UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

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Sapient Corporation

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April 29, 2008

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 Thursday, June 5, 2008 at 9:00 a.m. local time at the Company’s new headquarters located at 131 Dartmouth Street, Boston, Massachusetts 02116.

 

This booklet describes how you may participate in our Annual Meeting, whether or not in person, and includes the Notice of Annual Meeting of Stockholders and Sapient’s 2008 Proxy Statement, which describe the formal agenda for the meeting.

 

In addition to the specific agenda items we will address 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 Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2007 are available at http://www.proxyvote.com.

 

Alan J. Herrick

President and Chief Executive Officer

 

 

SAPIENT CORPORATION
25 First Street
Cambridge, Massachusetts 02141*

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The 2008 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 Thursday, June 5, 2008, at 9:00 a.m. (local time).

 

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

 

 

 

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

 

The record date for the Annual Meeting is April 10, 2008. Only stockholders of record as of the close of business on the record date are entitled to vote at the Annual Meeting and any adjournment or postponement thereof.

 

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

 

By Order of the Board of Directors,

 

Kyle A. Bettigole

Assistant Secretary

 

Cambridge, Massachusetts

April 29, 2008

 

 

 

 

TABLE OF CONTENTS

 

SAPIENT CORPORATION
25 First Street
Cambridge, Massachusetts 02141

 

PROXY STATEMENT

 

For the Annual Meeting of Stockholders
To Be Held on June 5, 2008

 

Why did I receive these proxy materials?

 

You received this proxy statement, accompanying proxy card or voting instruction form, and our Annual Report on Form 10-K for the year ended December 31, 2007 (without exhibits) (our “Annual Report”) because the Board of Directors of Sapient Corporation is soliciting your proxy to vote at our 2008 Annual Meeting of Stockholders (the “Annual Meeting”).

 

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?

 

 

Who may vote at the Annual Meeting?

 

Only stockholders of record as of the close of business on April 10, 2008, 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, 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, bank or other nominee. For purposes of voting at the Annual Meeting, the broker, bank or other nominee holding your account is considered to be the record holder, but as a beneficial owner you have the right to direct your broker, bank or other nominee on how to vote the shares in your account.

 

If you are a beneficial owner, you are invited to attend the Annual Meeting but may not vote your shares in person unless you request and obtain a valid proxy issued in your name from your broker, bank or other nominee. To vote your shares in person at the Annual Meeting, you are required to present the following items to the Corporate Secretary before the voting begins: (a) picture identification; (b) an account statement, or a letter from the record holder, indicating that you owned the 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 that you own.

 

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 voting instruction form. Instead, please follow the instructions on your proxy card or voting 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 you need directions to the offices of the Company, please contact our Investor Relations Department at Sapient Corporation Investor Relations Department at the address listed on the Notice of Annual Meeting of Stockholders, or by email to ir@sapient.com.

 

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

 

If a properly executed proxy is submitted and no instructions are given, the proxy will be voted for the election of each of the director nominees, and for the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year. If other matters are presented at the Annual Meeting, proxies will be voted in accordance with the discretion of the proxy holders on such other matters.

 

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

 

 

What is a quorum requirement?

 

To be valid, the Annual Meeting must have a quorum of stockholders present. A quorum of stockholders will be deemed present 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 a quorum, abstentions, votes withheld from a director nominee, and broker non-votes will be counted as present. As of the close of business on the record date, 126,777,236 shares of our common stock were outstanding and entitled to vote. Thus, for a quorum to exist, 63,388,619 shares must be present or represented by proxy at our Annual Meeting.

 

A “broker non-vote” is a proxy submitted by a broker or other nominee for a matter over which the broker or other nominee does not have discretionary voting power and for which such broker or other nominee has not received instructions from the beneficial owner or other person entitled to vote the shares represented by the proxy. A broker or other nominee may vote shares for the election of directors and for the ratification of the independent registered public accounting firm without receiving instructions from the beneficial owners.

 

May I submit a proposal to be considered for a vote at next year’s Annual Meeting?

 

Our stockholders may submit a proposal to be considered for a vote at our 2009 Annual Meeting. If you wish to submit a proposal to be considered at our 2009 Annual Meeting and would like your proposal to be included in our proxy materials for that meeting, your proposal must be submitted in writing to the Secretary of the Company at our headquarters and received no later than December 30, 2008.

 

If you wish to submit a proposal to be considered at the 2009 Annual Meeting but do not want the proposal to be included in our proxy materials for that meeting, our by-laws dictate that you must provide your written request not less than 60 nor more than 90 days prior to the meeting, or no later than April 4, 2009, assuming our 2009 Annual Meeting will be held on June 4, 2009.

 

In the event that notice of the date of our 2009 Annual Meeting is provided to stockholders less than 70 days beforehand, and without prior public disclosure, your request must be received no later than the close of business on the tenth day following the date on which such notice was mailed or public disclosure was made, whichever occurs first. Proposals that do not comply with these notice provisions will not be considered at the 2009 Annual Meeting.

Important Notice Regarding the Availability of Proxy Materials for the Sapient Corporation Annual Meeting of Stockholders to be Held on June 5, 2008

 

This proxy statement and our Annual Report are available free of charge at http://www.proxyvote.com.

 

You may also find a copy of this proxy statement and our Annual Report (with exhibits) on the website of the Securities and Exchange Commission (“SEC”) 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 requests by mail to Sapient Corporation Investor Relations Department, 25 First Street, Cambridge, Massachusetts 02141; or by e-mail to ir@sapient.com. If requesting additional copies via mail, please note that, effective June 1, 2008, the Company’s new headquarters will be 131 Dartmouth Street, Boston, Massachusetts 02116.

 

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 on the matters to be decided at the Annual Meeting over the Internet. Choosing electronic delivery reduces the number of bulky documents in your mail, conserves natural resources, and reduces our printing and mailing costs. To obtain electronic delivery of future mailings, visit http://www.icsdelivery.com/sape and enter information for all of your Sapient Corporation stockholdings. Your enrollment will be effective until you cancel it by following the instructions as provided on the website. If you have questions about electronic delivery, please do not hesitate to contact our Investor Relations department by mail at the appropriate mailing address as noted above or by e-mail at ir@sapient.com.

 

Some companies, brokers, banks, and other nominee record holders participate in a practice commonly known as “householding,” where a single copy of the 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 by calling us at (617) 761-1676. If you are receiving multiple copies at your household and wish to receive only one, please notify your bank, broker, or other nominee record holder, 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 eight directors. Upon the recommendation of our Governance and Nominating Committee, the Board of Directors has nominated James M. Benson, Hermann Buerger, Darius W. Gaskins, Jr., Alan J. Herrick, J. Stuart Moore, Bruce D. Parker, Ashok Shah, and Vijay Singal for election as directors (collectively, the “director nominees”). Other than Ashok Shah and Vijay Singal, each of the director nominees is currently a director of the Company. Information about our director nominees can be found on pages 7-8 of this proxy statement.

 

If elected, each director nominee will serve as a director until our 2009 Annual Meeting, until his successor is duly elected and qualified, or until his death, resignation or removal. Jeffrey M. Cunningham, a director since September 2004 and Chairman of the Board of Directors since October 2006, and Gary S. McKissock, a director since March 2003, are not nominees for election, and their terms serving on the Board will end immediately preceding the Annual Meeting on June 5, 2008. We thank them for their service to the Company.

 

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

 

The 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 be voted “FOR” the election of each of the eight director nominees.

 

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

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT 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 year ending December 31, 2008.

 

PwC has served as our independent registered public accounting firm since 1999 and is independent with respect to the Company and its subsidiaries. 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, 2007 and 2006 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 give 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 at any time during the year, should the Audit Committee 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 ended December 31, 2008. 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. Broker non-votes will be voted “FOR” the ratification of the selection of PwC as our independent registered public accounting firm.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2008.

 

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.

 

On behalf of the Company’s 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, 2007 and management’s assessment of internal controls over financial reporting as of December 31, 2007. PwC, the Company’s independent registered public accounting firm in 2007, 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 on Form 10-K for the year ended December 31, 2007.

 

Additionally, the Committee has discussed with PwC the matters required to be discussed in accordance with Statement on Auditing Standards No. 61, Communication with Audit Committees. The Committee also has received the written disclosures and the letter from PwC required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, 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, 2007 be included in the Company’s Annual Report on Form 10-K for the year then ended.

 

The members of the Committee are not professionally engaged in the practice of accounting or auditing, however the Board of Directors has determined that the Committee’s chairperson, Hermann Buerger, is an “audit committee financial expert” within the meaning of the rules and regulations of the SEC and applicable Nasdaq listing standards. Members of the Committee rely, without independent verification, on the information provided to them and on the representations made by management and the independent registered public accounting firm. Accordingly, the Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Committee’s considerations and discussions referred to above do 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, Chairperson

Darius W. Gaskins, Jr.

Bruce D. Parker

 

Our director nominees are listed below, with their principal occupation and business experience for at least the last five years, the names of other publicly held companies of which they serve as a director, and their age and length of service as a member of our Board of Directors, as applicable.

 

 

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 direct or indirect material relationship with a company other than as a director

and/or a stockholder. 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 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 J. Stuart Moore (a current director and our former co-chief executive officer and co-founder), and each of the nominees for director are independent directors under the applicable guidelines noted above. The Board specifically reviewed a related party transaction involving James M. Benson, a director nominee, and Pearl Meyer & Partners, a company that has provided us with compensation consultancy services, and has affirmatively determined that the relationship does not interfere with Mr. Benson’s independent judgment. See “Benson Relationship to Company Consultant” on page 44 of this proxy statement for specific information with respect to this relationship.

 

Our Board of Directors has three committees: the Audit Committee, the Compensation Committee and the Governance and Nominating Committee. Each of these committees consists solely of Board members who meet the standards for independence required 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 2007, the Board of Directors held seven meetings and took action without a formal meeting by unanimous written consent five times. Each director attended at least 90% of the aggregate of the meetings of the Board and of the regular meetings of the committees on which he served. Mr. Cunningham served as Chairman of the Board. 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 2007 Annual Meeting, which was held on August 16, 2007.

 

The Audit Committee of our Board of Directors, among other things, reviews our auditing, accounting, financial reporting and internal control functions, and selects our independent registered public accounting firm. See “Report of the Audit Committee of the Board of Directors” on page 6 of this proxy statement. The Audit Committee met nine times in 2007.

 

The current members of the Audit Committee are Messrs. Buerger, Gaskins, and Parker, each of whom is an independent director within the meaning of applicable Nasdaq listing rules, SEC rules and applicable securities laws and regulations. Mr. Buerger serves as the Chairperson of the Audit Committee. Our Board of Directors has determined that Mr. Buerger is an “audit committee financial expert” within the meaning of the rules and regulations of the SEC and 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, the Chairperson of the Committee will serve as a one-person subcommittee with the discretionary authority to act on the Committee’s behalf during the periods between Committee meetings. The Committee may request reports of the actions of any subcommittee at subsequent meetings. The Audit 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 Audit Committee is required to review and approve the proposed retention of an independent registered public accounting firm to perform any proposed permissible non-audit services, as outlined in its charter. The Audit Committee has specified certain types of prohibited “non-audit” services that the Company is not authorized to obtain from PwC, as well as types of audit-related and “non-audit” services that are permitted and approved. The Audit Committee has not established policies and procedures separate from its charter concerning the pre-approval of audit and “non-audit” related services. However, for those services that are permitted and approved, the Audit Committee requires the Company to obtain additional approval from the Audit Committee prior to initiating such service by PwC where the fees payable by Sapient are anticipated to exceed $100,000 in the aggregate. All PwC services provided in 2007 were pre-approved by the Audit Committee.

 

On November 9, 2006, 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 our website, http://www.sapient.com. 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 Compensation Committee of our Board of Directors is responsible for reviewing our overall compensation policies and, with the input of the Chief Executive Officer, setting the compensation of 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 Compensation Committee meets at least three times annually, and with greater frequency if necessary. The Compensation Committee met fifteen times in 2007, and currently comprises Messrs. Cunningham, Gaskins, and McKissock, each of whom meets the criteria for independence required under Nasdaq listing rules, Internal Revenue Service rules, SEC rules and applicable securities laws and regulations. Currently, Mr. McKissock serves as the Chairperson of the Committee. Although the Committee regularly meets in executive session, from time to time it invites various members of management, other employees and outside advisors or consultants to join the 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 Compensation Committee may form and delegate authority to subcommittees consisting of one or more members of the Committee, as appropriate. Unless specifically determined otherwise by the Committee, the Chairperson of the Committee will serve as a one-person subcommittee with the discretionary authority to act on the Committee’s behalf during the periods between Committee meetings. The Committee may request reports of the actions of any subcommittee at subsequent meetings. The Compensation 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.”

 

More detailed information related to our compensation philosophies and goals, as well as the Compensation Committee’s specific determinations with respect to executive compensation, may be found under “Compensation Discussion and Analysis,” beginning on page 18 of this proxy statement.

 

The Governance and Nominating Committee is, among other things, responsible for identifying and evaluating potential candidates for our Board of Directors and making recommendations regarding such

candidates to our Board of Directors. The Committee also provides counsel to our Board of Directors regarding principles and practices applicable to governance of the Company, and may engage search firms or other third parties to assist in the identification or evaluation of potential director nominees.

 

The current members of the Governance and Nominating Committee, which met twice in 2007, are Messrs. Buerger, Cunningham, and Gaskins, each of whom meets the criterion for independence required under applicable Nasdaq listing rules, SEC rules, and applicable securities laws and regulations. Mr. Gaskins serves as the Chairperson of the Committee.

 

Under its charter, the Governance and Nominating Committee may form and delegate authority to subcommittees consisting of one or more members of the Committee, as appropriate. Unless specifically determined otherwise by the Committee, the Chairperson of the Committee will serve as a one-person subcommittee with the discretionary authority to act on the Committee’s behalf during the periods between Committee meetings. The Committee may request reports of the actions of any subcommittee at subsequent meetings. The Governance and Nominating 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 will consider and evaluate director candidates as recommended by eligible stockholders. Candidates nominated by eligible stockholders will be considered and evaluated on the same basis as candidates recommended by other sources. In evaluating all candidates for director, the Committee strives to develop a Board and committees of the Board 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.

 

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 a one-year period 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 Governance and Nominating Committee will be required to consider and evaluate under this policy with respect to 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 Governance and Nominating 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 referenced above.

 

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 2009 Annual Meeting, nominations must be received not less than 60 nor more than 90 days prior to the meeting, or no later than April 4, 2009, assuming our 2009 Annual Meeting will be held on June 4, 2009.

 

In the event that notice of the date of our 2009 Annual Meeting is provided to our stockholders less than 70 days before the meeting and without prior public disclosure, we must receive your request no later than the close of business on the tenth day following the date on which such notice or public disclosure was made, whichever occurs first.

Each nomination by a Nominating Stockholder 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 stockholders may submit correspondence to our Board of Directors. 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 Investor portion of our website, http://www.sapient.com, under “Corporate Governance.”

 

The following table sets forth in summary form information concerning the compensation that we paid during the year ended December 31, 2007 to each of our non-employee directors other than J. Stuart Moore.

 

 

 

 

 

 

 

 

As of August 17, 2007, 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:

 

 

From January 1, 2007 through August 16, 2007, we paid each of our non-employee directors an annual retainer of $15,000 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 the revised Board compensation plan approved by our directors effective as of August 17, 2007, each of our non-employee directors is granted the following equity grants in connection with his service on the Board:

 

 

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

 

 

 

Except as outlined above, our directors receive no other compensation for serving as directors.

 

The vesting of certain equity (stock options and RSUs) granted to our directors is affected by a “change in control” of Sapient. Under the terms of the applicable stock option agreement for each of the option grants, the vesting of shares under these stock option grants will be accelerated by 12 months in the event of a change in control of the Company. Under the terms of the applicable RSU agreements for each of the RSU grants, the RSUs will become vested immediately upon a change in control of the Company. The following table summarizes the director stock options and RSUs subject to such change in control provisions:

 

 

The following table sets forth information as of April 10, 2008 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 9, 2008 (60 days from April 10, 2008) 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 126,777,236 shares of common stock outstanding as of April 10, 2008.

 

 

 

 

 

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 2007, except as set forth below.

 

Administrative oversights caused the late filing of (i) a Statement of Changes of Beneficial Ownership of Securities (Form 4) for each of Preston B. Bradford, Darius W. Gaskins, Alan J. Herrick, and Bruce D. Parker, relating to amendment of outstanding options held by these reporting persons that resulted in the deemed cancellation of the “old” options and grant of replacement options, and (ii) an Annual Statement of Beneficial Ownership of Securities (Form 5) for J. Stuart Moore associated with a charitable contribution of 2,990 shares made by Mr. Moore on December 31, 2007.

 

The following table summarizes, as of December 31, 2007, the number of options and awards issued under our equity compensation plans and the number of awards available for future issuance under these plans.

 

 

 

 

Compensation Objectives and Strategy

 

The primary purpose of Sapient’s executive compensation programs (“Executive Programs”) is to establish a meaningful reward system within an appropriate cost structure that aligns executive compensation with the interests of our shareholders. The objectives and strategy of our Executive Programs are as follows:

 

 

 

 

 

Role of the Compensation Committee

 

The Compensation Committee of our Board of Directors approves and oversees the framework for our Executive Programs, including the elements and amounts of compensation for our executive officers. The Committee consists of three non-employee directors of Sapient, each of whom is an independent director under the Nasdaq listing requirements. The Committee met fifteen times in 2007 and typically convenes two meetings each year to approve executive compensation. In the first quarter of each year, the Committee meets to approve our senior leadership team’s annual bonus payments for the prior year. In the third quarter of each year, the Committee meets to approve that year’s base salary changes, annual bonus targets, and equity awards for our senior leadership team except our Chief Executive Officer (“CEO”), Alan J. Herrick, whose compensation package the Committee determines in the first quarter of each year. The Committee also meets at other times, as warranted, to approve compensation adjustments for our executives. For example, the Committee met twice in March 2007 to review and approve the principal terms of Mr. Herrick’s compensation package.

 

The Committee’s Charter, which our Board of Directors has approved, describes the Committee’s functions in greater detail, and is available via our website at http://www.sapient.com.

 

Compensation Inputs Used for Compensation Committee Decision-Making

 

To determine our executive officers’ compensation packages and ensure that compensation decisions for each officer are consistent with and promote our compensation objectives and strategy, the Committee relies upon multiple inputs, as follows:

 

 

A. Competitive Assessments

 

The Committee uses competitive assessments to acquire an understanding of executive pay programs, pay levels and mix among similarly situated companies and assess the overall market competitiveness of our Executive Programs. In 2006 and throughout 2007, we retained Pearl Meyer & Partners, an independent compensation firm (the “Management Advisor”) to perform a competitive assessment of base salaries, actual total cash compensation, target total cash compensation, long-term incentives and actual total direct compensation within our Executive Programs. Additionally, in the fourth quarter of 2006 and throughout 2007, the Committee engaged Exequity, LLP, an independent compensation advisor (the “Committee Advisor”), to advise it concerning proposed compensation packages for Mr. Herrick and Joseph S. Tibbetts, Jr., our Chief Financial Officer. We summarize further below our use of competitive assessments to assist the Committee in developing our executives’ 2007 compensation packages.

B. Market Definition/Approach and Methodology

 

To assess the market competitiveness of our Executive Programs, we first determined the competitive market against which to compare Sapient and industry peer executive compensation.

 

With respect to Mr. Herrick’s compensation package, the Committee defined the competitive market based on a review of chief executive officer pay at 10 peer companies (the “CEO Peer Group”), which were selected for benchmarking because they compete with Sapient for the same executive talent pool: Accenture Ltd.; Perot Systems Corporation; Cognizant Technology Solutions Corporation; Monster Worldwide, Inc.; CIBER, Inc.; Keane, Inc.; Parametric Technology Corporation; Digitas; aQuantive, Inc.; and Diamond Management and Technology Consultants, Inc. Although the median revenues of the CEO Peer Group were significantly larger than Sapient’s revenue, the Committee Advisor regressed the pay level data to Sapient’s size to enable a meaningful company-to-company comparison. In addition to compiling CEO Peer Group data to determine the competitive market, the Committee Advisor reviewed CEO pay generally for professional service companies. This information enabled the Committee to benchmark Mr. Herrick’s proposed compensation relative to CEO compensation within the CEO Peer Group firms and determine, based on the Committee’s executive compensation objectives and strategy and considerations of Mr. Herrick’s performance, an appropriate pay package relative to his industry peers.

 

For Mr. Tibbetts’ compensation package, the Committee Advisor provided our Board of Directors general advice and direction concerning market compensation rates for chief financial officers in companies within Sapient’s industry that have comparable financial performance. As described further on page 23, however, the Committee did not perform detailed benchmarking in developing Mr. Tibbetts’ compensation package.

 

Regarding the compensation packages for our Named Executive Officers and senior level executives other than Messrs. Herrick and Tibbetts, the Committee defined the competitive market as follows:

 

 

 

In addition to using competitive assessments and peer benchmarking, the Committee heavily weighs individual performance against established and agreed upon objectives in setting executive compensation. The Committee’s key considerations regarding executive performance include the following:

 

 

In determining our executives’ compensation packages, and awarding annual or long-term incentives, we do not weigh a specific performance area more heavily than another, but rather assess the totality of the individual’s performance against all performance areas to determine that individual’s compensation.

 

 

The Committee reviews each executive’s compensation history, including historical equity awards and salary progression, to inform its current year compensation decisions. In considering compensation changes for our executives in 2007, the Committee reviewed executive base salaries in the prior two years, the number and “in the money” value of equity awards in the prior 10 years (or fewer years for those executives who have worked at Sapient fewer than 10 years), and actual and target bonuses in the prior year. Through this information, the Committee observes trends in our compensation approaches for each executive (for example, an executive’s compensation history may reflect that he has not received a base salary increase for several years) and, based on these observations and the other considerations described in this Compensation Discussion and Analysis, may approve compensation adjustments for the executives.

 

 

While we rely on survey data and comparative analysis through peer group benchmarking to compare compensation levels and assess the market competitiveness of our Executive Programs, we believe that internal pay equity among our executives is equally critical to ensuring fairness in our Executive Programs. 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. In particular, the Committee developed Mr. Herrick’s compensation package, in part, by considering internal parity between Mr. Herrick and Mr. Tibbetts (Mr. Tibbetts’ package was established prior to the Committee finalizing Mr. Herrick’s package). Additionally, in determining the compensation packages for Alan M. Wexler, Senior Vice President, North America, and Dr. Christian Oversohl, Senior Vice President, Europe, the Committee considered each executive’s pay element relative to the other executive’s corresponding pay element, given the similar roles and responsibilities of these two executives, as well as their pay levels relative to the business executives who report to them.

Management and Outside Advisor Participation in Compensation Package Determinations

 

In addition to foregoing considerations, the Committee’s decisions and decision-making processes concerning executive compensation are informed by consultation with Mr. Herrick, who provides detailed input regarding our executives’ job performance (other than his own performance), including accomplishments, strengths and areas for personal development. Mr. Herrick’s reviews of our executives’ performance derive, in part, from a review of the results of our company-wide, twice per year, employee review process, in which our executives and other employees are evaluated, and receive a numerical performance score, based on their value, productivity and contributions to Sapient. Additionally, the executives are assessed for their promotion and contributions to the achievement of our Strategic Context.

 

Mr. Herrick and our Vice President — People Success (who oversees our human resources functions) typically attend Committee meetings in which the Committee reviews the performance of the Company and individual executives (other than themselves) and approves executive compensation. The Committee weighs Mr. Herrick’s recommendations regarding pay issues applicable to other executives and members of senior management who compose our company-wide leadership team. Other members of management and certain other Board members may also participate in the executive compensation review and approval process on an as-requested basis. Nonetheless, the Committee retains ultimate decision-making authority over the compensation decisions for these individuals, and only the Committee members (and no members of management) may approve executive compensation.

 

In the fourth quarter of 2006 and throughout 2007, the Committee Advisor advised the Committee on proposed compensation packages for Mr. Tibbetts and Mr. Herrick. The Committee Advisor counsels the Committee only on issues associated with executive and Board pay, and has no other financial or business relationship with the Company. The Committee Advisor is hired by, and performs all work directly for, the Committee. The Committee authorizes all projects and associated consulting fees in connection with the Committee Advisor’s work for the Committee. In addition to its services concerning compensation packages for Messrs. Herrick and Tibbetts, the Committee Advisor also assisted the Committee review Board pay and other general compensation issues in 2007.

 

To evaluate and develop proposed 2007 compensation packages for our Named Executive Officers and other senior leadership team members except Messrs. Herrick and Tibbetts, in 2006 throughout 2007 management retained the Management Advisor to assess the competitiveness of our Executive Programs across base salary, actual total cash compensation, target total cash compensation, long-term incentives and actual total direct compensation.

 

Compensation and Benefits Structure

 

Our compensation and benefits structure comprises three key elements:

 

 

Pay Level

 

The Committee determines executive pay levels based on several factors, including an individual’s experience and role, responsibilities and performance at Sapient, and comparative pay levels for peers within Sapient and in similar job functions in the marketplace.

 

In connection with its review of Mr. Herrick’s compensation, the Committee Advisor confirmed that the package that the Committee negotiated with Mr. Herrick was comparable to the CEO Peer Group (as regressed to match Sapient’s size) for both pay levels and mix.

 

Further, the Committee assessed Mr. Herrick’s proposed compensation package in terms of internal parity with Mr. Tibbetts’ compensation package. To this end, the Committee Advisor reviewed market data concerning pay levels between CEO and CFO roles within the same company, to confirm that Messrs. Herrick and Tibbetts’ compensation packages would result in pay parity. The Committee Advisor’s assessment revealed that Messrs. Herrick and Tibbett’s compensation packages represented a typical pay correlation between the CEO and the CFO roles, when evaluated against the CEO Peer Group.

 

Finally, the Committee Advisor assessed Mr. Herrick’s proposed compensation package for general conformity with market norms for pay mix, and confirmed that Mr. Herrick’s proposed pay mix was generally consistent with such norms.

 

Ultimately, Mr. Herrick’s compensation package was targeted at — and resulted in — the following levels of competitive pay when assessed against the CEO Peer Group:

 

 

Overall, the total value of Mr. Herrick’s 2007 compensation package approximated the 50^th percentile of total packages among the CEO Peer Group (regressed to Sapient’s revenue size).

 

 

Mr. Tibbetts’ pay levels were established in October 2006, in connection with the employment agreement that he signed upon joining Sapient (see page 41 for a summary of Mr. Tibbetts’ employment agreement). The pay levels, and Mr. Tibbetts’ overall compensation package, resulted from a negotiation process between Mr. Tibbetts and our Board of Directors. To ensure overall market reasonableness of Mr. Tibbetts’ compensation package, our Board of Directors consulted the Committee Advisor. The Committee Advisor provided general advice and direction to the Board concerning market compensation rates for chief financial officers in companies within our industry that have comparable financial performance. Based on the Committee Advisor’s guidance, the Board determined that Mr. Tibbetts’ proposed compensation package was consistent with our overall compensation philosophy and pay objectives and, accordingly, approved it.

 

In 2007, no changes were made to Mr. Tibbetts’ base salary or annual bonus target, and Mr. Tibbetts did not receive any long-term incentives additional to those already provided for in his employment agreement. Mr. Tibbetts’ compensation package remained unchanged in 2007, principally because his initial package was finalized in late 2006 and our Board of Advisors expected that the pay levels set forth in the initial package should continue in effect through year-end 2007.

 

 

In assessing competitive compensation levels, we considered our overall financial performance relative to the Industry Peer Group for the trailing twelve months and three-year period including and preceding March 31, 2007, and then compared our compensation levels to the Industry Peer Group. Our rationale for this comparison was to determine whether our executive compensation levels, relative to the Industry Peer Group, were disproportionately greater or less than our financial performance relative to the Industry Peer Group. The comparison revealed that our financial performance was at the 55th percentile and ranked 5th on a one-year

basis, and at the 65th percentile and 4th on a three-year aggregate basis, respectively, for revenue growth, EBITDA as a percentage of revenue, and total shareholder return.

 

We then analyzed our average executive compensation in effect for 2006 and the first half of 2007, relative to the Industry Composite, and determined that our executive compensation levels rank as follows:

 

 

 

 

Factoring in our financial performance relative to the Industry Peer Group firms, individual roles and the corresponding benchmark positions for those roles, and our compensation objectives and strategy, the Management Advisor then prepared compensation recommendations for our entire senior leadership team (except Messrs. Herrick and Tibbetts).

 

 

With respect to Mr. Wexler, the Management Advisor benchmarked his position by comparing it to a (a) top division executive, within the Survey Group, and (b) division president, within the Industry Peer group. Based on this benchmarking, our CEO recommended a compensation package for Mr. Wexler, which the Committee reviewed in July 2007.

 

In connection with reviewing the CEO’s recommendation, the Committee considered Mr. Wexler’s salary progression, noting that when Mr. Wexler assumed his current position in October 2006, he had received a 25% base pay increase. Further, the Committee considered Mr. Wexler’s experience, role, responsibilities and individual performance, and the performance of our North American business. Additionally, the Committee considered internal parity between Mr. Wexler and (a) Dr. Oversohl, given Dr. Oversohl’s similar position and responsibilities with respect to our European business, and (b) the business executives who report to Messrs. Wexler and Oversohl. Finally, the Committee considered Mr. Wexler’s pay mix in light of our pay mix philosophy, described below, including the fact that Mr. Wexler’s then-current salary level placed him above our targeted market range for base salary (i.e., at or below Median). Taking these factors and our overall

compensation objectives and strategy into account, the Committee approved the following pay elements for Mr. Wexler:

 

 

 

 

 

Regarding pay level setting for Dr. Oversohl, we compared his position to a top (a) international division executive, within the Survey Group, and (b) European executive within the Industry Peer Group, which indicated that relative to the Industry Composite, Dr. Oversohl’s base salary (prior to adjustment in July 2007) was in the 30^th percentile and Total Cash was in the 25^th percentile. Based on this benchmarking, our CEO recommended a 2007 compensation package for Dr. Oversohl, which the Committee reviewed in October 2007.

 

In connection with reviewing the CEO’s recommendation, the Committee reviewed Dr. Oversohl’s salary progression, noting that his base salary had not changed for seven years. The Committee also considered Dr. Oversohl’s experience, role, responsibilities and individual performance, and the performance of our European business. Additionally, the Committee considered internal parity between Dr. Oversohl and (a) Mr. Wexler, and (b) our business executives who report to Dr. Oversohl and Mr. Wexler. Further, the Committee considered the competitive market for an executive with Dr. Oversohl’s background and skills, and compensation levels intended to encourage his long-term retention. Taking these factors and our overall compensation objectives and strategy into account, the Committee approved a compensation package for Dr. Oversohl that ultimately resulted in compensation elements that exceeded somewhat our target

compensation ranges and pay mix goals (the below amounts are converted from Euros to USD, based on an exchange rate of 1 Euro =1.33866 USD as of June 21, 2007):

 

 

 

 

 

Our Chief Operations and Administrative Officer (“COAO”), Preston B. Bradford, maintains responsibility for process reengineering and improvement initiatives concerning our core internal financial operations. As Mr. Bradford’s position is a niche position and unlike that of a typical chief operating officer, the Management Advisor was unable to specifically benchmark Mr. Bradford’s position with peer groups, or rely on the Industry Peer Group or Survey Group data in recommending a 2007 compensation package for him. However, we compared Mr. Bradford’s then-current Total Cash compensation to market Total Cash compensation for second level finance executives and top administrative executives at the 50^th percentile. Based on this comparison, the Management Advisor determined that Mr. Bradford’s Total Cash was at or above Median. Accordingly, and per management’s recommendation, the Committee determined that Mr. Bradford’s Total Cash compensation for 2007 should remain unchanged from his 2006 Total Cash compensation. With respect to Mr. Bradford’s LTI compensation, Mr. Herrick recommended that the Committee approve a grant of 20,000 restricted stock units (“RSUs”) based on Mr. Bradford’s performance against his individual objectives, considerations of internal pay equity among members of our senior leadership team, and LTI competitive analysis that the Management Advisor prepared.

 

Pay Mix

 

Consistent with our stated compensation philosophy to tie total compensation closely to — and make it heavily dependent upon — achievement of Company and individual performance, we emphasize “variable” compensation (i.e., bonus and equity-based awards) over “fixed” compensation (i.e., base salary). Accordingly, relative to an assessment of competitive market practices, and as noted above, the Committee aims to establish executive base salaries equal to or as much as 15% below Median, with Total Cash compensation targeted at Median, and total executive compensation (inclusive of equity-based incentive compensation) targeted above 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 and other factors. As a result of our emphasis on performance-based pay, 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 operating goals and individual performance achievement.

The Committee believes strongly in the importance of assessing each pay element in relation to the other pay elements that the Executive Programs comprise. To determine optimal pay mix, the Committee reviews executive salary progression, historic equity grants, target and actual bonus levels by year, experience levels, job responsibilities and contributions to the organization, and general market information. The Committee also believes that our combination of programs and plans provides an appropriate mix of fixed and variable pay, balances short-term operational performance with long-term shareholder value, and promotes executive recruitment and retention, allowing us to attract and retain highly qualified executives.

 

In light of the foregoing, we aim to make the variable portion of executive pay a larger proportion of our executives’ total compensation, relative to industry norms. In connection with its competitive assessment work, the Management Advisor provided management the following median compensation mix statistics for the Industry Composite group, to provide management insight into how our executive compensation mix compares with market compensation mix:

 

 

By comparison, we established the following compensation mix for our Named Executive Officers’ compensation packages:

 

 

Pay-for-Performance

 

As noted, we use multiple vehicles to create a strong link between pay and performance. Our annual cash bonus program rewards participants for their achievement of short-term, operational goals (through generating revenue, improving profitability and/or creating efficiencies and cost savings for Sapient) as well as their promotion and contributions to the achievement of our Strategic Context. We use the annual bonus plan as a means to focus our people on the achievement of annual performance goals.

 

Additionally, we offer equity in the form of RSUs to reward participants for their annual contributions, and encourage their long-term commitment, to Sapient. 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 Median. While, with the exception of the performance-based vesting RSUs that we granted to Mr. Tibbetts in connection with him joining Sapient in October 2006, our RSU awards are time-based vesting equity awards, we deem RSUs to be a form of “performance-based” compensation in that the actual number of RSUs granted to any participant can vary greatly depending on the individual’s performance, and the value of the underlying shares is tied to company performance.

The Committee maintains discretion to make adjustments (upward or downward) to an executive’s incentive compensation if Sapient’s and/or individual goals are not achieved.

 

Principal Components of Executive Programs

 

Our Executive Programs principally comprise the following pay elements:

 

 

Base Salaries

 

As noted above, our compensation philosophy emphasizes the aspects of compensation that are performance-dependent. Accordingly, the Committee targets executive base salaries at or as much as 15% below Median, and places greater emphasis on variable compensation in the form of bonus and equity-based awards. However, pay levels and opportunities for specific individuals and/or job functions may vary from these targets, based on market demand for particular talent and other factors.

 

Adjustments to our executives’ base pay levels are determined annually 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.

2007 Base Salaries Determination

 

Our employment agreements with each of our CEO, CFO and European business lead provided for each executive’s base salary in 2007. As noted above, the Compensation Committee determined Mr. Herrick’s 2007 base salary with the assistance of the Committee Advisor, and based on a consideration of CEO pay within the CEO Peer Group companies, internal parity between Mr. Herrick and Mr. Tibbetts, and desired pay mix. Mr. Tibbetts’ 2007 base salary, which was established per his employment agreement when he joined Sapient in October 2006, did not change in 2007 for the reasons stated above. Dr. Oversohl’s 2007 base salary, as described above, resulted from a review of his salary progression (his salary had not changed for seven years), experience, role, responsibilities and individual performance, the performance of our European business, and internal parity between Dr. Oversohl and (a) Mr. Wexler, and (b) our business executives who report to Dr. Oversohl and Mr. Wexler.

 

Regarding Mr. Wexler, no changes were made to his 2007 base salary. In light of the fact that Mr. Wexler had received a 25% base salary increase in October 2006 and that, at the new rate, Mr. Wexler’s base salary was at the 55th percentile as compared to the Industry Composite, the Committee determined that a further increase was not warranted. Additionally, Mr. Bradford’s 2007 base salary remained unchanged from 2006.

 

Annual Cash Bonus/Incentive Program

 

As noted, our annual incentive payments are designed to reward individual performance and our achievement of our short-term operating objectives. Our executives are eligible to receive annual bonuses, paid in cash or equity, under our Global Performance Bonus Plan, as well as our 1998 Stock Incentive Plan (“1998 Plan”). In 2007, our shareholders approved an amendment to the 1998 Plan to enable cash and equity awards granted under the plan to qualify for tax benefits available under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Currently, Mr. Herrick’s bonus is paid pursuant to our 1998 Plan (to qualify his performance-based compensation for the tax benefits available under Section 162(m)), and our other Named Executive Officers’ bonuses are paid pursuant to our Global Performance Bonus Plan. Per the 1998 Plan, and with respect to 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.

 

Consistent with our pay level strategy, we set annual incentive levels for our executives at an amount intended to generate target Total Cash compensation that is at Median. Annual target incentives for our executives range from 30% to 90% of the executives’ base salaries. In March 2008, we paid annual bonuses for our Named Executive Officers’ 2007 performance in the amounts indicted on page 35.

 

Except with respect to our CEO’s annual incentive payment, payments under our annual incentive plans do not qualify as “performance-based” compensation under Section 162(m). With respect to Mr. Herrick, in March 2007 the Committee approved an annual incentive target, described more fully below, that qualified as performance-based compensation for purposes of Section 162(m). The Committee will, in the future, consider establishing annual compensation targets for our other executives that qualify as performance-based compensation under Section 162(m), but may continue to make payments that do not comply with this statute to the extent it deems necessary and/or advisable.

 

2007 Annual Incentive Determination

 

1. Chief Executive Officer Annual Incentive Determination

 

At the time of Mr. Herrick’s appointment to the CEO role in October 2006, we were undergoing significant changes relating to our company leadership structure, as well as a review of our historical stock-based compensation granting practices that ultimately culminated in our restatement of certain prior-years’ financial statements. As a result of these circumstances, the Committee believed that achieving stability in our operating profit was a critical goal for 2007. Accordingly, the Committee determined that Mr. Herrick’s 2007 annual incentive payment should directly correlate with our operating profit.

In light of this goal, and to qualify Mr. Herrick’s 2007 annual incentive as performance-based compensation under Section 162(m), the Committee established a performance-based, non-discretionary bonus target tied to Sapient’s 2007 operating profit (we define “operating profit” as income from our operations, as reported in our publicly filed financial statements on Form 10-K, adjusted to add back certain expenses identified as “Non-GAAP” in our earnings release financial statements or other public disclosures). Mr. Herrick’s 2007 annual incentive target was $425,000 (the “2007 Incentive Target”), payable in full if Sapient achieved an operating profit target of $56.2 million (the “2007 Profit Target”). Depending on actual profit achievement as a percentage of the 2007 Profit Target (the “Profit Achievement Percentage”), Mr. Herrick was eligible to receive an annual incentive payment equal to the result obtained by multiplying the Incentive Target by the Profit Achievement Percentage. Although, per the foregoing calculation, Mr. Herrick’s potential annual incentive payment had no upper limit, he was ineligible to receive any incentive payment if the Profit Achievement Percentage was less than 40%. Based on our actual 2007 operating profit of $46.4 million and a Profit Achievement Percentage of 82.53%, Mr. Herrick received a 2007 annual incentive payment equal to 82.53% of his 2007 Incentive Target, or $350,753.

 

2. Other Named Executive Officers Annual Incentive Determination

 

In 2007, the Committee determined our executives’ annual incentives based upon several considerations. The annual incentives for Messrs. Tibbetts and Bradford were based principally on Sapient’s 2007 performance against company-wide revenue and profit growth goals, while the annual incentives for Messrs. Wexler and Oversohl were based principally on each executive’s 2007 performance against revenue and profit growth goals within North America (with respect to Mr. Wexler) and Europe (with respect to Dr. Oversohl). Additionally, the Committee determined annual incentives for the Named Executive Officers (other than Mr. Herrick) based on their achievement of company-wide goals, among others, pertaining to people retention and morale, and their performance as company leaders and contributions to our senior leadership team. Further, the Committee evaluated each executive’s promotion of and contribution to the achievement of our Strategic Context. Finally, the Committee assessed our executives’ performance against various individually established goals and objectives for 2007. Unlike the non-discretionary, objective, performance-based metrics for Mr. Herrick’s annual incentive, many of the metrics used to assess our other executives’ performance are qualitative and required the Committee to exercise significant discretion in assessing proposed payments. As a result, actual incentive payments for our Named Executive Officers other than Mr. Herrick ranged between 73% and 100% of the executives’ annual incentive targets.

 

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. Under three of our shareholder approved long-term incentive plans, the Committee may grant a variety of long-term incentive vehicles to our executives, including stock options, stock appreciation rights, RSUs and performance shares or units, settled in cash or stock. In 2007, the Committee approved RSUs only as the type of equity-based awards granted to our executives and other employees, and this practice continues to date. We grant RSUs only for long-term incentive compensation because we believe they serve as a valuable incentive to attract, retain and promote high performance by company leaders, and simultaneously enable us to administer our equity-based incentive programs in an efficient, simple and cost effective manner. However, consistent with its authority under our long-term incentive plans, the Committee may opt to grant other types of equity-based awards in the future.

 

Our current executive long-term incentive granting framework involves developing RSU grant ranges for our leadership group and, within those ranges, allocating awards to our executives based on their performance during the prior year, cash compensation, amount of equity needed to achieve our pay mix and market targeting goals, and historical equity holdings. The Committee believes this method not only ensures that each executive receives appropriate awards, but also that the awards are equitable as compared to the executive’s colleagues on our senior leadership team.

 

As noted above, while we believe that both retention and long-term performance are important objectives for the long-term incentive program, we also believe that the “at risk” component of the long-term incentive

program should be higher for our executives in more senior roles. Therefore, the ratio of RSUs to cash varies by level of participant, with our more senior executives receiving a higher percentage of their total long-term award value in the form of RSUs.

 

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 award for each executive at a scheduled meeting, usually held in July. In 2007, we granted time-based RSU awards to our executive officers, as described more fully below.

 

2007 Long-Term Incentive Determinations

 

1. CEO Long-Term Incentive Determination

 

Regarding the long-term incentives provided to Mr. Herrick, the Committee Advisor reviewed CEO Peer Group data to determine Median long-term incentive awards for chief executive officers. Then, consistent with our pay-for-performance philosophy and desire to put more of Mr. Herrick’s compensation at risk to promote retention and high performance, the Committee Advisor proposed long-term incentives for Mr. Herrick above the CEO Peer Group Median — while simultaneously, as noted, proposing base salary below the CEO Peer Group Median. Taking into account Mr. Herrick’s strong performance in the CEO role to date, as well as internal parity with the long-term incentives provided to Mr. Tibbetts, the Committee approved a grant of 150,000 time-based RSUs per year over three years (450,000 RSUs in the aggregate), of which the first two 150,000 RSU grants occurred in February 2007 and 2008, respectively, and the third 150,000 RSU grant will occur in February 2009. Each RSU grant vests 331/3 percent annually on January 1 of each of the first three years following the year in which the grant was or will be made.

 

2. CFO Long-Term Incentive Determination

 

Mr. Tibbetts’ long-term incentive awards were provided for in his employment agreement when he joined Sapient in October 2006. As with the other components of Mr. Tibbetts’ compensation, Mr. Tibbetts’ equity component resulted from a negotiation between Mr. Tibbetts and our Board of Directors. With the assistance of the Committee Advisor, our Board determined that Mr. Tibbetts’ proposed long-term incentive award was consistent with our overall pay objectives and market norms. To tie Mr. Tibbetts’ compensation to company performance, however, the Board determined that a significant portion of Mr. Tibbetts’ total equity incentives should be performance-based awards, which vest if our stock achieves the levels described below. As a result, Mr. Tibbetts received a combination of time-based and performance-based RSU awards. The time-based RSU awards consist of three grants of 75,000 RSUs each (225,000 RSUs in the aggregate). Mr. Tibbetts received the first 75,000 RSU grant on November 1, 2006; the second grant occurred on November 1, 2007; and the third grant will occur on November 1, 2008. Mr. Tibbetts’ performance-based award consisted of 400,000 RSUs. The performance-based RSUs vest in increments of 100,000 units when/if the average 30-day closing price of our stock equals or exceeds each of the following targets: $5.00; $10.00; $15.00; and $20.00. Any performance-based units that have not vested as of the fourth anniversary of the RSU grant date will be forfeited. In December 2006, the first 100,000 share increment of Mr. Tibbetts’ performance-based RSU award vested; the remaining 300,000 performance-based RSUs have not yet vested. In 2007, the Committee did not award Mr. Tibbetts any equity additional to the awards described in his employment agreement.

 

3. Other Named Executive Officers Long-Term Incentive Determination

 

In determining Messrs. Wexler and Oversohl’s long-term incentive awards for 2007, the Committee considered several factors, including each executive’s performance against company financial goals and individual objectives, our pay-for-performance philosophy, market comparisons to the Industry Peer Group and Survey Group, historical equity grants made to executives in each year since they joined Sapient, and pay parity between Mr. Wexler and Dr. Oversohl, and between Messrs. Wexler and Oversohl and our other leadership team members. Accordingly, in July 2007 the Committee awarded Mr. Wexler 50,000 time-based RSUs and Dr. Oversohl 40,000 time-based RSUs.

 

Finally, the Committee determined Mr. Bradford’s 2007 RSU award, which consisted of 20,000 time-based RSUs, based on a review of Mr. Bradford’s performance and achievement of individual objectives,

historical equity grants made to Mr. Bradford in the prior 10 years, pay parity within our senior leadership team, and our pay-for-performance philosophy.

 

Benefits and Perquisites

 

As employees of the Company, our executives are eligible to participate in all Company-sponsored benefits programs on the same basis as other full-time employees. These include the Company’s health and welfare benefits (e.g., medical/dental plans, disability plans, life insurance) and 401(k) Plan (or its equivalent for management team members located outside of the United States). We believe our benefit plans assist Sapient in its mission to attract and retain high quality employees.

 

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 2007 the value of these perquisites for each executive did not exceed $10,000. Except as noted below with respect to 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. The Committee’s decision not to offer supplemental benefits or perquisites to our executives is 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.

 

Dr. Oversohl receives the following supplemental benefits: (1) a company premium contribution in the amount of 20,000 Euros per year into a retirement support fund for the benefit of Dr. Oversohl which is a legally independent fund and thus not subject to the control of Germany’s Insurance Supervisory Authority (BaFin) (the “Support Fund”); and (2) in lieu of receiving a company car, a monthly payment in the amount of 1,200 Euros per month, retroactive to July 1, 2007. In considering these benefits for Mr. Oversohl, our management engaged two international benefits consulting firms: Sentinel Benefits Group, Inc. and Towers Perrin (together, the “International Consultants”). The International Consultants advised that German employers commonly make payments into retirement support funds for the benefit of their employees, particularly executives/managing directors, and that the executive payments typically are at an amount equal to 10% of an executive’s base salary. Additionally, the International Consultants advised that German executives/managing directors routinely receive an automobile allowance in the range of 1,200 to 1,800 Euros per month. In light of these benefits norms within Germany, Dr. Oversohl’s senior executive position within Sapient, and our desire to provide Dr. Oversohl industry-standard benefits intended to promote his retention and continued commitment to Sapient, the Committee deemed it appropriate to make payments into a Support Fund for Dr. Oversohl in an amount equal to 8% of his base salary and pay an automobile allowance at the low end of the standard range for that benefit.

 

Employment Contracts

 

The Company maintains employment agreements with Messrs. Herrick, Tibbetts, Wexler and Oversohl. These agreements contain severance arrangements and other benefits to the executives. Further, Messrs. Herrick and Tibbetts’ employment agreements contain provisions that provide each executive certain financial benefits in the case of a change in control of Sapient. The employment contracts and change in control provisions for the foregoing officers, as well as an estimate of the termination or change in control amounts that would be payable to the executives if such payments were triggered at year-end 2007, are summarized on pages 42 and 43. Additionally, all of our executives have agreed to covenants that protect Sapient against the executives joining a competitor, and/or soliciting Sapient clients and employees.

 

While, historically, we have not entered into executive employment agreements, in limited circumstances we have negotiated employment agreements with our senior executives and other company leaders. Consistent with market practice, we implemented employment agreements with Messrs. Herrick and Tibbetts to provide them post-termination benefits that are consistent with our overall pay objectives and typical market practice. These benefits are intended to enable each executive to focus on his present responsibilities and be fully committed to Sapient for the duration of his employment. Further, with respect to Messrs. Herrick and Tibbetts’ change in control arrangements, we believe these arrangements are important not only for the

foregoing reasons, but also because we believe that the interests of our stockholders will best be served if our senior-most leaders’ interests are aligned with them. Providing change in control benefits helps ensure the objectivity of executives in reviewing potential change-in-control transactions and contributes to an overall pay program that is consistent with typical pay practices in this regard.

 

We entered into a new employment agreement with Dr. Oversohl effective as of July 1, 2007 (Dr. Oversohl had previously entered into employment agreement with Sapient that expired on June 30, 2007) because, within Germany, employment agreements and post termination benefits of the type we have provided to Dr. Oversohl are standard features of executive compensation packages. Thus, for competitive reasons, and to promote Dr. Oversohl’s retention and commitment to Sapient, we believed it was necessary and appropriate to provide him an employment agreement that includes severance benefits. Further, we determined the level of Dr. Oversohl’s severance benefit based, in part, on a comparison to, and desire to ensure parity with, Mr. Wexler’s severance benefit.

 

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

 

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

 

2007 Compensation Actions

 

The Committee reviews and approves salary levels for our executive officers typically on an annual basis, in July. For 2007, our Named Executive Officers salaries increased over their 2006 salaries by an unweighted average of 13%. Additionally, base salaries for our Named Executive Officers in 2007 represented between 25% and 45% of total direct compensation for these individuals.

 

For 2007, we paid total annual incentives of $999,685 to our Named Executive Officers. In the aggregate, these actual amounts represent 88% of the executives’ target annual incentive for 2007, based on Sapient’s and individual performance relative to company/individual goals for 2007.

 

In 2007, we granted an aggregate of 335,000 RSU awards to our Named Executive Officers.

 

2008 Compensation Actions

 

On March 28, 2008, the Committee approved changes to Mr. Herrick’s compensation package, as described more fully below. To develop Mr. Herrick’s compensation changes, the Committee reviewed the CEO Peer Group and eliminated three constituent companies: Keane, Inc., and Digitas, because those firms had been acquired, and Monster Worldwide, Inc., because the Committee determined this company did not compete with Sapient either for client business or executive talent as closely as other companies within the CEO Peer Group. Further, to provide a more comprehensive set of relevant benchmark companies, the Committee included additional companies that compete with Sapient either for client business or executive talent. As a result, the CEO Peer Group, as revised, comprised the original CEO Peer Group companies (less Keane, Digitas and Monster Worldwide), plus: Computer Sciences Corporation; Omnicom Group; Interpublic Group of Companies; BearingPoint, Inc.; Mantech International Corp.; Gartner, Inc.; Maximus, Inc.; Ness Technologies, Inc.; and Covansys Corporation (collectively, the “Revised CEO Peer Group”).

 

In light of Mr. Herrick’s strong performance and leadership as our Chief Executive Officer in 2007 and early 2008, the Committee decided to increase Mr. Herrick’s entire compensation package to bring each compensation element closer to the Revised CEO Peer Group median. As a result, the Committee approved Total Cash compensation changes for Mr. Herrick, as indicated below. In addition, the Committee approved a long-term incentive award in which Mr. Herrick received 150,000 RSUs, which began vesting as of January 1, and will vest over three years in equal increments of 331/3% (i.e., 50,000 RSUs) per year.

 

Except with respect to Mr. Herrick, the Committee, had not, as of April 29, 2008, approved 2008 compensation changes for our other Named Executive Officers.

 

Impact of Tax and Accounting on Compensation Decisions

 

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 SFAS No. 123R, grants of stock options, restricted stock, RSUs and other share-based payments result in an accounting charge for the Company. 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. With respect to both RSUs and stock options, this expense is amortized over the requisite service or vesting period.

 

Further, as noted, per a shareholder-approved amendment to our 1998 Plan that enables cash and equity awards granted thereunder to qualify for the tax benefits available under Section 162(m), the Committee has qualified Mr. Herrick’s annual incentive compensation for these tax benefits. Because in 2007 and prior years, total compensation levels for our executive officers (other than Messrs. Herrick and Tibbetts) have not exceeded the $1 million threshold for which it would be desirable to qualify performance-compensation for tax benefits under Section 162(m), we have qualified only Mr. Herrick’s performance-based compensation for these tax benefits. However, the Committee continues to monitor aggregate compensation levels among each of our executive officers in light of Section 162(m)’s tax benefits. With respect to those executives whose total compensation is anticipated to exceed $1 million in a given year, the Committee may opt in the future to structure compensation arrangements with the executives in a manner that qualifies elements of their compensation for Section 162(m) tax benefits (except for Mr. Tibbetts, as chief financial officers are not deemed “covered persons” for purposes of Section 126(m)’s tax benefits).

 

 

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 report contained in this proxy statement. Based on this review and discussion, the Compensation Committee has approved the inclusion of the Compensation Discussion and Analysis report in this proxy statement.

 

Gary S. McKissock, Chairperson
Jeffrey M. Cunningham
Darius W. Gaskins, Jr.

 

The following table sets forth compensation for the fiscal year ended December 31, 2007 with respect to our Chief Executive Officer, Chief Financial Officer, and our three other most highly compensated executive officers who earned more than $100,000 in fiscal 2007. We refer to these officers in this proxy statement as the “Named Executive Officers.”

 

 

 

 

The following table provides information regarding plan-based awards granted to each of the Named Executive Officers as of December 31, 2007.

 

 

 

 

With respect to mispriced, unexercised stock options held by our employees, including certain of our Named Executive Officers, that also are subject to an excise tax (and interest charges) under Section 409A (the “409A Affected Options”), the Company implemented a remediation plan in 2007. Under this plan, on May 18, 2007 the Company increased the exercise price of 1.9 million 409A Affected Options to the fair market value of the Company’s stock on the correct measurement date for these option awards. In turn, to

compensate the Affected Employees for the increase to the exercise price of their 409A Affected Options, the Compensation Committee authorized Management to issue (a) current employees additional stock options at an exercise price equal to the Company’s stock price on the date of the price increase (May 18, 2007). The Company incurred no compensation expense associated with additional option grants issued to current employees, as the fair value of the employees’ repriced and new option grants equaled the fair value of the original 409A Affected Options. See “Outstanding Equity Awards at Fiscal Year-End.”

 

The following table provides information regarding all outstanding equity awards held by each of the Named Executive Officers as of December 31, 2007.