan. Because Mr. Bernstein was not a participant in the Retirement Plan, which was closed to participation prior to his commencement of employment, Carnival Corporation matched 50% of every dollar Mr. Bernstein deferred into the Savings Plan up to the lower of (i) 50% of the U.S. Internal Revenue Service qualified plan limitation (which in 2014 was $17,500, or $23,000 with catch-up contributions) or (ii) 6% of his annual base salary (before any pre-tax contributions from his pay and taxes) and bonus. Additional information regarding the Savings Plan is described in the narrative immediately following the Nonqualified Deferred Compensation in Fiscal 2014 table. Information regarding nonqualified deferred compensation for each of the NEOs is shown in the Nonqualified Deferred Compensation in Fiscal 2014 table.
Mr. Thamm does not participate in any pension or defined contribution plans sponsored by Carnival Corporation or Carnival plc.
As a result of Section 457A of the U.S. Internal Revenue Code, Carnival Corporation no longer provides future accruals under the Retirement Plan, the Princess SERP, the Savings Plan or the Salary Deferral Plan to its employees, including the NEOs.
In lieu of participation in the Retirement Plan or the Savings Plan, the Compensation Committees approved payment of an additional annual cash bonus directly to these employees in an amount equal to what would have been deposited on behalf of those employees into those plans, less, as described below, any amount Carnival Corporation contributes to the Carnival Corporation Fun Ship Savings Plan, a 401(k) plan (the 401(k) Plan). These payments are taxable as ordinary income.
Beginning with the 2010 calendar year, the 401(k) Plan was amended and currently allows Messrs. Donald, Bernstein, Buckelew and Cahill (as well as all other highly compensated employees) to defer a limited amount of compensation into the 401(k) Plan subject to nondiscrimination testing. Similarly, except for Mr. Cahill, Carnival Corporation shall make a matching contribution to the 401(k) Plan under the plans formula, subject to nondiscrimination testing.
STOCK OWNERSHIP REQUIREMENTS
Our boards of directors and Compensation Committees believe it is important for executive officers and directors to build and maintain a long-term ownership position in Carnival Corporation or Carnival plc shares in order to align their financial interests with those of our shareholders and to encourage the creation of long-term value. Our compensation structure provides for a significant percentage of compensation to be equity-based, which places a substantial portion of compensation at risk over a long-term period. Accordingly, our Section 16 Officers, including our NEOs, are subject to a stock ownership policy. The policy specifies target ownership levels of Carnival Corporation or Carnival plc shares for each participant expressed in terms of the value of the equity holdings (including unvested restricted shares and RSUs) as a multiple of each Section 16 Officers base salary as follows:
Officers |
Ownership Target Multiple of Base Salary | |
Chairman and/or Chief Executive Officer |
5X salary | |
Vice Chairman and/or Chief Operating Officer |
4X salary | |
Other Section 16 Officers |
3X salary |
Current Section 16 Officers are expected to be in compliance with the stock ownership policy within five years of the date of the policys adoption in January 2010. Individuals who are newly designated as Section 16 Officers are expected to be in compliance with the stock ownership policy within five years of the date of becoming a Section 16 Officer. All of our NEOs have either already complied with the stock ownership policy or are on target to comply within the five year period. Our Section 16 Officers are restricted from trading call and put options and entering into any hedging transactions with respect to our shares. Carnival Corporation & plc does not make any commitment to any persons covered by the stock ownership policy that they will receive any particular level of equity-based awards.
47
During 2014, the stock ownership policy was amended in line with best practices to provide that Section 16 Officers be required to retain at least 50% of the share awards received upon exercise or release after deducting the exercise price (of stock options) and withholding taxes, until their target ownership is achieved.
IMPACT OF REGULATORY REQUIREMENTS ON COMPENSATION
In making determinations regarding executive compensation, the Compensation Committees consider relevant issues relating to accounting treatment, tax treatment (both company and individual) and regulatory requirements. The global nature of Carnival Corporation & plcs operations necessarily means that monitoring these technical issues and considering their potential impact on the appropriate design and operation of executive remuneration programs is an increasingly complex exercise. Technical issues are evaluated in light of Carnival Corporation & plcs philosophy and objectives for executive compensation and its corporate governance principles, as described earlier in this Compensation Discussion and Analysis.
REPORT OF THE COMPENSATION COMMITTEES
The Compensation Committees have reviewed the Compensation Discussion and Analysis and discussed it with the management of Carnival Corporation & plc. Based on its review and discussions with management, the Compensation Committees recommended to our boards of directors that the Compensation Discussion and Analysis be incorporated by reference into the Carnival Corporation & plc joint Annual Report on Form 10-K for 2014 and included in the Carnival Corporation & plc 2015 proxy statement. This report is provided by the following independent directors, who comprise the Compensation Committees:
The Compensation Committee of Carnival Corporation |
The Compensation Committee of Carnival plc | |
Randall J. Weisenburger, Chairman |
Randall J. Weisenburger, Chairman | |
Richard J. Glasier |
Richard J. Glasier | |
Laura Weil |
Laura Weil |
48
Although Carnival Corporation and Carnival plc are two separate entities, our business is run by a single management team. The following table sets forth the annual compensation for our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers for the year ended November 30, 2014. Because Mr. Thamm lived in Italy, his compensation was payable in euros. These euro amounts have been converted into U.S. dollars at the average U.S. dollar to euro exchange rate for fiscal 2014 of $1.34:1.
Summary Compensation Table
Name and Principal Position |
Fiscal Year |
Salary ($) |
Bonus ($) |
Stock Awards(1) ($) |
Non-Equity Incentive Plan Compensation ($) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(2) ($) |
All Other Compensation(3) ($) |
Total ($) |
||||||||||||||||||||||
Arnold W. Donald |
2014 | 1,000,000 | | 3,527,992 | 3,911,400 | | 291,120 | 8,730,512 | ||||||||||||||||||||||
President & CEO |
2013 | 416,667 | 1,125,000 | 5,845,134 | | | 469,549 | 7,856,350 | (4) | |||||||||||||||||||||
David Bernstein |
2014 | 675,000 | | 3,121,189 | 1,330,000 | | 122,551 | 5,248,739 | ||||||||||||||||||||||
CFO |
2013 | 595,000 | | 914,458 | 317,200 | | 132,586 | 1,959,244 | ||||||||||||||||||||||
2012 | 548,333 | | 889,983 | 353,800 | | 145,341 | 1,937,457 | |||||||||||||||||||||||
Alan Buckelew |
2014 | 825,000 | | 3,424,196 | 1,525,000 | | 296,680 | 6,070,876 | ||||||||||||||||||||||
Chief Operations Officer |
||||||||||||||||||||||||||||||
Gerald R. Cahill |
2014 | 798,250 | | 3,645,814 | 1,630,000 | | 64,073 | 6,138,137 | ||||||||||||||||||||||
Former President and CEO of CCL |
2013 | 798,250 | | 1,465,709 | 566,500 | 44,449 | 57,968 | 2,932,876 | ||||||||||||||||||||||
2012 | 798,250 | | 1,484,982 | 1,298,418 | 493,780 | 64,078 | 4,139,508 | |||||||||||||||||||||||
Michael Thamm |
2014 | 938,000 | | 3,429,976 | 1,675,000 | | 441,707 | 6,484,683 | ||||||||||||||||||||||
CEO of the Costa Group |
2013 | 924,000 | | 627,830 | 594,000 | | 318,523 | 2,464,353 |
(1) | No stock option grants were made in fiscal 2012 through 2014. The amounts included in the Summary Compensation Table reflect the grant date fair value, assuming no risk of forfeiture of the grants of Carnival Corporation restricted shares, Carnival Corporation RSUs and Carnival plc RSUs made to the named executive officers in fiscal 2014, calculated in accordance with ASC 718. The valuation of share-based grants is discussed in footnotes 2 and 12 to the financial statements in the Carnival Corporation & plc joint Annual Report on Form 10-K for the year ended November 30, 2014. The amounts reflect the grant date fair value (102% of target) of the annual PBS grants made in April 2014, calculated in accordance with ASC 718. The grant date fair value of the annual PBS grants assuming maximum performance (being 200% of target) is $2,855,987 for Mr. Donald, $866,993 for Mr. Bernstein, $1,172,987 for Mr. Buckelew, $956,220 for Mr. Cahill and $977,686 for Mr. Thamm. In December 2013, Messrs. Bernstein, Buckelew, Cahill and Thamm also received a special PBS grant so the amount for these named executive officers also reflects the grant date fair value (182% of target) of the special PBS grant. The special PBS grant is capped at a maximum value (being 800% of target) of $8,000,000 for Messrs. Bernstein, Buckelew, Cahill and Mr. Thamm. For the proceeds actually received by the listed officers upon exercise of options granted in prior years or the vesting of restricted shares or RSUs, see the Option Exercises and Stock Vested for Fiscal 2014 table. For the grant date fair value of equity grants made to the named executive officers as compensation for fiscal 2014, which grants were made in January 2015, see the Equity Grants Made During Fiscal 2015 as Compensation for Fiscal 2014 table. |
(2) | Represents the actuarial increase during the applicable fiscal year in the pension value for the plans in which each named executive officer participates. Carnival Corporation & plc does not pay above-market rates under its nonqualified deferred compensation plans. A description of these benefits is set forth in the Pension Benefits in Fiscal 2014 and Nonqualified Deferred Compensation Benefits in Fiscal 2014 tables. As disclosed in the footnotes and narrative to the Pension Benefits in Fiscal 2014 table, the value of a portion of Mr. Cahills benefits are distributed to him in the fiscal year following their accrual. As a result, this amount in this column already reflects the distribution of the prior years accrual. |
(3) | See the All Other Compensation Table for additional information. |
(4) | Mr. Donald served as President and CEO for a portion of fiscal 2013, from July to November 2014. |
The amounts set forth in the column entitled Stock Awards in the Summary Compensation Table do not represent the equity-based compensation granted to the named executive officers as compensation for fiscal 2014. As required by SEC rules and as described in note 1 to the Summary Compensation Table, the amounts reported in this column only reflect the grants made during fiscal 2014. The amounts reported in this column do not include value associated with grants made in January 2015 that are described in the Compensation Discussion and Analysis. The equity grants made to the named executive officers in January 2015 as compensation for fiscal 2014 are as follows:
Equity Grants Made During Fiscal 2015 as Compensation for Fiscal 2014
Name |
Grant Date Fair Value of Stock Awards(1) ($) |
Option Awards ($) | ||||||||
Arnold W. Donald |
2,099,992 | 0 | ||||||||
David Bernstein |
799,984 | 0 | ||||||||
Alan Buckelew |
999,957 | 0 | ||||||||
Gerald R. Cahill |
1,099,989 | 0 | ||||||||
Michael Thamm |
770,621 | 0 |
(1) | The amounts are the full value of the TBS grants on January 12, 2015, the date the grants were made. The value for Carnival plc shares has been converted from sterling into U.S. dollars based on the January 12, 2015 exchange rate of $1.52:£1. The full grant date fair value for a grant is the amount that Carnival Corporation & plc will expense in its financial statements over the grants vesting period or until the retirement eligibility date, if such date is earlier than the vesting date, when vesting is not contingent upon any future performance. The full grant date fair value may not correspond to the actual value that will be realized by the named executive officers. |
49
All Other Compensation Table
Each component of the All Other Compensation column in the Summary Compensation Table is as follows:
Item |
Arnold W. Donald ($) |
David Bernstein ($) |
Alan Buckelew ($) |
Gerald R. Cahill ($) |
Michael Thamm ($) | ||||||||||||||||||||
Compensation in lieu of Savings Plan profit sharing contribution |
| 45,610 | | | | ||||||||||||||||||||
Private medical/health insurance costs and premiums(1) |
36,103 | 46,739 | 37,642 | 28,536 | | ||||||||||||||||||||
Automobile lease or allowance |
24,000 | 11,400 | 12,363 | 18,000 | 35,384 | ||||||||||||||||||||
Personal use of Aircraft(2) |
194,283 | | | | | ||||||||||||||||||||
Other personal air travel(3) |
8,604 | 3,909 | 13,942 | 9,944 | | ||||||||||||||||||||
Living accommodations and maintenance |
| | | | 179,030 | ||||||||||||||||||||
Driver and Security |
3,095 | | | | 100,605 | ||||||||||||||||||||
Relocation expenses |
| | 100,000 | | 126,688 | ||||||||||||||||||||
Vacation Payout from Subsidiary |
125,187 | ||||||||||||||||||||||||
Other(3) |
25,035 | 14,893 | 7,546 | 7,593 | | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total |
291,120 | 122,551 | 296,680 | 64,073 | 441,707 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Certain of our named executive officers are eligible to participate in an executive health insurance program, which includes a fully insured plan and a secondary insured plan. Amounts reported represent the cost of the premiums paid on a named executive officers behalf under these plans plus the additional costs of medical services rendered during the fiscal year. Named executive officers participating in this plan generally have until March 31, 2015 to submit their 2014 claims for reimbursement, and as a result, these amounts may increase. The maximum amount that may be reimbursed in any year under the secondary plan is $20,000. |
(2) | Represents the aggregate incremental cost to Carnival Corporation & plc for travel on the Aircraft not related to company business. The aggregate incremental cost for the use of the Aircraft for personal travel is calculated by multiplying the hourly variable cost rate for the Aircraft used by the hours used. The hourly variable cost rate primarily includes fuel, airport handling and other fees, aircraft repairs and maintenance, crew expenses and catering. The variable cost rate is recomputed annually to reflect changes in costs. Fixed costs which do not change based on usage, such as pilots salaries, Aircraft depreciation and overhead costs, are excluded. |
(3) | Includes the total amount of other benefits provided, none of which individually exceeded $10,000 for the named executive officer. These other benefits include: accidental death or dismemberment insurance premiums, long-term disability insurance premiums, life and auto insurance premiums, automobile repairs and expenses, health or other club membership, spousal meals, second office expenses, tax planning and return preparation fees, the opportunity to travel on Carnival Corporation & plc cruise lines for reduced fares, the cost of tickets purchased by Carnival Corporation & plc used by the named executive officers or their guests on non-business occasions, employer contributions to a defined contribution plan and gross-ups for a portion of Mr. Buckelews income taxes for his club membership. |
Additional information with respect to Carnival plcs compensation and reimbursement practices during fiscal 2014 for non-executive directors is included in Part II of the Carnival plc Directors Remuneration Report, which is attached as Annex B to this proxy statement.
50
Grants of Plan-Based Awards in Fiscal 2014
Equity grants and non-equity awards made to the named executive officers during fiscal 2014 are as follows:
Name |
Grant Date | Estimated Possible Payouts UnderNon- Equity Incentive Plan Awards(1) ($) |
Estimated Possible Payouts Under Equity Incentive Plan Awards(2) (#) |
All Other Stock Awards: Number of Shares of Stock or Units(3) (#) |
Grant Date Fair Value of Stock Awards(4) ($) |
|||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||
Arnold W. Donald |
1,325,000 | 2,650,000 | 5,300,000 | |||||||||||||||||||||||||||||||||
1/14/2014 | 50,578 | 2,099,999 | ||||||||||||||||||||||||||||||||||
4/16/2014 | 19,157 | 38,314 | 76,628 | 1,427,993 | ||||||||||||||||||||||||||||||||
David Bernstein |
450,000 | 900,000 | 1,800,000 | |||||||||||||||||||||||||||||||||
12/27/2013 | 5,696 | 28,481 | 142,405 | 2,067,715 | ||||||||||||||||||||||||||||||||
1/14/2014 | 14,932 | 619,977 | ||||||||||||||||||||||||||||||||||
4/16/2014 | 5,816 | 11,631 | 23,262 | 433,497 | ||||||||||||||||||||||||||||||||
Alan Buckelew |
550,000 | 1,100,000 | 2,200,000 | |||||||||||||||||||||||||||||||||
12/27/2013 | 5,696 | 28,481 | 142,405 | 2,067,715 | ||||||||||||||||||||||||||||||||
1/14/2014 | 18,545 | 769,988 | ||||||||||||||||||||||||||||||||||
4/16/2014 | 7,868 | 15,736 | 31,472 | 586,493 | ||||||||||||||||||||||||||||||||
Gerald R. Cahill |
566,500 | 1,133,000 | 2,266,000 | |||||||||||||||||||||||||||||||||
12/27/2013 | 5,696 | 28,481 | 142,405 | 2,067,715 | ||||||||||||||||||||||||||||||||
1/14/2014 | 26,493 | 1,099,989 | ||||||||||||||||||||||||||||||||||
4/16/2014 | 6,414 | 12,828 | 25,656 | 478,110 | ||||||||||||||||||||||||||||||||
Michael Thamm |
603,000 | 1,206,000 | 2,412,000 | |||||||||||||||||||||||||||||||||
12/27/2013 | 5,518 | 27,591 | 137,955 | 2,056,370 | ||||||||||||||||||||||||||||||||
1/14/2014 | 20,870 | 884,763 | (5) | |||||||||||||||||||||||||||||||||
4/16/2014 | 6,508 | 13,015 | 26,030 | 488,843 | (6) |
(1) | Represents the potential value of the payout of the annual cash bonuses under the management incentive plan applicable for each named executive officer for fiscal 2014 performance. The Non-Equity Incentive Plan awards for Messrs. Donald, Bernstein and Buckelew were made under the Corporate Plan. The Non-Equity Incentive Plan awards for Messrs. Cahill and Thamm were made under the Brand Management Plan. The actual amount of a named executive officers annual cash bonus paid in fiscal 2015 for fiscal 2014 performance is shown in the Summary Compensation Table under the Non-Equity Incentive Plan Compensation column. For a more detailed description of the potential payout under each plan, see the description in the Compensation Discussion and Analysis under the section 2014 Annual Cash Bonuses. |
(2) | Represents the potential number of shares under the annual PBS grants and the special PBS grant made to Messrs. Bernstein, Buckelew, Cahill and Thamm. For a more detailed description of the potential payout under these PBS grants, see the description in the Compensation Discussion and Analysis under the sections Annual PBS Grants and Special PBS Grant Made to Messrs. Bernstein, Buckelew, Cahill and Thamm. |
(3) | Represents the number of restricted shares of Carnival Corporation common stock underlying the TBS grants made to the named executive officers in fiscal 2014 granted under the Carnival Corporation 2011 Stock Plan, with the exception of Mr. Thamm who received Carnival plc RSUs under the Carnival plc 2005 Employee Share Plan. |
(4) | Represents the full grant date fair values of the stock grants made in fiscal 2014, which were determined based on the assumptions set forth in footnotes 2 and 12 to the financial statements in the Carnival Corporation & plc joint Annual Report on Form 10-K for the year ended November 30, 2014 (disregarding estimated forfeitures). The full grant date fair value for a grant is the amount that Carnival Corporation & plc will expense in its financial statements over the grants vesting schedule or until the retirement eligibility date, if such date is earlier than the vesting date, when vesting is not contingent upon future performance. The full grant date fair value may not correspond to the actual value that will be realized by the named executive officers. |
(5) | The value for Carnival plc shares has been converted from sterling into U.S. dollars based on the January 14, 2014 exchange rate of $1.64:£1. |
(6) | The value for Carnival plc shares has been converted from sterling into U.S. dollars based on the April 16, 2014 exchange rate of $1.67:£1. |
Narrative Disclosure to the Summary Compensation Table and the Grants of Plan-Based Awards in Fiscal 2014 Table
Employment Agreements
Employment Agreement with Arnold W. Donald. Mr. Donald entered into an employment agreement in October 2013, setting forth the contractual and economic terms of his post as the President and Chief Executive Officer of Carnival Corporation & plc. The employment agreement provides for a term of three years. Mr. Donalds base salary for fiscal 2014 is $1,000,000, which is subject to increase or decrease by the boards of directors. Mr. Donalds annual performance-based bonus will be determined pursuant to the Corporate Plan.
For more detailed information regarding these Mr. Donalds employment agreement, please refer to the Compensation Discussion and Analysis and the exhibit index to the Carnival Corporation & plc 2014 joint Annual Report on Form 10-K.
Employment Agreement with Michael Thamm. Mr. Thamm entered into an agreement in June 2012, which was amended in January 2013 and November 2014, setting forth the contractual and economic terms of his post as the Chief Executive Officer of the Costa Group. Mr. Thamms annual base salary compensation for fiscal 2014 is 700,000. Pursuant to the agreement, Mr. Thamms annual performance-based bonus is determined pursuant to the Brand Management Plan.
In the event the agreement is terminated, in consideration for non-competition and non-solicitation obligations, Mr. Thamm will receive an amount equal to his annual base salary and target bonus, payable in quarterly installments.
51
Annual Cash Bonus Plans
Annual cash bonuses for the named executive officers are determined based on the Corporate Plan and the Brand Management Plan. For more detailed information regarding these plans, please refer to the Compensation Discussion and Analysis and the exhibit index to the Carnival Corporation & plc 2014 joint Annual Report on Form 10-K.
Equity-Based Compensation
In January 2014, the Compensation Committees made the annual TBS grants in the form of restricted shares or RSUs to the named executive officers employed at that time that cliff vest after three years, in conformity with the UK Corporate Governance Code. The closing price of Carnival Corporation common stock and Carnival plc ordinary shares on January 14, 2014, the grant date, was $41.52 and £25.85, respectively.
The restricted shares have the same rights with respect to dividends and other distributions as all other outstanding shares of Carnival Corporation common stock. RSUs do not receive dividends or have voting rights. Each RSU is credited with dividend equivalents equal to the value of cash and stock dividends paid on Carnival Corporation common stock or Carnival plc ordinary shares. The cash and stock dividend equivalents will be distributed upon the settlement of the RSUs upon vesting.
In accordance with the Compensation Committees focus on long-term shareholder return, the Compensation Committees also approved the 2014 annual PBS grants on April 16, 2014 for Messrs. Donald, Bernstein, Buckelew, Cahill and Thamm and other key executives within Carnival Corporation & plc. The grants vest zero to 200% of target based and the initial vesting calculation is determined based on the extent to which Carnival Corporation & plcs annual earnings before income and taxes, as adjusted for certain fuel price changes, for each of the three fiscal years in the 2014-2016 performance cycle exceeds specified performance goals and the extent to which the ROIC exceeds the specified performance goal over the three-year performance period. The vesting percentage is then modified up or down by up to 25% at the end of the three year-performance cycle for Carnival Corporations TSR rank relative to the Peer Group. The maximum payout is 200% of target.
In order to establish additional alignment between compensation opportunities for the named executive officers and shareholder outcomes over the next four years, the Compensation Committees granted special PBS grants on December 27, 2013 to Messrs. Bernstein, Buckelew, Cahill and Thamm with a target value of $1,000,000 (being 730,000 for Mr. Thamm). The special PBS grant is entirely performance-based and the ultimate value is based on the compound annual growth rate (CAGR) of Carnival Corporations TSR over the three-year period ending December 27, 2016.
The special PBS grant includes an absolute TSR condition which requires Carnival Corporations TSR to increase as follows:
TSR growth over 3 years |
Less than 5% per year |
Between 5% and 17% per year |
17% per year or greater | |||
Vesting |
0% | At 5%, 0.2x the shares initially granted will vest increasing by 0.2x for each additional 0.5% increase in TSR so the multiple becomes 5x at 17% |
5x the initial number of shares awarded subject to a cap that the number of shares be reduced to such shares as have a value equal to $8 million if, at the end of the performance period, they would be then be worth more than $8 million |
While dividends are taken into account in assessing the TSR calculation, the shares which vest do not accrue any dividends over the performance period. TSR is calculated using the 90-day average stock price as of December 27, 2013 and the 90-day average stock price as of December 27, 2016. At the end of the performance period, 50% of the earned shares will immediately vest and the other 50% will vest 12 months later, if the executive continues to be employed by us.
In the event of departure before the end of the performance period, the special PBS grant will generally lapse, except in certain situations identified in the special PBS grant agreement in which case the shares shall vest in respect of the target level (subject to pro-rating for the period actually worked). In the event of a change in control, the shares shall vest according to the performance condition pro-rated through the change in control date.
For further information regarding forfeiture and treatment upon termination or change of control, refer to the section entitled Potential Payments Upon Termination or Change of Control below.
52
Outstanding Equity Awards at Fiscal 2014 Year-End
Information with respect to outstanding Carnival Corporation options, restricted shares and RSUs granted by Carnival Corporation & plc to and held by the named executive officers as of November 30, 2014, except for the options and RSUs issued to Mr. Thamm, which related to Carnival plc ordinary shares, is as follows:
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name |
No. of Securities Underlying Unexercised Options (#) Exercisable |
No. of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price(1) ($) |
Option Expiration Date |
No. of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested(2) ($) |
Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||||
Arnold W. Donald |
5,000 | 0 | 46.61 | 10/18/2015 | 3,840 | (3) | 169,574 | 43,613 | 1,925,950 | (4) | ||||||||||||||||||||||||||||||
5,000 | 0 | 47.83 | 10/16/2016 | 3,611 | (5) | 159,462 | 93,457 | 13,206,596 | (6) | |||||||||||||||||||||||||||||||
50,578 | (7) | 2,233,524 | 38,314 | 3,383,892 | (8) | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
TOTAL |
10,000 | 0 | 58,029 | 175,384 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
David Bernstein |
0 | 0 | 17,845 | (9) | 788,035 | 8,640 | 0 | |||||||||||||||||||||||||||||||||
16,467 | (10) | 727,183 | 8,551 | 377,612 | (4) | |||||||||||||||||||||||||||||||||||
14,932 | (7) | 659,397 | 28,481 | 2,515,442 | (11) | |||||||||||||||||||||||||||||||||||
11,631 | 1,027,250 | (8) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
TOTAL |
0 | 0 | 49,244 | 57,303 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Alan Buckelew |
17,151 | 0 | 54.12 | 2/28/2015 | 12,723 | (9) | 561,848 | 4,800 | 0 | |||||||||||||||||||||||||||||||
10,226 | (10) | 451,580 | 4,138 | 182,734 | (4) | |||||||||||||||||||||||||||||||||||
9,273 | (7) | 409,496 | 28,481 | 2,515,442 | (11) | |||||||||||||||||||||||||||||||||||
15,736 | 1,389,804 | (8) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
TOTAL |
17,151 | 0 | 32,222 | 53,155 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Gerald Cahill |
0 | 0 | 18,176 | (9) | 802,652 | 7,392 | 0 | |||||||||||||||||||||||||||||||||
14,608 | (10) | 645,089 | 6,372 | 281,388 | (4) | |||||||||||||||||||||||||||||||||||
13,247 | (7) | 584,988 | 28,481 | 2,515,442 | (11) | |||||||||||||||||||||||||||||||||||
12,828 | 1,132,969 | (8) | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
TOTAL |
0 | 0 | 46,031 | 55,073 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Michael Thamm |
5,700 | 0 | 46.64 | 2/28/2015 | 6,256 | (9) | 275,214 | 7,241 | 0 | |||||||||||||||||||||||||||||||
6,516 | (12) | 286,652 | 12,312 | 541,630 | (4) | |||||||||||||||||||||||||||||||||||
4,824 | (10) | 212,217 | 27,591 | 2,427,567 | (11) | |||||||||||||||||||||||||||||||||||
20,870 | (7) | 918,113 | 13,015 | 1,145,112 | (8) | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
TOTAL |
5,700 | 0 | 38,466 | 60,159 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) | Options issued to Mr. Thamm are in Carnival plc shares, which are priced in British Pounds Sterling. These options have been converted based on the November 28,2014 exchange rate of $1.56:£1. |
(2) | Market value of the stock awards is based on the closing price of Carnival Corporation common stock on November 28, 2014 of $44.16, except for the Carnival plc RSUs granted to Mr. Thamm under the Carnival plc 2005 Employee Share Plan, which are based on closing price of Carnival plc shares on November 28, 2014 of £28.20, which has been converted into $43.99 based on the November 28, 2014 exchange rate of $1.56:£1. |
(3) | Restrictions lapse on April 11, 2015. |
(4) | Market value is based on maximum performance assuming 100% payout on the July 2013 and October 2013 PBS grants as at November 28, 2014. These grants vest zero to 150% of target based upon the extent to which annual EBIT, as adjusted for certain fuel price changes and fuel expense in emission control areas, for each of the three fiscal years in the 2013-2015 performance cycle exceeds specified performance goals, as modified up or down by up to 25% at the end of the three-year performance cycle for Carnival Corporation & plcs total shareholder return rank relative to the Peer Group. If the TSR modifier increase applies, the maximum payout would be 187.5% of target. |
(5) | Restrictions lapse on May 22, 2016. |
(6) | Market value is based on target performance assuming 320% payout on the special PBS grant to Mr. Donald as at November 28, 2014. This equity incentive award is based on Compound Annual Growth Rate (CAGR) of Carnival Corporations total shareholder return over the three-year period ending October 14, 2016. Mr. Donald may receive a number of shares valued at up to eight times the initial target value of the grant based on the CAGR growth of the closing price of a share of Carnival Corporation common stock on the date of grant compared to the 90-day average price of a share of Carnival Corporation common stock as at the end of the three-year period. Market value is based on threshold performance assuming 20% payout. Equity incentive awards are subject to certain EPS targets measured over a three-year period ending November 30, 2014. The named executive officers may receive zero to 200% of the stated number of shares depending on whether and to what extent the EPS targets have been met. |
(7) | Restrictions lapse on January 14, 2017. |
(8) | Market value is based on maximum performance assuming 200% payout on the April 2014 PBS grant as at November 28, 2014. These grants vest zero to 200% of target based upon the extent to which annual EBIT, as adjusted for certain fuel price changes for each of the three fiscal years in the 2014-2016 performance cycle and ROIC for the three-year performance cycle exceeds specified performance goals, as modified up or down by up to 25% at the end of the three-year performance cycle for the Carnival Corporation & plcs total shareholder return rank relative to the Peer Group. If the TSR modifier increase applies, the maximum payout would be 200% of target. |
53
(9) | Restrictions lapse on February 15, 2015. |
(10) | Restrictions lapse on January 15, 2016. |
(11) | Market value is based on threshold performance assuming 200% payout on the special PBS grant to these NEOs as at November 28, 2014. This equity incentive award is based on CAGR of Carnival Corporations total shareholder return over the three-year period ending December 27, 2016. The NEOs may receive a number of shares valued at up to eight times the initial target value of the grant based on the CAGR growth of the 90-day average price of a share of Carnival Corporation common stock as of the date of grant compared to the 90-day average price of a share of Carnival Corporation common stock as at the end of the three-year period. |
(12) | Restrictions lapse on October 8, 2015. |
54
Option Exercises and Stock Vested for Fiscal 2014
The following table provides information for the named executive officers on (1) option exercises during fiscal 2014, including the number of shares acquired on exercise and the value realized, and (2) the number of shares acquired upon the vesting of restricted shares and RSUs and the value realized, each before the payment of any applicable withholding tax and broker commissions.
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise(1) ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting(1) ($) |
||||||||||||
Arnold W. Donald |
0 | 0 | 3,188 | 116,442 | ||||||||||||
David Bernstein |
0 | 0 | 11,673 | 479,819 | ||||||||||||
Alan Buckelew |
0 | 0 | 16,189 | 668,509 | ||||||||||||
Gerald R. Cahill |
0 | 0 | 25,135 | 1,037,545 | ||||||||||||
Michael Thamm |
0 | 0 | 4,346 | 183,852 |
(1) | The value realized on exercise represents the difference between the exercise price of the options and the fair market value of Carnival Corporation shares at exercise. The fair market value of Carnival Corporation shares realized on exercise or vesting has been determined using the average of the highest and lowest sale prices reported as having occurred on the New York Stock Exchange on the date of exercise in the case of options or the vesting date in the case of stock. The fair market value of Carnival plc shares realized on vesting has been determined using the average of the highest and lowest sale prices reported as having occurred on the London Stock Exchange on the date of vesting. The value for Carnival plc shares has been converted from sterling into U.S. dollars based on the January 21, 2014 exchange rate of $1.64:£1. |
Pension Benefits in Fiscal 2014
The following table provides information regarding defined benefit retirement plan benefits for each of the named executive officers. . Mr. Buckelew participates in the Princess SERP and Mr. Cahill participates in the Retirement Plan.
Name |
Plan Name | Number of Years Credited Service(1) (#) |
Present Value of Accumulated Benefit(2) ($) |
Payments During Last Fiscal Year(3) ($) | ||||||||||||||||
Arnold W. Donald |
None | | | | ||||||||||||||||
David Bernstein |
None | | | | ||||||||||||||||
Alan Buckelew |
Princess SERP | 15 | 6,120,504 | | ||||||||||||||||
Gerald R. Cahill |
Retirement Plan | 20 | 4,472,440 | 355,116 | ||||||||||||||||
Michael Thamm |
None | | | |
(1) | Credited service for benefit calculation purposes under the Princess SERP and the Retirement Plan is limited to 15 and 30 years, respectively. |
(2) | The present value of benefits was calculated based on the interest rate assumptions disclosed in note 12 to the financial statements in the Carnival Corporation & plc joint Annual Report on Form 10-K for the year ended November 30, 2014, which was used to calculate the fiscal 2014 year-end liabilities for each of the plans. For the Princess SERP and the Retirement Plan, benefits are assumed payable as lump sums at the later of age 65 or current age. For the Princess SERP, 2017 lump sums were calculated using a 4.49% interest rate and the RP-2000 mortality table projected to 2017. The future payments are then discounted to current age using an interest rate of 1.60%. For the Retirement Plan, lump sums were calculated using an interest rate of 4.25% and the 1994 Group Annuity Reserving Table. They were then discounted to the current age using an interest rate of 1.66%. Due to taxation issues created by the adoption of Section 457A, benefits accrued as of December 31, 2008 under both the Retirement Plan and the Princess SERP will be paid as lump sums at the earlier of retirement or December 31, 2017. |
(3) | The benefits accrued after December 31, 2008 are being paid annually as a lump sum pursuant to an amendment to the Retirement Plan adopted in light of Section 457A. Mr. Buckelew has not accrued or received (and is not entitled to accrue) any additional benefits under the Princess SERP after December 31, 2008. |
Carnival Corporation & plc operate various group pension programs for its executives in which the named executive officers also participate. Under the Carnival plc pension plans, in line with UK best practice, pension benefits are based solely on base salary and no other elements of compensation are taken into account when determining pension benefits. Under the Carnival Corporation pension programs, base salaries and annual cash bonuses are used to determine pension benefits.
Mr. Buckelew participates in the Princess SERP. The Princess SERP is unfunded and is not qualified for U.S. tax purposes. The Princess SERP provides a benefit equal to 65% of the highest base salary earned by Mr. Buckelew during any consecutive 60-month period offset by the actuarial equivalent of any benefits accrued as of December 31, 2008 under any other retirement plan maintained by Princess Cruise Lines, Ltd., or any affiliate (or predecessor) and Social Security benefits. Mr. Buckelew is vested in his benefit in accordance with the terms of the Princess SERP. As a result of the adoption of Section 457A, Mr. Buckelews benefits under the Princess SERP were frozen as of December 31, 2008 and Mr. Buckelew is not entitled to accrue any additional benefits under the Princess SERP after that date. Benefits under the Princess SERP are generally paid in the form of a monthly annuity commencing on the later of the (i) the first day of the first month following the participants separation from service or (ii) the participants earliest commencement date, which is a date elected in advance by the participant that must be no earlier than the date the participant turns age 55 and no later than the date the participant turns 65. However, as a result of the adoption of Section 457A, any benefits accrued under the Princess SERP that remain unpaid as of December 31, 2017 will be paid in a single lump sum payment on December 31, 2017.
55
Mr. Cahill participates in the Retirement Plan. The Retirement Plan is unfunded and is not qualified for U.S. tax purposes. Benefits under the Retirement Plan are calculated based on age, length of service with Carnival Corporation and the average of a participants five highest consecutive years of compensation out of the last ten years of service. The benefit formula provides an annual benefit accrual equal to 1% of the participants earnings for the year up to covered compensation plus 1.6% of earnings for the year in excess of covered compensation then multiplied by the participants years of service up to a maximum of 30 years of credited service. Covered compensation may vary over the years based in part on changes in the Social Security taxable wage base. Covered compensation in fiscal 2014 for Mr. Cahill was $77,508. The elements of compensation to determine his benefit is his base salary and annual cash bonus. Mr. Cahill is vested in his benefit in accordance with the terms of the Retirement Plan. As a result of the adoption of Section 457A, benefits under the Retirement Plan will be paid as elected by the participant as a lump sum or monthly payments on or prior to the earlier of separation from employment, retirement or December 31, 2017. Annual accruals are paid in a lump sum each March up through 2017. During fiscal 2014, Mr. Cahill received the present value of his 2013 annual accruals of $355,116 as a lump sum. The normal form of payment is a continuous and certain annuity for five years. Benefits payable in other forms are actuarially equivalent. At December 1, 2014, the accrued annual benefit for fiscal 2014 payable as a five-year certain and continuous annuity under the Retirement Plan to Mr. Cahill is $332,135 for benefits earned before December 31, 2008 and $30,220 for benefits earned during fiscal 2014.
The Retirement Plan provides a reduced early retirement benefit at age 55 after completion of 15 years of service. The normal retirement age under the Retirement Plan is age 65. Benefits under the Retirement Plan are reduced by 6% for each year ( 1/2% for each month) that the participant retires before age 65. Mr. Cahill is currently eligible for early retirement under the Retirement Plan.
Messrs. Donald, Bernstein and Thamm do not participate in any defined benefit pension plans sponsored by Carnival Corporation or Carnival plc. Messrs. Donald and Bernstein are not eligible to participate in the Retirement Plan because it was closed to participation prior to their commencement of employment.
Nonqualified Deferred Compensation in Fiscal 2014
Name |
Executive Contributions in Last FY ($) |
Registrant Contributions in Last FY ($) |
Aggregate Earnings in Last FY ($) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last FYE ($) | ||||||||||||||||||||
Arnold W. Donald |
0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
David Bernstein |
0 | 0 | 11,556 | 0 | 195,240 | ||||||||||||||||||||
Alan Buckelew |
0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Gerald R. Cahill |
0 | 0 | 714,089 | 0 | 10,793,341 | ||||||||||||||||||||
Michael Thamm |
0 | 0 | 0 | 0 | 0 |
Carnival Corporation has established the Savings Plan, which is a nonqualified defined contribution plan for U.S. tax purposes. Until December 31, 2008, Messrs. Cahill and Bernstein could defer salary and/or bonus amounts into the Savings Plan. As described in the section of the Compensation Discussion and Analysis entitled Impact of Regulatory Requirements on Compensation, effective January 1, 2009, they could no longer defer any salary or bonus amounts into the Savings Plan. No company contributions were made on behalf of Mr. Cahill since he participated in the Retirement Plan. Although the Savings Plan is unfunded, Carnival Corporation has established a rabbi trust that holds any executive deferrals and company contributions to the Savings Plan.
Benefits are paid based on the participants form and timing elections made in accordance with applicable Section 409A Treasury Regulations. Benefits are based on the participants deferrals of cash compensation and associated earnings and losses based on the investment allocation selected by the participant. The investment options available to participants in the Savings Plan are identical to those available to participants in the 401(k) Plan, except for the Standard & Poors index fund and money market investment options. A participant may change his or her investment allocation at any time.
56
Because Mr. Bernstein is not a participant in the Retirement Plan, which was closed to participation prior to his commencement of employment, for every dollar Mr. Bernstein deferred into the Savings Plan prior to January 1, 2009, Carnival Corporation matched 50% up to the lower of (i) 50% of the U.S. Internal Revenue Service qualified plan limitation or (ii) 6% of his eligible pay. Eligible pay includes regular pay (before any pre-tax contributions from his pay and taxes) and bonus. Carnival Corporation may also make profit sharing contributions into the Savings Plan based upon his eligible pay and years of service according to the following schedule:
Years of Service |
Award (% of Eligible Pay) | |
Less than 2 |
0% | |
2-5 |
1% | |
6-9 |
2% | |
10-13 |
3% | |
14-16 |
5% | |
17-19 |
7% | |
20-22 |
9% | |
23-25 |
12% | |
26 and over |
15% |
Following the promulgation of Section 457A, salary and bonus deferrals into the Savings Plan are no longer permitted. As a result, Messrs. Donald, Bernstein and Buckelew and all other Savings Plan participants and those who are deemed highly compensated employees under IRS regulations are paid the equivalent of their annual matching award (less any amount actually contributed by Carnival Corporation to the 401(k) Plan on their behalf as a matching contribution) and profit sharing contribution as additional cash compensation. The effect of this provision will result in no additional benefit for Messrs. Donald and Bernstein and will not result in a material incremental cost to Carnival Corporation.
As of November 30, 2014, Messrs. Donald, Bernstein and Buckelew had 2, 17 and 37 years of service.
Additional information with respect to pension plan arrangements for Carnival plc for the year ended November 30, 2014 is included in Part I of the Carnival plc Directors Remuneration Report included in this proxy statement as the Compensation Discussion and Analysis and Part II of the Carnival plc Directors Remuneration Report, which is attached as Annex B to this proxy statement.
Potential Payments Upon Termination or Change of Control
Each of our named executive officers may be eligible to receive certain payments and benefits in connection with termination of employment under various circumstances. The potential benefits payable to our named executive officers in the event of termination of employment under various scenarios on November 30, 2014 are described below.
In addition to benefits described below, the named executive officers will be eligible to receive any benefits accrued under Carnival Corporation & plc broad-based benefit plans, such as distributions under life insurance and disability benefits and accrued vacation pay, in accordance with those plans and policies. These benefits are generally available to all employees. Our named executive officers will also be eligible to receive any account balances at the fiscal 2014 year-end under our nonqualified deferred compensation plans and programs as set forth in the Nonqualified Deferred Compensation in Fiscal 2014 table in accordance with their payout election. Our named executive officers will also be eligible to receive any vested benefits under our pension programs upon termination of employment in accordance with those plans and policies. These benefits are described in the Pension Benefits in Fiscal 2014 table and the description that follows that table. There are no special or enhanced executive benefits under our pension and nonqualified deferred compensation plans and programs, and all of our named executive officers are fully vested in those benefits.
Cash Severance Benefits
It is the policy of the Compensation Committees for executive officers to have notice periods of not more than 12 months in duration. The Compensation Committees may make an exception to this practice where they believe doing so would be in the best interests of Carnival Corporation and Carnival plc and their shareholders. The Compensation Committees will continue to consider the individual circumstances of each case taking account of best practice in the UK and the U.S. and the expected cost to Carnival Corporation & plc of any termination of an executives employment arrangements.
Accordingly, Messrs. Bernstein, Buckelew and Cahill have no employment agreements and no entitlement to severance except for possible retention of unvested options and restricted share grants depending on the circumstances of their separation of employment discussed below.
Messrs. Donald and Thamm are the only named executive officers with employment agreements providing cash severance and other benefits. The table below details the various payments associated with certain termination events. Payment outcomes associated with the treatment of equity is detailed below in the section entitled Potential Value of Equity Grants upon Termination of Employment or Change of Control.
Post-Employment Cash Compensation Obligations to Mr. Donald
Upon termination of Mr. Donalds employment during the three-year term, Mr. Donald shall be entitled to certain payments. If Mr. Donalds employment is terminated by Carnival Corporation & plc for cause (as defined in Mr. Donalds employment agreement)
57
or by Mr. Donald other than for good reason (as defined in the employment agreement), Carnival Corporation & plc shall pay Mr. Donald all amounts earned or accrued through the termination date. If Mr. Donalds employment with Carnival Corporation & plc is terminated by reason of his death or disability, Carnival Corporation & plc shall provide Mr. Donald with benefits or payments under any applicable disability or life insurance benefit plans, programs or arrangements maintained by Carnival Corporation & plc, which benefits shall be provided and amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements. If Mr. Donalds employment by Carnival Corporation & plc shall be terminated by Carnival Corporation & plc other than for cause, death or disability, or by Mr. Donald for good reason, then Mr. Donald shall be entitled to (i) severance pay equal to one times his base salary and target bonus for the year of termination; and (ii) continued medical and dental coverage for up to 18 months. If Mr. Donald is terminated after a qualifying change in control event, he be entitled to the same benefits described in the preceding sentence, except that he would be eligible to receive cash severance in an amount equal to two times (rather than one times) the sum of his base salary and target bonus for the year of termination. In the event any benefit payments to which Mr. Donald is entitled to upon a change in control are subject to an excise tax under Section 4999 of the Internal Revenue Code of 1986, Carnival Corporation & plc shall not reimburse Mr. Donald for any such taxes; instead, such benefits shall be either paid to Mr. Donald or reduced to avoid such excise taxes.
Post-Employment Compensation Obligations to Mr. Thamm
Mr. Thamm is eligible to receive 12 months of base salary plus his target bonus if his employment is terminated as compensation for his non-competition and non-solicitation obligations. If Mr. Thamms employment had terminated on November 30, 2014, he would have received a payment equal to one years base salary of $938,000 plus a bonus equal to his target bonus of $1,206,000. These amounts would be payable in euros. His potential compensation has been converted into U.S. dollars at the average exchange rate of the dollar for fiscal 2014 of $1.34: 1.
Cash and Benefit Payments
The following table and footnotes quantify the cash compensation or value of benefits that Messrs. Donald and Thamm, the only named executive officers with employment agreements, would receive upon various scenarios for termination of employment or a change in control. The amounts shown assume the event that triggered the treatment occurred on November 30, 2014. The table does not include amounts they would be entitled to without regard to the circumstances of termination, such as accrued compensation.
Estimated Cash and Benefit Payments Upon Termination of Employment or Change of Control
Name |
Benefit |
Termination without Cause ($) |
Voluntary Termination (without Good Reason) ($) |
Voluntary Termination (with Good Reason) ($) |
Death or Disability ($) |
Change of Control ($) | |||||||||||||||||||||
Arnold W. Donald |
Separation Payment | 3,650,000 | 0 | 3,650,000 | 0 | 7,300,000 | |||||||||||||||||||||
Post-Employment Benefits(1) |
82,244 | 0 | 82,244 | 0 | 109,659 | ||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
TOTAL |
3,732,244 | 3,732,244 | 7,409,659 | ||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
Michael Thamm |
Non-Competition Compensation |
2,144,000 | 2,144,000 | 2,144,000 | 2,144,000 | 2,144,000 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
TOTAL |
2,144,000 | 2,144,000 | 2,144,000 | 2,144,000 | 2,144,000 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Includes medical, dental, group life, accidental death or dismemberment, and long-term disability insurance premiums. |
Equity-Based Compensation
Vesting of options, restricted shares and RSUs upon termination of a named executive officers employment is dependent upon the reasons the named executive officers employment is terminated, the terms of the respective equity plan and the associated equity grant agreement. Equity grants made to Messrs. Donald, Bernstein, Buckelew, Cahill and Thamm are subject to the same terms as all other participants generally, except as described below.
Carnival Corporation 2011 Stock Plan
All named executive officers except Mr. Thamm receive equity grants under the Carnival Corporation 2011 Stock Plan. The terms of the Carnival Corporation 2011 Stock Plan and the equity grant agreements applicable to participants generally provide that upon termination for death or disability, all unvested equity grants will immediately vest. Upon retirement, TBS grants continue to vest according to their terms as though employment had not ended; provided, however, that as each participant reaches retirement age, 50% of the grant will immediately vest, if such participant becomes subject to tax withholding at that time. Retirement is defined as voluntary termination of an employee being at least 60 years of age with 15 years of service or at least 65 years of age with five years of service. Upon involuntary termination within 12 months of a change of control, all options become immediately exercisable and the
58
restricted period on all restricted shares and RSUs immediately expires. Change of control means the occurrence of any of the following (i) the acquisition by any individual, entity or group of beneficial ownership of 50% or more of either (A) the then outstanding shares of common stock of Carnival Corporation or (B) the combined voting power of the then outstanding voting securities of Carnival Corporation and Carnival plc entitled to vote generally in the election of directors, except that this provision does not apply to affiliated companies or the Arison family, (ii) incumbent directors cease to constitute at least a majority of the boards of directors, (iii) the dissolution or liquidation of Carnival Corporation, (iv) the sale, transfer or other disposition of all or substantially all of the business or assets of Carnival Corporation, or (v) the consummation of a reorganization, recapitalization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving Carnival Corporation that requires the approval of the shareholders, whether for such transaction or the issuance of securities in the transaction.
All of the equity grant made to participants, including the named executive officers, contain claw back and forfeiture provisions in the event of a violation of confidentiality and non-compete provisions (which restrict them from competing with Carnival Corporation & plc for the remainder of the awards vesting period) or fraud or conduct contributing to any financial restatements or irregularities.
Carnival Corporation 2002 Stock Plan
All named executive officers except Messrs. Donald and Thamm received equity grants under the Carnival Corporation 2002 Stock Plan. All restricted share and RSU awards made to the named executive officers under the Carnival Corporation 2002 Stock Plan have been settled. Mr. Buckelew continues to hold fully vested stock options that will expire on February 27, 2015. For further details please see the Outstanding Equity Awards at Fiscal 2014 Year-End table.
Carnival Corporation 2001 Outside Director Stock Plan
Mr. Donald is the only named executive officer that holds outstanding options under the Carnival Corporation 2001 Outside Director Stock Plan by virtue of his prior status as a non-executive director. All the options held by Mr. Donald are fully vested.
Individual Arrangements Related to Equity Grants under the Carnival Corporation 2002 Stock Plan and Carnival Corporation 2011 Stock Plan
Arnold Donald, David Bernstein, Alan Buckelew and Gerald R. Cahill. The terms of Messrs. Donald, Bernstein, Buckelew and Mr. Cahills restricted stock agreements provide that if their employment is terminated without cause or they voluntarily terminate due to a diagnosis of terminal medical condition, the restricted shares will continue to vest according to their original vesting schedule. For the purposes of the agreement, cause is defined as any action or inaction which constitutes fraud, embezzlement, misappropriation, dishonesty, breach of trust, a felony or moral turpitude, as determined by the boards of directors.
Special RSU Grant. Pursuant to the terms of his employment agreement, Mr. Donald received a one-time special PBS grant. The other named executive officers received a special PBS grant in December 2013. The terms of the special PBS grant provide that if the executives employment is terminated without cause (or by Mr. Donald for good reason), he will vest in the target number of special PBS grant on a pro-rata basis as of the date of termination. In addition, in the event of a change in control, the special PBS grant would be pro-rated as of the date of the change in control.
Carnival plc Executive Share Option Plan
Mr. Thamm is the only named executive officer that holds outstanding options under this plan. All the options held by Mr. Thamm are fully vested and are scheduled to expire in February and April 2015. Mr. Thamm receives the same treatment as other Carnival Executive Share Option Plan participants generally. Under the terms of the plan and Mr. Thamms equity agreements, upon termination for cause or voluntary termination, all options will be forfeited. Upon change of control or termination of employment for retirement, injury, disability, ill health or termination by Carnival plc without cause, all options will remain exercisable. Change of control is defined to mean (i) a person, alone or in concert with others making a general offer to acquire the whole of the share capital of Carnival plc, (ii) a person becoming bound or entitled to give notice under sections 428 to 430F of the Companies Act 1985 to acquire shares, (iii) a court directing that a meeting of the holders of shares be convened pursuant to section 425 of the Companies Act 1985 for the purposes of considering a scheme of arrangement of Carnival plc or its amalgamation with any other company or companies and the scheme of arrangement being approved by the shareholders meeting or sanctioned by the court, or (iv) notice being duly given of a resolution for the voluntary winding-up of Carnival plc. Cause is not specifically defined in this plan.
Carnival plc 2005 Employee Share Plan
Mr. Thamm is the only named executive officer who receives grants under the Carnival plc 2005 Employee Share Plan. Mr. Thamm receives the same treatment under the Carnival plc 2005 Employee Share Plan as other participants generally for grants made through fiscal 2011, except as described in the section entitled Individual Arrangements Related to Equity Grants under the Carnival plc Equity Plans. All grants vest upon termination of employment for death or disability. Upon retirement, all TBS grants will continue to vest according to their terms as if the employment had not been terminated. For equity grants made prior to December 2008,
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retirement is defined as voluntary termination of an employee being at least 55 years of age with 15 years of service or at least 65 years of age with five years of service. In December 2008, the Compensation Committees amended the definition of retirement to increase the retirement age to 60 years of age with 15 years of service. Upon a change of control, all grants will vest. Change of control is defined to mean the occurrence of any of the following (i) a person (either alone or together with any person acting in concert with him) obtaining control of Carnival plc as a result of a general offer or otherwise for the whole of the share capital of Carnival plc (other than those shares which are already owned by him and/or any person acting in concert with him), (ii) the acquisition by any individual, entity or group of beneficial ownership of 50% or more of either (A) the then outstanding shares of Carnival plc or (B) the combined voting power of the then outstanding voting securities of Carnival plc entitled to vote generally in the election of directors, except that this provision does not apply to affiliated companies or members of the Arison family, (iii) incumbent directors cease to constitute at least a majority of the boards of directors, (iv) a person becoming bound or entitled to give notice under sections 428 to 430F of the Companies Act 1985 to acquire shares, (v) a court directing that a meeting of the holders of shares be convened pursuant to section 425 of the Companies Act 1985 for the purposes of considering a scheme of arrangement of Carnival plc or its amalgamation with any other company or companies and the scheme of arrangement being approved by the shareholders meeting or sanctioned by the court, (vi) notice being duly given of a resolution for the voluntary winding-up of Carnival plc, (vii) the sale, transfer or other disposition of all or substantially all of the business or assets of Carnival plc, or (viii) the completion of a reorganization, recapitalization, merger, consolidation, share exchange or similar form of corporate transaction involving Carnival plc that requires the approval of the shareholders, whether for such transaction or the issuance of securities in the transaction.
All of the equity grants made to the named executive officers in February 2008 and thereafter contain confidentiality and non-compete provisions that restrict them from competing with Carnival plc. If they breach either of these provisions, they will forfeit the right to receive all unvested and unexercised equity grants.
Individual Arrangements Related to Equity Grants under the Carnival plc Equity Plans
Michael Thamm. The terms of Mr. Thamms RSU agreement for RSUs granted in October 2012 and thereafter provide that if his employment is terminated without cause or he voluntarily terminates due to diagnosis of a terminal medical condition, the RSU grant will continue to vest according to its original vesting schedule.
Potential Value of Equity Grants Upon Termination of Employment or Change of Control
The following chart shows the value of all outstanding option, restricted share and RSU grants that would have become vested,