schl-def14a_20190918.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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

Exchange Act of 1934 (Amendment No.           )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

Scholastic Corporation

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

1)

Title of each class of securities to which transaction applies:

 

 

2)

Aggregate number of securities to which transaction applies:

 

 

3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

4)

Proposed maximum aggregate value of transaction:

 

 

5)

Total fee paid:

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

1)

Amount Previously Paid:

 

 

2)

Form, Schedule or Registration Statement No.:

 

 

3)

Filing Party:

 

 

4)

Date Filed:

 

 


 

Scholastic 557 Broadway, New York, NY 10012-3999 (212) 343-6100
www.scholastic.com

SCHOLASTIC CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Holders of Class A Stock and Common Stock:

The Annual Meeting of Stockholders of Scholastic Corporation (the “Company”) will be held at the Company’s corporate headquarters located at 557 Broadway (entrance at 130 Mercer Street), New York, New York on Wednesday, September 18, 2019 at 9:00 a.m., local time, for the following purposes:

Matters to be voted upon by holders of the Class A Stock

 

1.

Electing seven directors to the Board of Directors

Matters to be voted upon by holders of the Common Stock

 

1.

Electing two directors to the Board of Directors

and such other business as may properly come before the meeting and any adjournments thereof.

A proxy statement describing the matters to be considered at the Annual Meeting of Stockholders is attached to this notice. Only stockholders of record of the Class A Stock and the Common Stock at the close of business on July 26, 2019 are entitled to notice of, and to vote at, the meeting and any adjournments thereof.

We hope that you will be able to attend the meeting. Whether or not you plan to be present at the meeting, we urge you to vote your shares promptly. You can vote your shares in three ways:

 

via the Internet at the website indicated on your proxy card;

 

via telephone by calling the toll free number on your proxy card; or

 

by returning the enclosed proxy card.

By order of the Board of Directors

 

 

 

 

 

 

Andrew S. Hedden

 

Secretary

 

August 8, 2019

 

 

 


 

TABLE OF CONTENTS

 

Solicitation of Proxies

 

1

 

 

 

 

 

General Information

 

1

 

 

 

 

 

Voting Securities of the Company

 

3

 

 

 

 

 

Principal Holders of Class A Stock and Common Stock

 

4

 

 

 

 

 

Change of Control Arrangement for Certain Class A Stockholders

 

7

 

 

 

 

 

Delinquent Section 16(a) Beneficial Ownership Reports

 

7

 

 

 

 

 

Share Ownership of Management

 

8

 

 

 

 

 

Compensation Committee Interlocks and Insider Participation

 

10

 

 

 

 

 

Human Resources and Compensation Committee Report

 

10

 

 

 

 

 

Compensation Discussion and Analysis

 

10

 

 

 

 

 

Summary Compensation Table

 

21

 

 

 

 

 

Grants of Plan-Based Awards

 

23

 

 

 

 

 

Outstanding Equity Awards at May 31, 2019

 

24

 

 

 

 

 

Option Exercises and Stock Vested

 

25

 

 

 

 

 

Pension Plan

 

26

 

 

 

 

 

Nonqualified Deferred Compensation Table

 

26

 

 

 

 

 

Potential Payments upon Termination or Change-in-Control

 

26

 

 

 

 

 

Pay Ratio

 

30

 

 

 

 

 

Transaction with Executive Officer

 

30

 

 

 

 

 

Equity Compensation Plan Information

 

31

 

 

 

 

 

Stock Ownership Guidelines

 

31

 

 

 

 

 

Matters Submitted to Stockholders

 

32

 

 

 

 

 

Proposal 1 – Election of Directors

 

32

 

 

 

 

 

Nominees for Election by Holders of Class A Stock

 

33

 

 

 

 

 

Nominees for Election by Holders of Common Stock

 

33

 

 

 

 

 

Board Leadership Structure and Risk Oversight

 

38

 

 

 

 

 

Meetings of the Board and its Committees

 

39

 

 

 

 

 

Corporate Governance

 

41

 

 

 

 

 

Director Compensation

 

45

 

 

 

 

 

Consulting Agreement with Director

 

47

 

 

 

 

 

Independent Registered Public Accountants

 

48

 

 

 

 

 

Audit Committee’s Report

 

49

 

 

 

 

 

Stockholder Proposals for 2020 Annual Meeting

 

49

 

 

 

 

 

Other Matters

 

49

 

 

 

 

 

 

 

 

 


 

Important Notice Regarding Availability of Proxy Materials

for the 2019 Annual Meeting of Stockholders to Be Held on September 18, 2019

This Proxy Statement and the Annual Report to Stockholders are available at

www.proxyvote.com

SCHOLASTIC CORPORATION

557 Broadway

New York, New York 10012-3999

________________________

PROXY STATEMENT

________________________

ANNUAL MEETING OF STOCKHOLDERS

September 18, 2019

________________________

SOLICITATION OF PROXIES

General Information

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Scholastic Corporation, a Delaware corporation (the “Company”), to be voted at its Annual Meeting of Stockholders (the “Annual Meeting”), which will be held at 557 Broadway (entrance at 130 Mercer Street), New York, New York at 9:00 a.m., local time, on Wednesday, September 18, 2019, and at any adjournments thereof.

The Company has made available to you over the Internet or delivered paper copies of this proxy statement, a proxy card and the Annual Report to Stockholders (of which the Company’s 2019 Annual Report on Form 10-K for the fiscal year ending May 31, 2019 is a part (the “Annual Report”) in connection with the Annual Meeting. The Company is using the rules of the Securities and Exchange Commission (“SEC”) that allow companies to furnish their proxy materials over the Internet. As a result, the Company is mailing to many of its stockholders a notice about the Internet availability of the proxy materials instead of a paper copy of the proxy materials. All stockholders receiving the notice will have the ability to access the proxy materials over the Internet, as well as to request a paper copy by mail or via email, free of charge, by following the instructions in the notice.

This proxy statement and the accompanying form of proxy, together with the Company’s Annual Report, are being mailed to those stockholders who are not receiving the notice concerning Internet availability on or about August 8, 2019.

1


 

Shares represented by each proxy properly submitted, either by mail, the Internet or telephone as indicated on the enclosed form of proxy, will be voted in accordance with the instructions indicated on such proxy unless revoked. A stockholder may revoke a proxy at any time before it is exercised by:

 

delivering to the Secretary of the Company a written revocation thereof or a duly executed proxy bearing a later date;

 

providing subsequent telephone or Internet voting instructions; or

 

voting in person at the Annual Meeting.

Any written notice revoking a proxy should be sent to the attention of Andrew S. Hedden, Corporate Secretary, Scholastic Corporation, 557 Broadway, New York, New York 10012-3999.

If you are a Common Stockholder of record submitting a proxy, and no instructions are specified, your shares will be voted FOR the election of the directors.

If you are a Common Stockholder and you hold your shares beneficially through a broker, bank or other holder of record submitting a proxy, and no instructions are specified, your shares will NOT be voted.

If you are a Class A Stockholder submitting a proxy, and no instructions are specified, your shares will be voted FOR the election of the directors.

By submitting a proxy, you authorize the persons named as proxies to use their discretion in voting upon any other matter brought before the Annual Meeting. The Company does not know of any other business to be considered at the Annual Meeting.

SEC rules permit the Company to deliver only one copy of the proxy statement or the notice of Internet availability of the proxy statement to multiple stockholders of record who share the same address and have the same last name, unless the Company has received contrary instructions from one or more of such stockholders. This delivery method, called “householding,” reduces the Company’s printing and mailing costs. Stockholders who participate in householding will continue to receive or have Internet access to separate proxy cards.

If you are a stockholder of record and wish to receive a separate copy of the proxy statement, now or in the future, at the same address, or you are currently receiving multiple copies of the proxy statement at the same address and wish to receive a single copy, please write to or call the Corporate Secretary, Scholastic Corporation, 557 Broadway, New York, NY 10012, telephone: (212) 343-6100.

Beneficial owners sharing an address who are currently receiving multiple copies of the proxy materials or notice of Internet availability of the proxy materials and wish to receive a single copy in the future, or who currently receive a single copy and wish to receive separate copies in the future, should contact their bank, broker or other holder of record to request that only a single copy or separate copies, as the case may be, be delivered to all stockholders at the shared address in the future.

2


 

The cost of soliciting proxies will be borne by the Company. Solicitation other than by mail may be made personally or by telephone, facsimile or e-mail by regularly employed officers and employees who will not be additionally compensated for such solicitation. The Company may also reimburse brokers, custodians, nominees and other fiduciaries for their reasonable expenses in forwarding proxy materials to principals.

Voting Securities of the Company

Only holders of record of the Company’s Class A Stock, $0.01 par value (“Class A Stock”), and Common Stock, $0.01 par value (“Common Stock”), at the close of business on July 26, 2019 (the “Record Date”) are entitled to vote at the Annual Meeting. As of the Record Date, there were 1,656,200 shares of Class A Stock and 33,167,329 shares of Common Stock outstanding.

The Amended and Restated Certificate of Incorporation of the Company (the “Certificate”) provides that, except as otherwise provided by law, the holders of shares of the Class A Stock (the “Class A Stockholders”), voting as a class, have the right to: (i) fix the size of the Board so long as it does not consist of less than fewer (3) nor more than fifteen (15) directors; (ii) elect all the directors, subject to the right of the holders of shares of Common Stock, voting as a class, to elect such minimum number of the members of the Board as shall equal at least one-fifth of the members of the Board; and (iii) exercise, exclusive of the holders of shares of Common Stock, all other voting rights of stockholders of the Company. The Certificate also provides that, except as otherwise provided by law, the voting rights of the holders of shares of Common Stock are limited to the right, voting as a class, to elect such minimum number of the members of the Board as shall equal at least one-fifth of the members of the Board.

Each share of Class A Stock and Common Stock is entitled to one vote. No holders of either class of stock have cumulative voting rights. At the Annual Meeting, the Class A Stockholders will vote on the election of seven members of the Board and the holders of Common Stock will vote on the election of two members of the Board. If any other matters were to properly come before the Annual Meeting, they would be voted on by the Class A Stockholders.

The vote required for the election of directors is specified in the description of such proposal. In the election of directors, withheld votes and abstentions have no effect on the vote.  For the purpose of determining whether a proposal has received the required vote, abstentions will not be considered as votes cast and will have no effect. Because none of the shares of Class A Stock are held by brokers, the effect of broker non-votes is not applicable in the case of the Class A Stock. Because the only proposal before Common Stockholders is the election of two directors, the effect of broker non-votes is not applicable in the case of the Common Stock.

The holders of a majority of the shares entitled to vote at the meeting constitute a quorum for the Annual Meeting, provided that, for purposes of matters to be voted upon by the holders of Class A Stock, a quorum is the holders of a majority of the Class A Stock and, for purposes of matters to be voted upon by the holders of Common Stock, a quorum is the holders of a majority of the Common Stock.

3


 

Principal Holders of Class A Stock and Common Stock

The following table sets forth information regarding persons who, to the best of the Company’s knowledge, beneficially owned five percent or more of the Class A Stock or the Common Stock outstanding on the Record Date. Under the applicable rules and regulations of the SEC, a person who directly or indirectly has, or shares, voting power or investment power with respect to a security is considered a beneficial owner of such security. Voting power is the power to vote or direct the voting of shares, and investment power is the power to dispose of or direct the disposition of shares. In computing the number of shares and percentage beneficially owned by any stockholder, shares of Class A Stock or Common Stock subject to options or restricted stock units (“RSUs”) held by that person that are currently exercisable or vested or become exercisable or vested within 60 days of the Record Date are included. Such shares, however, are not deemed outstanding for purposes of computing the percentage owned by any other person.

 

 

 

Class A Stock

 

 

Common Stock

 

Name and Address

of Beneficial Owner

 

Amount and Nature

of Beneficial

Ownership(1)

 

 

Percent of

Class

 

 

Amount and Nature

of Beneficial

Ownership(2)

 

 

Percent of

Class

 

Richard Robinson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

1,656,200

 

 

 

 

100

%

 

 

 

4,977,007

(3)

 

 

 

13.9

%

 

Barbara Robinson Buckland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

648,620

 

 

 

 

39.2

%

 

 

 

2,068,662

 

 

 

 

6.1

%

 

Mary Sue Robinson Morrill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

765,296

 

 

 

 

46.2

%

 

 

 

2,670,821

(4)

 

 

 

7.9

%

 

William W. Robinson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

648,620

 

 

 

 

39.2

%

 

 

 

2,079,991

 

 

 

 

6.1

%

 

Florence Robinson Ford

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

648,620

 

 

 

 

39.2

%

 

 

 

2,055,862

 

 

 

 

6.1

%

 

Andrew S. Hedden

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

648,620

 

 

 

 

39.2

%

 

 

 

1,973,817

(5)

 

 

 

5.8

%

 

Trust under the Will of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maurice R. Robinson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

648,620

 

 

 

 

39.2

%

 

 

 

1,831,712

 

 

 

 

5.4

%

 

Trust under the Will of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Florence L. Robinson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Scholastic Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557 Broadway

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10012

 

 

116,676

 

 

 

 

7.0

%

 

 

 

466,676

 

 

 

 

1.4

%

 

T. Rowe Price Associates, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100 E. Pratt Street

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baltimore, MD 21202

 

 

 

 

 

 

 

 

 

 

1,829,093

(6)

 

 

 

5.5

%

 

4


 

 

 

Class A Stock

 

 

Common Stock

 

Name and Address

of Beneficial Owner

 

Amount and Nature

of Beneficial

Ownership(1)

 

 

Percent of

Class

 

 

Amount and Nature

of Beneficial

Ownership(2)

 

 

Percent of

Class

 

BlackRock, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55 East 52nd Street

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10055

 

 

 

 

 

 

 

 

 

 

4,181,729

(7)

 

 

 

12.6

%

 

Dimensional Fund Advisors LP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building One

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6300 Bee Cave Road

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Austin, TX 78746

 

 

 

 

 

 

 

 

 

 

2,818,908

(8)

 

 

 

8.5

%

 

The Vanguard Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100 Vanguard Boulevard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Malvern, PA 19355

 

 

 

 

 

 

 

 

 

 

2,524,139

(9)

 

 

 

7.6

%

 

Royce & Associates LP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

745 Fifth Avenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York, NY 10151

 

 

 

 

 

 

 

 

 

 

2,058,500

(10)

 

 

 

6.2

%

 

 

 

(1)

Each of Richard Robinson, Barbara Robinson Buckland, Mary Sue Robinson Morrill, William W. Robinson, Florence Robinson Ford, Andrew S. Hedden and the Trust under the Will of Maurice R. Robinson (the “Maurice R. Robinson Trust”) have filed Statements on Schedule 13G with the SEC (the “13G Filings”) regarding beneficial ownership of Common Stock. Richard Robinson, Chairman of the Board, President and Chief Executive Officer of the Company, Barbara Robinson Buckland, Mary Sue Robinson Morrill, William W. Robinson and Florence Robinson Ford, all of whom are siblings of Richard Robinson, and Andrew S. Hedden, a director and executive officer of the Company, are trustees of the Maurice R. Robinson Trust, with shared voting and investment power with respect to the shares owned by the Maurice R. Robinson Trust. Under the terms of the Maurice R. Robinson Trust, the vote of a majority of the trustees is required to vote or direct the disposition of the shares held by the Maurice R. Robinson Trust. In addition, Richard Robinson and Mary Sue Robinson Morrill are the co-trustees of the Trust under the Will of Florence L. Robinson (the “Florence L. Robinson Trust”), with shared voting and investment power with respect to the shares owned by the Florence L. Robinson Trust. Any acts by the Florence L. Robinson Trust require the approval of each trustee. Each such trust directly owns the shares attributed to it in the table and each person listed herein as a trustee of such trust is deemed to be the beneficial owner of the shares directly owned by such trust. Based on their 13G Filings and subsequent information made available to the Company, the aggregate beneficial ownership of the Class A Stock on the Record Date by the following persons was: Richard Robinson—890,904 shares (sole voting and investment power) and 765,296 shares (shared voting and investment power); Barbara Robinson Buckland—648,620 shares (shared voting and investment power); Mary Sue Robinson Morrill—765,296 shares (shared voting and investment power); William W. Robinson—648,620 shares (shared voting and investment power); Florence Robinson Ford—648,620 shares (shared voting and investment power); Andrew S. Hedden—648,620 shares (shared voting and investment power); Maurice R. Robinson Trust—648,620 shares (sole voting and investment power); and Florence L. Robinson Trust—116,676 shares (sole voting and investment power).

(2)

The shares of Class A Stock are convertible at the option of the holder into shares of Common Stock at any time on a share-for-share basis. The number of shares of Common Stock and percentage of the outstanding shares of Common Stock for each beneficial owner of Class A Stock assumes the conversion of such holder’s shares of Class A Stock into shares of Common Stock. Based on their 13G Filings and subsequent information made available to the Company, the aggregate beneficial ownership of Common Stock on the Record Date by the following holders was: Richard Robinson—2,678,619 shares (sole voting and investment power), and 2,298,388 shares (shared voting and investment power); Barbara Robinson Buckland—236,950 shares (sole voting and investment power) and 1,831,712 shares (shared voting and investment power); Mary Sue Robinson Morrill—2,670,821 shares (shared voting and investment power); William W. Robinson—248,279 shares (sole voting and investment power) and 1,831,712 shares (shared voting and investment power); Florence Robinson Ford—224,150 shares (sole voting and investment power) and 1,831,712 shares (shared voting and investment power); Andrew S. Hedden—142,105 shares (sole voting and investment power) and 1,831,712 shares (shared voting and investment power); Maurice R. Robinson Trust—1,831,712 shares (sole voting and investment power); and Florence L. Robinson Trust—466,676 shares (sole voting and investment power).

5


 

(3)

Includes 1,656,200 shares of Common Stock issuable on conversion of the Class A Stock described in Notes 1 and 2 above; 713,956 shares of Common Stock held directly by Mr. Robinson; 840,702 shares of Common Stock under options exercisable by Mr. Robinson within 60 days of the Record Date under the Scholastic Corporation 2011 Stock Incentive Plan (the “2011 Plan”); 85,812 shares of Common Stock under options exercisable by Mr. Robinson within 60 days of the Record Date under the Scholastic Corporation 2001 Stock Incentive Plan (the “2001 Plan”); 12,473 shares of Common Stock with respect to which Mr. Robinson had voting rights on the Record Date under the Scholastic Corporation 401(k) Savings and Retirement Plan (the “401(k) Plan”); 1,183,092 shares of Common Stock owned by the Maurice R. Robinson Trust; 350,000 shares of Common Stock owned by the Florence L. Robinson Trust; 48,120 shares of Common Stock owned by his two sons for which Mr. Robinson does not disclaim beneficial ownership; 58,138 shares of Common Stock owned by the Richard Robinson Charitable Fund and 28,514 RSUs scheduled to vest within 60 days of the Record Date under the Scholastic Corporation Management Stock Purchase Plan (the “MSPP”). Does not include an additional 42,159 unvested RSUs under the MSPP. 684,438 of the shares held directly by Mr. Robinson are pledged to a bank as collateral for a personal loan.

(4)

Does not include an aggregate of 182,145 shares of Common Stock held under Trusts for which Ms. Morrill’s spouse is the trustee for the benefit of their children, 3,010 shares held by her daughter-in-law, 1,160 shares held by her son and 97,275 shares in an insurance trust for which neither Ms. Morrill nor her spouse are trustees, as to which Ms. Morrill disclaims beneficial ownership.

(5)

Includes 25,112 shares of Common Stock held directly by Mr. Hedden; 104,167 shares of Common Stock under options exercisable within 60 days of the Record Date under the 2011 Plan; 10,000 shares of Common Stock under options exercisable within 60 days under the 2001 Plan; 2,826 RSUs scheduled to vest within 60 days of the Record Date under the 2011 Plan; 648,620 shares of Common Stock issuable on conversion of the Class A Stock owned by the Maurice Robinson Trust; and 1,183,092 shares of Common Stock owned by the Maurice R. Robinson Trust. Does not include 9,391 unvested RSUs under the MSPP and 4,651 unvested RSUs under the 2011 Plan.

(6)

The information for T. Rowe Price Associates, Inc. (“Price Associates”) is derived from a Schedule 13G Amendment dated February 14, 2019, filed with the SEC reporting beneficial ownership as of December 31, 2018. These shares are owned by various individual and institutional investors, as to which Price Associates serves as investment adviser, and Price Associates holds 2,118,233 shares, with sole dispositive power over all such shares and sole voting power over 600,936 of such shares. For purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Price Associates is deemed to be a beneficial owner of these shares; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such shares.

(7)

The information for BlackRock, Inc. (“BlackRock”) is derived from a Schedule 13G Amendment, dated January 31, 2019, filed with the SEC reporting beneficial ownership as of December 31, 2018. BlackRock has the sole power to direct investments with regard to all 4,181,729 shares and the sole power to vote with regard to 4,102,887 of such shares. Accordingly, for purposes of the reporting requirements of the Exchange Act, BlackRock is deemed to be a beneficial owner of these shares. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds of the sale of, these shares.

(8)

The information for Dimensional Fund Advisors LP (“Dimensional Fund”) is derived from a Schedule 13G Amendment, dated February 8, 2019, filed with the SEC reporting beneficial ownership as of December 31, 2018. Dimensional Fund serves as investment adviser to certain investment companies and as investment manager or subadvisor to certain other commingled funds, group trusts and separate accounts (collectively, the “Funds”). In certain cases, subsidiaries of Dimensional Fund may act as an advisor or subadvisor to certain Funds. The Funds own these shares, and in its role as investment advisor, subadvisor and/or manager, Dimensional Fund or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over shares owned by the Funds. Dimensional has the sole power to direct investments with regard to all 2,811,985 shares and the sole power to vote with regard to 2,716,411 of such shares. The Funds have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares held in their respective accounts. For purposes of the reporting requirements of the Exchange Act, Dimensional Fund is deemed to be a beneficial owner of these shares; however, Dimensional Fund expressly disclaims that it is, in fact, the beneficial owner of such shares.

6


 

(9)

The information for The Vanguard Group (“Vanguard”) is derived from a Schedule 13G Amendment, dated February 11, 2019, filed with the SEC reporting beneficial ownership as of December 31, 2018. Vanguard has the sole power to vote with regard to 28,527 shares, the sole power to direct investments with regard to 2,494,463 shares, the shared power to vote with regard to 4,566 shares and the shared power to direct investments with regard to 29,676 shares. Accordingly, for purposes of the reporting requirements of the Exchange Act, Vanguard is deemed to be a beneficial owner of these shares.

(10)

The information for Royce & Associates LP (“Royce”) is derived from a Schedule 13G Amendment, dated January 16, 2019, filed with the SEC reporting beneficial ownership as of December 31, 2018. Royce has the sole power to vote and direct investments with regard to all 2,050,100 shares. Accordingly, for purposes of the reporting requirements of the Exchange Act, Royce is deemed to be a beneficial owner of these shares.

Change of Control Arrangement for Certain Class A Stockholders

Pursuant to an agreement dated July 23, 1990 between the Maurice R. Robinson Trust and Richard Robinson, the Maurice R. Robinson Trust has agreed that if it receives an offer from any person to purchase any or all of the shares of Class A Stock owned by the Maurice R. Robinson Trust and it desires to accept such offer, Richard Robinson will have the right of first refusal to purchase all, but not less than all, of the shares of Class A Stock that such person has offered to purchase for the same price and on the same terms and conditions offered by such person. In the event Richard Robinson does not elect to exercise such option, the Maurice R. Robinson Trust shall be free to sell such shares of Class A Stock in accordance with the offer it has received. In addition, if Richard Robinson receives an offer from any person to purchase any or all of his shares of Class A Stock and the result of that sale would be to transfer to any person other than Richard Robinson or his heirs voting power sufficient to enable such other person to elect the majority of the Board, either alone or in concert with any person other than Richard Robinson, his heirs or the Maurice R. Robinson Trust (a “Control Offer”), and Mr. Robinson desires to accept the Control Offer, the Maurice R. Robinson Trust will have the option to sell any or all of its shares of Class A Stock to the person making the Control Offer at the price and on the terms and conditions set forth in the Control Offer. If the Maurice R. Robinson Trust does not exercise its option, Mr. Robinson will be free to accept the Control Offer and to sell his shares of Class A Stock in accordance with the terms of the Control Offer. If the Maurice R. Robinson Trust exercises its option, Mr. Robinson cannot accept the Control Offer unless the person making the Control Offer purchases the shares of Class A Stock that the Maurice R. Robinson Trust has elected to sell.

Delinquent Section 16(a) Beneficial Ownership Reports

During the fiscal year ended May 31, 2019, the Company had no Section 16(a) reports that were delinquent.

7


 

Share Ownership of Management

On the Record Date, July 26, 2019, each director and Named Executive Officer reported under the caption “Executive Compensation” and all directors and executive officers as a group beneficially owned shares of the Class A Stock and Common Stock as set forth in the table below. In computing the number of shares and percentage beneficially owned by any stockholder, shares of Class A or Common Stock subject to options or restricted stock units (“RSUs”) held by that person that are currently exercisable or vested or will become exercisable or vested within 60 days of the Record Date are included. Such shares, however, are not deemed outstanding for purposes of computing the percentage owned by any other person.

 

 

 

 

Class A Stock

 

 

Common Stock

 

Name

 

Amount and Nature

of Beneficial

Ownership(1)

 

 

Percent of

Class

 

 

Amount and Nature

of Beneficial

Ownership(1)

 

 

Percent of

Class

 

Directors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard Robinson

 

 

1,656,200

(2)

 

 

 

100

%

 

 

 

4,977,007

(3)

 

 

 

13.9

%

 

Andrés Alonso

 

 

 

 

 

 

 

 

 

 

13,416

(4)

 

 

 

*

 

 

James W. Barge

 

 

 

 

 

 

 

 

 

 

42,570

(5)

 

 

 

*

 

 

Mary Beech

 

 

 

 

 

 

 

 

 

 

3,974

(6)

 

 

 

*

 

 

John L. Davies

 

 

 

 

 

 

 

 

 

 

3,974

(6)

 

 

 

*

 

 

Andrew S. Hedden

 

 

648,620

(2)

 

 

 

39.2

%

 

 

 

1,973,817

(7)

 

 

 

5.8

%

 

Peter Warwick

 

 

 

 

 

 

 

 

 

 

17,945

(8)

 

 

 

*

 

 

Margaret A. Williams

 

 

 

 

 

 

 

 

 

 

34,734

(9)

 

 

 

*

 

 

David J. Young

 

 

 

 

 

 

 

 

 

 

13,979

(10)

 

 

 

*

 

 

Named Executive Officers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard Robinson

 

 

1,656,200

(2)

 

 

 

100

%

 

 

 

4,977,007

(3)

 

 

 

13.9

%

 

Kenneth J. Cleary

 

 

 

 

 

 

 

 

 

 

30,980

(11)

 

 

 

*

 

 

Iole Lucchese

 

 

 

 

 

 

 

 

 

 

126,157

(12)

 

 

 

*

 

 

Satbir Bedi

 

 

 

 

 

 

 

 

 

 

63,895

(13)

 

 

 

*

 

 

Judith Newman

 

 

 

 

 

 

 

 

 

 

72,725

(14)

 

 

 

*

 

 

All directors and executive officers as a group (14 persons)

 

 

1,656,200

(2)

 

 

 

100

%

 

 

 

5,654,152

(15)

 

 

 

15.6

%

 

*Less than 1.0%

(1)

Except as indicated in the notes below, each person named has sole voting and investment power with respect to the shares shown opposite his or her name.

(2)

See the information with respect to Richard Robinson and Andrew S. Hedden under “Principal Holders of Class A Stock and Common Stock” above. The shares of Class A Stock are convertible at the option of the holder into shares of Common Stock at any time on a share-for-share basis.

(3)

See the information with respect to Richard Robinson under “Principal Holders of Class A Stock and Common Stock” above.

(4)

Includes 2,487 shares of Common Stock held directly by Dr. Alonso, 3,831 shares of Common Stock under options exercisable by Dr. Alonso within 60 days of the Record Date under the Amended and Restated Scholastic Corporation 2007 Outside Directors Stock Incentive Plan (the “2007 Plan”), 5,845 shares of Common Stock under options exercisable by Dr. Alonso within 60 days of the Record Date under the Scholastic Corporation 2017 Outside Directors Stock Incentive Plan (the “2017 Plan”) and 1,253 shares underlying RSUs scheduled to vest within 60 days of the Record Date under the 2017 Plan.

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(5)

Includes 14,570 shares of Common Stock held directly by Mr. Barge, 20,902 shares of Common Stock under options exercisable by Mr. Barge within 60 days of the Record Date under the 2007 Plan, 5,845 shares of Common Stock under options exercisable by Mr. Barge within 60 days of the Record Date under the 2017 Plan and 1,253 shares underlying RSUs scheduled to vest within 60 days of the Record Date under the 2017 Plan.

(6)

Includes 2,721 shares of Common Stock under options exercisable by such director within 60 days of the Record Date under the 2017 Plan and 1,253 shares underlying RSUs scheduled to vest within 60 days of the Record Date under the 2007 Plan.

(7)

See the information with respect to Andrew S. Hedden under “Principal Holders of Class A Stock and Common Stock” above.

(8)

Includes 4,708 shares of Common Stock held directly by Mr. Warwick, 6,139 shares of Common Stock under options exercisable by Mr. Warwick within 60 days of the Record Date under the 2007 Plan, 5,845 shares of Common Stock under options exercisable by Mr. Warwick within 60 days of the Record Date under the 2017 Plan and 1,253 shares underlying RSUs scheduled to vest within 60 days of the Record Date under the 2017 Plan.

(9)

Includes 9,734 shares of Common Stock held directly by Ms. Williams, 17,902 shares of Common Stock under options exercisable by Ms. Williams within 60 days of the Record Date under the 2007 Plan, 5,845 shares of Common Stock under options exercisable by Ms. Williams within 60 days of the Record Date under the 2017 Plan and 1,253 shares underlying RSUs scheduled to vest within 60 days of the Record Date under the 2017 Plan.

(10)

Includes 3,305 shares of Common Stock held directly by Mr. Young, 3,576 shares of Common Stock under options exercisable by Mr. Young within 60 days of the Record Date under the 2007 Plan, 5,845 shares of Common Stock under options exercisable under the 2017 Plan and 1,253 shares underlying RSUs scheduled to vest within 60 days of the Record Date under the 2017 Plan.

(11)

Includes 2,592 shares of Common Stock held directly by Mr. Cleary, 26,958 shares of Common Stock under options exercisable by Mr. Cleary within 60 days of the Record Date under the 2011 Plan and 1,430 RSUs scheduled to vest within 60 days of the Record Date under the 2011 Plan. Does not include an additional 4,540 unvested RSUs under the 2011 Plan.

(12)

Includes 26,097 shares of Common Stock held directly by Ms. Lucchese, 93,765 shares of Common Stock under options exercisable by Ms. Lucchese within 60 days of the Record Date under the 2011 Plan, 1,000 shares of Common Stock under options exercisable by Ms. Lucchese within 60 days of the Record Date under the 2001 Plan, 2,826 RSUs scheduled to vest within 60 days of the Record Date under the 2011 Plan and 2,469 RSUs scheduled to vest within 60 days of the Record Date under the MSPP. Does not include an additional 4,651 unvested RSUs under the 2011 Plan.

(13)

Includes 7,807 shares of Common Stock held directly by Mr. Bedi, 53,262 shares of Common Stock under options exercisable by Mr. Bedi within 60 days of the Record Date under the 2011 Plan and 2,826 RSUs scheduled to vest within 60 days of the Record Date under the 2011 Plan. Does not include an additional 4,651 unvested RSUs under the 2011 Plan.

(14)

Includes 1,422 shares of Common Stock held directly by Ms. Newman, 65,889 shares of Common Stock under options exercisable by Ms. Newman within 60 days of the Record Date under the 2011 Plan, 2,826 RSUs scheduled to vest within 60 days of the Record Date under the 2011 Plan and 2,588 RSUs scheduled to vest within 60 days of the Record Date under the MSPP. Does not include an additional 14,861 unvested RSUs under the MSPP and 4,651 unvested RSUs under the 2011 Plan.

(15)

Includes 1,656,200 shares of Common Stock issuable on conversion of the Class A Stock described in Notes 1 and 2 under “Principal Holders of Class A Stock and Common Stock” above; 1,183,092 shares of Common Stock owned by the Maurice R. Robinson Trust; 350,000 shares of Common Stock owned by the Florence L. Robinson Trust; 48,120 shares of Common Stock owned by his two sons for which Mr. Robinson does not disclaim beneficial ownership; and 58,138 shares owned by the Richard Robinson Charitable Fund. Also includes an aggregate of 844,354 shares of Common Stock held directly by all directors and executive officers as a group; an aggregate of 1,250,632 shares of Common Stock under options exercisable by members of the group within 60 days of the Record Date under the 2011 Plan; an aggregate of 96,812 shares of Common

9


 

Stock under options exercisable by members of the group within 60 days of the Record Date under the 2001 Plan; an aggregate of 52,350 shares of Common Stock under options exercisable by members of the group within 60 days of the Record Date under the 2007 Plan; an aggregate of 34,667 shares of Common Stock under options exercisable by members of the group within 60 days of the Record Date under the 2017 Plan; an aggregate of 8,771 RSUs scheduled to vest within 60 days of the Record Date under the 2017 Plan; an aggregate of 15,560 RSUs scheduled to vest within 60 days of the Record Date under the 2011 Plan; an aggregate of 38,098 shares of Common Stock scheduled to vest within 60 days of the Record Date under the MSPP; and an aggregate of 17,358 shares of Common Stock with respect to which members of the group had voting rights as of the Record Date under the 401(k) Plan. Does not include an aggregate of 76,063 unvested RSUs under the MSPP and an aggregate of 27,795 unvested RSUs under the 2011 Plan.

Compensation Committee Interlocks and Insider Participation

No member of the Human Resources and Compensation Committee (the “HRCC”) was at any time during fiscal 2019 an officer or employee of the Company or any of the Company’s subsidiaries nor was any such person a former officer of the Company or any of the Company’s subsidiaries. In addition, no HRCC member is an executive officer of another entity at which an executive officer of the Company serves on the board of directors.

Human Resources and Compensation Committee Report

The HRCC has reviewed and discussed with management the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement. Based on this review and discussion, the HRCC recommended to the Board (and the Board has approved) that the CD&A be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019.

The members of the Human Resources and Compensation Committee of the Board of Directors of Scholastic Corporation have provided this report.

 

John L. Davies, Chairperson

Peter Warwick

Margaret A. Williams

David J. Young

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

The Company’s compensation programs for its executive officers and other senior management are administered by the Human Resources and Compensation Committee (“HRCC”), which is composed solely of independent directors as defined by NASDAQ rules. The Company’s overall objective is to maintain compensation programs that foster the short-term and long-term goals of the Company and its stockholders while attracting, motivating and retaining qualified individuals.

The HRCC generally consults with management regarding employee compensation matters. The Company’s Chief Executive Officer, working with the Company’s Human Resources Department, makes annual compensation recommendations to the HRCC for executive officers (other than himself) and senior management, including the Named Executive Officers. The Company’s compensation programs have been adopted in order to implement the

10


 

HRCC’s compensation philosophy discussed below, while taking into account the Company’s financial position and performance. They have been developed with the assistance of the Human Resources Department, as well as independent executive compensation consultants retained by the HRCC. A description of the composition and procedures of the HRCC is set forth under “Meetings of the Board and its Committees-Human Resources and Compensation Committee” and “Corporate Governance-HRCC Procedures” in “Matters Submitted to Stockholders - Proposal 1: Election of Directors,” below.

The HRCC regularly reviews the Company’s compensation programs and considers appropriate methods to tie the executive compensation program to performance and to further strengthen management’s alignment with stockholders.

Compensation Philosophy and Objectives

 

Pay Competitively

The Company’s goal is to provide a competitive compensation framework, taking into account the financial position and performance of the Company, individual contributions, teamwork, business unit contributions and the external market in which the Company competes for executive talent.

 

The Company, through competitive compensation policies, strives to foster the continued development of the Company’s operating segments, which in turn builds stockholder value.

 

In determining the compensation of its Named Executive Officers, the Company seeks to achieve its compensation objectives through a combination of fixed and variable compensation.

 

The Company reviews the executive compensation of a broad group of companies in the publishing, media, technology and education industries for comparative purposes. In addition, the Company considers compensation practices of a compensation peer group for which companies are selected based upon several criteria, including size of company by revenues, relevant industry and other factors.

Pay for Performance

The Company’s compensation practices are designed to create a direct link between the aggregate compensation paid to each Named Executive Officer and the overall financial performance of the Company.

 

The performance of a specific business unit for which an executive is responsible may be used to create a link between the achievement of business unit financial goals and the overall financial performance of the Company.

Executives as Stockholders

The Company’s compensation practices are also designed to link a portion of each Named Executive Officer’s compensation opportunity directly to the value of the Common Stock through the use of stock-based awards, including stock options and restricted stock units and, as deemed appropriate, performance-based stock units.

 

Peer Group Analysis

The Company reviews the compensation practices of selected peer companies to use as a general frame of reference, but it does not formally benchmark its compensation against that of such peer companies. The peer companies to which the Company has looked to gauge its competitiveness for these purposes have included but were not limited to the following: Barnes & Noble Inc., Career Education Corporation, Houghton Mifflin Harcourt Company, Meredith Corporation, Pearson plc, E. W. Scripps Company, Graham Holdings Co., K-12, Inc., and John Wiley & Sons, Inc., which companies constituted the peer group for fiscal 2019.  Additionally, in analyzing its executive compensation, from time to time the Company reviews general industry

11


 

compensation surveys provided by consulting firms, as well as more focused surveys covering a broad base of media companies.

Components of Executive Compensation

The following chart provides a brief overview of each of the elements of compensation. A more detailed description of each compensation element follows this chart.

 

Compensation

Element

Objective

Key Features

Fixed

 

 

 

 

Base Salary

To establish a fixed level of compensation principally tied to day-to-day responsibilities

Base salary is determined taking into account several factors, including individual job performance, current salary, internal equity, competitive external market conditions for recruiting and retaining executive talent, the scope of the executive’s position and level of experience, changes in responsibilities, responsibility for larger, more difficult to manage or more complex initiatives, such as new product development or technology initiatives, or positions that require considerable creative or technical talent, creative marketing capability or digital skills, or the management of those providing such creative content, technical skills or marketing and digital expertise.

Variable

 

 

 

 

Annual Performance-Based Cash Bonus Awards

To provide a reward based upon the achievement of the Company’s financial, operating and strategic goals established for the year

Through the use of annual bonus awards, the HRCC ties a significant portion of each Named Executive Officer’s total potential compensation to Company performance and, in the case where the executive officer is responsible for a business unit of the Company, performance of the actual business unit. For fiscal 2020, as discussed below in this CD&A section, awards for senior management, including the Named Executive Officers, will be in the form of performance-based stock units rather than cash.

Long-Term Incentive Compensation

To align the long-term interests of the executives and the Company’s stockholders

Stock options, which typically vest ratably over four years, producing value for executives and employees only if the Common Stock price increases over the exercise price.

Restricted stock units, which convert automatically into shares of Common Stock on a 1-to-1 basis upon vesting, generally over a four year period, serving as a retention tool, as well as increasing an executive’s stock ownership.

Performance-based stock units, which have previously been issued on a limited basis to a few executives as an incentive for the achievement of specifically defined objectives, and, as discussed below in this CD&A section, are expected to be added as an additional component of the Company’s long-term incentive compensation program for senior management, including the Named Executive Officers, for fiscal 2020.

12


 

Compensation

Element

Objective

Key Features

Other Equity-Based Incentives and Benefit Plans

 

To attract and retain highly qualified talent and maintain market competitiveness

 

The Company’s executives participate in the 401(k) Plan on the same terms as all employees.

 

The ESPP provides a method for all employees, including executives, to purchase Common Stock at a 15% discount.

 

The MSPP permits senior management to defer receipt of all or a portion of their annual cash bonus payments in order to acquire restricted stock units at a 25% discount.

 

Base Salary

Base salaries are reviewed annually in the context of the HRCC’s consideration of the effect of base compensation on recruiting and retaining executive talent. In establishing each executive officer’s base salary, including those of the Named Executive Officers, the HRCC considers several factors, as described under “Base Salary” in the above chart. In considering annual base salary increases, Company financial performance is also taken into consideration.

Consistent with the Company’s policy for all employees, salaries for executive officers and senior management, including the Named Executive Officers, are reviewed annually in September and any increases, based on the compensation objectives discussed above, are generally effective on October 1 of each year. For fiscal 2019, the HRCC’s independent compensation consultant conducted an annual compensation review of market comparisons using both survey data and information from the most recent proxy statements for the peer group indicated above.  As a result of this review, in fiscal 2019, Mr. Bedi received a base salary increase as result of his promotion to Executive Vice President and increased operational responsibilities; Mr. Cleary received a base salary increase to bring his total compensation in better alignment with his responsibilities as Chief Financial Officer; and Ms. Lucchese received a base salary increase to bring her compensation in alignment with a broadened scope of responsibilities.

Annual Performance-Based Cash Bonus Awards

The HRCC ties a meaningful portion of each Named Executive Officer’s total potential compensation to Company performance, which, in the case where a Named Executive Officer is responsible for an operating unit of the Company, may also include business unit performance, generally through the use of annual cash bonus awards. In setting financial and operating performance targets, which are established early in the fiscal year, the HRCC considers Company-wide strategic and operating plans and, where applicable, those of the executive’s business unit. In each case, whether considering the Company as a whole or an executive’s business unit, the HRCC considers the budget for the next fiscal year and sets specific incentive targets that are directly linked to the Company’s financial performance or that of the business unit. The continued focus of the annual bonus element of compensation has been to align the interests of senior management, including the Named Executive Officers, with the Company’s financial, operating and strategic goals for the relevant fiscal year and primarily to encourage the achievement of the Company’s key financial and operating goals for such fiscal year, with the focus on overall Company performance.

13


 

Potential bonus awards for senior management, including the Named Executive Officers, and other eligible employees are currently set and determined under the Company’s Management Incentive Plan (“MIP”). As a result of the Tax Cuts and Jobs Act of 2017, which amended the Internal Revenue Code of 1986, the Company’s Employee Performance Incentive Plan (“EPIP”) is no longer being used to determine the bonus payouts for the Named Executive Officers. Upon the recommendation of the Chief Executive Officer, made at the time annual fiscal year targets are established, targets may also be established to reflect certain other Company objectives, such as revenue growth, expense management, strategic development, organizational effectiveness or demonstration of the achievement of certain cross-departmental Company or specific individual goals.

As discussed below, for fiscal 2020, and taking into account the financial performance of the Company for fiscal 2019, the HRCC determined that the MIP design for senior management, including the Named Executive Officers, for fiscal 2020 should be tied to performance-based stock units, rather than cash, in order to more closely align the fiscal 2020 MIP design for senior management with the financial objectives of the Company for fiscal 2020.

Fiscal 2019 Bonuses

For each of the Named Executive Officers, individual MIP bonus potentials for fiscal 2019 were dependent upon the achievement of Company targets, with the potential bonus percentage payout for each executive ranging from 0% to 150%.

As discussed above, the annual bonus awards are generally designed to reward for Company-wide measurable performance, as well as certain other indicators of performance. With respect to fiscal 2019, the HRCC set the MIP performance targets for the Named Executive Officers primarily based on Company-wide goals, focusing on the objective of meeting the Company’s fiscal 2019 operating plan. A corporate bonus was to be funded based upon the achievement of the Corporate Operating Income target. Assuming that the Corporate Operating Income target had been met for fiscal 2019, the portion of the corporate bonus pool resulting from any performance above target, if awarded, would have been based on Corporate Operating Income and, for one of the Named Executive Officers, the Division Operating Income in accordance with the table below. Corporate Operating Income was defined for this purpose as the Company’s net revenues less total operating costs and expenses from continuing operations as reported in the Company’s audited financial statements, excluding one-time items as discussed in earnings releases or calls and press releases, legal or tax settlements, changes to accounting policies or impaired assets. Division Operating Income was defined as the operating income of the specific business unit for which the Named Executive Officer was responsible.

 

 Fiscal 2019 MIP Payment Structure

Participants

MIP at Above Target Performance

Corporate Operating Income

Division Operating Income

Named Executive Officers - Business

50%

50%

Named Executive Officers - Staff

100%

0%

14


 

For fiscal 2019, the total bonus pool was proposed to be funded in accordance with the table below:

 

Fiscal 2019 Bonus
Targets and Payouts

% Achievement of
Corporate Operating
Income
Target

Bonus
Percentage
Payout

84%

40%

100%

80%

110%

100%

115%

125%

120%

150%

 

Target bonus payout amounts are stated as a percentage of base salary. As part of the annual compensation review referred to in the base salary discussion above, for fiscal 2019 no changes were recommended to the target bonus payout amounts for the Named Executive Officers, with the exception of Ms. Lucchese, whose bonus percentage changed from 70% to 85% of her annual salary, and Messrs. Cleary and Bedi, each of whom’s bonus percentage changed from 50% to 70% of his annual salary. Ms. Lucchese received an increase to her bonus percentage as a result of her broadened scope of responsibilities; Mr. Cleary received an increase in order to bring his total compensation in better alignment with his responsibilities as Chief Financial Officer; and Mr. Bedi received an increase as a result of his promotion to Executive Vice President and increased operational responsibilities.

For fiscal 2019, the Company achieved Corporate Operating Income (as defined) of $56.4 million, which was 61% of the target amount and below the threshold for bonus payout under the MIP. Although Corporate Operating Income did not achieve the minimum 84% of target in 2019, the terms of the MIP permit the HRCC to make awards from a discretionary bonus pool funded within the range of 20-25% of the target amounts to be used for retention purposes for the top 10-20% highest performing employees based upon recommendations to the HRCC resulting from individual performance analyses by the Human Resources Department. At its July 23, 2019 meeting, the HRCC determined to fund such a discretionary pool at 12.5% of the target funding.  The HRCC also approved a bonus for Ms. Lucchese, to be paid from this discretionary pool, in the amount of $250,000 for her efforts in leading certain strategic initiatives focused on cross-Company organizational effectiveness related to the Company’s children’s trade book businesses in the United States and internationally, which bonus will be paid in August 2019.  Accordingly, since the Company did not meet its threshold Corporate Operating Income target, no bonus will be paid for fiscal 2019 to the Named Executive Officers under the MIP, except for the bonus paid to Ms. Lucchese from the discretionary pool referred to above.

Fiscal 2020 Bonus Targets

At its meeting on July 23, 2019, taking into account the financial performance of the Company for fiscal 2019, the HRCC also determined that the MIP design for fiscal 2020 for senior management at the Senior Vice President level and above, including the Named Executive Officers, should be tied to performance-based stock units (“PSUs”), rather than cash bonuses, in

15


 

order to more closely align the 2020 MIP design for senior management with the financial objectives of the Company for fiscal 2020.

Accordingly, for fiscal 2020, the cash MIP bonus for senior management, including the Named Executive Officers, will be replaced with PSU awards equal in value to the fiscal 2020 MIP target payout, and the achievement measure to determine whether the bonus target has been achieved will be based on an Adjusted EBITDA target for fiscal 2020.  Adjusted EBITDA is defined by the Company as earnings (loss) before interest, taxes, depreciation and amortization, excluding one-time items detailed in earnings releases or calls and press releases, legal or tax settlements, changes to accounting policies or impaired assets.

The Table below presents the current target bonus payout amounts stated as a percentage of base salary applicable to the Named Executive Officers:

Name

Target Bonus Payout Amount as a Percentage of Base Salary

Richard Robinson

125%

Kenneth Cleary

70%

Iole Lucchese

85%

Satbir Bedi

70%

Judith A Newman

70%

The Table below presents the PSU award payout percentage for the Named Executive Officers based upon the achievement of the Adjusted EBITDA target for fiscal 2020.

% Achievement of Adjusted EBITDA Target

PSU Award Payout Percentage

80%

50.00%

100%

100.00%

150%

150.00%

It is intended that any PSUs awarded to senior management, including the Named Executive Officers, under the MIP for fiscal 2020 would be granted under the 2011 Plan after the determination by the HRCC as to the achievement of the Adjusted EBITDA target, with each PSU award having an aggregate dollar value equal in value to the fiscal 2020 MIP target payout applicable to the respective participant based on the fair market value of the Common Stock on the date of the award grant, calculated as the average of the high and low prices of the Common Stock on the date of grant. The PSU awards would vest in in their entirety on the third anniversary of the date of grant of the award and would convert into shares of Common Stock on a one-to-one basis upon vesting.

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Long-Term Incentive Compensation

The HRCC determines the awards of long-term incentive compensation through equity incentives (in the form of stock options, restricted stock units and performance-based stock units) granted to executive officers, including the Named Executive Officers, and senior management, as well as other eligible employees.

The current practice of the HRCC is to consider:

 

Annual equity grants to key employees, including the Named Executive Officers and other members of senior management, at its regularly scheduled meeting in September.

 

Equity grants at other times depending upon circumstances such as promotions, new hires or special considerations.

From September 2001 through July 2011, equity awards to employees were made under the Scholastic Corporation 2001 Stock Incentive Plan (the “2001 Plan”), which provided for the grant of non-qualified stock options, incentive stock options, restricted stock and other stock-based awards. Only non-qualified stock options and restricted stock units were granted under the 2001 Plan, which expired in July 2011, and the only Named Executive Officers with options outstanding under the 2001 Plan are Mr. Robinson and Ms. Lucchese. The Company currently makes its grants of stock options, restricted stock units and other stock-based awards under the 2011 Plan, which was approved by the Board in July 2011 and by the Class A stockholders in September 2011.

The Company is currently considering granting performance-based stock units in September 2019 to its Named Executive Officers and certain other members of Company management for a portion of his or her annual grant, subject to HRCC approval at its September meeting. It is expected that the metric to determine achievement for the payment of any such PSUs would be Adjusted EBITDA, which is defined by the Company as earnings (loss) before interest, taxes, depreciation and amortization, excluding one time items as detailed in earning releases or calls and press releases, legal or tax settlements, changes to accounting policies or impaired assets.

The HRCC has determined that its practice should continue to be to generally consider the award of restricted stock units tied to vesting, with the addition of performance-based stock units for a portion of the awards, and stock options, including a combination of the foregoing in most cases, which determination reflects the desire to maintain a strong long-term equity component in executive compensation and to reduce, through the restricted and performance-based stock unit components, the number of equity units required to provide such components. Accordingly, the Company currently intends to utilize grants of stock options, restricted and performance-based stock units or a combination thereof to qualified executives, including the Named Executive Officers.

Options to Purchase Common Stock and Restricted Stock Units

During fiscal 2019, the HRCC granted equity-based awards to the Named Executive Officers and certain other members of senior management and to certain newly-hired or

17


 

promoted employees to fulfill contractual obligations or commitments. These grants were made in the form of stock options, restricted stock units or a combination of both.

Stock options produce value for executives and employees only if the Common Stock price increases over the exercise price, which is set at the fair market value of the Common Stock on the date of grant, calculated as the average of the high and low prices on the date of grant. The Company historically has calculated the exercise price of stock options by this method, which it believes gives a fair market value and eliminates price fluctuations during the day that the grant is made. Stock options granted by the HRCC normally vest in 25% annual installments beginning on the first anniversary of the grant date and expire after ten years.

Restricted stock units granted under the 2011 Plan convert automatically into shares of Common Stock on a one-to-one basis upon vesting. The 2011 Plan does not permit the deferral of restricted stock units, and the vesting of restricted stock units is generally in four equal annual installments beginning with the first anniversary of the date of grant. Through vesting and forfeiture provisions, both stock options and restricted stock units create incentives for executive officers and senior management to remain with the Company. Through the addition of the use of PSUs, the Company is intending to align management interests with stockholder interests and increase stockholder value by incentivizing its members of senior management, including the Named Executive Officers, to focus their efforts on the achievement of Adjusted EBITDA growth targets in order to have the PSUs granted to him or her vest and convert into shares of Common Stock.

The specific fiscal 2019 grants to the Named Executive Officers are set forth below in the “Grants of Plan-Based Awards” table, and information regarding the equity awards held by the Named Executive Officers as of the end of fiscal 2019 is set forth below in the “Outstanding Equity Awards at May 31, 2019” table. The HRCC made its customary annual long-term incentive compensation grants for fiscal 2019 for each of the Named Executive Officers in September 2018.

Equity Awards for the Chief Executive Officer

Mr. Robinson had previously received a total of 1,499,000 options to purchase shares of Class A Stock pursuant to annual grants during the period 2004 through 2008 under the stockholder-approved Scholastic Corporation 2004 Class A Stock Incentive Plan, of which Mr. Robinson was the only participant (the “Class A Plan”). There are no outstanding options under the Class A Plan.

Since completion of the program contemplated by the Class A Plan, long-term incentives provided to Mr. Robinson have been considered annually by the HRCC and have been in the form of options to purchase Common Stock. For fiscal 2016 through fiscal 2019, Mr. Robinson was granted options under the 2011 Plan to purchase 137,477 shares of Common Stock, 165,945 shares of Common Stock, 194,750 shares of Common Stock and 116,582 shares of Common Stock, respectively, in each case at the same time as the long-term incentive grants were also awarded to other executive officers and senior management.

Information regarding the equity awards held by Mr. Robinson as of the end of fiscal 2019 is set forth below in the “Outstanding Equity Awards at May 31, 2019” table.

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Performance Bonus Plan for Named Executive Officer

In December 2017, the HRCC approved the Company entering into a three-year incentive plan for Satbir Bedi, Executive Vice President and Chief Technology Officer of the Company, and authorized management to complete the key performance metrics for such plan.  The purpose of the plan is to recognize Mr. Bedi’s leadership of the technological transformation involved in the development, implementation and deployment of the Company initiatives established under the Company’s 2020 Plan and to provide an incentive for the further successful implementation of such initiatives. The plan covers a three-year performance period including fiscal 2019, 2020 and 2021 and provides for an award of performance-based stock units (PSUs) to be issued under the 2011 Plan and to fully vest in their entirety at the end of such three-year period, based on meeting annual performance metrics during each of the three fiscal years covered by the plan. The Company is in the process of finalizing the performance metrics for fiscal 2020 and 2021 to be included in the performance bonus agreement with Mr. Bedi (the “Agreement”), for approval by the HRCC, incorporating the incentive plan previously approved by the HRCC.

While, as discussed below, the performance metrics for fiscal 2020 and 2021 are in the process of being finalized, for fiscal 2019 an amount of $133,333 has been accrued in connection with the identified metric for the first year, fiscal 2019, relating to the achievement of the fiscal 2019 annual expense reduction target for STS/ Technology and Operations (including manufacturing, production and fulfillment).

The performance metrics for fiscal 2020 and 2021 to be included in the Agreement will be tied to two metrics, one relating to further annual expense reduction targets for STS/Technology and Operations (including manufacturing, production and fulfillment) and the other to a return on investment metric tied to the implementation and deployment of specific Plan 2020 initiatives in the Company’s business units by reference to annual targets for the identified initiatives agreed to with the business units. For purposes of the Agreement, the achievement of the performance metrics to be included in the Agreement will be separately determined as a dollar value on an annual basis, and the final amount of the award will be the sum of the dollar value amounts for the three fiscal years, with the entire award being paid at the end of the three-year period in the form of PSUs having an aggregate dollar value equal to the aggregate dollar values of such annual determinations, which will immediately vest and be settled in shares of Common Stock based on the fair market value of the Common Stock determined as of the last day of the three-year performance period.  Under the plan, Mr. Bedi will be eligible for a potential payout in the range of $200,000 to $600,000, depending on the achievement of the annual targets for the three fiscal years to be covered by the Agreement, with $400,000 being the target amount of the sum of the annual goals.

Other Equity-Based Incentives

The Scholastic Corporation Employee Stock Purchase Plan (as amended, the “ESPP”) and the Scholastic Corporation Management Stock Purchase Plan (as amended, the “MSPP”) were designed to augment the Company’s stock-based incentive programs by providing participating employees with equity opportunities intended to further align their interests with the Company and its stockholders. The purpose of the ESPP is to encourage broad-based employee stock ownership. The ESPP is offered to United States-based employees, including the Named

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Executive Officers other than Mr. Robinson. The ESPP permits participating employees to purchase, through after-tax payroll deductions, Common Stock at a 15% discount from the closing price of the Common Stock on the last business day of each calendar quarter. Of the Named Executive Officers, only Mr. Bedi and Mr. Cleary participate in the ESPP.

Under the MSPP, which was adopted in 1999 in order to provide an additional incentive for senior management, including the Named Executive Officers, to invest in Common Stock through the use of their cash bonuses paid under the MIP, eligible members of senior management may use such annual cash bonus payments on a tax-deferred basis to purchase restricted stock units (“RSUs”) in the Company at a 25% discount from the lowest closing price as reported on NASDAQ in the fiscal quarter in which the bonus is paid.

With respect to fiscal 2019, senior management participants were permitted to defer receipt of all or a portion of their annual cash bonus payments, which would be used to acquire RSUs at a 25% discount from the lowest closing price of the underlying Common Stock during the fiscal quarter ending on August 31, 2019. The deferral period chosen by the participants could not be less than the three-year vesting period for the RSUs, with the first three years of deferral running concurrently with the vesting period. Upon expiration of the applicable deferral period, the RSUs would be converted into shares of Common Stock on a one-to-one basis.  During fiscal 2019, seven members of senior management elected to participate in the MSPP, however only one member of senior management, who is not a Named Executive Officer, is an MSPP participant receiving a bonus from the discretionary pool under the MIP and making a deferral under the MSPP.

Results of Stockholder Advisory Vote on Compensation of Named Executive Officers

At the 2017 Annual Meeting of Stockholders, the Class A Stockholders approved the fiscal 2017 compensation for the Company’s Named Executive Officers, including the policies and practices related thereto. The Company believes this vote reflected the general satisfaction of the Class A Stockholders with the Company’s compensation philosophy for the Named Executive Officers. Accordingly, the HRCC continued to apply the same general principles in determining the amounts and types of executive compensation for fiscal 2019 as outlined in the Company’s compensation philosophy and framework described above. In addition, at the 2017 Annual Meeting of Stockholders, the Class A Stockholders approved a determination that the Company hold advisory votes on Named Executive Officer compensation once every three years. As a result, the next advisory vote on Named Executive Officer compensation will take place at the Annual Meeting in respect of the fiscal 2020 compensation for the Company’s Named Executive Officers, including the policies and practices related thereto.

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SUMMARY COMPENSATION TABLE

The following table summarizes the total compensation earned by or paid to the Named Executive Officers for the fiscal years ended May 31, 2019, 2018 and 2017, as indicated below.

 

Name and

Principal

Position

Fiscal

Year

 

Salary

($)(1)

 

 

Bonus

($)

 

 

Stock

Awards(2)

($)

 

 

Option

Awards(3)

($)

 

 

Non-Equity

Incentive Plan

Compensation(4)

($)

 

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings(5)

($)

 

 

All Other

Compen-

sation(6)

($)

 

 

Total

($)

 

Richard Robinson

2019

 

$

1,007,308

 

 

$

0

 

 

$

0

 

 

$

1,609,997

 

 

$

0

 

 

$

0

 

 

$

139,845

 

 

$

2,757,150

 

Chairman of the Board,

2018

 

$

970,000

 

 

$

0

 

 

$

0

 

 

$

2,299,998

 

 

$

515,313

 

 

$

33,927

 

 

$

472,487

 

 

$

4,291,725

 

Chief Executive Officer

2017

 

$

970,000

 

 

$

0

 

 

$

0

 

 

$

2,299,998

 

 

$

1,212,500

 

 

$

71,337

 

 

$

379,984

 

 

$

4,933,819

 

and President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth J. Cleary

2019

 

$

568,270

 

 

$

0

 

 

$

149,989

 

 

$

100,003

 

 

$

0

 

 

$

0

 

 

$

12,972

 

 

$

831,234

 

Chief Financial Officer

2018

 

$

447,116

 

 

$

0

 

 

$

104,998

 

 

$

241,638

 

 

$

106,250

 

 

$

0

 

 

$

11,457

 

 

$

911,459

 

Iole Lucchese(7)

2019

 

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