Concerns with communication, transparency of feedback, and responsiveness
As described in the CD&A, we continue to engage with our shareholders in a timely manner so their concerns can be voiced and Xerox can be transparent
regarding feedback received and actions taken in response. In response to the lack of Say-on-Pay support in 2021, we proactively reached out to owners of 81.6% of our
outstanding shares (speaking with owners of more than 40% of our outstanding shares) and have taken action to address nearly all concerns raised by shareholders and proxy advisory firms, including and in addition to the meaningful pay program
changes we reported in our CD&A. As part of our ongoing shareholder engagement program, we continue to reach out to our shareholders and consider how best to align our executive compensation programs with shareholder interests and disclose this
information in subsequent Proxy Statement filings.
Concerns relating to the granting of one-time retention
bonuses
The unprecedented circumstances of 2020 resulted in the Board approving a significant and necessary investment in employee retention in the
form of one-time retention bonuses. That action has proven effective, enabling Xerox to retain 100% of the executive officer team and 90% of senior leaders overall during a time when both demand for talent
across most industries was surging and management continuity for the Company was a key priority.
Notably, consistent with the Company’s executive
compensation practices prior to the exceptional and unforeseeable circumstances of 2020, the Compensation Committee did not authorize any one-time bonuses in 2021 and, as noted in the CD&A, has no plans to
do so in the foreseeable future.
The Compensation Committee will continue to apply sound judgement when extraordinary, unforeseen situations arise and is
committed to taking appropriate actions that are aligned with the best interests of the Company’s shareholders.
Concerns over Xerox’s new
compensation framework for enhanced value creation
In the spirit of supporting ongoing shareholder value creation, the Board approved an enhanced
incentive compensation framework that allows for a transaction bonus to be awarded to certain employees in the event of a future “liquidity event” transaction with respect to a particular business unit (e.g., IPO, sale, spin). The
framework could be utilized in the future to reward certain employees, which may include NEOs but will not include the Company’s Vice Chairman & CEO, for extraordinary contributions to the growth and successful monetization of the
business unit in a way that creates value for Xerox shareholders. Under this framework, award amounts are denominated as a percentage of Xerox’s incremental gain on investment—directly linking payouts with value-creating performance
against a key strategic objective of Xerox.
This design supports our
pay-for-performance philosophy in that there will be no payout if a liquidity transaction does not occur or no increase in value is realized. While the Company has not
issued an award under this framework since its approval in February 2022, we are confident this arrangement will incentivize eligible employees to act in the best interests of shareholders when considering value creating transactional opportunities.
Concerns over lack of disclosure of future targets and performance ranges
Performance targets in our incentive plans directly flow from the Company’s Board-approved financial plan for the years ahead. Consistent with prevailing
public company practice, the Company provides limited official guidance concerning future financial results. Many of the metrics in our incentive plans are not included in the Company’s financial guidance, and for the metrics that are included
in the Company’s guidance, the performance ranges in the incentive plans often include an aspirational component that is intended to drive individual performance but not influence market expectations for the Company’s future results. The
Board believes that disclosure of future targets and performance ranges may create confusion among investors, analysts, rating agencies and other market participants trying to forecast the Company’s future performance, as such targets and
ranges differ from the Company’s stated financial guidance. In addition, disclosure of aspirational future performance targets could present retention challenges if third parties were to leverage that information if those metrics were at risk
of not being met. Consistent with best practices, the Company discloses targets and performance ranges after the performance cycle has ended.