UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No. )

 

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Notice is hereby given that the 2020 Virtual Annual Meeting of Stockholders of CDK Global, Inc. (the “Company,” “CDK Global,” “us,” “our” or “we”), will be held on November 12, 2020 at 9:00 a.m. central time at www.virtualshareholdermeeting.com/CDK2020 (the “Annual Meeting”). This Annual Meeting will be a completely virtual, live, audio webcast meeting of stockholders. There will be no physical location for stockholders to attend.

The items of business are:

All stockholders of record of our common stock at the close of business on September 18, 2020, the record date, are entitled to notice of and to vote at the Annual Meeting and any adjournments thereof.

September 29, 2020

Hoffman Estates, Illinois

 

Lee J. Brunz

Executive Vice President, General Counsel and Secretary

SEC rules permit companies to furnish proxy materials to their stockholders over the internet. This expedites stockholders’ receipt of proxy materials, lowers annual meeting costs and conserves natural resources. We are therefore mailing stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of the proxy statement and our Annual Report on Form 10-K. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy materials online, vote and (if desired) obtain a paper copy of our proxy materials. This Notice of Internet Availability of Proxy Materials will first be mailed to stockholders on or about October 2, 2020.

Your vote is important, and we urge you to vote as promptly as possible by using the internet, by telephone, or by signing, dating and returning the proxy card mailed to you if you received a paper copy of this proxy statement.

Stockholders are being asked to vote on the following matters at the Annual Meeting:

You may cast your vote in any of the following ways:

This proxy statement contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made in this document, other than statements of historical fact, may be forward-looking statements. These statements are based on management's expectations and assumptions as of the date of this filing and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed, or implied by, these forward-looking statements. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for fiscal 2020 under the heading “Risk Factors.” We disclaim any obligation to update or revise forward-looking statements that may be made to reflect new information or future events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law. As used herein, “CDK Global,” “CDK,” the “Company,” “we,” “our,” and similar terms include CDK Global, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.

Upon the recommendation of the nominating and governance committee, the CDK Global Board of Directors (the “Board”) has nominated nine directors for election at the Annual Meeting. Each nominee is currently serving as one of our directors. If you re-elect them, they will hold office until our next annual meeting of stockholders or until their successors have been elected and qualified. If any of the nominees should for any reason be unable or unwilling to serve as of the Annual Meeting, the Board may designate a substitute nominee or reduce the size of the Board. If the Board designates a substitute nominee, the proxies will be voted for the election of such other person.

The nominating and governance committee and the Board look for current and potential directors collectively to have a mix of skills, experience, qualifications, and attributes that strike the right balance between long-term understanding of our business and fresh external perspectives, and that ensure we have a well-rounded, diverse Board that functions effectively as a unit. Recognizing that the selection of qualified directors is complex and crucial to our long-term success, the Board and the nominating and governance committee have established the Board composition and refreshment processes as described beginning on page 11 of this proxy statement.

All nine of our nominees are seasoned leaders, the majority of whom are or were chief executive officers or other senior executives. Collectively, they bring to the Board a balanced mix of skills, experience, and qualifications gained during their tenure at a wide array of public companies, private companies, non-profits, and other organizations. The following graphics summarize the average age, independence, demographic diversity, skills, experience and qualifications of the nominees, and highlight the balanced mix of skills, experience, and qualifications of the Board as a whole. This high-level summary is not intended to be an exhaustive list of the nominees' collective skills, experience, and qualifications, or their contributions to the Board. On the following pages we have indicated for each nominee certain of the specific skills, experience, and qualifications that led the nominating and governance committee and the Board to conclude that the nominee should continue to serve as a director.

 

The Board and the nominating and governance committee believe that the following director nominees possess the necessary skills, experience, qualifications, and attributes to provide effective oversight of the business and quality advice and counsel to our management to ensure accountability to our stockholders:

The following pages present information regarding each director nominee, including information about each nominee’s professional experience, areas of expertise, background, and qualifications that led the Board to nominate him or her for election. The following also includes information about all public company directorships each nominee currently holds.

 

 

 

 

 

 

 

 

 

Our by-laws provide that directors are elected by a majority of votes cast unless the number of nominees exceeds the number of directors to be elected, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a director exceeds the number of votes cast “against” the director; abstentions are not counted either “for” or “against.” If an incumbent director in an uncontested election fails to receive a majority of votes cast for his or her election, the director is required to offer to tender his or her resignation to the Board for consideration by the nominating and governance committee. The nominating and governance committee will make a recommendation to the Board as to whether to accept or reject the resignation or to take other action. The Board is required to review and act on this recommendation within 90 days of the date of the certification of election results.

Recognizing that the selection of qualified directors is complex and crucial to our long-term success, the nominating and governance committee has established director selection and membership criteria for membership on the Board. When considering current directors for re-nomination to the Board, the nominating and governance committee assesses changes to any director’s skills, experience, qualifications, and attributes, including their independence, and takes into account the performance of each director, which is part of the committee’s annual Board evaluation process. The nominating and governance committee then recommends actions for the Board to consider and adopt as it sees fit.

The nominating and governance committee has not established specific minimum age, education, skill, experience, or qualification requirements for potential members. Instead, the nominating and governance committee reviews the composition of the Board in light of the Company’s current challenges and needs and the current challenges and needs of the Board. Based on this review, the Board then determines whether it may be appropriate to add or remove individuals after considering, among other things, the need for audit committee expertise and issues of independence, viewpoint and demographic diversity, judgment, character, reputation, age, skills, education, training, background, and experience. All potential candidates should also possess the following personal characteristics: (i) business community respect for his or her integrity, ethics, principles, insights, and analytical ability; and (ii) ability and initiative to frame insightful questions, speak out, and challenge questionable assumptions and disagree without being disagreeable. The nominating and governance committee values viewpoint and demographic diversity as a factor in selecting nominees to serve on the Board and considers the criteria noted above in selecting nominees for directors, including members with diverse demographic attributes, and members from diverse backgrounds who combine a broad spectrum of experience and expertise. The nominating and governance committee believes that the Board, as currently constituted, is well-balanced and that it fully and effectively addresses our needs.

Nominations of candidates for the Board by our stockholders for consideration at our 2021 Annual Meeting of Stockholders are subject to the deadlines and other requirements described beginning on page 60 of this proxy statement.

The nominating and governance committee oversees an annual self-assessment process, whereby each director is surveyed to obtain his or her evaluation of the Board as a whole and the committees on which he or she serves. The surveys solicit ideas from the directors about, among other things, improving quality of Board and committee discussions on key matters, and identifying specific issues which should be discussed in the future. After these evaluations are complete, our general counsel summarizes the results, provides a preview for the Chairman of the Board and the Chair of each committee and then submits the summaries for discussion by the nominating and governance committee. If necessary, action plans are developed by the nominating and governance committee and recommended for discussion by the full Board.

In addition, as part of the annual self-assessment process, the nominating and governance committee facilitates structural sessions in which directors are encouraged to provide feedback on the performance of their peers. The Chairman of the Board and/or the Chair of the nominating and governance committee communicate relevant feedback to each director and take further action as they deem appropriate.

The nominating and governance committee oversees our orientation programs for new directors and continuing education programs for directors.

Each new director, after joining the Board, is provided with orientation regarding the Board and the Company's operations. As part of this orientation, each new director has an opportunity to meet with members of our senior management team.

Directors are also provided with continuing education on various subjects that will assist them in discharging their duties. Such continuing education may include presentations by our management, the Board’s outside advisors or other third party experts on our business, information security and system disruption, compliance efforts, applicable legal, regulatory or other developments or other matters as the Board, or the nominating and governance committee in its oversight of the Board’s continuing education program, may deem appropriate.

The executive officers of the Company, their ages, and positions are as follows:

Brian M. Krzanich has served as our President, Chief Executive Officer and as a member of our Board of Directors since November 7, 2018. Prior to joining CDK, Mr. Krzanich served as the Chief Executive Officer of Intel Corporation from 2013 to June 2018. As Chief Executive Officer, he led Intel’s corporate strategy and operations, including development of Intel’s business model and identification of emerging technologies. Mr. Krzanich joined Intel in 1982, became a corporate Vice President in 2006, and served until 2010 as Vice President and General Manager of Assembly and Test. He was Senior Vice President and General Manager of Manufacturing and Supply Chain from 2010 to 2012. He became Executive Vice President and Chief Operating Officer in 2012, responsible for global manufacturing, supply chain, human resources, and information technology. Mr. Krzanich has served as a member of the Supervisory Board of ams AG since June 2019.

Joseph A. Tautges has served as our Executive Vice President since August 1, 2017 and began service as our Executive Vice President, Chief Financial Officer on August 9, 2017. Prior to joining CDK, Mr. Tautges served as Chief Financial Officer of the $18 billion Enterprise Services segment of Hewlett Packard Enterprise (“HPE”) from May 2014 to April 2017. While at HPE, he led a transformation initiative which enabled significant margin expansion and improved free cash flow resulting in the spin-merger of Enterprise Services with Computer Science Corporation to form DXC Technology Company. Prior to HPE, Mr. Tautges held various levels of increasing responsibility in both operations and financial management with Sears Holdings from 2011 to 2014 and Aon Hewitt from 2002 to 2011. Mr. Tautges is a Certified Public Accountant.

Neil Packham has served as our President, CDK International since January 18, 2017. Mr. Packham joined CDK in July 2013 as Vice President for CDK's UK region, which encompasses UK, Middle East, Ireland and Africa. Prior to joining CDK, Mr. Packham worked in the automotive, digital, and software sectors working in a variety of business areas such as business development and strategy, sales and marketing, product development, and general management. He has held senior positions within a number of large corporations and start-ups.

Mahesh Shah has served as our Chief Product & Technology Officer since April 22, 2019. Previously, Mr. Shah was Senior Vice President and General Manager of Application Services & Business Process Services at

DXC Technology Company until April 2019. He served as Vice President and General Manager of Business Process Services at DXC Technology, including both the current portfolio of service offerings and next-generation business process services at DXC Technology Company until 2018. Previously, Mr. Shah served as General Manager and Vice President of Acquisition and Divestiture, IT Consulting Services at Hewlett Packard Enterprise. Prior to DXC Technology, Mr. Shah spent 16 years, in various roles at HPE including building a consulting organization focused on M&A, serving as chief information officer, vice president, Product R&D and IT, and executive director, Security Product Management and Development.

Lee J. Brunz has served as our Executive Vice President, General Counsel and Secretary since October 2014. Prior to October 2014, Mr. Brunz served as Vice President, Counsel for the Digital Marketing business of the Dealer Services division of ADP since Dealer Services’ 2010 acquisition of Cobalt Holding Company (“Cobalt”). Prior to joining the Dealer Services division of ADP, he served as Vice President, Finance & General Counsel of Cobalt from 2008 to 2010 and as Vice President & General Counsel of Cobalt from 2004 to 2008.

Amy W. Byrne has served as our Executive Vice President, Chief Human Resources Officer since June 5, 2017. Prior to joining CDK, Ms. Byrne served as Vice President, Human Resources, Latin America for Avon Products from 2011 to 2016 and as Vice President, Corporate Human Resources and Global Compensation and Benefits for Avon Products from 2006 to 2011.

We have robust policies and procedures for our directors and management and our commitment to good corporate governance is integral to our business. Our key governance practices are described below.

A key component of the Board's role is to provide guidance on and oversight of the Company's strategy. In connection with these responsibilities, the Board has an obligation to keep informed about the Company’s business and strategies. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise independently the Board's decision-making authority on matters of importance to the Company. Acting as a full Board and through the Board’s three standing committees, the Board is directly involved in the Company’s strategic planning process.

Each year senior management convenes to review and refine the Company’s overall corporate strategy. Strategic areas of importance and specific operating priorities are identified, which, in turn inform the Company’s long-range planning. Some of the priorities will be short-term in focus; others will be based on longer time horizons. Senior management then reviews the conclusions reached with the Board at one or more meetings. These meetings involve both management presentations and input from the Board regarding the assumptions, priorities and strategies that form the basis for management’s operating plans.

At subsequent Board meetings, the Board continues to review the Company’s progress against its strategic priorities and to exercise oversight and decision-making authority regarding strategic areas of importance and associated authorizations. For example, in the summer, the Board typically reviews the Company’s overall annual performance and considers the operating budget and capital plan for the coming fiscal year. In this time period, the Board also usually finalizes specific criteria against which the Company’s performance will be evaluated. In addition, Board meetings held throughout the year target areas of the business for extended, focused Board input and discussion. These time frames are flexible, however, and the Board adjusts its meeting agendas and plans to reflect business priorities and developments.

The oversight and input provided is integral to the development and review of the Company’s strategy and operating plans. Through this rigorous and interactive process, the Board encourages the long-term success of the Company by exercising sound and independent business judgment on the strategic issues that are important to the Company’s business.

The Board provides oversight with respect to our enterprise risk assessment and risk management activities that are designed to identify, prioritize, assess, monitor, and mitigate the various risks we confront, including risks that are related to the execution of our operational and financial strategy, risks related to information security, cybersecurity, and system disruption, and other inherent and exogenous risks to our business, operations or prospects. The Board performs this oversight function periodically as part of its meetings and also through its three committees, each of which examines various components of enterprise risk as part of its assigned responsibilities. The committees report on risk oversight matters directly to the Board on a regular basis. Management is responsible for establishing and supervising day-to-day risk management processes and reporting to the Board and its committees as necessary.

The compensation committee oversees risks related to compensation matters. The nominating and governance committee oversees risks associated with Board structure and other governance policies and practices. The audit committee focuses on financial risks, including reviewing with management, our internal auditors, and our independent auditor our major financial risk exposures, the adequacy and effectiveness of internal control over financial reporting, and the steps management has taken to monitor and control financial risk exposures.

In addition, the audit committee reviews risks related to our financial reporting, and compliance with other applicable laws, regulations, and ethical standards. The audit committee regularly receives, reviews, and discusses with management presentations and analyses on various risks we confront.

Our corporate governance principles do not require the separation of the roles of Chairman of the Board and Chief Executive Officer because the Board believes that effective board leadership can depend on the skills and experience of, and personal interaction between, people in leadership roles. The Board is currently led by Mr. Brun, our independent non-executive Chairman of the Board. Mr. Krzanich, our President and Chief Executive Officer, serves as a member of the Board. The Board believes this leadership structure is in the best interests of our stockholders at this time. While this structure is not required, we believe that separating these positions allows our Chief Executive Officer to focus on developing and implementing our business plans and supervising our day-to-day business operations, and allows our Chairman of the Board to lead the Board in its oversight, advisory, and risk management roles.

The Board is currently composed of eight non-employee directors and one employee director. The Board has established that nine directors will be the number that will constitute the full Board at the time of the Annual Meeting. Under our Corporate Governance Guidelines and the NASDAQ Stock Market (“NASDAQ”) listing standards, at least a majority of our Board must be independent. The Board’s standards of director independence are consistent with the NASDAQ listing standards. Directors meeting these standards are considered to be “independent.” The Board has affirmatively determined that all directors other than Mr. Krzanich meet these standards and are, therefore, considered to be independent directors. Mr. Krzanich is not considered an independent director because he is the current President and Chief Executive Officer of the Company. Based on these standards, all current members of the audit, compensation, and nominating and governance committees are independent.

The Board has adopted Corporate Governance Guidelines. These guidelines address items such as the standards, qualifications, and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. The guidelines are subject to periodic review by the Board and to modification from time to time by the Board. The guidelines together with the charters of each of the Board’s audit, compensation, and nominating and governance committees are available under “Corporate Governance” in the “Investor Relations” section of our website at cdkglobal.com.

The Board has three standing committees: audit, compensation, and nominating and governance. The table below indicates the members of each Board committee.

E = Financial Expert

The compensation committee has engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent external advisor. The compensation committee reviewed its relationship with FW Cook, considered FW Cook’s independence and the existence of potential conflicts of interest, and determined that the work of FW Cook did not raise any conflicts of interest and that FW Cook was independent in fiscal 2020. In making this assessment, the compensation committee considered various factors, including the independence factors enumerated in the compensation committee's charter, Rule 10C-1(b) under the Exchange Act, and applicable NASDAQ listing standards.

Willie Deese, Robert Radway, and Eileen Voynick served on the compensation committee for all of fiscal 2020. No member of the compensation committee is now, or was during fiscal 2020, an officer or employee of ours, and none of our executive officers serves, or served during fiscal 2020, as a director or member of a compensation committee of any entity that has one or more executive officers serving as a member of the Board or compensation committee. No member of the compensation committee had any relationship with us or any of our subsidiaries during fiscal 2020 pursuant to which disclosure would be required under our Related Persons Transactions Policy or applicable SEC rules pertaining to the disclosure of transactions with related persons.

During fiscal 2020, the Board held five meetings, the audit committee held eight meetings, the compensation committee held four meetings, and the nominating and governance committees held four meetings. Overall attendance at such meetings was approximately 94%. All of our directors attended at least 75%, in the aggregate, of the meetings of the Board and the committees of which they were members during the periods that they served on the Board during fiscal 2020. It is also our policy that our directors attend the Annual Meeting. All directors attended the 2019 Annual Meeting.

Executive sessions of the non-management directors are held during each Board meeting and the majority of committee meetings. Mr. Brun, our independent non-executive Chairman of the Board, presides at each executive session of the Board.

The Board and each of its principal committees may retain independent legal, financial, or other advisors of their choosing at our expense. The Board does not need to obtain management’s consent to retain outside advisors. In addition, the three principal committees do not need to obtain either the Board’s or management’s consent to retain outside advisors.

Engagement and transparency with our stockholders provide us with useful feedback on a wide variety of topics, including governance, compensation, stockholder communication, Board composition, stockholder proposals, business performance, and operations. This information is shared regularly with our management and the Board and considered in the processes that set the governance practices and our strategic direction. We also use stockholder feedback to better tailor the public information we provide to address the interests and inquiries of our stockholders.

We interact and communicate with our stockholders through a number of forums, including quarterly earnings presentations, SEC filings, annual meetings, investor conferences, and web communications.

In addition, the Board has endorsed the Shareholder-Director Exchange (“SDX”) Protocol as a guide for effective, mutually beneficial engagement between our stockholders and directors. The Board believes that management should speak for the Company and that the Chairman of the Board should speak for the Board.

In order to provide our stockholders and other interested parties with a direct and open line of communication to the Board, we have adopted the following procedures for communications to directors. Stockholders and other interested persons may communicate with the Board by written communications addressed in care of Lee J. Brunz, our Secretary, at CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169.

All communications received in accordance with these procedures will be reviewed initially by our Secretary who will relay all such communications to the appropriate director or directors unless it is determined that the communication: (i) does not relate to our business or affairs or the functioning or constitution of the Board or any of its committees; (ii) relates to routine or insignificant matters that do not warrant the attention of the Board; (iii) is an advertisement or other commercial solicitation or communication; (iv) is frivolous or offensive; or (v) is otherwise not appropriate for delivery to directors.

The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made only in accordance with applicable laws and regulations relating to the disclosure of information.

The Secretary will retain copies of all communications received pursuant to these procedures for a period of at least one year. The Board will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes.

In addition, anyone who has a concern about the Company's conduct or about the Company's accounting, internal accounting controls or auditing matters may communicate those concerns directly to the audit committee. Such communications may be confidential or anonymous and may be submitted electronically, by phone or in writing to:

We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to our executive officers, directors, and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions. The Code of Ethics may be viewed on our website at www.cdkglobal.com under “Corporate Governance” in the “Investor Relations” section. In the event we amend or waive any of the provisions of the Code of Ethics applicable to any of our directors, our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions that relates to any element of the definition of “code of ethics” enumerated in Item 406(b) of Regulation S-K under the Exchange Act, we intend to disclose these actions on our website within four business days following the date of the amendment or waiver. No such waivers were made during fiscal 2020.

Our credibility and reputation depend upon the good judgment, ethical standards, and personal integrity of each director, executive officer, and employee and we expect them to conduct themselves with the highest degree of integrity, ethics, and honesty. In order to better protect us and our stockholders, we regularly review our Code of Ethics and related policies to ensure that they provide clear guidance to our directors, executive officers, and employees.

We have established an independent CDK Global Ethics Hotline, utilizing a global internet and telephone information and reporting service, to allow any employee, director, or vendor to confidentially and anonymously: (i) ask questions about our Code of Ethics and other ethics and compliance issues; and (ii) submit a report or complaint about any potential accounting, internal control, auditing, Code of Ethics, or other violation or matter of concern (unless prohibited by local privacy laws in the jurisdiction of the reporting employee, in which case an alternate inquiry and reporting system has been implemented).

We have adopted a written Related Persons Transactions Policy (the “policy”), which sets forth our policy with respect to the review, approval, ratification, and disclosure of all related person transactions by our audit committee. In accordance with the policy, our audit committee has overall responsibility for implementation of and compliance with the policy. A “related person” means a director, executive officer, or beneficial holder of more than 5% of our outstanding common stock, or any immediate family member of the foregoing, as well as any entity at which any such person is employed, is a partner or principal (or holds a similar position), or is a beneficial owner of a 10% or greater direct or indirect equity interest. Our directors and executive officers must inform our general counsel at the earliest practicable time of any plan to engage in a potential related persons transaction. For purposes of the policy, a “related persons transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are, or will be a participant and the amount involved exceeded, exceeds, or will exceed $120,000 and in which any related person (as defined in the policy) had, has, or will have a direct or indirect material interest. A “related persons transaction” does not include any employment relationship or transaction involving an executive officer and any related compensation resulting solely from that employment relationship that has been reviewed and approved by the Board, the compensation committee, or a group of independent directors performing a similar function. Further, we have determined that “related persons transactions” do not include transactions in which the related person’s interest derives solely from his or her service as a director of another entity that is a party to the transaction.

The policy requires that notice of a proposed related persons transaction be provided to our legal department prior to entry into such transaction. If our legal department determines that such transaction is a related persons transaction, the proposed transaction will be submitted to our audit committee for consideration at its next meeting or, in those instances in which the legal department, in consultation with the Chief Executive Officer or the Chief Financial Officer, determines that it is not practicable or desirable for us to wait until the next audit committee meeting, to the Chair of the audit committee. Under the policy, our audit committee or the Chair of the audit committee, as applicable, may approve only those related persons transactions that: (i) are in our best interests; or (ii) are not inconsistent with our best interests. In the event that we become aware of a related persons transaction that has not been previously reviewed, approved, or ratified under the policy and that is ongoing or is completed, the transaction will be submitted to the audit committee or Chair of the audit committee so that it may determine whether to ratify, rescind, or terminate the related persons transaction.

The policy also provides that the audit committee will review certain previously approved or ratified related persons transactions that are ongoing to determine whether the related persons transaction remains in our best interests and the best interests of our stockholders.

Additionally, we make periodic inquiries of directors and executive officers with respect to any potential related persons transaction of which they, or any of their immediate family members, may be a party or of which they may be aware.

There were no related persons transactions during fiscal 2020.

The compensation program for non-employee directors is designed to: (i) fairly pay directors for the work required at a company of our size and scope; (ii) align directors’ interests with the long-term interests of our stockholders; and (iii) be simple, transparent, and easy for our stockholders to understand.

For the service year beginning immediately after the 2019 Annual Meeting, our non-employee directors received annual compensation (cash + equity) as shown in the table below. There are no additional meeting fees. The Chairman of the Board and the Chairperson of each Board committee receive additional compensation due to the workload and broad responsibilities of these positions.

Of the $300,000 retainer, $185,000 is paid in the form of restricted stock units (“RSUs”) and $115,000 is paid in cash. 100% of the committee Chair compensation is paid in cash. One-half of the additional $150,000 paid to the Chairman is paid in cash and one-half in the form of mandatory deferred stock units (“DSUs”).

Cash retainer payments are paid quarterly in arrears beginning with the quarter following the effective date of appointment, and subsequently, beginning with the quarter following each annual meeting. Each year the first quarterly cash payment must be received as cash, but directors may elect on or about the date of each annual meeting to receive some or all of the remaining three quarterly payments in the form of DSUs. Equity awards, including mandatory and elective DSUs for the coming year, are granted in full on or about the date of each annual meeting.

The restricted period with respect to the RSUs lapses on the earlier of one year from the grant date and the date of our next annual meeting of stockholders. Upon the lapse of the restricted period, the RSUs convert to DSUs. No dividends or divided equivalents are paid or earned with respect to RSUs during the restricted period. Non-employee directors do not have any voting rights with respect to their RSUs or the converted DSUs.

DSUs are fully vested when credited to a director’s account. When a dividend is paid on our common stock, each director’s account is credited with a dividend equivalent in an amount equal to the cash dividend. When a director ceases to serve on the Board, such director will receive a number of shares of common stock equal to the number of DSUs in such director’s account and a cash payment equal to the dividend equivalents accrued, without interest. Non-employee directors do not have any voting rights with respect to their DSUs.

The nominating and governance committee periodically (and at least every two years) reviews director compensation and recommends any changes to the Board for approval. In its review, the nominating and governance committee considers information from its independent compensation consultant regarding the amounts and type of compensation paid to non-employee directors at companies within the same peer group used by the compensation committee to assess executive compensation. Based on the recommendation of the nominating and governance committee, the Board last approved an adjustment to director compensation in connection with the

2019 review for the service year beginning immediately after the 2019 Annual Meeting. The approval superseded the prior adjustment made immediately after the 2017 Annual Meeting, and increased each non-employee director's base annual compensation by $20,000, all of which was in the form of RSUs. All other compensation remained at the amounts last approved immediately after the 2017 Annual Meeting.

The stock ownership requirements set forth in the Corporate Governance Guidelines are intended to promote ownership in our stock by our non-employee directors and to align their financial interests more closely with those of our other stockholders. Each non-employee director is required to hold a minimum aggregate level of ownership of our common stock and DSUs while serving as a director, equal to five times the annual cash retainer payable to each director (excluding committee chair retainers, but including the Chairman's retainer, and calculated without regard to DSU elections). RSUs for which the restricted period has not lapsed do not count toward the ownership requirements. Directors will retain any shares of our common stock purchased until this minimum level is reached, taking into account all DSUs received pursuant to their service as a Board member. Each director is expected to attain this ownership threshold within five years from the date of his or her first election to the Board. In addition, non-employee directors are required to hold for at least one year the net shares obtained from exercising stock options after selling sufficient shares to cover the exercise price, taxes, and broker commissions. The number of shares or units that make up the ownership threshold is calculated annually on July 1, and is equal to 5x the then annual cash retainer applicable to each non-employee director described above divided by the simple moving average of CDK's stock price during the last 20 trading days of June. As of July 1, 2020, the non-employee directors had satisfied, or progressed toward, the stock ownership guidelines as follows:

 

Our Insider Trading Policy prohibits directors, executive officers, and employees from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of our common stock. Our directors, executive officers, and employees are also prohibited from engaging in short sales related to our common stock. The policy also prohibits any pledging of our common stock, including holding common stock in a margin account.

The following table presents compensation for our non-employee directors for fiscal 2020.

As discussed in the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement, the Board believes that our long-term success depends in large measure on the talents and efforts of our employees. Our compensation system plays a significant role in our ability to attract, retain, and motivate the highest quality workforce. The principal underpinnings of our compensation system are an acute focus on performance, stockholder alignment, sensitivity to the relevant marketplace, and a long-term orientation.

In accordance with Section 14A of the Exchange Act, we are asking our stockholders to vote on an advisory basis, commonly referred to as “say on pay,” to approve the compensation paid to our Named Executive Officers (“NEOs”) as disclosed in the CD&A, the compensation tables and the related narrative disclosure contained in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies, and practices described in this proxy statement.

This advisory proposal is not binding on the Board or us. Nevertheless, the views expressed by the stockholders, whether through this vote or otherwise, are important to management and the Board, and accordingly, the Board and the compensation committee intend to consider the results of this vote when making determinations in the future regarding NEO compensation arrangements.

Unless the Board modifies its policy on the frequency of say-on-pay votes, a non-binding advisory vote on our executive compensation program will again be included in our proxy statement next year.

Advisory approval of this proposal requires the vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.

The compensation committee considers the outcome of prior stockholder advisory votes to approve compensation of our NEOs when making future decisions relating to the compensation of the executive officers identified in the CD&A and our executive compensation programs and policies.

At the 2019 Annual Meeting, stockholders expressed their support of our fiscal 2019 executive compensation programs with approximately 92% of the votes cast for approval of the “say on pay” proposal. The compensation committee believes that the voting outcome conveyed our stockholders’ support for the philosophy, strategy and objectives of our executive compensation programs, and as a result the compensation committee did not make any material changes to the structure of our program.

This Compensation Discussion and Analysis describes our compensation philosophy and summarizes the material components of our fiscal 2020 executive compensation program for our NEOs. Our NEOs for fiscal 2020 were:

We believe that executive compensation should be designed to create a direct link between performance and stockholder value. To align the interests of our executives with those of our stockholders, the compensation committee has designed our executive compensation program with a substantial emphasis on variable compensation, which ties the earned compensation of our executives to the annual and long-term performance of the Company as measured by financial and strategic accomplishments as well as changes in stockholder value. The five principles that guide our decisions involving executive compensation within this program are that an executive’s compensation should be:

Our compensation programs are designed so that target pay reflects the market for the executive’s skills and experience, and relative levels of responsibility among our key executives. In addition, the proportion of pay tied to operating performance and changes in stockholder value varies directly with executives’ levels of responsibility and accountability to stockholders. We assign all executives to pay grades by comparing their position-specific duties and responsibilities with market data and our internal management structure. Each pay grade has ranges for base salary, total annual cash compensation, and annual equity grants. Executives are positioned within these ranges based on a variety of factors, most notably their experience and skill set and their performance over time.

We design our performance-based compensation so that actual, realized compensation will vary relative to the target award opportunity based on performance. As such, actual compensation amounts may vary above or below targeted levels depending on our overall performance and the achievement of individual performance goals. We have adopted this compensation design to provide meaningful incentives for our key executives to achieve superior results. We also believe that it is important for our executive officers and other senior executives to have an ongoing long-term investment in us as outlined in this proxy statement under “Stock Ownership Guidelines.”

Fiscal 2020 was a year of navigating unprecedented business conditions and, in the face of extraordinary global disruption and uncertainty, a year of demonstrating our commitment to our customers, employees and stockholders. It was a commitment not just to get through the global crisis, but to emerge stronger and more resilient and well positioned to deliver on our long term strategy of growth and value creation. To do so, CDK took the following actions in response to the COVID-19 pandemic:

Even given the challenges that the industry faced and the support we gave our customers, our performance during fiscal 2020 highlighted the strength and resilience of our business. We further believe that our investment strategy will continue to provide the solutions and capabilities necessary to achieve our long-term goals of integrating and innovating across our product portfolio and creating long-term growth and value for all our stakeholders.

The non-GAAP (adjusted) results presented in this table represent non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are provided in the tables in the Company’s Annual Report on Form 10-K for fiscal 2020.

We provide an annual incentive cash bonus to align each senior executive's interests with our stockholders’ interests, and to reinforce key strategic initiatives and encourage superior individual performance. For fiscal 2020, incentive bonus achievement was based on three core corporate performance measures, an Organizational Health goal that was designed to drive a more performance oriented culture, and various individual performance measures. Each of the measures is capped at 200% of target. The specific measures and targets (and the weighting that was placed on each), are as follows:

In August 2020, the compensation committee reviewed the Company’s performance and approved the results of the corporate performance measures which resulted in overall financial performance achievement at 39.1%. While we were on track to achieve or exceed all of the financial performance measure targets through the third quarter, the impact of the COVID-19 pandemic, including the impact of customer discounts and credits in response to the COVID-19 pandemic ultimately resulted in achievement below targets. The calculation of our fiscal 2020 bonus plan is described in more detail below under “Annual Incentive Cash Bonus Program - Fiscal 2020 Financial Results.”

The NEOs, with the exception of Messrs. Krzanich, and Shah, were awarded performance-based stock units (“PSUs”) at the beginning of fiscal 2018 (the “fiscal 2018 PSUs”), which had a three-year performance period that ran from July 1, 2017, to June 30, 2020. The fiscal 2018 PSUs were settled at 50% of target based on achievement of our financial goals at 67% and further modified by 75% for our TSR ranking in our peer group. Additional details regarding the settlement of the fiscal 2018 PSUs are provided below under “Compensation Review and Determination - Long-Term Equity Incentive Compensation - Performance-Based Stock Units.”

For fiscal 2020, our NEOs received long-term equity compensation in the form of PSUs for 70% of their total award value. In order to better align our mix of equity compensation grant types with those of our peer group, the remaining 30% consisted of stock options with pro rata annual vesting over three years for the Chief Executive Officer and time-based restricted stock units (“RSUs”) with pro rata annual vesting over three years for the other NEOs. The compensation committee believes that utilizing a mix of award types balances the dual goals of incentivizing the revenue and profit growth of our business over an extended period while also providing for retention during a period of transformation.

The PSUs granted to NEOs during fiscal 2020 (“fiscal 2020 PSUs”) cliff vest at the end of a three-year performance period based on actual achievement of performance goals. For fiscal 2020, the compensation committee approved changing the design of the Company's PSU awards to consist of three individual fiscal year performance periods that comprise the three-year performance period, with respect to the PSUs based on financial measures. The total shareholder return (“TSR”) modifier continues to be measured over the three-year performance period against the S&P Software & Services Select Index. At the end of the three-year performance period the financial results of each one-year performance period are averaged and then modified by the three-year TSR result. This change addresses uncertainty around setting long-term goals, and will aid in retention of our NEOs by creating better line of sight in efforts to achieve the performance goals each year, while maintaining a link to shareholder value over the full three-year performance period. Under this design, only the first year of the PSU is deemed granted as the compensation committee has approved financial measures for only fiscal 2020. The Summary Compensation Table reflects the value of only the first year of the PSU grants. The PSU values in the Summary Compensation Table in subsequent years will increase as the compensation committee approves the financial measures for those years.

The following table summarizes the major elements of our fiscal 2020 executive officer compensation programs:

Consistent with a pay-for-performance philosophy, the fiscal 2020 mix of compensation for Mr. Krzanich and the other NEOs was structured so that a significant portion of their total compensation is at-risk and paid based on meeting certain performance goals. The mix of target total direct compensation (base salary, cash bonus, and long-term incentive awards) for fiscal 2020 was designed to deliver the following approximate proportions of total compensation to Mr. Krzanich and the other NEOs (on average) if Company-wide and individual target levels of performance are achieved. Mr. Krzanich’s higher portion of at-risk compensation reflects his greater responsibility for overall Company performance.

Chief Executive Officer and NEO Total Direct Compensation Mix at Target

 

We are committed to ensuring that our compensation programs reflect principles of good governance. The following practices are key aspects of our compensation program:

The compensation committee oversees and administers our executive compensation programs. Before the start of the fiscal year the compensation committee reviews the executive compensation program, considers what modifications are appropriate to adapt to changes in market conditions, the Company's experience with attracting and retaining executive talent, and alignment with the strategic priorities of the business, and then establishes base salaries, target annual cash bonus opportunities, and long-term incentive awards for executives and other eligible employees.

The compensation committee examines compensation data detailing the amounts and mix of base salary, cash bonus, and long-term equity incentives for each of the NEOs, which compare the amounts and mix to competitive compensation levels. We generally target base salary, annual cash bonus, and long-term equity incentives at the median of competitive compensation levels, but will set targets above or below the median when warranted in the judgment of the compensation committee. The degree to which target compensation ranges are above or below the median competitive rate is based on a variety of factors, including each executive’s skill set, performance, and experience relative to market peers. Executives who are new in their roles and therefore less experienced than market peers are typically positioned lower in the range, whereas executives with a long tenure in their role may be positioned higher in the range.

Our compensation committee has engaged FW Cook as its independent external advisor to provide assistance with the design of our compensation programs regarding the amount and types of compensation that we provide our executives, and how these compare to peer company compensation practices. In June 2019, FW Cook examined the competitiveness of senior executive compensation levels and the Company’s aggregate share usage, dilution, and fair value cost of long-term incentives for all participants, which was used for setting fiscal 2020 target total compensation.

Representatives of FW Cook attend meetings of the compensation committee as requested and may also communicate with the Chair of the compensation committee outside of meetings. As part of its ongoing support to our compensation committee, FW Cook also reviews executive compensation disclosures, reviews and provides comments on changes to the committee’s charter, advises on emerging trends and the implications of regulatory and governance developments, and reviews and provides commentary on materials and proposals prepared by management that are presented at the committee’s meetings. FW Cook also advises our nominating and governance committee on director compensation and conducts biennial competitive reviews of director compensation.

With respect to the total cash and long-term incentive compensation for our Chief Executive Officer and other NEOs, the compensation committee reviews competitive compensation market data based on compensation surveys reflecting the pay practices of publicly traded companies and our compensation peer group, discussed below. For fiscal 2020, the surveys used were the Willis Towers Watson U.S. General Industry Executive Database, the Aon Hewitt U.S. Total Compensation Measurement Executive Survey, and the Radford Global Technology Survey. In benchmarking compensation levels against the survey data, the compensation committee considered only the aggregated survey data, and the identity of the companies included in the survey data is not disclosed to, or considered by, the compensation committee in its decision-making process. The companies included were based on a revenue range such that the median company revenue approximates the annual revenue for CDK Global or the executive’s business unit, as appropriate. In setting target compensation for the NEOs, the compensation committee also considers the executive’s total compensation for the previous year and internal comparisons of total compensation to our other executive officers.

For fiscal 2020, the compensation peer group was unchanged from last year and consisted of companies that are of a similar business model to CDK (including B-to-B operations and back-office services), that are of similar size to CDK based on revenue and market capitalization. The compensation committee also considered the peer groups identified by prominent proxy advisory firms and the peer groups used by our peers. The following companies made up our peer group for fiscal 2020 compensation decisions:

With the announcement of the divestiture of our Digital Marketing business, FW Cook conducted an independent review to determine whether the current peer companies remain reasonable for competitive comparison purposes and continue to reflect the Company's evolving business operations. FW Cook recommended removing CA, Inc, Red Hat, Total System Services, LiveRamp, Adobe Systems, and Zillow. FW Cook recommended adding Citrix Systems, CoreLogic, PTC, RealPage, and Workday. The compensation committee approved the changes in February 2020. As a result, the new peer group for fiscal 2021 compensation decisions will consist of 20 companies that are representative of CDK's evolving business operations.

The Chief Executive Officer provides recommendations to the compensation committee with respect to each NEO's overall performance and actual achievement against performance objectives, and in the determination of each NEO's compensation, other than his own. The compensation committee takes the Chief Executive Officer’s general input into consideration when reviewing and approving compensation for NEOs other than the Chief Executive Officer.

The Chief Executive Officer and Chief Human Resources Officer participate in the development of the performance criteria measures and any plan design changes for our annual bonus and equity plans. The Chief Human Resources Officer incorporates any plan design changes and presents proposed compensation matters to the compensation committee for its review and approval.

Base salaries represent fixed amounts paid to each executive for performing their normal duties and responsibilities. For fiscal 2020, the compensation committee determined the amount based on the executive’s overall performance in prior years, level of responsibility, pay grade, competitive positioning, and comparison to our other executives. Based on these criteria, our NEOs received the following annual salary increases in fiscal 2020:

The NEOs are eligible to earn an annual incentive cash bonus as a way to align each NEO's interests with our stockholders’ interests, and to reinforce key strategic initiatives and encourage superior individual performance. Potential payouts are capped at 200% of target based on actual performance against corporate and individual performance measures. There is no minimum payment level, and the corporate performance portion of the annual incentive cash bonus is forfeited if all of the financial threshold performance measure goals are not achieved. When making final payout determinations, the compensation committee may exercise discretion to award something other than the bonus amount based on both actual corporate performance measures and individual goal achievements.

Each year the compensation committee approves certain performance measures aligned with the key components of our operational and strategic success and the degree to which the Chief Executive Officer and the other NEOs have responsibility for overall performance results. For fiscal 2020, incentive bonus achievement was based on: (i) three core financial corporate performance measures; (ii) a newly introduced organizational health corporate performance measure that facilitates collaborative engagement around a common objective; and (iii) individual performance measures designed to enhance focus on each NEOs specific business objectives, such as operational objectives, strategic initiatives, succession planning, and talent development, which are important to the long-term success of the Company. The specific performance measures and the weighting that was placed on each, are as follows:

The corporate performance measures are defined and explained in greater detail as follows:

The terms of the fiscal 2020 annual incentive cash bonus program remained largely consistent with those of the program from the prior year, subject to the following two adjustments:

As reflected in the table below, the effect of the COVID-19 pandemic on the global economy and the actions taken by the Company to support its customers in response to the COVID-19 pandemic had a significant impact on the achievement of our fiscal 2020 bonus targets. In August 2020, the compensation committee reviewed and determined performance (with no modification or adjustment for the impact of the COVID-19 pandemic) against the corporate performance measures, calculated as of June 30, 2020, as follows:

With respect to performance against the Individual Performance Measures, the compensation committee evaluated Mr. Krzanich's performance during an executive session held in August 2020. The evaluation included an analysis of Mr. Krzanich's performance against all of his Individual Performance Measures, which included defining a long-term strategy for the Company; identifying and executing strategic mergers, acquisitions and divestitures; retaining customers; and establishing the right organization design and leadership talent to achieve our strategic objectives. As Mr. Krzanich voluntarily elected in March 2020 to forgo his entire fiscal 2020 annual bonus due to the COVID-19 pandemic, the compensation committee determined that Mr. Krzanich achieved his goals but an actual Individual Performance Measures achievement percentage was not provided.

As the Chief Executive Officer, Mr. Krzanich evaluated the performance of the other executive officers and presented his recommendations to the compensation committee in August 2020 based on those evaluations. The evaluations included an analysis of each officer's performance against his or her Individual Performance Measures, which are intended to be differentiated performance measures. After discussion, the compensation committee determined the degree of attainment of the Individual Performance Measures. The results of these evaluations and selected Individual Performance Measures for the other NEOs are summarized below:

Mr. Tautges.The compensation committee determined that Mr. Tautges' Individual Performance Measures were achieved at 140%. Mr. Tautges' Individual Performance Measures were focused on implementing CDK's quote to cash ERP project, which included: establishing governance processes, simplification of the product catalog, reductions in the initial quote turnaround time, roll-out of new invoice format, and improved invoice accuracy rate.

Mr. Shah.The compensation committee determined that Mr. Shah's Individual Performance Measures were achieved at 140%. Mr. Shah's Individual Performance Measures included: management of the R&D net budget, revenue growth in our Fortellis platform, and increases in our Drive Flex active base.

Ms. Byrne. The compensation committee determined that Ms. Byrne's Individual Performance Measures were achieved at 140%. Ms. Byrne's Individual Performance Measures included: development and implementation of CDK's corporate values, elevating the CDK brand as an employer of choice, and advancement of HR practices and systems.

Mr. Brunz. The compensation committee determined that Mr. Brunz's Individual Performance Measures were achieved at 140%. Mr. Brunz's Individual Performance Measures included: protecting CDK interests by managing priority legal threats, drive strategic merger, acquisition and divestiture opportunities, drive the execution of the Digital Marketing divestiture, and deliver on fiscal 2020 vendor cost savings projects.

Based on the findings of these performance evaluations, the compensation committee evaluated performance against the non-financial measures for the NEOs to determine the overall level of achievement in the table below. We do not disclose detailed Individual Performance Measure goals for each NEO out of concern for competitive harm.

Based on the fiscal 2020 financial and non-financial level of performance, the calculated annual incentive results for the NEOs under the annual incentive cash bonus program was 59.3% of target. The calculated annual incentive awards are reflected in the table below.

 

We believe that long-term incentive compensation is a significant factor in attracting and retaining key executives and in aligning their interests directly with the interests of our stockholders. For fiscal 2020, for NEOs other than the Chief Executive Officer, the compensation committee approved long-term incentive awards to be granted as a mix of PSUs and RSUs. The compensation committee approved the use of RSUs to continue to increase the retention impact of our program during a time of transformation, and improve the external market competitiveness of our

program by aligning with the more prevalent time-based equity grant type found in our compensation peer group. The compensation committee will continue to be able to grant stock options where it deems appropriate, for example, the grant made to Mr. Krzanich included stock options.

The Company's fiscal 2020 long-term equity incentive compensation for its executives consisted of a grant of PSUs for 70% of total award value, which cliff vest at the end of a three-year performance period based on actual achievement of performance goals set at the time of the grant, and for NEOs other than the Chief Executive Officer, a grant of RSUs for the remaining 30% of total award value, which have pro rata annual vesting over three years. Each executive officer is awarded a target dollar value of PSUs and, other than in the case of Mr. Krzanich, a dollar value of RSUs. The target dollar value of PSUs and dollar value of RSUs are converted into a number of units of the respective award by dividing the awarded dollar value by the closing stock price of the Company's stock on the date of grant. The dollar value of Mr. Krzanich's stock options grant is calculated by dividing the awarded dollar value by the fair value of the grant as determined by a binomial option-pricing model.

The compensation committee selected these awards because they ensure that the overall long-term incentive program is tied closely to changes in stockholder value and the degree to which critical operating objectives are attained while also supporting our talent attraction and retention objectives. The compensation committee may also from time to time grant discretionary awards of time-based restricted stock and RSUs. These awards are for special situations and are not considered in the target allocation of total long-term incentive compensation.

The quantity of awards granted during fiscal 2020, which includes target fiscal 2020 PSUs, fiscal 2020 RSUs for NEOs other than Mr. Krzanich, and stock options for Mr. Krzanich, are summarized in the table below (the fair market value of these awards can be found in the “Grants of Plan-Based Awards” Table on page 45 of this proxy statement):

We granted fiscal 2020 PSUs to all of our officers based upon their pay grades, and for officers other than the Chief Executive Officer, based on input from the Chief Executive Officer to the compensation committee. For fiscal 2020, we changed the PSU design to consist of three individual one-year performance periods for the financial component, while maintaining a full three-year period for the TSR component. Financial goals for each one-year performance period are set at the beginning of each fiscal year. The fiscal 2020 PSUs vest on June 30, 2022. We believe that this program is aligned to our business transformation plan to grow revenues and create shareholder value and further the Company's long-term financial goals by aligning the compensation of our key executives with our long-term operating performance, creating commonality of interest between executives and stockholders, and supporting our talent retention objectives.

Potential payouts for the fiscal 2020 PSUs can range from 50% to 200% of target for threshold and maximum performance respectively. If threshold performance is not achieved, the PSUs will be forfeited. The number of PSUs earned is subject to further adjustment (increase or decrease) depending on the TSR of our common stock during the three-year performance period compared against the S&P Software & Services Select Index peer group which can increase the maximum payout to 260% of target.

The compensation committee approved the fiscal 2020 PSU program in September 2019 and the impact of relative TSR on the award payout. In September 2019, the compensation committee also established adjusted global revenue growth and adjusted diluted EPS performance measure goals and award ranges for fiscal 2020 under the PSU program. Our adjusted global revenue growth for fiscal 2020 was 2.8%, which resulted in an earned award level for the fiscal 2020 performance year in the amount of 0% of target. Our adjusted diluted EPS for fiscal 2020 was $3.19, which also resulted in an earned award level for the fiscal 2020 performance year in the amount of 0% of target. The following table shows the annual performance measure goal targets, results and award levels achieved for fiscal 2020, as a percentage of target:

After the conclusion of the three-year performance cycle the results of each of the three individual one-year performance periods will be averaged to determine the overall performance goal achievement percentage. The compensation committee will confirm the final overall achievement percentage, which will be modified based on the three-year TSR results for the performance period. The PSU award earned will also be credited with dividend equivalents from the grant date of the target award until the issuance date, assuming all dividends were reinvested in our stock at the time dividends are paid. The PSUs earned will be paid in the form of shares of our common stock following the conclusion of the three-year performance period.

The NEOs, with the exception of Messrs. Krzanich, and Shah, were awarded fiscal 2018 PSUs, which had a three-year performance period that ran from July 1, 2017, to June 30, 2020. Performance goals for the period were approved by the compensation committee in September 2016, the same meeting at which the compensation committee approved the fiscal 2017 PSU goals. The compensation committee approved both PSU plans in September 2016 to further align our executive officers' incentives through the completion of the business transformation plan and to allow for a balanced focus on our operational growth with strategic flexibility.

The fiscal 2018 PSU goals consisted of:

The number of PSUs earned was subject to further adjustment depending on the TSR of our common stock during the performance period compared against a performance peer group of companies in similar Global Industry Classification Standard (“GICS”) codes, as well as digital advertising and marketing companies. The TSR adjustment is interpolated between 75% and 125% if CDK's TSR ranking is between the 25th and 75th percentiles. The TSR adjustments are capped at 75% and 125% if CDK's TSR ranking is less than the 25^th percentile or greater than the 75^th percentile, respectively.

 

Lastly, if our compounded annual revenue growth over the performance period cycle was below 3%, awards would be capped at 100% of target.

The following table shows the fiscal 2018 PSU targets, results and award payout levels achieved, as a percentage of target:

These results, specifically our performance against adjusted EBITDA growth for fiscal 2019 to fiscal 2020, was significantly impacted by the COVID-19 pandemic and our financial efforts to support our customers during this challenging time. The overall financial result was calculated at 67% based on 1/3 of the fiscal 2018 adjusted EBITDA margin achievement of 200% only as achievement for fiscal 2019 to 2020 adjusted EBITDA growth did not exceed threshold. The fiscal 2018 PSUs were then settled at 50% of target based on achievement of our financial goals at 67% of target multiplied by 75% for our three-year TSR ranking below the 25^th percentile in the performance peer group. Finally, if the payout would have exceeded 100% it would not have been subject to the revenue growth cap as the compounded annual revenue growth over the performance period cycle exceeded 3%.

Our TSR peer group includes companies of any size against which we can best measure financial and business performance. Our compensation peer group disclosed above is distinguished from our TSR peer group in that the compensation peer group companies are broadly reflective of the industry in which we compete for executive talent and provide a good indicator of the current range of executive compensation for companies within a reasonable size range of CDK Global. The companies in our TSR performance peer group¹ are:

For fiscal 2020, the compensation committee only approved a stock option grant to Mr. Krzanich. The stock options granted to Mr. Krzanich were time-vesting stock options that vest in three equal annual installments on the first three anniversaries of the grant date. When stock options are awarded they have an exercise price equal to the closing market price of our common stock on the date of grant. Executives will realize value only if the market price of our common stock increases during the period the option is outstanding, which provides a strong incentive to our executives to increase stockholder value that can be sustained over time.

Additional stock option grants may be made at any time to assist us in recruiting, promoting, or retaining executives.

In addition to the compensation components discussed above and the same health and welfare benefits and retirement benefits available to our U.S. employees generally, we offer the NEOs deferred compensation, limited perquisites, change in control protection, and severance benefits. We believe that these additional benefits are fair, competitive, and consistent with our overall compensation philosophy, and designed to ensure that we can effectively retain our NEOs and compete for executive talent.

We do not provide a defined benefit pension plan to our employees. Benefits for executives are generally the same as those available to all employees, including a group health plan, a group life insurance program, and a qualified 401(k) plan with matching Company contributions capped based on applicable IRS limits.

All of our executive officers are also eligible participate in our Deferred Compensation Plan which permits the executive to elect to defer payment of all or a portion of their annual cash bonuses. We make this program available to our executive officers to be competitive, to facilitate the recruitment of new executives, and to provide our executive officers with a tax-efficient way to save for retirement. We do not match deferrals by these executive officers or otherwise contribute any amounts to the NEOs’ deferred compensation accounts. We generally do not consider the executive’s deferred account balances, or investment earnings or losses on such balances, when we make compensation decisions because the value of such accounts reflects voluntary contributions made by the individual executives and the earnings (or losses) thereon. Cash bonus contributions are fully vested from the date of deferral. Participants can elect to have payment of deferred amounts commence on an in-service date or upon termination (including, retirement), and the form of payment can be in either installments or a lump sum.

We also provide the CDK Global, Inc. Retirement Savings and Restoration Plan, which is designed to restore or replace Company contributions that cannot be provided under the qualified 401(k) plan due to IRS limits. Company contributions on eligible compensation above the IRS limits are deposited into a nonqualified bookkeeping account established for each participant in accordance with the program. Company contributions under this program are subject to the same vesting conditions as would have applied to the corresponding Company contributions under the qualified 401(k) plan.

We provide our NEOs with the use of automobiles leased by us. Consistent with our policy towards all attendees, we pay for the spouses of our executive officers to accompany them to our annual sales conference.

We provide relocation assistance to newly hired and current senior executives who must relocate to accept our job offer or a new role within the Company. Such relocation assistance is generally pursuant to our relocation program, which is designed to cover the costs directly resulting from the Company-requested relocation and includes tax gross-up payments for taxable relocation benefits under the program. In connection with Mr. Tautges’ relocation to our San Jose, California office, he was provided relocation assistance.

Our Change in Control Severance Plan for Corporate Officers provides benefits in the case of an involuntary termination (other than for cause) of employment in connection with a change in control and is designed to: (i) retain our corporate officers; and (ii) align their interests with our stockholders’ interests so that they can consider transactions that are in the best interests of our stockholders and maintain their focus without concern regarding how any such transaction might personally affect them. Each of our NEOs participates in this plan.

The severance formulas used for the Chief Executive Officer and the other participating executive officers are each designed to provide the level of temporary replacement income that we feel is appropriate for that office, but the compensation that our executive officers may receive after termination of employment or a change in control is not taken into account when current compensation levels are determined.

Our Change in Control Severance Plan is described in more detail below under “Potential Payments to Named Executive Officers Upon Termination or Change in Control.”

Our Corporate Officer Severance Plan provides benefits in the case of an involuntary termination of employment (other than for cause) other than in connection with a change in control and is designed to: (i) attract and retain executive officers by a level of protection against involuntary job loss; (ii) provide an appropriate level of benefit to enable executive officers to transition to new employment; and (iii) secure restrictive covenants such as non-competition, non-solicitation, etc.

As described below under “Potential Payments to Named Executive Officers Upon Termination or Change in Control,” participating executive officers have separation entitlements under the Corporate Officer Severance Plan that differ from those available to the Chief Executive Officer.

Our Corporate Officer Severance Plan is described in more detail below under “Potential Payments To Named Executive Officers Upon Termination or Change in Control.”

In general, our philosophy is to seek to preserve the tax deductibility of executive compensation to the extent practicable and consistent with our overall compensation philosophies and, although we take into account accounting and tax implications when we design our equity-based and cash compensation programs and when we make awards or grants, we do not make compensation determinations based on the accounting or tax treatment of any particular type of award. Rather, the compensation committee believes that the overriding considerations when evaluating the design component of our executives’ compensation are the effectiveness of the component with respect to recruiting, retaining, and motivating highly talented executives and the stockholder value that management and the compensation committee believe that the pay component reinforces. Effective beginning in 2018, changes to Section 162(m) of the Internal Revenue Code eliminated our ability to deduct certain “performance-based” compensation for our principal executive officer, principal financial officer and our three next most highly compensation officers that was previously deductible. These changes, however, have not significantly impacted our compensation philosophy. A significant portion of our NEOs’ compensation has and should remain tied to the Company’s performance without regard to the changes to Section 162(m).

In addition to the clawback provision contained in the 2014 Plan, the Board adopted a compensation recovery policy in September 2015, whereby the compensation committee will recoup any incentive compensation (including requiring the reimbursement of any cash incentive compensation or canceling any equity award granted pursuant to the 2014 Plan) if: (i) with respect to the recoupment of any equity award granted pursuant to the 2014 Plan, the recipient of such equity award, without the consent of the Company, while employed by or providing services to the Company or any affiliate or after termination of such employment or service, violates a non-competition, non-solicitation, or non-disclosure covenant or agreement or otherwise engages in any activity that is in conflict with or adverse to the interests of the Company or any affiliate, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the compensation committee in its sole discretion; or (ii) with respect to the recoupment of any cash incentive compensation, the recipient of such cash incentive compensation engages in fraud or conduct contributing to any financial restatements or irregularities, as determined by the compensation committee in its sole discretion. In addition, if, with respect to the recoupment of any equity award granted pursuant to the 2014 Plan, a recipient engages in any activity referred to in clause (i) of the preceding sentence, the recipient will forfeit any gain as a result of any such incentive compensation (including any gain realized on the vesting or exercise of any equity award) and must repay that gain to the Company.

Our Insider Trading Policy prohibits directors, executive officers, and employees from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of our common stock. Our directors, executive officers, and employees are also prohibited from engaging in short sales related to our common stock. The policy also prohibits any pledging of our common stock, including holding common stock in a margin account.

We have established stock ownership guidelines to encourage equity ownership by our executive officers in order to reinforce the link between their financial interests and those of our stockholders. The stock ownership guidelines were set on the basis of each executive officer’s pay grade, expressed as a multiple of the executive officer’s base salary on the first day of the fiscal year. Stock ownership (as defined under the guidelines) consists of stock owned outright by the executive officer or beneficially through ownership by direct family members (spouses and dependent children). Our executive officers are expected to satisfy the guidelines within five years of becoming an executive officer.

Under our stock ownership guidelines, Mr. Krzanich is expected to own an amount of our stock equal in value to six times his base salary. Our other executive officers are expected to own an amount of our stock equal in value to three times their respective base salaries. Executive officers whose ownership levels are below the minimum required levels are required to retain as shares of our common stock at least 75% of post-tax net gains on stock option exercises, and 75% of shares (net of taxes) received upon vesting of RSUs or the settlement of PSUs. As of September 29, 2020, Mr. Brunz had satisfied the guidelines. The other executive officers are making progress towards achievement and are expected to satisfy the guidelines within the relevant time period.

The compensation committee of the Board oversees the Company’s compensation programs on behalf of the Board. In fulfilling its oversight responsibilities, the compensation committee reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement.

In reliance on the review and discussions referred to above, the compensation committee recommended to the Board that the Compensation Discussion and Analysis be incorporated by reference to the Company’s Annual Report on Form 10-K for fiscal 2020 and in this proxy statement.

COMPENSATION COMMITTEE

Willie A. Deese, Chair

Robert E. Radway

Eileen J. Voynick