Table of Contents

This summary highlights information contained elsewhere in this proxy statement. It does not contain all information that you should consider, and you should read the entire proxy statement carefully before voting. In this proxy statement, “we,” “us,” “our,” “Stericycle” and the “Company” all refer to Stericycle, Inc.

The Board of Directors recommends a vote “FOR” the election of these twelve Director nominees. Proxies solicited by the Board will be so voted unless stockholders specify a different choice.

We believe that the twelve director nominees possess the experience, qualifications and skills that warrant their election as directors. Our directors have in common, among other qualities, a breadth of business experience, seasoned judgment, and a long-term perspective in directing and supporting our management. From their service on the boards of other public and private companies, our directors also bring to us the insights that they gain from the operating policies, governance structures, and growth dynamics of these other companies.

The Nominating and Governance Committee seeks to ensure that we have an experienced and exceptionally qualified Board with deep expertise in areas relevant to Stericycle. When evaluating potential director nominees, the committee considers each individual’s professional expertise and background, in addition to his or her personal characteristics. The committee always conducts this evaluation in the context of the Board as a whole. The committee works with the Board to determine the appropriate mix of backgrounds and experiences that will foster and maintain a Board strong in its collective knowledge and best able to perpetuate our long-term success. To assist in this objective, the Nominating and Governance Committee conducts a detailed annual evaluation of the Board and the Board’s committees, assessing the experience, skills, qualifications, diversity, performance and contributions of each individual and of the group as a whole.

Key skill sets and competencies for the Board include:

The following table highlights each nominee’s specific skills, knowledge and experiences in these areas. A particular director may possess additional skills, knowledge, or experience even though they are not indicated below:

 

Our Board of Directors has four standing committees: Compensation, Audit, Nominating and Governance, and Operations and Safety. All of the members of each of the Compensation, Audit, and Nominating and Governance Committees are outside directors who are independent under the applicable SEC rules and Nasdaq listing standards. All of the members of the Operations and Safety Committee are outside directors who are independent under the applicable SEC rules and Nasdaq listing standards with the exception of our President and CEO, Cindy Miller, who is a member of the Operations and Safety Committee.

 

The charters of the Compensation, Audit, Nominating and Governance, and Operations and Safety Committees are available on our investor relations website, investors.stericycle.com.

Our Board of Directors held 14 meetings in person, by video conference or by telephone during 2020 and acted without a formal meeting on several occasions by the unanimous written consent of the directors. The Compensation Committee held seven meetings during the year. The Audit Committee held 15 meetings during the year. The Nominating and Governance Committee held four meetings during the year. The Operations and Safety Committee was formed in May 2020 and held two meetings during the year. Each director attended 75% or more of the aggregate number of Board meetings and the total number of meetings of all Board committees on which he or she served during his or her term of service.

We encourage our directors to attend the annual meeting of stockholders. Each of the director nominees attended the 2020 Annual Meeting of Stockholders, and we anticipate that all of our director nominees will attend this year’s Annual Meeting of Stockholders.

 

 

As we closed 2020, 23% of our global workforce were women, with a slightly higher proportion of women holding senior management and middle management roles (29% and 30%, respectively). Within the U.S., 53% of our team members are from federally designated racial or ethnic minority categories.

 

 

The following table provides information about the compensation paid to our directors in 2020. Ms. Miller did not receive any additional compensation for her services as a director or as Chair of the Operations and Safety Committee.

While the COVID-19 pandemic presented many unique challenges in 2020, our executive leadership team delivered strong financial results for the year while also increasing safety outcomes and maintaining excellent levels of customer service. Although we saw increased demand for some of our regulated waste and compliance services, we also encountered pandemic-related business disruption, which included impacts to secure information destruction and maritime waste services. Given the pandemic-related business impact, our team members quickly mobilized an international effort to secure sufficient PPE for our essential front-line team members, which ensured continuity of service to the healthcare industry during an unprecedented time. Despite these challenges, Stericycle successfully serviced our customers, achieving all-time highs in customer service metrics. We also drove operational efficiencies, executed on several business rationalization initiatives, including our largest divestiture ever, improved our credit agreement defined debt leverage ratios, and launched several new services and products. Thanks to these efforts, Stericycle achieved above-plan results in our annual cash incentive plan (158.7% of target) and long-term performance-based plan (139.0% of target) for 2020 without making any adjustments for pandemic-related impacts.

Our executive team drove these results in a thoughtful way that balanced attainment of strong outcomes without sacrificing our goals to continually improve safety and service and to protect what matters – our team members, our customers, and our communities. When the pandemic first began to have an impact in March 2020, our executive team immediately requested that their salary increases (which had been effective in February 2020) be rolled back until there was better clarity on the impact of the pandemic on our business. When it became clear that we would need to furlough some workers due to the lower demand in certain business areas, Stericycle prioritized employees’ healthcare benefits and continued to pay the employer portion of the furloughed employees’ medical benefits until we could return them to active employment. While many of our employees were able to transition to work from home, many were not, and to reward these front-line employees who worked during the early days of the pandemic (March – June), our executive team made the decision to pay bonuses for these workers in June 2020 as a reward for their perseverance in servicing our customers.

Stericycle values its pay for performance philosophy and our actions have been consistent with this philosophy over time. While we are pleased with the 2020 business results and correlating incentive plan outcomes, we have consistently demonstrated that we align pay with performance – whether above or below plan targets. In recent years, this philosophy has yielded a result of zero or reduced earned compensation for both our annual cash incentive plan and our long-term incentive plan for executives. The cash incentive plan payout was zero for fiscal years 2017 and 2019 and the payout for fiscal 2018 results was low, at 24.2% of target. Similarly, the results for our long-term incentive plan metrics did not meet the threshold for any vesting for our performance-based equity awards tied to fiscal 2017 or 2019 results and the performance-based awards for fiscal 2018 vested at 43.0% of target. Pursuant to the ratable vesting schedule which was in place for performance-based awards through 2019, any unvested awards were forfeited for these three years.

In the midst of achieving these results for 2020, the executive leadership team did not allow other key team member initiatives to fall behind, particularly in the areas of D&I, employee engagement and caring for our team members. As referenced in the earlier Focus on Diversity and Inclusion (D&I) and Engagement sections above, we concentrated significant efforts on enhancing diversity and inclusion with the goal of developing a workforce that represents the customers and communities that we serve. In addition, we completed a global team member engagement and feedback survey to gauge the sentiment of our team members under the new executive leadership team and results from the survey indicate an engagement improvement of approximately 10.5% compared to 2018.

Our executive leadership team also devotes time and effort to caring for our team members and their communities. These efforts include providing every U.S.-based employee with a Seal and Send envelope in their annual benefits enrollment package so that each team member can dispose of unused drugs from their homes safely and free of charge to reduce the opportunity for opioid abuse or for pharmaceuticals to contaminate the water supplies in our team members’ communities. Through our SteriCares program, we provided grants for 41 team members experiencing acute financial needs and raised significant funds for future grants, including a matching campaign by our executive leadership team and board members. In summary, our executive team is committed to cultivating a company that cares for people and the environment while delivering strong financial results to its stakeholders.

We were able to achieve these results in 2020 in large part due to the strong and diverse skillsets that we have sought out over the last three years by redesigning our executive team. During 2018 and 2019, we significantly evolved the executive management team to drive the transformation of our Company, including the addition of new leaders with deep experience in change management, safety, logistics,

commercial expertise, engineering capability, technology expertise, and operational excellence. These leaders and the skills they bring have been a critical component on our journey to reposition Stericycle with our customers, improve our long-term growth and profitability, and drive stockholder value, which we are now seeing in the 2020 results.

Our leadership changes began with the appointment of Cindy J. Miller as Stericycle’s President and Chief Operating Officer during October 2018. In February 2019, we announced that Ms. Miller would become President, Chief Executive Officer and a member of the Board of Directors. Her appointment as President, Chief Executive Officer was effective May 2, 2019.

Additional leadership changes that took place from 2018 through the present included the following direct reports to the CEO:

Stericycle’s leadership team includes the CEO and these eight executive vice presidents. Over the last 18 months, the executive team’s new perspective and focus have strengthened Stericycle’s leadership guidance by identifying opportunities for transformation, implementing new policies, procedures and systems, and establishing a collaborative and results-oriented dynamic as an executive team. Together, they have made Stericycle stronger and they strive for continuous improvement.

This Compensation Discussion and Analysis explains our executive compensation program and the compensation awarded to our CEO, CFO, and our three other most highly compensated executive officers who were serving as executive officers as of the end of 2020. These executives, referred to as our “named executive officers” or “NEOs”, were:

Compensation decisions for our executive officers are made by the Compensation Committee of our Board of Directors, subject in some instances to approval by the full Board. All of the Committee’s members are independent under the applicable SEC rules and Nasdaq listing standards.

For 2020, the peer group consisted of the following companies:

At our 2020 Annual Stockholders’ Meeting, our Say on Pay Advisory vote garnered 93.6% support, an outcome significantly above results for 2019, which returned support of 70.6%. We were disappointed by the results of the 2019 Say on Pay Advisory vote and we were determined to listen to our stockholders and make changes to our programs based on their input. After the 2019 annual meeting, we proactively reached out to our top 25 stockholders (82% of outstanding shares) to review changes for the 2020 compensation programs and to discuss feedback from the 2019 Say on Pay Advisory vote.

As a result of this feedback from our stockholders, our Compensation Committee, with the input of a new independent advisor, approved changes in compensation for 2020 to focus management on driving improvements to both the balance sheet and the income statement and to better align Stericycle with compensation best practices. We saw the positive reception of these changes in our Say on Pay Advisory vote with the increase from 70.6% support in 2019 to 93.6% support in 2020. In December 2020, we furthered our outreach efforts by contacting our top 30 stockholders, representing approximately 75% of outstanding ownership, to review several matters, including the 2020 Say on Pay Advisory vote, and 13 stockholders, who held 39% of outstanding shares, met with the Company in response to this outreach.

Given the strong stockholder support in 2020, the information from subsequent shareholder engagement, and the fact that we still have several aspects of our transformation to complete, we have maintained substantially the same plan design for 2021 as was introduced in 2020. Noted below is a summary of the key components of the executive compensation plans that were re-designed for 2020 and will be continued in 2021.

The Compensation Committee works with its compensation consultant to conduct an independent review of executive officer salaries. After considering the results of the independent review in 2019, the Compensation Committee approved salary increases for seven of our executive officers, including the CEO, and cash incentive target increases for three of our executive officers, including the CEO, which were effective on February 9, 2020. As the global pandemic began to present new and unknown impacts to businesses everywhere, the officers requested that their salary increases be reversed for the good of the Company and their former salaries were reinstated effective March 22, 2020. After the impact of the pandemic on Stericycle’s business was better understood, the increases were reinstated on June 28, 2020. Additionally, as a result of our Chief Financial Officer assuming the additional duties and responsibilities of Chief Information Officer on June 28, 2020, the Compensation Committee increased her base salary further at that time.

For 2020, our named executive officers’ annual cash performance bonuses were based 40% on the performance of our EBIT Metric and 35% on the performance of our Free Cash Flow Metric. Both metrics have pre-approved and clearly defined adjusted items that are reasonable and customary. The EBIT Metric provides the best representation of how we are achieving results and managing our capital; effective capital management ultimately shows expansion in operating margin if we are putting that capital to its best use. The Free Cash Flow Metric measures our progress on generating cash from operations, improving our balance sheet, and the effective deployment of capital investments.

The metrics for the remaining 25% of the 2020 plan focused on annual priorities, which for 2020 included performance improvement in safety weighted at 15% and delivering strong customer service weighted at 10%.

In 2020, the EBIT Metric and the Free Cash Flow Metric excluded items such as:

Furthermore, as we divested certain businesses in 2020, we did not reduce our incentive targets down by what was still remaining in the plan for those businesses. Instead, we added back that remaining portion of the income for those businesses in order to reconcile back to the original target. For additional detail and reconciliations, see Appendix A to this proxy statement.

Our executives are also compensated with a long-term incentive program in the form of equity grants. For 2020, the award structure of the long-term incentive plan was divided between time-based RSUs (weighted at 45%) and PSUs (weighted at 55%). Vesting of the PSUs at the end of the three-year vesting period is based on two equally weighted metrics (an EPS Metric and a ROIC Metric), which are averaged

over the three-year period and then multiplied by an rTSR modifier based on the performance of Stericycle’s stock relative to the S&P Midcap 400. Both metrics have pre-approved and clearly defined adjusted items that are reasonable and customary. These grants of equity were designed to incentivize our named executive officers to focus on long-term value creation.

The principal elements and purposes of our executive compensation program for 2020 are summarized below. These elements are discussed in more detail under “2020 Compensation Program Highlights.”

For 2020, approximately 81% of our CEO’s target total compensation and approximately 73% of the target total compensation of our other NEOs was at risk.

The chart below illustrates how these components were allocated in actual total compensation received by our CEO and other NEOs in 2020.

 

In 2020, our executive officers were eligible to earn annual cash performance bonuses based 40% upon the performance on our EBIT Metric, 35% upon the performance on our Free Cash Flow Metric and 25% upon the achievement of Annual Priorities, which for 2020 included Safety objectives (15%) and Service objectives (10%). Stericycle achieved above-plan results in our annual cash incentive plan of 158.7% of target without making any adjustments for pandemic-related impacts. Details on the annual cash performance goals and results for 2020 are described below under the section “2020 Compensation Program Highlights.”

In 2020, our executive officers held unvested performance-based RSUs and PSUs from grants made in 2018, 2019, and 2020. The third tranche of the 2018 grant and the second tranche of the 2019 grant were eligible for vesting based upon 2020 results. Additionally, the first tranche of the 2020 grant was eligible for measurement for conditional vesting based upon 2020 results. 2020 performance was scored against two equally weighted measures - an EPS Metric and a ROIC Metric. Stericycle achieved above-plan results on these metrics, achieving 139.0% of target for 2020 without making any adjustments for pandemic-related impacts. Details on the PSU goals and results for 2020 are described below under the section “2020 Compensation Program Highlights.”

The table below illustrates the NEOs’ base salaries over the past three fiscal years.

For 2021, the Compensation Committee once again engaged its compensation consultant to conduct an independent review of executive officer salaries. After considering the results of the independent review, the Compensation Committee approved salary increases for the NEOs effective on March 1, 2021. The 2021 salary increases for the NEOs range from 2% - 5% and represent the Compensation Committee’s intent to keep pace with the market but not to make any large adjustments in base salary levels.

The following table shows how different levels of performance on the EBIT Metric and the Free Cash Flow Metric were designed to affect the payout.

The performance targets allowed for payout of the annual cash performance bonuses at levels that increase proportionally from the minimum tier (an amount equal to the specified percentage of the executive officer’s base salary multiplied by the payout percentage associated with the minimum achievement level on any one metric) to the maximum.

The EBIT Metric and the Free Cash Flow Metric are Non-GAAP measures. For additional detail and reconciliations to the most directly comparable U.S. GAAP measures, see Appendix A to this proxy statement.

For 2020, in order to maintain competitiveness with the market but reflect our company’s overall performance, the Committee approved an increase in the cash performance incentive targets for Ms. Miller and Ms. Zelenka. The annual target cash performance bonus percentages for 2020 for our named executive officers were as follows:

The 2020 time-based RSU awards for our named executive officers were as follows:

The target number of PSUs, and the related grant date value, awarded to our named executive officers in 2020 were as follows:

We provide limited perquisites and personal benefits to our executive officers. See “2020 Summary Compensation Table – All Other Compensation” and the related footnotes.

All of our executive officers and non-employee directors are expected to hold a minimum position in our common stock. We established this program to help align the long-term interests of our executive officers and non-employee directors with those of our stockholders. For 2020, we increased the stock ownership guidelines for the Chief Executive Officer and Non-Employee Directors from four times annual base salary (for the CEO) or respective annual cash retainer (for the Non-Employee Directors) to five times that amount. To further strengthen our stock ownership guidelines, in March 2021 we amended our stock ownership guidelines to remove provisions to the effect that: (i) the in the value money of vested and unvested stock options would count toward achievement of the applicable stock ownership guideline, and (ii) once a director or executive officer achieved the applicable ownership threshold, that individual would be considered in compliance, regardless of any change in his or her salary or cash retainer, or the price of our common stock, so long as such individual continued to own at least the number of shares of our common stock and other awards owned at the time of achieving the applicable threshold.

As disclosed earlier in this proxy statement, in order to encourage sound financial reporting and enhance individual accountability, we have a clawback policy that allows us to recover from our executive officers certain performance-based compensation in certain circumstances. In 2020, we received a stockholder proposal requesting certain changes to our clawback policy. At the 2020 Annual Meeting, approximately 53% of the shares present voted in favor of that proposal. Following the 2020 Annual Meeting, the Compensation Committee, the Nominating and Governance Committee, and our Board of Directors carefully reviewed and considered the requested terms of the stockholder proposal against our clawback policy that was then in place, as well as market practices and strong governance practices. As a result of this review, in September 2020, the Board made significant revisions to our clawback policy, which it believes substantially implemented the key elements and objectives of the stockholder proposal. After the Board revised our clawback policy, we met with a number of our largest institutional investors to discuss, among other things, the revisions to our clawback policy. None of the shareholders with whom we met expressed negative feedback with respect to our clawback policy as amended. Those changes included, among other things:

As demonstrated in the table above, the revisions made by the Board to the prior clawback policy and reflected in the amended and restated clawback policy adopted in September 2020 significantly expanded the employees covered and the circumstances under which we might recoup incentive compensation paid, granted or awarded to such employees. For additional information on our clawback policy, please see “Corporate Governance – Clawback Policy.”