UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

 

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o Preliminary Proxy Statement

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þ Definitive Proxy Statement

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o Soliciting Material Pursuant to § 240.14a-12

 

 

Sapient Corporation

(Name of Registrant as Specified In Its Charter)

 

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

 

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April 29, 2010

 

Alan J. Herrick            

President and Chief Executive Officer

 

Dear Stockholder,

 

We invite you to join us at the Annual Meeting of Stockholders of Sapient Corporation, a Delaware corporation. The meeting will be held on Wednesday, June 2, 2010 at 9:00 a.m. local time at the Company’s headquarters located at 131 Dartmouth Street, Boston, Massachusetts 02116.

 

This booklet describes how you may participate in our Annual Meeting, whether or not in person, and includes the Notice of Annual Meeting of Stockholders and Sapient’s 2010 Proxy Statement, which describe the formal agenda for the meeting.

 

In addition to addressing the specific agenda items at the meeting, we will present a general overview of our operations and ongoing strategy, and will be happy to respond to stockholder questions properly brought before the meeting.

 

For your convenience, our 2010 Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2009 are available via the Internet at https://materials.proxyvote.com/803062.

 

Alan J. Herrick
President and Chief Executive Officer

 

 

 

SAPIENT CORPORATION
131 Dartmouth Street
Boston, Massachusetts 02116

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The 2010 Annual Meeting of the Stockholders of Sapient Corporation (the “Annual Meeting”) will be held at the offices of Sapient Corporation (“Sapient” or the “Company”), located at 131 Dartmouth Street, Boston, Massachusetts on Wednesday, June 2, 2010, at 9:00 a.m. (local time).

 

The purpose of the Annual Meeting is to take action on the following proposals:

 

 

The stockholders will also act on any additional business that may properly come before the Annual Meeting.

 

If the Annual Meeting is adjourned or postponed for any reason, any action remaining to be taken on the above matters will be resumed on the date to which the meeting is adjourned or postponed.

 

The record date for the Annual Meeting is April 6, 2010. Only stockholders of record as of the close of business on the record date are entitled to vote at the Annual Meeting and any adjournment or postponement thereof.

 

Your vote is very important and is being solicited by our Board of Directors.  Instructions on how to vote, a discussion of the above proposals, and significant information about the Company may be found in our 2010 Proxy Statement (the “Proxy Statement”) attached to this Notice. Please carefully review the Proxy Statement and submit your vote at your earliest opportunity using any of the methods available to you as described on the accompanying proxy card and voting instructions. If you plan to attend the Annual Meeting in person, please check the appropriate box on your proxy card prior to submission.

 

We are pleased to take advantage of rules of the Securities and Exchange Commission (the “SEC”) that permit us to furnish these proxy materials and our 2009 Annual Report on Form 10-K (our “Annual Report”) to stockholders via the Internet. We believe posting these materials on the Internet enables us to provide our stockholders with necessary information more quickly, lowers costs of printing and delivery and reduces the environmental impact of our annual meetings of stockholders.

 

By Order of the Board of Directors,

 

Kyle A. Bettigole

Assistant Secretary

 

Boston, Massachusetts

April 29, 2010

 

 

TABLE OF CONTENTS

 

 

 

SAPIENT CORPORATION
131 Dartmouth Street
Boston, Massachusetts 02116

 

PROXY STATEMENT

 

For the Annual Meeting of Stockholders
To Be Held on June 2, 2010

 

Why did I receive these proxy materials?

 

You received this proxy statement (this “Proxy Statement”), accompanying proxy card or vote instruction form, and our Annual Report on Form 10-K for the year ended December 31, 2009 (without exhibits) (our “Annual Report”) because the Board of Directors of Sapient Corporation is soliciting your proxy to vote at our 2010 Annual Meeting of Stockholders (the “Annual Meeting”). In these materials, we refer to Sapient Corporation as “Sapient,” “Company,” “we,” “us,” and “our.”

 

What proposals are being considered at the Annual Meeting?

 

The proposals listed in the Notice of Annual Meeting of Stockholders are the matters that will be voted on at the Annual Meeting.

 

How many votes are needed to approve the proposals?

 

 

 

If you choose to withhold authority to vote for any individual director nominee(s) or if you vote to “Abstain” from Proposal Two, your votes will not be included in the vote tally for such proposal and will have no effect on the results of the vote.

 

Who may vote at the Annual Meeting?

 

Only stockholders of record as of the close of business on April 6, 2010, the record date, will be entitled to vote at the Annual Meeting.

 

Stockholder of Record — If you own shares of our common stock and those shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are a stockholder of record, or a “record holder.” As a record holder, you may vote in person at the Annual Meeting or by proxy.

 

Beneficial Owner — If your shares are held in an account at a brokerage firm, bank or other nominee (each, a “Broker”), then you are the “beneficial owner” of shares held in “street name,” and these proxy materials have been or will be forwarded to you by your Broker. For purposes of voting at the Annual Meeting, the Broker holding your account is considered the record holder, but as a beneficial owner you have the right to direct your Broker on how to vote the shares in your account.

 

If you are a beneficial owner, you are invited to attend the Annual Meeting but may not vote your shares in person unless you request and obtain a valid proxy issued in your name from your Broker. To vote your

shares in person at the Annual Meeting, you are required to present the following items to the Corporate Secretary before the voting begins: (a) picture identification; (b) an account statement or letter from the record holder, indicating that you owned the stated shares as of the record date; and (c) a proxy from the record holder issued in your name.

 

How do I vote my shares?

 

You are entitled to one vote for each share of our common stock owned by you as of the record date. Whether or not you plan to attend the Annual Meeting, please carefully review this Proxy Statement and submit your proxy promptly by one of the methods available to you, as described below.

 

 

If you vote by telephone or the Internet, you do not need to return your proxy card or vote instruction form. Instead, please follow the instructions on your proxy card or vote instruction form for telephone and Internet voting. So long as your proxy is received prior to the vote at the Annual Meeting and not revoked, your shares will be voted as directed on your proxy. To make certain that your vote will be received in time, please cast your vote, by your choice of available means, at your earliest opportunity.

 

If you plan to attend the Annual Meeting and need directions to the Company’s headquarters, please contact our Investor Relations department at the address listed on the Notice of Annual Meeting of Stockholders or by email at ir@sapient.com.

 

May I change my vote after submitting my proxy or vote instruction form?

 

 

How will my shares be voted if I submit my proxy but don’t provide specific instructions?

 

 

What is a “broker non-vote”?

 

A “broker non-vote” is a proxy submitted by a broker for a matter over which the broker does not have discretionary voting power and for which such broker has not received instructions from the beneficial owner or other person entitled to vote the shares represented by the proxy. While Brokers may use their discretion to vote on routine matters where the beneficial owner has not provided instructions, under a recent SEC-approved rule change, the election of directors is no longer deemed a “routine” matter proposed for vote by a company’s stockholders at its annual meeting. Therefore, If you do not give your broker instructions as to how to vote on Proposal 1 (Election of Directors) described in this proxy statement, your shares will not be voted as to that Proposal at the Annual Meeting. If you have questions about this new rule or the voting process generally, please contact your Broker or visit the SEC’s website at http://www.sec.gov/spotlight/proxymatters.shtml.

 

What is a quorum requirement?

 

To be valid, the Annual Meeting must have a quorum of stockholders present or represented. A quorum of stockholders will be deemed present or represented if at least a majority of the total number of shares of common stock outstanding and entitled to vote as of the close of business on the record date is present or represented by proxy at the Annual Meeting. For purposes of achieving a quorum, abstentions (when you choose to decline to vote), votes withheld from a director nominee, and “broker non-votes” will be counted as present and entitled to vote. As of the close of business on the record date, 134,171,534 shares of our common stock were outstanding and entitled to vote. Thus, for a quorum to exist, 67,085,768 shares must be present or represented by proxy at our Annual Meeting.

 

This Proxy Statement and our Annual Report are available free of charge at https://materials.proxyvote.com/803062.

 

You may also find a copy of this Proxy Statement and our Annual Report (with exhibits) on the SEC website at http://www.sec.gov. We will, upon written request and without charge, send you additional copies of our Annual Report (with or without exhibits) and this Proxy Statement. To request additional copies, please send your request by mail to Sapient Corporation Investor Relations Department, c/o Sapient Corporation, 131 Dartmouth Street, Boston, Massachusetts 02116; or by e-mail to ir@sapient.com.

 

We are pleased to offer our stockholders the opportunity to receive stockholder communications electronically. By opting for electronic delivery of documents, you will receive stockholder communications such as our Proxy Statement and Annual Report as soon as they become available, and may vote via the Internet on matters to be decided at the Annual Meeting. Choosing electronic delivery reduces the number of bulky documents in your mail, conserves natural resources, and reduces our printing and mailing costs.

 

To sign up for electronic delivery of future mailings, visit http://www.icsdelivery.com/sape and enter information for all of your Sapient stockholdings. Once you enroll, you will receive all future mailings via electronic delivery until you elect to cancel your enrollment by following the instructions provided on the website. If you have any questions about electronic delivery, please contact our Investor Relations department by mail at the address noted above or by e-mail at ir@sapient.com.

 

Like many other companies, brokers, banks, and nominee record holders, Sapient participates in a practice commonly known as “householding,” where a single copy of our Proxy Statement and Annual Report is sent to one address for the benefit of two or more stockholders sharing that address. Householding is permitted under rules adopted by the SEC as a means of satisfying the delivery requirements for proxy

statements and annual reports, potentially resulting in extra convenience for stockholders and cost savings for companies. We will promptly deliver a separate copy of either document to you if you contact our Investor Relations department at the address or website listed above or call us at (617) 621-0200. If you are receiving multiple copies of our Proxy Statement and Annual Report at your household and wish to receive only one, please notify your Broker or contact our Investor Relations department at the mail or e-mail address listed above.

 

The first proposal for consideration at our Annual Meeting is the election of seven directors. Upon the recommendation of our Governance and Nominating Committee, the Board of Directors has nominated James M. Benson, Hermann Buerger, Darius W. Gaskins, Jr., Alan J. Herrick, J. Stuart Moore, Ashok Shah and Vijay Singal for election as directors (collectively, the “director nominees”), each of whom currently serves as a director of the Company. Information about our director nominees can be found on page 7 of this Proxy Statement.

 

If elected, each director nominee will serve as a director until his successor is duly elected and qualified, or until his death, resignation or removal. Bruce D. Parker, a director since September 1995, is not a nominee for election, and his term serving on the Board will end immediately preceding the Annual Meeting on June 2, 2010. We thank Mr. Parker for his service to the Company.

 

Each of the director nominees has indicated his willingness to serve as a member of our Board of Directors, if elected. However, if any of the director nominees should be unwilling or unable to stand for election, the person acting under the proxy may vote the proxy “FOR” a substitute nominee designated by the Board of Directors. The Board of Directors has no reason to believe that any of the director nominees will be unable to serve if elected.

 

The seven director nominees receiving the highest number of “FOR” votes by the shares entitled to be voted will be elected. The persons named in the enclosed proxy card will vote each proxy “FOR” the election of the director nominees unless authority to vote for the election of one or more of the nominees is withheld by marking the proxy card to that effect. Broker non-votes will not be counted in the election of each of the seven director nominees.

 

For more information about our Board of Directors and its Committees, including the director nomination process, see “Information About Our Directors and Corporate Governance” beginning on page 7 of this Proxy Statement.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS OUR STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE SEVEN DIRECTOR NOMINEES.

 

The second proposal for consideration at our Annual Meeting is to ratify the selection, made by the Audit Committee of our Board of Directors, of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for the year ending December 31, 2010.

 

PwC has served as our independent registered public accounting firm since 1999, and we have been advised by PwC that it is an independent registered public accounting firm with the Public Company Accounting Oversight Board (the “PCAOB”) and complies with the auditing, quality control and independence standards and rules of the PCAOB and the SEC. A representative of PwC is expected to be present at the Annual Meeting to answer appropriate questions, and to make a statement if he or she so desires.

 

The professional services provided by PwC and the aggregate fees for those services rendered to Sapient during the years ended December 31, 2009 and 2008 were as follows:

 

 

 

 

Although stockholder approval of the Audit Committee’s selection of PwC is not required by law, the Board of Directors believes it is advisable to afford stockholders an opportunity to ratify this selection. Even if the selection of PwC is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm or firms, in whole or in part, at any time during the year, should it determine that such a change is in the best interests of the Company and its stockholders.

 

Unless contrary instructions are given, shares represented by proxies solicited by the Board of Directors will be voted “FOR” the ratification of the selection of PwC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010. If this proposal is not approved at the Annual Meeting, the Audit Committee will reconsider its selection of PwC, although it may elect to continue to retain PwC. If you are a beneficial owner whose shares are held of record by a Broker, your Broker has discretionary voting authority to vote your shares on the ratification of the selection of PwC as our independent registered public accounting firm.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS OUR STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2010.

 

The report by this committee is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended.

 

The Audit Committee of the Board of Directors of Sapient comprises three non-employee directors, each of whom is an independent director within the meaning of the applicable Nasdaq listing standards and SEC rules and regulations.

 

On behalf of the Board of Directors, the Audit Committee oversees the operation of a comprehensive system of internal controls designed to ensure the integrity of Sapient’s financial statements and reports; compliance with laws, regulations and corporate policies; and the independent registered public accounting firm’s qualifications, performance and independence.

 

Consistent with this oversight responsibility, the committee has reviewed and discussed with management the audited financial statements for the year ended December 31, 2009 and management’s assessment of internal controls over financial reporting as of December 31, 2009. PwC, the Company’s independent registered public accounting firm in 2009, issued its report on the Company’s financial statements and the operating effectiveness of the Company’s internal control over financial reporting, the details of which are set forth in the Company’s Annual Report.

 

Additionally, the committee has discussed with PwC the matters required to be discussed in accordance with Statement on Auditing Standards (“SAS”) No. 61, Communication with Audit Committees, as amended by SAS No. 90, Audit Committee Communications. The committee also has received the written disclosures and the letter from PwC required by the Public Company Accounting Oversight Board, and discussed PwC’s independence from the Company and its management.

 

Based on these reviews and discussions, the committee recommended to the Board of Directors that the Company’s audited financial statements for the year ended December 31, 2009 be included in the Company’s Annual Report.

 

The committee’s oversight is intended to provide direction on the basis of the committee members’ financial and accounting experience and information it receives from, and discussions in which it engages with, the auditors and Company management. To provide this oversight, committee members rely on the information provided to them and on the representations made by management, internal auditors and the Company’s independent registered public accounting firm. As a result, the committee does not assure that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles, or that PwC is, in fact, “independent.”

 

Hermann Buerger, Chairman
Ashok Shah
Vijay Singal

 

At the recommendation of the Governance and Nominating Committee, our Board of Directors proposes the following seven (7) individuals, each a current member of our Board of Directors, be nominated for election at our Annual Meeting, as described on page 4 of this Proxy Statement.

 

The below biographical information is provided as of the date of this Proxy Statement for each director nominee, including his age, period of service as a director, business experience during the past five years (including other public company directorships), and any qualifications, attributes and skills that contributed to the Board’s conclusion that he should continue his service as a member of our Board of Directors.

 

 

Implemented in 2006, our current leadership structure separates the roles of Chief Executive Officer and Chairman of the Board. Our Chairman is an independent director, however, if we were to later appoint a Chairman who is not an independent director, we would appoint a Lead Director in order to act as a “check and balance” concerning Board leadership.

 

Our CEO, with the assistance of the Company’s leadership team, is responsible for the day-to-day management of the Company’s business, strategic planning and operational performance. Our Board’s primary responsibilities include, among other things, advising management on the strategic direction of the Company’s business, annual evaluation of our CEO’s performance, and oversight of compliance with our Code of Ethics and Conduct. Additionally, our Chairman establishes corporate governance procedures, sets Board and executive session meeting agendas, and oversees Board actions and progress. We feel our current leadership structure provides an appropriate level of independent oversight over the Company’s business operations, and enables objective review of our CEO’s performance.

 

The listing rules established by Nasdaq require that a majority of the members of a listed company’s board of directors qualify as “independent,” as affirmatively determined by the Board. This means that each independent director has no relationship that would interfere with his exercise of independent judgment. Our Board of Directors consults with legal counsel to ensure that our Board’s determination with respect to the definition of “independent” is consistent with current Nasdaq listing rules.

 

Our Board of Directors reviewed all relevant transactions or relationships between each director (or any of his family members) and Sapient and/or our senior management, and the Board has affirmatively determined that each of our current directors, other than Alan J. Herrick (our President and Chief Executive Officer), is an independent director under the applicable guidelines noted above.

 

Our Board of Directors has four committees: the Audit Committee, Compensation Committee, Governance and Nominating Committee, and Risk Committee. Each of these committees consists solely of Board members who meet the standards for independence required for membership on such committee, as established under current Nasdaq listing rules, SEC rules and applicable securities laws and regulations.

 

Our Board of Directors, together with its committees, meets periodically throughout the year, as needed, to direct management of the Company. In 2009, the Board of Directors held eleven meetings and took action without a formal meeting by unanimous written consent twice. Each director attended at least 93% of the aggregate of the meetings of the Board and of the regular meetings of the committees on which he served. Our independent directors met in regularly scheduled executive sessions at which only independent directors were present.

 

We encourage, but do not require, our directors to attend our Annual Meetings. All directors attended the Company’s 2009 Annual Meeting.

 

The Audit Committee of our Board of Directors, among other responsibilities, reviews our auditing, accounting, financial reporting and internal control functions, and selects our independent registered public accounting firm. See “Report of the Audit Committee of the Board of Directors” on page 6 of this Proxy Statement. The Audit Committee met nine times, and took action without a formal meeting by unanimous written consent once, in 2009.

The current members of the Audit Committee are Hermann Buerger, Ashok Shah and Vijay Singal, each of whom is an independent director within the meaning of applicable Nasdaq listing rules, SEC rules and securities laws and regulations, is able to read and understand the Company’s financial statements and, per the applicable Nasdaq listing standards, has not participated in the preparation of the Company’s or its subsidiaries’ financial statements in the last three years. Mr. Buerger serves as the Chairman of the committee. Our Board of Directors has determined that each of Mr. Buerger and Dr. Singal is an “audit committee financial expert” within the meaning of the rules and regulations of the SEC and has the requisite financial sophistication required by the applicable Nasdaq listing standards.

 

Under its charter, the Audit Committee may form and delegate authority to subcommittees consisting of one or more members of the committee, as appropriate. Unless otherwise specifically determined by the committee, its Chairman will serve as a one-person subcommittee with the discretionary authority to act on the committee’s behalf during the periods between its meetings. The committee may request reports of the actions of any subcommittee at subsequent meetings. The committee’s responsibilities are more fully described in its charter, a copy of which may be found on the Investors portion of our website, http://www.sapient.com, under “Corporate Governance.”

 

Consistent with requirements of the SEC and the Public Company Accounting Oversight Board regarding auditor independence, the Audit Committee has responsibility for appointing, setting the compensation of and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.

 

Prior to engagement of the independent registered public accounting firm for the next year’s audit, management submits a list of services and related fees expected to be rendered during that year within each of four categories of services to the Audit Committee for approval:

 

 

Prior to engagement, the Audit Committee pre-approves independent registered public accounting firm services within each category and the fees for each category are budgeted. The Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.

 

The Risk Committee, established on June 5, 2008 to focus on oversight of the Company’s enterprise risk management, is responsible for, among other duties, identifying, evaluating and mitigating strategic, operational and external environmental risks the Company may encounter. The committee’s primary role is to ensure Company management has instituted adequate processes to identify and evaluate major risks and has developed, where merited, credible plans to mitigate such risks. From time to time, the committee determines the primary risks it believes merit increased Board-level, strategic oversight focus, and ensures such focus occurs, as appropriate.

 

The committee met five times in 2009 and currently comprises James M. Benson, J. Stuart Moore and Vijay Singal. Mr. Benson and Dr. Singal meet the criterion for independence required under applicable Nasdaq listing rules, SEC rules, and applicable securities laws and regulations. Currently, Mr. Benson serves as the Chairman of the committee.

 

Under its charter, the committee may form and delegate authority to subcommittees consisting of two members of the committee, as appropriate. Subcommittees have the authority to act on the committee’s behalf during the periods between committee meetings, and the committee may request reports of the actions of any subcommittee at subsequent meetings. The committee’s responsibilities are more fully described in its charter, a copy of which may be found on the Investors portion of our website, http://www.sapient.com, under “Corporate Governance.”

 

The Compensation Committee of our Board of Directors is responsible for reviewing our overall compensation policies and, with the input of the Chief Executive Officer, approves and oversees the framework of our executive compensation program, including the elements and amounts of compensation for our executive officers. However, our Chief Executive Officer may not participate in or be present during any deliberations or determinations of the committee regarding his own compensation or individual performance objectives.

 

The committee meets at least three times annually, and with greater frequency if necessary. The committee met ten times, and took action without a formal meeting by unanimous written consent three times, in 2009. In the first quarter of each year, the Committee meets to (i) approve our senior leadership team’s annual bonus payments for the prior year, and (ii) determine and approve the current year’s base salary changes, annual bonus targets, and equity awards for our senior leadership team, including our CEO. The Committee also meets at other times, as warranted, to approve compensation adjustments for our executives, among other matters.

 

The current members of the committee are James M. Benson, Darius W. Gaskins, Jr. and Bruce D. Parker, each of whom is an independent director within the meaning of applicable Nasdaq listing rules, Internal Revenue Service rules, SEC rules and applicable securities laws and regulations. Currently, Mr. Parker serves as the Chairman of the committee. Although it regularly meets in executive session, from time to time the committee invites various members of management, other employees and outside advisors or consultants to join its meeting to make presentations, provide financial or other background information or advice, or otherwise participate. The committee also retains outside consultants periodically to provide advice regarding trends in compensation practices and comparative benchmarking data.

 

Under its charter, the committee may form and delegate authority to subcommittees consisting of one or more of its members, as appropriate. Unless specifically determined otherwise by the committee, its Chairman serves as a one-person subcommittee with the discretionary authority to act on the committee’s behalf during the periods between its meetings. The committee may request reports of the actions of any subcommittee at subsequent meetings. The committee’s functions and responsibilities are more fully described in its charter, a copy of which may be found on the Investors portion of our website, http://www.sapient.com, under “Corporate Governance.”

More detailed information related to our compensation philosophies and goals, as well as the committee’s specific determinations concerning executive compensation, may be found under “Compensation Discussion and Analysis,” beginning on page 20 of this Proxy Statement.

 

In 2008, the Compensation Committee retained Mercer (US) Inc. (“Mercer”), an outside consulting firm, to advise the committee on the Company’s executive compensation program, as described in more detail under “Compensation Discussion and Analysis,” beginning on page 20 of this Proxy Statement. In 2009, the Compensation Committee again engaged Mercer to assess the competitiveness of the base salaries, target and actual total cash compensation, long-term incentives and actual total direct compensation of our Named Executive Officers as well as assist the committee with the evaluation and development of compensation packages for our senior leadership team members. Mercer was paid $75,500 for these services.

 

Additionally, Sapient management also engaged Mercer in 2009 to provide support to the Company with non-executive compensation benchmarking, sales incentive compensation, surveys, international brokerage, and actuarial work related to our self-insured U.S. health plan. For these services, the Company paid Mercer $230,625 in fees. Although the Compensation Committee was aware of the extent and cost of Mercer’s additional services provided to management, the committee’s approval was not required, as management defined and authorized the work.

 

Mercer is owned by Marsh & McLennan Companies (“MMC”). In 2009, we paid fees of $225,000 to another MMC company, Marsh Inc. (“Marsh”), for the provision of insurance brokering services unrelated to those services provided by Mercer. These fees do not include the cost of insurance policy premiums. Engagement of Marsh was authorized by management.

 

The Governance and Nominating Committee’s duties, among others, are to identify and evaluate potential candidates for our Board of Directors and make recommendations regarding such candidates to our Board of Directors. The committee met twice in 2009 and its current members are Hermann Buerger, Darius W. Gaskins, Jr., J. Stuart Moore and Bruce D. Parker, each of whom is an independent director in the Board’s opinion and within the meaning of applicable Nasdaq listing rules, SEC rules, and applicable securities laws and regulations. Mr. Gaskins serves as the Chairman of the committee.

 

The committee also provides counsel to our Board of Directors regarding principles and practices applicable to governance of the Company, and monitors the Company’s compliance with its Governance Practices and Procedures as incorporated into the committee’s charter. Under its charter, the committee may form and delegate authority to subcommittees consisting of one or more of its members, as appropriate. Unless specifically determined otherwise by the committee, its Chairman serves as a one-person subcommittee with the discretionary authority to act on the committee’s behalf during the periods between its meetings. The committee may request reports of the actions of any subcommittee at subsequent meetings. The committee’s responsibilities are more fully described in its charter, a copy of which may be found on the Investors portion of our website, http://www.sapient.com, under “Corporate Governance.”

 

The Governance and Nominating Committee recommends candidates it believes have the requisite professional experience, knowledge, and perspective to contribute value to the Board’s oversight of the Company. Although the committee does not maintain a written policy outlining the specific characteristics the committee must consider in its candidate evaluation process, the committee strives to develop a Board and Board committees that are diverse in nature and comprise experienced and seasoned advisers. To achieve this goal, the committee considers a number of factors that it deems relevant, including judgment, skill, diversity, integrity, education, experience, availability, commitment, and the interplay of the nominee’s experience with the experience of other directors.

 

The Governance and Nominating Committee will consider and evaluate director candidates recommended by eligible stockholders on the same basis as candidates recommended by any other sources. Pursuant to our Policy Regarding Stockholder Candidates for Nomination as a Director, a stockholder is eligible to submit such a recommendation if the stockholder, either individually or as a member of a group, has beneficially owned 1% or more of our common stock for at least one year prior to the nomination date (the “Nominating Stockholder”). A Nominating Stockholder may submit only one candidate for consideration per year, and the aggregate number of candidates that the committee will be required to consider and evaluate under this policy regarding any Annual Meeting is limited to the number as set forth below:

 

 

If we receive more than the maximum number of candidate recommendations as set forth above, the committee will review and evaluate for possible nomination candidates recommended by those Nominating Stockholders with the highest level of beneficial ownership of our common stock, until the committee has evaluated the maximum number of candidates as outlined above.

 

Under the Policy, a Nominating Stockholder should submit a nomination in writing, delivered (by first class United States mail, postage prepaid) to our Board of Directors, in care of our Corporate Secretary, at the address listed on the Notice of Annual Meeting of Stockholders. To be considered for our 2011 Annual Meeting, nominations must be received no later than the 120^th calendar day before the anniversary of the date the Company released the prior year’s Annual Meeting proxy statement to our stockholders.

 

Each Nominating Stockholder recommendation must contain the following information:

 

 

Each nomination submitted by a Nominating Stockholder must contain additional information as required by our Policy Regarding Stockholder Candidates for Nomination as a Director, located on the Investors portion of our website, http://www.sapient.com, under “Corporate Governance.”

 

Our Board of Directors welcomes communications from our stockholders. The correspondence should be submitted in writing and delivered (by registered mail, signature required, where available) to the Board of Directors, in care of our General Counsel, at the address listed on the Notice of Annual Meeting of Stockholders. Our General Counsel will forward each submission, without editing or alteration, to the Chairman of the Board (or to the independent director having the longest tenure of Board service if the Board

does not have a Chairman at the time of submission), no later than the next scheduled meeting of the Board. Correspondence to the Board must contain the information listed in the Company’s Policy Regarding Stockholder Communications with Directors, located on the Investors portion of our website, http://www.sapient.com, under “Corporate Governance.”

 

On August 20, 2009, our Board of Directors approved the amended Sapient Corporation Code of Ethics and Conduct, which covers all employees, directors and independent contractors of the Company, including our Chief Executive Officer and our Chief Financial Officer. A current copy of our Code of Ethics and Conduct may be found on the Investors portion of our website, http://www.sapient.com, under “Corporate Governance.” Any future amendments to the Code of Ethics and Conduct, and any waivers thereto involving our executive officers, also will be posted on our website. A printed copy of these documents will be made available upon request.

 

The following table sets forth in summary form information concerning the compensation that we paid during the year ended December 31, 2009 to each of our non-employee directors other than J. Stuart Moore. Mr. Moore receives no compensation for his service as a director other than as noted on Page 17 of this Proxy Statement.

 

 

 

 

As of December 31, 2009 our non-employee directors had the following RSUs and stock options outstanding:

 

As consideration for their service on the Board, we pay each of our non-employee directors an annual retainer of $25,000 and the following additional retainers, as applicable:

 

 

All annual retainers are paid in four equal quarterly installments, provided that the director continues to serve in such capacity. Additionally, we pay non-employee directors the following attendance fees:

 

 

If a director participates in either a Board or committee meeting by telephone, rather than in person, or if the committee meeting is held on the same day and at the same location as a Board meeting, the director receives one-half of the applicable meeting fees. Additionally, we reimburse each non-employee director for expenses incurred in connection with his meeting attendance.

 

Pursuant to our 1998 Stock Incentive Plan, and under our Board compensation plan as approved by our directors on October 16, 2008, each of our non-employee directors is granted the following equity grants in connection with his service on the Board:

 

 

 

Although he is a non-employee director, J. Stuart Moore, our former Co-Chairman and Co-Chief Executive Officer, receives the following in lieu of the Board compensation as described above:

 

 

 

Our directors receive no other compensation for their service as directors other than as outlined above.

 

Certain equity awards granted to our directors are subject to acceleration of vesting upon a “change in control” of Sapient, such that the next scheduled vesting date will be deemed to have occurred on the date of a change in control of the Company. The following table summarizes the number of units underlying RSU awards outstanding as of December 31, 2009 for which vesting would be accelerated assuming a change in control on that date:

 

 

The following table sets forth information as of April 6, 2010 regarding the beneficial ownership of shares of our common stock by: (i) each person, or group of affiliated persons, known by us to beneficially own more than five percent of our common stock, (ii) each director and director nominee, (iii) each of our executive officers named in the Summary Compensation Table included in this Proxy Statement, and (iv) all of our current executive officers and directors as a group. The table is based on information supplied to us by our officers, directors, 5% stockholders, and a review of Schedules 13G, as filed with the SEC.

 

The number of shares beneficially owned includes any shares that may be acquired by exercising stock options that are either immediately exercisable or will become exercisable on or before June 5, 2010 (60 days from April 6, 2010) as well as any RSUs that have not yet vested but will have vested as of that date. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the person’s percentage ownership, but they are not treated as outstanding for purposes

of computing the percentage ownership of any other person. Applicable percentages are based on 134,171,534 shares of common stock outstanding as of April 6, 2010.

 

 

 

 

Our directors, executive officers, and persons holding more than 10% of our common stock, are required under Section 16(a) of the Securities Exchange Act of 1934, as amended, to file initial reports of ownership and reports of changes in ownership of our common stock and other equity securities with the SEC, and to provide us with a copy of any such filings. Based on a review of the copies of such reports provided to us, and written representations that no other reports were required, we believe that our directors, officers, and other persons holding more than 10% of our common stock complied with all Section 16(a) filing requirements during 2009, except as set forth below:

 

Administrative oversight led to the late filing of a Statement of Changes of Beneficial Ownership of Securities (Form 4) for Jane E. Owens, reporting the number of shares withheld for taxes upon the vesting of an RSU award.

 

This Compensation Discussion and Analysis (“CD&A”) describes Sapient’s executive compensation program (“Executive Program”) and explains the analysis and approach that the Compensation Committee of our Board of Directors (the “Committee”) applied in making compensation decisions for 2009 for the following Named Executive Officers (“NEOs”):

 

 

The compensation for our NEOs is listed in the tables following this CD&A.

 

Our Executive Program, which we use to motivate and reward our NEOs and other members of our senior leadership team, principally comprises the following pay elements:

 

 

 

In 2009, in response to the global economic recession, reduced demand for our services and our uncertain business outlook in 2009, Sapient management recommended, and the Committee determined, that base salaries and bonus targets be frozen across Sapient for 2009. Consequently, the Committee made no increases to our NEOs’ 2008 base salaries and bonus targets in setting their 2009 compensation. Additionally, given the uncertain economic conditions and our 2009 financial outlook, management determined that our bonus funding for our NEOs and nearly all other Sapient employees would be only 80%, rather than 100%, of the eligible recipients’ 2009 bonus targets.¹ As a result, and dependent on Sapient’s financial performance and the individual’s performance, each NEO was eligible to receive a 2009 bonus at a maximum amount of 80% of his or her bonus target. Further discussion of our NEOs’ 2009 bonus payments is set forth below.

 

Further, in light of the challenging economic environment and related freeze on cash compensation changes for our executives in 2009, the Committee desired to implement an incentive that would promote executive retention, morale and focus on achievement of Sapient’s 2009 operating and financial goals. As a result, the Committee opted to grant long-term incentive awards to our NEOs (other than our CEO, whose long-term incentives are approved in the first quarter of each year, as described below) and other Sapient key executives in April 2009, rather than later in the year when long-term incentive awards are typically granted to eligible employees.

 

 

¹ As discussed more fully below, Sapient employees in the role of associate or senior associate are entitled to receive 100% of their target bonus from the available bonus pool, depending on their individual performance (the “Associate-Level Bonuses”). As a result, bonuses are paid to other employees and our NEOs (other than the CEO) from the funds remaining in our bonus pool after payment of the Associate-Level Bonuses has occurred.

Compensation Objectives and Strategy

 

The primary purpose of our Executive Program is to establish a meaningful reward system within an appropriate cost structure that aligns executive compensation with our shareholders’ interests. The objectives and strategy of our Executive Program are to:

 

 

Role of Management and Outside Advisor in Compensation Determinations

 

The Committee’s executive compensation decisions are informed by consultation with Mr. Herrick, who provides detailed input regarding our executives’ job performance (other than his own performance), including their accomplishments, leadership, strengths and areas for personal development, and their promotion and contributions to the achievement of our business strategy and Strategic Context. Additionally, Mr. Herrick provides specific compensation recommendations for the executives based on the factors described in Compensation Decision-Making, below.

 

Mr. Herrick and our Vice President — People Success (who oversees our human resources functions) typically attend Committee meetings at which the Committee reviews the financial and operational performance of the Company and the performance of individual executives (other than themselves), and approves the compensation for those executives. Additionally, other members of management and our Board of Directors may, by Committee invitation, participate in the executive compensation review and approval process. Nonetheless, the Committee retains ultimate authority over the compensation decisions for our executives, and only the Committee members (and no members of management) may approve executive compensation.

 

In August 2008, after performing a competitive review of three potential compensation advisors, the Committee retained Mercer to be the Committee’s advisor for the Executive Program (the “Executive Compensation Advisor”). Mercer assisted the Committee by assessing the competitiveness of our Executive Program across base salary, actual total cash compensation, target total cash compensation, long-term incentives and actual total direct compensation and evaluating and developing proposed 2009 compensation packages for our NEOs and other senior leadership team members.

Compensation Decision-Making

 

To determine our executive officers’ compensation packages and ensure that compensation decisions are consistent with and promote our compensation objectives and strategy, the Committee relies on multiple inputs, which include the compensation practices of other companies within our target market (described below), individual performance and objectives, individual compensation history and comparative pay levels for peers within Sapient and in similar job functions in the marketplace.

 

 

The Committee uses competitive assessments to acquire an understanding of executive pay programs, pay levels and pay mix among similarly situated companies and to assess the overall market competitiveness of our Executive Program.

 

Relative to an assessment of competitive market practices, and consistent with our emphasis on the “at risk” portion of executive pay and rewarding our executives for Company and individual performance, the Committee aims to establish executive base salaries equal to or as much as 15% below the market median of each of the Executive Peer Group described below (the “Median”), with Total Cash (defined as base salary plus cash bonus eligibility) compensation targeted at the Median, and total executive compensation (inclusive of equity-based incentive compensation) targeted above the Median by as much as 15%. However, pay levels for specific individuals and/or job functions may vary from these targets based on market demand for particular talent, among other factors. As a result of our emphasis on “pay for performance,” actual total compensation in a given year may vary well above or well below our targeted compensation relative to Median levels, based primarily on the Company’s attainment of its financial and operating goals and achievement of individual performance goals.

 

To assess the market competitiveness of our Executive Program, we determined the competitive market against which to compare Sapient, as follows:

 

CEO Competitive Market.  Regarding Mr. Herrick’s 2009 compensation package, in early 2009 the Committee defined the competitive market based on a review of chief executive officer pay at 17 peer companies (the “Executive Peer Group”). In light of Sapient’s unique market position and differentiated service offerings, the Committee was unable to assemble an Executive Peer Group consisting of companies that provide the breadth and complement of marketing and technology services that Sapient provides its customers. However, the Committee selected the following companies for benchmarking due to their similarity to Sapient in terms of structure, organization, selling capacities, revenue and/or market capitalization:

 

 

 

 

Other NEO Competitive Market.  Regarding its assessment of the 2009 compensation packages for the NEOs other than the CEO, the Committee had expected to use the Executive Peer Group to perform competitive assessments for this group. As noted, however, in light of the global economic recession and challenging business outlook for 2009, management recommended, and the Committee agreed, that no changes to our NEOs’ cash compensation or total cash compensation should be made for 2009. Therefore, the Committee did not require and Mercer did not perform any new competitive assessments or analyses for 2009.

Instead, the Committee referred to such assessments/analyses performed in 2008 to review NEO compensation in 2009. The Committee used the following data in 2008 for benchmarking purposes:

 

 

 

In addition to using competitive assessments and peer benchmarking, the Committee weighs individual performance against established and agreed-upon objectives in determining base salaries, bonus targets and payouts, and long-term incentives for our executives. The Committee’s key considerations regarding executive performance include the following:

 

 

In determining our executives’ annual compensation packages, and awarding annual or long-term incentives, the Committee does not weigh a specific performance area more heavily than another, but rather assesses the totality of the individual’s performance against all performance areas in setting that individual’s compensation.

 

 

The Committee reviews each executive’s compensation history, including historical equity awards and salary progression, to determine its current year compensation decisions. In considering compensation changes for our executives in 2009, the Committee reviewed Sapient’s 2008 financial performance and each executive’s base salary for the prior two years, the number and “in the money” value of equity awards in the prior ten years (or fewer years for those executives who have worked at Sapient less than ten years) and actual and target bonuses in the prior year. Through this information, the Committee observes trends in our compensation

approaches for each executive and, based on these observations and the other considerations described in this CD&A, may approve compensation adjustments for the executives.

 

 

While the Committee relies on survey data and comparative analysis through peer group benchmarking to compare compensation levels and assess the market competitiveness of our Executive Program, we believe that internal pay equity among our executives is equally critical to ensuring fairness in our Executive Program. Accordingly, the Committee’s decisions concerning each executive’s compensation include a careful review of the executive’s pay components and levels relative to other executives in similar roles, seniority and/or levels of responsibility. The Committee performed an internal pay equity assessment for 2008 and determined that the compensation packages for our NEOs were equitable and, therefore, required no adjustments for reasons of internal pay equity. However, the Committee did not perform such an assessment in 2009, given that it made no base salary or target bonus changes for the NEOs, including Mr. Herrick.

 

Pay Mix

 

The Committee believes strongly in the importance of assessing each pay element in relation to the other pay elements that the Executive Program comprises. To determine optimal pay mix, the Committee reviews executive salary progression, historic equity grants, target and actual bonus levels by year, experience levels, job responsibilities and contributions to the organization, and general market information. Consistent with our compensation philosophy to tie total compensation closely to — and make it heavily dependent upon — achievement of Company goals and individual performance, we emphasize “variable” compensation (i.e., bonus and equity-based awards) over “fixed” compensation (i.e., base salary). Accordingly, actual total compensation in a given year may vary well above or well below our targeted compensation relative to Median levels, based principally on the Company’s attainment of its financial and operating goals and individual performance achievement.

 

As we aim to make the variable portion of executive pay a larger proportion of our executives’ total compensation, relative to industry norms, the Committee established 2009 compensation packages for our NEOs that resulted in the following pay mixes:

 

Percentage of Total Compensation by Pay Element — 2009

 

 

 

 

Pay Elements

 

Base Salaries

 

As noted, base salaries provide a fixed level of cash compensation for the individual’s performance of day-to-day responsibilities. Our executives’ base pay levels are reviewed and changes are determined annually in the first quarter of the year based upon numerous factors, including individual performance, job responsibilities, impact on the development and achievement of our strategic initiatives, the then-current state of the labor market, benchmarking data and our ability to attract and retain critical executives. For 2009, in light of challenging economic conditions, the Committee decided not to increase our NEOs’ salaries over their 2008 salaries. The 2009 base salaries for our NEOs represented between 27% and 56% of total direct compensation for these individuals.

 

Annual Incentive/Bonus Program

 

We use our annual incentive program to create a strong link between pay and performance. This program rewards participants for their achievement of short-term financial and operational goals (through generating revenue, improving profitability and/or creating efficiencies and cost savings for Sapient) as well as their promotion, and contributions toward the achievement, of our Strategic Context. Additionally, we use the annual bonus plan as a means to focus our people on the achievement of individual performance goals. Unlike the non-discretionary, objective, performance-based metrics for Mr. Herrick’s annual incentive (described below), many of the metrics used to assess our other executives’ performance are qualitative and require the Committee to exercise significant discretion in assessing proposed payments. Mr. Herrick’s annual bonus is administered pursuant to our 1998 Stock Incentive Plan (the “1998 Plan”), which enables cash and equity awards granted under the plan to qualify for tax benefits available under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Our other NEOs and executives’ bonuses are administered pursuant to our Global Performance Bonus Plan (the “Global Plan”).

 

Within the first quarter of our fiscal year, Sapient management sets business and financial objectives that our Board of Directors reviews. These objectives translate into our financial targets, and associated bonus pool funding under the Global Plan and 1998 Plan, for the payment of NEO and other Sapient employee bonuses. Depending on Sapient’s financial performance, the bonus pool payable in a given year may be as much as 100% of the eligible participants’ aggregate bonus targets (our actual bonus pool funding, as a percentage of our bonus pool funding target for a particular year, is defined as the “Bonus Pool Fund Percentage”). As noted, once the bonus pool has been funded, available bonus pool funds are first applied to payment of Associate-Level Bonuses. Thereafter, the remaining bonus pool funds are distributed to other employees, including the NEOs who receive bonuses pursuant to the Global Plan. As a result, depending on our Bonus Pool Fund Percentage, an executive may receive a bonus considerably less than his or her bonus target. To that end, due to our financial outlook for 2009, management determined that our Global Plan and 1998 Plan would be funded at only 80%, rather than 100%, of the recipients’ bonus targets. Consequently, each NEO was eligible to receive a 2009 bonus no greater than 80% of his or her bonus target, subject to the actual bonus pool funding, and the individual’s performance, in 2009.

 

Our NEOs’ 2009 target annual incentive opportunities ranged from 43% to 91% of their base salaries. Actual 2009 incentive payments for our NEOs (other than Mr. Herrick) ranged between approximately 50% and 66% of the executives’ annual incentive targets, while Mr. Herrick’s 2009 incentive payment was 62% of his annual incentive target.

 

The Committee has the ability to make bonus payments, additional to our annual incentive payments, to any of our NEOs based on criteria and conditions as the Committee may determine in its discretion. In 2009, the Committee did not authorize any such additional bonuses.

Long-Term Incentive Program

 

We use long-term incentives to balance the short-term focus of our annual incentive program by tying rewards to executive performance over multi-year periods. We grant time-based RSUs for long-term incentive compensation because we believe they serve as a valuable incentive to attract senior leaders and, by virtue of the RSUs vesting over several years, encourage our leaders’ long-term commitment to Sapient. Additionally, as RSU awards increase in value based on the market price of our stock, we believe that RSUs motivate and reward our leaders’ high performance, and simultaneously enable us to administer our equity-based incentive programs in an efficient, simple and cost effective manner. In 2009, we granted an aggregate of 635,000³ RSU awards to our NEOs.

 

We believe our use of RSUs is appropriate, particularly given our general philosophy of linking compensation to actual performance and de-emphasizing “fixed” compensation by positioning executive base salaries at or below the Median. With the exception of the market-based vesting RSUs that we granted to Mr. Tibbetts in connection with his joining Sapient in October 2006, and the performance-based vesting RSUs that we granted to Mr. Herrick in 2010 (as described below), our RSU awards are time-based vesting equity awards.

 

We typically grant equity awards to our executives once per year, on a pre-determined grant date that occurs shortly after the Committee approves the executive equity grants. The Committee reviews and approves the annual equity awards for our CEO and other executives in the first quarter. The RSU awards typically are granted on the first Nasdaq trading day of the month immediately following the Committee’s award approval date. In 2009, our executive equity awards consisted solely of time-based RSUs, as specified below. However, the Committee has the authority, and may elect, to grant other types of equity-based awards in the future.

 

Our current executive long-term incentive granting framework involves developing RSU grant ranges for our senior leadership team and, within those ranges, allocating awards to our executives based on company and individual performance during the prior year, cash compensation, amount of equity needed to achieve our pay mix and pay goals relative to our target market, and historical equity grants. Further, the Committee maintains discretion to make adjustments (upward or downward) to an executive’s incentive compensation if Sapient’s and/or individual goals are not achieved. The Committee believes this framework ensures not only that each executive receives appropriate awards, but also that the awards are equitably determined for all members of our senior leadership team.

 

The long-term component of our incentive program is higher for our executives in more senior roles. Specifically, the targeted value of the long-term incentive component for our CEO was approximately 200% and our NEOs averaged approximately 115% of their base salaries. The ratio of RSUs to cash varies by level of participant, with our more senior executives receiving a higher percentage of their total compensation in the form of RSUs.

 

Benefits and Perquisites

 

Our executives are eligible to participate in all Company-sponsored benefit programs on the same basis as other full-time employees, including health and welfare benefits (e.g., medical/dental plans, disability plans and life insurance) and our 401(k) Plan (or its equivalent for senior leadership team members located outside of the United States).

 

We do not offer any special “tax advantaged” programs for our executives. Additionally, while our executives from time to time receive certain immaterial personal benefits from Sapient, in 2009 the value of these perquisites did not exceed $10,000 for any executive. Consistent with our company-wide philosophy of promoting internal equity among all of our employees and not affording certain compensatory benefits only to an exclusive group of employees, and except as noted below regarding Dr. Oversohl, we do not offer any supplemental executive health and welfare or retirement programs, or provide any other supplemental benefits or perquisites, to our executives.

 

 

³ This amount includes 150,000 RSUs awarded to Mr. Herrick on February 2, 2009 per the terms of his July 21, 2007 employment agreement (the “CEO Agreement”).

 

CEO Compensation Determination

 

With the assistance of the Executive Compensation Advisor, the Committee developed a 2009 compensation package for Mr. Herrick intended to be comparable to the Executive Peer Group for pay mix and equal to or as much as 15% above the market median of the Executive Peer Group for pay level. Further, the Committee assessed Mr. Herrick’s proposed compensation package for general conformity with market norms for pay mix, and confirmed that Mr. Herrick’s proposed pay mix was generally consistent with such norms. Additionally, the Committee evaluated Mr. Herrick’s compensation in light of our overall compensation objectives and strategy as well as the poor economic climate and Sapient’s business outlook for 2009.

 

Based on the foregoing considerations, and Mr. Herrick’s request that, in light of the then-current economic conditions, his base salary and bonus target not increase in 2009, the Committee decided to maintain Mr. Herrick’s base salary and bonus target at the then-current (2008) levels. However, in recognition of his strong 2008 performance, and Executive Peer Group data concerning long-term incentive awards, the Committee awarded Mr. Herrick 150,000 RSUs that vest in equal installments over a four-year period. Accordingly, Mr. Herrick’s 2009 compensation package, as compared to his 2008 compensation packages, was as follows:

 

 

 

 

Regarding Mr. Herrick’s 2009 annual bonus target, the Committee determined, consistent with Mr. Herrick’s 2008 bonus target metric, that the payment should directly correlate with our financial performance. In light of this goal, and to qualify Mr. Herrick’s 2009 annual incentive as performance-based compensation under Section 162(m), the Committee established a performance-based, non-discretionary bonus target tied to Sapient’s 2009 non-GAAP operating profit. We define “non-GAAP operating profit” as income from our operations, as reported in our publicly filed financial statements on Form 10-K, adjusted to add back certain expenses identified as “non-GAAP” in our earnings release financial statements or other public disclosures. Mr. Herrick’s 2009 annual incentive target of $500,000 (the “2009 Incentive Target”), was payable in full if Sapient achieved a non-GAAP operating profit target of approximately $80.30 million (the “2009 Profit Target”). Depending on actual profit achievement as a percentage of the 2009 Profit Target (the “Profit Achievement Percentage”), Mr. Herrick was eligible to receive an annual incentive payment equal to the result obtained by multiplying the 2009 Incentive Target by the Profit Achievement Percentage. The potential incentive payment was capped at $2 million, and Mr. Herrick was ineligible to receive an incentive payment if the Profit Achievement Percentage was less than 20% (i.e., $16.06 million). Based on our actual 2009 non-

GAAP operating profit of $67 million and a Profit Achievement Percentage of 77.58%⁴, Mr. Herrick was entitled to receive a 2009 annual incentive payment equal to $387,900 (the “Initial Bonus Calculation”). However, as our company-wide 2009 bonus pool funding target was only 80% of the eligible recipients’ bonus targets, Mr. Herrick’s 2009 Initial Bonus Calculation was adjusted downward to yield a final bonus payment equal to 80% of $387,900, or $310,000.

 

Regarding Mr. Herrick’s 2009 long-term incentive, the Executive Compensation Advisor reviewed Executive Peer Group data to determine Median long-term incentive awards for chief executive officers. Then, consistent with our pay-for-performance philosophy and desire to put more of Mr. Herrick’s compensation at risk to promote retention and high performance, and taking into account Mr. Herrick’s strong performance in the CEO role to date, the Committee approved a grant of 150,000 time-based RSUs that began vesting March 2, 2009 in equal increments of 25% per year over four years. This amount is in addition to the 150,000 RSUs awarded to Mr. Herrick on February 2, 2009 that began vesting January 1, 2009 in equal installments of 33¹/₃% per year over three years per the terms of the CEO Agreement.

 

In March 2010, the Committee approved a new compensation package for Mr. Herrick based on the Executive Compensation Advisor’s assessment of the market competitiveness of, and recommendation concerning changes to, Mr. Herrick’s compensation package for 2010. The Committee increased Mr. Herrick’s 2010 base salary from $550,000 to $575,000 and target bonus from $500,000 to $776,250 (i.e., 135% of his 2010 base salary). Additionally, to recognize Mr. Herrick for his leadership in a very difficult global economic environment and his contributions to Sapient in 2009, and to encourage his continued strong service to the Company, the Committee elected to award him 350,000 RSUs consisting of time-based and performance-based vesting units, as follows:

 

 

 

 

 

⁴ For purposes of calculating Mr. Herrick’s 2009 annual incentive payment, the Committee excluded from Sapient’s 2009 non-GAAP operating profit results approximately $4.7 million attributable to our July 2009 acquisition of Nitro Group. As a result, the Committee determined Mr. Herrick’s 2009 annual incentive based on non-GAAP operating profit of $62.3 million (rather than $67 million, our publicly reported 2008 non-GAAP operating profit).

 

Other NEO Compensation Determinations

 

As noted, in light of the global economic downturn in 2009, and after considering management’s recommendation, the Committee decided not to increase base salaries or annual incentive bonus targets for our other NEOs in 2009. As a result, the cash compensation paid, and equity-based awards granted, to these NEOs for 2009, as described more fully below, were as follows:

 

 

 

As Dr. Oversohl is compensated in Euros, for purposes of this table his compensation was converted from Euros to U.S. Dollars (“USD”) using an average of the 2009 Euro to USD exchange rate of $1.39463 (the “2009 Euro Exchange Rate”).

 

The following summarizes our four other NEOs’ 2009 bonus payments and LTI awards.

 

Mr. Tibbetts, SVP, CFO

 

To determine Mr. Tibbetts’ 2009 bonus payment, the Committee considered his performance against various individual goals and objectives for 2009, which included implementing spending controls, accelerating the implementation of certain internal projects relating to global taxation and financial information management and reporting and increasing his visibility globally as CFO, as well as his contributions to our senior leadership team. Based on Mr. Tibbetts’ strong performance across these areas, the Committee elected to award him a bonus equal to 100% of the Bonus Fund Percentage for our GSS team, of which Mr. Tibbetts is a part. As our bonus pool funding for GSS resulted in a Bonus Pool Fund Percentage of 55% (after payment of Associate-Level Bonuses), the Committee awarded Mr. Tibbetts a bonus equal to 55% of his 2009 bonus target, or $115,500.

 

Regarding Mr. Tibbetts’ 2009 long-term incentive award, the Committee awarded him 100,000 RSUs in recognition of his fiscal management and overall leadership in a challenging economic environment, and to encourage his continued strong service to the Company. Additionally, the Committee considered our pay-for-performance philosophy, external market comparisons, historical equity grants made to him since joining Sapient and pay relationships within our senior leadership team, in determining Mr. Tibbetts’ long-term incentive award.⁵

 

 

        ⁵ Although Mr. Tibbetts is a GSS team member, for purposes of determining his long-term incentive awards the Committee applies the grant ranges used to determine equity awards for the most senior executives within Sapient, which include our CEO, SVP NA and SVP Europe.

Mr. Wexler, SVP, North America Business Unit

 

The Committee determined Mr. Wexler’s 2009 bonus based principally on his 2009 performance against profit achievement goals within North America. Specifically, our North America Business Unit achieved a 53.0% profit (against a profit target of $122.7 million) and our Government Services Business Unit achieved a 69.5% profit (against a profit target of $9.8 million). Additionally, the Committee weighed Mr. Wexler’s leadership and achievements against individual objectives (which included leading a global initiative relating to our culture and core values) in determining his 2009 bonus. As a result of the foregoing, the Committee awarded Mr. Wexler a 2009 bonus payment equal to 49.6% of his annual bonus target, or $136,400.

 

To determine Mr. Wexler’s long-term incentive awards for 2009, the Committee considered several factors, including his leadership in a challenging economic environment, the growth potential of the North America and Government Services Business Units, his performance against company financial goals and individual objectives, our pay-for-performance philosophy, historical equity grants made to Mr. Wexler in each year since he joined Sapient, and internal pay comparisons between Mr. Wexler and Dr. Oversohl and among other leadership team members. Taking these factors into account, and to encourage Mr. Wexler’s continued strong performance, the Committee elected to award him 100,000 RSUs.

 

Dr. Oversohl, SVP, Europe Business Unit

 

The Committee determined Dr. Oversohl’s 2009 bonus based primarily on his revenue and profit achievement against established goals for our European business. Specifically, our Europe Business Unit achieved a 72.8% profit (against a profit target of $63.7 million). Additionally, the Committee considered Dr. Oversohl’s performance against individual and strategic leadership objectives (which included implementation of a new global delivery structure) in determining his 2009 bonus. As a result of the foregoing, the Committee awarded Dr. Oversohl a 2009 bonus payment equal to 65.8% of his annual bonus target, or $151,415.

 

In determining Dr. Oversohl’s long-term incentive awards for 2009, the Committee considered several factors, including his leadership in a challenging economic market, the growth potential of the Europe Business Unit, his performance against company financial goals and individual objectives, our pay-for-performance philosophy, historical equity grants made to Dr. Oversohl in each year since he joined Sapient, and internal pay comparisons between Dr. Oversohl and Mr. Wexler and among all of our leadership team members. Taking these factors into account, and to encourage Dr. Oversohl’s continued strong performance, the Committee elected to award him 100,000 RSUs.

 

Ms. Owens, SVP, General Counsel

 

To determine Ms. Owens’ 2009 bonus payment, the Committee considered her performance against various individual goals and objectives for 2009, which included implementing changes concerning our risk management processes, providing leadership to our internal and Board-level risk committees and providing additional guidance to our Board of Directors relating to corporate governance and risk matters, as well as her contributions to our senior leadership team. Based on Ms. Owens’ strong performance across these areas, the Committee elected to award her a bonus equal to 100% of the Bonus Fund Percentage for GSS. As our bonus pool funding for GSS resulted in a Bonus Pool Fund Percentage of 55% (after payment of Associate-Level Bonuses), the Committee awarded Ms. Owens a bonus equal to 55% of her 2009 bonus target, or $68,750.

 

To determine Ms. Owens’ 2009 long-term incentive award, the Committee considered her strong performance as our chief legal officer and leadership in a difficult economic environment, our pay-for-performance philosophy, market comparisons to survey data, historical equity grants made to Ms. Owens since joining Sapient and pay relationships among members of our senior leadership team who are also GSS Team members (other than Mr. Tibbetts). Taking these factors into account, and to encourage Ms. Owens’ continued strong performance, the Committee awarded her 35,000 RSUs.

Employment and Severance Agreements

 

We maintain employment agreements with Messrs. Herrick, Tibbetts, Wexler and Oversohl that contain severance arrangements and other terms of employment. Additionally, certain financial benefits following a change in control (“CIC Benefits”) will be provided to Messrs. Herrick and Tibbetts under their employment agreements. Further, all of our executives have agreed to covenants that protect Sapient against the executives joining a competitor and/or soliciting Sapient clients and employees.

 

In April 2010, each of our NEOs (including Messrs. Herrick and Tibbetts) and certain other senior executives entered into severance agreements that provide for CIC Benefits (the “CIC Agreements”). Concerning Messrs. Herrick and Tibbetts, the CIC Benefits provided under each executive’s CIC Agreement are substantially similar to the change in control benefits set forth in the executive’s employment agreement, and supersede the CIC provisions of such employment agreement for so long as the CIC Agreements are in effect. Should Messrs. Herrick and Tibbetts’ CIC Agreements terminate, then the CIC Benefits per their employment agreements will apply if Sapient undergoes a change in control.

 

In developing the proposed CIC Benefits for our executives, our Board of Directors consulted with outside counsel and the Executive Compensation Advisor to acquire an understanding of the range and size of benefits typically accorded senior executives in connection with a change in control. Taking into account outside counsel’s and the Executive Compensation Advisor’s guidance, market norms for CIC Benefits packages, and the existing CIC Benefits packages for Messrs. Herrick and Tibbetts, the Board of Directors developed what it deemed to be reasonable CIC Benefits, at or below market levels, for these senior executives.

 

The CIC Benefits provided to these executives are intended to enable each executive to focus on his or her present responsibilities and be fully committed to Sapient for the duration of the executive’s employment. We believe these arrangements are important to ensure Sapient’s success during a time of potential transition and because they align our senior executives’ interests to our stockholders’ interests. Additionally, providing change in control benefits helps ensure the objectivity of executives in reviewing potential change in control transactions and contributes to an overall pay program that is consistent with typical pay practices in this regard.

 

The employment contracts and change in control provisions for our NEOs are summarized on pages 41 to 44 of this Proxy Statement. Additionally, estimates of the termination or change in control amounts that would have been payable to the NEOs, if the CIC Benefits or other severance provisions under their employment agreements had triggered at year-end 2009 (without taking into account the CIC Agreements entered into in 2010), are summarized on pages 44 to 46 of this Proxy Statement.

 

We entered into an employment agreement with Mr. Wexler in 2002 that provides a post-termination severance benefit equal to one year’s base pay and bonus pay. We implemented this arrangement with Mr. Wexler to promote his retention and commitment to Sapient during a time when the economic climate, and the market for our services, was less certain, and retention of senior leaders was critical.

 

For competitive reasons,⁶ and to promote Dr. Oversohl’s retention and commitment to Sapient by conferring on him the benefits described below, we entered into a new employment agreement with Dr. Oversohl effective as of July 1, 2007 (Dr. Oversohl had previously entered into an employment agreement with Sapient that expired on June 30, 2007) that includes, among other features, various supplemental and severance benefits. Dr. Oversohl’s supplemental benefits include: (1) a company premium contribution in the amount of 20,000 Euros per year into a retirement support fund for the benefit of Dr. Oversohl which is a legally independent fund and thus not subject to the control of Germany’s Insurance Supervisory Authority (BaFin) (the “Support Fund”); and (2) in lieu of receiving a company car, a monthly payment in the amount of 1,200 Euros per month, retroactive to July 1, 2007. In considering these benefits for Dr. Oversohl, we engaged two international benefits consulting firms: Sentinel Benefits Group, Inc. and Towers Perrin (together,

 

 

     ⁶ Within Germany, employment agreements and post termination benefits of the type we have provided to Dr. Oversohl are standard features of executive compensation packages.

the “International Consultants”). The International Consultants advised that German employers commonly make payments into retirement support funds for the benefit of their employees, particularly executives/managing directors, and that the executive payments typically are at an amount equal to 10% of an executive’s base salary. Additionally, the International Consultants advised that German executives/managing directors routinely receive an automobile allowance in the range of 1,200 to 1,800 Euros per month. In light of these benefits norms within Germany, Dr. Oversohl’s senior executive position within Sapient, and our desire to provide Dr. Oversohl industry-standard benefits intended to promote his retention and continued commitment to Sapient, the Committee deemed it appropriate to make payments into a Support Fund for Dr. Oversohl in an amount equal to 8% of his base salary and pay an automobile allowance at the low end of the standard range for that benefit. Regarding Dr. Oversohl’s severance arrangement, under which he is entitled to severance compensation in an amount equal to 12 months of base salary payments upon specified termination events, we determined the size of this benefit based, in part, on a comparison to, and desire to ensure parity with, Mr. Wexler’s severance benefit.

 

We have not formally benchmarked our executives’ post-termination benefits against our industry peers. However, based on compensation data available from our Executive Compensation Advisor and general industry resources, we believe the benefits are either at or below market and are not excessive.

 

Impact of Tax and Accounting on Compensation Decisions

 

In 2007, our shareholders approved an amendment to the 1998 Plan to enable cash and equity awards granted under the plan to qualify for tax benefits available under Section 162(m). Because, historically, total compensation levels for our executive officers (other than Messrs. Herrick and Tibbetts and, in 2008, Mr. Wexler) have not exceeded the $1 million threshold for which it would be desirable to qualify performance-based compensation for tax benefits under Section 162(m), we have qualified only Mr. Herrick’s performance-based compensation for these tax benefits. Pursuant to the 1998 Plan, and regarding awards intended to satisfy the performance-based exception under Section 162(m), the Committee maintains the subjective discretion to reduce, but not increase, incentive awards payouts below established annual incentive target levels. Further, notwithstanding the existence of the 1998 Plan and Mr. Herrick’s eligibility for an award thereunder, Sapient has reserved the right to make 2010 awards to its employees, including Mr. Herrick, outside of the 1998 Plan and subject to such criteria and conditions as the Compensation Committee may determine in its discretion. The Committee continues to monitor aggregate compensation levels among each of our executive officers in light of Section 162(m)’s tax benefits. Regarding those executives whose total compensation is anticipated to exceed $1 million in a given year, the Committee may opt in the future to structure compensation arrangements with the executives in a manner that qualifies elements of their compensation for Section 162(m) tax benefits.

 

When determining amounts of equity grants to executives and employees under our long-term incentive program, the Committee examines the accounting cost associated with the grants. Under FASB ASC Topic 718, grants of stock options, restricted stock, RSUs and other share-based payments result in an accounting charge for Sapient. The accounting charge is equal to the fair value of the instruments being issued. For RSUs, the cost is equal to the fair value of the stock on the grant date times the number of stock units granted. For stock options (if granted with time-based vesting), the cost is equal to the fair value of the option on the grant date using a Black-Scholes option pricing model times the number of options granted. RSUs granted with market-based vesting are valued using a lattice model. Regarding both RSUs and stock options, this expense is amortized over the requisite service or vesting period.

 

2010 Executive Program Changes

 

For 2010, the Committee will continue to enhance its review of the Executive Program in an effort to ensure that no components of the Executive Program encourage executives to take unnecessary or excessive risks that could threaten the value of Sapient. Additionally, while Mr. Herrick’s annual bonus and other performance-based compensation is subject to recoupment (“clawback”) under circumstances where Sapient materially fails to comply with a financial reporting requirement in connection with material misconduct by Mr. Herrick or any U.S. employee whom he supervises, Sapient does not have an executive compensation

clawback policy. The Committee will continue to review periodically whether to adopt a policy that authorizes executive compensation clawbacks where Sapient must make a financial restatement or recalculate a financial metric applicable to an annual bonus payment or a long-term incentive award. Further, while we have not adopted minimum stock ownership requirements, the Committee has reviewed each executive’s level of stock ownership. In light of the fact that our executive stock ownership levels exceed typical stock ownership levels for similar executives, the Committee has determined that stock ownership requirements are unnecessary at this time. The Committee will continue to monitor the stock holdings of our NEOs.

 

The report by this Committee is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of Sapient Corporation under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended.

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Bruce D. Parker, Chairman

Darius W. Gaskins, Jr.

James M. Benson

 

The following table sets forth NEO compensation for the fiscal years ended December 31, 2009, 2008 and 2007.

 

 

 

 

The following table provides information regarding plan-based awards granted in 2009 to each of the NEOs as of December 31, 2009.

 

 

 

 

The following table provides information regarding all outstanding equity awards held by each of the Named Executive Officers as of December 31, 2009.