UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

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Santander Consumer USA Holdings Inc.

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Santander CONSUMER USA | 2018 PROXY STATEMENT for Annual Meeting of Stockholders

 

 

TABLE OF CONTENTS

 

 

TABLE OF CONTENTS

 

2020 Proxy Summary			1
Corporate Governance			6
Proposal 1: Election of Directors			6

Director Independence			12
Board Leadership Structure and Risk Oversight			13
Board Committees			14
Director Compensation			17
Nomination of Directors			18
Executive Officers			19
Audit			21
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm			21
Audit Fees and Related Matters			22
Report of the Audit Committee			22
Compensation			24
Compensation Discussion and Analysis			24
Executive Compensation Tables			43
Equity Compensation Plan Information			49
Pay Ratio Disclosure			50
Stockholder Proposal			51
Additional Governance Information			54
Related Party Transactions			54
Stock Ownership Information			58
Other Governance Information			59
Questions and Answers			60

 

 

SC 2020 Proxy Statement		i

PROXY SUMMARY

 

 

2020 PROXY SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER. PLEASE READ THE ENTIRE PROXY STATEMENT CAREFULLY BEFORE VOTING.

Important Terms

 

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“2021 Annual Meeting” – the Company’s 2021 Annual Stockholder Meeting

 

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“Annual Meeting” – the Company’s 2020 Annual Stockholder Meeting

 

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“Banco Santander”, “Santander” and “SAN” – Banco Santander, S.A.

 

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“Board” – the Board of Directors of SC

 

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“BSI” – Banco Santander International, an affiliate of SC

 

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“BSPR” – Banco Santander Puerto Rico, an affiliate of SC

 

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“Bylaws” – the Third Amended and Restated Bylaws of SC

 

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“CCAR” – the United States Federal Reserve Board’s Comprehensive Capital Analysis and Review

 

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“CD&A” – the Compensation Discussion and Analysis section of this Proxy Statement

 

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“CEO” – Chief Executive Officer

 

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“CFO – Chief Financial Officer

 

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“Common Stock” – shares of SC common stock, par value $0.01 per share

 

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“Company,” “us,” “we,” “our,” and “SC” – Santander Consumer USA Holdings Inc. and, where appropriate, Santander Consumer USA Holdings Inc. and its subsidiaries

 

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“Compensation Committee” – SC’s Compensation and Talent Management Committee

 

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“Exchange Act” – the Securities Exchange Act of 1934, as amended

 

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“GAAP” – United States generally accepted accounting principles, the accounting standard adopted by the SEC

 

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“Independent Directors” – our independent directors as defined by the NYSE Listed Company Rules (as determined by the Board), including Dr. Akbari, Mr. Ferriss, Ms. Holiday, Mr. McCarthy, Mr. Muir, and Mr. Rainer

 

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“NEOs” – our “named executive officers,” as determined under Rule 402 of Regulation S-K, and as designated in this Proxy Statement

 

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“NYSE” – the New York Stock Exchange

 

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“Omnibus Plan” – SC’s Omnibus Incentive Plan

 

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“PwC” – PricewaterhouseCoopers LLP

 

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“RSU” – restricted stock unit

 

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“SBNA” – Santander Bank, N.A., a subsidiary of SHUSA and an affiliate of SC

 

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“SEC” – the United States Securities and Exchange Commission

 

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“Securities Act” – the Securities Act of 1933, as amended

 

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“SHUSA” – Santander Holdings USA, Inc., SC’s majority stockholder and a subsidiary of Banco Santander

 

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“SRIP” – Special Regulatory Incentive Program

 

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“SIS” – Santander Investment Securities, an affiliate of SC and formerly known as Santander Central Hispano Investment Services, Inc.

Your Vote

Your vote is very important. The Board is requesting you to allow your Common Stock to be represented at our Annual Meeting by proxies named on the proxy card.

This Proxy Statement is being sent to you in connection with this request and has been prepared for the Board by our management. This Proxy Statement is being sent to our stockholders on or about April 24, 2020.

 

 

SC 2020 Proxy Statement		1

PROXY SUMMARY

 

 

How to Vote

You may vote your shares prior to the Annual Meeting via the Internet, by telephone, or by mail.

 

INTERNET		TELEPHONE		MAIL
Go to www.proxypush.com/sc		Dial toll-free 855-782-8499		Mark, sign, and date your
You will need the control number included in your Proxy Card/Voting Instruction Form.		You will need the control number included in your Proxy Card/Voting Instruction Form.		Proxy Card/Voting Instruction Form and return it in the postage-paid envelope provided.

Summary of Voting Proposals and Voting Recommendations

 

PROPOSALS		BOARD RECOMMENDATION
PROPOSAL 1. Election of Directors (Page 6)   We are asking stockholders to vote on each director nominee to the Board named in this Proxy Statement. The Board and the Executive Committee believe that each director nominee has the qualifications, experience, and skills necessary to represent stockholders through service on the Board.		FOR ALL
PROPOSAL 2. Ratification of Appointment of Independent Registered Public Accounting Firm (Page 21)   The Audit Committee has appointed PwC to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020. The Audit Committee and the Board believe that the continued retention of PwC to serve as our independent auditor is in the best interests of the Company and its stockholders. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s appointment of PwC.		FOR
PROPOSAL 3. Stockholder Proposal (if properly introduced at the Annual Meeting) (Page 51)		AGAINST

 

 

2		SC 2020 Proxy Statement

PROXY SUMMARY

 

 

Nominees for Election as Directors

The Board recommends a vote FOR the election of each of the following nominees for director:

 

NAME		AGE		DIRECTOR SINCE		INDEPENDENT		COMMITTEE MEMBERSHIP
William Rainer		73		2015		●		Board Chair, EC (Chair)
Stephen A. Ferriss		74		2013		●		Board Vice Chair, AC, CC, EC, RC (Chair)
Mahesh Aditya		57		2017				EC
Homaira Akbari		59		2020		●		RC, RCOC
Juan Carlos Alvarez de Soto		49		2019				---
Victor Hill		56		2015				RC, RCOC
Edith E. Holiday		68		2016		●		CC (Chair), RCOC
Javier Maldonado		57		2015				CC, EC, RCOC
Robert J. McCarthy		66		2015		●		AC, CC, RCOC (Chair)
William F. Muir		65		2016		●		AC (Chair), RC, RCOC

 

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AC: Audit Committee

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CC: Compensation and Talent Management Committee

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EC: Executive Committee

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RC: Risk Committee

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RCOC: Regulatory and Compliance Oversight Committee

Corporate Governance Highlights

 

 

 

SC 2020 Proxy Statement		3

PROXY SUMMARY

 

 

Business Highlights

 

Environmental and Social Highlights

 

Our ultimate parent, Banco Santander, is the world’s most sustainable bank according to the 2019 Dow Jones Sustainability Index and has developed guiding principles of governance and supervision in matters of responsible banking, sustainability and culture for us and its other subsidiaries.

We are guided by the sustainability approach of Banco Santander and are staunchly committed to the environment and combating climate change. In furtherance of this commitment, in 2019, SC eliminated all single-use plastic in all of its facilities and recycled over 326 thousand pounds of paper.

In 2019, we have provided nearly $2.1 million in charitable giving in the communities where SC has a presence. We also have promoted financial literacy among our customers and employees through online education and community volunteer programs.

We are also committed to diversity and inclusion and are taking active steps to make SC a more diverse and equitable workplace. SC promotes six employee networking groups to ensure that we consider diverse perspectives across our business and throughout our culture.

 

 

4		SC 2020 Proxy Statement

PROXY SUMMARY

 

 

Executive Compensation Program—Overview

Our executive compensation program is designed to reinforce the link between the long-term interests of our executive officers and our stockholders. A significant portion of our executive officers’ incentive compensation is deferred and payable in SC shares, and therefore directly aligned with the Company’s performance, including total stockholder return.

 

Key Features of Our Compensation Program

 

 

 

SC 2020 Proxy Statement		5

CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

CORPORATE GOVERNANCE

Proposal 1: Election of Directors

 

WHAT YOU ARE VOTING ON:   At the Annual Meeting, 10 directors are to be elected to hold office until the 2021 Annual Meeting and until their successors are elected and qualified, or until the directors either resign or are removed from office.

Introduction

As of the date of the Annual Meeting, the Board will consist of 10 members. The current members are Mahesh Aditya, Homaira Akbari, Juan Carlos Alvarez de Soto, Stephen A. Ferriss, Victor Hill, Edith E. Holiday, Javier Maldonado, Robert J. McCarthy, William F. Muir, and William Rainer. Mr. Aditya and Mr. Alvarez de Soto are also members of the board of directors of Santander Consumer USA Inc., an Illinois corporation and wholly-owned subsidiary of SC (“SC Illinois”).

SHUSA has the right to nominate eight members of the Board. Please see “Corporate Governance—Nomination of Directors” for more information. SHUSA has nominated Mr. Aditya, Dr. Akbari, Mr. Alvarez de Soto, Mr. Ferriss, Ms. Holiday, Mr. Hill, Mr. Maldonado and Mr. Rainer for election to the Board. The Board has nominated Mr. McCarthy and Mr. Muir for election to the Board. The Board has determined that Dr. Akbari, Mr. Ferriss, Ms. Holiday, Mr. McCarthy, Mr. Muir, and Mr. Rainer are Independent Directors.

Each of the directors elected at the Annual Meeting will be elected for a one-year term, which expires at the next annual meeting, and will serve until the director’s successor has been elected and qualified, or until the director’s earlier resignation or removal.

Information Concerning the Nominees

Biographical information for each nominee for election to the Board appears below. The information is based entirely upon information provided by the respective nominees.

 

THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.

 

 

6		SC 2020 Proxy Statement

CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

MAHESH ADITYA		DIRECTOR SINCE: 2017     AGE: 57
President and CEO   COMMITTEES   »  Executive		EXPERIENCE   Mr. Aditya has been our President and CEO since December 2019. Previously, he served as the Chief Risk Officer of SHUSA from May 2018 to December 2019 and as Chief Risk Officer of SBNA from April 2018 to December 2019. He also served as the Chief Operating Officer of SHUSA from May 2017 to May 2018. Prior to joining SHUSA, he served as the Chief Risk Officer and was a member of the Operating Committee of Visa Inc. from June 2014 to February 2017. Prior to that role, from April 2011 until June 2014, Mr. Aditya was employed by JPMorgan Chase, first as the Chief Risk Officer of Retail Banking and then later the Chief Risk Officer of Mortgage Banking. Previously, he was employed as the Head of Risk for Mortgage and Business Banking at Capital One Bank from 2009 to 2011. He served as a member of the board of Early Warning Systems. Mr. Aditya holds a degree in electrical engineering from Bangalore University and a master’s degree in business administration from the Faculty of Management Studies, Delhi University. Mr. Aditya has extensive experience in risk management and finance, and we believe he is qualified to serve on the Board.
HOMAIRA AKBARI		DIRECTOR SINCE: 2020     AGE: 59
COMMITTEES   »  Regulatory and     Compliance Oversight   »  Risk		EXPERIENCE   Dr. Akbari has served as the President and Chief Executive Officer of Acknowledge Partners, LLC, a global advisory firm providing high-impact consultative strategies and advice to Fortune 1000 companies and private equity firms in the sectors of The Internet of Things (“IoT”), Cyber Security, Artificial Intelligence and analytics since 2012. From 2007 to 2012, Dr. Akbari was the President and Chief Executive Officer of SkyBitz, Inc., a leading provider of IoT asset tracking and security solutions specializing in real-time decision-making tools for companies with unpowered assets such as truck trailing equipment, intermodal containers and rail cars. Prior to her service with SkyBitz, Dr. Akbari held executive positions at Microsoft Corporation, Thales Group, TruePosition, Inc., a subsidiary of Liberty Media Corporation, and Cambridge Strategic Management Group. Dr. Akbari also serves on the Board of Directors of Banco Santander and of Landstar System, Inc., a transportation logistics company listed on NASDAQ. Previously, Dr. Akbari served on the board of directors of several public companies including Gemalto N.V., Veolia S.A. and Covisint Corporation, a company formerly listed on the NASDAQ. Dr. Akbari holds a Ph.D. in particle physics from Tufts University and an MBA from Carnegie Mellon Tepper School of Business. She served as the Chair of the Johns Hopkins University Physics and Astronomy Advisory Council and is currently a member of Business Board of Advisors for Tepper School of Business. Dr. Akbari has extensive business experience with an emphasis on cybersecurity and the use of technology in business, and we believe that she is qualified to serve on our Board.

 

 

SC 2020 Proxy Statement		7

CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

JUAN CARLOS ALVAREZ DE SOTO		DIRECTOR SINCE: 2019     AGE: 49
		EXPERIENCE   Mr. Alvarez de Soto has been the CFO of SHUSA since September 2019. He joined us and served as our CFO from October 2017 until September 2019. Prior to joining us, Mr. Alvarez de Soto served as Corporate Treasurer for SHUSA from 2009 to 2017, overseeing SHUSA’s liquidity risk management, asset liability management, and treasury functions. Prior to joining SHUSA, from 2005 to 2008, he was Senior Vice President and Head of Treasury and Investments for Banco Santander’s International Private Banking at BSI and Banco Santander Suisse. In this role he managed a team of investment professionals, overseeing the assets of Banco Santander’s international high-net-worth clients. From 2000 to 2004, Mr. Alvarez de Soto held the position of Directeur Adjoint for Santander Central Hispano Suisse, Geneva and was Head of Treasury, Trading and Asset-Allocation. Mr. Alvarez de Soto holds a master’s degree in finance from George Washington University and a bachelor’s degree in management from Tulane University, and is a Chartered Financial Analyst. Mr. Alvarez de Soto has extensive experience in finance and global markets, and we believe he is qualified to serve on our Board.
STEPHEN A. FERRISS		DIRECTOR SINCE: 2013     AGE: 74
Vice-Chairman of the Board   COMMITTEES   »  Audit   »  Compensation   »  Executive   »  Risk (Chair)		EXPERIENCE   Mr. Ferriss has served as a director of SHUSA since 2012. He also is the chairman of the boards of directors Santander BanCorp and BSPR and a director of BSI. Mr. Ferriss was also a director of SBNA from 2012 to 2015. Previously, he served as President and CEO of SIS (formerly known as Santander Central Hispano Investment Services, Inc.) from 1999 to 2002, and held various roles at Bankers Trust, including Managing Director and Partner of the Bankers Trust Global Investment Bank in London and New York. Prior to Bankers Trust, Mr. Ferriss spent 19 years at Bank of America. Mr. Ferriss graduated from Columbia College and received a master’s degree in Latin American international economics from Columbia University School of International and Public Affairs. Mr. Ferriss has extensive experience in management and international finance, and we believe he is qualified to serve on the Board.

 

 

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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

VICTOR HILL		DIRECTOR SINCE: 2015     AGE: 56
COMMITTEES   »  Regulatory and     Compliance Oversight   »  Risk		EXPERIENCE   Mr. Hill has worked within the UK motor finance industry for over 35 years, 18 of them at board level. He began his career within Lombard Motor Finance in 1982 and moved to First National Motor Finance in 1998, joining the board of directors in 2000. Mr. Hill was responsible for the launch of Santander Consumer Finance (UK) plc (“SCUK”), an affiliate of SC, in 2005, and continues to lead that business today as CEO. He led the acquisition of the UK motor finance portfolio from GE Money in 2009 and currently serves as a director of two joint venture subsidiaries, Hyundai Capital UK and PSA Finance. Mr. Hill has held a number of directorships, registered at Companies House in London, but his current responsibilities include directorships of five companies including SCUK, Hyundai Capital UK Ltd, PSA Finance UK Ltd, PSA Finance plc, and SC. He qualified as a Chartered Director in 2007 and achieved Fellowship of the Institute of Directors, in London, during 2012. He also qualified as a Mediator for Civil and Commercial Disputes in 2008. Mr. Hill has extensive management experience within the auto finance industry, and we believe that he is qualified to serve on the Board.
EDITH E. HOLIDAY		DIRECTOR SINCE: 2016     AGE: 68
COMMITTEES   »  Compensation (Chair)   »  Regulatory and     Compliance Oversight		EXPERIENCE   Ms. Holiday is a member of the boards of directors of Hess Corporation (NYSE:HES), White Mountains Insurance Group Ltd. (NYSE:WTM), and Canadian National Railway (NYSE:CNI), and is a member of the boards of directors or trustees of various investment companies in the Franklin Templeton Group of Funds, serving as Lead Director of the Franklin and Templeton Funds. She also joined the board of directors of SHUSA in December 2019. Ms. Holiday also served on the boards of directors of RTI International Metals, Inc. from 1999 to 2015, and of the H.J. Heinz Company from 1994 to 2013. Ms. Holiday was also the President, Secretary, and Treasurer of Comcast TW Holdings, Inc. from 2006 to 2007. From 1990 to 1993, Ms. Holiday was Assistant to the President of the United States and Secretary of the U.S. Cabinet. From 1989 to 1990, she served as General Counsel of the U.S. Treasury Department, and from 1988 to 1989 she served as Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison of the U.S. Treasury Department. Prior to that, Ms. Holiday held various other positions in government and in private practice. Ms. Holiday holds a bachelor of science and a law degree from the University of Florida. Ms. Holiday has extensive experience in legal and regulatory matters and in public service, and we believe that she is qualified to serve on the Board.

 

 

SC 2020 Proxy Statement		9

CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

JAVIER MALDONADO		DIRECTOR SINCE: 2015     AGE: 57
COMMITTEES   »  Compensation   »  Executive   »  Regulatory and     Compliance     Oversight		EXPERIENCE   Mr. Maldonado has served as Senior Executive Vice President, Global Head of Cost Control of Banco Santander since October 2015. He has held numerous management positions at Banco Santander and its affiliates, including Senior Executive Vice President, Head of the New General Directorate for Coordination and Control of Regulatory Projects of Banco Santander; Executive Committee Director, Head of Internal Control and Corporate Development, for Santander (UK) plc from May 2012 to September 2014; Vice President in Charge of Closed Funds and Complaints for Banco Santander Brazil from October 2011 to April 2012; and General Manager for Banco Santander in the Middle East from January 2011 to September 2011. Previously, Mr. Maldonado was an attorney with Baker & McKenzie and Corporate and International Law Department Head at J.Y. Hernández-Canut Law Firm. Mr. Maldonado has served as a director of SHUSA since April 2015 and has served as vice-chairman of the board of directors of SHUSA since October 2015. He also currently serves as a director of SBNA, BSPR, BSI, Santander BanCorp and SIS. He holds law degrees from Northwestern University and UNED University. Mr. Maldonado has extensive knowledge and experience in international finance and legal and regulatory affairs, and we believe he is qualified to serve on the Board.
ROBERT J. McCARTHY		DIRECTOR SINCE: 2015     AGE: 66
COMMITTEES   »  Audit   »  Compensation   »  Regulatory and     Compliance     Oversight (Chair)		EXPERIENCE   In 2014, Mr. McCarthy retired from Marriott International, Inc., where he served as Chief Operations Officer since 2012. Mr. McCarthy joined Marriott in 1975, where he served in various leadership positions, including Senior Vice President, Northeast Region from 1995 to 2000; Executive Vice President, Operations from 2000 to 2002; President, North America from 2003 to 2009; Group President from 2009 to 2011; and Chief Operations Officer from March 2012 until February 2014. Mr. McCarthy has served as Chairman of Hotel Development Partners since March 2014. He currently is a member of the Board of Trustees at Villanova University and a member of the board of directors of RLJ Lodging Trust (NYSE:RLJ). Previously, Mr. McCarthy served as a director of the ServiceSource Foundation, as a member of the board of directors of the Autism Learning Center, as a member of the Dean’s Advisory Board at Cornell University School of Hotel Administration, as a member of the Dean’s Advisory Board at Villanova University School of Business, and as a member of the board of managers at Avendra, LLC. He holds a bachelor’s degree in business administration from Villanova University and is a graduate of the Advanced Management Program at the Wharton School of Business at the University of Pennsylvania. Mr. McCarthy has extensive managerial and finance experience, and we believe he is qualified to serve on the Board.

 

 

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CORPORATE GOVERNANCE - PROPOSAL 1: ELECTION OF GOVERNANCE

 

 

WILLIAM F. MUIR		DIRECTOR SINCE: 2016     AGE: 65
COMMITTEES   »  Audit (Chair)   »  Risk   »  RCOC		EXPERIENCE   In 2014, Mr. Muir retired from Ally Financial Inc. (formerly known as General Motors Acceptance Corporation (“GMAC”)), where he served as President and head of its Global Automotive Services business starting in 2004. In that role, he led Ally’s automotive finance, insurance, vehicle remarketing, and servicing operations. Prior to that time, he served as Executive Vice President and Chief Financial Officer of GMAC from 1998 to 2004. From 1996 to 1998, Mr. Muir served as Executive-in-Charge of Operations and then Executive Director of Planning at Delphi Automotive Systems, a former subsidiary of General Motors (“GM”). Prior to serving at Delphi Automotive Systems, he served in various executive capacities upon joining GMAC in 1992 and also served in a number of capacities with GM since joining GM in 1983. Mr. Muir also served as Chairman of the Ally Insurance Group from 1999 to 2014 and a member of the Ally Bank board of directors from 2004 to 2016. Mr. Muir received a bachelor’s degree in industrial engineering and operations research from Cornell University in 1977. He earned a master’s degree in business administration from Harvard University in 1983. Mr. Muir has extensive experience in management, finance, and the auto finance industry, and we believe that he is qualified to serve on the Board.
WILLIAM RAINER		DIRECTOR SINCE: 2015     AGE: 73
Chairman of the Board   COMMITTEE   »  Executive (Chair)		EXPERIENCE   Mr. Rainer has extensive experience and has held numerous leadership roles in the financial services industry. From 2001 to 2004, Mr. Rainer served as the Chairman and CEO of OneChicago, LLC, a regulated futures exchange. He also served as the Chairman of the Commodity Futures Trading Commission from 1999 to 2001, as Chairman of the United States Enrichment Corporation from 1994 to 1998, and as Founder of Greenwich Capital Markets, Inc. from 1981 to 1988. Previously, Mr. Rainer held various leadership positions at Kidder, Peabody & Co., Inc. From July 2015 to March 2016, he served as a director of BSI, and from December 2015 to March 2016, he served as chairman of the board of SIS. Mr. Rainer served as director of IQ Funds, a family of closed-end mutual funds, from 2004 until 2010. From 1996 to 2000 and from 2004 to 2008, Mr. Rainer served as a trustee for Southern Methodist University. He has served as a member of the Dean’s Council of the Harvard Divinity School since 2004 and as its Chair from 2005 through June 2013. Mr. Rainer received his bachelor’s degree in economics and master’s degree in business administration from Southern Methodist University. Mr. Rainer has extensive knowledge and experience in finance, regulatory affairs, and leadership of financial services firms, and we believe he is qualified to serve on the Board.

 

 

SC 2020 Proxy Statement		11

CORPORATE GOVERNANCE - DIRECTOR INDEPENDENCE

 

 

Director Independence

Because we are a controlled company, we are exempt from the requirement in the NYSE Listed Company Rules that a majority of our directors must be independent. In addition, we are exempt from the requirements (i) that our Executive Committee (which under its charter has the responsibilities of a Nominating and Governance Committee) be composed solely of directors who meet the independence standards under the NYSE Listed Company Rules and (ii) that our Compensation Committee be composed solely of directors who meet additional, heightened independence standards under the NYSE Listed Company Rules and the rules of the SEC. The Company is subject to the requirement that all members of our Audit Committee satisfy independence requirements set forth under the NYSE Listed Company Rules and meet the additional criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under the Exchange Act.

Under the NYSE Listed Company Rules, to be considered independent, a director must not have a disqualifying relationship, as defined in the NYSE Listed Company Rules, and the Board must affirmatively determine that the director otherwise has no direct or indirect material relationship with the Company. In making independence determinations, the Board complies with all NYSE and SEC criteria and considers all relevant facts and circumstances. The Board has determined that Dr. Akbari, Mr. Ferriss, Ms. Holiday, Mr. McCarthy, Mr. Muir, and Mr. Rainer are Independent Directors.

In assessing the independence of the Independent Directors, the Board considered, without limitation, the following transactions, relationships, and arrangements:

 

DIRECTOR		ORGANIZATION		RELATIONSHIP		SC TRANSACTION/   RELATIONSHIP

Mr. Ferriss		SHUSA		Director		Majority Stockholder
		SBNA		Former Director		Affiliate
		SIS		Former CEO		Affiliate
		Santander BanCorp		Chairman of the Board		Affiliate
		BSPR		Chairman of the Board		Affiliate
		BSI		Director		Affiliate
Dr. Akbari		Banco Santander		Director		Sole Stockholder of   our Majority Stockholder
Ms. Holiday		SHUSA		Director		Majority Stockholder
Mr. Rainer		BSI		Former Director		Affiliate
		SIS		Former Chairman		Affiliate

The Board has also determined that each member of our Audit Committee is financially literate and that the chair of our Audit Committee (Mr. Muir) is an “audit committee financial expert” as defined by the SEC.

 

 

12		SC 2020 Proxy Statement

CORPORATE GOVERNANCE - BOARD LEADERSHIP STRUCTURE AND RISK OVERSIGHT

 

 

Board Leadership Structure and Risk Oversight

The Board is responsible for the oversight of management on behalf of our stockholders. The Board and its committees meet periodically throughout the year to: (i) review strategy, business and financial performance, risk and control matters, and compensation and management development; and (ii) provide guidance to and oversight of, and otherwise assess and advise, the CEO and other senior executives. The Board’s leadership structure, described below, is designed to ensure that authority and responsibility are effectively allocated between the Board and management.

The Board does not have any formal policy as to whether the same person should serve as both the CEO and Chairman of the Board, as the Board believes that it should have the flexibility to make the determination of the appropriate leadership for us at any given point in time. Currently, Mr. Rainer serves as the independent Chairman of the Board. We believe that having an independent Chairman can create an environment that leads to objective evaluation and oversight of management’s performance, increases management accountability, and improves the ability of the Board to monitor whether management’s actions are in the best interests of all stockholders. As a result, at this time, we believe that Mr. Rainer serving as our independent Chairman enhances the effectiveness of the Board as a whole. The Board will continue to review the Board’s leadership periodically and may modify this structure from time to time if it is in the best interests of our Company and our stockholders.

The Chairman of the Board leads the Board, sets the tone for its culture, and ensures its effectiveness in overseeing the Company and its management. The Chairman presides at all meetings of the Board, as well as executive sessions of Independent Directors, and, in consultation with the CEO, other directors, and management, establishes the agenda for each Board meeting. The Chairman also has the power to call special meetings of the Board. Mr. Ferriss serves as the Board’s Vice-Chairman, who acts as Chairman of the Board if Mr. Rainer is absent.

The Company has established a risk governance structure that assigns responsibility for risk management among front-line business personnel, an independent risk management function, and internal audit. According to this model, business owners maintain responsibility for identifying and mitigating the risks generated through their business activities. The Chief Risk Officer, who reports to the CEO and is independent of any business line, is responsible for developing and maintaining a risk framework that ensures risks are appropriately identified and mitigated, and for reporting on the overall level of risk in the Company. The Chief Risk Officer is also accountable to the Risk Committee and to SHUSA’s Chief Risk Officer. The Chief Risk Officer is charged with the implementation and execution of the enterprise risk management (“ERM”) program under the oversight of the Board and its committees.

Risk management is overseen by the Board through four standing committees: the Risk Committee, the Audit Committee, the Compensation Committee, and the Regulatory and Compliance Oversight Committee, each of which is chaired by an Independent Director. Committee chairs are responsible for calling meetings of their committees, presiding at meetings of their committees, approving agendas and materials for their committee meetings, serving as a liaison between committee members and the Board and between committee members and senior management (including the CEO, the CFO and the Chief Risk Officer), and working directly with the senior management responsible for committee matters. Each Board committee provides regular reports to the Board regarding matters reviewed by the Board committee.

In addition to receiving and discussing reports of risks under the purview of a particular committee, the Board monitors our risk culture and reviews specific and aggregate risks the Company faces. Further, at least annually, the Board approves, at the recommendation of the Risk Committee, a Risk Appetite Statement (a “RAS”), which defines the levels and types of risks the Company is willing to assume to achieve its business plans while controlling risk exposures within our risk capacity. In addition, the RAS establishes principles for risk-taking in the aggregate and for each risk type, and is supported by a comprehensive system of risk limits, escalation triggers, and control programs.

The Risk Committee is charged with responsibility for establishing governance over the ERM process and provides oversight of risk policies and risk management performance. The Risk Committee monitors our aggregate risk position and reviews reports from management on the comprehensive portfolio of risk categories and the potential impact these risks can have on our risk profile. A comprehensive risk report is submitted regularly by the Chief Risk Officer to the Risk Committee and to the Board, providing management’s view of our risk position. Further, the Risk Committee reviews and recommends for the Board’s approval the RAS and the ERM Policy. The Risk Committee also provides oversight of our impact on SHUSA’s compliance with its capital adequacy assessment process, including its capital plan submissions and resolution planning. In addition, the Risk Committee oversees the Company’s information and cyber risk management program. The Risk Committee also reviews and concurs in the appointment, replacement, performance, and compensation of the Chief Risk Officer.

 

 

 

SC 2020 Proxy Statement		13

CORPORATE GOVERNANCE - BOARD COMMITTEES

 

 

The Audit Committee is charged with oversight relating to the integrity of our financial statements and financial reporting process, the integrity of our systems of internal accounting and financial controls, and internal and external auditing, including the qualifications and independence of our independent registered public accounting firm. Please see “Audit—Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm” for discussion of PwC, our proposed independent registered public accounting firm for 2019. The Audit Committee oversees the performance of our internal audit function; reviews and concurs in the appointment, replacement, performance, and compensation of our Chief Audit Executive; and approves our internal audit function’s annual audit plan, charter, policies, and budget. The Audit Committee also receives regular updates on the audit plan’s status and results including significant reports issued by our internal audit function and the status of management’s corrective actions.

The Compensation Committee works to ensure that the compensation programs covering our executives, business units, and risk- taking employees appropriately balance risk with incentives such that business performance is achieved without taking imprudent or inefficient risks. At least annually, the Compensation Committee conducts an assessment of the compensation policies and practices for our employees, including our executive officers. The assessment includes whether such compensation policies and practices created risks that were reasonably likely to have a material adverse effect on the Company.

The Regulatory and Compliance Oversight Committee is charged with the oversight of risk relating to the effectiveness of our compliance management system. The Regulatory and Compliance Oversight Committee also oversees our progress in remediating risks identified in risk assessment findings, internal audit findings, and outstanding corrective actions identified by regulators in examination reports, enforcement actions, and other communications.

In addition to the Board and the Risk Committee, the CEO and Chief Risk Officer delegate risk responsibility to management committees. These committees include the Asset Liability Committee, Enterprise Risk Management (“ERM”) Committee, the Executive Risk Committee and the Pricing Committee. The Chief Risk Officer is a member of each of these committees and chairs the ERM Committee.

Board Committees

The Board has five standing committees: the Audit Committee, the Compensation and Talent Management Committee, the Executive Committee, the Regulatory and Compliance Oversight Committee, and the Risk Committee. The charters for each committee may be found on SC’s website at http://investors.santanderconsumerusa.com.

 

NAME

AUDIT

COMPENSATION AND TALENT MANAGEMENT

EXECUTIVE

REGULATORY  AND COMPLIANCE OVERSIGHT

RISK

Edith E. Holiday

Chair

●

Homaira Akbari

●

●

Javier Maldonado

●

●

●

Juan Carlos Alvarez de Soto

Mahesh Aditya

●

Robert J. McCarthy

●

●

Chair

Stephen A. Ferriss

●

●

●

Chair

Victor Hill

●

●

William F. Muir

Chair

●

●

William Rainer

Chair

 

 

14		SC 2020 Proxy Statement

CORPORATE GOVERNANCE - BOARD COMMITTEES

 

 

The following summarizes the membership of each Board committee, as well as the primary roles and responsibilities of each committee and the number of times each committee met in 2019.

 

AUDIT COMMITTEE				NUMBER OF MEETINGS IN 2019: 9
MEMBERS				AMONG OTHER THINGS, OUR AUDIT COMMITTEE:
»  Mr. Muir (Chair)   »  Mr. Ferriss   »  Mr. McCarthy				»		Reviews financial reporting policies, procedures, and internal controls.
				»		Responsibility for the appointment, compensation, and oversight of our independent registered public accounting firm.
				»		Pre-approves audit, audit-related, and non-audit services to be performed by our independent registered public accounting firm.
				»		Reviews and approves or ratifies all related-party transactions.
				»		Oversees our internal audit function, including approval of the annual internal audit plan and the review of the performance of our Chief Audit Executive.
				»		Oversees our compliance with legal and regulatory requirements as well as ethical standards adopted by the Company.
				»		Reviews certain risk management policies and procedures; certain policies, processes, and procedures regarding compliance matters; and our Supplemental Statement of Ethics and Code of Ethics for the CEO and Senior Financial Officers.
The Board has determined that each of the Audit Committee members is “independent” as defined by Section 10A(m)(3) of the Exchange Act, Rule 10A-3 under the Exchange Act, and the NYSE Listed Company Rules. The Board has also determined that each of the members is “financially literate” as required by Section 303A.07 of the NYSE Listed Company Rules and our chair (Mr. Muir) is an “audit committee financial expert” as defined in the SEC’s rules.
COMPENSATION AND TALENT MANAGEMENT COMMITTEE				NUMBER OF MEETINGS IN 2019: 8
MEMBERS				AMONG OTHER THINGS, OUR COMPENSATION AND TALENT MANAGEMENT COMMITTEE:
»  Ms. Holiday (Chair)   »  Mr. Ferriss   »  Mr. Maldonado   »  Mr. McCarthy				»		Reviews and approves the compensation of the CEO and each other executive officer.
				»		Reviews and makes recommendations to the Board regarding the compensation of the Independent Directors.
				»		Approves and evaluates all compensation plans, policies, and practices of the Company as they affect our CEO and other executive officers.
				»		Sets performance measures and goals and verifies the attainment of performance goals under performance-based incentive compensation arrangements applicable to our executive officers.
				»		Monitors and assesses whether the overall design and performance of our compensation plans, policies, and programs do not encourage employees, including our NEOs, to take excessive risk.
				»		Oversees the management development, succession planning, and retention practices for our executive officers.
The Board has determined that Mr. Ferriss, Ms. Holiday, and Mr. McCarthy are “independent” as defined by the NYSE Listed Company Rules and qualify as “non-employee” directors within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (“Rule 16b-3”). Mr. Ferriss, Ms. Holiday, and Mr. McCarthy constitute a subcommittee of the Compensation and Talent Management Committee when considering issues governed by Rule 16b-3.

 

 

SC 2020 Proxy Statement		15

CORPORATE GOVERNANCE - BOARD COMMITTEES

 

 

EXECUTIVE COMMITTEE				NUMBER OF MEETINGS IN 2019: 4
MEMBERS				AMONG OTHER THINGS, OUR EXECUTIVE COMMITTEE:
»  Mr. Rainer (Chair)   »  Mr. Aditya   »  Mr. Ferriss   »  Mr. Maldonado				»		Acts on the Board’s behalf between Board meetings on all matters that may be lawfully delegated.
				»		Considers and recommends candidates for election to the Board.
				»		Leads the annual performance evaluations of the Board and Board committees.
				»		Reviews and advises the Board on our corporate governance.
The Board has determined that Mr. Rainer and Mr. Ferriss are “independent” as defined by the NYSE Listed Company Rules.

 

REGULATORY AND COMPLIANCE OVERSIGHT COMMITTEE				NUMBER OF MEETINGS IN 2019: 6
MEMBERS   »  Mr. McCarthy (Chair)   »  Dr. Akbari   »  Mr. Hill   »  Ms. Holiday   »  Mr. Maldonado   »  Mr. Muir				AMONG OTHER THINGS, OUR REGULATORY AND COMPLIANCE OVERSIGHT COMMITTEE:
				»		Provides oversight of the Company’s significant banking and consumer regulatory compliance issues.
				»		Oversees the Company’s Compliance Program, including the Chief Compliance Officer.
				»		Oversees our progress in responding to internal audit findings, risk assessment findings, and outstanding corrective actions identified by regulators in examination reports, enforcement actions, and other communications.
				»		Reviews our regulatory correspondence and reports received from or submitted to regulators to ensure effective communication between the Company and its respective regulators.
The Board has determined that Mr. McCarthy, Dr. Akbari, Ms. Holiday, and Mr. Muir are “independent” as defined by the NYSE Listed Company Rules.

 

RISK COMMITTEE				NUMBER OF MEETINGS IN 2019: 17
MEMBERS				AMONG OTHER THINGS, OUR RISK COMMITTEE:
»  Mr. Ferriss (Chair)   »  Dr. Akbari   »  Mr. Hill   »  Mr. Muir				»		Assesses and manages, without limitation, our enterprise risk, credit risk, market risk, operational risk, liquidity risk, and other risk matters.
				»		Provides oversight of our risk governance structure in order to evaluate and control our risks, including the approval of our Risk Appetite Statement.
				»		Oversees our risk management function including appointment and evaluation of the Chief Risk Officer and annual review of the Chief Risk Officer’s proposed priorities, budget and staffing plans.
				»		Oversees and manages our activities related to capital planning and analysis.
The Board has determined that Mr. Ferriss, Dr. Akbari, and Mr. Muir are “independent” as defined by the NYSE Listed Company Rules.

 

 

16		SC 2020 Proxy Statement

CORPORATE GOVERNANCE - DIRECTOR COMPENSATION

 

 

Director Compensation

Only Independent Directors are compensated for their service on the Board. The compensation program for Independent Directors was approved by our non-independent, disinterested directors, who do not receive any compensation for their Board service. The program provided the following compensation for Independent Directors:

 

»

An annual cash retainer of $100,000 (paid quarterly in arrears); plus

 

»

An annual grant of RSUs with a grant date fair market value equal to $50,000, vesting on the earlier of the 1st anniversary of the grant date or the 1st annual stockholder meeting following the grant date (with the grant date occurring at or around the start of the applicable term of service); plus

 

»

$70,000 in cash annually for serving as the chair of any committee of the Board (paid quarterly in arrears); plus

 

»

$20,000 in cash annually for serving as a non-chair member of any committee of the Board (paid quarterly in arrears); plus

 

»

$450,000 in cash annually if the director also serves as the Chairman of the Board (paid quarterly in arrears).

The Compensation Committee annually reviews the form and amount of director compensation and recommends changes to the non-independent, disinterested Board members (who do not receive any director compensation from us), as appropriate. There were no changes to the Independent Director Compensation program in 2019.

Independent Director Stock Ownership Guidelines

In order to align the economic interests of our Independent Directors with those of our stockholders, the Board has determined that our Independent Directors should hold a meaningful equity stake in SC. To that end, our Independent Non-Employee Director Stock Ownership Guidelines require each of our Independent Directors to acquire and retain shares or share equivalents of our Common Stock with a target value not less than five times the annual equity retainer of $50,000.

There is no required time period within which an Independent Director must attain the applicable stock ownership target. However, until the stock ownership target is achieved, an Independent Director is required to retain 100% of all shares of our Common Stock received under SC’s Independent Director compensation program, other than shares received with a value equal to the amount of taxes due on income realized in connection with the vesting or exercise of awards.

As of the date hereof, all directors are in compliance with the Independent Non-Employee Director Stock Ownership Guidelines.

Director Compensation Table for 2019

The following table provides information regarding compensation for each Independent Director in 2019. Under our director compensation program, only Independent Directors are compensated for their service on the Board.

 

NAME(1)		FEES EARNED OR PAID IN CASH ($)					STOCK AWARDS(2) ($)					TOTAL     ($)
Stephen A. Ferriss		230,000					50,000					280,000
Edith E. Holiday		190,000					50,000					240,000
Robert J. McCarthy		210,000					50,000					260,000
William F. Muir		210,000					50,000					260,000
William Rainer		620,000					50,000					670,000

 

(1)	Dr. Akbari was appointed to the Board effective January 1, 2020, and therefore, did not receive compensation for 2019.

 

(2)

To align our Independent Directors’ compensation with stockholder interests, each Independent Director is granted RSUs upon election or re-election. In 2019, all director RSUs were granted on June 11, 2019. Each award will vest upon the earlier of (i) the first anniversary of the grant date and (ii) the first annual stockholder meeting following the grant date. This column represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, based on the closing price of our Common Stock on the applicable grant date, but excluding the effect of potential forfeitures. Except for Mr. Ferriss, who holds 5,207 vested options, the stock awards reflected above comprise all outstanding equity awards held by our Independent Directors at the end of 2019.

 

 

SC 2020 Proxy Statement		17

CORPORATE GOVERNANCE - NOMINATION OF DIRECTORS

 

 

Nomination of Directors

The Shareholders Agreement, by and among SC, SHUSA, and certain other holders of our Common Stock, which we refer to as the “Shareholders Agreement,” provides SHUSA with special rights to nominate directors to the Board. Please see “Additional Governance Information—Related Party Transactions—Shareholders Agreement” for further information. Pursuant to the Shareholders Agreement, SHUSA is entitled to nominate eight members of the Board. The Shareholders Agreement provides further that SHUSA may remove any director nominated by SHUSA with or without cause. In addition, SHUSA has the right to designate a replacement to fill a vacancy on the Board created by the departure of a director that was nominated by SHUSA, and we are required to take all action within our power to cause such vacancy to be filled by such designated replacement (including by promptly appointing such designee to the Board).

With respect to directors not nominated by SHUSA, the Board is responsible for selecting nominees for election to the Board by our stockholders. Generally, the Board begins identifying nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria described below. Generally, the Board identifies candidates for director nominees in consultation with sitting members of the Board and with management, through the use of search firms or other advisors, through recommendations submitted by other directors or stockholders, and through such other methods as the Board deems appropriate. In identifying and evaluating a potential director nominee, the Board considers, among other things, the following factors:

 

»

Our needs with respect to the particular talents and experience of our directors;

 

»

The nominee’s knowledge, skills, and experience, including experience in finance, administration, or public service, in light of prevailing business conditions and the knowledge, skills, and experience already possessed by other members of the Board;

 

»

Whether the nominee is independent, as that term is defined under the NYSE Listed Company Rules;

 

»

The familiarity of the nominee with our industry;

 

»

The nominee’s experience in legal and regulatory affairs;

 

»

The nominee’s experience with accounting rules and practices; and

 

»

The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.

In its identification and evaluation process, the Board collects information about candidates through interviews, detailed questionnaires, and other means that the Board deems helpful in such process.

The Board’s goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.

The Board is also committed to diversified Board membership. The Board will not discriminate, including on the basis of race, national origin, gender, sexual orientation, religion, or disability, in selecting nominees. Diversity and inclusion are values embedded into our culture and are fundamental to our business. In keeping with those values, when assessing a candidate, the Board considers the different viewpoints and experiences that a candidate could bring to the Board and how those viewpoints and experiences could enhance the Board’s effectiveness in the execution of its responsibilities. The Board is also committed to seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. Further, the Board is committed to interview at least one woman for every new Board position until we have at least four women on the Board. In addition, the Board assesses the diversity of the Board and committees as a part of its annual self-evaluation process.

Other than the foregoing, there are no stated minimum criteria for director nominees. The Board may also consider such other factors as it may deem in our best interests and the best interests of our stockholders. We also believe it may be appropriate for key members of our management to participate as members of the Board.

Subject to the rights of our majority stockholder, stockholders may nominate candidates for election to the Board. In order to nominate a candidate for election to the Board, stockholders must follow the procedures set forth in our Bylaws, including timely receipt by the Secretary of the Company of notice of the nomination and certain required disclosures with respect both to the nominating stockholder and the recommended director nominee. For a complete description of the requirements and procedures for stockholder nominations, please refer to our Bylaws.

Directors may be elected by a plurality of votes cast at any meeting called for the election of directors at which a quorum is present. The presence of a majority of the holders of our Common Stock, whether in person or by proxy, constitutes a quorum. The Board did not receive any recommendations from stockholders (other than SHUSA) requesting that the Board consider a candidate for inclusion among the nominees in this Proxy Statement. However, our policy is that we will consider any such recommendation as long as the stockholder making the recommendation provides to us the information concerning the recommended individual that is required under our Bylaws.

 

 

18		SC 2020 Proxy Statement

EXECUTIVE OFFICERS

 

 

EXECUTIVE OFFICERS

The names, ages, and current positions of our executive officers as of the date of this Proxy Statement are listed in the table below. Each executive officer, including the CEO, is elected by the Board. Each executive officer holds office until his or her successor is elected and qualified, or until he or she is removed from, or resigns from, that office. There are no family relationships among the executive officers nor is there any agreement or understanding between any officer and any other person pursuant to whom the officer was elected.

 

NAME		AGE				POSITION
Mahesh Aditya		57				President and Chief Executive Officer
Fahmi Karam		41				Chief Financial Officer
Shawn Allgood		55				Head of Chrysler Capital and Auto Relationships
Joshua Baer		45				Chief Risk Officer
Sandra Broderick		61				Head of Operations
Gene Cohler		64				Head of Decision Sciences and Model Development
Reza Leaali		61				Chief Technology Officer
Christopher Pfirrman		60				Chief Legal Officer, General Counsel, and Corporate Secretary
Mikenzie Sari		43				Chief Human Resources Officer

Mahesh Aditya

President and Chief Executive Officer

Mr. Aditya is discussed above under “Corporate Governance—Proposal 1: Election of Directors—Information Concerning the Nominees.”

Fahmi Karam

Chief Financial Officer

Fahmi Karam has served as our Chief Financial Officer since September 2019. He previously served as our Head of Pricing and Analytics since May 2018 and as our Executive Vice President, Strategy and Corporate Development since September 2015, overseeing financial planning and analysis, asset acquisition and sales and other strategic initiatives. Prior to joining SC, Mr. Karam was at JP Morgan Investment Bank for 12 years, where he most recently served as an Executive Director. Prior to JP Morgan, Mr. Karam served as a Senior Associate at Deloitte Audit Assurance Services for two years. Mr. Karam received a Bachelor’s and Masters of Accounting from Baylor University and is a Certified Public Accountant.

Shawn Allgood

Head of Chrysler Capital and Auto Relationships

Mr. Allgood has been the Head of Chrysler Capital and Auto Relationships since July 2019. In this role, he is responsible for Chrysler Capital, sales and marketing activities, and dealer and customer relationships. Previously, Mr. Allgood served as the Executive Vice President of Chrysler Capital since April 2017. Prior to joining the Company, Mr. Allgood held senior management positions at Ally Financial Inc., f/k/a General Motors Acceptance Corporation, for 29 years, where his last role was Executive Director of Collections. Mr. Allgood received a Bachelor of Arts from Valdosta State University and a Master of Business Administration from Kennesaw State University.

Joshua Baer

Chief Risk Officer

Mr. Baer has served as our Chief Risk Officer since March 2018, joining us from SHUSA, where he served as Head of Operations and Risk Strategy since May 2017. Prior to SHUSA, Mr. Baer worked at Capital One for 13 years, most recently as the Head of Consumer Credit Risk Analytics since 2010. Mr. Baer holds a bachelor’s degree in finance from James Madison University and a master’s degree in business administration from the Haas School of Business at the University of California, Berkeley.

 

 

SC 2020 Proxy Statement		19

EXECUTIVE OFFICERS

 

 

Sandra Broderick

Head of Operations

Ms. Broderick has served as our Executive Vice President, Head of Operations since October 2017 and, since October 2019, has also served as the U.S. Head of Operations for SHUSA. Ms. Broderick joined us from U.S. Bank, where she served as Executive Vice President, Operations Executive since March 2017. Prior to that, Ms. Broderick served as Managing Director, Operations Executive at JP Morgan Chase from March 2002 to March 2017, where she served as Head of Operations for their Automotive Finance and Student Lending businesses. Ms. Broderick was also a Senior Operations Director at GE Capital from December 1995 to September 1998 and a Senior Vice President of Operations Executive at Bank One from September 1998 to March 2002. Ms. Broderick attended State University of New York at Buffalo.

Gene Cohler

Head of Decision Sciences and Model Development

Mr. Cohler has served as our Executive Vice President and Head of Decision Sciences and Model Development since March 2020. Prior to joining us, he served as a Managing Director at Bank of America from May 2015 to November 2017, where he was Head of Consumer Risk Analytics and Modeling. Prior to Bank of America, Mr. Cohler was employed by JP Morgan for 28 years, where he most recently served as a Managing Director and Head of Consumer Risk Modeling. In these roles, he has worked in a variety of analytical areas including CCAR, CECL, capital and counterparty as well as structured products and derivatives trading models. Mr. Cohler holds a Ph.D. in theoretical physics from Yale University.

Reza Leaali

Chief Technology Officer

Mr. Leaali has served as our Chief Technology Officer since February 2018. He previously served as Chief Technology Officer for Wells Fargo from 2002 to 2018 and Vice President and Acting Chief Technology Officer for PurchasePro from 2001 to 2002. Prior to that, Mr. Leaali held the position of Chief Architect and Head of Core Technologies at Ingram Micro from 1995 to 2001. Mr. Leaali holds a bachelor’s degree in computer science from North London University.

Christopher Pfirrman

Chief Legal Officer, General Counsel, and Corporate Secretary

Mr. Pfirrman has served as our Chief Legal Officer, General Counsel, and Corporate Secretary since September 2015. He was previously employed by SHUSA, and most recently, served as Senior Executive Vice President and General Counsel of SHUSA and of SBNA from January 2012 to September 2015. He served as SBNA’s Senior Vice President and Deputy General Counsel from January 2000 to January 2012, and he was an attorney in the law firm of Edwards & Angell, LLP (now Locke Lord LLP) from 1996 to 2000. He received a bachelor’s degree from Fairfield University in Connecticut and a law degree from the College of William and Mary in Virginia. He is a member of the Massachusetts and Connecticut bars.

Mikenzie Sari

Chief Human Resources Officer

Mikenzie Sari has served as our Chief Human Resources Officer since September 2018. She previously served as Managing Director, Human Resources for Wholesale Banking at Santander Bank, N.A., and Chief Human Resources Officer of Santander Investment Securities from February 2016 to September 2018. She served as Managing Director, Human Resources of Wholesale Banking at Mitsubishi UFJ Financial Group from April 2013 to January 2016. Ms. Sari received a bachelor’s degree in mechanical engineering from Northwestern University and a master’s degree in business administration from Kellogg School of Management.

 

 

20		SC 2020 Proxy Statement

AUDIT - PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

AUDIT

Proposal 2: Ratification of Appointment of Independent Registered

                      Public Accounting Firm

 

WHAT YOU ARE VOTING ON:   We are asking our stockholders to ratify the appointment of PwC as our independent registered public accounting firm for 2020.

Our Audit Committee is responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting firm retained to perform the audit of our financial statements and our internal control over financial reporting. The Audit Committee has appointed the accounting firm of PwC to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.

Stockholder Ratification of Appointment of Independent Registered Public Accounting Firm

A proposal to ratify the appointment of PwC to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2020 will be presented at the 2020 Annual Meeting. PwC audited our consolidated financial statements for 2017–2019. Representatives of PwC are expected to be present at the meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from stockholders.

Stockholder ratification of the selection of PwC as our independent registered public accounting firm is not mandated by our Bylaws or otherwise required. However, the Board is submitting the selection of PwC to our stockholders for ratification as a matter of good corporate governance. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee at its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and our stockholders’ best interests.

The affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on this matter at the 2020 Annual Meeting, whether in person or represented by proxy, will approve the proposal to ratify PwC as our independent registered accounting firm for the fiscal year ending December 31, 2020.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF OUR APPOINTMENT OF PWC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL YEAR.

 

 

SC 2020 Proxy Statement		21

AUDIT - REPORT OF THE AUDIT COMMITTEE

 

 

AUDIT FEES AND RELATED MATTERS

Audit and Non-Audit Fees

The following tables present fees for professional audit services rendered by PwC for the audits of our annual financial statements and the effectiveness of internal controls for the years ended December 31, 2019 and 2018, and fees for other services rendered by PwC during 2019 and 2018.

 

		2019 ($)				2018 ($)
Audit Fees(1)		7,425,000				7,450,000
Audit-Related Fees(2)		1,625,000				975,000
Tax Fees(3)		150,000				332,167
All Other Fees(4)		7,000				6,827

 

(1)	Represents fees billed, or expected to be billed, for the audit of our financial statements included in our Annual Report on Form 10-K, review of financial statements included in our Quarterly Reports on Form 10-Q, and the audit of our internal control over financial reporting.

 

(2)

Represents fees billed, or expected to be billed, for assurance-related services. Such services during 2019 and 2018 principally included attestation reports required under services agreements, consent to use the auditor’s report in connection with various documents filed with the SEC, comfort letters issued to underwriters for securities offerings, and certain other agreed-upon procedures.

 

(3)	Represents fees billed, or expected to be billed, for tax compliance, tax advice, and tax planning.

 

(4)	Represents fees billed, or expected to be billed, for financial reporting subscription services.

Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditor

The Audit Committee has implemented procedures to ensure that all audit and permitted non-audit services provided to us are pre- approved by the Audit Committee. Specifically, the Audit Committee pre-approves the use of an independent accountant for specific audit and non-audit services, within approved monetary limits. If a proposed service has not been pre-approved, then it must be specifically pre-approved by the Audit Committee before it may be provided by our independent accountant. Any pre-approved services exceeding the pre-approved monetary limits require specific approval by the Audit Committee. The Audit Committee may delegate pre- approval authority to one or more of its members when expedition of services is necessary.

All of the audit-related, tax, and other services provided by PwC to us in 2019 were approved by the Audit Committee by means of specific pre-approvals or under procedures established by the Audit Committee. The Audit Committee has determined that all non-audit services provided by PwC in 2019 were compatible with maintaining its independence in the conduct of its auditing functions.

REPORT OF THE AUDIT COMMITTEE

This report reviews the actions taken by our Audit Committee with regard to the Company’s financial reporting process during 2019 and particularly with regard to the Company’s audited consolidated financial statements as of December 31, 2019 and 2018 and for the three years ended December 31, 2019.

The Audit Committee is comprised of three non-management Board members. The Board has determined that each member of our Audit Committee has no material relationship with the Company under the Board’s director independence standards and that each is independent under the NYSE’s listing standards and the SEC’s standards relating to the independence of audit committees. The Board has also determined that each member is financially literate and that our chair (Mr. Muir) is an “audit committee financial expert” as defined by the SEC.

The Audit Committee operates under a written charter adopted by the Board that is published on the investor relations section of our website at http://investors.santanderconsumerusa.com. The Audit Committee annually reviews its written charter and practices, and has determined that its charter and practices are consistent with the listing standards of the NYSE and the provisions of the Sarbanes- Oxley Act of 2002.

The purpose of the Audit Committee is to assist Board oversight of (i) our independent registered public accounting firm’s qualifications and independence, (ii) the performance of the internal audit function and that of the independent registered public

 

 

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accounting firm, (iii) management’s responsibilities to ensure that there is in place an effective system of controls reasonably designed to safeguard the assets and income of the Company, (iv) the integrity of our financial statements, and (v) compliance with our ethical standards, policies, plans, and procedures, and with laws and regulations.

The Audit Committee discussed with PwC the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC, including PwC’s overall audit scope and audit approach as set forth in the terms of their engagement letter, PwC’s overall audit strategy for significant audit risks identified by them, and the nature and extent of the specialized skills necessary to perform the planned audit. In addition, the Audit Committee monitors the audit, audit-related, and tax services provided by PwC. Details of the fees paid to PwC can be found in this Proxy Statement under “Audit—Audit Fees and Related Matters.”

PwC provided the Audit Committee the written disclosures and the letter required by PCAOB’s Ethics and Independence Rule 3526 (Communications with Audit Committees Concerning Independence), and the Audit Committee discussed and confirmed with PwC their independence. The Audit Committee has considered whether PwC’s provision of any non-audit services to us is compatible with maintaining auditor independence. The Audit Committee has concluded that the provision of any non-audit services by PwC was compatible with PwC’s independence in the conduct of its auditing functions.

Management is responsible for our internal control over financial reporting, the financial reporting process, and our consolidated financial statements. The independent auditor is responsible for performing an independent audit of our consolidated financial statements and of the effectiveness of internal control over financial reporting in accordance with auditing standards promulgated by the PCAOB. Our Internal Audit Department, under the Chief Audit Executive, is responsible to the Audit Committee for preparing an annual audit plan and conducting internal audits intended to evaluate our internal control structure and compliance with applicable regulatory requirements. The members of the Audit Committee are not professionally engaged in the practice of accounting or auditing. As noted above, the Audit Committee’s responsibility is to monitor and oversee these processes.

The Audit Committee regularly meets and holds discussions with our management and internal auditors and with the independent auditor, including sessions with the internal auditors and with the independent auditor without members of management present. Management represented to the Audit Committee that our consolidated financial statements were prepared in accordance with GAAP. The Audit Committee reviewed and discussed our consolidated financial statements with management and PwC.

The Audit Committee also discussed with PwC the quality of our accounting principles, the reasonableness of critical accounting estimates and judgments, and the disclosures in our consolidated financial statements, including disclosures relating to significant accounting policies. Based on the Audit Committee’s discussions with our management, internal auditors, and PwC, as well as a review of the representations given to the Audit Committee and PwC’s reports, the Audit Committee recommended to the Board, and the Board approved, inclusion of the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 27, 2020.

Submitted by the Audit Committee of the Board:

William F. Muir, Chair

Stephen A. Ferriss

Robert J. McCarthy

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or Exchange Act, and shall not otherwise be deemed filed under these Acts.

 

 

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COMPENSATION

Compensation Discussion and Analysis

Executive Summary

Introduction. This CD&A describes the material elements of compensation awarded to, earned by, or paid to each of our NEOs, and focuses on the information contained in the following tables and related footnotes for the year 2019, unless otherwise noted.

 

NAMED EXECUTIVE OFFICER		TITLE
Mahesh Aditya		President and Chief Executive Officer
Fahmi Karam		Chief Financial Officer
Sandra Broderick		Head of Operations
Christopher Pfirrman		Chief Legal Officer, General Counsel and Corporate Secretary
Joshua Baer		Chief Risk Officer
Scott Powell		Former President and Chief Executive Officer
Juan Carlos Alvarez de Soto		Former Chief Financial Officer
Richard Morrin		Former President, Chrysler Capital and Auto Relationships

This CD&A explains the overall objectives of our executive compensation program, how each element of our executive compensation program is designed to satisfy these objectives, and the policies underlying our 2019 compensation program.

The Compensation Committee designs our executive compensation program to be consistent with best practices, support our businesses in achieving their key goals and imperatives, and drive stockholder value. The Compensation Committee believes that our compensation programs, which are intended to comply with all applicable laws, regulations and directives from our regulators, are governed by a set of sound principles and are designed to mitigate excessive risk-taking.

2019 Changes in Leadership. During 2019, we had several key changes in our leadership team.

 

•

Mr. Powell, who had been serving as our President and CEO, resigned from the Company in December 2019. Mr. Aditya was named President and CEO on that date, succeeding Mr. Powell. Mr. Aditya previously served as Chief Risk Officer of our parent, SHUSA, since May 2018.

 

•

Mr. Alvarez de Soto was appointed CFO of SHUSA effective September 2019. Mr. Karam was named as our Chief Financial Officer on that date replacing Mr. Alvarez de Soto. Mr. Karam previously served as our Head of Pricing and Analytics.

 

•

Ms. Broderick has continued in her role as our Head of Operations throughout 2019, and in October 2019 was also appointed as Senior Executive Vice President, Head of Operations for SHUSA.

We believe these leadership transitions have proceeded smoothly. These changes highlight the deep bench of management talent that we and SHUSA have developed and our thoughtful approach to succession planning.

Mr. Aditya received base salary from us for his service in December, but given that he spent most of the year in his SHUSA role, his 2019 annual bonus award was based solely on his service to SHUSA and paid solely by SHUSA. He did not receive an annual bonus award from us for 2019. Because Mr. Alvarez de Soto and Ms. Broderick performed services for both us and SHUSA during 2019, their 2019 annual bonus was paid in part by us and in part by SHUSA. This Proxy Statement reports on the compensation decisions and awards made by the Compensation Committee for these NEOs’ service to SC during 2019, and does not reflect compensation paid by SHUSA for service to SHUSA.

 

 

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2019 Business Performance Highlights. We achieved strong financial performance for 2019, including all-time highs in net income and originations of loans and leases. The following summarizes key highlights from the year:

 

In line with the Compensation Committee’s goal of balancing risk/reward management with income and profitability, the above results were accomplished while also taking a measured approach to originations in a competitive market and improving the credit quality of our balance sheet.

2019 Compensation Highlights. The Compensation Committee’s compensation decisions for 2019 reflect the direct relationship between the pay opportunities for our NEOs and performance for our stockholders. Our NEOs receive bonuses from either the Santander US Executive Incentive Pool (the “SAN US Bonus Pool”) or the SC Executive Bonus Pool (the “SC Bonus Pool”). Both bonus pools take into account to varying degrees the performance of SC, SHUSA, and Santander as a whole. Based on our strong financial performance in an increasingly competitive market, consistent economic stability, robust customer relations, and steady regulatory compliance, and taking into account similar strong performance by SHUSA and Santander as a whole, the SAN US Bonus Pool and the SC Bonus Pool were each funded at approximately 110% of target.

Key Executive Compensation Philosophy and Objectives. The fundamental principles that the Compensation Committee follows in designing and implementing compensation programs for our NEOs are to:

 

»

Attract, motivate, and retain highly skilled executives with the business experience and acumen necessary for achieving our long-term business objectives;

 

»

Link pay to performance and, to an appropriate extent, align the interests of management with those of our stockholders;

 

»

Appropriately balance risk and financial results; and

 

»

Support our core values, strategic mission, and vision.

The Compensation Committee aims to provide a total compensation package (i.e., base salary and target annual bonus) that is comparable to that of other financial institutions with which we compete for business and for talent, taking into account publicly available information provided by Pay Governance, our independent compensation consultant. In 2019, the Compensation Committee took into account SC’s performance and each NEO’s individual performance, level of responsibility, and track record within the organization in setting the NEO’s compensation.

Allocation of Compensation Between SC and SHUSA for Mr. Powell. Prior to his resignation, Mr. Powell served as our CEO and also served as the CEO of our parent, SHUSA. Our Compensation Committee and SHUSA’s Compensation and Talent Management Committee (the “SHUSA Compensation Committee”) jointly determined to allocate Mr. Powell’s 2019 total compensation at 36% to SHUSA and 64% to SC. We jointly decided on these allocations to reflect the percentage of time that Mr. Powell spent working for and with respect to each organization based on time allocation tracking. Due to his resignation, however, he did not receive a 2019

 

 

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annual bonus award from either us or SHUSA. He also did not receive any severance or other payments in connection with his resignation, and all of his outstanding, unvested deferred cash and equity awards were forfeited in accordance with their terms.

2019 Compensation Actions

How we compensated our NEOs

 

MAHESH ADITYA		TITLE: President and Chief Executive Officer
As discussed in “Compensation Discussion and Analysis—Executive Summary—2019 Changes in Leadership,” Mr. Aditya became our President and CEO in December 2019. His annual rate of salary for that role was set at $1,550,000, although he only received salary payments for December from us. Given that Mr. Aditya spent most of the year in his SHUSA role, his 2019 annual bonus award was based solely on his service to SHUSA and paid solely by SHUSA. He did not receive an annual bonus award from us for 2019.

 

FAHMI KARAM		TITLE: Chief Financial Officer
In accordance with the terms of his July 2019 offer letter related to his new role as our CFO, Mr. Karam is paid base salary at the annual rate of $750,000 beginning in September 2019. Before that date his base salary was earned at the annual rate of $650,000. His July 2019 offer letter also states that his target annual bonus for 2019 is $650,000. For 2019, Mr. Karam received an annual bonus award of $700,000 (107.69% of Mr. Karam’s target bonus), which was provided in a mix of current and deferred cash and RSU awards.   In setting Mr. Karam’s compensation for 2019, the Compensation Committee, among other items, considered:   »  Improved the financial leverage position of the company and delivered Capital Contribution targets;   »  Optimized and expanded current origination partners with Chrysler, NMAC, Carmax and national dealer groups;   »  Successful execution of the FCA amendment; and   »  Finalization and implementation of pricing models.

 

SANDRA BRODERICK		TITLE: Head of Operations
In accordance with the terms of her October 2019 offer letter, Ms. Broderick is paid base salary at the annual rate of $1,000,000 beginning as of October 2019. Before that date her annual rate of base salary was $850,000. Her offer letter also increased her target annual bonus from $1,000,000 to $1,150,000 effective in October 2019, for a blended total target bonus for 2019 of $1,037,500. The Compensation Committee and the SHUSA Compensation Committee jointly determined to allocate Ms. Broderick’s 2019 total compensation, taking into account her time allocated to SC and SHUSA during the 4th quarter. As a result, she received an annual bonus award from us for 2019 of $1,146,000 (about 116% of Ms. Broderick’s target bonus prorated for the time allocated to SHUSA during the 4th quarter), which was provided in a mix of current and deferred cash and RSU awards. In addition, per the terms of her original offer letter, Ms. Broderick received the final $150,000 installment of a cash sign-on bonus.   In setting Ms. Broderick’s annual bonus award for 2019, the Compensation Committee, among other items, considered:   »  Creation of a digital roadmap including initiatives that drive cost savings through customer self-service;   »  Rolled out Dealer Management program strengthening dealer oversight;   »  Significant momentum and traction on addressing regulatory matters; and   »  Improvement of both dealer and consumer satisfaction scores.

 

 

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CHRISTOPHER PFIRRMAN		TITLE: Chief Legal Officer, General Counsel, and Corporate Secretary
For 2019, the Company provided Mr. Pfirrman with a base salary of $659,018. Ms. Pfirrman was also compensated with an annual bonus award of $650,000 (113.04% of Mr. Pfirrman’s target bonus), provided in a mix of current and deferred cash and RSU awards.   In setting Ms. Pfirrman’s annual bonus award for 2019, the Compensation Committee, among other items, considered:   »  Improved state and federal regulatory change management;   »  Pursued resolution of significant litigation and derivative matters;   »  Revived and operationalized SC Foundation and the Corporate Giving Area; and   »  Optimization and transformation of the Chrysler agreement.

 

JOSHUA BAER		TITLE: Chief Risk Officer
For 2019, Mr. Baer received a base salary at the annual rate of $700,000, increased to $750,000 effective August 2019, as well as an annual bonus award of $350,000 (140% of Mr. Baer’s target bonus), which was provided in a mix of current and deferred cash and RSU awards. In addition, per the terms of his February 2018 offer letter, Mr. Baer received the first $45,000 installment of a cash sign-on bonus, with a final $20,000 installment payable in February 2020.   In setting Mr. Baer’s compensation for 2019, the Compensation Committee, among other items, considered:   »  Completed and socialized a downturn playbook and early warnings monitoring;   »  Rebuild of risk organization;   »  Commitment regarding regulatory matters; and   »  Enhancement and improvement of analytical output and models.

 

SCOTT POWELL		TITLE: Former President and Chief Executive Officer
As discussed in “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell,” Mr. Powell’s 2019 compensation was allocated 36% to SHUSA and 64% to us. Mr. Powell received a base salary at the annual rate of $3,000,000 for his work as CEO of both SHUSA and SC during 2019. The Summary Compensation Table shows the portion of that base salary allocated to us and paid in 2019 through his resignation date. Because he resigned, he did not receive an annual bonus award from us or SHUSA for 2019. He also did not receive any severance or other payments in connection with his resignation, and all of his outstanding, unvested deferred cash and equity awards were forfeited.

 

JUAN CARLOS ALVAREZ DE SOTO		TITLE: Former Chief Financial Officer
For 2019, Mr. Alvarez de Soto received a base salary at the annual rate of $1,000,000 through the date he transitioned to his SHUSA role in September 2019. He also received an annual bonus award of $633,988 (147% of Mr. Alvarez de Soto’s target bonus prorated for the portion of the year allocated to SHUSA), which was provided in a mix of current and deferred cash and RSU awards. As discussed in “Compensation Discussion and Analysis—Executive Summary—2019 Changes in Leadership,” Mr. Alvarez de Soto was also eligible for an annual bonus award from SHUSA for his service to SHUSA during the year after his role change in September 2019.   In setting Mr. Alvarez de Soto’s compensation for 2019, the Compensation Committee, among other items, considered:   »  Ability to meet capital generation targets;   »  Delivered budget through disciplined financial management and support of SC’s business initiatives;   »  Improvements in managerial reporting and forecasting process; and   »  Leadership through a challenging environment and complicated situations.

 

 

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RICHARD MORRIN		TITLE: Former President, Chrysler Capital and Auto Relationships
Mr. Morrin left the Company in September 2019. For 2019, Mr. Morrin received base salary at the annual rate of $850,000 through his departure date. Mr. Morrin was not eligible for a 2019 annual bonus award. He also did not receive any severance or other payments in connection with his resignation, and all of his outstanding, unvested deferred cash and equity awards were forfeited.

 

 

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PROCESS FOR DETERMINING EXECUTIVE COMPENSATION

Compensation Committee

The Compensation Committee retains the final authority regarding and ultimately sets the compensation for our executive officers, including our NEOs, and has oversight of, among other things, adoption, modification, and termination of the terms of our executive incentive plans, and approval of amounts paid to our NEOs under those plans. The Compensation Committee operates under a written charter adopted by the Board that is published on the investor relations section of our website at http://investors.santanderconsumerusa.com. Pursuant to its charter, the Compensation Committee may delegate responsibilities to subcommittees consisting of one or more of its members, who must report on their activities to the Compensation Committee.

Banco Santander’s Board Remuneration Committee (the “Santander Remuneration Committee”) and Board of Directors as well as the SHUSA Compensation Committee also review, validate and approve the compensation provided to certain members of our team.

The Compensation Committee conducts an in-depth assessment of each NEO’s performance against his or her individual goals, as well as against SC’s performance, and then applies its judgment to make compensation decisions. The Compensation Committee utilizes a formula to approve a bonus pool for executive officers and certain other senior members of management (please see “Principal Components of Executive Compensation—Annual Bonuses—Bonus Pools” in this CD&A for further information), but does not otherwise rely on a formula or matrix to make individual compensation decisions. The Compensation Committee believes this process provides accountability for performance against SC and individual goals and enables the Compensation Committee to assess effectively the quality of the performance and leadership demonstrated by each NEO. Importantly, the Compensation Committee believes that the process also differentiates among each NEO’s performance and motivates each NEO’s short-term and long-term results as well as promotes innovation and business transformation within SC.

To advise the Compensation Committee in fulfilling its duties and responsibilities, the Compensation Committee has retained Pay Governance LLC (“Pay Governance”) for the last several years to act as its independent consultant and advise on executive compensation. Pay Governance reports directly to the Compensation Committee and performs no other work for SC. As part of its engagement of Pay Governance, each year the Compensation Committee analyzes Pay Governance’s independence from management and whether hiring Pay Governance would raise a conflict of interest. The Compensation Committee performed this analysis by taking into consideration the following factors set forth in Section 303A.05 of the NYSE Listed Company Manual:

 

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Any other services provided to us by Pay Governance;

 

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The amount of fees Pay Governance received from us as a percentage of Pay Governance’s total revenue;

 

»

Policies and procedures Pay Governance utilizes to prevent conflicts of interest;

 

»

Any business or personal relationship of the individual compensation advisor of Pay Governance with any member of the Compensation Committee or an executive officer of ours;

 

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Any business or personal relationship of Pay Governance with an executive officer of ours;

 

»

Any SC stock owned by Pay Governance or the Compensation Committee’s individual advisor at Pay Governance; and

 

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Any business or personal relationship of Pay Governance with an executive officer of ours.

The Compensation Committee determined, based on its analysis of the above factors, that Pay Governance is independent from management and that the work of Pay Governance and the individual compensation advisors employed by Pay Governance as compensation consultants to the Compensation Committee have not presented any conflict of interest.

Compensation Peer Group

Pay Governance assisted the Compensation Committee in 2019 by providing market and industry information regarding executive compensation as a market-check for Compensation Committee decisions. To facilitate this review, Pay Governance recommended that the Compensation Committee establish a customized peer group that considers the scale and nature of our business. Based on that review, the Compensation Committee approved a peer group comprised of comparable auto-lending businesses in the U.S. with a similar asset size to SC. These businesses are captive subsidiaries of automotive companies or auto lending units of diversified lenders. Each of the peer businesses participate in pay surveys prepared by McLagan Partners. Pay Governance reviews McLagan survey data for corresponding job functions similar to our NEOs, and for our CEO and CFO positions, also provides broader public company compensation data based on publicly available proxy statement information.

 

 

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The peer group used by the Compensation Committee for 2019 pay decisions for the NEOs was as follows:

 

AUTO LENDING SUBSIDIARIES (“CAPTIVES”)		AUTO LENDING UNITS OF DIVERSIFIED LENDERS
American Honda Motors		Ally Financial
BMW Financial Services		BBVA Compass
Daimler Financial Services		Bank of America
Ford Motor Company		Capital One
GM Financial		Citigroup
Hyundai Capital America		JP Morgan Chase
Nissan North America		Synchrony Financial
Toyota Financial		US Bancorp
Volkswagen Credit		Wells Fargo

While the Compensation Committee considered all relevant information, including the data provided by Pay Governance for the peer group, it did not target specific benchmarks or levels of market pay when setting NEO compensation for 2019.

Consideration of Say-on-Pay Vote

The Compensation Committee values input from our stockholders on our executive compensation program and our principles and objectives when determining executive compensation. One way the Compensation Committee receives that input is through the results of an advisory stockholder vote on executive compensation (the “Say-on-Pay vote”). We hold a Say-on-Pay vote every three years, most recently in 2018, based on the preference expressed by our stockholders at our 2015 Annual Meeting. In the 2018 Say-on-Pay vote, a significant majority of our stockholders (over 98% of votes cast) approved, on an advisory basis, the compensation for our NEOs. The Compensation Committee did not take any specific actions with respect to 2019 compensation decisions for our NEOs as a result of the 2018 Say-on-Pay vote. Our next Say-on-Pay vote is expected to be held at our 2021 Annual Meeting, at which time we expect to also hold an advisory vote on the frequency of future Say-on-Pay votes.

 

 

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PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION

Overview of Components

The Compensation Committee uses the following elements of compensation to attract and retain NEOs and maintain a stable team of effective leaders, to balance the compensation of our NEOs with the short-term and long-term objectives of SC, and to align the interests of our NEOs with the interests of all of our stockholders. For 2019, the compensation that we paid to our NEOs consisted primarily of base salary and short- and long-term incentive opportunities, as described more fully below. In addition, our NEOs were eligible for participation in company-wide retirement, health and welfare benefits plans, and provided with certain health and welfare benefits and perquisites not available to our employees generally, as described more fully below. The principal elements of compensation available to our NEOs in 2019 were as follows:

 

ELEMENT		DESCRIPTION AND PURPOSE
Base Salary		»		Fixed cash compensation component that reflects the NEO’s position and responsibilities.
		»		Offers stability for NEOs.
Annual Bonus		»		Annual bonus program designed to motivate and reward the achievement of SC, SHUSA, Santander and/or individual performance goals.
		»		The annual bonus is comprised of both short-term and long-term incentives. A portion of the bonus is deferred in cash and equity as part of a balanced design intended to appropriately balance compensation risk. Payment of the deferred cash and equity is specifically conditioned upon the absence of several negative risk and/or legal events as set forth in the Santander US Policy on Malus and Clawback Requirements, including, but not limited to, any of the following: (i) material failures with respect to risk management by us and any of our affiliates; (ii) any material, negative restatement of our financial statements as a result of activities carried out on or after January 1, 2019; (iii) material breach of any of our internal rules or regulations; or (iv) a material, negative change in our capitalization or risk profile.
		»		In 2020, the Compensation Committee awarded bonuses to our NEOs for their performance in 2019 based upon a bonus pool methodology adopted by the Compensation Committee. For bonuses awarded to Ms. Broderick, Mr. Pfirrman, and Mr. Alvarez de Soto, a portion of the deferred cash and RSUs are also subject to future Banco Santander and SC performance goals to further encourage long-term, sustainable performance.
Long-Term Incentive Compensation		»		In November 2016, we made final grants of performance-based RSUs (PSUs) under the SAN Performance Award program to certain NEOs. Vesting of those awards ended in 2019.
		»		Sometimes used with new hires in order to replace lost compensation opportunities with prior employers.
		»		Aligns long-term NEO and stockholder interests and encourages retention.
SRIP Awards		»		The Compensation Committee, in conjunction with SHUSA, adopted the SRIP to incentivize and reward our NEOs for meeting key regulatory commitments, as part of our long-term business strategy. No SRIP awards were made for performance year 2019. Instead, the final award opportunity was extended through December 31, 2020.
		»		Aligns long-term NEO and stockholder interests, encourages retention, and incentivizes achievement of regulatory goals.
Retirement Benefits; Health and Welfare Benefits; Perquisites		»		Provide NEOs with stability during employment and into retirement and are competitive with overall market practices.
Employment Agreements and Severance Policy		»		Severance benefits provided to NEOs upon certain terminations of employment.
		»		Facilitates retention of NEOs by providing income stability in the event of job loss.

 

 

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Base Salary

Base salary reflects each NEO’s level of responsibility, leadership, and tenure, as well as the Compensation Committee’s evaluation of each NEO’s contribution to the performance and profitability of SC. In establishing each NEO’s annual base salary, the Compensation Committee considered market salary data, our budget, achievement of performance objectives, and our CEO’s assessment of the other NEOs’ performance.

The following table provides detail regarding each NEO’s annual base salary rate for 2019:

 

NEO		ANNUAL BASE SALARY RATE ($)*
Mahesh Aditya		1,550,000
Fahmi Karam		750,000
Sandra Broderick		1,000,000
Christopher Pfirrman		659,018
Joshua Baer		750,000
Scott Powell		3,000,000
Juan Carlos Alvarez de Soto		1,000,000
Richard Morrin		850,000

 

*

This table provides the annual base salary rate for each NEO as of December 31, 2019 (or the last day employed by SC, if earlier). The base salary actually paid to each NEO in 2019 is reflected in the Summary Compensation Table below. The following summarizes changes to base salary rates during 2019 for the NEOs:

 

»

Mr. Aditya’s 2019 base salary for his role as our President and Chief Executive Officer became effective upon his appointment to that role in December 2019.

 

»

Mr. Karam’s base salary annual rate was increased effective September 2019 in connection with his appointment as our Chief Financial Officer. Before that date, he received base salary at the annual rate of $650,000.

 

»

Ms. Broderick’s 2019 base salary annual rate became effective October 2019 in connection with her appointment as SHUSA’s Head of Operations. Her base salary annual rate before that date was $850,000. As described above in “Compensation Discussion and Analysis—2019 Compensation Actions—How we compensated our NEOs,” the Compensation Committee and the SHUSA Compensation Committee jointly determined to allocate Ms. Broderick’s 2019 total compensation taking into account her time allocation to SC and SHUSA during the 4th quarter. The amount of base salary included in the Summary Compensation Table for Ms. Broderick reflects this allocation.

 

»

Mr. Baer’s base salary annual rate was increased effective August 2019. Before that date he received base salary at the annual rate of $700,000.

 

»

As described above in “Compensation Discussion and Analysis—Executive Summary—Allocation of Compensation Between SC and SHUSA for Mr. Powell.” the Compensation Committee and the SHUSA Compensation Committee jointly determined to allocate Mr. Powell’s 2019 base salary at 36% to SHUSA and 64% to us.

 

»

The base salary annual rate for Mr. Alvarez de Soto is the rate that applied during 2019 through September 2019 when he transferred to become SHUSA’s Chief Financial Officer.

Annual Bonuses

Introduction. For 2019, the annual compensation of our NEOs included bonuses payable in cash and equity under SC’s 2019 Executive Incentive Plan (the “Bonus Plan”).

The Bonus Plan is intended to provide an incentive for superior work and to motivate covered key executives toward even greater achievement and business results, to tie their goals and interests to the long-term interests of our stockholders, and to enable us to attract and retain highly-qualified executives. Under the Bonus Plan, our executive officers, including our NEOs and certain senior members of management, are eligible to receive bonus payments for a specified period (for example, our fiscal year), which may be performance-based or discretionary.

 

 

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Individual Bonus Targets. The Compensation Committee assigned to each NEO a target bonus award opportunity under the Bonus Plan for 2019 based on the NEO’s role and responsibilities, rate of base salary, and competitive practices at our compensation peer groups. As noted above, (i) Mr. Aditya was not eligible for an annual bonus from SC for 2019 given his December 2019 start date with SC, and (ii) Mr. Powell and Mr. Morrin were not considered for an annual bonus for 2019 given their departures from the Company during the year. The following table provides detail regarding each of the other NEO’s target bonus under the Bonus Plan for 2019:

 

NEO		TARGET BONUS ($)
Fahmi Karam		650,000
Sandra Broderick*		1,037,500
Christopher Pfirrman		575,000
Joshua Baer		250,000
Juan Carlos Alvarez de Soto**		575,000

 

*	Ms. Broderick’s 2019 SC bonus target represents nine months at the rate of $1,000,000 and three months at the rate of $1,150,000, as adjusted in connection with her appointment as SHUSA’s Head of Operations, before taking into account her time allocation to SC and SHUSA during the 4th quarter.

 

**	This amount represents the annual bonus opportunity for Mr. Alvarez de Soto for 2019 in his role as our Chief Financial Officer. This amount was prorated for 2019 to $431,250 to reflect the nine months he served in that role before his appointment as SHUSA’s Chief Financial Officer.

Bonus Pools. Bonus awards to the NEOs who are designated as senior executives by Santander are funded under the SAN US Bonus Pool, and bonus awards to our other NEOs are funded under the SC Bonus Pool. The funding of each bonus pool takes into account a scorecard of performance factors to varying degrees across SC, SHUSA, and Santander as a whole. For 2019, Ms. Broderick, Mr. Pfirrman, and Mr. Alvarez de Soto were designated to have their bonuses funded out of the SAN US Bonus Pool. Mr. Karam and Mr. Baer were designated to have their bonuses funded out of the SC Bonus Pool. In addition to having bonuses funded from a different pool, NEOs subject to the SAN US Bonus Pool may have a longer vesting period and the addition of performance conditions as part of the deferred portion of their bonus awards, as described below.

SAN US Bonus Pool. The SAN US Bonus Pool was used by SC as a methodology for setting the overall funding of Bonus Plan awards with respect to 2019 for Ms. Broderick, Mr. Pfirrman, and Mr. Alvarez de Soto. The SAN US Bonus Pool is also utilized by SHUSA as its methodology for setting the overall funding for annual bonus awards for its executive officers and certain other members of senior management.

The SAN US Bonus Pool funding is determined through a scorecard, which is primarily driven by a quantitative (mathematically informed) score, and is then adjusted by qualitative and discretionary measures. Santander developed the scorecard metrics to measure performance on an aggregate basis over the full year. For 2019, 70% of the SAN US Bonus Pool was determined by Santander’s consolidated results in the United States (“Santander US”) and 30% of the pool was determined by Santander’s global results. Because the SAN US Bonus Pool is primarily based upon the consolidated performance results of Santander in the United States, it therefore takes into account SC’s contribution to Santander’s performance.

 

 

SC 2020 Proxy Statement		33

COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

 

The Santander Remuneration Committee and the SHUSA Compensation Committee approved the following metrics for the SAN US Bonus Pool for 2019:

 

SAN US BONUS POOL METRIC		WEIGHTING OF SAN US BONUS POOL METRIC
Customers		20%
Net Promoter Score / Customer Satisfaction		10%
Number of Loyal Customers		10%
Risk		10%
Cost of Credit Ratio(1)		5%
Non-Performing Loans Ratio(1)		5%
Capital		20%
Contribution to Banco Santander Group Capital		20%
Profitability		50%
Net Profit(1)		20%
ROTE(1)		30%
Qualitative Adjustment		+/- 25%

 

(1)

Santander US generally assesses its performance based on financial measures calculated under GAAP. However, due to our relationship with Banco Santander, for purposes of the 2019 SAN US Bonus Pool, financial measures were calculated under International Financial Reporting Standards (“IFRS”). Differences between IFRS and GAAP in the accounting treatment of certain transactions can result in differences between financial measures calculated under IFRS and those calculated under GAAP. We believe using financial measures calculated under IFRS rather than GAAP did not significantly impact the Compensation Committee’s ability to assess our NEOs’ performance for purposes of determining 2019 SAN US Bonus Pool awards.

”Cost of Credit Ratio” is defined as the ratio of the sum of total provision to average customer loan balances (excluding allowances for loan and lease losses on the public balance sheet). “Non-Performing Loans Ratio” is defined as the balance of non-performing loans divided by total loan balances (without allowances for loan and lease losses) plus guarantees. “Net Profit” is defined as net profit after tax and prior to minority interests. “ROTE” (or “return on tangible equity”) is defined as net profit divided by the percentage of tangible equity times the 13-month average risk-weighted assets. Under certain banking regulators’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together with the measure for market risk, resulting in our total risk-weighted assets.

For 2019, Santander US performed above target on its Net Profit and ROTE goals. For purposes of the SAN US Bonus Pool, the Compensation Committee considered:

 

»

A Net Profit for 2019 for SHUSA of $1.037 billion, which was slightly above SHUSA’s 2019 goal Net Profit of $1.030 billion, and

 

»

A ROTE for 2019 for SHUSA of 6.85%, which was slightly below SHUSA’s 2019 goal ROTE of 6.95%.

For the Customers metrics, Santander US performed above target for both categories, Net Promoter Score / Customer Satisfaction and Number of Loyal Customers. For the Risk metric, SHUSA performed above target in both categories, Cost of Credit Ratio and Non-Performing Loans Ratio. On the Capital metric, Santander US performed below target for SHUSA’s contribution to Banco Santander Group Capital.

 

 

34		SC 2020 Proxy Statement

COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

 

The final calculated score of the SAN US Bonus Pool before the exercise of any discretionary adjustment was 101.2%. The SAN US Bonus Pool provides that this final calculated score may be adjusted by the Santander Remuneration Committee, in consultation with Santander’s control functions, by up to 25% based on certain qualitative factors. For 2019, the Santander Remuneration Committee considered five qualitative factors relating to risk, capital sustainability and execution of capital plan, financial results and costs, and certain financial benchmarks and determined that an adjustment of 8.2% was appropriate. Additionally, the SAN US Bonus Pool provides that the Santander Remuneration Committee may, in its discretion, make general risk and control adjustments or other exceptional adjustments to the SAN US Bonus Pool funding level. The Santander Remuneration Committee did not exercise its discretion to make any further adjustments to the SAN US Bonus Pool for 2019.

 

SAN US BONUS POOL METRIC		RESULTS					TARGET WEIGHTING					FINAL SAN US BONUS POOL
Customers							20%					22.0%
Net Promoter Score / Customer Satisfaction		Above target					10%					11.0%
Number of Loyal Customers		Above target					10%					11.0%
Risk							10%					12.3%
Cost of Credit Ratio		Above target					5%					5.6%
Non-Performing Loans Ratio		Above target					5%					6.7%
Capital							20%					17.2%
Contribution to Banco Santander Group Capital		Below target					20%					17.2%
Profitability							50%					49.7%
Net Profit		Slightly above target					20%					20.1%
ROTE		Slightly below target					30%					29.6%
Qualitative Adjustment		Applied					+/- 25%					+8.2%
TOTAL BEFORE SANTANDER WEIGHTING												109.4%
TOTAL AFTER SANTANDER WEIGHTING												110.45%

This Santander US achievement of 109.4% was weighted 70% and added to Santander’s overall achievement of its goals for 2019 at 113% of target, weighted 30%, for an overall SAN US Bonus Pool funding at 110.45% of target.

 

 

 

SC 2020 Proxy Statement		35

COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

 

SC Bonus Pool. The Compensation Committee approved the SC Bonus Pool as a methodology for setting the overall funding of Bonus Plan awards with respect to 2019 for our certain of our executive officers that were not covered by the SAN US Bonus Pool, including Mr. Karam and Mr. Baer. The target amount of the SC Bonus Pool is the sum of the individual target bonus amounts. The SC Bonus Pool methodology incorporates a balanced, “scorecard” approach that considers our financial performance against budgeted financial goals, as well as performance related to customer satisfaction, regulatory compliance, employees, and culture. The Compensation Committee approved the following metrics for the SC Bonus Pool for 2019:

 

SC BONUS POOL METRIC		WEIGHTING OF SC BONUS POOL METRIC
Customers & Employees		20%
Consumer Customer Satisfaction		5%
Chrysler Capital (CCAP) Dealer Loyalty		5%
Core Dealer Satisfaction		5%
Employee Engagement		5%
Regulatory & Risk		25%
Cost of Credit Ratio(1)		10%
Completed Action Plans for Regulatory Commitments and Written Agreements		10%
Non-Performing Loans Ratio(1)		5%
Profitability		55%
Net Profit(1)		25%
ROTE(1)		30%
SHUSA Scorecard Modifier		Formulaic
Discretionary Adjustment		+/- 25%

 

(1)

We generally assess our performance based on financial measures calculated under GAAP. However, due to our relationship with Banco Santander, for purposes of the 2019 SC Bonus Pool, financial measures were calculated under International Financial Reporting Standards (“IFRS”). Differences between IFRS and GAAP in the accounting treatment of certain transactions can result in differences between financial measures calculated under IFRS and those calculated under GAAP. We believe using financial measures calculated under IFRS rather than GAAP did not significantly impact the Compensation Committee’s ability to assess our NEOs’ performance for purposes of determining 2019 SC Bonus Pool awards.

”Cost of Credit Ratio” is defined as the ratio of the sum of total provision to the average customer loan balances (excluding allowances for loan and lease losses on the public balance sheet). “Non-Performing Loans Ratio” is defined as the balance of non-performing loans divided by total loan balances (without allowances for loan and lease losses) plus guarantees. “Net Profit” is defined as net profit after tax and prior to minority interests. “ROTE” (or “return on tangible equity”) is defined as net profit divided by the percentage of tangible equity times the 13-month average risk-weighted assets. Under certain banking regulators’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together with the measure for market risk, resulting in our total risk-weighted assets.

For 2019, we performed above target on our Net Profit and ROTE goals. For purposes of the Bonus Plan, the Compensation Committee considered:

 

»

A Net Profit for 2019 of $892 million, which was above our 2019 goal Net Profit of $851 million, and

 

»

A ROTE for 2019 of 13.09%, which was above our 2019 goal ROTE of 12.55%.

For the Regulatory & Risk metric, we performed above target in two of the three categories, Cost of Credit Ratio and Non-Performing Loans Ratio. On the Customers & Employees metric, we performed above target on two of the four categories, Consumer Customer Satisfaction and Employee Engagement.

The final calculated score of the SC Bonus Pool before the exercise of any discretionary adjustment was 103.3%. The SC Bonus Pool

provides that this final calculated score be calculated by adding our bonus plan score, multiplied by 80%, and the final score under SAN US Bonus Pool, multiplied by 20%. After reviewing the SAN US Bonus Pool score, the Compensation Committee determined that an adjustment of +0.1% was appropriate under this formulaic modifier.

 

 

 

36		SC 2020 Proxy Statement

COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS

 

 

While some of the metrics for the SC Bonus Pool were below target, net income and ROTE were strong in an increasingly competitive market and our NEOs made significant strides in achieving their individual goals, instilling a culture of compliance and balancing risk/reward management with income and profitability. As noted above, the Compensation Committee may use its discretion to adjust the final SC Bonus Pool funding up or down by 25 percentage points in either direction. Taking into account SC’s strong financial performance, the Compensation Committee in its discretion determined that the SC Bonus Pool should be increased by 6.66% and funded at 110% of target for 2019, summarized as follows:

 

SC BONUS POOL METRIC		RESULTS					TARGET WEIGHTING					FINAL SC BONUS POOL
Customers & Employees							20%					20.3%
Consumer Customer Satisfaction		Slightly above target					5%					5.3%
CCAP Dealer Loyalty		Slightly below target					5%					4.8%
Core Dealer Satisfaction		Below target					5%					4.4%
Employee Engagement		Above target					5%					5.8%
Regulatory & Risk							25%					25.5%
Cost of Credit Ratio		Above target					10%					10.9%
Completed Action Plans for Regulatory Commitments and Written Agreements		Below target					10%					7.9%
Non-Performing Loans Ratio		Above target					5%					6.7%
Profitability							50%					57.5%
Net Profit		Above target					25%					26.2%
ROTE		Above target					30%					31.3%
SAN US Bonus Pool Scorecard Modifier		Applied					+/- 20%					+0.1%
Discretionary Adjustment		Exercised					+/- 25%					+6.6%
TOTAL												110%

Individual Performance Assessments and Award Determinations. As described above, our performance resulted in an approved funding of 110.45 and 110% of the targets for the SAN US Bonus Pool and the SC Bonus Pool, respectively. The applicable bonus pool percentages are multiplied by the target bonus amount of each executive officer, including each NEO, to establish an initial starting point for each executive’s annual bonus amount.

Each executive’s award under the Bonus Plan is subject to a discretionary adjustment, either positive or negative, based on the evaluation of the executive’s performance by the Compensation Committee. The Compensation Committee believes that this individual performance review and these discretionary adjustments serve stockholder interests by providing the Compensation Committee with a means to differentiate compensation outcomes among our NEOs based on the quality of the performance and leadership demonstrated by each NEO.

The Compensation Committee conducted a detailed evaluation and assessment of each NEO’s 2019 performance against pre-established performance measures that were tied to financial performance and strategic initiatives, including risk and compliance measures. Please see “2019 Compensation Actions” in this CD&A for the additional information on the individual performance goals and assessments.

 

 

SC 2020 Proxy Statement		37