UNITED STATES
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SCHEDULE 14A INFORMATION

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WRIGHT EXPRESS CORPORATION

(Name of Registrant as Specified In Its Charter)

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April 21, 2011

 

Dear Fellow Stockholders,

 

You are invited to attend our 2011 annual meeting of stockholders. The meeting will be held on Friday, May 20, 2011, at 8:00 a.m., Eastern Time, at the Wright Express Corporation Long Creek Campus located at 225 Gorham Road, South Portland, Maine.

 

At the meeting we will:

 

 

Whether or not you attend the annual meeting, it is important that your shares be represented and voted at the meeting. As a stockholder of record, you can vote your shares by signing and dating the enclosed proxy card and returning it by mail in the enclosed envelope. If you decide to attend the annual meeting and vote in person, you may then revoke your proxy. If you hold your stock in “street name,” you should follow the instructions provided by your bank, broker or other nominee.

 

On behalf of the Board of Directors and the employees of Wright Express Corporation, we would like to express our appreciation for your continued interest in the Company.

 

Sincerely,

 

Michael E. Dubyak

CHAIRMAN OF THE BOARD,

PRESIDENT AND CHIEF EXECUTIVE OFFICER

 

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS

 

April 21, 2011

 

The 2011 annual meeting of stockholders of Wright Express Corporation will be held on Friday, May 20, 2011, at 8:00 a.m., Eastern Time, at the Wright Express Corporation Long Creek Campus located at 225 Gorham Road, South Portland, Maine, 04106. At the meeting we will:

 

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 20, 2011:

 

The proxy statement and annual report to stockholders are available at http://ir.wrightexpress.com.

 

Stockholders who owned shares of our common stock at the close of business on March 22, 2011 are entitled to attend and vote at the meeting and any adjournment or postponement of the meeting. A complete list of registered stockholders will be available at least 10 days prior to the meeting at our offices located at 225 Gorham Road, South Portland, Maine, 04106.

 

By Order of the Board of Directors,

 

 

Hilary A. Rapkin

SENIOR VICE PRESIDENT,

GENERAL COUNSEL AND

CORPORATE SECRETARY

TABLE OF CONTENTS

 

 

This proxy statement describes the proposals on which you may vote as a stockholder of Wright Express Corporation. It contains important information to consider when voting.

 

The Company’s board of directors, or the Board, is sending these proxy materials to you in connection with the Board’s solicitation of proxies. Our annual report to stockholders and our proxy materials were first mailed on or about April 21, 2011.

 

Your vote is important. Please complete, execute and promptly mail your proxy card as soon as possible even if you plan to attend the annual meeting.

 

Stockholders who owned the Company’s common stock at the close of business on March 22, 2011, the record date, may attend and vote at the annual meeting. Each share is entitled to one vote. There were 38,545,551 shares of common stock outstanding on the record date.

 

How do I vote?

 

 

You do this by completing and signing your proxy card and mailing it in the enclosed prepaid and addressed envelope.

 

 

We will pass out ballots to any record holder who wants to vote at the meeting. However, if you hold your shares in “street name,” you must request a proxy from your stockbroker in order to vote at the meeting. Holding shares in street name means you hold them through a brokerage firm, bank or other nominee, and as a result, the shares are not held in your individual name but through someone else.

 

If you hold your shares in street name, you should follow the instructions provided by your bank, broker or other nominee, including any instructions provided regarding your ability to vote by telephone or through the Internet.

 

How do I vote my shares held in the Wright Express Corporation Employee Savings Plan?

 

If you participate in our Wright Express Corporation Employee Savings Plan, commonly referred to as the “401(k) Plan,” shares of our common stock equivalent to the value of the common stock interest credited to your account under the plan will be voted automatically by the trustee in accordance with your instruction, if it is received by May 17, 2011. Otherwise, the share equivalents credited to your account will be voted by the trustee in the same proportion that it votes share equivalents for which it receives timely instructions from all plan participants.

 

Please refer to the “Information about Voting Procedures” section.

 

 

Our nominees for director this year are:

 

 

Each nominee is presently a director of the Company and has consented to serve a new three-year term.

 

We recommend a vote FOR these nominees.

 

 

We are providing you with the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of the executive officers named in the Summary Compensation Table under “Executive Compensation,” whom we refer to as our “named executive officers” or NEOs, as disclosed in this proxy statement in accordance with the SEC’s rules. This proposal, which is commonly referred to as “say-on-pay,” is required by the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which added Section 14A to the Securities Exchange Act of 1934, or Exchange Act. Section 14A of the Exchange Act also requires that stockholders have the opportunity to cast an advisory vote with respect to whether future executive compensation advisory votes will be held every one, two or three years, which is the subject of Item 3.

 

Our executive compensation programs are designed to attract, motivate, and retain our executive officers, who are critical to our success. The “Executive Compensation” section of this proxy statement beginning on page 21, including “Compensation Discussion and Analysis,” describes in detail our executive compensation programs and the decisions made by the Compensation Committee with respect to the fiscal year ended December 31, 2010.

 

Wright Express’ philosophy regarding executive compensation is straightforward: reward our executives for their contributions to the Company’s annual and long-term performance by tying a significant portion of their total compensation to key drivers of increased stockholder value. Reflecting our pay-for-performance philosophy, a significant portion of executive compensation is performance-based, subject to increase when results exceed corporate targets, reduction when results fall below target and elimination if results do not achieve threshold levels of performance.

 

The Board believes this link between compensation and the achievement of our annual and long-term business goals has helped drive our performance over time, including our strong performance in 2010. At the same time, we believe our program does not encourage excessive risk-taking by management. As discussed in Compensation Discussion and Analysis, our executive compensation program features a number of key factors designed to align the interests of our executives with those of our stockholders.

 

Our Board is asking stockholders to approve a non-binding advisory vote on the following resolution:

 

RESOLVED, that the compensation paid to Wright Express’ named executive officers, as disclosed in accordance with the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in this proxy statement, is hereby approved.

 

As an advisory vote, this proposal is not binding. Neither the outcome of this advisory vote nor of the advisory vote included in Item 3 overrules any decision by the Company or the Board (or any committee of the Board), creates or implies any change to the fiduciary duties of the Company or the Board (or any committee of the Board), or creates or implies any additional fiduciary duties for the Company or the Board (or any committee of the Board). However, our Compensation Committee and Board value the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for named executive officers.

 

We recommend a vote FOR approval of the compensation of our named executive officers.

 

In Item 2, we are providing you with the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers. In this Item 3, we are asking our stockholders to cast a non-binding advisory vote regarding the frequency of future executive compensation advisory votes. You may vote for a frequency of every one, two, or three years, or you may abstain on the proposal.

 

The Board will take into consideration the outcome of this vote in making a determination about the frequency of future executive compensation advisory votes. However, because this vote is advisory and non-binding, the Board may decide that it is in the best interests of our stockholders and the Company to hold the advisory vote to approve executive compensation more or less frequently.

 

After careful consideration, the Board believes that, at this time, an executive compensation advisory vote should be held every year, and therefore our Board recommends that you vote for a frequency of every ONE YEAR for future executive compensation advisory votes.

 

The Board believes that an annual executive compensation advisory vote will facilitate more direct stockholder input about executive compensation. An annual executive compensation advisory vote is consistent with our policy of reviewing our compensation program annually, as well as being accountable to our stockholders on corporate governance and executive compensation matters. We believe an annual vote would be the best governance practice for our Company at this time and in the best interests of the Company and its stockholders.

 

We recommend a vote for a frequency of every “ONE YEAR” for future executive compensation advisory votes.

 

 

The Audit Committee of the Board has selected Deloitte & Touche LLP, or D&T, as the independent registered public accounting firm for the Company’s fiscal year 2011. Stockholder ratification of the appointment is not required under the laws of the State of Delaware, but the Audit Committee has decided to request that the stockholders ratify the appointment. A representative of D&T will be present at the meeting to answer appropriate questions from stockholders and will have the opportunity to make a statement on behalf of the firm, if he or she so desires.

 

If this proposal is not approved by our stockholders at the 2011 annual meeting, the Audit Committee will reconsider its selection of D&T. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different independent registered public accounting firm at any point during the year if it determines that making a change would be in the best interests of the Company and our stockholders.

 

We recommend a vote FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm.

 

OTHER BUSINESS

 

We know of no other business to be considered at the meeting, and the deadline for stockholders to submit proposals or nominations has passed. However, if:

 

 

then Michael E. Dubyak or Melissa D. Smith will vote your shares on those matters according to his or her best judgment.

 

BOARD LEADERSHIP

 

Our Board is led by our Chairman, Mr. Dubyak, who is also our President and Chief Executive Officer. The Chairman leads all meetings of the Board at which he is present, sets meeting schedules and agendas and manages information flow to the Board to ensure appropriate understanding and discussion regarding matters of interest or concern to the Board. The Chairman also has such additional powers and performs such additional duties consistent with organizing and leading the actions of the Board as may be prescribed.

 

In addition to our Chairman, the Board has appointed Dr. Moriarty as our Vice Chairman and Lead Director. Dr. Moriarty chairs meetings of the independent directors in executive session and chairs any meetings at which the Chairman is not present. In addition, he facilitates communications between other members of the Board and the Chairman. The Lead Director is authorized to call meetings of the independent directors and is available to consult with any of the Company’s senior executives regarding any concerns an executive may have. Dr. Moriarty aids in the preparation of meeting agendas and is authorized to meet with stockholders as a representative of the independent directors.

 

Our Board believes that having one person serve as chairman and chief executive officer allows that individual to use his substantial knowledge gained from both roles to lead the Company most effectively, and to provide strong and consistent leadership, without risking overlap or conflict of roles. Our chief executive officer is also more familiar with our business and strategy than an independent, non-employee Chairman would be and is thus better positioned to focus the Board’s agenda on the key issues facing the Company. Our Board further believes that with the appointment of Dr. Moriarty as our Vice Chairman and Lead Director, the Board has in place a leadership structure that provides an independent view of governance and business-related matters for both stockholders and other parties.

 

THE BOARD’S ROLE IN RISK OVERSIGHT

 

Our Board oversees our risk management processes directly, and through a risk management program overseen by the Company’s Senior Vice President, General Counsel and Corporate Secretary, who reports directly to the Chief Executive Officer. Risks are identified and prioritized by management, and each prioritized risk is then referred by the full Board to a Board committee for oversight. In general, our Board oversees risk management activities relating to business strategy, acquisitions, capital allocation, organizational structure and certain operational risks; our Audit Committee oversees risk management activities related to financial controls and legal and compliance risks; our Compensation Committee oversees risk management activities relating to the Company’s compensation policies and practices and management succession planning; and our Corporate Governance Committee oversees risk management activities relating to Board composition. In addition, the Board receives periodic assessments, as necessary, from each committee with regard to its respective oversight activities, and annually reviews the Company’s risk management program as a whole.

MEMBERS OF THE BOARD OF DIRECTORS

 

 

NUMBER OF DIRECTORS AND TERMS

 

Our certificate of incorporation provides that our Board shall consist of such number of directors as is fixed by our By-Laws. Our By-Laws provide that our Board shall consist of such number of directors as from time to time is fixed exclusively by resolution of the Board. Currently, the Board has fixed the size of the Board at eight directors, who serve staggered terms as follows:

 

 

BOARD AND COMMITTEE MEETINGS

 

The Board held eight meetings in 2010. Each of our directors attended at least 75 percent of the aggregate number of meetings of the board and meetings of the board committees on which he or she served in 2010. Seven of our directors attended all meetings of the Board and one attended seven of the eight. Our independent directors meet in executive session in at least one regularly scheduled in-person Board meeting. As provided in our Corporate Governance Guidelines, we expect directors to attend the annual meeting of stockholders. All of our directors attended the 2010 annual meeting of stockholders.

Our Board has created the following committees:

 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

No member of our Compensation Committee (the members of which are listed in the table in the “Board and Committee Meetings” section) is or was one of our or our subsidiaries’ former officers or employees. During 2010, there were no Compensation Committee interlocks as required to be disclosed under SEC rules.

 

DIRECTOR COMPENSATION

 

In 2010, the compensation committee requested that DolmatConnell & Partners, Inc., or DCP, review our director compensation plan and provide the committee with recommendations on any changes to meet the following objectives of the compensation plan:

 

• Attract and retain directors

 

 

The committee reviewed DC&P’s analysis and agreed that no significant changes to the Wright Express Corporation Non-Employee Director Compensation Plan were necessary to meet the above objectives.

 

The plan splits the director retainer between cash and equity as shown below to meet our objectives of attracting and retaining directors while aligning director compensation with stockholder interests.

 

 

 

 

 

Non-Employee Directors Deferred Compensation Plan

 

Director Compensation

 

 

 

 

The following table indicates the full grant date fair value of stock awards made during 2010 to certain directors.

 

Grant Date Fair Values

 

 

NON-EMPLOYEE DIRECTOR OWNERSHIP GUIDELINES

 

On September 7, 2006, the Compensation Committee established and approved equity ownership guidelines for all non-employee directors. “Equity” for the purpose of these guidelines is defined to include shares of the Company’s common stock, vested restricted stock units and deferred stock units. Under the guidelines of the equity ownership program, all directors are expected to own equity equal in value to at least three times each director’s annual director cash retainer or non-executive chairman cash retainer. The Compensation Committee assesses progress against the guidelines each year on July 31. Directors have three years from July 31, 2007, or, if later, three years following their appointment to the Board, to achieve this level of ownership. All of our non-executive directors exceed the holdings in the guidelines.

 

This table shows common stock that is beneficially owned by our directors, our chief executive officer, our chief financial officer and our next three most highly compensated executive officers as of December 31, 2010, whom we refer to as our “named executive officers,” and all persons known to us to own 5 percent or more of the outstanding Company common stock, as of March 9, 2011.

 

AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED

 

 

 

 

 

DIRECTOR INDEPENDENCE

 

We have considered the independence of each member of the Board. To assist us in our determination, we reviewed NYSE requirements and our general guidelines for independence, which are part of our corporate governance guidelines.

 

To be considered independent: (1) a director must be independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) in the Board’s judgment, the director must not have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).

 

The Board has established guidelines to assist it in determining whether a director has a material relationship with the Company. Under these guidelines, a director will not be considered to have a material relationship with the Company if (1) he or she is independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) he or she: (i) serves as an executive officer of another company which is indebted to the Company, or to which the Company is indebted, provided that the total amount of either

company’s indebtedness to the other is less than one percent of the total consolidated assets of the company he or she serves as an executive officer; (ii) serves as an officer, director or trustee of a tax exempt organization, provided that the Company’s discretionary contributions to such organization are less than the greater of $1 million or 2 percent of that organization’s consolidated gross revenues; or (iii) serves as a director of another company with which the Company engages in a business transaction or transactions, provided that the director owns less than 5 percent of the equity interests of such other company and recuses himself or herself from deliberations of the Board with respect to such transactions. In addition, ownership of a significant amount of the Company’s stock, by itself, does not constitute a material relationship. For relationships not covered by the guidelines set forth above, the determination of whether a material relationship exists shall be made by the other members of the Board of Directors who are independent as defined above.

 

Based on our guidelines and NYSE corporate governance standards, we have determined that the following directors are independent: Shikhar Ghosh, Ronald T. Maheu, George L. McTavish, Rowland T. Moriarty, Kirk P. Pond, Regina O. Sommer and Jack VanWoerkom.

 

DIRECTOR NOMINATIONS

 

The Corporate Governance Committee is composed entirely of independent directors as determined by the Board in accordance with its independence guidelines and the listing standards of the NYSE. Among the committee’s responsibilities is recommending candidates for nomination to the Board. In that capacity, the Corporate Governance Committee, with Mr. Moriarty abstaining, recommended Mr. Moriarty for election by our stockholders and, unanimously recommended Messrs. Dubyak and Maheu for election. Messrs. Moriarty, Dubyak and Maheu have served as members of our Board since February 2005.

 

The Corporate Governance Committee will consider candidates nominated by stockholders for next year’s meeting in the same manner as candidates nominated by the Corporate Governance Committee. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then that nominee’s name will be included in the proxy card for the next annual meeting. Our stockholders also have the right under our By-Laws to directly nominate director candidates and should follow the procedures outlined in the answer to the question section entitled “How do I submit a stockholder proposal, including suggesting a candidate for nomination as a director to the Corporate Governance Committee, for next year’s annual meeting?”

 

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received not earlier than January 20, 2012 nor later than February 20, 2012. However, in the event that the annual meeting is called for a date that is not within 25 days before or after May 20, 2012, notice by the stockholder must be received no earlier than 120 days prior to the annual meeting and no later than the later of the 90th day prior to the annual meeting or the tenth day following the day on which notice of the date of the annual meeting is mailed or publicly disclosed.

 

Stockholder nominations must be addressed to:

 

Wright Express Corporation
Attention: Corporate Secretary
97 Darling Avenue
South Portland, ME 04106

 

Director Qualifications

 

The qualifications for directors are described in our Corporate Governance Guidelines and the guidelines for evaluating director nominees are in the Corporate Governance Committee’s charter, each of which is available on our website. In addition, the Corporate Governance Committee believes that a nominee for the position of director must meet the following specific, minimum qualifications:

 

 

 

Our Corporate Governance Committee does not have a policy with respect to diversity, but believes that our Board, taken as a whole, should embody a diverse set of skills, experiences and backgrounds. Our Board currently is comprised of eight directors, one of whom is a woman and another of whom is an Asian Indian. The Committee intends to be mindful of the diversity, with respect to gender, race and national origin, of our current Board members in connection with future nominations of directors not presently serving on the Board. In addition, our Corporate Governance Committee’s charter provides that nominees shall not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis prescribed by law.

 

Application of Criteria to Existing Directors

 

The re-nomination of existing directors is not viewed as automatic, but is based on continuing qualification under the criteria listed above. In addition, the Corporate Governance Committee considers the existing directors’ performance on the Board and any committee, which shall include consideration of the extent to which the directors undertook continuing director education.

 

The backgrounds and qualifications of the directors considered as a group are to provide a significant breadth of experience, knowledge and abilities in order to assist the Board in fulfilling its responsibilities. The rationale for the Company’s determination that each director is well suited to serve on the Board is specified with his or her respective biographical entry under the “Members of the Board of Directors” section of this proxy statement.

 

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

 

The Board believes that the Chief Executive Officer and his designees speak for the Company. Individual Board members may, from time to time, meet or otherwise communicate with various constituencies who are involved with the Company. It is, however, expected that Board members would do so with the knowledge of and, absent unusual circumstances or as contemplated by the committee charters, only at the request of the Company’s senior executives.

 

The Board will give appropriate attention to written communications that are submitted by stockholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by the committee charters, the Vice Chairman and Lead Director shall, subject to advice and assistance from the General Counsel, (1) be primarily responsible for monitoring communications from stockholders and other interested parties, and (2) provide copies or summaries of such communications to the other directors as he considers appropriate.

 

If you wish to communicate with the Board or the independent members of the Board, you may send your communication in writing to:

 

Independent Director Communication
Wright Express Corporation
Attention: Corporate Secretary
97 Darling Avenue
South Portland, ME 04106

 

You should include your name and address in the written communication and indicate whether you are a stockholder.

Governance Disclosures on Our Website

 

Complete copies of our corporate governance guidelines, committee charters and code of conduct are available on the Corporate Governance section of our website, at www.wrightexpress.com. In accordance with NYSE rules, we may also make disclosure of the following on our website:

 

 

AUDIT COMMITTEE REPORT

 

The board of directors appointed us as an audit committee to monitor the integrity of Wright Express’ consolidated financial statements, its system of internal controls and the independence and performance of its internal audit department and independent registered public accounting firm. As an audit committee, we select the independent registered public accounting firm.

 

We are governed by a written charter adopted by the Board, which is available through the Investor Relations page of the Company’s website at www.wrightexpress.com.

 

Our committee consisted of three non-employee directors at the time that the actions of the committee described in this report were undertaken. Each member of the audit committee is “independent” within the meaning of the New York Stock Exchange rules and the Securities Exchange Act of 1934. Wright Express’ management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. Wright Express’ independent registered public accounting firm is responsible for auditing those financial statements. Our responsibility is to monitor and review these processes. However, we are not professionally engaged in the practice of accounting or auditing. We have relied, without independent verification, on the information provided to us and on the representations made by Wright Express’ management and independent registered public accounting firm.

 

In fulfilling our oversight responsibilities, we discussed with representatives of Deloitte & Touche LLP, the independent registered public accounting firm for fiscal year 2010, the overall scope and plans for their audit of the consolidated financial statements for fiscal year 2010. We met with them, with and without Wright Express management present, to discuss the results of their examinations, their evaluations of the Company’s internal control over financial reporting and the overall quality of Wright Express’ financial reporting. We reviewed and discussed the audited consolidated financial statements for fiscal year 2010 with management and the independent registered public accounting firm.

 

We also reviewed the report of management contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC, as well as the Report of Independent Registered Public Accounting Firm included in the annual report on Form 10-K related to their audit of (i) the consolidated financial statements and (ii) the effectiveness of internal control over financial reporting. We continue to oversee the Company’s efforts related to its internal control over financial reporting and management’s preparations for the evaluation in fiscal year 2011.

 

We discussed with the independent registered public accounting firm the matters required to be discussed by Statement of Auditing Standards (“SAS”) No. 61, Communication with Audit Committees, as amended, as adopted by the Public Company Accounting Oversight Board, including a discussion of Wright Express’

accounting principles, the application of those principles, and the other matters required to be discussed with audit committees under generally accepted auditing standards.

 

In addition, we received from the independent registered public accounting firm the letter and the written disclosures required by the applicable requirements of the Public Company Accounting Oversight Board, and discussed the disclosures with them, as well as other matters relevant to their independence from management and Wright Express. In evaluating the independence of our independent registered public accountant, we considered whether the services they provided beyond their audit and review of the consolidated financial statements were compatible with maintaining their independence. We also considered the amount of fees they received for audit and non-audit services.

 

Based on our review and these meetings, discussions and reports, we recommended to the board of directors that the audited consolidated financial statements for fiscal year 2010 be included in the Annual Report on Form 10-K.

 

THE AUDIT COMMITTEE

 

Ronald T. Maheu, Chair

Regina O. Sommer

George L. McTavish

 

AUDITOR SELECTION AND FEES

 

Auditor Selection

 

The Audit Committee has selected D&T as the Company’s independent registered public accountant for the 2011 fiscal year. D&T has served as the Company’s independent registered public accountants since our initial public offering.

 

Audit Fees

 

The following is a description of the fees billed to the Company by D&T for the years ended December 31, 2009 and 2010:

 

 

 

 

Pre-Approval Policies and Procedures

 

The Audit Committee has adopted a policy regarding pre-approval of audit and non-audit services performed by D&T. According to the policy, the Audit Committee shall pre-approve all audit services to be provided to the Company, whether provided by the principal independent registered public accountant or other firms, and all other permitted services (review, attest and non-audit) to be provided to the Company by the independent registered public accountant; provided, however, that de minimis permitted non-audit services may instead be approved in accordance with applicable SEC rules. The independent registered public

accountant is not authorized to provide any prohibited non-audit services (as defined in Rule 2-01(c)(4) of Regulation S-X). The Chairman of the Audit Committee has the authority to pre-approve any permitted services on behalf of the Audit Committee and shall notify the full committee of such approval at its next meeting.

 

Since our initial public offering on February 16, 2005, the Audit Committee has pre-approved all of the services performed by D&T.

 

Non-Director Members of the Executive Management Team

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis, or CD&A, describes our compensation objectives and programs for our executive officers. The CD&A also describes the specific decisions, and the process supporting those decisions, which were made with respect to 2010 for the executive officers named in the Summary Compensation Table. We refer to these persons as our “named executive officers” or “NEOs.”

 

The following discussion includes statements regarding performance targets in the limited context of our compensation programs. These targets should not be understood to be statements of management’s expectations of our future results or other guidance. Investors should not apply these targets in any other context.

 

Executive Summary

 

Wright Express’ philosophy regarding executive compensation is straightforward: reward our executives for their contribution to the Company’s annual and long-term performance by tying a significant portion of their total compensation to key drivers of increased stockholder value. The elements of our executives’ total compensation are base salary, cash incentive awards, stock incentive awards, and retirement and other employee benefits. A significant portion of executive compensation is performance-based, subject to increase when results exceed corporate targets, reduction when results fall below target and elimination if results do not achieve threshold levels of performance. The performance measures used in our compensation programs include adjusted revenue, adjusted net income and other operational and strategic goals. Please refer to the notes to the table of performance objectives on page 28 for an explanation of how our performances measures that are non-GAAP financial measures are calculated.

 

2010 was a strong year for Wright Express. Total revenue grew 24% over 2009. We added more than 500,000 gross new fleet cards to our North American Portfolio, increased spend volume in our Corporate Card business by more than 43% over 2009 and expanded our international presence with the acquisition of our Australian fuel and prepaid card businesses. Our continued focus on innovation and industry leading customer service allowed us to increase customer retention to the highest level in recent history. Wright Express stockholders experienced an increase of 44% in their investment based on total shareholder return as measured from December 31, 2009 to December 31, 2010. This total shareholder return positions Wright Express in the top quartile of our Peer Group (as defined below) for 2010. Wright Express is executing its near-term strategy effectively, as shown in our annual financial success, and building long-term value by creating US and international growth opportunities and focusing on customer retention.

 

The compensation paid to our NEOs reflects their contribution to Wright Express’ success in 2010. In order to tie NEO total compensation to the performance of the Company:

 

 

The combined achievement under the STIP resulted in the NEOs receiving an average STIP payment of 139% of target. As a result of the STIP payments, our NEOs total cash compensation, on average, was between the 50th and 75th percentiles of the market data provided by our consultant in September of 2008 and 2009. This compensation is consistent with our overall business performance for 2010, which was in the top quartile compared to our Peer Group (as defined below).

In 2010, in addition to the cash compensation earned by the NEOs, we made a grant of equity (referred to below as the “2010 Growth Grant”) as part of our long-term incentive program, or LTIP. Given the Company’s focus on profitable growth over the next three years, an equity grant was made, to each executive, that is in or near the top quartile of the competitive market data provided by the compensation consultant retained by the Compensation Committee, or the Committee. The CEO’s grants are evenly split between stock options and performance vested restricted stock units, or PSUs. The other NEOs’ equity grants are made up 40% of time vested restricted stock units, or RSUs, and 60% PSUs. The level of PSUs that will be earned will depend on the metrics described below in the detailed discussion of our long-term incentive compensation. We believe that if the maximum level of PSUs become vested as a result of the performance of the Company, the total compensation provided to the NEOs (based on the grant date fair value shown in the Summary Compensation Table below) will reflect an appropriate pay-for-performance alignment.

 

On average, half of the NEOs’ cash compensation is variable and related to Company performance and nearly 70% of their total compensation (including equity) is aligned with the performance of the Company. The Committee is confident that the compensation programs outlined in this CD&A are market competitive and provide the appropriate incentive for the NEOs to achieve above market financial performance for the stockholders.

 

Other notable aspects of our executive compensation practices include the following:

 

 

Our compensation program for 2011, continues to adhere to our basic executive compensation philosophy, although we have placed a heavier emphasis on revenue growth in our STIP and LTIP and we have used annual performance metrics for our 2011 PSUs.

 

The Committee remains committed to providing our NEOs with competitive compensation opportunities that allow for significant upside when the Company is performing well above target and the stockholders are receiving returns commensurate with that level of performance. We remain focused on our pay-for-performance alignment and vigilant to avoid compensation arrangements that would incent excessive risk taking.

 

Compensation Philosophy

 

Wright Express is a global provider of business payment processing and information management solutions. We compete for both clients and employees with significantly larger companies. Our primary differentiator in this competitive market is our client-centered partnering approach. Our clients count on this when they outsource their branded business to us. The experience and performance of our associates, including the members of our executive team, are critical to sustaining this level of differentiation. Our chairman, president and chief executive officer has been with the Company for 25 years and has been instrumental in guiding this approach and in our resulting growth. The other members of our executive team bring significant industry and/or Company experience which is critical to our continued success. Accordingly, in addition to being designed to support our goals of achieving strong year-over-year and long-term growth and stockholder value, our compensation programs reflect the competitive environment in which we operate and our focus on differentiation in the marketplace through continuity of leadership and culture.

 

Our compensation programs are designed and administered to balance the achievement of near-term operational results and long-term growth goals with the ultimate objective of increasing long-term stockholder value. We achieve this by structuring our compensation programs to:

 

 

 

Compensation Objectives

 

We recognize the role total compensation plays in achieving our objectives of attracting, retaining and motivating our high-performing associates, including our executives, to achieve results. The chart below identifies the compensation elements and method of delivery used to support each of our compensation objectives.

 

 

 

 

We believe the compensation of our executives should, and does, reflect the performance and ultimate success of our Company. In setting compensation levels for each executive, we evaluate total direct compensation (base salary plus short-term incentive at target plus long-term equity incentive at target) against multiple factors including:

 

 

Annually, we reevaluate each compensation element with a focus on total direct compensation. We also evaluate equity ownership levels for each executive. The purpose of this review is to appropriately reward and motivate our executive team to increase stockholder value with a focus on providing compensation at above target levels when Company performance is above target and compensation below target levels when we do not achieve our performance goals.

 

In evaluating the components of compensation and the metrics used to determine individual and Company performance, the Committee considers whether these factors drive an appropriate level of risk taking. The Committee believes that the mix and design of the elements of compensation incent management to assume appropriate levels of risk to achieve both near-term operational goals and long-term growth. The Committee reviews the strategic, financial, and execution risks and exposures associated with the initiatives that drive our

performance based incentive compensation. In addition, the Committee believes the following ensure an appropriate level of risk in our compensation programs:

 

 

Annual Process of the Compensation Committee

 

The Committee is responsible for review and oversight of executive compensation. This includes approval of corporate goals and objectives used in the compensation programs for executives as well as setting executive compensation and approving annual incentive plan payouts and long-term incentive stock grants. The Committee meets at least once each quarter. In addition to the three independent directors who serve on the Committee, typical attendance at these meetings includes the Senior Vice President, Human Resources, the Vice President of HR Strategy, Compensation and Benefits and the Associate General Counsel and Assistant Corporate Secretary. Mr. Dubyak, our Chairman, President and CEO, generally joins two meetings each year to discuss the mid-year and end-of-year appraisal of his performance with the Committee. Otherwise, he generally does not attend Committee meetings. The Committee also meets in executive session as needed with no members of management present. Only the independent directors are entitled to vote on proposals that come before the Committee.

 

In the first quarter of each fiscal year, the Committee reviews the Board’s assessment of the CEO’s performance with him and reviews the Company’s results for the prior year. In addition, the Committee approves the following as explained in the Annual Review of Executive Compensation section:

 

 

Agenda items for the second quarter vary each year but always include a review of Company performance and progress toward the achievement of incentive plan targets.

 

The Committee generally conducts its annual review of executive compensation in the third quarter of each year. The Committee is provided a report from the independent compensation consultant which compares the compensation of the Company’s executives to a Peer Group of companies, details appropriate survey data and provides recommendations for compensation actions to be taken for the upcoming fiscal year.

 

In the final quarter of each fiscal year, management generally presents the Committee with recommended executive compensation changes for each element of compensation. Included in this presentation is a total direct compensation and wealth accumulation review for each member of the executive team. The review shows proposed total direct compensation in the context of historical compensation and current and projected wealth accumulated through the compensation provided by the Company.

 

The design of the STIP and LTIP is typically discussed over multiple meetings prior to the actual approval of the plans in the first quarter of each year. The discussions generally focus on the metrics to be utilized, the difficulty of the metric levels and the weightings for each category of metric.

Role of the Compensation Consultant

 

In 2010, the Committee utilized DolmatConnell & Partners, Inc., or DC&P, to provide advice regarding the Company’s executive compensation practices. DC&P reported directly to the Committee and the primary services it provided were an evaluation of executive officers’ base salaries, annual incentive targets and long-term incentive targets relative to identified peers and the broader market and a recommendation of compensation ranges for each executive officer. In addition, DC&P provided a pay-for-performance review comparing compensation levels with peer financial performance indicators. DC&P also provided advice on the design of the Company’s incentive plans, a review of Director compensation and updates regarding legislative and regulatory changes that affect executive compensation. DC&P did not provide any other services to the Company.

 

Role of the Executive Officers

 

In approving compensation levels, the Committee reviews competitive market data, Company performance and Mr. Dubyak’s recommendations regarding total direct compensation for the executive officers. Mr. Dubyak provides the Committee with an assessment of each executive officer’s performance to support his recommendations. These assessments include the results of specific operational and strategic goals as well as progress in the area of succession planning and concerns, if any, in the area of retention of the executive officer. Mr. Dubyak does not provide recommendations for his own compensation. Ms. Smith, who served as CFO and Executive Vice President, Finance and Operations until April 6, 2011 and now serves as our President, North America, attended meetings as needed to respond to requests for information from the Committee.

 

Peer Group

 

The peer group used by the Company is established by the compensation consultant, based on input from management and a review by the Committee. It is generally reviewed each year and modified as needed to reflect our growth and to account for changes due to market consolidation among peers.

 

In May 2009, changes were made to the Peer Group in order to better reflect the market for executives in which Wright Express competes. The following companies were utilized in the consultant’s executive compensation assessment in the fall of 2009, which was utilized for the establishment of fiscal year 2010 compensation.

 

 

The peer group was modified in May 2009, to remove four companies which had either been acquired or had market capitalization levels outside of the range recommended by DC&P. CheckFree Corporation, eFunds, Advanta Corporation and Moneygram International, Inc. were removed and replaced by the following five companies: Alliance Data Systems Corporation, CSG Systems International, Inc., Cybersource Corporation, Global Cash Access Holdings, Inc. and TNS Inc. In May of 2009, the average last month end market capitalization of the companies added to the peer group was $974 million compared to market capitalization for the Company for the same period of $910 million. We have relatively few industry competitors who are

publicly traded and US-based, and have found that the majority of companies that provide similar service offerings are somewhat larger than we are with respect to annual revenues. Consequently, the majority of the companies in our peer group are also larger than we are with respect to annual revenues. We have recognized this disparity in size in benchmarking efforts by referencing 40th percentile peer group pay data, rather than the median (50th percentile).

 

While the peer group listed above and the other survey data referred to below was used to compare our executives’ compensation to the market, the Committee believes that understanding compensation practices for these companies similar to us in size and industry is only one important element in determining the appropriate compensation level for each of our executives. As outlined more fully below, the compensation of any individual executive may vary from the specific market data based on factors such as the individual’s performance, the scope of the duties performed by that individual, the importance of the position to the Company and internal equity.

 

Annual Review of Executive Compensation

 

Based on the above peer group and the other data discussed below, DC&P provided recommended ranges of compensation for base salary, total cash and total direct compensation for each executive for 2010. DC&P collected comparable position data on each executive from two sources:

 

 

This data was blended equally where comparable peer data was available to produce a target compensation range for that executive. We believe market survey data at the 50th percentile for companies of comparable revenues is the appropriate target in order to meet our objectives of attracting and retaining talent. However, given the average revenue of our identified peer group, we believe the 40th percentile of the companies in our peer group is more appropriate than the 50th percentile in targeting compensation that will both attract and retain the members of our executive team. DC&P used the following surveys in establishing the 50th percentile market survey data for companies of our size for 2010 compensation:

 

 

Data from companies in our revenue category who participated in these surveys was aggregated and incorporated into the target compensation ranges provided to the Committee by DC&P. The Committee did not receive data identified for any individual Company in these surveys. DC&P provides the Committee and the Company’s human resources department with the current placement of each executive within the target range. Management uses the DC&P data to provide the Committee with recommended base salary changes, annual cash incentive targets and long-term equity targets for each of the executive officers.

 

In determining 2010 compensation, the Committee also examined the following in addition to the competitive data:

 

 

Total compensation summaries, showing historic, current and proposed total direct compensation for each executive officer are reviewed by the Committee each year. These summaries provide the target value of all components of the executive officers’ proposed compensation as well as the deferred compensation, benefits,

perquisites and exit pay in the event of various termination scenarios, including a change of control. The purpose of this review is to assess whether the overall compensation package is consistent with the individual executive’s contribution toward Company performance. Annual review of the total compensation summaries also provides the Committee with a view of the impact of historical changes to compensation over time and an opportunity to assess effectiveness in attracting and retaining our executives and driving high performance.

 

The Committee looks at the total impact of all year-over-year changes in executive compensation to decide whether changes are necessary and appropriate. In reviewing total cash and equity compensation, the Committee considers the retention value of the long-term equity currently held by the executive and the impact that retirement or voluntary termination would have on the executive. Based on this review, the Committee can decide to adjust one or more elements of an executive’s total compensation. The Committee aims to provide competitive total direct compensation and assesses an executive’s total compensation package when looking at the executive’s competitive standing relative to the market.

 

Compensation levels for 2010 were based on the Committee’s review of executive total compensation in September 2009 and February of 2010. At the time of the September 2009 review, all named executive officer base, total cash and total direct compensation fell within 15% of the market composite identified by our compensation consultant.

 

2010 Executive Compensation Overview

 

Base Salary.  Base salary is provided at a competitive level in order to attract and retain key talent and is reviewed annually. Annual adjustments to base salary are made based on a review of both the individual performance assessed by the CEO and reported to the Committee by management and the location of the executive officer’s current base salary in the target range provided by DC&P. After a year of no base salary increases in 2009, each of the named executive officers received a base salary increase consistent with the recommendations made by DC&P. The increases were 2.63% for Mr. Dubyak, 3% for Mr. Maxsimic and Ms. Rapkin and 9.4% for Ms. Smith and 25% for Mr. Hogan, reflecting an adjustment to their base salaries consistent with DC&P’s recommendation.

 

Annual Incentive Compensation.  The short-term annual incentive compensation program (STIP) is an annual bonus opportunity for associates at all levels of the organization who generally share the same key goals, other than those on commission and departmental incentive plans. The actual payouts of the STIP are contingent upon Committee-approved financial performance goals. For the executive officers, a performance-based bonus focuses management on our fiscal year financial results and strategic initiatives approved by the Committee at the beginning of each year.

 

At the target level of performance, named executive officer STIP payouts would be on average slightly below the median total cash compensation of the market composite identified by our compensation consultant. At the maximum level of performance, which would represent performance that significantly exceeded target goals, STIP payouts would be at or above the 75th percentile of this market composite. If we fail to meet the threshold level goals as defined by the Committee, the executive officers receive no payout under the STIP. In 2010, the Company was required to achieve threshold results for adjusted net income in order for any portion of the STIP to be paid to any employees, including the executive officers. This threshold was $77,534,000. In establishing our targets for the 2010 STIP, we utilized the following principles regarding the likelihood of achievement of the various performance levels:

 

 

Each year, management proposes performance level goals based on estimated achievability and current factors supporting or inhibiting achievement. The goals for 2010 were approved by the Committee in March 2010 and progress toward these goals was reported by the CEO to the Board of Directors throughout the year.

2010 STIP performance objectives and final payout factors used for each of the executive officers are shown below:

 

 

 

 

We have generally used adjusted net income and PPG adjusted revenue as performance measures in our STIP. They represent key areas of focus for continued growth and stockholder return. For 2010, we decreased the weight of the ANI metric for NEOs with the exception of Mr. Hogan from 60% to 50% and increased from 20% to 30% the total weighting of the three business goals for new fleet cards, voluntary customer attrition and MasterCard revenue.

 

For Mr. Hogan, the mix of metrics was 50% ANI, 30% PPG adjusted revenue and 20% international financial MBO in recognition of his critical role in our international expansion in 2010. Achievement against the goal for the international financial metric was at threshold level, which resulted in a total payout against total target of 102.7%, which is lower than the other NEOs.

 

The bonus targets for the NEOs employed on December 31, 2010 ranged from 45 percent to 100 percent of base salary. These targets were unchanged from 2009 with the exception of Mr. Maxsimic’s STIP target which was increased based on market and peer analysis conducted by DC&P and the decision to eliminate his separate sales incentive which had traditionally been paid in addition to STIP. Our executives’ STIP targets are set based primarily on the target ranges provided by DC&P. Their current STIP percentages represent what we believe is appropriate positioning within these targets based on their experience, performance and role in the Company.

 

Named executives received 2010 STIP payment as shown below based on the achievement outlined in the previous chart:

 

 

 

 

In addition to the STIP payments detailed in this section, the Committee determined that Mr. Hogan would receive a discretionary cash bonus of $50,000 for his extraordinary efforts in support of Wright Express’ international expansion in 2010, which were not reflected in the performance result for the international finance metric in STIP. His total cash incentive payout in 2010 was $161,994.

 

Long-Term Incentive Compensation.  The Company provides long-term equity-based incentives through the Wright Express Corporation Long-Term Incentive Program, or LTIP. Grants under the LTIP have generally been provided as a mix of performance-based restricted stock units, or PSUs, which vest from 0% to 200% based on the achievement of performance goals and restricted stock units, or RSUs, which vest based on the passage of time. The metric used to determine the vesting of PSUs has generally been the achievement of adjusted net income targets and/or revenue targets set by the Committee. PSUs and RSUs generally vest over a three or four year period of employment. Executive overall compensation is weighted more heavily toward equity than cash as compared to non-executive employees.

 

The 2010 LTIP was implemented pursuant to our 2005 Equity and Incentive Plan which allows us to grant employees and directors stock options, stock awards (including restricted stock units), stock appreciation rights, performance-contingent awards and other awards. Eligible participants include executive officers and other selected employees in the Company. Each of the executive officers received a grant in 2010 through the LTIP.

 

The Committee grants stock awards at the fair market value of the stock at the time of grant. In determining the size of equity grants to executive officers, the Committee considers the survey data described above. The Committee also reviews potential equity ownership as a percentage of shares outstanding for each executive versus comparable positions within the peer group. Management does not grant awards without Committee approval. With the exception of limited grants to newly hired associates, grants are generally awarded in the first quarter of each year.

 

2010 Growth Grant.  In March 2010, executive LTIP award targets for the annual grant were set after consideration of the data provided by DC&P. The 2010 Growth Grant was designed to support our long-term strategic plan and reward each of the NEOs for his or her contribution to the achievement of plan goals through 2012. While other NEO equity grants were 60% PSUs and 40% time vested RSUs, Mr. Dubyak’s grant was evenly split between stock options and PSUs in an effort to further align his interests with our stockholders. The RSUs and options in the 2010 Growth Grant vest equally over three years on the anniversary of the grant date. The PSUs vest, assuming performance criteria are met, on the third anniversary of the grant.

 

Mr. Dubyak’s 2010 equity grant value is larger than the other NEOs due to the scope of his role as Chairman, President and CEO and the stock options granted to Mr. Dubyak include a holding period of two years from vesting date for the net proceeds of any exercise. In determining the appropriate level for each of the named executive officer grants, the Committee reviewed a range of values provided by DC&P with the midpoint of the range being a blend of peer data and market data for the roles held by Mr. Dubyak, Ms. Smith and Mr. Maxsimic. Given the lack of comparable peer positions for the remaining two NEOs, only market data was used to determine their appropriate LTIP targets.

The following table reflects the vesting factors approved for the PSUs in the 2010 Growth Grant in March of 2010:

 

 

In addition to the metrics outlined above, regardless of the performance against the metrics, no shares would be earned by the NEOs unless 2010-2012 average Return on Invested Capital or ROIC was at or above a pre-established threshold. This “hurdle” was established to ensure that revenue is sustainable at our current margin, which supports the long-term financial strength of the Company.

 

The payout rate, which is also sometimes referred to as the “conversion level” of PSUs to shares of Company common stock, for each of the metrics is determined in accordance with the following schedule:

 

 

 

 

Threshold performance must be achieved for both the PPG Adjusted Revenue and Reported ANI metrics for any PSUs to vest.

 

Amendment of 2010 Growth Grant.  On April 8, 2011, the Committee amended the performance-based restricted stock units originally granted in March 2010 to the NEOs. At the time of the amendment, payout under the original 2010 PSUs was considered to be “probable” under applicable accounting standards.

 

As amended, the achievement of a targeted ROIC objective will be a separate and independent performance metric, rather than a condition to any payout with respect to the PPG Adjusted Revenue and Reported ANI metrics. The following table reflects the three vesting factors for the 2010 PSUs, as amended for the NEOs:

 

The threshold, target and maximum amounts for the PPG Adjusted Revenue and Reported ANI metrics have not been changed from those established at the time of grant in March 2010. Threshold, target and maximum amounts were established by the Committee in April 2011 for the new separate and independent ROIC metric. The target level for the new ROIC metric was set at an amount equal to the baseline “hurdle” ROIC level that was included in the original award. The threshold and maximum levels are lower and higher, respectively, than the original baseline “hurdle” ROIC level.

 

Because detailed disclosure of performance goals relating to future revenue, ANI and ROIC could be harmful to our competitive position and is not material to an investor’s understanding of 2010 compensation, we have sought and received confidential treatment of the specific metrics from the SEC. In addition, specifically disclosing performance goals for these metrics could put us at harm when negotiating future contracts with both customers and suppliers. The performance targets for each metric were considered reasonably difficult to achieve at the time they were set based on our historic levels of performance and internal projections for future growth.

 

The Committee approved the amendment of the 2010 PSUs in order to strengthen the alignment of the awards with the goal of the original grant, which was to incentivize long-term growth. The amendments improve the alignment of the 2010 PSUs with the Company’s business and acquisition strategy by better supporting the

Company’s objective of acquiring businesses that will support long-term growth, even though, on a short-term basis such acquisitions may reduce the likelihood of the baseline ROIC level being met at the end of 2012.

 

The Committee concluded that the amended 2010 PSUs also continue to achieve the original objective of ensuring that revenue from ongoing operations is sustainable, which supports the Company’s long-term financial strength. In acting to approve the amendment, the Committee took into consideration that the amendment will cause the 2010 PSUs to become subject to the limitation on deductibility imposed by Section 162(m) of the Internal Revenue Code. The Committee determined that the benefits of amending the 2010 PSUs outweighed the potential loss of tax deductibility.

 

The Committee also took into consideration that (1) following the Company’s September 2010 acquisition of RD Card Holdings Australia Pty Ltd., now referred to as Wright Express Australia, and the March 2011 acquisition of rapid! PayCard, the Company’s ROIC satisfied the baseline ROIC level and (2) the Company will not record any current incremental compensation expense in connection with this amendment because payout under the 2010 PSUs was considered to be “probable” under applicable accounting standards at the time of the amendment.

 

Given the goals of the 2010 Growth Grant, as amended, if the maximum level of PSUs become vested as a result of the performance of the Company, the Committee believes the total compensation provided to the NEOs would reflect an appropriate pay-for-performance alignment.

 

Tax Deductibility of Compensation.  Section 162(m) of the Internal Revenue Code generally places a limit of $1 million on the amount of compensation that Wright Express may deduct in any one year with respect to its CEO and the other three officers (other than the Chief Financial Officer) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act by reason of being among the most highly paid executive officers, other than our CFO. Wright Express receives no federal income tax deduction for any compensation that is (a) over $1 million and (b) is not performance-based as defined under Section 162(m). The STIP as well as the PSU and options components of our LTIP are generally intended to provide fully tax-deductible compensation. As discussed above, the PSUs originally granted in March 2010 will not qualify as performance-based compensation under Section 162(m). The time-based RSU component of our LTIP and discretionary cash bonuses are not considered performance-based under Section 162(m). The Committee has the authority to adjust payments under the STIP and LTIP up or down at its discretion with the exception of any adjustments which may increase or accelerate payment to any participant who is impacted by Section 162(m). The Committee may approve compensation that is not considered performance-based under Section 162(m) when it believes that such compensation is appropriate and consistent with our goal of building long-term stockholder value. In 2010, Mr. Dubyak received $436,364 in non-deductible compensation over the $1 million limit imposed by Section 162(m) of the Internal Revenue Code. No other named executive officers received non-deductible compensation over the 162(m) limit of $1 million.

 

Executive Officer Equity Ownership Guidelines.  We believe executive ownership of Company securities demonstrates a commitment to continued success and aligns the efforts of our executives with stockholders. The Committee established equity ownership guidelines for all executive officers in October 2005. “Equity,” for the purposes of executive officer ownership guidelines, includes shares of our common stock and ownership interests in the Wright Express Common Stock Fund held in the Company’s 401(k) Plan. It does not include any RSUs or PSUs prior to their vesting and conversion to shares of stock.

 

In December of 2010, the Committee voted to increase the ownership requirements under the policy. These new guidelines require Mr. Dubyak to hold securities equal in value to at least 4 times his annual base salary (an increase from the prior guideline of 3 times), Executive Vice Presidents to hold 2.5 times their annual base salaries (an increase from the prior guideline of 1 times) and all other executive officers to hold 1.5 times their annual base salaries (an increase from the prior guideline of 1 times). Beyond these ownership guidelines, the Company does not have a policy specifying a minimum period of time an executive must hold some or all of the Company shares obtained upon exercise of options or vesting of stock units. The policy requires existing officers to achieve their required ownership level within four years and newly appointed officers must now achieve their required ownership within three years of appointment.

The annual measurement date under the guidelines is July 31 of each year. For 2010, all named executive officers were in compliance with the guidelines as in effect prior to the amendment in December 2010. The Committee will continue to monitor compliance with the new policy.

 

Employment Agreements.  The Company provides employment agreements which include severance and change of control benefits to attract and retain key executive officers. In the event, or threat, of a change of control transaction, these agreements reduce uncertainty and provide compensation for the significant levels of executive engagement and support required during an ownership transition that results in the termination of their employment. In addition, our employment agreements contain non-compete, non-solicitation, non-disparagement and non-disclosure provisions which protect the Company in the event that an executive terminates his or her employment. These employment agreements represent competitive severance and change of control benefits based on analysis conducted and reviewed by the Committee annually to assess whether the total value to an executive provided by the agreement remains at the level needed to attract and retain executives without being considered excessive in the opinion of the Committee. The specific material provisions of these contracts are discussed in the “Employment Agreements, Severance and Change of Control Benefits” section of this proxy.

 

Benefits and Perquisites.  We provide competitive benefits to attract and retain high performing associates at all levels. This includes a health and welfare benefits package and a 401(k) plan. We offer a modest perquisites package to executives representing the benefits we have identified as most critical in attracting and retaining executives.

 

Nonqualified Deferred Compensation.  The Company administers an Executive Deferred Compensation Plan, or EDCP, that provides each of the executive officers with the opportunity to defer up to 80 percent of base salary and/or up to 98 percent of annual incentive compensation. The Company provides a match of up to 6 percent of the participant’s annual incentive compensation deferred into the EDCP. Investment income on contributions and Company match is accrued for participants to reflect performance of investment funds identified by each participant during their annual election period. The investment funds and their performance used to calculate earnings in the EDCP generally mirror those used in the 401(k) Plan.

 

Each of the named executives serving in his or her role at the time of election chose to defer a portion of his or her 2010 bonus into the EDCP in 2011. No named executive deferred a portion of his or her base salary into the EDCP in 2010.

 

Prior to our initial public offering, we offered the Wright Express Corporation Supplemental Investment and Savings Plan, or SERP, which allowed participants to defer compensation. The SERP was frozen to new contributions on December 31, 2004. Mr. Dubyak and Ms. Smith have balances in this plan, which continue to earn investment returns based on the funds they selected. These investment returns are market competitive for the type of funds offered; there is no preferential interest earned in either the EDCP or SERP accounts. No other executive officers participated in the SERP when it was an active plan.

 

Other Benefits.  The Company historically provided personal financial advisory services, a Company-sponsored automobile and limited use of the corporate country club membership to the named executive officers. The named executives were responsible for the taxes on the value of these benefits. In December 2010, the Company eliminated the personal financial advisory benefit and the limited use of the country club membership to each named executive officer effective January 1, 2011. Executive base salaries were increased by the value of this benefit on January 1, 2011. Executives with Company sponsored automobiles are also required to surrender their Company-sponsored automobile by December 31, 2011, at which time their base salary will be increased by the value of this benefit.

 

Travel.  Directors and executive officers, when traveling on Wright Express business, are reimbursed for their travel costs. No personal travel for directors or executive officers was reimbursed in 2010.

 

The aggregate value of all perquisites received by each of the executive officers in 2010 is detailed in the footnotes to the Summary Compensation Table.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

 

The compensation committee is comprised entirely of independent directors as determined by the Board of Directors in accordance with its independence guidelines and the listing standards of the New York Stock Exchange.

 

The compensation committee is responsible for review and oversight of executive compensation. This includes approval of corporate goals and objectives used in the compensation programs for executives as well as setting executive compensation and approving annual incentive plan payouts and long-term incentive stock grants. In connection with that responsibility, the compensation committee reports to the Board on the Company’s activities at each meeting of the Board. The compensation committee charter, which describes in detail the purpose, structure, membership, authority, responsibilities, procedures and administration of the compensation committee is available on the Company’s website.

 

The compensation committee reviewed and discussed the Compensation Discussion and Analysis with members of senior management and, based on this review and discussion, the committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s annual report on Form 10-K and proxy statement on Schedule 14A.

 

THE COMPENSATION COMMITTEE

 

Kirk P. Pond, Chair

Shikhar Ghosh

Regina O. Sommer

 

 

 

 

ALL OTHER COMPENSATION

 

 

 

 

 

 

The following table represents all plan-based awards granted to the named executive officers in 2010: