The Company values stockholder feedback and is committed to ongoing engagement. During fiscal 2024, formal discussions with stockholders were held reviewing topics including corporate governance and other matters that were priorities of our stockholders. Refer to the Corporate Governance section of this proxy statement for more information on our fiscal 2024 stockholder outreach and engagement.
Additional Information
Refer to the Frequently Asked Questions section of this proxy statement for important information about proxy materials, voting, annual meeting procedures, company documents, communications, and the deadlines to submit stockholder proposals for the 2025 Annual Meeting of Stockholders. Additionally, questions may be directed to Investor Relations at (800) 828-4411 or by written request to 911 Panorama Trail South, Rochester, NY 14625, Attention: Investor Relations. General information regarding the meeting and links to key documents can be found on our Investor Relations web page at https://investor.paychex.com.
Cautionary Note Regarding Forward-Looking Statements
This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future results or events and include, among others:
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statements with respect to the beliefs, plans, objectives, and expectations regarding the future compensation plans of the Company and corporate responsibility initiatives and goals of the Company; and |
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statements preceded by, followed by, or that include the words “aim,” “anticipate,” “believe,” “could,” “design,” “estimate,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “strategy,” “strive,” “target,” “will,” “would,” or similar expressions. |
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, many of which are outside our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance upon any of these forward-looking statements. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, please see the risks and other factors detailed from time to time in our most recent periodic reports on Form 10-K and Form 10-Q and other filings with the Securities and Exchange Commission (“SEC”). Except as required by law, we undertake no obligation to update these forward-looking statements after the date of filing this proxy statement with the SEC to reflect events or circumstances after such date, or to reflect the occurrence of unanticipated events.
Paychex, Inc. 2024 Proxy Statement • 4
PROXY STATEMENT
Paychex, Inc.
911 Panorama Trail South
Rochester, NY 14625
Paychex, Inc. (“Paychex,” the “Company,” “we,” “our,” or “us”), a Delaware corporation, is furnishing this proxy statement to stockholders in connection with the solicitation of proxies on behalf of the Board of Directors of the Company (the “Board”) for the 2024 Annual Meeting of Stockholders (the “Annual Meeting”). This proxy statement summarizes information concerning the matters to be presented at the Annual Meeting and related information to help stockholders make an informed vote. Distribution of this proxy statement and a form of proxy to stockholders is scheduled to begin on or about August 30, 2024.
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| PROPOSAL 1: ELECTION OF DIRECTORS FOR A ONE-YEAR TERM |
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| What am I voting on? |
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Voting Recommendation |
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| Stockholders are being asked to elect eleven director nominees for a one-year term. This section includes information about the Board and each director nominee. |
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The Board recommends a vote FOR each of the eleven director nominees. |
The Board is elected by the stockholders to oversee the overall success of the Company, review its operational and financial capabilities, and periodically assess its long-term strategic objectives. The Board serves as the ultimate decision-making body of the Company, except for those matters reserved for stockholders. The Board selects and oversees the members of senior management who are charged by the Board with conducting the day-to-day business of the Company. The Board acts as an advisor to senior management and ultimately monitors management’s performance.
Election Process
The Company’s Amended and Restated By-Laws (“By-Laws”) provide for the annual election of directors. The By-Laws provide that each director is elected by a majority of the votes cast for the director at any meeting held for the election of directors at which a quorum is present, and the director is running unopposed. If a nominee that is an incumbent director does not receive a required majority of the votes cast, the director must offer to tender his or her resignation to the Board. The Nominating and Governance (“N&G”) Committee, formerly known as the Nominating and Environmental, Social, and Governance Committee, considers such offer and will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board then considers the N&G Committee’s recommendation and will determine whether to accept such offer. The Board will disclose its decision and the rationale behind it within 90 days of the certification of the election results.
2024 Nominees for Director
There are eleven nominees for election as director, as listed on the following pages. Each of the nominees is a current member of the Board. As previously announced by the Company, Mr. Flaschen will not stand for reelection as a director, and his current term will expire at the Annual Meeting. The eleven persons listed have been nominated for election to the Board by the N&G Committee. The nominees, except for Messrs. Gibson, Golisano, and Mucci, are independent under the Nasdaq Stock Market (“Nasdaq”) director independence standards. If elected, each nominee will hold office until his or her successor is elected and qualified or until his or her earlier
Paychex, Inc. 2024 Proxy Statement • 5
resignation or removal. We believe that all the nominees will be available to serve as a director. However, if any nominee should become unable to serve, the named proxy holders may exercise discretionary authority to vote for substitute nominees proposed by the Board.
The Board believes that the combination of the various qualifications, skills, and experience of the 2024 director nominees will continue to contribute to an effective and well-functioning Board. Due in part to stockholder feedback, board refreshment continues to be an important consideration of our Board. For more information on our nomination process, refer to the Corporate Governance section of this proxy statement.
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| The Board recommends the election of each of the director nominees identified on the following pages. Unless otherwise directed, the named proxy holders will vote the proxy FOR the election of each of these director nominees. |
Summary of Director Nominees
Our director nominees are accomplished professionals, with diverse areas of expertise, who are well-equipped to oversee the success of the business and effectively represent the interests of stockholders. Our director nominees:
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are seasoned leaders who possess high personal and professional ethics and share the values of the Company; |
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are highly accomplished in their fields and have served as directors and officers in a diverse range of companies, including technology, financial services, and payment companies, among others; |
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strengthen our Board’s oversight capabilities by having varied lengths of tenure that provide historical and new perspectives about our Company; and |
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bring extensive and diverse experience in strategic planning, business development, international business, mergers and acquisitions, and go-to-market strategies, among others. |
The Board has identified qualifications, attributes, skills, and experience that are important to be represented on the Board as a whole, in light of the Company’s business and current needs. The Board believes the combination of the various qualifications, attributes, skills, diversity, and experience of the director nominees contribute to a well-functioning and effective Board.
Below is a summary to highlight some but not all the important skills our director nominees bring to the Board.
Paychex, Inc. 2024 Proxy Statement • 6
Deferred Compensation Plan
We maintain a non-qualified and unfunded deferred compensation plan in which all independent directors are eligible to participate. Directors may elect to defer up to 100% of their Board cash compensation. The Company does not contribute to this plan. Gains and losses are credited based on the participant’s selection of a variety of designated investment choices, which the participant may change at any time. We do not match any participant deferral or guarantee a certain rate of return. The interest rates earned on these investments are not above-market or preferential. Refer to the Non-Qualified Deferred Compensation table and discussion within the Named Executive Officer Compensation section of this proxy statement for a listing of investment funds available to participants and the annual rates of return on those funds. During fiscal 2024, no independent directors deferred compensation under the plan.
Benefits
We reimburse each director for expenses associated with attendance at Board and committee meetings.
Stock Ownership Guidelines
The Board set stock ownership guidelines for our non-management directors with a value of six times his or her annual Board retainer, not including any committee, committee chair, or lead independent director retainers. The ownership guidelines were established to provide long-term alignment with stockholders’ interests. The directors are expected to attain the ownership guideline within five years after the later of first becoming a director or the adoption of any increased guideline. Directors may not sell underlying stock received through time-based RSUs until their service on the Board is complete, except for those shares sold as necessary to satisfy tax obligations. For the purpose of achieving the ownership guideline, time-based RSUs awarded to the directors are included. All non-management directors are currently compliant with the stock ownership guidelines or within the grace period to achieve the requisite level of ownership.
Prohibition on Hedging or Speculating in Company Stock
Directors must adhere to strict standards with regards to trading in Paychex stock. Also, we prohibit directors from hedging Paychex stock. They may not, among other things:
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speculatively trade in Paychex stock; |
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short sell any securities of the Company; or |
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buy or sell puts or calls on the Company’s securities. |
Pledging of Company Stock
We maintain a pledging policy for all Paychex directors, officers, and employees that prohibits new pledging of Company securities for any purpose. Our pledging policy is posted on our website at https://investor.paychex.com/corporate-governance/governance-documents.
Paychex, Inc. 2024 Proxy Statement • 17
In fiscal 2024, we continued to expand our corporate responsibility efforts in key areas. These include but are not limited to:
DE&I efforts: At Paychex, we believe that we must be intentional with our commitment to DE&I and have made good progress in our efforts towards awareness, training, and measurement of DE&I initiatives. This plan involves taking a systematic approach to DE&I, building a culture of inclusion, and developing strategic community partnerships. Fiscal 2024 initiatives included:
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Our CEO is a signatory of the CEO Action for Diversity & Inclusion Pledge, which demonstrates that DE&I is a top priority of the Company and is supported by Company leadership; |
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Targeted recruitment activities including using tools such as training of Company recruiters and using dashboards and scorecards to track hiring, mobility, and attrition of diverse applicants; |
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Training and guidance regarding diversity aimed at increasing awareness with our employees and clients; |
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Mentorship programs to connect women and people of color to executive leaders, mentors, and promotional opportunities; |
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Creation of several Employee Business Resource Groups to foster community, development and cultural celebration for employees of underrepresented backgrounds and their allies; |
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Philanthropic support to organizations that support diverse communities and initiatives that align with our values; and |
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Established goals related to DE&I and governance, climate and corporate responsibility for executive incentive compensation plans for all executives for fiscal 2024. |
Environment: Paychex recognizes the need for companies to lead the climate transition and is taking initiative to manage our impact on the climate. We have an environmental policy in place and perform an annual Company-wide enterprise risk assessment that includes environmental-related risks. The Company is a supporter for the Task Force on Climate-Related Financial Disclosures. In fiscal 2023, we completed the CDP (formerly known as the Carbon Disclosure Project) Climate Change report. We have adopted initiatives that will reduce greenhouse gas (“GHG”) emissions including, but not limited to: geothermal HVAC systems, energy efficient LEDs, electric car chargers, energy efficient heating and cooling equipment, paper usage reductions, and waste recycling. We are striving to reach Net Zero GHG emissions by 2050 and in fiscal 2024, have continued implementing short-term and medium-term goals to progress toward the target.
Philanthropy: The Paychex Charitable Foundation (the “Foundation”) helps support strong and vibrant communities through funding grants that improve economic health for the community and its workforce. Through the Foundation’s strategic giving initiative focused on well-being, which supports mental health, physical health, financial health, and professional skills development, the Foundation has made a $4 million funding commitment to Mental Health America, Feeding America, Junior Achievement USA, and the National Urban League, with each organization receiving $1 million over the four-year grant period.
Data Security: Aligned with the National Institute of Standards and Technology Cybersecurity Framework and overseen by the Audit Committee and executive leadership, our Enterprise Security Organization seeks to maintain a consistent, resilient, and secure infrastructure by partnering with resources across the company. Protection of our clients’ sensitive information is among our highest priorities.
To learn more about our corporate responsibility efforts, including additional data and our latest initiatives, please see our Corporate Responsibility Report at www.paychex.com/corporate/corporate-responsibility. The inclusion of any website address in this proxy statement does not incorporate by reference the information on or accessible through the website into this proxy statement.
Paychex, Inc. 2024 Proxy Statement • 21
Board Leadership Structure
The Board’s current leadership structure is comprised of:
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Chairman of the Board and a non-independent director (Mr. Mucci); |
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President and CEO as a non-independent director (Mr. Gibson); |
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an independent director serving as Lead Independent Director (Mr. Tucci); and |
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Audit, C&L, Corporate Development Advisory, Investment, and N&G committees led by independent directors. |
We currently have separated the roles of Chairman and CEO and believe this structure currently best serves the Company, but may change the leadership structure in the future if the Board believes that a change would best serve the Company and its stockholders. The Board believes this structure provides a well-functioning and effective balance between strong Company leadership and appropriate safeguards and oversight by non-management directors. We believe that the Company is best served by having a Chairman who has in-depth knowledge of the Company’s operations and the industry. Mr. Mucci’s experience as our CEO and long tenure of service on the Board qualify him to lead the Board, particularly as it focuses on strategic risks and opportunities facing the Company.
Our Lead Independent Director is responsible for conducting regularly scheduled executive sessions of the non-management or independent directors and such other responsibilities as the independent directors may assign. Regularly scheduled executive sessions of the members of the Board, without members of management present, are held at each regularly scheduled Board meeting. As appropriate, matters presented to the Board by the N&G and C&L Committees are reviewed and discussed in executive sessions by the independent directors.
The Board and its standing committees that meet regularly conduct performance self-evaluations at least annually to assess the qualifications, attributes, skills, and experience represented on the Board and to determine whether the Board and its committees are functioning effectively. The Board also conducts individual Board member assessments annually.
Nomination Process
The N&G Committee is responsible for recommending candidates to the full Board to either fill vacancies or stand for election at each annual meeting of stockholders. The N&G committee follows the Board’s Nomination Policy, which is included in the N&G Committee Charter. The Board has determined that it is necessary for the continued success of the Company to ensure that the Board is composed of individuals having a variety of complementary experience, education, training, diversity, and relationships relevant to the then-current needs of the Board and the Company. The N&G Committee Charter includes a diversity search policy to ensure the Committee considers the diversity of nominees. The Board’s Nomination Policy requires that initial lists of independent director candidates to fill vacancies on the Board include racially/ethnically and gender diverse candidates and that any third-party search firm will be instructed to include such candidates in the initial lists they prepare.
In evaluating candidates for nomination to the Board, including candidates for nomination recommended by a stockholder, the Board’s Nomination Policy requires N&G Committee members to consider the contribution that a candidate for nomination would be expected to make to the Board and the Company. This is based upon the current composition and needs of the Board, and the candidate’s demonstrated business judgment, leadership abilities, integrity, prior experience, education, training, relationships, and other factors that the Board determines relevant. When identifying candidates for nomination to fill vacancies created by the expiration of the term of any incumbent director, the Nomination Policy requires N&G Committee members to determine whether such incumbent director is willing to stand for re-election and, if so, to take into consideration the value to the Board and to the Company of their continuity and familiarity with the Company’s business. The Board has previously used a third-party search firm to identify director candidates, and the N&G Committee is authorized by its charter to continue this practice.
The Board’s Nomination Policy requires the N&G Committee to consider candidates for nomination to the Board recommended by any reasonable source, including stockholders. Stockholders who wish to nominate candidates
Paychex, Inc. 2024 Proxy Statement • 22
for director must comply with the procedures set forth in the By-Laws, including sending timely notice in writing to the Secretary of the Company that includes the information and disclosure required by the By-Laws. For more information, see the subheading entitled “How do I submit a proposal for next year’s Annual Meeting?” in the Frequently Asked Questions section of this proxy statement.
Board Oversight of Risk
One of the most important functions of the Board is oversight of risks inherent in the operation of the Company’s business. Senior management is responsible for the day-to-day management of risks facing the Company. The Board implements its risk oversight function both as a whole and through delegation to Board committees. The Board is responsible for ensuring an appropriate culture of risk management exists within the Company, overseeing the Company’s aggregate risk profile, and monitoring how the Company addresses specific risks. The Board receives regular reports from officers on particular risks to the Company, reviews the Company’s strategic plan, and regularly communicates with its committees.
The Audit Committee receives quarterly updates from the Company’s Chief Information Security Officer regarding the Company’s cybersecurity risk management program. These updates include a status of current capabilities, ongoing initiatives, as well as the evolving cybersecurity threat landscape.
The C&L Committee regularly reviews the risks and rewards associated with our compensation programs. The programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. As part of its risk oversight, the C&L Committee conducts an annual assessment of risks arising from the Company’s compensation programs. The C&L Committee reviews such programs with its independent compensation consultant. The C&L Committee’s assessment includes identification of risk with the various forms of compensation, the inherent risk in performance-based compensation metrics, and existing risk mitigation controls. Risk mitigation includes, but is not limited to, the balance of fixed and variable compensation, the balance of short- and long-term compensation, stock ownership guidelines, level of oversight, and internal controls over financial reporting. Based on its last review, the C&L Committee concluded that the Company’s compensation policies and procedures are not reasonably likely to have a material adverse effect on the Company.
The N&G Committee assists the Board in developing and overseeing sustainability objectives to further integrate it into the Company’s strategy and operations. The N&G Committee also oversees policies and programs related to environmental sustainability, philanthropic, and political activities. The N&G Committee also provides oversight of the Company’s risks, reporting, and disclosure with respect to governance, climate and corporate responsibility matters, including an update on the annual assessment of environmental or climate-related risks facing the Company.
Paychex, Inc. 2024 Proxy Statement • 23
Policy on Transactions with Related Persons
Related persons include our executive officers, directors, and director nominees, as well as their immediate family members, and holders of more than 5% of the Company’s common stock. It is generally the Company’s practice to avoid transactions with related persons. However, there may be occasions when a transaction with a related person is in the best interest of the Company. The Company’s policies and procedures for the review and approval of related-person transactions are described below. In addition, the Company maintains a conflict of interest policy applicable to all employees, which is internally distributed and appears in the Company’s Code of Business Ethics and Conduct, which is posted at https://investor.paychex.com/corporate-governance/governance-documents.
Officers and directors are required to disclose any potential conflicts of interest or related-person transactions, which include: certain financial interests in or relationships with any supplier, client, partner, subcontractor, or competitor; and engaging in any activity that could create the appearance of a conflict of interest, including financial involvement or dealings with employees or representatives of the types of entities listed above. Annually, officers and directors complete a Director’s and Officer’s Questionnaire, within which they provide information regarding whether they or any member of their immediate family had any interest in any actual or proposed transaction with the Company or any of its subsidiaries where the amount involved exceeded $120,000. The individuals are also asked about any other economic relationships that might be conflicts of interest. The responses are reviewed by our Financial Reporting and Legal departments to determine if a conflict of interest exists related to any such transaction. For officers, the Company’s Chief Financial Officer (“CFO”) oversees the review of such transactions.
Members of the Board are required to disclose to the Chairman or the Chair of the N&G Committee any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company. This includes engaging in any conduct or activities that would impair the Company’s relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship.
The Financial Reporting department reviews and updates the Company’s listing of related persons on a quarterly basis for determination of potential related-person transactions that should be disclosed in the Company’s periodic reports to the SEC. During this quarterly review and update, these identified transactions are reviewed and disclosed as required. The N&G Committee is required to consider all questions of possible conflicts of interest of Board members and executive officers, including review of transactions of the Company in excess of $120,000 in which a director, executive officer, or an immediate family member of a director or executive officer has an interest. The factors considered by the N&G Committee in their review include: the business objective of the transaction; the individual’s involvement in the transaction; whether the transaction would impact the judgment of the officer or director to act in the best interest of the Company; and any other matters the N&G Committee deems appropriate. Except as noted below in “Transactions with Related Persons” for fiscal 2024, no instances of conflict or non-compliance have been identified. Should a conflict of interest be identified, relevant information and circumstances would be reviewed to determine if action is required relative to continuing the arrangement.
Transactions with Related Persons
For fiscal 2024, the following reportable transactions in excess of $120,000 were identified and communicated to the N&G Committee:
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Based on information in a Schedule 13G filed on January 26, 2024, Blackrock, Inc. and/or its affiliates (“Blackrock”) is an owner of more than 5% of the Company’s common stock, which makes Blackrock a “Related Person” of the Company under Item 404 of Regulation S-K. Blackrock has been a vendor of the Company since 2011. In fiscal 2024, the Company paid Blackrock approximately $1.8 million for investment management services. |
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The Company provides payroll and other ancillary services to Eastman Kodak Company (“Kodak”). Pursuant to the agreement between the Company and Kodak, Kodak paid the Company approximately $0.6 million in fees for these services during fiscal 2024. As a director and a beneficial owner of greater than 5% of the Company’s common stock, Mr. Golisano may be deemed to have an interest in this transaction, but is not expected to have any direct identifiable interest in this transaction. In addition to serving as a Board member of the Company, during a portion of fiscal 2024, Mr. Golisano also served as a director on Kodak’s Board of Directors as the designee of GO EK Ventures IV, LLC (“GO EK Ventures”). GO EK Ventures IV, LLC beneficially owns greater |
Paychex, Inc. 2024 Proxy Statement • 27
Communications with the Board of Directors
The Board has established procedures to enable stockholders and other interested parties to communicate in writing with the Board, including the chair of any standing committee of the Board. Written communications should be clearly marked and mailed to:
Stockholder and Other Interested Parties — Board Communication
Paychex, Inc.
911 Panorama Trail South
Rochester, New York 14625-2396
Attention: Corporate Secretary
In the case of communications intended for committee chairs, the specific committee must be identified. Any such communications that do not identify a standing committee will be forwarded to the Board. The Corporate Secretary will promptly forward all stockholder and other interested party communications to the Board or to the appropriate standing committee of the Board, as the case may be.
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| CODE OF BUSINESS ETHICS AND CONDUCT |
The Company has a Code of Business Ethics and Conduct that applies to all of its directors, officers, and employees. The Company requires all of its directors, officers, and employees to adhere to this code in addressing legal and ethical issues that they encounter in the course of doing their work. This code requires our directors, officers, and employees to avoid conflicts of interest, comply with all laws and regulations, conduct business in an honest and ethical manner, and otherwise act with integrity and in the Company’s best interest. All newly hired employees are required to certify that they have reviewed and understand this code. In addition, each year all employees and directors are reminded of and asked to affirmatively acknowledge their obligation to follow the code. The Code of Business Ethics and Conduct is available for review on the Company’s website at https://investor.paychex.com/corporate-governance/governance-documents. The Company intends to disclose any amendment to, or waiver from, a provision of its Code of Business Ethics and Conduct that relates to any element of the code of ethics definition enumerated in Item 406 of Regulation S-K by posting such information on its website at the address specified above.
Paychex, Inc. 2024 Proxy Statement • 29
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| COMPENSATION DISCUSSION AND ANALYSIS |
The CD&A provides a description of our executive compensation policies and programs, the decisions made by the C&L Committee regarding executive compensation, and the factors contributing to those decisions. This discussion focuses on the compensation of our NEOs for fiscal 2024, who were:
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| John B. Gibson |
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President and CEO (Principal Executive Officer) |
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| Robert L. Schrader |
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SVP and CFO (Principal Financial Officer) |
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| Mark A. Bottini |
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SVP of Sales |
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| Michael E. Gioja |
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SVP of Information Technology and Product Development (“IT and PD”) |
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| Elizabeth Roaldsen |
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SVP of Operations and Customer Experience |
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| Efrain Rivera |
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Former SVP and CFO (former Principal Financial Officer) |
Mr. Rivera, who stepped down from the role of SVP and CFO of the Company on October 13, 2023, qualified as one of our NEOs for fiscal 2024, pursuant to Item 402(a) of Regulation S-K. The Board appointed Mr. Schrader to serve as the Company’s SVP and CFO effective October 13, 2023.
Executive Summary
Business and Financial Highlights
Our executive compensation is tied to financial and operational performance and is intended to drive sustained, long-term increases in stockholder value. During fiscal 2024, we delivered solid financial results, reflecting growth across our business. Reported financial results for fiscal 2024 and the respective growth percentages compared to fiscal 2023 were as follows:
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| $5.1B |
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$2.2B |
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$4.67 |
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Operating income |
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Diluted earnings per share |
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| 5% increase |
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7% increase |
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9% increase |
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| $1.5B |
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$2.1B |
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$4.72 |
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Operating income, net of certain items(2) |
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Adjusted diluted earnings per share(2) |
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| 26% increase |
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6% increase |
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11% increase |
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Reflects dividends and repurchases of outstanding shares of our common stock. |
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Operating income, net of certain items and adjusted diluted earnings per share are not United States (“U.S.”) generally accepted accounting principles (“GAAP”) measures. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A of this proxy statement for a discussion of these non-GAAP measures and a reconciliation to the most comparable GAAP measure of operating income and diluted earnings per share. |
Our strategy is to be the digitally driven HR leader, serving as an essential partner to small- to medium-sized businesses by providing them with the technology and advisory services they need for HR, payroll, benefits, and insurance. We believe that successfully executing this strategy will lead to strong, long-term financial performance. In fiscal 2024, we continued to further drive growth and enhance our market position by executing on key elements of our strategy.
Paychex, Inc. 2024 Proxy Statement • 32
Growing our client base and market share. We operate in a large and growing market, with significant potential to expand within our current target markets. We have invested significantly in new demand generation tools, sales tools, and go-to-market strategies. During fiscal 2024, our total client base grew 1% to over 745,000 clients. Client retention improved over the prior year and remained in line with pre-pandemic levels. Revenue retention remained above pre-pandemic levels and HR outsourcing worksite employee retention continued to improve and remained at record levels.
Expanding our share of wallet. We offer a full suite of integrated solutions incorporating a unique combination of industry-leading HR technology and HR advisory solutions that sets us apart in the industry. We continue to increase penetration across our human capital management (“HCM”) software, HR outsourcing, retirement, insurance, and payment offerings. In particular, we achieved double-digit growth in revenue from our retirement products for fiscal 2024, and we now have over 120,000 retirement clients. HR outsourcing also reflected strong growth in revenue and worksite employees served, which exceeded 2.3 million employees as of May 31, 2024.
Leveraging technology innovations. We continue to invest in our proprietary, award-winning Paychex Flex® platform and mobility applications to maximize efficiency and functionality for our clients and their employees. We have implemented enhancements to our Paychex Flex platform designed to improve the client and client employee experiences from hiring and onboarding through employee retention. Paychex Flex has continued to earn awards in 2024 including an HR Tech Award from Lighthouse Research & Advisory for Best Small Business-focused Solution in the Core HR/Workforce category; a 2024 BIG (Business Intelligence Group) Innovation Award for our digital employee onboarding, and a Leader in Next Generation HCM Technology by NelsonHall.
In addition, we believe that we are well positioned to capture the artificial intelligence (“AI”) opportunity with our large and growing data sets, predictive analytics, and AI models. We have increased our AI investments to improve efficiency, enhance the customer experience, and unlock new growth opportunities. In fiscal 2024, we successfully implemented several additional innovative AI models that offer improved functionality for Paychex and our clients and also added new benchmarking and people analytics for Paychex Flex users.
Engaging in strategic acquisitions. We utilize acquisitions, when appropriate, as a means to expand our portfolio, enter new markets, or increase our scale. In fiscal 2024, we acquired Alterna Capital Solutions LLC, a company that purchases outstanding accounts receivable of their customers under non-recourse arrangements that allows businesses access to funding to manage their cash flow needs. This acquisition, which is not anticipated to have a significant impact on the Company’s results, allows the Company to increase and diversify its portfolio of solutions and support serving small- to medium-sized businesses.
Paychex, Inc. 2024 Proxy Statement • 33
CFO Transition
Our Board oversees executive management succession planning, which is formally reviewed at least annually by the C&L Committee. The Board regularly discusses succession and development plans with the CEO as well as without the CEO present in executive sessions of the Board. The Board makes sure that it has adequate opportunities to meet with and assess development plans for potential executive management successors to ensure that the Company has the right management talent to pursue its strategies successfully.
The Board appointed Mr. Schrader to serve as the Company’s SVP and CFO effective on October 13, 2023. Prior to Mr. Schrader’s promotion, and as part of the Board’s long-term CFO succession planning, Mr. Schrader was promoted to Vice President (“VP”), Finance and Investor Relations of the Company in January 2023. Prior to January 2023, he served in successive roles as VP and Controller, Senior Director of Financial Planning and Analysis, and Director of Internal Audit since joining the Company in December 2014. Mr. Rivera continued to serve as a senior advisor to the Company through August 1, 2024, since stepping down from his position of SVP and CFO of the Company.
Summary of Mr. Schrader’s Fiscal 2024 Compensation Arrangements
Upon Mr. Schrader becoming the Company’s SVP and CFO on October 13, 2023, Mr. Schrader’s total annual compensation was increased to $2,100,000 at target to reflect his new role and responsibilities as well as the assessment of this position versus market rates. Mr. Schrader’s total annual compensation of $2,100,000 at target included the following:
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A base salary of $450,000 per year. |
| • |
|
Eligibility to receive a cash annual incentive program award with a target of 100% of his base salary for the portion of fiscal 2024 he serves as the Company’s SVP and CFO upon the same performance metrics established for Mr. Rivera for fiscal 2024. |
| • |
|
Non-qualified stock option awards with a total grant-date fair value of $360,000 that will vest in three equal annual installments, have a 10-year term, and an exercise price equal to the closing price of the Company’s common stock on dates of grant. |
| • |
|
Time-based RSU awards with a total grant-date fair value of $240,000 that will vest in three equal annual installments. |
| • |
|
Performance-based RSU awards with a total grant-date fair value of $600,000 at target that will vest upon the achievement of the two-year performance metrics established by the C&L Committee in July 2023, followed by a one-year service vesting period. |
For the portion of fiscal 2024 in which Mr. Schrader served as VP, Finance and Investor Relations, he continued to participate in the same compensation and benefit arrangements available to other officers of the Company.
Summary of Mr. Rivera’s Fiscal 2024 Compensation Arrangements
Following the CFO transition on October 13, 2023, Mr. Rivera continued to serve as a senior advisor to the Company through the end of the calendar year 2023. On December 15, 2023, the Company and Mr. Rivera agreed to extend the period for Mr. Rivera to serve as a senior advisor to the Company and served in this role on a full-time basis until February 29, 2024, and then on a part-time basis until August 1, 2024. Mr. Rivera also agreed to forfeit the equity awards granted to him in July 2023, which included stock options and stock awards with an aggregate grant-date fair value of $1,950,032. Mr. Rivera’s base salary was reduced to $10,000 per month effective March 1, 2024, to reflect his part-time status. There were no other changes to Mr. Rivera’s existing compensation.
Paychex, Inc. 2024 Proxy Statement • 37
Fiscal 2024 Compensation Results
Base Salary
We pay base salary to attract talented executives and to provide a fixed base of cash compensation. Base salaries are reviewed annually. Our practice is to make targeted base salary increases as determined necessary based on performance, market information, and scope of responsibilities. For fiscal 2024, Mr. Gibson received a base salary increase of approximately 9% to $900,000 based on these factors, bringing his base salary closer to our Peer Group median, while remaining below it.
Upon Mr. Schrader’s promotion to SVP and CFO on October 13, 2023, his base salary was increased to $450,000 per year.
In connection with Ms. Roaldsen’s appointment as SVP of Operations and Customer Experience, her base salary was set at $450,000 per year. In October 2023, the C&L Committee increased her base salary to $475,000 per year due to the expanded scope of her role.
Annual Incentive Program
The annual incentive program was established to motivate NEOs to meet the financial goals set by the Company as presented to its stockholders, while maintaining alignment with stockholders’ interests. Upon achievement of the minimum eligible performance, payouts under our annual incentive program are determined based upon the satisfaction of certain quantitative and qualitative components.
The quantitative component consists of certain predetermined performance targets, which are established at the beginning of each fiscal year and are typically based on the Board-approved fiscal year financial plan. The targets for payout are established by the C&L Committee with consultation of management. The performance targets established are intended to provide a balance between growing revenue and managing expenses. Once a target is determined, it is set for the year and is normally not changed. For extraordinary circumstances, the C&L Committee reserves the right to apply discretion and make changes.
The qualitative component of the annual incentive program consists of individual-specific qualitative goals established at the beginning of the fiscal year based on functions and responsibilities unique to the individual. The CEO can potentially receive up to 20% of base salary and all other NEOs can potentially receive up to 10% of base salary. For fiscal 2024, a portion of the NEO’s qualitative goals was based on DE&I and governance, climate and corporate responsibility metrics. The assessment of qualitative goals is subjective and is not always based on quantifiable financial measurements. The C&L Committee may determine, at its sole discretion, whether satisfactory achievement has occurred, regardless of achievement against the pre-established individual goals. At its discretion for fiscal 2024, the C&L Committee individually evaluated each NEO and determined the specific percentage of the qualitative portion to award each NEO as presented on the following page.
The weight given each quantitative performance target is determined by the C&L Committee when the targets are established, and this weight varies for each NEO based on the individual’s position. Each of the performance targets applicable to an NEO’s annual incentive program provide the NEO an opportunity to earn a percentage of their annualized base salary based on achievement at threshold, target, and maximum. The total percentage of base salary for all performance measures that the NEOs have the opportunity to earn are as follows:
|
|
|
|
|
|
|
|
|
| |
|
|
| |
|
Quantitative Component |
|
Qualitative Component |
| Position |
|
Threshold |
|
Target |
|
Maximum |
| CEO |
|
55.0% |
|
130.0% |
|
205.0% |
|
20.0% |
| SVP-Sales |
|
47.5% |
|
105.0% |
|
162.5% |
|
10.0% |
| SVP-Other |
|
40.0% |
|
90.0% |
|
140.0% |
|
10.0% |
| VP |
|
27.5% |
|
65.0% |
|
102.5% |
|
10.0% |
Thresholds are set as the floor with any achievement below threshold resulting in no payout for the respective performance metric. Maximums are set as a ceiling on the amount of payout a NEO can receive for each performance metric.
Paychex, Inc. 2024 Proxy Statement • 41
In July 2023, the C&L Committee made an annual equity grant to our NEOs that was a blend of stock options, time-based RSUs and performance-based RSUs. The award value was split as follows:
This annual distribution provides for 50% of the total equity-based compensation value to be performance-based, consistent with the C&L Committee’s total compensation determination. For our July 2023 annual grants, the C&L Committee determined the estimated total value to be approximately: $5,750,000 for the CEO; $800,000 for the former VP-Finance and Investor Relations; $1,950,000 for the former CFO; $1,800,000 for the SVP-Sales; $1,900,000 for the SVP-IT and PD; and $1,100,000 for the SVP-Operations and Customer Experience. The estimated total value of our NEO’s equity-based compensation was increased in fiscal 2024 to adjust the compensation closer to market based on benchmarking analysis against our Peer Group. See further discussion under the “Peer Group” section within this CD&A.
The following equity-based compensation was granted in July 2023 for our NEOs (including Mr. Rivera, whose July 2023 annual grant was forfeited in December 2023):
|
|
|
|
|
|
|
| |
|
|
|
| NEO |
|
Performance-Based
RSU Awards (at Target)(1) |
|
Stock
Option
Awards(2) |
|
Time-Based
RSU Awards(3) |
| John B. Gibson |
|
25,208 |
|
63,583 |
|
9,515 |
| Robert L. Schrader |
|
3,507 |
|
8,846 |
|
1,324 |
| Mark A. Bottini |
|
7,891 |
|
19,904 |
|
2,979 |
| Michael E. Gioja |
|
8,330 |
|
21,010 |
|
3,144 |
| Elizabeth Roaldsen |
|
4,822 |
|
12,164 |
|
1,820 |
| Efrain Rivera |
|
8,549 |
|
21,563 |
|
3,227 |
| (1) |
Performance-based RSU awards are subject to a two-year performance period with full vesting provided after an additional one-year service period (i.e., total of three years). |
| (2) |
Stock option awards vest one-third per year over three years and have a term of 10 years. |
| (3) |
Time-based RSU awards vest one-third per year over three years. |
In October 2023, the C&L Committee granted additional equity awards to Mr. Schrader, the former VP, Finance and Investor Relations upon his promotion to SVP and CFO, with a total value at the time of grant of approximately $400,000. The incremental $400,000 represents a true-up to reflect his new role and responsibilities as well as the assessment of this position versus market rates. This grant consisted of 1,784 performance-based RSUs (at target), 4,237 stock options, and 678 time-based RSUs. The performance-based RSUs will vest upon the achievement of the two-year performance metrics established by the C&L Committee in July 2023, followed by a one-year service vesting period.
Also in October 2023, the C&L Committee granted additional equity awards to Ms. Roaldsen, the SVP-Operations and Customer Experience due to the expanded scope of her role, with a total value at the time of grant of
Paychex, Inc. 2024 Proxy Statement • 44
approximately $200,000. This grant consisted of 892 performance-based RSUs (at target), 2,119 stock options, and 339 time-based RSUs. The performance-based RSUs will vest upon the achievement of the two-year performance metrics established by the C&L Committee in July 2023, followed by a one-year service vesting period.
Performance Stock Awards
Performance-based stock awards are designed to provide variable compensation that is focused on longer-term results. Performance-based stock awards have a two-year performance period to determine the number of restricted stock units to be issued. The NEO generally must serve for one additional year for the restricted stock units to vest. The performance targets as approved by the Board are based on service revenue (weighted 50%) and operating income, net of certain items (weighted 50%), as projected in the strategic planning process. The C&L Committee establishes performance targets intended to be appropriately challenging at all levels, including the threshold level, but attainable with increasing difficulty for each level beyond threshold. The threshold level was expected to be appropriately challenging but achievable under normal circumstances. The target level would be achieved if the Company performed as expected under our strategic plan for the two-year period. The maximum level would be achievable only with exceptional performance.
2022-2024 Performance Stock Awards
The two-year performance period for performance-based stock awards granted in July 2022 was completed at the end of fiscal 2024. The shares earned were based on achievement against pre-established targets for the performance period as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Performance Goal ($ In Millions) |
|
Two-Year Performance Targets Established |
|
Actual Achievement |
| |
Threshold |
|
Target |
|
Maximum |
|
($) |
|
|
% of Target |
| Service revenue(1) |
|
$9,545 |
|
$10,047 |
|
$10,348 |
|
|
$10,039 |
|
|
100% |
| Operating income, net of certain items(2) |
|
$3,755 |
|
$3,953 |
|
$4,071 |
|
|
$3,989 |
|
|
101% |
| Percent of plan |
|
95% |
|
100% |
|
103% |
|
|
|
|
|
|
| Payout as a percent of target |
|
60% |
|
100% |
|
150% |
|
|
|
|
|
107% |
| (1) |
Service revenue as calculated under the performance share agreement allows for 2% of total service revenue to be delivered from acquisitions during the performance period. Refer to Appendix B for a description of this non-GAAP measure and a reconciliation of service revenue as calculated for the performance period to service revenue reported in our consolidated financial statements. |
| (2) |
Operating income, net of certain items, is a non-GAAP measure. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A of this proxy statement for a discussion of this non-GAAP measure and a reconciliation to the most comparable GAAP measure of operating income. In addition, this measure as calculated under the performance share agreement excludes the impact of business acquisitions and other unusual items during the performance period. Refer to Appendix B for a description of this non-GAAP measure and a reconciliation of the amount for the performance period to the most comparable GAAP measure of operating income. |
Fiscal Year 2025 Changes to Equity-Based Compensation
In fiscal 2024, the C&L Committee conducted a review of the overall incentive structure for our executive officers and approved changes to the long-term incentive (“LTI”) design for the fiscal year ending May 31, 2025 (“fiscal 2025”). The new design was informed by investor commentary and observations as well as input from the C&L Committee’s independent compensation consultant.
Under the new design, LTI is delivered to certain executive officers, including the CEO, in a mix of 60% performance-based RSUs, 25% stock options, and 15% time-based RSUs. In the prior design, performance-based RSUs represented 50% of total LTI with the remainder delivered via 30% stock options and 20% time-based RSUs. The new mix is intended to increase the focus on performance-based awards.
In addition to the change in LTI mix, the C&L Committee also extended the performance period from two to three years and eliminated the one-year service period that followed the performance period. Under the new design, the
Paychex, Inc. 2024 Proxy Statement • 45
performance targets continue to be based on service revenue (weighted 50%) and operating income, net of certain items (weighted 50%). At the beginning of the performance period, the threshold, target, and maximum annual growth rate goals for service revenue and operating income, net of certain items are set by the C&L Committee for the entire performance period. The threshold, target, and maximum growth rates for service revenue and operating income, net of certain items for each of the three years in the performance period are determined as percentage increases over the actual results from the prior year. As a result, payouts for the second and third year of the performance period require sustained growth over the three-year period. Because growth rates are calculated separately for each year in the performance period and are not aggregated over the three-year performance period, the plan allows for a long-term growth goal while recalibrating to actual performance on an annual basis.
The new design also adds relative total shareholder return (“TSR”) as a metric that modifies the final payout downward or upward by up to 25% based on the Company’s three-year TSR performance versus the S&P 500’s three-year TSR performance. The S&P 500 was chosen because the index consists of a broad group of companies that represents investors’ alternative capital investment opportunities, thereby aligning the performance-based RSU payout opportunity to the long-term investment experience of our stockholders.
In reflection of the increased performance focus of the overall LTI program and to align with the most prevalent practice among the Company’s peers and broader industry, the C&L Committee increased the maximum performance-based RSU payout opportunity from 150% of the target shares to 200%. The relative TSR modifier may not result in a payout in excess of 200% of the target shares.
Last, to align with the most prevalent practice among the Company’s peers and broader industry, the C&L Committee adjusted the death, disability and retirement benefits for performance-based RSUs to allow for full vesting, rather than a pro-rated portion. For death and disability, vesting of performance-based RSUs is for the target number of shares. For retirement, vesting of performance-based RSUs continues to be contingent upon the NEO retiring on or after the one-year anniversary of the grant date of such an award and is dependent upon actual Company performance for the performance period. In addition, in the event of termination without cause within the 12-month period following a change of control, the performance-vesting RSUs will vest for the target number of shares, conditioned upon the execution of a general release in favor of the Company. Both “cause” and “change in control” have the meanings given such terms in the Change in Control Plan.
Stock Ownership Guidelines
The C&L Committee has established stock ownership guidelines. The requirements for fiscal 2024 are as follows:
|
|
|
|
|
| |
|
| Position |
|
Requirement |
|
| CEO |
|
|
6X base salary |
|
| SVPs |
|
|
3X base salary |
|
| VPs |
|
|
2X base salary |
|
There are restrictions on sales of shares acquired from awards until the officer has attained the applicable stock ownership level. The ownership guidelines were established to provide long-term alignment with stockholders’ interests. For the purposes of achieving the ownership guidelines, unvested stock and stock units awarded to the executive officers that do not include performance-vesting metrics are included. All NEOs, except Ms. Roaldsen and Mr. Rivera, are currently compliant with the guidelines. Ms. Roaldsen, appointed as SVP of Operations and Customer Experience in May 2023, currently does not hold stock with a value in excess of the three times base salary requirement but has complied with the requirement to retain the shares of common stock acquired from awards. Mr. Rivera retired from the Company effective August 1, 2024.
Paychex, Inc. 2024 Proxy Statement • 46
Prohibition on Hedging or Speculating in Company Stock
NEOs, along with all employees of the Company, must adhere to strict standards with regards to trading in Paychex stock. These standards are set forth in our insider trading policy. Specifically, we prohibit executive officers from hedging Paychex stock. They may not, among other things:
| • |
|
speculatively trade in the Company’s stock; |
| • |
|
short sell any securities of the Company; or |
| • |
|
buy or sell puts or calls on the Company’s securities. |
Pledging of Company Stock
We maintain a pledging policy for all Paychex directors, officers, and employees that prohibits new pledging of Company stock for any purpose. Our pledging policy is posted on our website at https://investor.paychex.com/corporate-governance/governance-documents.
Clawback Policy
As of October 11, 2023, the C&L Committee adopted the Paychex, Inc. Policy for the Recovery of Erroneously Awarded Compensation (the “Clawback Policy”), a copy of which was filed as Exhibit 97.1 to the Company’s Form 10-K, effective October 2, 2023. The Clawback Policy applies to all executive officers, including all NEOs. Under the Clawback Policy, in the event that the Company is required to prepare an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the federal securities laws, the Company will recover, on a reasonably prompt basis, the excess incentive-based compensation received by any current or former executive officer during the prior three fiscal years that exceeds the amount that the executive officer would have received had the incentive-based compensation been determined based on the restated financial statements. The Clawback Policy is intended to comply with the requirements of Section 10D of the Exchange Act and Nasdaq Listing Rule 5608.
Prior to adopting the Clawback Policy, we retained the right to recoup all or a portion of the payouts made under the annual incentive program and equity-based compensation awards if those payouts were based on financial statements that were subsequently subject to restatement and where fraud or misconduct was involved.
Non-Compete and Other Forfeiture Provisions
Our equity-based compensation agreements state that following termination of employment, certain benefits (including equity-based compensation) will be forfeited if the NEO engages in activities adverse to the Company. These activities include:
| • |
|
competition with the Company during a specified period after termination of employment; |
| • |
|
solicitation of the Company’s clients or employees during a specified period after termination of employment; |
| • |
|
breach of confidentiality either during or after employment; or |
| • |
|
engaging in conduct which is detrimental to the Company during the NEO’s employment with the Company. |
Should any of these activities occur, we may cancel all or any outstanding portion of the equity awards subject to this provision and recover the gross value of any vested time-based stock awards and vested performance-based stock awards, including all dividends and dividend equivalents. In the case of stock options, we may suspend the NEO’s right to exercise the option and/or may declare the option forfeited. In addition, we may seek to recover all profits from certain prior exercises as liquidated damages and pursue other available legal remedies.
Perquisites
Our NEOs receive benefits in the form of vacation, health insurance, life insurance, Company matching contributions to the 401(k) Plan when such contributions are in effect, and other benefits, which are generally available to all our employees. We do not provide our NEOs with pension arrangements, post-retirement health coverage, or other similar benefits, with the exception of access to a non-qualified and unfunded deferred compensation plan.
Paychex, Inc. 2024 Proxy Statement • 47
Deferred Compensation
We offer a non-qualified and unfunded deferred compensation plan to our NEOs. The deferred compensation plan is intended to supplement the NEO’s 401(k) Plan account. Due to limitations on the 401(k) Plan accounts placed by the Internal Revenue Service, this plan allows for further savings toward retirement for the NEOs and functions similarly to the 401(k) Plan account. Refer to the “Non-Qualified Deferred Compensation” discussion included in the Named Executive Officer Compensation section of this proxy statement for more information on how our deferred compensation plan functions.
Change in Control Plan
Executives of the Company are covered by a Change in Control Plan. Upon involuntary termination by the Company without cause or a voluntary termination by the participant for good reason, within 12 months following a change in control, the executive becomes entitled to certain severance benefits. Such severance benefits are conditioned upon the execution of a general release in favor of the Company.
Cause means the participant’s dereliction of duty to the Company, conviction for a felony, or willful misconduct that has a substantial adverse effect on the Company. Good reason means a significant change to the duties, authority, or position that were assigned immediately before the change in control including: the reduction in or removal of any material duties, authority, or position within the Company; assignment of duties inconsistent with the participant’s position, authorities, or responsibilities; material reduction to base salary, annual incentive, or other elements of total compensation; relocation of the participant’s principal workplace to an area outside of a 50-mile-radius, or the failure of a successor company to assume or adopt the Change in Control Plan. Refer to the “Potential Payments upon Termination or Change in Control” discussion within the Named Executive Officer Compensation section of this proxy statement for further information.
Compensation Decision Process
Role of the Compensation Consultant
As outlined in its charter, the C&L Committee has the authority to retain consultants and advisers, at the Company’s expense, to assist in the discharge of the committee’s duties. The C&L Committee can retain and dismiss such consultants and advisers at any time. The consultants report directly to the committee and have direct access to the committee through the C&L Committee’s Chair. The C&L Committee requires that any consultant it retains cannot be utilized by management for other purposes. Although management, particularly the VP, Chief Human Resources Officer (“CHRO”), may work closely with the consultant, the consultant is ultimately accountable to the C&L Committee on matters related to executive compensation.
The C&L Committee retains the services of Frederic W. Cook & Co. (“FW Cook”) as its independent compensation consultant. FW Cook has not provided any other services to the Company prior to or subsequent to being retained as the compensation consultant to the C&L Committee. The C&L Committee was solely responsible for the decision to retain FW Cook as its consultant. FW Cook advises the C&L Committee on matters of NEO compensation, assists with analysis and research, and provides updates on evolving best practices in compensation. While FW Cook may express an opinion on compensation matters, the C&L Committee is solely responsible for setting the type and amount of compensation for NEOs.
The C&L Committee recognizes that it is essential to receive objective advice from its compensation consultant. The C&L Committee closely examines the procedures and safeguards that FW Cook takes to ensure that the compensation consulting services are objective. The C&L Committee has assessed the independence of FW Cook pursuant to SEC rules and concluded that FW Cook’s work for the C&L Committee does not raise any conflict of interest. In making this assessment, the following factors were taken into consideration:
| • |
|
that the compensation consultant reports directly to the C&L Committee, and the C&L Committee has the sole power to terminate or replace its compensation consultant at any time; |
| • |
|
the compensation consultant does not provide any other services to the Company; |
Paychex, Inc. 2024 Proxy Statement • 48
| • |
|
whether aggregate fees paid by the Company to the compensation consultant, as a percentage of the total revenue of the compensation consultant, are material to the compensation consultant; |
| • |
|
the compensation consultant’s policies and procedures designed to prevent conflicts of interest; |
| • |
|
any business or personal relationships between the compensation consultant, on one hand, and any member of the C&L Committee or executive officer, on the other hand; and |
| • |
|
whether the compensation consultant owns any shares of the Company’s stock. |
Role of Compensation and Leadership Committee and Management
As part of the C&L Committee’s responsibility to evaluate and determine NEO compensation, on an annual basis the C&L Committee:
| • |
|
reviews the companies in our Peer Group for any changes; |
| • |
|
reviews base salaries for adjustments, if any; |
| • |
|
establishes and approves the performance targets and payouts under incentive-based programs and awards; and |
| • |
|
grants equity awards under our 2002 Plan. |
The C&L Committee continues to review each of the elements of compensation annually to ensure that compensation is appropriate and competitive to attract and retain a high-performing executive team. The C&L Committee targets to maintain performance-based pay equal to or greater than 50% of total target NEO compensation and at-risk pay equal to or greater than 80% of total target NEO compensation. Additionally, the C&L Committee targets the value of long-term compensation to be approximately 70% for the CEO and 60% for the other NEOs.
The C&L Committee, in making its decisions, targets an equitable mix of compensation. It utilizes various sources of information to evaluate our NEO compensation, including, but not limited to:
| • |
|
compensation consultant reports and analyses; |
| • |
|
benchmarking information with NEOs at Peer Group companies for all compensation elements; and |
| • |
|
internal management reports including a three-year history of total compensation for all officers and a summary for the upcoming fiscal year of total cash compensation and equity awards for all officers. |
The C&L Committee strives for our NEOs’ compensation to be in line with our Peer Group. The information provided by the compensation consultant indicates whether our compensation package, if target performance is achieved, is comparable to the median compensation of our Peer Group, given current competitive practices, overall best practices, and other compensation and benefit trends.
Management reports are used to evaluate compensation recommendations and the impact to total compensation for each individual. They are also used to view a complete picture of the trend of compensation to executive officers, both as a team and as individuals. This facilitates discussion that more accurately details individual officer compensation, noting differences that reflect officer tenure, performance, and position in the management structure.
The C&L Committee uses these management updates along with peer information, where available, as tools to evaluate executive compensation. This information is reviewed in a subjective manner. There is no implied direct or formulaic linkage between peer information and the C&L Committee’s compensation decisions.
Our CEO and our CHRO provide recommendations to the C&L Committee on design elements for compensation. These individuals, and from time-to-time invited guests including other officers, will attend the meetings of the C&L Committee to present and respond to questions on current or proposed plan design. Annually, our CEO reviews achievement of the recently completed fiscal year’s plan and presents recommendations regarding salary for each of the NEOs (other than himself), the upcoming fiscal year’s annual incentive program structure, and equity awards. Management is excluded from executive sessions of the C&L Committee where final decisions on compensation are made, particularly those on our CEO’s performance and compensation. Executive sessions occur at each meeting of the C&L Committee.
Paychex, Inc. 2024 Proxy Statement • 49
FASB ASC Topic 718. The amounts do not reflect whether the recipient has actually realized a financial gain from such awards (such as a lapse in the restrictions on a stock award). The fair value per share of the time-based stock awards and performance-based stock awards were determined based on the closing price of the underlying common stock on the date of grant, adjusted for the present value of expected dividends over the applicable performance period for performance-based stock awards. For additional information about the assumptions used in these calculations for fiscal 2024, see Note F, “Stock-Based Compensation Plans,” to our audited consolidated financial statements for fiscal 2024, included in our Form 10-K.
The amount reported for Mr. Rivera for fiscal 2024 reflects the aggregate grant-date fair values of time-based RSUs and performance-based RSUs granted in July 2023 that were forfeited in December 2023.
Performance-based stock awards are reflected in the Fiscal 2024 Summary Compensation Table assuming target achievement at the date of grant. The grant-date fair value of these awards at target achievement and at maximum achievement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Fiscal 2024 |
|
Fiscal 2023 |
|
Fiscal 2022 |
| |
|
|
|
|
|
|
| |
|
Target |
|
Maximum |
|
Target |
|
Maximum |
|
Target |
|
Maximum |
| John B. Gibson |
|
|
$ |
2,874,972 |
|
|
|
$ |
4,312,459 |
|
|
|
$ |
2,499,969 |
|
|
|
$ |
3,749,954 |
|
|
|
$ |
741,704 |
|
|
|
$ |
1,112,557 |
|
| Robert L. Schrader(1) |
|
|
$ |
599,924 |
|
|
|
$ |
899,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mark A. Bottini |
|
|
$ |
899,969 |
|
|
|
$ |
1,349,953 |
|
|
|
$ |
800,012 |
|
|
|
$ |
1,200,018 |
|
|
|
$ |
635,808 |
|
|
|
$ |
953,712 |
|
| Michael E. Gioja |
|
|
$ |
950,037 |
|
|
|
$ |
1,425,055 |
|
|
|
$ |
849,979 |
|
|
|
$ |
1,274,969 |
|
|
|
$ |
678,124 |
|
|
|
$ |
1,017,185 |
|
| Elizabeth Roaldsen(1) |
|
|
$ |
649,924 |
|
|
|
$ |
974,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Efrain Rivera(2) |
|
|
$ |
975,013 |
|
|
|
$ |
1,462,520 |
|
|
|
$ |
974,950 |
|
|
|
$ |
1,462,425 |
|
|
|
$ |
784,127 |
|
|
|
$ |
1,176,191 |
|
| (1) |
Mr. Schrader and Ms. Roaldsen were not NEOs for fiscal 2023 or 2022. |
| (2) |
The fiscal 2024 columns include Mr. Rivera’s July 2023 performance-based RSU award, which was forfeited in December 2023. |
The annual performance-based stock awards have a two-year performance period, followed by an additional year of service required (i.e., total of three years). The fair value of these awards is determined based on the closing price of the underlying common stock on the date of grant, adjusted for the present value of expected dividends over the performance period, as dividends are not earned during the two-year performance period.
Refer to the Grants of Plan-Based Awards for Fiscal 2024 table included in this proxy statement for further information on time-based RSUs and performance-based RSUs granted in fiscal 2024.
Option Awards (Column (f))
The amounts in this column reflect the grant-date fair value of stock options granted during the respective fiscal years and were computed in accordance with FASB ASC Topic 718. The amounts do not reflect whether the recipient has actually realized a financial gain from such awards (such as by exercising stock options). The per share fair values of the stock options were determined using a Black-Scholes option pricing model. For additional information about the assumptions used in these calculations for fiscal 2024, see Note F, “Stock-Based Compensation Plans,” to our audited consolidated financial statements for fiscal 2024, included in our Form 10-K.
The amount reported for Mr. Rivera for fiscal 2024 reflects the grant-date fair value of stock options granted in July 2023 that were forfeited in December 2023.
Refer to the Grants of Plan-Based Awards for Fiscal 2024 table included in this proxy statement for further information on stock options granted in fiscal 2024.
Non-Equity Incentive Plan Compensation (Column (g))
The amounts in this column are the amounts earned under the annual incentive program. These amounts were paid in July following the applicable fiscal year end. Refer to the discussion in the CD&A “Elements of
Paychex, Inc. 2024 Proxy Statement • 54
Estimated Future Payouts Under Equity Incentive Plan Awards (Columns (f), (g), and (h))
The amounts in these columns consist of performance-based RSUs granted during fiscal 2024 under the 2002 Plan. The performance-based RSUs granted are earned, if at all, based on achievement compared to established targets for service revenue (weighted 50%) and operating income, net of certain items (weighted 50%) over a two-year performance period, followed by an additional one-year service requirement (i.e., total of three years). For performance-based RSUs, the NEOs do not have voting rights, but after the end of the performance period, the NEOs accrue dividend equivalents on the performance-based RSUs earned, which are paid at the time of vesting. In December 2023, Mr. Rivera forfeited the performance-based RSUs granted to him in July 2023.
All Other Stock Awards: Number of Shares of Stock or Units (Column (i))
The amounts in this column consist of time-based RSUs granted in fiscal 2024 under the 2002 Plan. For the time-based RSUs granted to our executive officers, one-third of time-based RSUs vest annually over a three-year period from the date of grant, provided the executive officer is an employee of the Company on the vesting date. NEOs do not have voting rights on these awards prior to vesting, but do accrue dividend equivalents which are paid at the time of vesting. In December 2023, Mr. Rivera forfeited the time-based RSUs granted in July 2023.
All Other Option Awards: Number of Securities Underlying Options (Column (j))
The amounts in this column consist of time-based stock options granted in fiscal 2024 under the 2002 Plan. These stock options have an exercise price equal to the closing stock price on the date of grant and have a term of ten years. For the stock options granted to our executive officers, the stock options vest one-third per annum over a three-year period from the date of grant, provided the executive officer is an employee of the Company on the vesting date. In December 2023, Mr. Rivera forfeited the stock options granted to him in July 2023.
Grant-Date Fair Value of Stock and Option Awards (Column (l))
The amounts in this column represent the aggregate grant-date fair value of time-based RSUs, performance-based RSUs, and stock options granted in fiscal 2024 under the 2002 Plan.
| • |
|
The fair values of the time-based RSUs granted to our NEOs in July 2023 and October 2023 were $120.86 per share and $117.98 per share, respectively, and were determined based on the closing price of the underlying common stock on the date of grant. |
| • |
|
The fair values of the performance-based RSUs granted to our NEOs in July 2023 and October 2023 were $114.05 per share and $112.08 per share, respectively and were determined based on the closing price of the underlying common stock on the date of grant, adjusted for the present value of expected dividends over the performance period. |
| • |
|
The fair values of the stock options granted to our NEOs in July 2023 and October 2023 were $27.13 and $28.32, respectively, and were determined using a Black-Scholes option pricing model, applying the following assumptions; risk-free interest rates of 4.0% and 4.7% as of July 15, 2023 and October 15, 2023, respectively; a dividend yield of 3.1%; a stock-price volatility factor of 0.25; and an expected option life of 6.5 years from the date of grant. |
Paychex, Inc. 2024 Proxy Statement • 57
Number of Shares or Units of Stock and Market Value of Shares or Units of Stock That Have Not Vested (Columns (h) and (i))
The stock awards in this column include all time-based stock awards, which vest one-third per annum over a three-year period from the date of grant. Additionally, this column includes performance-based stock awards for which the performance conditions have been met. These performance-based stock awards are now restricted with a one-year service requirement before the restrictions lapse in July 2024 and July 2025, respectively.
The following table provides information with respect to the future vesting of each NEO’s outstanding stock awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
Number of Securities Vesting (#) |
|
| |
|
|
|
| |
|
Fiscal 2025 |
|
|
Fiscal 2026 |
|
|
Fiscal 2027 |
|
| John B. Gibson |
|
|
18,291 |
|
|
|
30,826 |
|
|
|
3,172 |
|
| Robert L. Schrader |
|
|
5,281 |
|
|
|
4,513 |
|
|
|
668 |
|
| Mark A. Bottini |
|
|
11,982 |
|
|
|
9,747 |
|
|
|
993 |
|
| Michael E. Gioja |
|
|
12,694 |
|
|
|
10,344 |
|
|
|
1,048 |
|
| Elizabeth Roaldsen |
|
|
719 |
|
|
|
720 |
|
|
|
720 |
|
| Efrain Rivera |
|
|
13,458 |
|
|
|
10,662 |
|
|
|
— |
|
The market value displayed is based on the number of shares or units that have not vested multiplied by $120.16, the closing price of the Company’s common stock as of May 31, 2024. Total dividends or dividend equivalents on the stock awards that have not vested as of May 31, 2024, were as follows: Mr. Gibson—$125,940; Mr. Schrader—$31,630; Mr. Bottini—$70,617; Mr. Gioja—$74,938; Ms. Roaldsen—$7,579; and Mr. Rivera—$73,252. The grant-date fair value for stock awards incorporates expected dividends or dividend equivalents.
Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested (Columns (k) and (l))
The stock awards in these columns represent the grant of performance-based stock awards. The annual performance-based stock awards are presented at target performance and have pre-established performance goals that can be achieved over a two-year performance period. Stock units earned will be determined at the end of the performance period and will then vest after satisfying a one-year service requirement. The market value displayed is based on the number of shares at target multiplied by $120.16, the closing price of the Company’s common stock as of May 31, 2024.
Potential Payments Upon Termination or Change in Control Fiscal 2024
Change in Control Plan
The Company has a Change in Control Plan covering the officers of the Company. Upon involuntary termination by the Company without cause or a voluntary termination by the participant for good reason, within 12 months following a change in control, as defined in the Change in Control Plan, the officer becomes entitled to certain severance benefits. “Cause” means the participant’s dereliction of duty to the Company, conviction for a felony, or willful misconduct that has a substantial adverse effect on the Company. “Good reason” means a significant change to the duties, authority, or position that were assigned immediately before the change in control including: the reduction in or removal of any material duties, authority, or position within the Company; assignment of duties inconsistent with the participant’s position, authorities, or responsibilities; material reduction to base salary, annual incentive, or other elements of total compensation; relocation of the participant’s principal workplace to an area outside of a 50-mile radius; or the failure of a successor company to assume or adopt this plan.
Paychex, Inc. 2024 Proxy Statement • 61
Aggregate Withdrawals/Distributions (Column (d))
The amounts in this column would represent amounts withdrawn from the plan and would have been included in the “Salary” and “Non-Equity Incentive Plan Compensation” amounts reported in the Summary Compensation Tables for current and previous years.
Aggregate Balance as of May 31, 2024 (Column (e))
The amounts in this column reflect the accumulated balances in the plan and include the “Salary” and “Non-Equity Incentive Plan Compensation” deferred amounts reported in current and previous years in the Fiscal 2024 Summary Compensation Table.
The investment funds available to NEOs, and the respective one-year rates of return as of May 31, 2024, are as follows:
|
|
|
|
|
|
|
| |
|
|
|
| Name of Fund |
|
Rate of
Return |
|
Name of Fund |
|
Rate of
Return |
| American Funds Europacific Growth Fund |
|
16.68% |
|
Invesco Developing Markets Fund |
|
5.47% |
| BlackRock Global Allocation Fund Class A |
|
13.83% |
|
MFS Mid Cap Value Fund |
|
25.38% |
| Delaware Small Cap Core Fund |
|
17.26% |
|
T. Rowe Price Equity Income Fund |
|
24.44% |
| Fidelity Extended Market Index Fund |
|
24.57% |
|
T. Rowe Price Growth Stock Fund |
|
31.25% |
| Fidelity Government Money Market Fund |
|
5.14% |
|
T. Rowe Price New Income Fund |
|
0.86% |
| Fidelity 500 Index Fund |
|
28.09% |
|
Vanguard Total International Stock Index Fund |
|
16.80% |
CEO Pay Ratio
Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are required to provide the ratio of the annual total compensation of Mr. Gibson, our CEO, to the annual total compensation of our median employee.
To identify our median employee for fiscal 2024, we took the following steps:
| • |
|
We identified our global employee population of approximately 16,800 employees, excluding our CEO, who were employed by us on March 1, 2024. Approximately 92% of our employees are located in the U.S. and 8% are located in jurisdictions outside the U.S. We included all employees, whether employed on a full-time, part-time, or seasonal basis; |
| • |
|
As permitted by the SEC’s “de minimis” exemption, we adjusted our global employee population to exclude employees from certain jurisdiction outside of the U.S. (239 in Germany and 185 in Denmark); |
| • |
|
We identified the median employee by examining the previous 12-month period of W-2 wages for our adjusted global employee population, excluding our CEO, who were employed by us on March 1, 2024; and |
| • |
|
We did not make any assumptions, adjustments, or estimates with respect to W-2 wages, however we did annualize the compensation for any full-time or part-time employees that were not employed by us for the entire 12-month period. |
We calculated total annual compensation for fiscal 2024 for the median employee using the same methodology we used for our CEO as set forth in the 2024 Summary Compensation Table in this proxy statement.
The table below sets forth comparative information regarding: (A) the total annual compensation of our CEO for fiscal 2024; (B) the median of the total annual compensation of all other employees of the Company, excluding employees of certain non-U.S. jurisdictions and our CEO, for fiscal 2024; and (C) the ratio of the CEO total annual compensation to the median of the total annual compensation of all other employees, excluding employees of certain non-U.S. jurisdictions and our CEO:
|
|
|
|
|
| |
|
| Mr. Gibson, our CEO, total annual compensation (A) |
|
|
$7,534,855 |
|
| |
|
| Median employee total annual compensation, excluding employees of certain non-U.S. jurisdictions and our CEO (B) |
|
|
$ 73,013 |
|
| |
|
| Ratio of CEO to median employee compensation (C) |
|
|
103:1 |
|
Paychex, Inc. 2024 Proxy Statement • 67
Report of the Audit Committee
The Audit Committee of the Board of Directors oversees the Company’s financial reporting process on behalf of the Board and is composed entirely of independent directors. The Audit Committee is governed by a written charter and its primary responsibilities are highlighted in the Corporate Governance section of this Proxy Statement.
Paychex management is responsible for the preparation of the consolidated financial statements, the financial reporting process, and for the Company’s internal controls over financial reporting. PwC, the Company’s independent accountants, is responsible for performing independent audits of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board. The independent accountants are also responsible for expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. The Audit Committee monitors and oversees these processes. Also, the Audit Committee discussed with PwC the matters required to be discussed by Auditing Standard 1301 as adopted by the Public Company Accounting Oversight Board relating to communications with audit committees.
As part of the oversight processes, the Audit Committee regularly meets with management, the Company’s internal auditors, and the independent accountants. The Audit Committee meets with the internal auditors and independent accountants, with and without management present, to discuss the overall scope and plans for various audits, results of their examinations, their evaluations of the Company’s internal controls, and the overall quality and effectiveness of the Company’s financial reporting process and legal and ethical compliance programs, including the Company’s Code of Business Ethics and Conduct. The Audit Committee held six meetings during fiscal 2024 and had full access to each of the aforementioned parties.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed with management and the independent accountants the consolidated financial statements for fiscal 2024, including a discussion on the quality and acceptability of the Company’s accounting policies, the critical audit matter addressed in PwC’s audit report, the reasonableness of significant judgments and estimates, and the clarity of disclosures in the consolidated financial statements. The Audit Committee also monitored the progress and results of testing of internal controls over financial reporting, reviewed reports from management and internal audit regarding design, operation, and effectiveness of internal controls over financial reporting, and reviewed the report from the independent accountants regarding the effectiveness of the Company’s internal control over financial reporting.
The Audit Committee has discussed with the independent accountants the matters required to be discussed by Auditing Standard 1301 and SEC Rule 2-07. The independent accountants have provided the Audit Committee with written disclosures and the letter required by the Public Company Accounting Oversight Board regarding independent accountants’ communications with the audit committee concerning independence, and the Audit Committee has discussed with the independent accountants and management the accountants’ independence. The Audit Committee approved non-audit services provided by PricewaterhouseCoopers LLP during fiscal 2024. The Audit Committee considered whether PricewaterhouseCoopers LLP’s provision of non-audit services to the Company and its affiliates and the fees and costs billed for those services, is permissible with PricewaterhouseCoopers LLP’s independence. The Audit Committee has a clear policy on non-audit services that may be provided by the independent accountants, which prohibits certain categories of work and requires pre-authorization for all non-audit related services.
Based upon the reviews and discussions referred to above, the Audit Committee recommended, and the Board approved that the audited consolidated financial statements be included in the Company’s Form 10-K for the fiscal 2024 for filing with the SEC. The Audit Committee has recommended for approval by the Board the selection of the Company’s independent accountants.
The Audit Committee:
David J. S. Flaschen, Chair
Thomas F. Bonadio
Theresa M. Payton
Kevin A. Price
Kara Wilson
Paychex, Inc. 2024 Proxy Statement • 75
|
| FREQUENTLY ASKED QUESTIONS |
What is a proxy statement and what is a proxy?
We are furnishing this proxy statement to stockholders on behalf of our Board, who is soliciting your proxy to vote at the Annual Meeting. A proxy statement is a document that SEC regulations require us to give you when we ask you to sign a proxy designating individuals to vote on your behalf. This proxy statement summarizes information concerning the matters to be presented at the Annual Meeting and related information to help stockholders make an informed vote.
A proxy is your legal designation of another person to vote the stock that you own. That other person is called a proxy. The proxy card is your written document that designates someone to be your proxy. We have designated two of our officers as proxies for the Annual Meeting — John B. Gibson, President and CEO, and Robert L. Schrader, SVP and CFO.
When and where is the Annual Meeting?
The Annual Meeting will be held virtually on Thursday, October 10, 2024 at 9:30 a.m. Eastern Time at www.virtualshareholdermeeting.com/PAYX2024. There will not be an option for stockholders to attend in person. The following information about the Annual Meeting can be found at www.virtualshareholdermeeting.com/PAYX2024:
| • |
|
How any stockholder can attend the Annual Meeting; |
| • |
|
How stockholders as of the record date can use their 16-digit control number to vote during the Annual Meeting; |
| • |
|
How stockholders as of the record date may submit questions electronically before and while attending the Annual Meeting; and |
| • |
|
How to view a replay of the Annual Meeting for approximately one month after the date of the Annual Meeting. |
How can I view and participate in the Annual Meeting?
To participate, go to www.virtualshareholdermeeting.com/PAYX2024 and log in with the 16-digit control number provided in your proxy materials.
When should I join the Annual Meeting?
You may begin to log in to the meeting platform at 9:15 a.m. Eastern Time on Thursday, October 10, 2024. The meeting will begin promptly at 9:30 a.m. Eastern Time.
What if I lost my 16-digit control number?
If you lost your 16-digit control number, you will still be able to log in as a guest. To view the Annual Meeting webcast, visit www.virtualshareholdermeeting.com/PAYX2024 and log in as a guest. Please note, that if you log in as a guest, you will not be able to submit questions or vote during the meeting. If the proxy materials or voting instruction form that you received do not indicate that you may vote your shares through the www.proxyvote.com website, you should contact your bank, broker or other nominee (preferably at least 5 days before the Annual Meeting) and obtain a “legal proxy” (which will contain a 16-digit control number that will allow you to attend, participate in, or vote at the Annual Meeting).
How can I ask questions and vote at the Annual Meeting?
We encourage you to submit your questions and vote in advance of the Annual Meeting by visiting www.proxyvote.com. Stockholders may also vote or ask questions virtually during the Annual Meeting when accessing www.virtualshareholdermeeting.com/PAYX2024.
Paychex, Inc. 2024 Proxy Statement • 76
Any question topics pertinent to meeting matters that are not addressed during the meeting due to time constraints will be addressed and posted online at https://investor.paychex.com. If we receive questions about the same or similar topics, we may provide a representative question and a single response to avoid repetition. The questions and answers will be available as soon as practical after the meeting and will remain available until one week after posting.
What if I have technical difficulties or trouble accessing the virtual meeting?
If you encounter any technical difficulties logging into the website (www.virtualshareholdermeeting.com/PAYX2024) or during the virtual meeting, there will be a 1-800 number and international number available on the website to assist you. Technical support will be available 15 minutes prior to the start of the virtual meeting.
What is the “Notice and Access” model and why did the Company elect to use it?
We are making this proxy statement and our annual report available to stockholders on the Internet under the SEC’s Notice and Access model. On or about August 30, 2024, we will mail to all stockholders a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) in lieu of mailing a full printed set of the proxy materials. Accordingly, on or about August 30, 2024, our proxy materials are first being made available to our stockholders on www.proxyvote.com and https://investor.paychex.com. The Notice of Internet Availability includes instructions for accessing the proxy materials on the Internet and for how to vote. You will also find instructions for requesting a full printed set of the proxy materials in the Notice of Internet Availability.
We believe the electronic method of delivery under the Notice of Internet availability model will decrease postage and printing expenses, expedite delivery of proxy materials to you, and reduce our environmental impact, and we encourage you to take advantage of the availability of the proxy materials on the Internet. If you received the Notice of Internet Availability but would like to receive a full printed set of the proxy materials in the mail, you may follow the instructions in the Notice of Internet Availability for requesting such materials.
Can I access proxy materials on the Internet?
The Notice of Internet Availability will provide you with instructions for viewing our proxy materials for the 2024 Annual Meeting at www.proxyvote.com as well as on https://investor.paychex.com. You may elect to receive an e-mail message, which will provide a link to these documents on the Internet instead of waiting to receive the Notice of Internet Availability for viewing the materials.
What am I voting on? How do you recommend I vote? What vote is required for approval?
The table below shows the proposals subject to vote at the Annual Meeting, along with information on what vote is required to approve each of the proposals, assuming the presence of a quorum at the Annual Meeting, and the Board’s recommendations for each proposal. With respect to Proposals 1, 2, and 3, you may vote “FOR,” “AGAINST,” or “ABSTAIN.”
|
|
|
|
|
| |
|
|
| Proposal |
|
Vote Required |
|
Board Recommendation |
| Proposal 1: Election of eleven nominees to the Board of Directors for a one-year term |
|
Majority of the votes duly cast |
|
FOR all director nominees |
| Proposal 2: Advisory vote to approve the Company’s named executive officer compensation |
|
Majority of the shares present and entitled to vote on the proposal |
|
FOR |
| Proposal 3: Ratification of the selection of our independent registered public accounting firm |
|
Majority of the shares present and entitled to vote on the proposal |
|
FOR |
Paychex, Inc. 2024 Proxy Statement • 77
Who is entitled to vote at the Annual Meeting?
Stockholders of record of our common stock as of the close of business on August 12, 2024 (the “Record Date”) will be eligible to vote at the Annual Meeting. Each share outstanding as of the Record Date will be entitled to one vote.
How many shares must be present to hold the Annual Meeting?
In order for us to conduct our Annual Meeting, the holders of a majority of the shares entitled to vote must be present at the Annual Meeting. This is called a quorum. A quorum is necessary to hold a valid meeting. As of August 12, 2024, 359,741,705 shares of common stock were issued and outstanding. A total of 179,870,853 shares will constitute a quorum.
What is the difference between a registered stockholder and a beneficial stockholder?
If your shares are registered directly in your name with the Company’s transfer agent, Equiniti Trust Company, LLC, you are considered a stockholder of record, or a “registered stockholder”, with respect to those shares. If your shares are held in a brokerage account in the name of your bank, broker, or other nominee (this is called “street name”), you are not a registered stockholder, but rather are considered a “beneficial owner” of those shares. Your bank, broker, or other nominee will send you instructions on how to vote your shares.
What shares are included on Notice of Internet Availability or the proxy card?
You may receive more than one Notice of Internet Availability if you have multiple accounts with our transfer agent, or with banks, brokers, or other nominees, or proxy card if you have requested a full printed set of proxy materials.
If you are a registered stockholder, you will receive a Notice of Internet Availability, or proxy card if you have requested a full printed set of proxy materials, for shares of common stock you hold in certificate form or in book-entry form.
If you are a participant in the Paychex Employee Stock Ownership Plan Stock Fund (“ESOP”) of the Company’s 401(k) Plan, you will receive electronic communication or a proxy card that reflects those shares. You can vote those shares using the methods described below. This will serve as a voting instruction for Fidelity Management Trust Company (the “Trustee”), who is the holder of record for the shares in the ESOP. As a participant in the ESOP, you have the right to direct the Trustee on how to vote the shares of common stock credited to your account at the Annual Meeting. The participants’ voting instructions will be tabulated confidentially. Only the Trustee and/or the tabulator will have access to each participant’s individual voting direction. If you do not submit voting instructions for your shares of common stock in the ESOP, those shares will be voted by the Trustee in the same proportions as the shares for which voting instructions were received from other participants. To allow sufficient time for voting by the Trustee, voting instructions by ESOP participants must be received by 11:59 p.m. Eastern Time on Monday, October 7, 2024. The Trustee will then vote all shares of common stock held in the ESOP by the established deadline.
If you are a beneficial owner, you will receive voting instruction information from the bank, broker, or other nominee through which you own your shares of common stock.
How do I vote in advance of the Annual Meeting?
If you are a registered stockholder, or a participant in the ESOP, you can vote in one of the following ways:
| • |
|
Via the Internet—Go to the website noted on your Notice of Internet Availability in order to vote via the Internet. Internet voting is available 24 hours a day. We encourage you to vote via the Internet, as it is the most cost-effective way to vote; |
| • |
|
By telephone—Call 1-800-690-6903 and follow the voice prompt instructions to vote by telephone. Telephone voting is available 24 hours a day; or |
| • |
|
By mail—If you requested a full printed set of proxy materials, mark your proxy card, sign and date it, and return it in the enclosed postage-paid envelope. |
Paychex, Inc. 2024 Proxy Statement • 78
Proxies submitted by Internet or telephone must be received by 11:59 p.m. Eastern Time on Wednesday, October 9, 2024.
If you are a beneficial owner, you can vote in the manner prescribed by the bank, broker, or other nominee through which you own your shares of common stock. You will receive voting instruction information for you to use in directing the bank, broker, or other nominee how to vote your shares. Check the voting instruction information used by the bank, broker, or other nominee to see if it offers Internet or telephone voting.
May I vote during the Annual Meeting?
If you are a registered stockholder, you may vote your shares during the Annual Meeting if you attend virtually by visiting the website at www.virtualshareholdermeeting.com/PAYX2024 and logging in with your 16-digit control number, even if you previously voted by Internet or telephone. Votes submitted during the Annual Meeting must be received no later than the closing of the polls at the Annual Meeting. Whether or not you plan to attend the meeting, however, we strongly encourage you to vote your shares by proxy before the meeting.
If you are a beneficial owner and want to vote your shares during the Annual Meeting, you can vote online using your 16-digit control number.
May I change my mind after I vote?
Registered stockholders may change a properly executed proxy at any time prior to it being voted at the Annual Meeting by:
| • |
|
providing written notice of revocation to the Corporate Secretary; |
| • |
|
submitting a later-dated proxy via the Internet, telephone, or mail (if you requested a printed copy of the proxy materials); or |
| • |
|
voting during the Annual Meeting. |
Beneficial owners should contact their broker, bank, or other nominee for instructions on how to change their vote.
If you are a participant in the ESOP, you may change a properly executed proxy at any time prior to 11:59 p.m. Eastern Time on Monday, October 7, 2024, by submitting a proxy that has a more recent date than the original proxy by Internet, telephone, or mail. You may not, however, change your voting instructions during the Annual Meeting because the Trustee will not be present.
In what manner are proxies voted? What if I did not specify a vote?
All votes properly cast and not revoked will be voted at the Annual Meeting in accordance with the stockholder’s directions. You should specify your choice for each matter when you vote. However, if you do not specify your choices then your shares will be voted in accordance with the Board’s recommendations. Should any matter not described above be properly presented at the Annual Meeting, the proxies will vote in accordance with their judgment as permitted.
If you are a beneficial owner, in order to ensure your shares are voted the way you would like, you must provide voting instructions to your bank, broker, or other nominee. If you do not provide your voting instructions to that party, whether your shares can be voted depends on the type of item being considered for vote. New York Stock Exchange (“NYSE”) rules, which also apply to companies with shares listed on the Nasdaq Global Select Market, allow your bank, broker, or other nominee to use its own discretion and vote your shares on routine matters. A bank, broker, or other nominee does not have discretion to vote your shares on non-routine matters (known as “broker non-votes”). Proposals 1 and 2 are not considered to be routine matters under the current NYSE rules, and so your bank, broker, or other nominee will not have the discretionary authority to vote your shares on those items. Proposal 3 is considered a routine matter under NYSE rules, so your bank, broker, or other nominee will have discretionary authority to vote your shares on that item.
Paychex, Inc. 2024 Proxy Statement • 79
How are broker non-votes and abstentions counted?
Broker non-votes are not considered votes for or against a proposal and therefore will have no direct impact on any proposal since they are not deemed to be duly cast nor entitled to vote, but they will be counted for the purpose of determining the presence or absence of a quorum. Therefore, we urge you to give voting instructions to your bank or broker on all voting items.
Abstentions are also counted for the purposes of establishing a quorum but will have the same effect as a vote against a proposal, except in regard to the election of directors. For this item, abstentions will have no direct impact since they are not deemed to be duly cast.
How can I find the results of the voting?
The Company will report the final results in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.
Are there any other actions to be presented at the Annual Meeting?
As of the date of this proxy statement, management does not intend to present, and has not been informed that any other person intends to present, any matter for action at the Annual Meeting other than those described in this proxy statement. If any other matters properly come before the Annual Meeting, the named proxy holders will vote on such matters in accordance with their judgment.
Who pays for the cost of solicitation of proxies?
Solicitation of proxies is made on behalf of the Company and the Company will pay the cost of solicitation of proxies. The Company will reimburse any banks, brokers and other custodians, nominees, and fiduciaries for their expenses in forwarding proxies and proxy solicitation material to the beneficial owners of the shares held by them. In addition to solicitation by use of the mail or via the Internet, directors, officers, and regular employees of the Company, without extra compensation, may solicit proxies personally or by telephone or other communication means.
How is the Company’s Annual Report being delivered?
We are pleased to be using the SEC’s rule that allows companies to furnish proxy materials to their stockholders over the Internet. In accordance with this rule, on or about August 30, 2024, we will send stockholders of the Record Date a Notice of Internet Availability. The Notice contains instructions on how to access our Proxy Statement and Annual Report for fiscal 2024 on the Internet. You may also access it on https://investor.paychex.com.
In addition, on www.proxyvote.com there are instructions on how to request to receive paper copies of the document. You may also obtain a copy of our Form 10-K filed with the SEC, without charge, upon written request submitted to Paychex, Inc., 911 Panorama Trail South, Rochester, New York 14625-2396, Attention: Investor Relations.
What is householding?
In accordance with the Exchange Act, the Company delivers materials to stockholders under a program known as “householding.” Under the householding program, the Company is delivering one copy of its Notice of Internet Availability addressed to all stockholders who share a single address, unless such stockholders previously notified the Company that they wish to revoke their consent to the householding. Householding is intended to reduce the Company’s printing and postage costs.
You may revoke your consent at any time by calling toll-free (866) 540-7095 or by writing to Broadridge Investor Communications Services, Attention: Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you revoke your consent, you will be removed from the householding program within 30 days of receipt of your revocation, and each stockholder at your address will receive individual copies of the Notice of Internet Availability.
Paychex, Inc. 2024 Proxy Statement • 80
Stockholders of record residing at the same address and currently receiving multiple copies of the Notice of Internet Availability who wish to receive a single copy may also contact Broadridge Investor Communications Services at the phone number and address noted above. Beneficial owners will need to contact their broker, bank, or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.
The Company hereby undertakes to deliver upon oral or written request a separate copy of its Notice of Internet Availability, proxy statement or annual report to a stockholder at a shared address to which a single copy was delivered. If such stockholder wishes to receive a separate copy of such documents, contact Jason Harbes, Director, Investor Relations, either by calling toll-free (800) 828-4411 or by writing to Paychex, Inc., 911 Panorama Trail South, Rochester, New York 14625-2396, Attention: Investor Relations.
If you own Paychex stock beneficially through a bank, broker, or other nominee, you may already be subject to householding if you meet the criteria. If you wish to receive a separate Notice of Internet Availability, proxy statement and annual report in future mailings, you should contact your bank, broker, or other nominee.
How do I submit a proposal for next year’s Annual Meeting?
Stockholder proposals, which are intended to be presented at the 2025 Annual Meeting, for inclusion in the Company’s proxy statement pursuant to SEC Rule 14a-8, must be received by the Company at its executive offices on or before May 2, 2025 to be considered timely. Any such proposals, including stockholder proposals for candidates for nomination for election to the Board, must be submitted in accordance with applicable SEC rules and regulations, and follow the Company’s procedures under “Communications with the Board of Directors.”
Stockholder proposals, which are intended to be presented at the 2025 Annual Meeting outside of the SEC Rule 14a-8 process, must be received by the Company’s Corporate Secretary at its executive offices no sooner than June 12, 2025 and no later than July 12, 2025 to be considered timely.
If the date of our 2025 Annual Meeting has been changed by more than 30 days before or more than 60 days after the first anniversary of this Annual Meeting, stockholders must submit proposals (1) not earlier than the 120th day prior to the 2025 Annual Meeting and not later than the close of business on the 90th day prior to the 2025 Annual Meeting or (2) if public announcement of the 2025 Annual Meeting is less than 100 days prior to the date of the meeting, not later than the 10th day following the day on which public disclosure of the 2025 Annual Meeting is first made.
Stockholders may nominate candidates for the Board by the same deadlines as proposals for business to come before the 2025 Annual Meeting. Each notice of business or nomination must set forth the information required by our By-laws. Any such proposals, including stockholder proposals for candidates for nomination for election to the Board, must be submitted in accordance with applicable SEC rules and regulations, and follow the Company’s procedures in its By-Laws. Submitting a notice does not ensure that the proposal will be raised at the 2025 Annual Meeting. We will not permit stockholder proposals that do not comply with the foregoing notice requirement to be brought before the 2025 Annual Meeting.
In addition to satisfying the advance notice requirements in order to comply with the universal proxy rules under the Exchange Act, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice to the Company’s Corporate Secretary that sets forth the information required by Rule 14a-19 under the Exchange Act no later than August 11, 2025.
Paychex, Inc. 2024 Proxy Statement • 81
August 30, 2024
Dear Paychex Stockholder:
The Board of Directors cordially invites you to attend our virtual Annual Meeting of Stockholders (the “Annual Meeting”) on Thursday, October 10, 2024 at 9:30 a.m. Eastern Time online at www.virtualshareholdermeeting.com/PAYX2024.
The accompanying booklet includes the formal Notice of Annual Meeting of Stockholders and the Proxy Statement. The Proxy Statement tells you about the agenda items and the procedures for the Annual Meeting. It also provides certain information about Paychex, Inc., its Board of Directors, and its Named Executive Officers.
It is important that your shares be represented at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, you are encouraged to vote. You may vote by Internet, telephone, or if you requested a full printed set of proxy materials, by mail. We encourage you to use the Internet as it is the most cost-effective way to vote.
We hope you will be able to attend the Annual Meeting and would like to take this opportunity to remind you that your vote is important. If you have any questions about the Annual Meeting, please contact the Corporate Secretary at (800) 828-4411, or write to Paychex, Inc., 911 Panorama Trail South, Rochester, New York 14625-2396, Attention: Corporate Secretary.
Sincerely,
John B. Gibson
Chief Executive Officer
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
V56002-Z88404-Z88403
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| PAYCHEX, INC. Proxy Solicited on Behalf of the Board of Directors of Paychex, Inc. for the Annual Meeting, October 10, 2024 |
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| PROXY |
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| The undersigned hereby appoints JOHN B. GIBSON and ROBERT L. SCHRADER, or either of them, with full power of substitution, attorneys and proxies to represent the undersigned at the Annual Meeting of Stockholders to be held on October 10, 2024 (“Annual Meeting”), and at any adjournment thereof, with all the powers which the undersigned would possess if personally present to vote all shares of stock which the undersigned may be entitled to vote at said Annual Meeting. The shares represented by this proxy will be voted as instructed by you and in the discretion of the proxy on all other matters. If not otherwise specified in this proxy card, shares will be voted in accordance with the recommendations of the Board of Directors. |
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| If shares of Paychex, Inc. Common Stock are issued to or held for the account of the undersigned under the Paychex Employee Stock Ownership Plan Stock Fund (“ESOP”) of the Paychex, Inc. 401(k) Incentive Retirement Plan, then the undersigned hereby directs the trustee of the ESOP to vote all shares of Paychex, Inc. Common Stock in the undersigned’s name and/or account under such plan in accordance with the instructions given herein, at the Annual Meeting and at any adjournment thereof, on all matters properly coming before the Annual Meeting, including but not limited to the matters set forth on the reverse side. |
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| THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY’S BOARD OF DIRECTORS. PLEASE MARK, SIGN, DATE AND RETURN IT IN THE ENCLOSED ENVELOPE. IF NOT OTHERWISE MARKED, THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED “FOR” EACH OF THE NOMINEES IN PROPOSAL 1, “FOR” PROPOSAL 2 AND “FOR” PROPOSAL 3. |
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| Continued and to be signed on reverse side |
Pay vs Performance Disclosure - USD ($)
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12 Months Ended |
May 31, 2024 |
May 31, 2023 |
May 31, 2022 |
May 31, 2021 |
| Pay vs Performance Disclosure |
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| Pay vs Performance Disclosure, Table |
In accordance with rules adopted by the SEC, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEO”) and Non-PEO NEOs and Company performance for the fiscal years listed below.
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Summary Compensation Table Total for PEO |
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Compensation Actually Paid to PEO |
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Compensation Table Total for Non-PEO NEOs (2) |
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Compensation Actually Paid to Non-PEO NEOs (2)(3) |
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Value of Initial Fixed $100 Investment Based On: |
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Net of Certain Items (5) (in millions) (i) |
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Peer Group Total Shareholder Return (4) |
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Net
Income
(in millions)
(h) |
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| 2024 |
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$ |
7,534,855 |
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$ |
— |
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$ |
8,462,562 |
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$ |
— |
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$ |
2,498,637 |
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$ |
2,602,402 |
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$ |
185.79 |
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$ |
153.68 |
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$ |
1,690 |
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$ |
2,054 |
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| 2023 |
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$ |
6,680,180 |
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$ |
14,442,172 |
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$ |
5,660,044 |
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$ |
(3,614,572 |
) |
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$ |
2,691,157 |
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$ |
1,782,985 |
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$ |
157.41 |
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$ |
121.82 |
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$ |
1,557 |
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$ |
1,933 |
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| 2022 |
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$ |
— |
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$ |
11,025,026 |
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$ |
— |
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$ |
23,305,787 |
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$ |
3,257,026 |
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$ |
5,846,642 |
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$ |
180.70 |
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$ |
118.53 |
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$ |
1,393 |
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$ |
1,782 |
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| 2021 |
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$ |
— |
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$ |
9,627,247 |
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$ |
— |
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$ |
21,142,733 |
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$ |
2,605,572 |
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$ |
4,992,766 |
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$ |
144.16 |
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$ |
127.00 |
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$ |
1,098 |
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$ |
1,434 |
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| (1) |
John B. Gibson was our PEO in fiscal 2024 and during fiscal 2023 following October 13, 2022. Martin Mucci was our PEO during fiscal 2023 through October 13, 2022, and in fiscal 2022 and 2021. The amounts deducted and added in calculating Compensation Actually Paid (“CAP”) for Mr. Gibson for fiscal 2024 are as follows: |
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Summary Compensation Table Total |
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Deduction of stock awards and option awards reported in the Summary Compensation Table |
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(5,749,962 |
) |
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Fiscal year-end value of equity awards granted during the fiscal year that remained unvested as of the last day of the fiscal year |
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5,363,389 |
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Change in fair value from the last day of the prior fiscal year to the last day of the fiscal year of unvested equity awards |
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728,917 |
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Change in fair value from the last day of the prior fiscal year to the vesting date during the fiscal year |
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484,838 |
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Value of dividends or other earnings paid on equity awards not otherwise included |
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100,525 |
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Compensation Actually Paid |
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| (2) |
For fiscal 2024, the Company’s Non-PEO NEOs were Robert L. Schrader, Efrain Rivera, Mark A. Bottini, Michael E. Gioja, and Elizabeth Roaldsen. For fiscal 2023, the Company’s Non-PEO NEOs were Efrain Rivera, Mark A. Bottini, Michael E. Gioja, and Stephanie L. Schaeffer. For fiscal 2022 and 2021, the Company’s Non-PEO NEOs were Efrain Rivera, John B. Gibson, Mark A. Bottini, and Michael E. Gioja The amounts deducted and added in calculating the average CAP for these NEOs for fiscal 2024 are as follows: |
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Summary Compensation Table Total |
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Deduction of stock awards and option awards reported in the Summary Compensation Table |
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(1,629,976 |
) |
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Fiscal year-end value of equity awards granted during the fiscal year that remained unvested as of the last day of the fiscal year |
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1,158,174 |
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Change in fair value from the last day of the prior fiscal year to the last day of the fiscal year of unvested equity awards |
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261,135 |
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Change in fair value from the last day of the prior fiscal year to the vesting date during the fiscal year |
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274,648 |
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Value of dividends or other earnings paid on equity awards not otherwise included |
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39,784 |
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Compensation Actually Paid |
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| (3) |
The amounts shown for CAP have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect the actual compensation realized or received by our NEOs. |
| (4) |
The Peer Group TSR set forth in this table utilizes the Company’s peer group used for executive compensation benchmarking purposes which was also utilized in the stock performance graph required by Item 201(e) of Regulation S-K included in our Form 10-K. This Peer Group was reassessed for fiscal 2024, resulting in a set of peers with a stronger business fit while median revenue and other relevant metrics remained comparable. Refer to the Compensation Discussion and Analysis section within this proxy statement for further discussion and a listing of the companies included in our Peer Group for fiscal 2024. The table below compares the cumulative TSR of both Peer Groups for fiscal 2021 through fiscal 2024. |
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Peer Group—Old |
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$153.48 |
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$121.58 |
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$120.09 |
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$128.62 |
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$100.00 |
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Peer Group—New |
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$153.68 |
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$121.82 |
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$118.53 |
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$127.00 |
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$100.00 |
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| (5) |
Operating income, net of certain items is a non-GAAP measure. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A of this proxy statement for a discussion of this non-GAAP measure and a reconciliation to the most comparable GAAP measure of operating income. |
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| Company Selected Measure Name |
Operating income, net of certain items
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| Named Executive Officers, Footnote |
For fiscal 2024, the Company’s Non-PEO NEOs were Robert L. Schrader, Efrain Rivera, Mark A. Bottini, Michael E. Gioja, and Elizabeth Roaldsen. For fiscal 2023, the Company’s Non-PEO NEOs were Efrain Rivera, Mark A. Bottini, Michael E. Gioja, and Stephanie L. Schaeffer. For fiscal 2022 and 2021, the Company’s Non-PEO NEOs were Efrain Rivera, John B. Gibson, Mark A. Bottini, and Michael E. Gioja
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| Peer Group Issuers, Footnote |
| (4) |
The Peer Group TSR set forth in this table utilizes the Company’s peer group used for executive compensation benchmarking purposes which was also utilized in the stock performance graph required by Item 201(e) of Regulation S-K included in our Form 10-K. This Peer Group was reassessed for fiscal 2024, resulting in a set of peers with a stronger business fit while median revenue and other relevant metrics remained comparable. Refer to the Compensation Discussion and Analysis section within this proxy statement for further discussion and a listing of the companies included in our Peer Group for fiscal 2024. The table below compares the cumulative TSR of both Peer Groups for fiscal 2021 through fiscal 2024. |
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Peer Group—Old |
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$153.48 |
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$121.58 |
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$120.09 |
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$128.62 |
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$100.00 |
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Peer Group—New |
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$153.68 |
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$121.82 |
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$118.53 |
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$127.00 |
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$100.00 |
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| Adjustment To PEO Compensation, Footnote |
| (1) |
John B. Gibson was our PEO in fiscal 2024 and during fiscal 2023 following October 13, 2022. Martin Mucci was our PEO during fiscal 2023 through October 13, 2022, and in fiscal 2022 and 2021. The amounts deducted and added in calculating Compensation Actually Paid (“CAP”) for Mr. Gibson for fiscal 2024 are as follows: |
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Summary Compensation Table Total |
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Deduction of stock awards and option awards reported in the Summary Compensation Table |
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(5,749,962 |
) |
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Fiscal year-end value of equity awards granted during the fiscal year that remained unvested as of the last day of the fiscal year |
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5,363,389 |
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Change in fair value from the last day of the prior fiscal year to the last day of the fiscal year of unvested equity awards |
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728,917 |
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Change in fair value from the last day of the prior fiscal year to the vesting date during the fiscal year |
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484,838 |
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Value of dividends or other earnings paid on equity awards not otherwise included |
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100,525 |
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Compensation Actually Paid |
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| Non-PEO NEO Average Total Compensation Amount |
$ 2,498,637
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$ 2,691,157
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$ 3,257,026
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$ 2,605,572
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| Non-PEO NEO Average Compensation Actually Paid Amount |
$ 2,602,402
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1,782,985
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5,846,642
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4,992,766
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| Adjustment to Non-PEO NEO Compensation Footnote |
| (2) |
For fiscal 2024, the Company’s Non-PEO NEOs were Robert L. Schrader, Efrain Rivera, Mark A. Bottini, Michael E. Gioja, and Elizabeth Roaldsen. For fiscal 2023, the Company’s Non-PEO NEOs were Efrain Rivera, Mark A. Bottini, Michael E. Gioja, and Stephanie L. Schaeffer. For fiscal 2022 and 2021, the Company’s Non-PEO NEOs were Efrain Rivera, John B. Gibson, Mark A. Bottini, and Michael E. Gioja The amounts deducted and added in calculating the average CAP for these NEOs for fiscal 2024 are as follows: |
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Summary Compensation Table Total |
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Deduction of stock awards and option awards reported in the Summary Compensation Table |
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(1,629,976 |
) |
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Fiscal year-end value of equity awards granted during the fiscal year that remained unvested as of the last day of the fiscal year |
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|
1,158,174 |
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| |
|
Change in fair value from the last day of the prior fiscal year to the last day of the fiscal year of unvested equity awards |
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|
261,135 |
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|
Change in fair value from the last day of the prior fiscal year to the vesting date during the fiscal year |
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274,648 |
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Value of dividends or other earnings paid on equity awards not otherwise included |
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39,784 |
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Compensation Actually Paid |
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| Compensation Actually Paid vs. Total Shareholder Return |
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| Compensation Actually Paid vs. Net Income |
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| Compensation Actually Paid vs. Company Selected Measure |
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| Total Shareholder Return Vs Peer Group |
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| Tabular List, Table |
The following list presents the financial performance measures that the Company considers to have been the most important in linking CAP to our PEOs and Non-PEO NEOs for fiscal 2024 to Company performance. The measures listed below are not ranked.
| • |
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Annualized new business revenue (1) |
| • |
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Operating income, net of certain items (2) |
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| Total Shareholder Return Amount |
$ 185.79
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157.41
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180.7
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144.16
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| Peer Group Total Shareholder Return Amount |
153.68
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121.82
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118.53
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127
|
| Net Income (Loss) |
$ 1,690,000,000
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$ 1,557,000,000
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$ 1,393,000,000
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$ 1,098,000,000
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| Company Selected Measure Amount |
2,054,000,000
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1,933,000,000
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1,782,000,000
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1,434,000,000
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| Measure:: 1 |
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| Pay vs Performance Disclosure |
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| Name |
Annualized new business revenue
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| Measure:: 2 |
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| Pay vs Performance Disclosure |
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| Name |
Operating income, net of certain items
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| Non-GAAP Measure Description |
Operating income, net of certain items is a non-GAAP measure. Refer to “Paychex, Inc. Non-GAAP Financial Measures” in Appendix A of this proxy statement for a discussion of this non-GAAP measure and a reconciliation to the most comparable GAAP measure of operating income.
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| Measure:: 3 |
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| Pay vs Performance Disclosure |
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| Name |
Service revenue
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| Martin Mucci [Member] |
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| Pay vs Performance Disclosure |
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| PEO Total Compensation Amount |
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$ 14,442,172
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$ 11,025,026
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$ 9,627,247
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| PEO Actually Paid Compensation Amount |
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$ (3,614,572)
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$ 23,305,787
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$ 21,142,733
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| PEO Name |
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Martin Mucci
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| John B. Gibson [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| PEO Total Compensation Amount |
$ 7,534,855
|
$ 6,680,180
|
|
|
| PEO Actually Paid Compensation Amount |
$ 8,462,562
|
$ 5,660,044
|
|
|
| PEO Name |
John B. Gibson
|
|
|
|
| PEO | John B. Gibson [Member] | Stock Awards And Option Awards [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
$ (5,749,962)
|
|
|
|
| PEO | John B. Gibson [Member] | Fiscal Year End Value Of Equity Awards Granted During The Fiscal Year That Remained Unvested As Of The Last Day Of The Fiscal Year [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
5,363,389
|
|
|
|
| PEO | John B. Gibson [Member] | Change In Fair Value From The Last Day Of The Prior Fiscal Year To The Last Day Of The Fiscal Year Of Unvested Equity Awards [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
728,917
|
|
|
|
| PEO | John B. Gibson [Member] | Change In Fair Value From The Last Day Of The Prior Fiscal Year To The Vesting Date During The Fiscal Year [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
484,838
|
|
|
|
| PEO | John B. Gibson [Member] | Value Of Dividends Or Other Earnings Paid On Equity Awards Not Otherwise Included [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
100,525
|
|
|
|
| Non-PEO NEO | Stock Awards And Option Awards [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
(1,629,976)
|
|
|
|
| Non-PEO NEO | Fiscal Year End Value Of Equity Awards Granted During The Fiscal Year That Remained Unvested As Of The Last Day Of The Fiscal Year [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
1,158,174
|
|
|
|
| Non-PEO NEO | Change In Fair Value From The Last Day Of The Prior Fiscal Year To The Last Day Of The Fiscal Year Of Unvested Equity Awards [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
261,135
|
|
|
|
| Non-PEO NEO | Change In Fair Value From The Last Day Of The Prior Fiscal Year To The Vesting Date During The Fiscal Year [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
274,648
|
|
|
|
| Non-PEO NEO | Value Of Dividends Or Other Earnings Paid On Equity Awards Not Otherwise Included [Member] |
|
|
|
|
| Pay vs Performance Disclosure |
|
|
|
|
| Adjustment to Compensation, Amount |
$ 39,784
|
|
|
|
Award Timing Disclosure
|
12 Months Ended |
|
May 31, 2024 |
Jul. 15, 2023
USD ($)
Securities
$ / shares
|
| Award Timing Disclosures [Line Items] |
|
|
| Award Timing MNPI Disclosure |
Policies and Practices Related to the Grant of Certain Equity Awards Our equity awards, including stock options, are granted in accordance with a predetermined schedule, which coincides with regularly scheduled C&L Committee meetings that are scheduled more than one year in advance. Annual grants of equity awards, including stock options, to our NEOs and members of the Board are approved during the regularly scheduled meeting of the C&L Committee in July after the release of our fiscal year-end earnings and upcoming fiscal year financial guidance. Our trading black-out period normally lifts on the second business day following such release of information. The C&L Committee may also grant equity awards to individuals upon hire or promotion to executive officer positions or appointment to the Board. These equity awards are not granted during any trading black-out periods. The C&L Committee does not grant equity awards in anticipation of the release of material nonpublic information. Similarly, we do not time the release of material nonpublic information based on equity award grant dates. In accordance with rules adopted by the SEC, the following table provides certain information about the July 2023 stock options granted to our NEOs one business day after the Company filed its fiscal 2023 Annual Report on Form 10-K on July 14, 2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Number of
securities
underlying
the award
(#) |
|
Exercise
price of the
award |
|
Grant date fair
value of the
award |
|
Percentage change
in the closing
market price of the
securities
underlying the
award between the
trading day ending
immediately prior to
the disclosure of
material nonpublic
information and the
trading day
beginning
immediately
following the
disclosure of
material nonpublic
information |
| John B. Gibson |
|
|
7/15/2023 |
|
|
63,583 |
|
$120.86 |
|
$1,725,007 |
|
<1% |
| Robert L. Schrader |
|
|
7/15/2023 |
|
|
8,846 |
|
$120.86 |
|
$ 239,992 |
|
<1% |
| Mark A. Bottini |
|
|
7/15/2023 |
|
|
19,904 |
|
$120.86 |
|
$ 539,996 |
|
<1% |
| Michael E. Gioja |
|
|
7/15/2023 |
|
|
21,010 |
|
$120.86 |
|
$ 570,001 |
|
<1% |
| Elizabeth Roaldsen |
|
|
7/15/2023 |
|
|
12,164 |
|
$120.86 |
|
$ 330,009 |
|
<1% |
| Efrain Rivera |
|
|
7/15/2023 |
|
|
21,563 |
|
$120.86 |
|
$ 585,004 |
|
<1% |
|
|
| Awards Close in Time to MNPI Disclosures, Table |
In accordance with rules adopted by the SEC, the following table provides certain information about the July 2023 stock options granted to our NEOs one business day after the Company filed its fiscal 2023 Annual Report on Form 10-K on July 14, 2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Number of
securities
underlying
the award
(#) |
|
Exercise
price of the
award |
|
Grant date fair
value of the
award |
|
Percentage change
in the closing
market price of the
securities
underlying the
award between the
trading day ending
immediately prior to
the disclosure of
material nonpublic
information and the
trading day
beginning
immediately
following the
disclosure of
material nonpublic
information |
| John B. Gibson |
|
|
7/15/2023 |
|
|
63,583 |
|
$120.86 |
|
$1,725,007 |
|
<1% |
| Robert L. Schrader |
|
|
7/15/2023 |
|
|
8,846 |
|
$120.86 |
|
$ 239,992 |
|
<1% |
| Mark A. Bottini |
|
|
7/15/2023 |
|
|
19,904 |
|
$120.86 |
|
$ 539,996 |
|
<1% |
| Michael E. Gioja |
|
|
7/15/2023 |
|
|
21,010 |
|
$120.86 |
|
$ 570,001 |
|
<1% |
| Elizabeth Roaldsen |
|
|
7/15/2023 |
|
|
12,164 |
|
$120.86 |
|
$ 330,009 |
|
<1% |
| Efrain Rivera |
|
|
7/15/2023 |
|
|
21,563 |
|
$120.86 |
|
$ 585,004 |
|
<1% |
|
|
| Awards Close in Time to MNPI Disclosures |
|
|
| Name |
|
John B. Gibson
|
| Underlying Securities | Securities |
|
63,583
|
| Exercise Price | $ / shares |
|
$ 120.86
|
| Fair Value as of Grant Date | $ |
|
$ 1,725,007
|
| Underlying Security Market Price Change |
|
0.01
|
| Robert L. Schrader [Member] |
|
|
| Awards Close in Time to MNPI Disclosures |
|
|
| Name |
|
Robert L. Schrader
|
| Underlying Securities | Securities |
|
8,846
|
| Exercise Price | $ / shares |
|
$ 120.86
|
| Fair Value as of Grant Date | $ |
|
$ 239,992
|
| Underlying Security Market Price Change |
|
0.01
|
| Mark A. Bottini [Member] |
|
|
| Awards Close in Time to MNPI Disclosures |
|
|
| Name |
|
Mark A. Bottini
|
| Underlying Securities | Securities |
|
19,904
|
| Exercise Price | $ / shares |
|
$ 120.86
|
| Fair Value as of Grant Date | $ |
|
$ 539,996
|
| Underlying Security Market Price Change |
|
0.01
|
| Michael E. Gioja [Member] |
|
|
| Awards Close in Time to MNPI Disclosures |
|
|
| Name |
|
Michael E. Gioja
|
| Underlying Securities | Securities |
|
21,010
|
| Exercise Price | $ / shares |
|
$ 120.86
|
| Fair Value as of Grant Date | $ |
|
$ 570,001
|
| Underlying Security Market Price Change |
|
0.01
|
| Elizabeth Roaldsen [Member] |
|
|
| Awards Close in Time to MNPI Disclosures |
|
|
| Name |
|
Elizabeth Roaldsen
|
| Underlying Securities | Securities |
|
12,164
|
| Exercise Price | $ / shares |
|
$ 120.86
|
| Fair Value as of Grant Date | $ |
|
$ 330,009
|
| Underlying Security Market Price Change |
|
0.01
|
| Efrain Rivera [Member] |
|
|
| Awards Close in Time to MNPI Disclosures |
|
|
| Name |
|
Efrain Rivera
|
| Underlying Securities | Securities |
|
21,563
|
| Exercise Price | $ / shares |
|
$ 120.86
|
| Fair Value as of Grant Date | $ |
|
$ 585,004
|
| Underlying Security Market Price Change |
|
0.01
|