Waste Management 2014 Annual Report Download - page 69

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Waste Management Response to Stockholder Proposal on Policy Regarding Accelerated Vesting of Equity
Awards to Named Executive Officers upon a Change in Control
The Board recommends that stockholders vote AGAINST this proposal.
The Board does not believe that adoption of a rigid policy restricting the acceleration of vesting of named
executive officers’ equity awards is in the best interests of the Company or our stockholders. Such a policy could
put the Company at a competitive disadvantage in attracting and retaining key executives, it would disrupt the
alignment of interests between our management and our stockholders by discouraging pursuit of any transaction
that could result in a change in control, and it would unduly restrict our MD&C Committee from designing and
administering appropriate compensation arrangements.
Competitive disadvantage in attracting and retaining executives
The proponent’s supporting statement asserts that over a third of the largest 200 companies now pro rate,
forfeit, or only partially vest performance shares upon a change of control. Waste Management is among those
companies, as the proponent notes that we only vest performance share units on a pro rata basis upon a change in
control, and only based on actual performance to date.
However, a very substantial majority of the companies with which we compete for executive talent are not
restricted in their ability to attract and retain key executives through the use of change in control equity vesting
triggers, and in fact, routinely provide for accelerated vesting of equity-based awards upon a change in control.
As a result, the proposed policy could significantly jeopardize the objective of our compensation program to
attract, retain, reward and incentivize exceptional, talented employees who will lead the Company in the
successful execution of its strategy.
Additionally, the proposed policy would permit pro rata vesting of equity-based awards following both a
change in control and termination of a named executive officer. Yet, vesting of equity-based awards, even on a
pro rata basis, would not be permitted with respect to named executives that continue employment at the post-
change-in-control successor entity. As noted above, our current award agreements for performance share units
provide for accelerated vesting on a pro rata basis, based on actual performance achieved, upon a change in
control event, as it is likely not to be feasible to carry forward the performance metrics of the outstanding awards
to the successor entity. Under the proposed policy, terminating named executives could have more certainty
regarding the value of their outstanding performance share units than named executives that remain, who would
have to forfeit their awards or rely on the successor entity to grant replacement awards. Such a result is clearly
contrary to the retention objective of our compensation program and fails to appreciate the practical realities of
change in control scenarios where the successor is a materially different entity.
The proposed policy may also make it particularly difficult for us to retain key executives during the
pendency of a potential change in control, which could be disruptive to the transaction. Allowing executives to
retain the value of their awards encourages our executives to remain with us through consummation of a merger
or similar change in control transaction, reinforcing the retention value of those awards. Accelerated vesting
provisions therefore help provide stability and ensure continuity of executive management during the critical
stages of a potential change in control transaction.
Disruption of alignment between management and our stockholders
The Board believes that executives should not be discouraged from pursuing and facilitating change in
control transactions when they are in the best interests of stockholders. Putting executives’ compensation at risk
in the event of a change in control could create a conflict of interest if the Board believed a potential change in
control transaction was in the best interests of our stockholders. One of the essential purposes of providing
executives with equity-based awards is to align their interests with those of our stockholders. As described in our
Compensation Discussion & Analysis, a significant percentage of each named executive officer’s compensation
opportunity is in the form of equity-based awards, and at any time, our named executives’ unvested equity
awards represent a significant portion of their total compensation. The proposal would eliminate our ability to
provide reasonable assurance to named executives that they can realize the expected value of their equity-based
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