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

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o Preliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ Definitive Proxy Statement

o Definitive Additional Materials

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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May 2, 2011

 

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 8, 2011 at 9:00 a.m. local time at the Company’s headquarters located at 131 Dartmouth Street, Boston, Massachusetts.

 

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 2011 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 2011 Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2010 are available via the Internet at www.proxyvote.com.

 

Alan J. Herrick
President and Chief Executive Officer

 

 

 

SAPIENT CORPORATION
131 Dartmouth Street
Boston, Massachusetts 02116

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The 2011 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 8, 2011, at 9:00 a.m. (local time), for the following purposes:

 

 

 

 

 

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

 

The record date for the Annual Meeting is April 12, 2011. 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. If the Annual Meeting is adjourned or postponed for any reason, any action remaining to be taken on the above matters will be considered when the meeting is resumed.

 

Your vote is 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 2011 Proxy Statement (the “Proxy Statement”) attached to this Notice. 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 offer these proxy materials and our 2010 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 printing and delivery costs 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

May 2, 2011

 

 

TABLE OF CONTENTS

 

 

 

SAPIENT CORPORATION
131 Dartmouth Street
Boston, Massachusetts 02116

 

PROXY STATEMENT

 

For the Annual Meeting of Stockholders
To Be Held on June 8, 2011

 

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, 2010 (without exhibits) (our “Annual Report”) because the Board of Directors of Sapient Corporation is soliciting your proxy to vote at our 2011 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 Proposals Two, Three, Four or Five, 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 12, 2011, 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 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 must 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 you owned 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, the election of directors is no longer deemed a “routine” matter proposed for vote by a company’s stockholders at its annual meeting. Of the proposals to be acted upon at the Annual Meeting, only the ratification of auditors is a routine matter. Therefore, if you do not give your broker voting instructions, your shares will not be voted as to any Proposal at the Annual Meeting other than ratification of auditors. 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, 137,929,752 shares of our common

stock were outstanding and entitled to vote. Thus, for a quorum to exist, 68,964,877 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 www.proxyvote.com.

 

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 at the mail or e-mail address listed above.

 

 

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 the eight directors named in this Proxy Statement. Upon the recommendation of our Governance and Nominating Committee, the Board of Directors has nominated James M. Benson, Hermann Buerger, Darius W. Gaskins, Jr., Jerry A. Greenberg, 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 16 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.

 

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 eight 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 eight 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 16 of this Proxy Statement.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS OUR STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE EIGHT 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 fiscal year ending December 31, 2011.

 

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, 2010 and 2009 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, 2011. 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 FISCAL YEAR ENDING DECEMBER 31, 2011.

 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), stockholders are entitled to vote at the Annual Meeting to approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K. The stockholder vote on executive compensation is an advisory vote only, and it is not binding on the Company or the Board of Directors. Although the vote is non-binding, the Compensation Committee and the Board value the opinions of the stockholders and will consider the outcome of the vote when making future compensation decisions.

 

As described in detail under the heading “Compensation Discussion and Analysis” (“CD&A”), beginning on page 31 of this Proxy Statement, our executive compensation program is designed to implement and achieve the goals of our executive compensation philosophy, which, fundamentally, are to align each executive’s compensation with Sapient’s short-term and long-term performance and to provide the compensation and incentives needed to attract, motivate, and retain our named executive officers, who are critical to the success of the Company. Under this executive compensation program, our named executive officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals, and the realization of increased stockholder value. The CD&A provides additional details about our executive compensation program, including information about the fiscal year 2010 compensation of our named executive officers.

 

Sapient continues to maintain best practices in designing and implementing its executive compensation program. These practices include the following:

 

 

We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named

executive officers and our philosophy, policies and practices as described in this proxy statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution:

 

“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.

 

Under the Dodd-Frank Act, stockholders are entitled to vote on whether the “say-on-pay” vote (described above) should occur every one, two or three years. Stockholders also have the option to abstain from voting on the matter. Pursuant to the Dodd-Frank Act, the stockholder vote on the frequency of the “say-on-pay” vote is an advisory vote only, and it is not binding on the Company or the Board of Directors. Although the vote is non-binding, the Compensation Committee and the Board of Directors value the opinions of the stockholders and will consider the outcome of the vote when determining the frequency of the stockholder vote on executive compensation.

 

The Board of Directors has determined that an annual advisory “say-on-pay” vote is the best approach for the Company and its stockholders. In formulating its recommendation, the Board of Directors considered that an annual advisory vote on executive compensation will allow our stockholders to provide us with their direct input on our compensation program as disclosed in the proxy statement every year. Additionally, an annual advisory vote on executive compensation is consistent with our policy of seeking input from, and engaging in discussions with, our stockholders on corporate governance matters and our executive compensation programs.

 

You may cast your vote on your preferred voting frequency by choosing the option of one, two or three years on the enclosed proxy card or voting instructing form.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE OPTION OF ONCE EVERY YEAR AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE PROVIDED AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.

 

2011 Plan — Introduction

 

Like many other companies in the marketing services and technology consulting industry, we have long utilized incentive awards as an important means of attracting, retaining and motivating talented employees. The Board of Directors believes that the continued growth and success of the Company depends, in large part, on our ability to continue to attract, retain and motivate such employees. Accordingly, on April 7, 2011, the Board of Directors adopted, subject to stockholder approval at our Annual Meeting, the Sapient Corporation 2011 Incentive Plan (the “2011 Plan”). The 2011 Plan is similar to our existing 1998 Stock Incentive Plan (the “1998 Plan”). Under the 2011 Plan, the Company may issue up to 13,075,979 shares of common stock in the form of stock-based and other incentive awards (includes 10,000,000 new shares of common stock plus 3,075,979 shares of common stock available for issuance under the 1998 Plan immediately prior to the adoption of the 2011 Plan). Consistent with this objective of attracting, retaining and motivating employees, awards granted under the 2011 Plan will generally be subject to vesting and forfeiture provisions. Vesting of restricted stock units (“RSUs”) awards, our current form of equity awards that we grant to employees, have historically been allocated over a three- or four-year period. We intend to continue this general practice under the 2011 Plan.

 

As of April 12, 2011, there were 137,929,752 shares of common stock outstanding, approximately 7,381,327 RSUs outstanding under the 1998 Plan, and 2,744,717 total options outstanding under the 1998 Plan, our 1996 Equity Stock Incentive Plan (the “1996 Plan”), and our 2001 Stock Option Plan (the “2001 Plan”) combined, at a weighted average exercise price of $5.22. No further grants may be made under either

the 1996 Plan or the 2001 Plan as they have expired. We will terminate our 1996 Director Stock Option Plan, with no further grants made pursuant to such plan, if the 2011 Plan is approved by our stockholders. Further, we do not intend to make any grants under the 1996 Director Stock Option Plan prior to our Annual Meeting.¹ As of the date of the adoption of the 2011 plan, 3,075,979 shares of common stock were available for award under our 1998 Plan (the “Available 1998 Plan Shares”). If the 2011 Plan is approved by our stockholders, available 1998 Plan Shares will be transferred to the 2011 Plan and no further awards will be issued under the 1998 Plan. On April 12, 2011, the last reported sale price of the Company’s common stock on the Nasdaq National Market was $12.01.

 

The number of RSUs that we granted during 2010 equaled approximately 2.03% of the total shares of common stock of the Company outstanding on December 31, 2010. We believe this percentage to be competitive with the grant practices of other companies in similar industries or stages of growth as the Company, yet is significantly less than the percentage granted by some of our peer companies. We feel that the number of shares we are requesting our stockholders approve at the Annual Meeting to be available under the 2011 Plan, together with the Available 1998 Plan Shares, should provide sufficient shares for future incentive awards to be offered under the 2011 Plan for approximately the next three to five years.

 

THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION OF THE 2011 PLAN IS IN THE BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE 2011 PLAN AND THE RESERVATION OF 10,000,000 NEW SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.

 

2011 Plan — Key Aspects

 

The following sets forth key aspects of the 2011 Plan. See “2011 Plan — Summary,” below, for a summary of the material features of the 2011 Plan.

 

 

Should our stockholders not approve our adoption of the 2011 Plan, the 2011 Plan will not go into effect, and we will not grant any awards under the 2011 Plan.

 

2011 Plan — Summary

 

The following description is only a summary of the material features of the 2011 Plan and does not describe all of its provisions. A copy of the 2011 Plan is included as Appendix A to this Proxy Statement.

 

 

¹ No new awards have been made under the 1996 Director Stock Option Plan since September 2004.

² Dilution is defined as the sum of all outstanding stock options, outstanding and unvested restricted stock units and shares available for future issuance under our legacy plans, and the 10,000,000 newly authorized shares, divided by the sum of the shares in the numerator plus our common stock outstanding as of April 12, 2011.

Introduction.  The 2011 Plan permits the grant of the following types of awards: (i) options to purchase shares of common stock that are “incentive stock options” (“Incentive Options”) under the Internal Revenue Code (“Code”), (ii) options to purchase shares of common stock that do not so qualify (“Non-Qualified Options”), (iii) stock appreciation rights (“SARs”), (iv) restricted stock, (v) unrestricted stock, (vi) stock units, including restricted stock units, (vii) performance awards, (viii) cash awards and (ix) other incentive awards that are convertible or otherwise based on the stock of the Company. The term of each award requiring exercise issued under the 2011 Plan may not exceed ten years (and, in the case of Incentive Options granted to certain ten percent (or greater) stockholders, five years). The 2011 Plan is not required to be qualified under Section 401 of the Code nor is it subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.

 

Shares Subject to the 2011 Plan.  10,000,000 new shares of common stock have been authorized and reserved for issuance under the 2011 Plan. The number of shares of common stock available for issuance under the 1998 Plan immediately prior to the time the 2011 Plan was adopted (as of April 12, 2011, this number was 3,075,979) will also be available for issuance under the 2011 Plan, which together equals 13,075,979 shares of common stock available for issuance under the 2011 Plan. Awards of no more than 1,000,000 shares subject to for which stock options or SARs are issued may be granted to any person in any calendar year. Additionally, the maximum number of shares subject to other awards granted to any individual in any calendar year is 1,000,000 shares. The maximum amount payable to any person in any year as a cash award is $3,000,000. No more than 10% of the shares subject to the 2011 Plan may be granted as, or made subject to, awards of restricted stock or restricted stock units that are scheduled to vest more rapidly than ratably over a three-year period or, if such vesting is performance based, are scheduled to vest based on performance criteria by reference to a performance period of less than one year.

 

Shares of common stock underlying any awards that are forfeited (except as described below), cancelled or satisfied without the issuance of common stock or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2011 Plan. Any shares of common stock tendered by a participant to the Company as full or partial payment of the exercise of an award or withheld by, or otherwise remitted to, the Company to satisfy a participant’s tax withholding obligations arising due to an award will not be added back to the shares of common stock available for issuance under the 2011 Plan.

 

Plan Administration.  The 2011 Plan will be administered by the Compensation Committee. All members of the Compensation Committee must be “non-employee directors” as that term is defined under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and “outside directors” as defined in Section 162(m) of the Code and the regulations promulgated thereunder. The Compensation Committee, acting as the administrator of the 2011 Plan (in such role the Compensation Committee will be referred to as the “Administrator”), will have the power and authority to select participants under the 2011 Plan, to make any combination of awards to participants, and to determine (and modify from time to time) the specific terms and conditions of each award, all subject to the provisions of the 2011 Plan. The Administrator, in its discretion, may delegate authority to one or more officers of the Company with respect to the granting of equity awards to certain participants, subject to certain limitations.

 

Eligibility.  Persons eligible to participate in the 2011 Plan are those employees, directors and key persons (including consultants and advisors) of the Company and its affiliates who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company and its affiliates. However, only employees of the Company and its subsidiaries may be granted Incentive Options.

 

Stock Options and Stock Appreciation Rights.  The exercise price or base price (as applicable) per share of common stock subject to each stock option and SAR will be determined by the Administrator but may not be less than 100% of the fair market value of a share of common stock on the date of grant. Each grant will be subject to such vesting requirements as the Administrator determines.

 

Terms of Awards.  No awards may be made after April 6, 2021, but previously granted awards may continue in accordance with their terms. The Administrator will determine the terms and conditions of each award granted to participants, including the vesting terms applicable to all awards, including RSUs. The

Administrator may condition the vesting of any award upon the satisfaction of performance targets or goals as described below. With respect to any award intended to qualify as performance-based for the purposes of Section 162(m) of the Code, other than a stock option or SAR (“Performance Awards”), the Administrator will pre-establish, in writing, one or more specific performance criteria no later than 90 days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the award as performance-based under Section 162(m) of the Code). Prior to grant, vesting or payment of the Performance Award, as the case may be, the Administrator will certify whether the applicable performance criteria have been attained. Performance criteria means an objectively determinable measure of performance relating to any, or any combination, of the following: sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings.

 

Termination of Service.  Unless provided otherwise in an award or provided otherwise by the Administrator, upon termination of a participant’s employment (or other service relationship) with the Company and its affiliates, all awards that are not vested at the time of such termination will expire. Except as provided otherwise in an award or by the Administrator, upon termination, all vested stock options or SARs, (a) held by a participant prior to his or her death, to the extent then exercisable, will remain exercisable for one year, (b) held by a participant prior to termination of such relationship for reasons other than death or for cause will, to the extent then exercisable, remain exercisable for three months, and (c) held by a participant prior to termination of such relationship for cause or if the cessation of employment has resulted due to reasons which cast such discredit as to justify immediate termination of the award, terminate immediately. However, in no event will any stock option or SAR remain exercisable beyond its otherwise scheduled expiration date.

 

Tax Withholding.  Participants under the 2011 Plan are responsible for the payment of any federal, state or local taxes that may become due in connection with the grant or exercise of awards. The Company may deduct any such taxes from any payment otherwise due to a participant. Subject to the Administrator’s approval, participants may elect to have the minimum tax withholding obligations satisfied either by authorizing the Company to withhold from shares of common stock otherwise issuable or by transferring to the Company shares of common stock having a value equal to the amount of such taxes.

 

Amendments and Termination.  The Administrator may at any time or times amend the 2011 Plan or any outstanding award for any purpose which may at the time be permitted by law, and may at any time terminate the 2011 Plan as to any future grants of awards; provided, that except as otherwise expressly provided in the 2011 Plan the Administrator may not, without the consent of participants, alter the terms of an award so as to affect materially and adversely the rights of a participant under such award, unless the Administrator expressly reserved the right to do so at the time the award was granted. Prior stockholder approval is required for the (a) cancellation of outstanding stock options or SARs and the grant in substitution therefor of new stock options or SARs having a lower exercise price, (b) amendment of outstanding stock options or SARs to reduce the exercise price thereof, or (c) the repurchase by the Company for cash or other property of “underwater” stock options or SARs. Further, amendments to the 2011 Plan are subject to stockholder approval if and to the extent such amendments (a) will materially increase the benefits accruing to participants under the 2011 Plan, (b) will materially increase the number of securities that may be issued under the 2011 Plan, (c) will materially modify the requirements as to eligibility in the 2011 Plan, or (d) are required by the Code to preserve the qualified status of Incentive Options or to preserve tax deductibility of compensation earned under stock options and SARs.

 

Adjustments to Awards.  As a result of certain transactions (such as any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock), the outstanding shares of the common stock may be increased or decreased or exchanged for a different number or kind of shares or other securities. Also, as a result of such transactions, cash or in-kind distributions may be made with respect to such shares of common stock or other securities. In such cases, the Administrator

will make equitable adjustments in the maximum number of shares reserved for issuance under the 2011 Plan, the number of awards that can be granted to any one individual participant, the number and kind of shares or other securities subject to any then outstanding awards under the 2011 Plan, and the price for each share subject to any then outstanding stock options and SARs under the 2011 Plan, without changing the aggregate exercise as to which such stock options and SARs remain exercisable. The adjustment by the Administrator will be final, binding and conclusive. The Administrator may also adjust the number of shares subject to outstanding awards and the exercise price and the terms of outstanding awards to take into consideration other distributions to stockholders, or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of awards made hereunder, having due regard for the qualification of Incentive Options under Section 422 of the Code, the requirements of Section 409A of the Code, and for the performance-based compensation rules of Section 162(m) of the Code, where applicable.

 

Change of Control and Other Transaction Provisions.

 

Except as otherwise provided in an award, the following provisions apply in the event of Change of Control, which means a (i) consolidation, merger, or similar transaction or series of related transactions, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company’s then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) sale or transfer of all or substantially all the Company’s assets, or (iii) dissolution or liquidation of the Company. If the Change of Control is one in which there is an acquiring or surviving entity, the Administrator may provide for the assumption or continuation of some or all outstanding awards or for the substitution of new awards. If the Change of Control is one in which holders of the Company’s stock will, upon consummation, receive a payment, the Administrator may provide for a cash-out with respect to some or all awards, subject to such conditions, as the Administrator determines. If the Change of Control is one in which there is no assumption, continuation, substitution or cash-out, the Administrator may provide that each award requiring exercise will become fully exercisable, and the delivery of any shares of stock remaining deliverable under each outstanding award of restricted stock or restricted stock units will be accelerated and such shares will be delivered, prior to the Change of Control. Except as provided for above, each award will otherwise terminate upon consummation of the Change of Control. Any award may, in the discretion of the Administrator, contain such restrictions, if any, as the Administrator deems appropriate to reflect any performance or other vesting conditions to which the Award was subject and that did not lapse (and were not satisfied) in connection with the Change of Control.

 

New 2011 Plan Benefits.  The future benefits or amounts that would be received under the 2011 Plan by executive officers, non-executive directors and non-executive officer employees are discretionary and are therefore not determinable at this time. Similarly, the benefits or amounts which would have been received by or allocated to such persons for the last completed fiscal year if the 2011 Plan had been in effect would have been discretionary and are, therefore, indeterminable. The following table indicates the awards made in 2010 pursuant to the Company’s incentive plans:

 

2010 Awards Under Our 1998 Plan and 2001 Plan(1)

 

 

 

Tax Aspects of Any Awards Under the Code

 

The following is a summary of the principal U.S. federal income tax consequences of transactions under the 2011 Plan. It does not describe all U.S. federal income tax consequences under the 2011 Plan, nor does it describe state, local, foreign tax or all U.S. federal non-income tax consequences.

 

Incentive Options.  No taxable income is generally realized by the optionee upon the grant or exercise of an Incentive Option. If shares of common stock issued to an optionee pursuant to the exercise of an Incentive Option are sold or transferred after two years from the date of grant of the stock option and after one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the exercise price will be taxed to the optionee as a long-term capital gain, and any loss sustained by the optionee will be a long-term capital loss, and (ii) there will be no deduction for the Company for federal income tax purposes. The exercise of an Incentive Option may result in alternative minimum tax liability for the optionee.

 

If shares of common stock acquired upon the exercise of an Incentive Option are disposed of prior to the expiration of the two-year and one-year holding periods described above (a “disqualifying disposition”), generally (i) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of common stock acquired on the date of exercise (or, if less, of the amount realized on a sale of such shares of common stock) over the exercise price, and (ii) the Company will be entitled to deduct such amount. Any additional gain recognized on the disposition is treated as a capital gain to the optionee for which the Company is not entitled to a deduction.

 

If an Incentive Option is exercised at a time when it no longer qualifies for the tax treatment described above, the stock option is treated as a Non-Qualified Option. Generally, an Incentive Option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of the optionee’s employment. Incentive Options are also treated as Non-Qualified Options to the extent that, in the aggregate, they first become exercisable by an individual in any calendar year for shares of common stock having a fair market value (determined as of the date of grant) in excess of $100,000.

 

Non-Qualified Options.  With respect to Non-Qualified Options under the 2011 Plan, no income is realized by the optionee at the time the stock option is granted, and the Company does not receive a tax deduction at such time. Generally (i) at exercise, ordinary income is realized by the optionee in an amount equal to the excess (if any) of the fair market value of the shares of common stock on the date of exercise over the exercise price, and the Company receives a tax deduction for the same amount, and (ii) at disposition of such shares, any appreciation or depreciation in the value of such shares after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held.

 

Restricted Stock Units.  The grant of an award of RSUs will not be a taxable event. The recipient of the award generally will recognize ordinary compensation income in each year in which the units vest in an amount equal to the fair market value of the shares of common stock received. A recipient’s basis for determining gain or loss on a subsequent disposition of these shares of common stock will be the amount the recipient must include in income when the units vest. Any gain or loss recognized on a disposition of the shares of common stock generally will be short-term or long-term capital gain or loss, depending on the length of time the recipient holds the shares.

 

Section 162(m).  Under Section 162(m) of the Code, certain remuneration in excess of $1,000,000 may be nondeductible if paid by a publicly traded corporation to any of its chief executive officer or other four

most highly compensated officers. Stock options, SARs and “performance based” awards of both cash and equity issued under the 2011 Plan are intended to qualify for exemption from the Section 162(m) deduction limit. Under Section 162(m) of the Code, the deduction is available if, among other reasons, the compensation constitutes qualified performance-based compensation. One requirement to be qualified performance-based compensation is that the material terms of the performance goal or goals under which the compensation will be paid must be disclosed to and approved by our stockholders before the compensation is paid, and the approval of the 2011 Plan by shareholders serves such function. In addition, the material terms of the performance goal or goals must be disclosed to and reapproved by stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which stockholder approval was previously received. We expect to seek such re-approval periodically in the future.

 

Summary of Equity Compensation Plans

 

The following table summarizes, as of December 31, 2010 the number of options issued under our current equity compensation plans and the number of awards available for future issuance under these plans.

 

 

 

 

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, 2010 and management’s assessment of internal controls over financial reporting as of December 31, 2010. PwC, the Company’s independent registered public accounting firm in 2010, 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, 2010 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 eight individuals, each a current member of our Board of Directors, be nominated for election at our Annual Meeting, as described on page 5 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.

 

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) and Jerry A. Greenberg, 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. With the exception of Mr. Greenberg’s service on the

Risk Committee, Each of these committees consists solely of Board members determined to be independent 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 2010, the Board of Directors held ten meetings and took action without a formal meeting by unanimous written consent three times. Each director attended 100% 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 2010 Annual Meeting other than Mr. Gaskins, who was unable to attend the meeting for medical reasons.

 

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 14 of this Proxy Statement. The Audit Committee met nine times in 2010.

 

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, 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 that each member of the Committee 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 four times in 2010 and currently comprises James M. Benson, Jerry A. Greenberg, J. Stuart Moore and Vijay Singal. Dr. Singal and Messrs. Benson and Moore meet the criteria for independence required under applicable Nasdaq listing rules. Currently, Dr. Singal 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 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 nine times, and took action without a formal meeting by unanimous written consent once, in

2010. 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 Chief Executive Officer. 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 Ashok Shah, each of whom is an independent director within the meaning of applicable Nasdaq listing rules, tax rules, and applicable securities laws and regulations. Currently, Mr. Benson 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 31 of this Proxy Statement.

 

Since 2008, the Compensation Committee has retained Mercer LLC (“Mercer”), an outside consulting firm, to advise the committee on the Company’s executive compensation program. In 2010, 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 $129,957 for these services.

 

Additionally, Sapient management also engaged Mercer in 2010 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 $154,809 in fees. Although the Compensation Committee was aware of the extent and cost of Mercer’s additional services provided to management, management defined and authorized the work.

 

Mercer is a wholly-owned subsidiary of Marsh & McLennan Companies (“MMC”). In 2010, we paid fees of $234,874 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.

 

Because the Committee and management both use Mercer for compensation consultancy services, the Committee and Mercer have implemented policies and procedures to ensure that the advice the Committee receives from Mercer is objective and not influenced by Mercer’s or its affiliates’ relationships with the Company. These policies and procedures include:

 

 

 

In advising the committee, it is necessary for the consultant advising the committee to interact with management to gather information, but the committee has adopted protocols governing if and when the consultant’s advice and recommendations to the committee can be shared with management. These protocols are included in the consultant’s engagement letter. The committee also determines the appropriate forum for receiving consultant recommendations. Where appropriate, management invitees are present to provide context for the recommendations. In other cases, the committee receives the consultant’s recommendations in executive session where management is not present. This approach protects the committee’s ability to receive objective advice from the consultant so that the committee may make independent decisions about executive pay at the Company.

 

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 2010 and its current members are James M. Benson, Hermann Buerger, Darius W. Gaskins, Jr. and Vijay Singal, each of whom is an independent director within the meaning of applicable

 

Nasdaq listing rules, and applicable securities laws and regulations. Mr. Gaskins serves as the Chairman of the committee.

 

The committee also advises 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 2012 Annual Meeting, nominations must be received no later than the 120th 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 18, 2010, 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, 2010 to each of our non-employee directors.

 

 

 

 

As of December 31, 2010 our non-employee directors had the following RSUs 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 post-employment benefits in addition to 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, 2010 for which vesting would be accelerated assuming a change in control on that date:

 

 

 

 

The following table sets forth information as of April 12, 2011 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 11, 2011 (60 days from April 12, 2011) 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 137,929,752 shares of common stock outstanding as of April 12, 2011.

 

 

 

 

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 2010.

 

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 2010 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:

 

 

 

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 stockholders’ interests. The objectives and strategy of our Executive Program are to:

 

 

 

³ For purposes of this CD&A, the terms “business unit” and “operating segment” are used interchangeably.

 

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 (defined as our company purpose, core company values, vision, goals and client value proposition). 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”). Again in 2010, 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 2010 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 groups (“Executive Peer Groups”) 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 at or 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 the executive’s achievement of individual performance goals.

To assess the market competitiveness of our Executive Program, the Committee determines the competitive market against which to compare Sapient, as follows. Working with Mercer, the Committee reviews its Executive Peer Group each year to ensure that the Executive Peer Group companies selected remain appropriate for compensation and performance comparison purposes. Companies are selected based on industry and size, reflected by both revenue and market capitalization. The Committee’s goal is to assemble a group of companies with which Sapient competes for executive talent. In light of Sapient’s unique market position and differentiated service offerings, the Committee could not 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, in late 2009, the Committee nonetheless created an Executive Peer Group by selecting peer companies, listed below, that are similar to Sapient in terms of structure, organization, selling capacities, revenue and/or market capitalization. The Committee then used these companies, among several other decision-making inputs described in this CD&A, to inform its executive target compensation decisions for 2010:

 

 

 

 

Source: Standard & Poor’s Research Insight Database

 

To afford the Committee a broader industry perspective on executive compensation, the Executive Compensation Advisor, in addition to compiling Executive Peer Group information, provided the Committee published survey data consisting of professional service companies and/or high-technology and marketing firms similar in size to Sapient. The Committee principally used the 2009 Mercer Executive Remuneration Database for executive compensation survey data.

 

 

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 and/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 2010, the Committee reviewed Sapient’s 2009 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 our executives are compensated fairly, relative to each other, for each executive’s contributions to Sapient. 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 2010 and determined that the compensation packages for our NEOs were equitable and, therefore, did not — solely for internal pay equity purposes — require adjustment. However, adjustments to our executives’ compensation were implemented in light of company performance, external market data and executive achievement against individual performance objectives.

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, competency 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.

 

Because the Committee aims to make the variable portion of executive pay a larger proportion of our executives’ total compensation, relative to industry norms, it established 2010 compensation packages for our NEOs that resulted in the following pay mixes:

 

     % of Total Compensation By Pay Element — 2010

 

 

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. In considering these factors, the Committee lifted the ban on executive base pay increases that it implemented in 2009 and approved base pay increases in 2010, effective as of April 1, 2010. The resulting 2010 base salaries for our NEOs represented between 14% and 29% of total direct compensation for these individuals, and, in the aggregate, approximated the Median (2% above Median). Commentary regarding the base salary increase for each executive follows:

 

 

 

The below chart summarizes the annualized base salary changes from 2009 to 2010 for the CEO and the Other NEOs.

 

 

 

 

Annual Incentive/Bonus Program

 

We use our annual incentive program to create a strong link between pay and performance. With respect to Mr. Herrick’s annual incentive, the Committee has, each year since 2007, established a non-discretionary, objective, performance-based bonus metric in which Mr. Herrick’s bonus is determined based on Sapient’s performance against a fiscal year non-GAAP⁴ operating profit target. Mr. Herrick’s bonus is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code (“Section 162(m)”) and is administered pursuant to our 1998 Stock Incentive Plan (the “1998 Plan”). The 1998 Plan enables cash and equity awards granted under the plan to qualify for tax benefits available under Section 162(m).

 

With respect to our NEOs other than Mr. Herrick (the “Other NEOs”), our annual incentive program rewards the executives for their achievement of short-term financial and operational goals 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. Consequently, unlike the non-discretionary, objective, performance-based metrics for Mr. Herrick’s annual

 

 

⁴ 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.

incentive, many of the metrics used to assess the Other NEOs’ performance are qualitative as well as quantitative and require the Committee to exercise discretion in assessing proposed payments.

 

The Other NEOs’ bonuses are administered pursuant to our Global Performance Bonus Plan (the “Global Plan”). The funding and payout of annual bonuses for the Other NEOs are administered in the following manner. In the first quarter of each fiscal year, Sapient management sets business and financial objectives that our Board of Directors reviews and approves. These objectives translate into financial targets, and associated bonus pool funding targets under the Global Plan, for the payment of the Other NEO and other Sapient employee bonuses. Historically, the Board has approved extremely aggressive “stretch” company performance targets that are capable of achievement only if Sapient’s company-wide financial performance in a given year is exceptional. For 2010, our bonus pool funding was based upon Sapient’s achievement of non-GAAP operating profit dollars against a non-GAAP operating profit dollars target. Once the bonus pool has been funded, available bonus pool funds are first applied to payment of associate and senior associate bonuses, which are paid at 100% of those employees’ target bonuses, depending on individual performance. Additionally, the bonus pool is further adjusted to account for increases or decreases to headcount targets for employees eligible to receive a bonus. The resulting bonus pool funding, from which bonuses are paid to the Other NEOs and non-executive employees, is defined as the “Bonus Pool Fund Percentage.”

 

Additionally, while the bonus pool funding for our internal operations Global Shared Services team — of which Mr. Tibbetts is a part — is directly tied to overall company performance, the bonus pool funding for our operating segments (SapientNitro North America, SapientNitro Europe, Sapient Global Markets and Sapient Government Services) is subject to overall company performance as well as adjustments based on each operating segment’s performance against an operating profit dollar target for the segment and the segment’s financial performance relative to other segments’ financial performance against their associated operating profit dollar targets (the “Segment Performance Adjustments”). Further, the bonus calculations for our NEOs who lead the operating segments (Messrs. Wexler, Oversohl and Register) are subject to a payout “weighting” of 70% and 30% for segment and company operating performance, respectively (the “Payout Weighting”). Consequently, for a given year, depending on our Bonus Pool Fund Percentage and operating segment financial performance, and the Payout Weighting, our NEOs who lead operating segments may receive a bonus considerably less than their bonus targets.

 

With respect to setting annual bonus targets for our NEOs in 2010, the Committee considered and approved changes to our NEOs’ target annual incentive opportunities in light of external market data, internal pay relationships, individual and company performance and Sapient’s compensation philosophy. The below chart summarizes the annualized target incentive opportunity changes from 2009 to 2010 for the CEO and the Other NEOs.

 

 

 

 

Taking into account 2010 base salaries and the foregoing annual incentive/bonus targets for our NEOs, the total target cash compensation opportunities for the NEOs, relative to peer NEOs, were as follows:

 

 

Regarding the actual 2010 incentive payments for our NEOs, as indicated below, payouts ranged between approximately 67% and 86% of the executives’ annual incentive targets:

 

 

 

 

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 2010, 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. In 2010, we principally granted 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 2010, we granted an aggregate of 650,000 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, including the RSUs granted to our executives in 2010, historically have been time-based vesting equity awards. However, the Committee has elected to implement some performance-based vesting RSUs for all NEOs in 2011.

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 2010, with the exception of certain performance-based vesting awards granted to Mr. Herrick, 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.

 

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, total 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 depending on the achievement of Sapient’s and/or the individual’s goals. 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 of our executive time-based vesting RSU awards was approximately 138% of our CEO’s base salary and incentive target compensation, and approximately 115%, on average, of the Other NEOs’ base salaries and incentive target compensation. 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. The following table sets forth the equity awards and grant date fair market value of such awards, that we granted to our NEOs in 2010:

 

 

 

 

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 2010 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.

CEO Compensation Determination

 

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). These changes, as noted earlier, position Mr. Herrick’s base salary and target cash compensation (base salary plus target annual incentive opportunity) at a Median approximate position (11% and 13% above Median, respectively).

 

Regarding Mr. Herrick’s 2010 annual bonus target, the Committee determined, consistent with Mr. Herrick’s 2009 bonus target metric, that the bonus payment should directly correlate with our financial performance. In light of this goal, and to qualify Mr. Herrick’s 2010 annual incentive as performance-based compensation under Section 162(m), the Committee established a performance-based, non-discretionary bonus target tied to Sapient’s 2010 non-GAAP operating profit. Mr. Herrick’s 2010 annual incentive target of $776,250 (the “2010 Incentive Target”) was payable in full if Sapient achieved a non-GAAP operating profit target of approximately $105.0 million (the “2010 Profit Target”). Depending on actual profit achievement as a percentage of the 2010 Profit Target (the “Profit Achievement Percentage”), Mr. Herrick was eligible to receive an annual incentive payment equal to the result obtained by multiplying the 2010 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., $21.00 million). Based on our actual 2010 non-GAAP operating profit of $87.726 million and a Profit Achievement Percentage of 83.5%, Mr. Herrick was entitled to receive a 2010 annual incentive payment equal to $648,402.

 

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:

 

 

 

 

Accordingly, and in summary, Mr. Herrick’s total direct compensation for 2010 was as follows:

 

 

 

 

Other NEO Compensation Determinations

 

The Committee approved increases to base salaries and/or annual incentive bonus targets for the Other NEOs in 2010. As a result, the cash compensation paid, equity-based awards granted, and total direct compensation provided to these NEOs for 2010, as described more fully below, were as follows:

 

 

The following summarizes the Other NEOs’ 2010 bonus payments and LTI awards.

 

Mr. Tibbetts, SVP, Global CFO and Managing Director, AsiaPacific

 

To determine Mr. Tibbetts’ 2010 bonus payment, the Committee considered his performance against various individual goals and objectives for 2010, 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 Pool Fund Percentage for our Global Shared Services (GSS) team, of which Mr. Tibbetts is a part. Our 2010 Bonus Pool Fund Percentage for GSS was 79.7%. Accordingly, the Committee awarded Mr. Tibbetts a bonus equal to 79.7% of his 2010 bonus target, or $191,280.

 

Regarding Mr. Tibbetts’ 2010 long-term incentive award, the Committee awarded him 70,000 RSUs in recognition of his strong fiscal management and overall leadership in helping Sapient’s ongoing emergence from a challenging economic environment in 2009, and to encourage his continued strong leadership 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, SapientNitro North America Operating Segment

 

The Committee determined Mr. Wexler’s 2010 bonus based principally on his 2010 performance against profit achievement goals within North America. Specifically, our North America operating segment achieved a 108.5% profit (against a profit target of $110.8 million) and our Government Services operating segment achieved a 110.9% profit (against a profit target of $12.8 million), measured in constant currency. After applying Segment Performance Adjustments to the Bonus Pool Fund Percentage, the North America operating segment bonus was funded at 89.2% of target payout and the Government Services operating segment bonus was funded at 91.1% of target payout. Additionally, the Committee weighed Mr. Wexler’s leadership and achievements against individual objectives in determining his 2010 bonus. Taking into account the North America and Government Services operating segment bonus funding, the Payout Weighting and the Committee’s qualitative review of Mr. Wexler’s performance, the Committee awarded Mr. Wexler a 2010 bonus payment equal to 85.9% of his annual bonus target, or $252,214.

 

To determine Mr. Wexler’s long-term incentive awards for 2010, the Committee considered several factors, including his leadership in helping Sapient’s ongoing emergence from a challenging economic environment in 2009, the growth potential of the North America and Government Services operating segments, 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 among Mr. Wexler, Mr. Register 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 75,000 RSUs.

 

Dr. Oversohl, SVP, SapientNitro Europe Operating Segment

 

The Committee determined Dr. Oversohl’s 2010 bonus based principally on his 2010 performance against profit achievement goals within Europe. Specifically, our Europe operating segment achieved a 75.5% profit (against a profit target of $62.3 million) measured in constant currency. After applying Segment Performance Adjustments to the Bonus Pool Fund Percentage, the Europe operating segment bonus was funded at 62.1% of target payout. Additionally, the Committee weighed Dr. Oversohl’s leadership and achievements against individual objectives (which included leading our global delivery organization) in determining his 2010 bonus. Taking into account the Europe operating segment bonus funding, the Payout Weighting and the Committee’s qualitative review of Dr. Oversohl’s performance, the Committee awarded Dr. Oversohl a 2010 bonus payment equal to 67% of his annual bonus target, or $170,027.

 

In determining Dr. Oversohl’s long-term incentive awards for 2010, the Committee considered several factors, including his leadership in helping Sapient’s ongoing emergence from a challenging economic environment in 2009, the growth potential of the Europe operating segment, 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 among Dr. Oversohl, Mr. Wexler and Mr. Register and among other leadership team members. Taking these factors into account, and to encourage Dr. Oversohl’s continued strong performance, the Committee elected to award him 80,000 RSUs.

 

Mr. Register, SVP, Sapient Global Markets Operating Segment

 

The Committee determined Mr. Register’s 2010 bonus based principally on his 2010 performance against profit achievement goals within Global Markets. Specifically, our Global Markets operating segment achieved a 92.1% profit (against a profit target of $107.2 million) measured in constant currency. After applying Segment Performance Adjustments to the Bonus Pool Fund Percentage, the Global Markets operating segment bonus was funded at 75.7% of target payout. Additionally, the Committee weighed Mr. Register’s leadership and achievements against individual objectives in determining his 2010 bonus. Taking into account the Global Markets operating segment bonus funding, the Payout Weighting and the Committee’s qualitative review of Mr. Register’s performance, the Committee awarded Mr. Register a 2010 bonus payment equal to 76.3% of his annual bonus target, or $213,752.

In determining Mr. Register’s long-term incentive awards for 2010, the Committee considered several factors, including his leadership in helping Sapient’s ongoing emergence from a challenging economic environment in 2009, the growth potential of the Global Markets operating segment, his performance against company financial goals and individual objectives, our pay-for-performance philosophy, historical equity grants made to Mr. Register in each year since he joined Sapient, and internal pay comparisons among Mr. Register, Mr. Wexler and Dr. Oversohl and among other leadership team members. Taking these factors into account, and to encourage Mr. Register’s continued strong performance, the Committee elected to award him 75,000 RSUs.

 

Impact of Tax and Accounting on Compensation Decisions

 

In 2007, our stockholders 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). In 2010, we qualified only Mr. Herrick’s performance-based compensation for these tax benefits. However, as each of our NEOs’ aggregate compensation levels in 2010 exceeded the $1 million threshold for which it would be desirable to qualify performance-based compensation for tax benefits under Section 162(m), the Committee has opted in 2011, and 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.

 

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 our NEOs’ eligibility for an award thereunder, Sapient has reserved the right to make 2011 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.

 

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.

 

Additional Information Regarding the Compensation Program

 

Executive Clawbacks.  Although 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.

 

Stock Ownership Requirements.  While we have not adopted minimum executive 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 requirements 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.

 

James M. Benson, Chairman

Darius W. Gaskins, Jr.

Ashok Shah

 

The following table sets forth NEO compensation for the fiscal years ended December 31, 2010, 2009 and 2008.

 

 

 

 

 

The following table provides information regarding plan-based awards granted in 2010 to each of the NEOs as of December 31, 2010.